Financial terms
74 concepts, each defined in a sentence and then worked through with real numbers.
Accounts & Net Worth
What you own, what you owe, and the arithmetic that connects them.
- Net WorthEverything you own minus everything you owe.
- Assets vs LiabilitiesWhat you own on one side, what you owe on the other, and net worth as the difference.
- LiquidityHow quickly an asset becomes spendable cash, and what it costs you to hurry.
- Debt-to-Asset RatioThe share of what you own that is financed by someone else.
- Good Debt vs Bad DebtWhether borrowing leaves you better off comes down to the rate and to what the money bought.
- Debt Avalanche vs SnowballTwo orderings for paying down several debts at once: highest rate first, or smallest balance first.
- APR (Annual Percentage Rate)The annualized cost of borrowing, including the fees a headline rate leaves out.
- Compound InterestGrowth that earns on prior growth, which is why the holding period matters more than the rate.
- InflationThe rate at which a dollar loses purchasing power.
- Net IncomeWhat reaches your account after tax, benefits and retirement contributions come out.
Transactions & Spending
How money moves through your accounts, and the patterns sitting in the transaction history.
- Income vs ExpensesMoney arriving against money leaving, and the gap between them.
- Savings RateThe share of income you keep rather than spend.
- Category BreakdownSpending sorted into categories, which is usually the first place estimates and reality separate.
- Transaction VelocityHow frequently you transact, measured separately from how much you spend.
- BudgetingAllocating income to categories before the month starts rather than accounting for it afterward.
Investments & Portfolio
Portfolio structure, risk, and the handful of decisions that drive long-run returns.
- Asset AllocationHow a portfolio is divided across stocks, bonds and cash.
- DiversificationSpreading holdings so that no single failure decides the outcome.
- Equities (Stocks)Part ownership of a company, and a claim on whatever it earns.
- Fixed Income (Bonds)A loan to a government or company that pays interest on a fixed schedule.
- ETFs & Index FundsA single holding that contains hundreds or thousands of underlying positions.
- DividendA cash payment from a company to its shareholders out of profits.
- Dollar-Cost Averaging (DCA)Investing a fixed amount on a fixed schedule, whatever the price happens to be.
- Capital GainsProfit realized on selling an asset for more than it cost, taxed by holding period.
- Cost BasisWhat you paid for a holding, and the figure a taxable gain is measured against.
- Real Rate of ReturnReturn after inflation, which is the only version that describes what you can buy.
- Passive IncomeIncome produced by assets you own rather than hours you work.
- Cash DragThe return given up by cash sitting uninvested inside a portfolio.
- Investment GrowthPortfolio value over time, separating what you contributed from what the market added.
- Glide PathA schedule that shifts a portfolio from equities toward bonds as the spending date approaches.
- Restricted Stock Units (RSUs)Employer stock granted as compensation, delivered only once it vests.
Cash Flow & Runway
How cash moves month to month, how long it would last, and which direction the trend runs.
- Cash PositionMoney available to spend today, with nothing to sell and no penalty to pay.
- Burn RateWhat a month of your life costs to run.
- RunwayHow many months your liquid savings would cover if income stopped.
- Emergency FundCash held specifically so that an unplanned expense does not become debt.
- Operating Cash Flow (OCF)The change in your cash position from income and spending, with transfers stripped out.
- Sankey Cash Flow DiagramA flow diagram where the width of each stream is proportional to the money moving through it.
Financial Profile & Comparisons
Demographic matching, percentile rankings, and the benchmarks that give a number context.
- Peer CohortHouseholds that resemble yours on the variables that actually move financial outcomes.
- Percentile RankingYour position within the cohort distribution. The 75th percentile sits above three quarters of it.
- Cost-of-Living AdjustmentNormalizing income and benchmarks for what things actually cost where you live.
- Year-over-Year TrendsComparing a period against the same period a year earlier, which removes seasonality.
- Lifestyle InflationSpending rising alongside income, so that a raise leaves the savings rate unchanged.
FIRE & Financial Independence
The arithmetic behind financial independence, and the variants people build around it.
- FIRE (Financial Independence, Retire Early)Accumulating enough that investment income covers expenses, well before conventional retirement age.
- FI NumberThe portfolio value at which investment income covers annual expenses indefinitely.
- The 4% Rule (Safe Withdrawal Rate)A withdrawal rate calibrated so a portfolio survived every historical 30-year window tested.
- Lean FIREFinancial independence built on a deliberately low spending level.
- Fat FIREFinancial independence at a spending level that requires no reduction in lifestyle.
- Barista FIREA portfolio covering most expenses, with part-time work closing the gap and supplying benefits.
- Coast FIREHaving enough invested that growth alone reaches the target by retirement age, with no further contributions.
- Sequence of Returns RiskThe risk that poor returns arrive early in retirement, when withdrawals compound the damage.
- Monte Carlo SimulationTesting a plan against a thousand randomized return sequences instead of one average.
Retirement Accounts
The tax-advantaged account types, what each one does, and where the rules differ. Contribution figures are 2026 and the IRS indexes them annually.
- 401(k)An employer-sponsored retirement account with tax advantages and, often, matching contributions.
- 401(k) MatchEmployer contributions made in proportion to your own, up to a stated ceiling.
- IRA (Individual Retirement Account)A retirement account you open independently of any employer, in traditional or Roth form.
- Roth IRAAn after-tax retirement account where qualified withdrawals, growth included, are untaxed.
- Backdoor Roth IRAA non-deductible traditional IRA contribution converted to Roth, which the income limits do not restrict.
- Roth ConversionMoving a balance from a traditional account to a Roth, paying income tax in the year of the move.
- HSA (Health Savings Account)The only US account that is untaxed on contribution, on growth, and on qualified withdrawal.
- 403(b) & 457 PlansWorkplace retirement plans for nonprofit and government employees, with different early-withdrawal rules.
- 529 PlanA state-sponsored account where growth used for qualified education expenses is untaxed.
- RMD (Required Minimum Distribution)The minimum amount that must be withdrawn each year from tax-deferred accounts, starting at 73.
- Tax-Advantaged AccountsAccounts carrying a deduction, deferral, or exemption, and how they differ from a taxable brokerage.
Tax Planning
How brackets, deductions and the main planning mechanics work. Each figure names its own year, and most are indexed annually.
- Adjusted Gross Income (AGI)Gross income minus above-the-line deductions, and the figure most other tax thresholds key off.
- Tax Brackets (Marginal Tax Rate)Rates applied in slices, where each rate touches only the income falling inside its own band.
- Effective Tax RateTotal tax divided by total income, which is always below the top bracket reached.
- Tax-Loss HarvestingRealizing a loss to offset a realized gain, reducing the taxable amount for the year.
- SALT DeductionThe itemized deduction for state and local taxes, and the cap Congress placed on it.
- Estate PlanningThe documents that determine what happens to your assets and decisions when you cannot make them.
- FiduciaryAn advisor legally bound to act in your interest, which is a higher standard than the alternative.
Retirement Planning
Income sources, withdrawal strategies, and the structures retirement actually runs on.
- Social SecurityA government benefit based on your earnings history, with the amount set by when you claim.
- Pension (Defined Benefit Plan)An employer-funded retirement income paid for life, calculated from service and salary rather than a balance.
- Withdrawal RateThe share of a portfolio drawn each year, and the main lever over how long it lasts.
- Bucket StrategySplitting a portfolio by when the money will be spent, so near-term spending is never funded by selling equities.
- Retirement Spending SmileRetirement spending tends to fall through the middle years and rise again late, tracing a shallow curve.
- GeoarbitrageEarning in a high-cost location and spending in a lower-cost one, which changes the target rather than the savings.
Every one of these is a number in the app
Promi computes them from your own balances and transactions, with the definition one click from the figure.
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