Personal finance glossary

Net worth is the total value of everything you own minus everything you owe. It is the single best measure of your overall financial position.

Your savings rate is the percentage of your income that you save and invest rather than spend. It is the single biggest lever on how soon you can retire.

A sinking fund is money you set aside in advance for a known, irregular expense — like car insurance, holidays, or annual subscriptions — so it never blows up your monthly budget.

Two strategies for paying off multiple debts: the snowball targets the smallest balance first for psychological wins; the avalanche targets the highest interest rate first for the lowest total cost.

APR is the yearly cost of borrowing money, expressed as a percentage and including most fees. It is the standard way to compare loans, credit cards, and credit products.

A simple budgeting framework: spend 50% of your take-home pay on needs, 30% on wants, and 20% on savings and debt repayment.

FIRE is a movement that combines aggressive saving with index-fund investing to reach financial independence years or decades before traditional retirement age.

Compound interest is interest earned on both your original money and on the interest it has already earned. Over long periods, the compounding curve is dramatic.

Open banking is a regulated framework that lets you securely share your bank data with third-party apps you choose — without handing over your bank login.