Glossary
The words behind your money, in plain English.
90 terms — pay, taxes, goals, retirement accounts, housing — each on its own page with an example and the calculator that uses it. No jargon in the definitions.
Pay & compensation
- 83(b) electionA form filed within 30 days of receiving restricted stock that lets you pay tax on its value now, while it is low, instead of later as it vests.
- Accelerator (commission)A higher commission rate that kicks in once you pass quota, so every dollar sold above target pays more than the dollars below it.
- Annual bonusA once-a-year cash payment based on company and individual performance, usually expressed as a target percentage of base salary.
- Base salaryThe fixed, guaranteed part of your pay, spread evenly across the year's paychecks before any bonus, commission, or stock is added.
- ClawbackA contract term that requires you to repay money you already received, most often a sign-on bonus or relocation payment, if you leave too soon.
- CommissionPay earned as a percentage of what you sell, so the amount changes with each deal and each month rather than arriving as a fixed salary.
- Double-trigger vestingA rule at many private companies where RSUs need two events to vest: your time-based schedule and a liquidity event like an IPO or acquisition.
- Draw (against commission)An advance on future commission paid to a salesperson, often during a ramp period, that is later deducted from commissions actually earned.
- ESPP (employee stock purchase plan)A benefit that lets you buy your company's stock through payroll deductions at a discount, often 15% below the market price.
- ISO (incentive stock option)A type of employee stock option with special tax treatment: no regular income tax when you exercise, and possible long-term capital gains if you hold.
- NSO (non-qualified stock option)A stock option where the gain between your strike price and the share value is taxed as ordinary income the moment you exercise.
- OTE (on-target earnings)The total a sales role pays if you hit exactly 100% of quota: base salary plus the commission you would earn at target.
- Pay period (biweekly vs semimonthly)How often you get paid; biweekly means 26 checks a year every other week, semimonthly means 24 checks on fixed dates like the 15th and 30th.
- Refresh grantAn additional stock grant given to a current employee, usually each year, so that equity pay keeps flowing after the original grant finishes vesting.
- RSU (restricted stock unit)A promise from your employer to give you shares of company stock on a future date, as long as you are still there when that date arrives.
- Sign-on bonusA one-time cash payment for joining a company, usually paid in your first paycheck or two and often repayable if you leave within a year.
- Strike price (exercise price)The fixed price at which a stock option lets you buy a share, set when the option is granted, no matter what the stock is worth later.
- Take-home pay (gross vs net)The amount that actually reaches your bank account after taxes, insurance, and retirement contributions come out of your gross pay.
- Total compensationEverything a job pays in a year added together: base salary, bonus, stock, and sometimes benefits, as opposed to the salary figure alone.
- Vesting (and vesting schedules)The process by which promised stock or retirement money becomes truly yours over time, usually on a fixed calendar called a vesting schedule.
- Vesting cliffA waiting period, usually one year, during which none of your stock grant vests; at the end of it a large chunk vests all at once.
Taxes
- Additional Medicare taxAn extra 0.9% Medicare tax on wages above $200,000 for single filers or $250,000 for married couples, on top of the regular 1.45%.
- AMT (alternative minimum tax)A parallel tax calculation with fewer deductions and its own rates; you pay whichever is higher, and exercising incentive stock options often triggers it.
- Capital gains (short-term vs long-term)Profit from selling an investment for more than you paid; gains on assets held over a year get lower tax rates than gains on assets sold sooner.
- Cost basisWhat you paid for an investment, including fees, or the value you were taxed on when you received it; the starting point for measuring gain or loss.
- Estimated taxes (quarterly payments)Tax payments you send directly to the IRS four times a year when withholding will not cover what you owe, common with big equity gains or side income.
- FICA (Social Security and Medicare tax)Payroll taxes taken from every paycheck: 6.2% for Social Security up to a yearly wage cap and 1.45% for Medicare with no cap, matched by your employer.
- Marginal vs effective tax rateYour marginal rate is the tax on your next dollar of income; your effective rate is total tax divided by total income, and it is always lower.
- Social Security wage baseThe maximum amount of yearly wages subject to Social Security tax, $184,500 in 2026; income above it is not taxed for Social Security.
- Standard deductionA fixed amount every taxpayer can subtract from income before tax is calculated, $16,100 for single filers and $32,200 for married couples (2026).
- Supplemental wages (and supplemental withholding)Pay that is not regular salary, like bonuses, commissions, and vested stock, which the IRS lets employers withhold on at a flat 22% rate (2026).
- Tax bracketOne of the income ranges the federal government taxes at a set rate; only the income inside each range is taxed at that range's rate.
- Tax-loss harvestingSelling investments that have dropped in value to lock in a loss that offsets taxable gains or income, then buying something similar to stay invested.
- W-4 (withholding form)The form you give your employer that tells them how much federal income tax to take out of each paycheck, based on your filing status and other income.
- Wash saleSelling an investment at a loss and buying the same or a nearly identical one within 30 days before or after, which disallows the loss for tax purposes.
- Withholding gapThe difference between the tax your employer took out during the year and the tax you actually owe, which becomes a bill or a refund in April.
Budgeting & planning
- 50/30/20 ruleA simple budget split of after-tax income: about 50% to needs, 30% to wants, and 20% to savings and debt payoff.
- Cash flowThe timing of money in and money out over a period; positive cash flow means more came in than went out, regardless of what you own.
- Emergency fundCash set aside in a safe, easy-to-reach account to cover three to six months of essential expenses if income stops or a large surprise bill arrives.
- Envelope budgetingPutting a set amount into a separate envelope, real or digital, for each spending category, and stopping when the envelope is empty.
- Liquid net worthThe part of your net worth you could turn into cash within days without penalty: bank accounts, taxable investments, and vested stock you can sell.
- Net worthEverything you own minus everything you owe, one number that shows whether your finances are moving forward over time.
- Sinking fundMoney saved a little each month toward a known future expense, like car insurance, holidays, or a vacation, so the bill is covered when it arrives.
- Zero-based budgetA budgeting method where every dollar of income is assigned a job, spending, saving, or debt, so income minus assignments equals zero.
Saving & investing
- APY vs APRTwo ways of quoting a yearly rate: APR ignores compounding and is used for loans, while APY includes it and is used for savings.
- Asset allocationHow your investments are split between stocks, bonds, and cash; the mix drives most of your long-term return and how bumpy the ride is.
- Coast FIREHaving enough invested that, with no more contributions, it will grow into a full retirement fund by normal retirement age; you only cover today's bills.
- Compound interestGrowth on top of growth: earnings are added to the balance, and then those earnings earn too, so money grows faster the longer it is left alone.
- DiversificationSpreading money across many investments so that no single company, industry, or country can sink your whole plan.
- Dollar-cost averagingInvesting a fixed amount on a regular schedule regardless of price, which spreads out timing risk and removes the need to guess when to buy.
- Expense ratioThe yearly fee a fund charges, expressed as a percentage of your balance and taken out invisibly; 0.05% is cheap, 1% is expensive.
- FatFIREFinancial independence with a large budget, typically $100,000 or more of yearly spending, which means a portfolio of several million dollars.
- FIRE (financial independence, retire early)A plan to save a large share of income so that investments can cover living costs long before traditional retirement age.
- Index fundA mutual fund or ETF that holds every stock in a market index like the S&P 500, so you own a slice of the whole market at very low cost.
- InflationThe general rise in prices over time, which means each dollar buys a little less every year and savings must grow just to keep their value.
- Real vs nominal returnA nominal return is the headline growth figure; a real return subtracts inflation to show how much your buying power actually grew.
- RebalancingPeriodically buying and selling to bring your portfolio back to its intended mix after market moves have pushed it off target.
- Safe withdrawal rate (the 4% rule)The percentage of a portfolio you can spend each year, adjusted for inflation, with a good chance it lasts 30 years; the classic estimate is 4%.
- Time value of moneyThe idea that a dollar today is worth more than a dollar later, because today's dollar can be invested and grow in the meantime.
Retirement accounts
- 401(k)An employer-sponsored retirement account you fund from your paycheck, with tax advantages and a yearly contribution limit of $24,500 (2026).
- 415(c) limit (total 401(k) contribution limit)The cap on everything that can go into your 401(k) in a year from all sources, $72,000 in 2026, including your contributions and your employer's.
- Backdoor Roth IRAA way for people above the Roth IRA income limit to still fund one: contribute to a traditional IRA without a deduction, then convert it to Roth.
- Catch-up contributionExtra retirement contributions allowed once you turn 50: $8,000 more in a 401(k) ($11,250 at ages 60 to 63) and $1,100 more in an IRA (2026).
- Employer match (401(k) match)Money your employer adds to your 401(k) based on what you contribute, such as 50 cents per dollar up to 6% of pay; it is part of your compensation.
- FSA (flexible spending account)A pre-tax account through your employer for medical or dependent-care costs that must be used within the plan year or mostly forfeited.
- HSA (health savings account)A tax-free account for medical costs, available with a high-deductible health plan, with limits of $4,400 for individuals and $8,750 for families (2026).
- IRA (individual retirement account)A retirement account you open yourself at a brokerage, separate from any employer, with a $7,500 yearly limit (2026) and traditional or Roth tax treatment.
- Mega backdoor RothA strategy for putting far more than the normal limit into Roth savings by making after-tax 401(k) contributions and converting them to Roth.
- RMD (required minimum distribution)The minimum amount you must withdraw from traditional retirement accounts each year once you reach age 73, whether you need the money or not.
- Roth 401(k)A version of the 401(k) where contributions are taxed now and every dollar, including growth, comes out tax-free in retirement.
- Traditional vs RothThe choice between paying tax on retirement savings later (traditional) or now (Roth); it usually comes down to your tax rate today versus in retirement.
Debt & credit
- Credit scoreA three-digit number, usually 300 to 850, that summarizes how reliably you have handled borrowed money; lenders use it to set rates and approvals.
- Credit utilizationThe share of your available credit you are using, measured on your statement date; keeping it under 30% and ideally under 10% helps your credit score.
- Debt avalanche vs debt snowballTwo ways to order debt payoff: avalanche pays the highest interest rate first to save the most money; snowball pays the smallest balance first for quick wins.
- DTI (debt-to-income ratio)Your total monthly debt payments divided by your gross monthly income; lenders use it to decide how much mortgage or loan you can carry.
Housing
- AmortizationThe schedule that splits each fixed loan payment between interest and principal; early payments are mostly interest, later ones mostly principal.
- Closing costsThe fees paid to finish a home purchase or refinance, typically 2% to 5% of the loan amount, covering the lender, title, appraisal, and prepaid items.
- Escrow (mortgage escrow account)An account your lender runs to collect property tax and homeowners insurance as part of your monthly payment, then pays those bills for you.
- HELOC (home equity line of credit)A revolving credit line secured by your home equity, with a variable rate; you borrow only what you need during a draw period and repay it afterward.
- PMI (private mortgage insurance)A monthly fee added to a mortgage when your down payment is under 20%, protecting the lender if you default; it can be removed once you reach 20% equity.
- RefinanceReplacing an existing mortgage with a new one, usually to get a lower rate, change the term, or pull out cash from home equity.
- Rent vs buy break-evenThe number of years you would need to stay in a home for buying to come out ahead of renting, once closing costs, upkeep, and investment returns are counted.
Allocate terms
- Allo-BotAllocate's assistant: it answers questions from your own numbers, stages changes to your plan for you to approve, and never moves money itself.
- Expected income eventIn Allocate, a bonus, commission, or stock vest you tell the app about in advance, so the plan counts it as income on the date it is due to arrive.
- Goal fitIn Allocate, a month-by-month check that each goal can be funded from take-home pay after bills and the goals ahead of it, with a one-tap fix if not.
- Lump sum matched to a goalIn Allocate, an expected one-off payment, like a bonus or vest, assigned to fund a specific goal, so the goal counts it and stops warning.
- Morning briefIn Allocate, a short written note each morning covering what moved in your money overnight and anything that needs a decision from you.
- My planIn Allocate, a written plan listing your goals in order, the monthly amount each one gets, and the date each one lands.
- Safe to spendIn Allocate, the money that is genuinely free between now and your next payday, after bills and goal contributions are already covered.
- WorkspaceIn Allocate, a board where you arrange cards, notes, and live sheets built from your own numbers to explore a question your way.