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Personal finance glossary.

Short, clear definitions of the concepts that come up again and again in personal finance: budgeting, saving, banking, European regulation. No unnecessary jargon.

Budgeting

50/30/20 rule

Monthly net income split: 50% needs, 30% wants, 20% savings or debt.

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Banking

APR — Annual Percentage Rate

Standardised figure that shows the annual cost or yield of a financial product including fees and term.

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Saving

Compound interest

Mechanism by which generated interest is added to the principal and itself produces more interest.

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Saving

Emergency fund

Liquid reserve meant to cover unexpected expenses without falling into debt.

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Budgeting

Envelope method

System where each spending category has a separate pot, and when it empties you stop spending there.

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Budgeting

Fixed vs variable expense

Distinction between recurring expenses with predictable amounts and expenses that change month to month.

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Economy

Inflation

Sustained rise in the general price level, which reduces the purchasing power of money over time.

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Banking

Nominal interest rate

The “pure” interest rate applied to the principal, without fees or compounding frequency.

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Regulation

PSD2 — European open banking

European directive forcing banks to open access to your data and payment initiation to authorised third parties.

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Budgeting

Zero-based budgeting

Method in which every euro of monthly income is assigned to a specific destination until you reach zero.

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