Financial Glossary
40 essential financial terms explained in plain English — with real examples, actionable tips, and zero jargon. Your financial education starts here.
40 termsPlain EnglishZero jargon
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Financial Foundations
(10 terms)Asset AllocationAsset allocation is the strategy of dividing your investment portfolio among different asset categories …→Cash FlowCash flow is the net movement of money into and out of your financial life over a given period — what comes in…→Compound InterestCompound interest is the process by which interest earns interest over time, causing money to grow at an…→DiversificationDiversification is the investment practice of spreading your money across a range of different assets, sectors…→Emergency FundAn emergency fund is a dedicated pool of savings set aside exclusively for unexpected financial shocks — job loss…→Financial IndependenceFinancial independence means having enough money that you no longer have to work to cover your living expenses…→InflationInflation is the rate at which the general price level of goods and services rises over time — and…→LiquidityLiquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its…→Net WorthNet worth is the difference between everything you own (your assets) and everything you owe (your liabilities). It…→Passive IncomePassive income is money earned with little or no active, ongoing effort. Unlike a salary, passive income flows in…→
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Investing & Wealth Building
(10 terms)Bear Market / Bull MarketA bull market is a period of rising asset prices and investor confidence. A bear market is the opposite — a…→Capital GainsA capital gain is the profit you make when you sell an asset for more than you paid for it. Understanding how…→Dividend InvestingDividend investing is a strategy focused on building a portfolio of stocks or funds that pay regular cash…→Dollar-Cost Averaging (DCA)Dollar-cost averaging (DCA) is an investment strategy where you invest a fixed amount of money at regular…→ETF (Exchange-Traded Fund)An ETF, or Exchange-Traded Fund, is a type of investment fund that trades on a stock exchange — just like a…→Expense RatioAn expense ratio is the annual fee charged by a fund — such as an index fund or ETF — expressed as a percentage of…→Index FundAn index fund is a type of investment fund designed to track the performance of a specific market index — such as…→RebalancingRebalancing is the process of realigning your investment portfolio back to its original target allocation after…→Risk ToleranceRisk tolerance is the degree of variability in investment returns that you are willing and able to withstand. It's…→Time in the Market"Time in the market beats timing the market" means that consistently staying invested over a long period produces…→
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Retirement & FIRE
(10 terms)Barista FIREBarista FIRE is a hybrid strategy where you accumulate enough invested assets to cover most living expenses, then…→Coast FIRECoast FIRE is the point at which you have invested enough that — even without investing another dollar — compound…→Fat FIREFat FIRE prioritises a comfortable, high-spending retirement — typically $100,000/year or more — requiring a…→FIRE (Financial Independence, Retire Early)FIRE stands for Financial Independence, Retire Early — a movement built around aggressive saving, smart investing…→FIRE NumberYour FIRE number is the total amount of invested assets you need to retire or achieve financial independence. It's…→Lean FIRELean FIRE is a version of FIRE built around achieving financial independence on a modest, minimalist budget …→Retirement PortfolioA retirement portfolio is the collection of investments you accumulate over your working life, specifically…→Safe Withdrawal Rate (SWR)The safe withdrawal rate (SWR) is the maximum percentage of your portfolio you can withdraw each year in…→Sequence of Returns RiskSequence of returns risk is the danger that the timing of investment returns — not just their average — can…→The 4% RuleThe 4% rule states that if you withdraw 4% of your investment portfolio in the first year of retirement, then…→
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Crypto & Alternative Assets
(6 terms)AltcoinAn altcoin is any cryptocurrency other than Bitcoin. The landscape ranges from Ethereum — with a market cap in the…→Bitcoin (BTC)Bitcoin is the world's first and largest cryptocurrency — a decentralised digital currency that operates without a…→BlockchainA blockchain is a decentralised digital ledger that records transactions across a network of computers in a way…→Crypto WalletA crypto wallet stores the private keys needed to access and manage your cryptocurrency. It doesn't hold crypto…→Dollar-Cost Averaging in CryptoDollar-cost averaging in crypto means investing a fixed amount into cryptocurrency at regular intervals regardless…→Market CapitalisationMarket capitalisation is the total market value of an asset, calculated by multiplying the current price by the…→
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Debt & Budgeting
(4 terms)50/30/20 Budget RuleThe 50/30/20 rule divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for…→Debt-to-Income Ratio (DTI)Your debt-to-income ratio (DTI) compares your total monthly debt payments to your gross monthly income. It's one…→The Avalanche MethodThe debt avalanche method pays off debts from highest interest rate to lowest, regardless of balance. It minimises…→The Snowball MethodThe debt snowball method pays off debts from smallest balance to largest, regardless of interest rate. Once the…→
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