I wanted to (finally) give you a money dictionary that doesn’t require a dictionary to understand the word’s definition. That doesn’t exist . . . so I made my own. You know how you explain a term to a friend who doesn’t “get” it? That’s the way it’s written here. Let this glossary be your go-to guide for definitions with a practical perspective whenever you need a little cheat-sheet. Some stuff changes over the years, but these basics never go out of style.
Debit Card -
Debit Card: Looks like a credit card but allows you to spend only money that you actually have in your checking account.
Debt: Also known as borrowed money. Not all debt is created equal. You can take on debt for legitimate reasons—to buy a home, to finance a business, to go back to school. But it’s also easy to borrow money for things you just want, like swiping your credit card out on a shopping spree or taking out a car loan. If you are responsible with your debt and make your payments on time, it can be a great way to live the life you want. But if you are irresponsible with it and make late payments (or don’t pay at all a.k.a. default) you can end up with interest payments, a bad credit score, and even bankruptcy. (See also: Default)
A presentation that you create, typically in PowerPoint or PDF, to present or pitch your idea or business to colleagues or investors in a cohesive, organized way.
Deductible: The amount of expenses (usually set) that you pay out of pocket before your insurer jumps in to pick up the rest of the tab.
Deduction: Any item or expense that you can subtract from your gross income to reduce the amount of money that Uncle Sam can tax you at the end of the year. These are good when it comes time to file as they typically mean more money in your pocket. The most common deductions are charitable contributions, anything related to running a business, home mortgage interest payments and medical expenses. (See also: Gross Income, Itemized Deduction, Standard Deduction)
Default: Failure to make payments on a loan. You’ll likely get charged big penalties and, if the loan was for a particular item like a car or a home, you could lose it. Seriously. Those loans are secured loans, where the item is collateral that the bank takes if you don’t pay up. Defaulting on unsecured loans can lead to wage garnishment which is when money is forcibly deducted from your paycheck to pay it.
Deferment: Financial procrastination, or delaying a loan payment. You might defer on, say, a student loan payment if you are still in school, or graduated recently but haven’t found a job yet. But it’s not a good idea to keep kicking the can down the road, as you’re getting hit with interest the whole time.
Deficit Finance -
Financing an endeavor or business by borrowing money (from investors, friends and family, or your own bank account).
The product or service that is the result of a specific project. For instance, if you promise a client that you will deliver six new widgets by the end of the month, those widgets are the deliverable.
A particular sector of the population, such as millennials or suburban housewives or female business owners. For our purposes, this will be your business’s target consumer.
Dependent: Someone who depends on you financially; usually a child, but it can also be another family member, such as an elderly parent.
Depreciation: When something loses value over time. Something that depreciates is typically an actual item like a car or computer—it loses value/relevance soon after you purchase it. (New cars depreciate 15-20% the second you drive them off the lot, and we’ve all felt the burn of buying a schmancy new gadget only to have a newer one come out a few months later.) (See also: Appreciation)
Just like you’d weaken a strong drink, when you weaken your ownership position by giving away too much equity to investors, you are diluting the power and control you ultimately have over the company.
Direct Reports -
The staff who report directly to you. Your direct reports may have people junior to them who report directly to them, and so on.
When you are so innovative that you shake up the status quo. It’s a good thing, as opposed to being disruptive, which is just annoying.
Diversification: Helps you to avoid putting all of your eggs into one basket, only to drop the basket and break them all. Like in the proverb, distributing your “eggs,” or investments, around into different “baskets,” or investments, reduces your risk of breakage, or in this case—breaking the bank! For example, let’s say you put 80% of your investing money into stocks. Don’t go all in on one stock; instead, invest in a variety of them, so if that one stock tanks it doesn’t tank your entire portfolio. (See also: Asset Allocation)
Dividend: One of the things a company can do with its profits is give them to the shareholders in the form of cash; this is called a dividend. Getting cash is nice and thus so are dividends. Even better, as earnings grow, companies can give out more dividends, which is even nicer. They can also cut them in bad times (which sucks). What do you do with that cash the company sends you? Best to reinvest it. Over time, reinvested dividends are a major source of stock investor returns.
I often say that investing in yourself will pay dividends later on. You’ll hear it used in that context, and it means that the work you put into something now will allow you to reap the rewards later.
Domestic Partnership -
Domestic Partnership: So you share your house, your car, your dog, your bank account, your LIFE—but you’re not technically married: you’re in a domestic partnership. It’s a legal and/or personal relation- ship between two people who share the trappings of marital bliss without the official title.
Double Taxation -
In a C corp, both the business and the employees are taxed (double taxed). In an S corp or partnership, only the employees are taxed (not
Dow, The -
Dow, The: The Dow Jones Industrial Average, an index of the top thirty “blue chip” stocks, like Apple, Microsoft and Wal-Mart. It’s an index that is usually a good indicator of how the overall stock market is doing. If you hear “the market is up today” on the news, they are usually referring to The Dow. (See also: Index, Blue Chip)
Drop Ship -
Instead of keeping inventory, a retailer will take a customer’s order and pass it along to a manufacturer who will then ship the product directly to the customer.
Unlike an eagle, who is set to soar, a duck will complain about how much work sucks without making an effort to change anything, because “that’s how it’s always been done.” (See also: Eagle)