Dictionary 2017-01-23T08:54:45+00:00

Dictionary

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.

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E-mail Marketing Service -  An online company, like MailChimp or Constant Contact, that helps businesses to create e- mail marketing campaigns targeted to users who are most likely to purchase a particular product or service.
EAFE -  EAFE: Another one of those financial acronyms, pronounced EEE- fee. The EAFE (the letters stand for Europe, Australasia, Far East) is a stock index that covers the major markets of the industrialized world, excluding the US and Canada; think of it as the S&P for the rest of the world. And while we’re on foreign stock indices, let’s mention the MSCI Emerging Market Index, which covers emerging markets like China, India, Brazil and the like. Some other country- specific foreign indices you might hear mentioned on the news include the TSX (Canada), DAX (Germany), CAC 40 (France), FTSE 100 (or “Footsie,” Great Britain), Nikkei (Japan), Shanghai (China, obviously), and the Hang Seng (Hong Kong).
Eagle -  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)
Earned Income -  Income that comes from wages, salaries, tips— in other words, money that you’ve earned and which is taxable.
Earnings -  Earnings: Not to be confused with revenue, this is the amount of profit that a company takes in over a given period of time after taxes, expenses, etc. So it’s effectively the amount of money the company actually makes (bottom line) versus revenue (top line), which is everything the company brings in. (See also: Bottom line, Revenue)
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) -  EBITDA is another way to look at profits. It’s a term you’ll hear a lot if you are starting a business, so know what it stands for (there are different versions, like EBIT and EBITA, depending on the business). The better this number is, the better the company is doing.
EIN (Employee Identification Number) -  It’s like a Social Security number for corporations, in that it ties together a company’s taxes, debts, contracts, etc.— and keeps a record of them over time. When you form a corporation, the federal government issues you one.
Elevator Pitch -  Your thirty- second description of your business, concept, or brand— something short and sweet that you can explain in the time it takes to ride the elevator. Whether you’re starting a business or carving out your niche at work, you must have one of these.
EQ -  Emotional intelligence, as opposed to IQ, or intellectual intelligence. EQ is all about understanding other people, reading their signals, and reacting appropriately. A high EQ is a must for any Boss Bitch, whether she’s born with it or proactively develops it over time.
Equity -  Equity: Another word for stock. If you have equity in a company, it means you own shares in that company. You can have equity in a public or private company. Also known as having “skin in the game.” You invested money in the company in exchange for shares in that company, so you now have a stake in it (and how it performs over time). You can have equity in a public or private company. (See also: Stock, Bond)
Escrow -  Escrow: An account that is set up such that you can’t touch the money in it. When two parties are conducting a transaction, an escrow account is usually held by an impartial third party. If you buy a house, for example, you’ll be asked to deposit a certain amount of money into an escrow account until you and the seller have satisfied all of the terms of the sale.
Estate -  Estate: All of your stuff. All of it: your house, your car, jewelry, all of your money, and legal rights—minus anything you owe (debt and liabilities). “Estate Planning” is a nice way of saying how to plan for what happens to your estate when you die, which includes setting up a will, power of attorney and tax planning for everything in your estate so that you leave your heirs with the best financial situation possible.
Estimated Taxes -  If you are a sole proprietorship, your clients will pay you in pretax dollars, which mean you’ll be on the hook to pay Uncle Sam quarterly estimated taxes. Estimated is the key word here; it’s tough to predict how accurate these taxes are, especially during the first year or two of your business, so it’s a good idea to set aside 25% or so of each check you receive for the purpose of taxes. That way, if you end up with a larger- than- expected tax bill at the end of the year, you’ll have the funds to cover it.
ETF -  ETF: Exchange traded funds are like mutual funds but they trade on a stock exchange. They are also cheaper to buy than mutual funds because they aren’t managed by professionals. It’s a way to get exposure to a bunch of different stocks by buying just one thing. So, you want exposure to technology stocks? You can get an ETF for that—many, actually. There’s an ETF for almost any type of investment you want to make. (See also: Mutual Fund)
Executive Compensation -  Executive Compensation: What it sounds like—how much the big boys earn in salary, bonuses and stock or stock options.
Exemption -  Exemption: A reduction to the amount of your gross income that would otherwise be taxed. The amount of the reduction is the same for everybody. There are two types of exemptions: personal and dependency. For example, if you are filing your own tax return and have two children, you have one personal exemption for yourself and one dependency exemption for each kid = three total exemptions. At the current amount of $3,900 per person, that’s $3,900 x 3 = $11,700 that you can take out of your gross income. (See also: Deduction)
Exit Strategy -  Your script for the final act of your business. This is the means by which you will cash out of your investment in your business, for instance, by selling to or merging with another company. This strategy can and will change over time as your business grows and objectives change, but Boss Bitches always have a plan for when it’s time to take a bow.
Expense Ratio -  Expense Ratio: The fee that a fund you invest in charges to do what it says it’s going to do. Expense ratios on index funds are typically very low, maybe 0.25% or less. An expense ratio of 0.25% would charge you $25 per $10,000 per year. So if you have $10,000 invested in that fund, think of the $25 as a service fee for the broker managing the fund to work it for you. A 1% expense ratio (typical for actively managed funds) would charge you $100 per year on $10,000.