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.
S Corp -
The full name is Subchapter S corporation, named for the part of the IRS code that defines it. This is a way to incorporate your business (and shift the liability away from you and onto the business) without being double taxed as you would in a regular corporation, in which business tax comes out of the company and personal tax comes out of your income. Instead, profits and losses pass down to you as the shareholder, so you report them on your personal tax return. In other words, you pay taxes on every dollar the corporation earns (after all deductions have been calculated). A S corp must have no more than one hundred employees, and also be owned in the US of A; no foreign ownership.
S&P 500 -
S&P 500: The Standard & Poor’s 500 index of America’s 500 largest stocks. Some say this is the best indicator of the true pulse of the U.S. economy. (See also: Index)
Sarbanes-Oxley: Also known as “SOX,” the Sarbanes-Oxley Act of 2002 was named for two lawmakers who aimed to create new standards for boards, management, and accounting firms of pub- lic companies. The regulations are like “checks and balances” over companies the public can invest in. They are supposed to have your back if you’re an investor.
Schedule C -
It’s the page on your IRS Form 1040 on which you can list and deduct your business expenses— aka, the first place you hit up to brain- dump
those receipts you’ve been saving all year (ahem!).
Schmuck Insurance -
Not actually insurance, this is a way to structure the sales of a product or line of business while keeping your hand in the financial cookie jar by, say, keeping 10% or 20% ownership of that product in case the new owners do really well with it.
Your signature thing that makes you memorable and stand out within a crowd or industry.
SEC: Stands for the Securities and Exchange Commission. It is a federal government organization that is supposed to be the good guy. Their sole purpose is to “protect investors” from the bad guys (like shady brokers or fraudulent trading schemes). They put in regulations for “securities” markets or anything stock related. Investors feel like the SEC has their back while companies often think they are a thorn in their side.
Secured Credit Card -
Secured Credit Card: A credit card for people who have little or no credit, or the most dreaded of all: bad credit. They’re backed by a savings account, which serves as collateral on the credit available on the card. You deposit money into the savings account and it remains there, thereby backing the card and easing the lender’s fears about your credit-worthiness. The card’s limit is based on two things: your credit history (if you have any) and the amount you deposited into the account. So why would you get a card of this type? If you want to build credit, or rebuild bad credit. (See also: Credit Card, Debit Card)
Secured Debt -
Secured Debt: It’s the kind of debt you get when you take out a loan and back it with collateral, like your house, to reduce the risk associated with lending. For example, you could use your house as collateral to take out a mortgage. But if you don’t pay, the bank takes your house, instead. They will then sell it and use the proceeds to pay back the debt. The “security” for their debt will always win over your security. Ouch. (See also: Unsecured Debt)
Security: A general term to describe a position of interest in a company, such as a stock (ownership), a bond (a creditor position), or a derivative (the right to buy a stock, say). Think of a financial family tree where “security” would be the name of the family, and stocks, bonds, and derivatives would be types of securities underneath.
Seed Money -
Seed Money: A.k.a. “seed funding,” or the money to help you get your small business off the ground. You’ll likely get your seed money from friends and family who believe in you and your dream (that’s why your first round of fundraising is called the “friends and family” round). If you’re not lucky enough to have a supportive community around you, you’ll probably turn to your savings or your credit cards for money to make your company grow, baby, grow.
SEP IRA -
Stands for Simplified Employee Pension plan. It’s a variation of an IRA just for businesses. The most important difference between a SEP and a 401(k) is that 100% of the contributions are made by you as the employer, not your employee. As of 2016, you could contribute up to 25% of an employee’s compensation up to $265,000 for a maximum contribution of $53,000 (25% of $265K is $53K, so that’s the max you can put in).
Series A -
The first round of funding for a start- up after the initial seed funding, or friends- and- family round. (See also: Seed funding)
Compensation a company pays employees who are laid off or leave the company for reasons other than “for cause,” aka you didn’t fuck up but you had to go anyway due to a company reorganization or simply not being the best fit for the job.
Share: The amount, or “stake,” that you have in a company where you own stock; also the unit used to measure stocks. For example, if you own 1,000 stocks in a company, you own 1,000 shares. (See also: Shareholder, Stock, Stock Market)
Share Economy -
An economic model in which people share something they own with people who need it, and charge money for that transaction, such as renting out your home on Airbnb or offering the use of your vehicle on Lyft.
The owner of stock in a company. If the company does well, they stand to make moolah— and sometimes big moolah. But if the company does
poorly, then shareholders have the potential to lose money, too. Your stake in the company as a shareholder depends on how many shares in that company you own— the more shares you own, the greater your stake. The person who owns the majority of the shares is called the principal shareholder.
Short: “Going short” basically means you’re trying to make money off of something that you think won’t do well. It’s the opposite of “going long” or just buying a stock outright which is a vote of confidence in that company. It’s a more advanced trade because there is way more risk. If you buy the company outright, the most you can lose is 100% of the value. If you short it and it goes up more than 100% you can lose an unlimited amount of money—so be careful, and make sure that you think it’s going to go way down because you make the difference if you are right. You lose the difference if you are wrong. (See also: Long)
Side Hustle -
An additional job or passion project that you take on to make extra money on the side of your day job.
While the name makes you believe it’s “simple,” it’s not that much so. It stands for Savings Incentive Match Plan for Employees. It’s another cousin of an IRA, like the SEP. Unlike with a SEP however, the employer and employee (if you have one hundred or fewer employees who earned at least $5K or more in salary both contribute. The contribution limits are lower than with a 401(k): $12,500 if you’re under the age of fifty, and $15,500 if you’re over the age of fifty (so about $3,000 to $5,000 less than a 401[k] depending on how old you
are). (See also: SEP)
Small Business Administration (SBA) -
The US government agency set up to help entrepreneurs with loans, grants, and other forms of support.
Social Security -
Social Security: The big daddy of social welfare. The Fed rolled it out in 1935, and we’ve been living with and around it ever since. The program’s benefits include retirement income, disability income, Medicare, Medicaid, and death and survivorship benefits. Based on the year you are born, you can start getting retirement benefits as early as age sixty-two or as late as age sixty-seven. (That number is likely to get higher in the coming years, so you might not start collecting until age seventy or even older.) The amount of income you get from the government is based on the average wages earned over your lifetime. Spouses are also eligible to receive Social Security benefits, even if they have worked only part time or not at all. It’s been around for a long time, but factors like longer life expectancies, a large baby boomer population currently entering retirement age, and inflation have put it in serious danger in current times.
Solo 401(k) -
If you don’t have any employees, you can look at investing in a solo 401(k), which is really just a one- woman 401(k), but one that you control. If you work for yourself and you’re killing it, you should look at this as a great retirement vehicle for yourself. You control the costs and the investment options. But they are more advantageous than a regular 401(k) because there is a far higher contribution limit. In addition to the $18,000 you can invest annually as an employee— the same limit you’d have in a regular 401(k)— as an employer
you can add matching funds up to 25% of your compensation for a total of up to $53,000 in 2016. So you’re reaping both the employee and employer benefits for yourself (and your spouse, if you have one).
Standard Deduction -
Standard Deduction: A flat amount you can take out of your taxes. You can either choose to take a “standard deduction” or an “itemized deduction” to reduce your tax bill (but not both). If you choose the “standard deduction,” it makes doing your taxes a whole lot simpler because you don’t have to save every receipt. You just write the amount down ($6,200 for single people in 2015) with no questions asked. This might be for you if you don’t have a mortgage or have a lot of medical or business expenses that would act as good “itemized deductions.” (See also: Itemized Deductions)
A measure of how memorable a product or company name is to a consumer. You want your name and idea to be as sticky as possible!
Stock: A share, or stake, in a company. As a shareholder, you own part of the corporation’s assets and earnings—so you’re (technically) a part-owner! Your stake in the company depends on the number of shares you own relative to the number of total number of shares (so, sadly, your one hundred shares of Apple probably won’t get you into the next shareholders’ meeting . . .). Stocks are also the “meat and potatoes” of most investment portfolios and have outperformed most other investments historically. Publicly traded stocks have a ticker symbol to identify them and trade on—you guessed it— the stock exchange. (See also: Equity, Security, Stock Exchange)
Stock Exchange -
Stock Exchange: Where stocks are traded. It can be a physical place, like the New York Stock Exchange, or a computer system, like the NASDAQ, or any of the many other systems used to trade stocks. Overall, billions of shares of stock are traded every day. Once upon a time, when someone said “the stock market,” she meant the NYSE. But now there are many more exchanges where stocks are traded. (See also: Share, Shareholder, Stock)
Stock Market -
Stock Market: This represents all companies investors can buy into, sell or trade. To actually place a trade, investors use different stock exchanges, like the NYSE or NASDAQ. So when you hear on the news, “The stock market crashed after the President’s speech,” it’s referring generally to all stock trading. (See also: New York Stock Exchange, NASDAQ)
Stock Split -
Stock Split: This is when companies divide existing shares to lower the share price so that more investors can join the party. For example, let’s say that The Lapin Corporation of America has 10,000 shares selling at $100 a pop. The maximum capitalization is $1,000,000. If the stock split two for one, that means there are now 20,000 selling at $50 a pop. (The share price goes down, but the max capitalization stays the same.) The lower price can be more inviting to more investors. If you already owned one share of this company at $100, you would now own two shares at $50 each. A stock may split two for one, three for two, or any other combination. A reverse stock split is when a company lowers the number of its outstanding shares, which would be, for example, a one for two split. (See also: Stock, Share)
Stock, Common -
The lowest priority stock in a company. You may or may not see dividends (aka get money back) depending on what the company’s board
chooses to do. If a company’s assets are liquidated, common stockholders are the last ones to get paid. (See also: Dividend, Liquidity)
Stock, Preferred -
The highest priority stock in a company. If you have this type of stock, you get dividends paid out regularly, and they are usually of a fixed amount, as well as being guaranteed. (And yes, in this case you might actually be invited to that shareholder’s meeting). (See also: Dividend, Shareholder)
Sweat Equity -
Sweat Equity: It’s the best advice in business: outwork everyone. It’s how much you and only you invest in your company by working at it, not just taking cash from the outside and looking pretty. It’s said that your “sweat equity” will pay off most in the long run. It’s kinda like if you own a home, and you decide to go to Home Depot and redo your kitchen yourself before selling the house for a profit. You’ve added value by working at it.
A new trend that involves networking and exercise at the same time! Instead of grabbing a drink or scheduling a lunch date, meet your colleague for a run. You can talk biz and get your workout in— everyone wins.
When the combination of two ideas or companies results in great value and performance is better than the sum of the individuals or companies. This can apply to two departments or even two people working together for a better result, too— basically a fancy word for the old adage “Two heads are better than one.”