Financial glossary
Clear, precise definitions of key financial terms used in mortgage and property investment analysis.
Global terms
Universal financial terms and concepts applicable across all markets and jurisdictions.
Allowance
A regular fixed amount of money given to a child, often weekly, as an introduction to managing money.
Amortisation
The process of paying off a loan through regular scheduled payments of principal and interest over time.
Annualised return
The geometric average return per year over a multi-year period, accounting for compounding to enable fair comparison across periods.
APR (Annual Percentage Rate)
An annualised interest rate that includes fees and charges, providing a more complete picture of the cost of borrowing than the nominal rate alone.
Balloon payment
A large lump-sum payment due at the end of a loan term, typically on top of smaller regular instalments paid throughout the loan.
Break-even (education)
The point when cumulative earnings from a qualification exceed its total cost — including foregone income during study.
Break-even analysis
The process of determining when revenue equals total costs, marking the point where a business begins to generate profit.
Break-even point
The point at which total costs equal total revenue or savings, resulting in zero net gain or loss for a decision.
Break-even rate
The minimum contractor hourly rate needed to match a salaried package once leave, overhead, and non-billable time are accounted for.
Budget rule
A framework for dividing income into spending categories, such as the 50/30/20 rule allocating income to needs, wants, and savings.
Burn rate
The rate at which a business spends cash reserves, typically expressed monthly, used to calculate runway before additional funding is required.
Capital gain
The profit made when an asset is sold for more than its original purchase price, often subject to specific tax treatment.
Capital works deduction
A tax deduction available in many jurisdictions for the decline in value of a building's structure and permanent fixtures over its effective life.
Car vs transport cost
The cost comparison between owning a vehicle and using public transport, including hidden ownership costs like parking, depreciation, and insurance.
Carrying cost
The total cost of holding inventory, including capital, storage, insurance, depreciation, obsolescence, and shrinkage.
Comparison rate
An interest rate that includes both the advertised interest rate and most fees and charges, designed to give a truer cost of a loan.
Compound interest
Interest calculated on the initial principal and on accumulated interest from previous periods, accelerating growth over time.
Cost of living (student)
Total non-tuition expenses a student incurs during studies — accommodation, food, transport, and daily essentials.
Cost per hire
The total expense of recruiting and onboarding a new employee divided by the number of hires made over the same period.
Cost per use
The total cost of an item divided by the number of times it is used — exposing whether a purchase actually earns its price tag.
Credit card interest
The cost charged by a card issuer on unpaid balances, typically calculated daily on the outstanding amount and expressed as an annual percentage rate.
Daily interest
The amount of interest that accrues on a loan balance over a single calendar day, calculated as balance × annual rate ÷ 365.
Debt avalanche
A repayment strategy that targets the highest-interest debt first to minimise total interest paid across all balances.
Debt burden
Total weight of debt repayments relative to income, expressed as a percentage and used to assess financial health.
Debt consolidation
Combining multiple debts into a single new loan, typically at a lower rate, to simplify repayments and reduce total interest.
Debt snowball
A repayment strategy that pays off the smallest debt balance first to build psychological momentum, then rolls payments to the next.
Debt-to-income ratio
Proportion of income that goes toward debt repayments — a key measure of financial health and borrowing capacity.
Degree comparison
Side-by-side financial analysis of two education paths based on cost, duration, and projected lifetime earnings.
Depreciation
The decrease in an asset's value over time, often claimable as a tax deduction against income generated by the asset.
Dividend yield
The annual dividend paid by a company expressed as a percentage of its current share price, used to compare income across stocks.
Dollar cost averaging
Investing a fixed amount at regular intervals regardless of price, reducing the impact of market volatility on average purchase cost.
Drawdown
The peak-to-trough decline in a portfolio's value before it recovers to a new peak, used as a key measure of investment downside risk.
DRIP (Dividend Reinvestment Plan)
An arrangement where dividends are automatically used to purchase additional shares, compounding the share count and future dividends over time.
Economic order quantity (EOQ)
The order size that minimises total annual inventory cost by balancing the cost of placing orders against the cost of holding stock.
Effective annual rate
The true annual interest rate after accounting for compounding frequency, allowing fair comparison of products with different compounding intervals.
Effective hourly rate
The true per-hour value of income after accounting for all hours worked, unpaid leave, and deductions from gross pay.
Emergency fund
A reserve of accessible savings covering unexpected expenses or income disruption — typically three to six months of essential living costs.
Equipment TCO
The full lifecycle cost of business equipment — including purchase, installation, training, maintenance, downtime, and disposal.
Equity
The portion of a property's value owned outright — calculated as the property's market value minus any outstanding debt.
Establishment fee
A one-time fee charged by a lender to set up a new loan, covering application processing, document preparation, and approval costs.
EV upgrade cost
The net cost of replacing a petrol or diesel car with an EV — purchase minus trade-in and incentives, plus running-cost differences.
Financial goal
A specific money target with a defined purpose and timeframe — the unit of planning for saving, budgeting, and investing.
FIRE number
The portfolio value needed to sustain annual living expenses indefinitely through a safe withdrawal rate — typically 25× annual expenses under the 4% rule.
Fixed rate
A loan interest rate that stays the same for a set period, locking in repayments and protecting borrowers from market rate changes.
Foregone wages
Income not earned because time is spent studying or training instead of working — the largest hidden cost of education.
Grade point average (GPA)
Standardised measure of academic achievement — a weighted average of grades across courses where each course is weighted by its credit hours.
Gross yield vs net yield
The difference between rental return measured before expenses (gross) and after deducting all holding costs (net).
Holding cost
The total ongoing costs of owning an asset over a period of time, net of any income the asset generates.
Hurdle rate
The minimum rate of return required before an investor or business will commit capital to a particular opportunity.
Incoterms
Standardised international trade terms that define which party — buyer or seller — bears the cost and risk at each point in the shipment of goods.
Inflation
The rate at which the general price level of goods and services rises over time, eroding the purchasing power of money.
Interest accrual
The accumulation of interest charges on a loan balance over time, typically calculated daily and applied to the account monthly.
Interest-only mortgage
A loan where repayments cover only interest for an initial period — deferring principal, raising total interest, and creating a payment shock at IO end.
Investment scenario analysis
Comparing investment strategies under the same assumptions to find which delivers the best outcome after fees, dividends, and reinvestment.
Landed cost
The total cost of a product delivered to its destination, including purchase price, freight, duties, taxes, insurance, and handling.
Lease residual
The estimated value of a leased asset at the end of the lease term, used to calculate the depreciation portion of the lease payment.
Lifetime cost
The total cost of owning an asset over its entire useful life — purchase, financing, running costs, and resale value combined into a single figure.
LVR (Loan-to-Value Ratio)
The ratio of a loan amount to the assessed value of the property, expressed as a percentage.
Management fee
An ongoing charge levied by a fund manager for operating an investment, expressed as an annual percentage of assets under management.
Minimum payment
The lowest amount a borrower must pay each period to keep an account in good standing and avoid late fees or default.
Minimum payment trap
The pattern where paying only the minimum on a credit card shrinks the balance so slowly that total interest paid far exceeds the original balance.
Mortgage affordability
The maximum a borrower can reasonably borrow given income, existing debts, and interest rates — an estimated loan size and monthly repayment.
Net rental yield
Annual rental income minus all property ownership costs, expressed as a percentage of property value — the cash-flow return investors actually keep.
Net worth
The total value of a person's or household's assets minus all liabilities, measured at a single point in time.
Net worth projection
A forward estimate of net worth based on current position, ongoing savings, expected returns, and key life-stage assumptions.
New vs used value
The total ownership cost comparison between a new and used vehicle, accounting for depreciation, warranty, maintenance, financing, and resale value.
Offset account
A feature offered by some lenders where a linked savings account reduces the interest charged on a loan.
On-costs
The additional costs an employer pays beyond an employee's base salary, including taxes, retirement contributions, insurance, and benefits.
Opportunity cost
The value of the next best alternative foregone when choosing one option over another — central to all financial decisions.
Opportunity cost (investing)
The return foregone when capital is committed to one investment instead of the next-best available alternative.
Opportunity cost of education
The income and investment growth foregone by choosing to study rather than work and invest during the same period.
Opportunity cost of savings
The interest or growth foregone by keeping money in a low-return account instead of a higher-yielding alternative — invisible, but real.
Outstanding balance
The total amount currently owed on a loan, including all unpaid principal and any accrued interest not yet charged to the account.
Principal
The original loan amount borrowed, excluding any interest or fees added over the life of the loan.
Real interest rate
The interest rate adjusted for inflation, representing the true purchasing-power return to a lender or cost to a borrower.
Real return
The return on an investment after adjusting for inflation, representing the actual increase in purchasing power rather than the nominal account balance.
Redraw facility
A loan feature that lets you withdraw extra repayments you have previously made, keeping those funds accessible while still reducing your loan balance.
Refinancing
The process of replacing an existing loan with a new one, typically to secure a lower interest rate, change the loan term, or access equity.
Rental yield
The annual rental income from a property expressed as a percentage of its value, used to assess investment performance.
Reorder point
The inventory level at which a replenishment order is triggered, calculated from lead time demand plus safety stock.
Replacement cycle cost
The cumulative cost of repeatedly purchasing and replacing an item over time — every replacement's price plus the running costs between replacements.
Residual value
The estimated worth of an asset at the end of a lease or ownership period, used to determine lease payments and depreciation rates.
Return on education
The financial return from an education investment, comparing lifetime earnings with and without the qualification against its total cost.
Rule of 72
A quick mental-math formula that estimates how many years it takes for an investment to double in value by dividing 72 by the annual return rate.
SaaS total cost
The full cost of a software subscription — including licences, implementation, training, integrations, and hidden overhead.
Safe withdrawal rate
The percentage of a retirement portfolio that can be withdrawn each year, adjusted for inflation, without exhausting it over the planned horizon.
Saving vs spending
Saving means keeping money for later. Spending means using it now. Both are okay — the trick is finding the right balance.
Savings goal
A specific financial target reached through regular contributions, usually with a defined dollar amount and timeframe.
Savings rate
The percentage of income set aside as savings rather than spent — a leading indicator of long-term financial health.
Scenario modelling
A planning technique that models different possible outcomes side by side, using what-if assumptions about costs, returns, and time.
Secured vs unsecured loan
The distinction between loans backed by collateral (secured) and those approved on creditworthiness alone (unsecured).
Sequence of returns risk
The risk that the order of investment returns — particularly poor returns early in retirement — affects the sustainability of withdrawals.
Simple interest
Interest calculated only on the original amount, not on any interest already earned — the most basic form of interest.
Sinking fund
A savings strategy where money is set aside regularly toward a specific known future expense, reducing the need to borrow when the expense arises.
Stamp duty (property transfer)
A property transfer tax levied in many jurisdictions when real estate changes ownership, typically calculated as a percentage of the purchase price.
Student loan
A loan taken to fund education costs, repaid with interest after completing or leaving a course of study.
Student relocation cost
Total financial difference between living at home and moving out during study — rent, utilities, commuting, groceries, and one-time setup costs.
Study-time investment
Total hours spent on academic study, viewed as a financial investment of time that could alternatively have been spent earning income.
Total cost of ownership
The complete cost of owning an asset over its lifetime — including purchase, financing, operating, maintenance, and disposal costs.
Total cost of ownership (vehicle)
The complete cost of owning and operating a vehicle over its lifetime, including purchase price, depreciation, fuel, insurance, maintenance, and financing.
Tuition inflation
The rate at which education costs increase year over year — historically faster than general inflation in most economies.
Variable rate
A loan interest rate that moves with market conditions, causing repayments to rise or fall over the life of the loan.