What Is an Interest Rate?

An interest rate is the percentage of a loan that the lender charges per year for giving the borrower the privilege of using the money. For example, to take out a car loan, a dealer might charge you 8 percent of the amount you own on the loan as interest. Alternatively, when you put money in a savings account at a bank, the bank might pay you 2.5 percent per year because you're letting the bank use your money.

What Is Inflation?

Inflation refers to how the price for goods and services increases over time. For example, a loaf of bread that would have cost $2 10 years ago might cost $4 today. Even though you can't nail down exactly what inflation rates will be in the future, understanding how inflation works allows you to plan for your future financial goals.

What Is Leasing a New Car?

Leasing a new car refers to signing a contract with a car dealership that gives you the right to drive the car for a certain period of time in exchange for making rental payments to the dealership. Depending on your financial circumstance and automotive preferences, leasing a car might be a good deal. But, unless you know what you're looking for, you could end up stuck with a fee-filled lease.

What Is Money Management?

Money management refers to how you handle all aspects of your finances, from making a budget for where each paycheck goes to setting long-term goals to picking investments that will help you to reach those goals. Money management is not just about saying "no" to any purchase, but developing a plan that allows you to say "yes" to the things that are most important to you. Any amount of money can prove to be too little if you don't have good money management skills.

What Is Severance Pay?

Severance pay refers to payments made by an employer when employees are laid off or accept voluntary early retirement. Usually, you won't receive severance pay if you quit or are fired for cause, but there are exceptions.

What Is Savings?

Savings refer to money you put aside for future use rather than spending it immediately. In addition to the benefits of saving up for future purchases, delaying an impulse purchase also helps you decide whether it is something you really need, or a waste of money you will regret shortly after buying.

What is Retirement Planning?

Retirement planning is the process of setting goals for your retirement years and then creating a plan to fulfill those goals. Executing a retirement plan requires most people to put aside some of their current income for long-term savings and investment. You can use tax-sheltered vehicles, such as traditional individual retirement accounts (IRAs) and employer pension plans, to fund part of your retirement plan with pre-tax dollars.

What Is Renting vs. Buying?

Renting versus buying refers to the decision that people have to make when deciding where to live. The question has different answers for different people, and there's more than just financial considerations to think about when making your decision. Renting can be less expensive up front, but owning may cost you less of the long term.

What Is Refinancing?

Refinancing refers to the process of taking out a new loan to pay off old debts. Refinancing is particularly common with mortgages because of their long repayment terms. The ability to adjust the terms of the old mortgage to a new loan -- the refinance loan -- that might fit your budget better is an attractive option for many consumers.

What Is Recurring Debt?

A recurring debt is the requirement to make a payment for a loan or other obligation on a continuing basis. The debtor cannot easily cancel recurring debt. Some familiar examples include credit card debt, mortgages, car loans, alimony and child support.

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