Key financial abbreviations you should know

3 MIN READ | #blog

Learning more about managing your finances? That’s great. The financial world has its own shorthand, and the more you understand these terms, the easier it can be to make smart financial decisions. Here are some key terms and common abbreviations and what they mean for your financial decision-making.

AGI: Adjusted Gross Income is an abbreviation you likely see every year during tax season. It’s a number that the Internal Revenue Service (IRS) uses to determine how much income tax you owe. AGI is calculated by taking your total (or gross) income for the year and deducting certain items, like educator expenses, student loan interest, and alimony payments.

APR: Comparing lenders for a mortgage or car loan? Pay more attention to the Annual Percentage Rate (APR) than the interest rate. APR shows you interest plus fees and other charges, which can add up.

Tip: APR affects student loans as well, so take time to investigate your options, and make sure you’re saving enough for college.

CAGR: Compound Annual Growth Rate is the rate of return you’ll get on an investment because of compounding, or reinvesting the profits over the lifespan of the investment. You can think of compounding as a wealth-building tool. Imagine a small snowball rolling down a steep hill. The longer it rolls, the more snow it accumulates. Your original investment (the snowball) becomes a snow-boulder by accumulating earnings on top of earnings over time.

Tip: Start saving early and remember your tax burden also compounds, so plan accordingly.

FDIC: The Federal Deposit Insurance Corporation is an independent US government agency that insures bank deposits and examines financial institutions for safety and soundness. When you deposit money in a savings or checking account, FDIC insures that money against loss due to bank failure up to $250,000.

FICO: You probably recognize FICO, short for Fair Isaac Corp, if you’ve ever taken out a loan or opened a bank account. Lenders use FICO’s predictive analytics to calculate your credit-worthiness, most commonly represented as your credit score.

Tip: To raise your FICO score, pay your bills on time and avoid carrying high balances on credit cards.

HNWI: High Net Worth Individual — what many of us aspire to be — are those with over $1 million in liquid financial assets.
Tip: Become a world-class saver, starting today.[1] Some of the savviest CEOs understand the importance cash flow plays in saving and building wealth. What’s more, their approaches to savings and cash flow can be adopted by people of every income bracket.

HSA: Health Savings Account are special savings accounts offered by many employers. They allow you to deposit money from your paycheck and withdraw that money tax-free for medical expenses.

IRA: Individual Retirement Accounts are a popular way to save for retirement. Social Security alone likely won’t be enough to be your sole source of income in retirement — an IRA provides a way to save additional money.

Tip: An IRA is only part of the equation. Securing guaranteed income in retirement can help you retire with confidence.

LLC: A Limited Liability Corporation is a common type of corporate structure that protects its owners from certain types of liabilities, like debts. LLCs also allow profits and losses to get passed through to their owners’ personal income without paying corporate income tax.

ROI: Return on Investment measures the profitability or benefit earned on money you’ve invested.

Tip: A smart strategy to help optimize your investment mix is to build a well-diversified portfolio with stocks, bonds, cash and whole life insurance, balanced to your age and life goals.

TCO: Total Cost of Ownership shines a light on the full costs of owning an asset. Whether it’s a car or a house, the price tag is just the tip of the iceberg. Make sure you identify all costs for maintenance, upkeep, service, and so on, so you can budget accordingly.

And finally, one last acronym for you: FEC, or financial and emotional confidence. Our research has found that financial confidence and overall emotional confidence are closely linked. How confident are you? Take our Financial & Emotional Confidence Quiz to find out how you can start improving your financial confidence today.

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1 Guardian considers a world class saver as someone who saves at least 15 to 20% of their annual gross income.


This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.