Asset
Anything of monetary value owned by an individual or a business. A potential source of collateral for a loan.

Asset mix
The relative proportions of cash, debt and equity instruments in a portfolio.

Balance sheet
A formal statement indicating the financial position of an individual or business at a specific point in time. Assets are usually listed on the left side, and liabilities on the right. Net worth, or the difference between total assets and total liabilities, is indicated at the bottom.

Bankers’ acceptance
A short-term debt instrument issued by a corporation, but guaranteed by a bank, and sold on a discounted basis.

Budget
A formal estimate of future income and expenses used for financial planning.

Cash flow
The movement of cash into, through, and out of a particular entity, i.e. an individual’s deposit account.

Charge account
A credit account extended by a retailer which is subject to specific interest rates and payment requirements.

Credit card
A card issued by a financial institution that allows the cardholder to use credit to purchase goods and services up to a predetermined limit. Interest rates are traditionally higher than those charged on consumer loans.

Credit rating
An assessment of an individual’s or organization’s credit-worthiness, based on past behaviour in repaying debts. An important criteria for lenders who have access to this information through credit bureaus.

Debit
A charge on a deposit or credit card account.

Debt
(see Liability)

Default
Failure of a borrower to make scheduled loan or mortgage payments when they are due, or failure to fulfil any other term or condition of the agreement.

Demand loan
A loan with no fixed date of termination. A demand loan may be repaid at any time by the borrower, or called in for repayment at any time by the lender.

Equity
The ownership interest in any tangible asset including a company (in the form of common or preferred shares); mutual funds (in the form of units); and real estate, precious metals, artwork, etc.

Expenses
The costs incurred to purchase specific goods or services.

Financial planning
The process of assessing your financial situation, determining your objectives and formulating a plan to achieve them.

Fixed expenses
Periodic ongoing costs that comprise your regular living expenses and to which you are committed. Rent or mortgage payments, property taxes, personal taxes, insurance premiums, etc. are prime examples.

Fixed interest rate loan
A loan in which the interest rate is set for the full term and cannot be renegotiated.

Foreclosure
A legal procedure whereby a lender obtains ownership of a property following default by the borrower by terminating all of the borrower’s rights in the property covered by the mortgage.

Income
Total revenue and/or funds received from all sources.

Interest
Payments made by a borrower to an investor for the use of his or her money.

Interest rate
The rate of return a lender receives for permitting a borrower to use money for a specified term. The interest rate is usually expressed as an annual percentage.

Liability
An amount owed to a creditor.

Line of credit
A type of credit arrangement usually issued by a financial institution which offers an individual immediate access to a pre-determined amount of cash upon demand without having to apply for a loan. A line of credit may be either unsecured or secured with personal assets such as bonds, term deposits or home equity. A secured line of credit results in lower risk to the financial institution and a lower rate of interest to the individual.

Loan
An agreement in which money owned by one party is lent to another, in exchange for which the borrower pays the lender a predetermined rate of interest. Repayment is usually subject to specific terms and conditions.

Maturity
The date on which a loan, bond or debenture becomes due and on which the principal is repayable.

Net worth
The difference between an individual’s total assets (what they own) and their total liabilities (what they owe).

Overdraft
An amount paid out by a bank to cover cheques and withdrawals that exceed the balance of funds available in a deposit account.

Overdraft protection
A service offered by banks that ensures all cheques and withdrawals are covered regardless of whether adequate funds are available in the account. Overdraft protection is negotiated up to a predetermined amount, and there is a specified minimum charge. Interest is charged on the overdraft until it is repaid.

Overdrawn
The withdrawal of more money than an account actually has on deposit.

Pre-authorized payment
An amount that an individual authorizes to be automatically withdrawn from his or her deposit account on a regular basis. Mortgage payments, car or automatic bill payments, or contributions to an RSP are examples.

Principal
The amount of a loan owed to a lender at any specified time, not including interest.

Promissory note
A written promise committing an individual or institution to repay a specified sum of money either on demand or at a fixed or determinable future date, with or without interest.

Revolving credit
Typical of a line of credit or credit card in which the amount of available credit increases and decreases as funds are borrowed and then repaid.

Service fees or service charges
Fees charged by a financial institution for account services such as funds withdrawals, transfers, bill payments, etc.

Total debt service ratio
The percentage of an individual’s gross income that will be used to service all personal debt, including monthly payments of mortgage principal, interest, taxes, heating and other outstanding loans and debts.

Variable interest rate loan
A loan in which the interest rate fluctuates in relation to changes in the prime lending rate.