Glossary
Plain-English definitions of personal-finance terms. We grow this over time so every article can link to a clear reference instead of repeating the same explanation.
Net worth
Net worth is the total value of everything you own minus everything you owe.
FIRE number
Your FIRE number is the portfolio size you need to cover annual spending at a safe withdrawal rate.
Compound interest
Compound interest is interest earned on both the original amount and the interest already added.
ISA
An ISA is a UK account that protects savings and investments from income tax and capital gains tax.
SIPP
A SIPP is a UK pension that gives you full control over the investments inside it.
Withdrawal rate
A withdrawal rate is the percentage of a portfolio you take out each year to live on.
4% rule
The 4% rule is a guideline that says you can withdraw 4% of a retirement portfolio in year one, then adjust for inflation.
Snowball method
The snowball method pays off the smallest debt first, then rolls that payment into the next smallest.
Avalanche method
The avalanche method pays off the highest-interest debt first, then moves to the next highest.
Multi-currency budget
A multi-currency budget tracks income and spending in more than one currency and converts them to a single base currency.