Personal Finance Commonly Used Terms and Their Definitions

Budget—A plan for spending and saving money based on a person’s goals during a given time period.

Cash Management—How a person manages money (cash) coming in and money going out.

Expenses—Any money a person spends or gives away.

Fixed Expenses—Expenses that are the exact amount every time.

Federal Income Tax—A fee for the support of federal government programs collected by the employer and paid to the Internal Revenue Service (IRS).

Income—Any money a person receives.

Gross Income—The total amount of income from wages or salary before payroll deductions.

Medicare Tax—Collected from most employees to fund hospital insurance provided under the Social Security System.

Net Income –The amount of a paycheck that a person can actually spend( i.e.  gross income less any payroll deductions).

Payroll Deductions—Amounts subtracted from gross income, which is withheld by an employer for items like taxes and employee benefits.

Social Security Tax—A fee collected from most employees to support this federal program, which provides old -age, survivors, and disability insurance.

State Income Tax—A fee for the support of state programs that is usually collected by the employer and paid to the state revenue department.

Taxes—Fees placed on income, property, or goods to support government programs and activities.

Variable Expenses—Expenses that are not fixed and vary from one time period to the next.



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