Financial Vocab 101


Arrears payments: Tax payments that are owed, but made after the due date.


Beneficiary: In the financial world, a beneficiary typically refers to someone who is eligible to receive distributions from a trust, will or life insurance policy.


Bonds: When you invest by purchasing bonds from a company or government, you are actually making them a loan or purchasing a piece of their debt. You earn money from bonds by collecting interest on the debt based on a fixed interest rate over a set period of time.


Burn Rate: In business this is the rate at which a new company uses up its venture capital to finance overhead before generating positive cash flow from operations. In other words, it’s a measure of negative cash flow. When referring to personal finances, burn rate is the rate at which an individual or family spends, in other words, how much money do you “burn” on a monthly or yearly basis.


Capital gain: An increase in the value of a capital asset, such as an investment or real estate, which gives it a higher worth than the purchase price. Capital gains are realized when the asset is sold and must be claimed on income tax.


Corporate minute book: Is a binder or bound book used to store all important corporate documents such as the articles of incorporation, the minutes of shareholders’ and directors’ meetings, stock certificates, tax filings, by-laws and other legal documents.


Debt Service Ratio: A measure that lenders use as a rule of thumb to give a preliminary assessment of whether a potential borrower is already in too much debt. More specifically, this ratio shows the proportion of gross income that is already spent on housing-related and other similar payments (such as loans). A ratio of less than 40% means that the potential borrower has an acceptable level of debt.


Deficit: The amount by which a sum of money falls short of the required amount, or the amount by which expenditures or liabilities exceed income or assets.


Due Diligence: Taking the amount of care (or “diligence”) that would be expected (or “due”) before making a business decision such as a purchase, investment or even the hiring of an individual or company.   It includes systematically researching and verifying the accuracy of any financial statements or credentials presented.


Financial Capital: Your financial resources and ability to use them. Could include experts you know, financial skills and knowledge.


Liquidity: The degree to which an asset or security can be converted to cash quickly. Assets that can be easily bought or sold are known as liquid assets.


Money Behaviours: All behaviours that you exhibit related to how you use and manage money including saving, spending, investing, budgeting, giving and earning.


Money Belief: An assumption or conviction related to money that you hold to be true. It is possible to be somewhat or even completely unaware of beliefs that you hold.


Non-Routine Expenses: Things you only occasionally have to pay for, such as gifts, vet bills, car repairs, etc.


Philanthropy: Means the love of humankind. It is often shown by efforts to increase the well-being of humankind through charitable aid or donations.


Protector: In trust law, a protector is a person appointed under the trust instrument to direct or restrain the trustees in relation to their administration of the trust.


Routine Expenses: Things you must pay for regularly, such as rent, mortgage, food, utilities, taxes, etc.


Social Capital: The networks, community and goodwill you have built through relationships.


Surplus: A quantity or amount in excess of what is required, or the amount by which income or assets exceed expenditures or liabilities.


SWOT Analysis: A structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or business venture. A SWOT analysis can be carried out for a product, place, industry or person.


Withholding Tax: Also called a retention tax, is a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government. This commonly applies to withdrawals made from an RRSP or to employment income.