Financial Planning for Generation X & Y Women
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Glossary of Financial Terms

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Debt-to-Income Ratio
The percentage of net income that pays for non-mortgage debt. Examples of non-mortgage debt include auto loans, student loans, and credit cards. Ratio is calculated by dividing the total amount of monthly payments by total net income. A debt-to-income ratio should be less than 15 percent. Debt-to-income ratios exceeding 20 percent indicates potential for repayment difficulties.
Defined Benefit Plan
A defined benefit plan promises you a specified monthly benefit at retirement. It may promise an exact dollar amount or use a formula that considers factors such as salary and years of service. Your employer or both you and your employer contribute to these plans.
Defined Contribution Plan
In these plans, you or your employer (or both) contribute to your individual account under the plan. These contributions generally are invested on your behalf. What you receive is based on contributions plus or minus investment gains or losses. Examples include 401 (k) plans and 403 (b) plans.
Direct Stock Purchase Plans (DPPs)
Allows you to buy stock directly from a company.
Disability Insurance
Disability insurance provides a weekly or monthly income benefit if you are disabled due to a covered injury or sickness.
A court order that says an individual does not have to pay certain debts. An individual who files for bankruptcy receives a discharge.
A taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings (earnings not paid out as dividends but instead reinvested in the core business), usually quarterly.
Dividend Reinvestment Plans (DRIPS)
Dividends are reinvested to buy more company stock instead of being issued to you as a dividend check.
Dollar Cost Averaging
Dollar-cost-averaging is a strategy where a fixed dollar amount is invested at regular intervals, resulting in more shares purchased when the price per share is low and fewer shares when the price is high.
Durable Power of Attorney
Governs what happens during your lifetime by designating someone to perform certain actions for you if you should become incapacitated or otherwise unable to manage your financial affairs or make financial decisions.