Money Glossary

Budgeting terms

Budget

A plan for how you will use your money over a period, usually a month, matching expected income against spending and savings. Our guide on how to budget walks through the steps.

Take-home pay (net income)

The money that actually reaches your account after income tax, CPP, EI and other payroll deductions. Budgets should always be built on take-home pay, not gross salary.

Fixed expenses

Costs that stay the same each month, such as rent, a car payment or an insurance premium. See fixed vs variable expenses for examples.

Variable expenses

Costs that change with your usage or choices, such as groceries, fuel and dining out. They are usually the quickest place to find savings.

Cash flow

The difference between the money coming in and the money going out over a period. Positive cash flow creates a surplus; negative cash flow is covered by savings or debt. Read what personal cash flow means.

Sinking fund

Money set aside a little at a time for a known future expense, such as car registration or holiday gifts, so it does not land all at once. More in our sinking funds guide.

50/30/20 rule

A guideline that splits take-home pay into 50% needs, 30% wants and 20% savings and extra debt repayment. See the 50/30/20 rule explained.

Zero-based budget

A budget in which every dollar of income is assigned a job, so income minus planned spending and saving equals zero.

Envelope budgeting

A method that caps spending by putting a fixed amount of cash, or a digital equivalent, into an envelope for each category and stopping when it is empty.

Pay yourself first

Moving money into savings as soon as you are paid, before any discretionary spending, so saving happens automatically.

Lifestyle creep

The tendency for spending to rise as income rises, so a raise leaves you no better off in savings.

Borrowing and credit terms

APR

Annual percentage rate: the yearly cost of borrowing expressed as a percentage, including certain required fees for loans. See what APR means.

Principal

The amount you originally borrowed, or the part of a loan balance that is not interest. Extra payments usually go straight to principal.

Credit score

A three-digit number that summarizes how reliably you have handled credit. In Canada, scores run from 300 to 900. Read what a credit score is.

Credit report

A record of your credit accounts, balances and payment history, kept by credit bureaus and used to calculate your credit score.

Debt-to-income ratio

Your monthly debt payments divided by your monthly gross income, which lenders use to judge how much more you can borrow. See debt-to-income ratio explained.

Minimum payment

The smallest amount you must pay on a credit card or line of credit by the due date to keep the account in good standing. Paying only the minimum keeps interest charges high.

Debt avalanche and debt snowball

Two payoff strategies: the avalanche pays the highest interest rate first to save the most money, while the snowball pays the smallest balance first for quick wins. Compare them in debt snowball vs avalanche.

Economy and currency terms

Budgeting across currencies raises its own questions. EMOH Pay supports 148 currencies with automatic conversion, so you can see spending in your home currency even when you pay in another. It is free to start on iPhone, Android and the web.

Inflation

The general rise in prices over time, which reduces what each dollar can buy. In Canada it is measured by the Consumer Price Index. Read what inflation is.

Purchasing power

How much a unit of money can buy. Inflation reduces purchasing power; deflation increases it.

Exchange rate

The price of one currency in terms of another. Rates change constantly, and the rate a transfer service offers usually includes a margin over the mid-market rate.