Personal Finance Glossary

A Systematic Investment Plan (SIP) is a way of investing a fixed amount of money in a mutual fund at regular intervals — typically every month.

CAGR is the smoothed annual rate at which an investment would have grown if it had compounded steadily over a given period.

Compound interest is interest earned not just on your original investment, but also on the interest that has already been added to it.

A mutual fund pools money from many investors and invests it in a portfolio of stocks, bonds, or other assets, managed by a professional fund manager.

NAV is the per-unit price of a mutual fund, calculated as the total value of the fund's holdings minus its liabilities, divided by the number of units.

XIRR is the annualised return on an investment with irregular cash flows — the correct way to measure what a SIP has actually earned.

ELSS is a category of equity mutual fund that qualifies for tax deduction under Section 80C of the Income Tax Act, with a mandatory 3-year lock-in.

The Public Provident Fund is a government-backed, long-term savings scheme with a 15-year lock-in, tax-free interest, and Section 80C tax benefits.

An EMI is the fixed monthly amount you pay to a lender to repay a loan over a set period, comprising both principal and interest.

The debt snowball is a repayment strategy that clears your smallest balance first, then rolls that freed-up payment onto the next-smallest debt.

The debt avalanche is a repayment strategy that targets your highest interest rate first, which always costs the least in total interest.

A credit score is a three-digit rating, usually between 300 and 900 in India, that summarises how reliably you have repaid borrowed money.

The 50/30/20 rule is a budgeting framework that splits your post-tax income into 50% needs, 30% wants, and 20% savings and debt repayment.

A budget is a plan that assigns every rupee of your monthly income to a purpose — spending, saving, or repaying debt — before the month begins.

An emergency fund is a pool of easily accessible cash set aside to cover unexpected expenses without forcing you to break investments or take on debt.

Net worth is what you own minus what you owe — the single number that measures financial position, as opposed to income, which only measures cash flow.

CTC is the total annual amount an employer spends on an employee, including benefits and contributions that never appear in the monthly bank credit.

In-hand salary is the amount actually credited to your bank account each month after all deductions — the only figure a budget should be built on.