As promised, words printed in the text in bold type are explained below. A few new words are included, because you will meet them widely. They are straightforward and will enrich your vocabulary even more.

accommodation address - you may be tempted to invest in an organization because of its up-market London address. Any firm based there must be sound, you might think. In fact, whole streets in London operate as accommodation addresses. Each building acts as a post box for dozens of different organizations, sending on their mail. The actual firm will be based somewhere much less impressive or reputable, so they hide the fact by using an accommodation address. They may have other things to hide as well. If you should beware where there is a physical site, like a street, how much more so when using the internet. You look at an impressive website but cannot judge the organization behind it. It could be one man and his dog, a neighbour of yours, or someone in Africa.

account card - many shops offer one. You use it to buy goods from any branch of the shop. Nowhere else accepts it. Usually you can spend up to a set limit and then repay by instalments which include high interest. The shop benefits from giving you this loan because you keep spending with them. On the other hand, your choice is limited to that shop's goods. People who snapped up account cards from every shop in the high street when they first appeared soon found themselves deeply in debt.

accounts - a page or two of figures drawn up by an accountant from your business records, to show you what profit your business has made. There will be a profit and loss account (sometimes called an income statement) and often a balance sheet.

alimony (often called maintenance in the UK) - regular payments that a court may order one spouse to make to the other to maintain her (very occasionally him) after a divorce. If the husband does not pay, the wife has to return to the court and ask for help in getting the money. If she wants or needs more, she has to go back to court and prove hardship.

amortization - the same as depreciation.

annual equivalent rate - see interest rate.

annual percentage rate - see interest rate.

annuity - a fixed sum you receive every year as long as you live. Perhaps someone arranged to pay you an annuity in their will, or you can buy one for yourself with a lump sum. You get a quotation from an insurance broker. The quotation varies from day to day.

appreciation - assets appreciate when they become worth more. Every time a Van Gogh painting sells for millions, every other Van Gogh painting appreciates in value. Assets appreciate either as they become scarcer or because more people want them. A vintage Bentley, something that once belonged to Queen Victoria or Elvis Presley, a rare book: all are worth more than they have ever been before, even when new.

AER - stands for annual equivalent rate. This is the interest rate to use to compare investments. See interest rate.

APR - stands for annual percentage rate. This is the interest rate to use to compare the cost of borrowing. See interest rate.

arrangement fee - a charge made by some organizations to arrange a loan or to change it. In theory, the fee covers their costs of paperwork etc. In practice, it is often a way to squeeze a little more money out of you.

assets - if a woman has pretty hair or shapely legs, one would say those were her assets. In the same way, anything you possess is an asset if it will earn you income - either directly, like cash earning interest in the bank; or indirectly, like the table you use to display the antiques you sell in the market on Saturdays. Even more indirectly, assets include the gold necklace you bought because you could always sell it one day if you really needed to. Like the word capital, 'assets' covers all sorts of things. Most as tangible (you can touch them) like a car. Others do not look as though they could be worth much - for instance, a share certificate, which is just a piece of paper; a few doodles which represent a brilliant new design; or a few squiggles that supply the magic formula for a cream that will give every woman lifelong perfect skin or cure baldness. Some assets are intangible, like the fact that you can prove people owe you money for work you have done, or if you have someone's written promise to help you with money if need arises. The opposite of an asset is a liability.

audit - auditing is a part of accounting. Auditors visit clients' businesses and check over their records to ensure they are correct and complete. The checking is called an audit. It may take days or weeks.

balance - the amount you have in an account at the moment. If there is money in your account, you are 'in the black'. The bank will say you have a 'credit balance' because you are one of their creditors, they owe you money. If you are overdrawn or owe the bank money, you are 'in the red'. They call it a debit balance because you are one of their debtors; you owe them money.

balance sheet - this is a snapshot of a business on a given day. It show just what assets and liabilities it possessed on that date.

banker's card - a plastic card that most banks issue. It guarantees to shopkeepers that the cheque you give them will not bounce. It is not a credit card, cash card, charge card or account card. That said it may be combined with one; Barclaycard also acts as a banker's card for a Barclays cheque.

bank payment card or Switch card - another plastic card supplied by your bank (or incorporated in another), used like a credit card. All transactions are charged directly to your bank account.

bankruptcy - if you cannot pay your debts, your creditors can take you to court and ask for you to be made bankrupt. The court orders officials called bailiffs to take over everything you possess. This even includes your children's toys. They sell the lot to pay off your debts. They must leave you with a table, a chair, a bed and the tools of your trade. Being made bankrupt is a nightmare experience. Bankrupt people lose rights. They cannot vote or get credit. If and when they pay off all their original debts, or at the end of a certain length of time, they can ask the court to discharge them. Discharged bankrupts regain all their rights.

base lending rate (sometimes just called the base rate) - this is the rate of interest which fixes most bank lendings. You find it in the newspapers, on the net and displayed prominently in most banks. Depending on how safe a borrower you are, the bank will lend to you at 1,2,3 or even more per cent above its base lending rate.

beneficiary - someone who receives money or goods as ordered by a will or a trust.

bequest - the same as a legacy. You bequeath a bequest.

black economy - wages, sales etc., which are hidden from the Inland Revenue to avoid paying tax on them. In some countries the black economy is bigger than the ordinary legal one.

broker - a middleman or go-between. There are brokers who buy and sell stocks and shares for clients; brokers who arrange insurance policies for clients (sometimes specialist policies like insurance for a film star's bust or a pianist's fingers) brokers who buy and sell raw materials like copper in large quantities.

capital - money or assets which you invest or use to make income. Capital is like a tree, and income is the apples on it. Capital can be any sort of asset, from banknotes to a yacht that you charter out, anything that directly or indirectly earns you income. So the definition of 'capital' can stretch very broadly.

capital gains tax if you buy British Telecom shares, a field in the countryside or any other asset with a long life, and sell it at a profit, you pay capital gains tax on the difference. Your home is exempt, and you cannot pay capital gains tax and income tax on the same profit. It is either/or.

cash card - a plastic card issued by a bank or building society. It enables you to withdraw money from a machine outside their branches during or after banking hours. Not a banker's card, credit card or charge card.

charge card - a plastic card you can use to buy goods and services -for example Diner's Card or American Express. It differs from a credit card because you have to repay everything within a month of receiving your account. So it really represents a very short-term loan. You usually pay a fixed sum each year to get your card.

Child Trust Fund - this is new and only applies to children born after September 2002. The government issues vouchers worth £250 per child (more for low income families). These must be invested in an account for the benefit of the child. He or she cannot touch the money until they are eighteen. Meanwhile the investment grows free of all taxes and parents and friends are encouraged to add to it. Banks and dozens of other organizations offer such accounts. They can be either simple deposit accounts or based on equities. The idea is to give children 'a better start in life'. It is too soon to say how well it will work. It offers a wonderful opportunity for the wealthy to shunt money around the family tax-free. I cannot see how it encourages the child personally to save when others are doing it for him or her. Will the trust generate enough to make a real difference to a child's future rather than a simple spending spree at eighteen?

civil service - thousands of people employed by the government to carry on its work at home and abroad. From the clerk who calculates your old age pension to the chauffeur-driven ambassador on his way to dine with world leaders under the chandeliers - all civil servants enjoy job security and equal pay for men and women within the same grade. There are also thousands of other jobs in local government (working for your town council, for instance) the armed forces, the police, etc. where employees may enjoy broadly similar pay and conditions of work to civil servants.

clause - a sentence or two in a contract. Contracts are made up of clauses. Each lays down a different rule to govern the agreement.

commission - money charged by professional people for performing a service, as when an estate agent sells your house, or a valuer assesses one you long to buy. Sometimes the amount of commission is based on the price of the item concerned. Stockbrokers may charge you 1 per cent of the proceeds of the shares they sell for you. If so, they are charging 'on a percentage basis'. Sometimes the commission stays the same whatever the value of the item concerned. Your bank may charge you £20 whether they change £100 worth of pounds into euros for you to spend on holiday or whether they change £5,000 worth. This is called a 'flat-rate commission'. Sometimes the commission is worked out on a mixture of flat-rate and percentage basis. Estate agents may charge you a flat £100 plus 2 per cent of the value of the house they sell for you. Commissions, sometimes called 'fees' , are the bread and butter of the professions.

In your life you have already paid far more commissions than you realize, because many of them are hidden. When you take out an insurance policy, you pay your money to the insurance company. Some of it zooms straight back to the sales agent who sold you the policy. Umpteen people earn commissions : football pools collectors, even some charity collectors. Commissions are also paid on recommendations. If accountant A advises a client to go to broker (or solicitor) B, he will tell B in advance and usually expect commission. Broker B will often hand on one-tenth of the first year's fees from his client. Many firms offer their employees commission for any clients they can introduce from their friends or family. So, if you do this, don't forget to ask for it.

commodity market - a place where people agree to buy or sell commodities like tea, rubber, cotton, sugar and gold in large quantities. These goods are not on display. They may not even exist yet. People agree to buy and sell, either here and now, or on a set date in the future, at a price agreed now. See futures market.

compound - if you put money in the bank to earn interest, you are free to take out the interest when it arises. (It is called 'simple interest'.) If, instead, you order the bank to add that interest to your capital, so that together they earn you even more interest, you compound your investment. Some investments don't allow you to touch your interest as you go along. They add it to your capital and it too earns interest. When the investment matures and you receive your interest, it is called compound interest. Compound interest is always higher than simple interest, because you have to wait longer before you can touch it.

consols or consolidated stock - another name for gilt-edged securities or gilts. Remember safe Sue and how puzzled she was by the different rates of gilts (Chapter 13)? Here is the reason.

She may notice a gilt called 2010 3% and wonder how anyone could invest for such a lower return, even if it is safe. But this government stock may have been issued forty years ago when a guaranteed 3 per cent was a good buy. Since then, the stock will have changed hands many times, at different prices. If Sue buys stock with a face value (what it is apparently worth) of £1,000, she will receive £30 interest per year. (3 per cent of £1,000 = £30.) If Sue only has to pay £400 for her £1,000-worth, then she is really getting 7 and a half per cent (7 and a half percent of £400 is £30). A cast-iron 7 and a half per cent is much more tempting. Besides, when the stock is repaid in 2010, Sue, if she has not sold it, will receive back from the government the full £1,000. So she can look forward to a cast-iron capital gain of £600 (£1,000 - £400) as well as guaranteed income.

Alternatively, Sue may be tempted by a gilt called '2010 15%' at a time when most investments only pay 12 %. If she buys £100 face value, she will earn £15 a year. But she may have to pay £125 to get that £100 gilt. Then the £15 she receives will give her a return of 12 per cent (£125 at 12 per cent = £15). So she is no better off than if she invested elsewhere for 12 per cent. Besides, when the gilt is repaid in 2010, she will only receive face value of £100 although she paid £125 for it. So she faces a capital loss of £25.

Overall, Sue will find one gilt gives her (yields) just the same return as another. The difference between them is whether she wants her money as income or as capital gain and when she wants what. But all are safe.

contract - an agreement which is legally binding. If one of the parties (the people who made the contract) breaks it, the other/s can take them to court. The court decides whether to make the contract breaker keep his/her part of the bargain or pay compensation to the other/s.

contract for services - an agreement, which need not be in writing, between a self-employed person and the person who wants his/her services. You go to the beautician and pay her for a facial. You don't tell her how to do it. She provides the salon, the couch, the equipment and the cosmetics, even the overall and the cotton wool. If she damages your skin or stains your clothes, she must compensate you out of her own money. You never employ her, although she is doing something for which you pay her.

contract of service - an agreement, which must be in writing between an employer and an employee. It states the work to be done, hours, conditions and pay. All employees have a legal right to such a contract and can take their employers to court if the employers do not stick to its terms.

conveyancing - the legal work of arranging the purchase or sale of a house or flat, business premises or land. The legal document that transfers ownership or land or buildings is called a conveyance. Conveyancing is a solicitor's bread and butter. Most cases are totally straightforward and, with word processors, don't justify the fees that solicitors charge. Nowadays there are alternative professionals you can use.

corporation tax - a tax that limited companies pay on their income and capital gains.

cost of living index - the government keeps records of the cost of goods and services. From those details, it calculates how the cost of living has increased or decreased over the year. The change is usually given as a percentage. If the index shows year one as 100 and year 2 and 107, then the cost of living has increased by 7 per cent. These indices (indices is the plural of index) can be misleading. See Chapter 17.

credit card - a plastic card which you can use in place of money to buy goods and services or get cash from holes in the wall. Examples are Barclaycard Visa and Barclaycard Mastercard. It is very convenient and you can even buy things over the phone, or the internet, internationally, quoting your number. You can do this worldwide because each card-issuing organization belongs to an international 'umbrella' organization. You can use Barclaycard Visa anywhere that accepts Visa and so on. The interest charged is high, and no one insists you repay in full by a set date. The only limit is your own credit limit, this is the maximum that the company issuing the card allows you to owe at any one time. If you are very firm with yourself, you can use your credit card like a charge card and avoid interest. But it is easy to succumb just this once... If you miss a repayment or go over your credit limit - you will pay heavily for it.

creditors - people to whom you owe money. The opposite are debtors. In your accounts, creditors represent liabilities and debtors are assets.

cumulative preference shares - if a company cannot afford to pay a dividend one year, it must pay cumulative preference shareholders two dividends the next year. So cumulative preference shares are a bit safer than preference shares .

Customs and Excise - an enormous government department with branches nationwide. It collects various taxes including value added tax. You meet its employees at ports and airports searching through your suitcases. The Customs and Excise Department is both stricter and more powerful than the Inland Revenue. Never mess them around! The planned monster department of HM Revenue and Customs will result when these two merge on 1.4.2005. No doubt within a few years, it will be decided that the department is just too big and must be split again...

day-release training - you work for an employer and receive a wage, but the employer allows you a day or more a week at college studying towards a qualification. Sometimes the agreement allows you to work full-time for a term then study for a term. This is called block-release.

debenture - a loan to a public limited company. You can buy or sell debentures on the stock market. A debenture entitles you to a fixed amount of interest which must be paid. Unlike shareholders, debenture holders have no say in the running of the company, cannot vote at meetings and don't share in the profits. Debentures are safer than shares.

debit card - this simply transfers money from your bank account to that of the person from whom you are buying. An example is a Switch card. http://www.switch.co.uk/

debtor - someone who owes you money is your debtor. You are his/her creditor.

deed of covenant - a document promising to pay a sum regularly to another person or organization for either seven years or a shorter date. If you regularly drop money into the church collection plate on Sundays or make an annual donation to your favourite charity, you should do it under a deed of covenant. You sign a deed - which is easy - and continue to pay as before. The church or charity can claim a 'repayment' from the Inland Revenue. They claim an extra £2.50 for every £7.50 you give them (when the basic rate of tax is 25 per cent). You get the form from the church or charity, a legal stationer or your solicitor. The latter will draw one up and charge you.

deed of family arrangement - a document drawn up by a solicitor within two years of a death. It must be signed by all those people, called the beneficiaries, who would have benefited under the will. The deed changes the terms of the will and takes its place.

deed of variation - another name for deed of family arrangement.

deeds - the legal document which proves who owns a house or other building or land.

deflation - the opposite to inflation. Prices fall repeatedly. It last happened in Britain in the 1930s but left many people so poor that they did not notice.

Department of Work and Pensions - a large government department dealing with all sorts of welfare charges and welfare payments like pensions. Their website is www.dwp.gov.uk/ They used to deal with your National Insurance contributions but this is now a Revenue and Customs Department responsibility.

deposit - a vague word, generally used to mean a small part of the price of something. You pay it to stop the vendor selling the item to someone else. Also called a 'down-payment'. A real deposit is not returnable, so be very sure in advance whether you can get back what you have paid if you change your mind. When buying a house, it is rare - but not unknown - to borrow the full cost of the property. Such a mortgage is called a 100 per cent mortgage. If you are offered a 90 per cent mortgage, you must find the remaining 10 per cent from your own savings. That remainder is commonly called a deposit.

depreciating - reducing in value. See depreciation

depreciation - goods don't last for ever; they wear out, so they are worth less. In other words, they depreciate in value. You expect a longer life from some things than from others. A heating boiler should last longer than a stereo, a three-piece suite longer than a comb. Some assets never wear out, like a house or land. Some assets even increase in value over the years, like antiques. They are called appreciating assets. When accounts are prepared for a business, depreciation is calculated because every asset has suffered wear and tear during the year. I have not shown this in Sally's Salon's accounts (Chapter 5), but it is worked out as explained in Chapter 9. Broadly, Sally would be able to reduce the tax she pays because of the depreciation her business assets have suffered.

direct debit - if you sign a direct debit, you authorize someone, perhaps the electricity company or a hire purchase company to take money from your bank account to pay their bill. You should check that they only take the number of payments they are entitled to. It is easy for direct debits to continue although the debt has been paid in full. See also standing order

director - a person appointed by the shareholders to run the limited company they own. The chief director is called the managing director. A director is an employee of the company and usually receives a salary. A person can be a shareholder and director of the same company or of many companies at once.

discount - a reduction in price. The seller might offer you a discount for cash, or because you are buying a large quantity at once, or because you are a regular customer.

dividend - income which a limited company pays out to its shareholders from its profits. There is no guarantee that a company will pay out a dividend every year, although many do, or how much it will be.

DWP - see Department of Work and Pensions.

economics - the study of how resources are used to create and distribute wealth. Economics is too vague to give you any practical help with your day-to-day problems. I say this with a degree in the subject.

There is an old joke about the economist, the mathematician and the physicist. They were marooned on a desert island, starving, with one can of baked beans between them and no tin-opener. The physicist said, 'I can use the rays of the sun to burst open the can.' They mathematician said, ' I can calculate where to stand so that one-third of the beans falls into each of our mouths.' The economist scoffed, 'You are doing this all wrong. You must start off by assuming that we have a tin-opener.'

endowment-linked mortgage - a mortgage where you repay only the interest on the home loan over the years. You rely on a life assurance policy or even a pension policy to produce the money at the end of the agreed time to repay the capital. Like interest-only mortgages, and for the same reason, endowment-linked mortgages are more expensive than repayment ones.

equities - another name for stocks and shares. Equity investment simply means investment in stocks and shares. Careful with this word, though: 'equity' has several other meanings not connected with money.

estate - everything you own when you die. It will be allocated according to your will or according to fixed rules if you did not make one. If the value of the estate is large enough, inheritance tax must be paid first. Currently, only estates worth more than £263,000 pay tax, but remember that this includes the value of your home. Husbands and wives have separate estates. If one inherits everything from the other, no tax is paid.

exchange controls - the rules a country makes to stop its citizens and outsiders moving its own currency in or out of the country. The government is often afraid that the wealth of the country will be siphoned outside. Usually governments don't object to foreign currency being brought in, although they may restrict the ways it can be spent. Some countries don't allow foreigners to buy property or start businesses. They are afraid of being dominated by foreigners using their money. When one Japanese businessman flew to Australia and bought ninety business premises all in one day, without stepping out of his limousine, the Australian government immediately passed a law forbidding foreigners to buy premises. Britain no longer has exchange controls. Other countries do and, if so, you will have to comply with them if you want to buy that sun-soaked villa.

exchange rate - this tells you the number of Euros, Dollars, Yen etc. your pound will buy you. The rates change from day to day for each currency.

finance - see financial.

finance house - an organization that lends money to people by arranging for them to buys goods on hire purchase: a hire purchase company, in fact.

financial - simply means to do with money. You finance something when you find the means to pay for it. I knew a girl once who used to called her fiancé her 'finance'.

Financial Services Authority - This controls the UK financial services industry. They try and protect the public (investors, borrowers and lenders) from deceit and outright fraud. All advisers must register with them. It is a crime for unregistered people to try to part you from your money. You can check on the FSA website if the person who approaches you is registered or not.

foreign currency - the notes and coins issued by other countries for use inside their own borders. Some countries limit the amount a visitor can bring in or take out again. Some, like China, even produce a special currency that only tourists can use.

foreign currency mortgage - a mortgage where, instead of borrowing in pounds and repaying in pounds, you borrow and repay in another currency, hoping to pay less interest. You may borrow in Euros in Germany at 5 per cent when the ordinary pound rate is 15 per cent. But neither rate is fixed. In a year or two, British interest rates may fall below German ones. Countries normally enjoy low rates when their currencies are strong and likely to get stronger. Examples are the Swiss franc and, historically, the US dollar. Currencies growing weaker include, unfortunately the pound sterling and (probably as more and more poor countries join it) the Euro. But the process does not happen evenly. All currencies pass through strong and weak periods, and fortunes are made and lost as a result. With a foreign currency mortgage, you gamble on the interest rate, on the exchange rate at which you pay that interest and on the exchange rate at which you repay the capital you borrowed.

Take Else. She borrowed £50,000 in New Zealand dollars when the interest rate was 5 per cent compared to 10 per cent at home. The exchange rate was 3 $NZ to £1, so she borrowed $NZ 150,000 and had to find $NZ 7,500 interest a year. At 3 $NZ to £1, this cost her £2,500. (In Britain, she would be paying interest of £5,000 - that is, 10 per cent of £50,000 - so she is ahead.)

It only needs the exchange rate to change to $NZ 2.5 to £1 for the interest to cost her £3,000. If the New Zealand interest rate rises to 8 per cent as well, she may find herself paying £4,800 ($NZ 150,000 x 8 per cent divided by 2.5 to convert it to pounds.) So far she is still ahead.

Now suppose, when Elsie comes to repay the capital, that the rate is still $NZ 2.5 to £1. Instead of repaying the £50,000 she borrowed, she will have to find £60,000 (150,000 divided by 2.5)!

forward contract - an agreement to buy or sell something at a future date at a price to be fixed now.

FSA - see Financial Services Authority.

futures market - many crops (cocoa, coffee) and metals (tin, copper) are bought and sold in huge quantities in markets in London called the commodity markets. People can buy or sell before the crop has even been harvested or the metal mined. There is not a coffee bean in sight; these are simply paper transactions. People can buy or sell for some future date without actually spending a penny. If things go wrong, not only can you lose all your capital but you may have to spend more on top to cover your debts. This makes betting on the horses look safe.

futures trading - buying and selling forward contracts (sometimes called 'futures contracts'). Many futures contracts are made on the commodity markets. They are also made in other areas like foreign currencies and even shares.

gilt-edged securities (sometimes just called gilts) - when a government wants to raise money to finance its activities but it does not want to increase taxes, it will sell gilts. A gilt may be dated or undated. If it is dated, the government will return your money in the year stated. Otherwise, the government does not promise when it will repay. In the meantime, you receive a fixed amount of interest. If you want your capital you can sell your gilts to someone else on the stock market. You will not get the same as you paid for it. How much you get depends on the length of time before repayment and how high your interest rate is compared with other interest rates at the time you want to sell. Gilts are safe investments.

goodwill - an invisible asset. It represents the difference between a brand-new business and one in full swing. The existing one has regular customers, perhaps in a 'round'. People in the area know it, use it, trust it. It is established. If you buy an existing business, you usually have to pay for the goodwill.

gross - the full amount before anything has been deducted from it. If you take a job at £500 a week, this is your gross pay. The opposite of net. See income.

guarantor - someone who promises, in writing, that if another person cannot pay their debt, the guarantor will pay it for them.

hire purchase (or HP) - an agreement you sign with a hire-purchase company. If you want to buy a car from a garage, the hire-purchase company will buy the car and become its owner. You will pay the company the purchase price plus interest over a period of years, by instalments. At the end of the time, the vehicle becomes yours, although, of course, you have been using it in the meantime.

identity theft - while this is not strictly a financial term, it can empty your pockets. Someone (anywhere in the world) finds out details about you, financial and otherwise, then pretends to be you over the phone or internet. They can do anything from buying goods, taking out loans in your name to blatantly criminal activities, leaving you with the worry and expense of proving your innocence.

income - first, what you earn though work, and, second, what your assets earn for you. The income from the money you put in the building society account is the interest you receive. The gross income from a house or flat you let out is the rent you receive for it. The net income is the sum left after you have deducted your expenses from that rent.

income tax - a tax the government charges on all sorts of income. It is collected from employees by the Pay As You Earn (PAYE) system before they receive their wages. The self-employed also pay income tax, normally half in January and half in June. How much they pay is based on how much profit they show in their accounts with various adjustments.

inflation - a time when prices go up and up. It is more a symptom than an illness. You may suffer from inflation, but as yet, no one really knows enough to prevent or cure it. There is nothing new about inflation; people complained about it in the 1500s when all the galleons sailed home to Spain laden with gold from the New World. The Spaniards spent so freely, they forced up prices all over Europe.

inheritance tax - a tax charged on death on the value of estates over about £263,000 at present (the figure changes regularly). This figure includes your home and virtually all you possess. Husband and wife are treated separately for inheritance tax. What a husband leaves to his wife, or she to him, is exempt. This means the assets are not included in the total value, and there is no tax to pay on them. When people talk generally about 'death duties' they mean inheritance tax.

Inland Revenue - a large government department concerned with collecting income tax and other taxes. Not VAT: this is collected by the Customs and Excise department. Both departments have offices nationwide and, of course, websites. They have just merged to become HM Revenue and Customs Department.

instant access - if a bank or building society account offers this, it means you can withdraw your money at any time without telling them beforehand and you don't lose any interest. Interest is paid right up to the day before you draw out your money.

interest - what you receive for lending your money to someone, like a bank, for a while; or what you pay when you borrow. For centuries in Europe, charging interest was considered wicked and unchristian. As a result, the only lenders were Jews. Some grew very wealthy. Time after time, Christians throughout Europe found it cheaper to kill off Jews than repay their debts.

interest-only mortgage unlike a repayment mortgage, you only pay interest through the life of the mortgage. At the end, you will owe all the capital you borrowed. You pay it off in one lump - perhaps by selling the house or flat itself and using the profit left after repaying the capital (if there is enough) to buy somewhere else. This sort of mortgage is not historically popular in Britain because it is usually more expensive. You borrow all the capital for the full length of the mortgage, so you have to pay more interest on it. People prefer endowment-linked mortgages so they can use the sum they receive to pay off the capital on the mortgage and keep their home.

interest rate - this is always shown as a percentage. It is the amount of interest you pay (or receive) if you lend (or borrow) money. The interest figure is meaningless unless you know the period. Usually, the rates quoted are annual - in other words, how much you would receive (pay) if the money was lent (borrowed) for a year. Credit cards like Barclaycard often quote a monthly rate. To calculate the annual rate roughly, you multiply that by 12. Then you realize that the annual rate looks jolly high and understand why they quote a monthly rate. To get roughly from a quarterly rate to an annual rate, multiply by 4. Chapter 11 describes how the government tries to protect borrowers from misleading rates by insisting that the ARP is always shown as well. Chapter 13 describes how the government tries to protect lenders by insisting that the AER is shown. As far as I know, there is no legal upper limit to the interest rate people can charge. Some of the small advertisements in the newspaper which don't demand security, and will even lend to people already overwhelmed by debts, demand a horrific 65 per cent. You should be quite desperate for money to consider paying more than 20 per cent. Even at this rate, you borrow £5 but pay back £6. If base lending rate rockets that high, you may have little choice.

investment trust - a limited company set up to invest in the shares of other companies. Members receive shares.

invoice - a bill

Individual Savings Account - this is the latest way in which the government tries to encourage people to invest by allowing small savers whose investments meet certain conditions to receive their income free of tax.

ISA - see Individual Savings Account

job-sharing - where two people, usually female, do one job. One may work mornings, the other afternoons, or both alternate days. Some jobs lend themselves to this, like factory production line work, some social work jobs, copy-typing and nursing. Some do not - for example, jobs where each individual deals personally with their own clients, or where events move so fast that continuity is vital, or where you are overseeing the work of others.

lease - a written agreement to rent a property (house, flat, shop etc.) for a set length of time. The person who owns the property is called the 'lessor', the person who will be paying the rent and using the premises is called the 'lessee'. If you lease a whole house and only want to use one floor, you may - if the lease allows it - sub-let the rest. The original lease is then called the 'head lease', and the new one between you and your tenants is called a 'sub-lease'. Obviously, the sub-lease cannot last longer than the head lease.

lease purchase - a variation on hire purchase which can take many forms. It can involve paying a huge first instalment or a huge final instalment; or there may be an agreement that the vehicle, for instance, be sold at the end of the period, or a difference in the date when you as borrower finally own the article. Unlikely to be cheaper than hire purchase, although the repayment times may suit you better.

legacy - money paid out or goods handed over after someone's death because this is what the will ordered. The person leaving the legacy is called the 'legator'. The person who receives it is called the 'legatee'.

liability - the opposite of an asset. It is a disadvantage, a present or future responsibility. All the debts you owe others are your liabilities. These people are your creditors.

life assurance - you pay regularly over a number of years. If you die, your dependants receive a sum of money. If you are still alive and kicking at the end of the policy, say at age 60, you receive a sum of money. Either way, someone gets paid.

life insurance - you pay regularly over a number of years. If you die, your dependants receive a sum of money. If you survive, you have been protected throughout the period, but your contributions are lost. Also called 'term insurance', it is far cheaper than life assurance. Building societies usually insist on term insurance. Then, if you die during the course of your mortgage, your dependants receive the money and use it to pay off the mortgage and keep a roof over their heads. Sometimes this is called mortgage protection insurance.

life interest - if you have a life interest in an asset , you can use it for as long as you live. It does not belong to you, so you cannot sell, change or destroy it. You can leave someone a life interest in your will like so: 'I leave the country cottage to Great-Aunt Jane to live in as long as she chooses, and on her death, I leave it to my children.'

limited company - people talk loosely about a company when they mean any sort of business run by a person on their own or by a group of people. A limited company means a legal person, set up by shareholders to run a business. The shareholders appoint directors - often themselves - to do the actual work. The company continues to live even though the shareholders and directors may change and the trade finish. It only dies when it is 'wound up'. It is called 'limited' because, if the trade fails and the company owes more money than it can find, the shareholders' loss is limited to their original stake. That is the money they put up to buy the shares. All their other assets, like the family home, stay safe.

liquid asset - an asset that is easily turned into cash.

liquidity - how quickly you could turn your assets into cash if necessary. The more liquid, the better. Many firms have gone bankrupt because, although they had plenty of assets - far more than their liabilities - the assets could not be sold quickly enough to meet a sudden need for cash, and the firm could not borrow enough to tide itself over. This is called a 'liquidity crisis'. Sometimes at this point firms get bought up cheaply by rivals or by asset strippers. I explain asset stripping in Chapter 14.

the market - all the other buyers and sellers.

maturity - when a policy or investment finishes. If you invest in a ten-year scheme in 1999, it will mature in 2009. This is when you will get your money.

mortgage - a very long-term loan, sometimes for as much as thirty-five years, usually to buy a house or flat, a business or a farm. Building societies give mortgages; so do banks and some insurance companies. They all demand security for the loan. They keep the deeds of the property or land (the legal document proving you own it). If you cannot keep up your repayments of interest and capital, they may make you sell the property. They take the money owing out of the proceeds before they release the deeds. See also foreign currency mortgages.

mortgage protection insurance - a life insurance policy that a borrower takes out. If he or she dies before the mortgage is repaid, the insurance company pays off the mortgage and the spouse or other dependants can keep the family home.

mutual - restricted to members only. A credit union only borrows money from members and only lends money to members. All building societies used to be mutual. When you opened an account you become a member of the society. This is why you receive lots of rubbish in the post about elections and voting to light the fire with. Now, Nationwide is one of the few left. Mutual concerns do not aim to satisfy shareholders but members.

National Insurance - money the government takes from employees (through PAYE before you receive your wages), the self-employed and employers. The money pays for the National Health Service, old age pensions and other benefits like unemployment benefit. The system is operated by the Department of Work and Pensions with hundreds of local offices nationwide. In addition, they store everyone's pension details in a vast computer in Newcastle. www.thepensionservice.gov.uk/

negative equity - suppose your house cost you £200,000 and you bought it with a mortgage of £150,000. If the value of all properties falls and you could not hope to sell your house for as much as £150,000, you have negative equity in your house. This happened widely in the UK in the 1990s. It is normally a short-term problem, for people who must sell. After a few years, prices normally rise dramatically again.

net (sometimes spelt nett) - the amount of a sum left after the deduction of whatever has to be deducted. Employees receive their wages net of tax. The opposite is gross.

offshore - means based anywhere abroad or in the Channel Islands or the Isle of Man. These last two have their own tax rules and are tax havens.

onshore - the opposite to offshore. It means based in mainland England, Scotland, Wales, Northern Ireland or any of the British islands except the Channel Islands or the Isle of Man. Onshore organizations are covered by British tax rules.

option - if you possess a legal option, you have a contract giving you the right to do something in the future. Perhaps you rent a house and the rental agreement gives you the right to buy it for a set price. An option is a choice. You don't have to buy. If you do, you 'exercise your option' or 'take it up'. Options can be very valuable. One of my clients had an option to buy an aerodrome for £1 million. The land must be worth a hundred times that. For the moment, he has no intention of buying, but his option is a valuable asset, increasing in value all the time. Sometimes, limited companies offer their shareholders the right to buy extra shares at a special low price. Depending on the contract, you may be able to sell your option to others. You may come across options under the name of 'warrants'.

overdraft - you agree this with your bank in advance. The manager allows you to withdraw more money than you actually have in your account, up to a certain limit. An overdraft can turn out cheaper than a loan because you don't start paying interest until you actually spend the money. With a loan, you pay interest from day one on the full amount, whether you have spent it or not. Sometimes, you can agree, at a later stage, to extend your overdraft - this means increase the limit, to allow you to draw out another £5,000, say.

overheads - the background expenses of a business to provide the setting for the owner to earn money, such as payments for electricity, wages, gas and rent. Sometimes people are even vaguer and call any running cost of a business an overhead.

p.a. - see per annum.

partner -someone who joins with one or several others to run a business. They pool their capital and expertise and share the profits. Each partner has joint and several liability. This means any one partner is responsible for their own debts and also for the debts of all the other partners.

partnership - see partner.

Pay As You Earn (or PAYE.) - a system that employers must operate on the wages of employees. Employers calculate how much income tax and National Insurance to deduct for each employee, using tables and a tax code (now, of course, incorporated into a computer package) given them by the Inland Revenue. They pay over the net wages to the employee. They pay the tax and NI deducted to the Inland Revenue, together with their own NI contributions for each employee. Britain invented and has operated PAYE successfully for over fifty years. The French are still fighting tooth and nail to prevent its introduction there. They claim it will never work!

per annum - a year. Sometimes written 'p.a.'

personal guarantee - a written promise, made by a director of a limited company, for example, that if the company cannot pay its debts, he or she will pay them out of his or her own pocket.

portfolio - if you stock up at the supermarket, you end up with a trolleyful. When you buy various different shares, your trolleyful is called your portfolio.

preference shares - these are shares in a company which must receive their dividend, or be repaid their capital, before ordinary shares, so they are a bit safer.

premium - a payment or instalment you pay, for instance, to take out an insurance policy. Sometimes, as with a lease, the premium means the first payment only. It is the lump sum you pay to get the lease.

principal - the original sum lent, invested or borrowed.

private limited company - one where the shares belong to a small number of people, often just one family. The shares are not bought or sold on the stock market.

professional indemnity insurance - this is insurance taken out by members of a profession like chartered accountants. If a member, or their employee, makes a mistake or is dishonest, as a result of which the client loses money, the insurance reimburses the client. Such insurance often forms a condition of membership of the profession. The sum covered will run into millions. Mistakes come ever more expensive.

profit - first, the amount of income a business earns, less all the expenses of earning that money; second, if you buy and sell an asset, the difference between what you paid for it and what you received, after deducting the costs of purchase and sale, like legal fees. There is a world of difference between these two sorts of profit. Business profits suffer income tax and profits on the sale of assets may suffer capital gains tax. In everyday speech, people describe both as profits. The opposite is a loss.

profit and loss account - this records what came into and what went out of a business in the year. The difference between the two is the profit (or loss). This account is a history of the business. It includes income items not capital ones.

property trust - like a unit trust but it uses investors' money to buy property, often office blocks and business premises. Income comes from rents received and profits from the sale of premises.

prospectus - a glossy brochure encouraging you to invest, say, in a new company.

public limited company (or PLC) - a company that the public can buy shares in through the stock market. Such a company has thousands of shareholders.

quotation - like an estimate but fixed. The price someone will charge to do a job; or, if you tell them how much you want to spend or invest, the amount they calculate your money will earn you.

rate of interest - see interest rate.

repayment mortgage - the normal sort of mortgage where you repay capital as well as interest as you go along. Alternatives are interest-only mortgages and endowment-linked mortgages.

risk - with an investment, the likelihood of losing the original money you invested (the capital) as well as the income you should have earned on the investment. The more risky an investment, the higher the income you want from it to justify the risk.

securities - any piece of paper that represents money, such as stocks and shares, debentures and gilts.

security - what a lender demands from a borrower to guarantee that the borrowings can be repaid. A building society will keep the deeds of a house so that the borrower cannot sell it and run off with the building society loan.

self-employment - if you start up your own business, you become self-employed. There is nothing to stop you being an employee in the daytime and self-employed in the evening, if you have the energy. You cannot be self-employed at the same time as unemployed: the DWP will soon stop your unemployment benefit and may prosecute you for not telling them. Self-employed people have a contract for services, probably many, and receive their income in full. They pay income tax and National Insurance later, separately.

selling forward - you agree to sell something at a future date at a price which is fixed now.

settlor - someone who sets up a trust.

share - ownership of a small part of a limited company, like Vodaphone or Microsoft. As you own it, you have a say in how the company is run and can vote to appoint the directors to run it. You are entitled to receive a share of the company's profits. What you receive is called a dividend. But the directors have discretion not to distribute profits. They may choose to plough them back into the business or buy back shares instead. In which case, you receive nothing. If the company runs up debts it cannot pay, you are not responsible for paying them. If the shares become worthless, you lose what you paid to buy them in the first place. The shares of public limited companies are bought and sold on the stock market.

share certificate - the piece of paper that proves you own a share.

shareholder - someone who owns a share in a limited company.

sole trader -someone who runs a business on their own. A sole trader may employ other people but is the only owner.

spot rate - the going rate if you buy or sell here and now. The alternative is called the 'future rate'. Similarly, the spot price of something is the here-and-now present price - like the one you pay in any shop.

stakeholder pension - the government set these up in 2001 to give people without a second pension the chance to build one up. For example, those whose employer has less than five employees, those who do not work at all (perhaps they care for an invalid relative) or those who earn very little. The idea is for the insurance industry to offer a no-frills, ultra-cheap pension arrangement that can be changed if your circumstances change. The government helps by paying into your pension scheme the amount of the tax you would have paid on your contribution if you had been a tax-payer. In general, a low earner (£11,600 a year in 2005) with a choice between one of these pensions and a state second pension, would do better to choose the state second pension. Women with a choice between a stakeholder pension and a pension provided by an employer would do better to choose the employer's pension - especially if the employer contributes. But a stakeholder pension is better than nothing. http://www.dwp.gov.uk

standing order - an instruction you give your bank by filling in a form, to pay a certain bill regularly for you on a certain date, perhaps your mortgage payment. Watch your standing orders, because it is easy for the bank to continue paying although the debt, say hire purchase has been paid in full. This is not the same as a direct debit. You keep more control over a standing order.

sterling - the name for the British currency, pounds and pence.

stock - the goods that traders buy to sell in their shop. If you buy a shop you often have to buy the existing stock with it. Stock must be counted and valued before accounts can be prepared. This is called 'stock-taking'. Stock is also the old word for a group of shares.

stock market - traditionally men called jobbers and brokers met to buy stocks and shares in public limited companies for their clients. The building used was called the Stock Exchange. The original one was in London, continental stock exchanges are often called Bourses (literally Purses). The United States has two exchanges in New York called Wall Street and Nasdaq. Nowadays, with modern technology, you can buy and sell through your bank too. And on-line. All the people occupied in buying and selling shares are known collectively as the stock market.

stocks and shares - in practice, the same thing. See share.

subsidiary company - just as human beings can have children, so can limited companies. A 'parent' company can set up a subsidiary company to form a 'family' or group of companies. A subsidiary may have its own subsidiaries. Some 'families' can have hundreds of member companies, all owned by the 'parent' company.

supply and demand - the basic rule of the subject of economics. The more people supply an item the cheaper it will be. When there is a glut of tomatoes, they're very cheap. The more people demand an item, the more expensive it will be. When everyone is clamouring to see the latest Lloyd-Webber show or the men's singles final at Wimbledon, touts can sell tickets for many times more than their original value. The same rules apply to the supply and demand for services. Brain surgeons receive high wages because there are few of them. If typists earned as much as pop stars, the colleges would not be able to cope with the rush of people eager to learn to type.

tax exile - a very wealthy person who decides he or she does not want to pay British taxes and goes to live in a tax haven. Tax exiles need move no further than Jersey. Strange as it seems to us, England is a tax haven for multimillionaires from Scandinavia where the taxes are astronomic.

tax haven - somewhere abroad where you can put your money or even live; and, because the local tax rates are low, you pay a lot less tax than you would if you lived in Britain. The world is dotted with tax havens, such as Andorra, although some are rather unpleasant, unstable places to live. You can imagine the sort of sharks they might attract. Someone once called them 'sunny places for shady people'.

tax return - the form sent out by the Inland Revenue in April on which you enter details of all your income for the last year. You also enter any profits or losses you have made on selling assets. In practice, the Revenue often don't need to send returns to employees every year. The self-employed complete and return them annually with a copy of their business accounts.

time share - a developer builds a holiday complex or splits up an old house and sells holiday-makers the right to use a flat or villa in it for one week each year, say, for ten years, or for ever. People can sell their rights if they want to. There are exchange schemes where you can swap your week in Cyprus, or Scotland, for a similar week in Italy. The developers make a lot of money from sales and management fees. Generally, time shares are a way of enjoying your money rather than an investment. Whether it is worthwhile depends on how much you spend on your holidays. Prices may increase yearly, and so can management fees. If your week is out of season, you may find your management charge higher than you would have had to pay to rent the flat as an outsider.

top-up mortgage - a second mortgage, usually at a higher interest rate, often offered by banks or solicitors, to top you up to the amount you need to buy the house or flat you want.

tracker - you will find tracker funds and tracker mortgages. A tracker fund aims to do as well as a set target. No better, no worse. Computer programmes enable it to buy and sell shares to achieve this. By taking the decision out of human hands, you are no longer reliant on the skills of the fund managers. Nor does the fund need to employ highly paid analysts. So, in theory, they should be cheaper to run, giving the investor more profit. On the other hand, if all funds are computer-managed, they all buy and sell at the same time at the least competitive prices.

The interest rate you pay with a tracker mortgages follows the ups and downs of the base rate - it tracks it.

traveller's cheques - you buy them before you leave Britain. You can cash in any left when you return. Each cheque is for a fixed amount; you sign it in advance and then again when you change it for local currency. Unlike cash, if your traveller's cheque is lost or stolen, you can claim your money back from the organization (like Thomas Cook or American Express) that issued them. So traveller's cheques are safer than cash.

trust - a legal arrangement where one person looks after another's assets. A toddler may inherit, but adults will need to manage everything until he or she comes of age. Some trusts last for ever - perhaps the person who owns the property is incurably disabled. The people who manage the trust are called 'trustees'. Some trusts allow the trustees wide powers to spend trust money as they see fit; others strictly limit them. Originally designed to protect the weak, trusts are now used widely to avoid tax. Most wealthy families set up one or several trusts. You can set up a trust at any time or leave instructions in your will for one to be set up after your death. The Settlor can also be a trustee. A trustee cannot be a beneficiary.

trustee - see trust.

unit trust - an organization which allows a lot of small investors to invest in a wide range of shares. It takes in their money, giving them a number of 'units' in return. It employs experts to use this money to buy shares in different companies. These shares will yield dividends and also capital profits (or losses) when they are sold. This income is handed on to the investors after deducting the management expenses of the unit trust.

value added tax (or VAT) - a tax collected by the Customs and Excise department. It is a straight percentage of the price of many of the goods and services you buy, like dinner in a restaurant. Customs and Excise are much stricter and more powerful than the Inland Revenue. They have the power to enter and search premises, and will prosecute for the slightest delay. Never mess them about. It will be interesting to see how the two departments use their powers now they are united as HM Revenue and Customs.

VAT - see value added tax

Incidentally, you will not find a reading list at the end of this book. Why not? Because, by and large, the sort of knowledge you need is not found in books. Finding out what is on offer now, in the real world, means asking and listening, picking up snippets from journals and advertising bumf - and generally growing more aware of the world around you. You cannot do that with your nose in a book.

And the internet? Well, in many ways, that makes life more difficult, not easier, with the bewildering array of choice and the excess of information. Internet use demands extreme prudence - all the rogues in the world can now find their way to your door - but luckily women come with built-in prudence.

Jargon changes all the time - it is a deliberate ploy of salesmen to befuddle astute customers. The internet is very helpful. Here is just one site with a vast glossary to help you find the latest confusing term.

http://www.finance-glossary.com/terms/