Individual Financial Planning, LLC.

Underwriting: Underwriting is the process by which an insurance company determines whether, and on what basis, it can assume the risk of a specific life insurance policy. Also, underwriting is the business of investment bankers, who purchase new issues of securities from a company or government and then resell them to the public.

 

Unemployment: When a previously employed worker is “laid off” or involuntarily “not in gainful employment,” he or she is considered unemployed and possibly eligible for certain state and federal compensation and benefits.

 

Uniform Gift to Minors Act (UGMA): Also called Uniform Transfer to Minors Act (UTMA) in some states, these laws allow an adult to contribute to a custodial account in a minor’s name without having to establish a trust or name a legal guardian.

 

Uniform Transfer to Minors Act (UTMA): Also called Uniform Gift to Minors Act (UGMA) in some states, these laws allow an adult to contribute to a custodial account in a minor’s name without having to establish a trust or name a legal guardian.

 

Universal Life Insurance: Universal life insurance allows the holder to vary the amount and timing of premiums and to change the death benefit, based on the policyholder’s changing needs and circumstances. It is generally considered more flexible than traditional whole life insurance and includes a “cash value” savings feature that may allow certain premium funds the opportunity to earn tax-deferred interest.

 

Unsecured Debt: This type of debt is not guaranteed by collateral. If the borrower defaults, the issuer has no assets to back up the loan.

 

Variable Interest Rate: A variable interest rate is one that fluctuates with a measure or an index, such as current money market rates or the lender’s cost of funds. Often, variable interest rate loans have a fixed rate for several years and then become variable. The borrower is usually protected from dramatic increases in the loan rate by a “rate cap.”

 

Vesting: Vesting is the process leading to a future event at which time money or property held in trust belongs to a person, though it may not be available for distribution until a future date or occurrence. Vesting usually refers to the scheduled confirmation of ownership rights in qualified employee benefit retirement plans.

 

Volatility: Volatility refers to the relative rate at which the price of a security moves up and down, found by calculating the annualized standard deviation of daily change in price. The more volatile a security or mutual fund, the more it is subject to rapid and extreme price fluctuations relative to the market.

 

Voluntary Employee Contribution: An employee may be permitted to make voluntary contributions to a retirement plan, usually unmatched by the employer, in excess of mandatory contributions to his or her plan account. Voluntary employee contributions may be deposited on a pre-tax or post-tax basis that is pre-arranged.

 

Waiver of Premium: This insurance policy rider allows a policyholder to stop making premium payments if the insured suffers a permanent disability. Generally, there is an additional cost for this rider to become part of a policy.

 

Whole Life Insurance: Whole life insurance provides coverage for the insured’s entire life, provided the policyholder continues to pay the premiums. Premiums generally remain level for the life of the contract. In addition, there is also a cash value component that can be used to help supplement future financial needs.

 

Withholding: Withholding refers to the process by which an employer deducts a portion of employee wages, usually for income taxes. Employers base the withholding amounts on Form W-4, Employee’s Withholding Allowance Certificate, which employees submit when commencing employment. A Treasury account at a bank is the repository for withholding amounts and is a credit toward future tax liability for the calendar year.

 

Working Capital: During the business life cycle, working capital or money ensures that the business will be able to operate on a daily basis.

 

Yield: The yield of an investment is its annual gain or loss, generally expressed as a percent. To determine the yield on a bond, divide the amount of interest received from the bond by the amount paid for the bond. For example, suppose an individual paid $5,000 for a bond. At 5% interest, he/she would earn $250 annually in interest income. The yield, $5,000 divided by $250, would be 5%. Similarly, to determine the yield on stocks, divide the dividend received per share by the amount paid per share.

 

Yield To Maturity (YTM): The return an investor will receive if a long-term interest-bearing investment, such as a bond, is held until the date it becomes due and payable (maturity date). A calculation to determine the YTM of a bond, for example, would account for the interest rate, the payment schedule, the market value, the face value, and the length of the term.

 

Zero Coupon Bond: A zero coupon bond is a bond that makes no periodic interest payments, but rather sells at a deep discount from its face value. At the maturity date, the investor will receive the face value of the bond, plus the interest that has accrued over a fixed term.

 

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