Money · Reference

The money glossary

58 words you will meet in payslips, loan letters, policies and fund documents, explained plainly. Definitions, not recommendations.

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Planning

Net worth: Everything you own minus everything you owe. A snapshot, not a score: a resident with an education loan can have a negative net worth and be on an entirely sensible path.; See also: Liquidity
Liquidity: How quickly something can be turned into cash without losing value. A savings account is highly liquid; a flat or a long lock-in investment is not.; See also: Emergency fund
Emergency fund: Money kept somewhere safe and easy to reach, set aside for the unexpected: a job change, an illness, a family need. How many months of essential costs it should cover depends on how secure your income is.; See also: Runway, LiquidityRead: A doctor’s first money plan
Runway: How long your savings would cover your essential costs if your income stopped. We think it is one of the most useful measures of financial freedom: it is the time you could take to choose, rest or change course.; See also: Emergency fund, Financial independenceTry the Doctor Wealth Calculator
Savings rate: The share of your income you save or invest. Over a career it usually matters more than finding the best investment.; See also: CompoundingTry the Doctor Wealth Calculator
Inflation: The general rise in prices over time, which means the same rupee buys less each year. Long-term plans should be judged after inflation, not before it.; See also: Real return, Nominal return
Nominal return: The growth of an investment before allowing for inflation: the number usually quoted in advertisements and statements.; See also: Real return, Inflation
Real return: The growth of an investment after inflation: how much more it can actually buy. Our calculators use real returns, so every result is in today’s rupees.; See also: Nominal return, InflationTry the Doctor Wealth Calculator
Compounding: Earning returns on earlier returns, so growth builds on itself. Its power comes mainly from time, which is why starting early tends to matter more than starting big.; See also: Savings rate, CAGRTry the Doctor Wealth Calculator
Financial independence: Having enough savings and investments that paid work becomes a choice rather than a necessity. For most doctors the useful goal is not early retirement but options: the freedom to choose work on your own terms.; See also: Runway
Asset allocation: How your money is divided between kinds of investment, such as equity, debt and cash. It drives most of the risk and return of a portfolio, and should follow your goals and timeline rather than recent performance.; See also: Diversification, Rebalancing
Diversification: Spreading money across many investments so that no single failure does too much damage. It reduces risk without requiring you to predict which investment will do best.; See also: Asset allocation, Index fund
Rebalancing: Periodically moving money between investments to return to your chosen asset allocation, because markets move the mix over time.; See also: Asset allocation
Sequence-of-returns risk: The risk that poor returns arrive at the worst moment, typically just as you begin to rely on your investments. It is one reason to reduce risk as a goal comes closer.; See also: Asset allocation

Investing

Equity: Ownership in a company, through shares or funds that hold shares. Historically higher-growth and more volatile than most other asset classes; suited to long horizons.; See also: Volatility, Debt fund
Volatility: How much and how quickly an investment’s value moves up and down. Volatility is uncomfortable but is not the same as permanent loss for a long-term investor.; See also: Equity
Mutual fund: A pooled investment managed by a fund house and regulated in India by SEBI. Investors own units whose value moves with the fund’s holdings.; See also: Index fund, NAV, Expense ratio
Index fund: A fund that aims to match a market index rather than beat it, usually with low costs. A common choice for simple, diversified, long-term investing.; See also: Expense ratio, Diversification
Expense ratio: The yearly fee a fund charges, taken from the fund’s value as a percentage of your money. Small differences compound into large ones over decades, so it is worth checking.; See also: Direct plan, Regular plan
Direct plan: A version of a mutual fund bought directly from the fund house, with no distributor’s commission built into its cost.; See also: Regular plan, Expense ratio
Regular plan: A version of the same mutual fund bought through a distributor, whose commission is included in a higher expense ratio. The underlying investments are the same as the direct plan’s.; See also: Direct plan, Mutual fund distributor
NAV: Net asset value: the price of one unit of a mutual fund, calculated from the value of its holdings. A high or low NAV says nothing by itself about whether a fund is good.; See also: Mutual fund
SIP: Systematic investment plan: investing a fixed amount at regular intervals, usually monthly. It builds the habit and removes the temptation to time the market.; See also: Compounding
Debt fund: A mutual fund that invests in bonds and similar instruments. Usually less volatile than equity but not risk-free: interest rates and credit quality both matter.; See also: Equity, Asset allocation
CAGR: Compound annual growth rate: the steady yearly rate that would take a single investment from its starting value to its ending value. Useful for one lump sum.; See also: XIRR, Compounding
XIRR: A return measure that accounts for money going in and out at different times, such as monthly SIPs. More meaningful than CAGR for regular investing.; See also: CAGR, SIP
PPF: Public Provident Fund: a long-term, government-backed savings scheme in India with a fixed tenure and rules on deposits and withdrawals. Check the current interest rate and rules before relying on it.; See also: EPF, NPS
EPF: Employees’ Provident Fund: a retirement savings scheme for eligible salaried employees in India, with contributions from employee and employer. Whether you are covered depends on your employer and pay.; See also: PPF, NPS
NPS: National Pension System: a regulated, voluntary retirement scheme in India that invests in a mix of assets, with rules on how much can be withdrawn and when.; See also: EPF, PPF
SEBI-registered investment adviser: A person or firm registered with the Securities and Exchange Board of India to give investment advice for a fee. SEBI has cautioned the public to take advice only from registered advisers; registrations can be checked on SEBI’s website.; See also: Mutual fund distributorSEBI press release, 2015
Mutual fund distributor: Someone who sells mutual funds and is paid through commissions included in regular plans. Distribution and advice are different roles; it is fair to ask anyone recommending a product how they are paid.; See also: Regular plan, SEBI-registered investment adviser

Tax

Tax regime: In India, individuals have been able to choose between tax regimes that trade lower rates against fewer deductions. Which suits you depends on your own deductions, and the rules are revised, so check the current law each year.; See also: TDS, Advance tax
TDS: Tax deducted at source: tax withheld by whoever pays you, such as an employer or a hospital paying consultation fees, and credited against your final tax bill.; See also: Advance tax, Tax regime
Advance tax: Income tax paid in instalments during the year rather than all at the end. It matters for doctors with consulting or practice income where not enough tax is deducted at source.; See also: TDS
Professional income: Income from practising a profession, such as private consultations, taxed differently from salary. Indian law includes a simplified option for eligible professionals; its conditions change, so check them with a chartered accountant.; See also: Advance tax
Capital gains: Profit from selling an investment for more than you paid. How it is taxed depends on the asset and how long you held it, and those rules have changed several times.; See also: Equity

Loans

EMI: Equated monthly instalment: a fixed monthly payment that covers interest and repays part of the loan. Early EMIs are mostly interest; later ones are mostly repayment.; See also: Amortisation, PrincipalTry the Loan Repayment Calculator
Principal: The amount borrowed, or the part of it still outstanding, on which interest is charged.; See also: EMI, Prepayment
Amortisation: How a loan is paid down over time through regular instalments. An amortisation schedule shows how much of each payment goes to interest and how much to principal.; See also: EMITry the Loan Repayment Calculator
Fixed and floating rates: A fixed rate stays the same for a set period; a floating rate moves with a benchmark, so your EMI or tenure can change. Read which one you have, and how it is reset.; See also: EMI
Moratorium: A period, common in education loans, when repayments have not yet begun. Interest usually still accrues; whether you pay it as you go or it is added to the loan changes the total cost.; See also: PrincipalTry the Loan Repayment Calculator
Prepayment: Paying off part of a loan early. It reduces the interest you pay overall; check whether your lender charges for it and whether it shortens the tenure or lowers the EMI.; See also: PrincipalTry the Loan Repayment Calculator
Collateral: An asset pledged as security for a loan, which the lender can claim if the loan is not repaid.; See also: Principal
Credit score: A number summarising your borrowing and repayment history, used by lenders to decide whether to lend and at what rate. Paying every EMI on time is what builds it.; See also: EMI

Insurance

Term insurance: Life insurance that pays a sum only if you die during the policy term, with no savings or investment element. It protects people who depend on your income, usually at a far lower cost than policies that mix insurance with investment.; See also: Sum assured, Nominee
Sum assured: The amount a life insurance policy pays out. The right amount depends on who depends on you and for how long.; See also: Term insurance
Health insurance: Insurance that pays for hospital and related medical costs. Doctors are not immune to illness, and an employer’s cover usually ends with the job.; See also: Waiting period, Co-payment, Sub-limit, Super top-up
Waiting period: The time after buying a health policy before certain conditions or treatments are covered. Read it before you need it.; See also: Health insurance
Co-payment: The share of each claim you pay yourself under the policy’s terms. Lower premiums sometimes come with higher co-payments.; See also: Health insurance
Sub-limit: A cap inside a health policy on what it pays for a specific item, such as room rent or a particular procedure, regardless of the overall cover.; See also: Health insurance
Super top-up: A health policy that pays once your total medical costs in a year pass a set threshold, used to add cover above a base policy.; See also: Health insurance
Professional indemnity: Insurance that covers a doctor’s legal costs and compensation in claims of professional negligence. Check what your employer’s cover includes before relying on it.
Nominee: The person named to receive the money from a policy or account on your death. Keep nominations up to date as life changes.; See also: Term insurance

Practice

Fixed costs: Costs a practice pays whatever the number of patients: rent, salaried staff, software, loan repayments.; See also: Variable costs, Break-even
Variable costs: Costs that rise with each patient or procedure, such as consumables and per-test charges.; See also: Fixed costs, Break-even
Break-even: The volume of work at which a practice’s income covers all its costs. Below it you lose money; above it you begin to earn a return on your time and capital.; See also: Fixed costs, Variable costs
Cash flow: The timing of money in and out. A profitable practice can still struggle if payments, such as insurer claims, arrive long after costs are due.; See also: Working capital
Working capital: The money needed to run day to day while waiting to be paid. New practices often underestimate it.; See also: Cash flow

The Handover

Money, decoded, every Sunday.

The Handover brings one considered letter a week, with money pieces that explain rather than sell.