Money glossary

Amortisation schedule

An amortisation schedule is the month-by-month table behind a repayment loan. Every row shows the date, the payment, how much of that payment is interest, how much reduces the debt itself, and the balance left afterwards. Run the table to the end and the balance reaches zero on a specific date. That date is the single most useful number a borrower can have, and it is almost never printed on a statement.

The mechanism is simple. Interest for a period is charged on the balance still outstanding, so it is largest at the start and shrinks as the debt comes down. With a flat monthly payment, the interest share falls month after month and the principal share rises to fill the gap. On a long loan the early years can be mostly interest, which is why two loans with the same monthly payment can be in very different places after three years.

A schedule is also the only honest way to see what an extra payment does. Paying more than the instalment removes principal immediately, so every future interest charge is calculated on a smaller balance, and the effect compounds forward for the rest of the term. The final row is usually a few cents different from the others, because rounding has to land somewhere.

You can build one for your own loan with the loan payoff calculator.

Annuity vs linear loan annuïteit vs lineair

Annuity and linear are the two common shapes a repayment loan can take. They borrow the same money at the same rate; they differ only in how the repayment is spread across the term.

An annuity loan (annuïteitenlening) keeps the total monthly payment constant for the whole term. Inside that fixed amount the split moves: a lot of interest and a little principal at the start, the other way round at the end. The appeal is predictability — the same figure leaves the account every month, so it is easy to budget around.

A linear loan (lineaire lening) keeps the principal portion constant instead. You repay the same slice of the debt every month, and because the balance falls steadily, the interest charged on it falls too. The total payment therefore starts higher than an annuity and decreases every month. Because the balance comes down faster, a linear loan accrues less interest over the full term, at the cost of a heavier start.

In the Netherlands both shapes are standard mortgage products (annuïteitenhypotheek and lineaire hypotheek), and which one suits a household depends on income now versus income later, on tax treatment, and on how much room there is in the early years. That is a conversation for a qualified adviser, not a definition.

APR vs interest rate

The interest rate is the price of the money you have borrowed, quoted as a percentage per year. The APR — annual percentage rate, and in EU consumer-credit documents the APRC or, in Dutch, the jaarlijks kostenpercentage — is a wider figure. It annualises the interest together with the compounding frequency and the mandatory costs of taking the credit out.

The gap between the two is made of fees and timing. An arrangement fee, a compulsory administration charge or a required insurance premium do not appear in the interest calculation, but they are money you pay to borrow, so they belong in the APR. Compounding matters too: a rate charged monthly costs slightly more over a year than the same nominal rate charged annually.

This is why two offers quoting an identical interest rate can carry different APRs, and why the APR is the number regulators want shown for comparison. It has limits. It generally assumes the loan runs its full agreed term and that nothing changes, so early repayment, a variable rate or a promotional period can all make the realised cost differ from the advertised APR.

For monthly-payment maths, the nominal rate is the input; for comparing two offers against each other, the APR is the fairer figure.

Disposable income besteedbaar inkomen

Disposable income is what is left of your income after tax and compulsory social contributions have been taken out. It is the household equivalent of net pay: the money that actually arrives and that you can, in principle, decide what to do with.

It is routinely confused with a second term. Discretionary income is what remains after the essentials as well — after rent or mortgage, energy, insurance, groceries and transport. Disposable income is a large number; discretionary income is usually a much smaller one, and it is the smaller one that determines whether a new monthly commitment is comfortable or tight. Statistics offices and lenders tend to mean the first; people describing their own finances usually mean the second.

Two practical wrinkles. Disposable income is not steady for everyone: freelancers, shift workers and anyone on variable hours see it move month to month, so an average across a year is more informative than any single month. And it is not the same as available cash — money can be disposable on paper and already spoken for by a bill that lands next week.

Both figures are descriptive. Neither tells you what proportion should go anywhere; that depends on circumstances no definition can know.

Emergency fund buffer

An emergency fund is cash held aside for costs that are unplanned and unwelcome: a boiler that fails, a car that will not start, an excess on an insurance claim, a gap between contracts. In Dutch it is simply the buffer, and the word is used the same way — the money that means a bad week does not turn into debt.

It is usually sized in months of essential outgoings rather than as a flat amount, because the point is how long it keeps a household running. Common rules of thumb run anywhere from one month to six, and they disagree for good reason: the right size depends on job security, whether one income or two supports the household, how old the car and the boiler are, and what insurance already covers. There is no formula, and anyone presenting one as settled is overstating it.

Two features distinguish an emergency fund from other savings. It is for events you cannot schedule, which is what separates it from a sinking fund. And it needs to be reachable in days, not tied up somewhere that penalises withdrawal, because a fund you cannot get at during an emergency is not doing the job.

Building one is ordinary arithmetic — a target, a date, a monthly amount. The savings goal calculator does that part.

Envelope budgeting huishoudboekje · het enveloppensysteem

Envelope budgeting divides income into per-category pots and limits spending in each category to what its pot holds. Classically the pots were literal: cash counted out into paper envelopes marked groceries, fuel, going out. When an envelope was empty, that category was finished until next month. Borrowing from another envelope was allowed, but you had to physically do it, which made the trade-off impossible to ignore.

The Dutch tradition runs alongside it. A huishoudboekje is the household book in which income and spending are written down by category, and het enveloppensysteem is the cash version of the same discipline. Both are old, both survive because they work, and both are essentially bookkeeping with a rule attached.

Digital envelopes keep the rule and drop the cash. Category budgets in an app are the same mechanism: an amount assigned up front, a running total, and a visible boundary. What is lost is the physical friction of an empty envelope; what is gained is that card payments, direct debits and transfers are all covered, which a cash system cannot manage in a country where most spending is contactless.

Envelope budgeting is about containment — keeping each category inside its line. That makes it a close relative of zero-based budgeting, which is about assignment, and the two are often run together.

Financial month / payday month

A financial month is a budgeting period that runs from payday to payday instead of from the 1st to the end of the calendar month. If you are paid on the 24th, your financial month runs from the 24th to the 23rd, and the calendar plays no part in it.

The reason to bother is that most budgeting tools reset on the 1st, and for a great many people that date falls in the middle of a pay cycle. In the Netherlands and Belgium salaries commonly land somewhere around the 23rd to the 25th. Spend on the 27th and a calendar budget charges it to a month that has four days left, then hands you a clean slate on the 1st, funded by money you received the week before. The result is a budget that looks tight at the end of one month and unrealistically generous at the start of the next, when nothing about your actual position changed.

Running the month from payday fixes the mismatch. One pay packet funds exactly one budgeting period, so the amount coming in and the amount going out describe the same stretch of time. Bills that fall near the boundary land in the period the money for them arrived in.

Weekly and four-weekly pay create the same problem more often, and are handled the same way.

Fixed costs vaste lasten

Fixed costs are the commitments that recur on a predictable date for a predictable amount: rent or mortgage, energy and water, insurance, council and local taxes, phone and internet, childcare, transport passes, subscriptions, and loan instalments. In Dutch they are the vaste lasten, and the phrase carries the same weight — the part of the month that is already decided before you decide anything.

The distinction from variable costs is about predictability, not importance. Groceries are essential but vary week to week; a streaming subscription is inessential but perfectly fixed. Both matter, and both need tracking, but only fixed costs can be forecast months ahead with any confidence, which is what makes them the backbone of a projection.

Fixed does not mean unchangeable. It means the amount and date are set until you change them. Insurance can be re-shopped, energy tariffs switched, subscriptions cancelled — and because these costs repeat every single month, a change to one of them is worth more over a year than the same saving found once in a variable category.

The practical value of listing them is that the total tells you what your month costs before you have bought anything at all. Everything after that number is a choice.

Net vs gross income netto vs bruto

Gross income (bruto) is pay before deductions. Net income (netto) is what reaches the bank account after income tax, social contributions, pension and anything else withheld at source. Job adverts, mortgage assessments and salary comparisons almost always quote gross; budgets only work on net.

The distance between the two is larger than people expect, and it is not a fixed percentage. It moves with tax bands, credits and allowances, so a rise in gross pay does not translate one-for-one into a rise in take-home pay. This is why budgeting from a gross figure produces a plan that never quite balances — the money was never there to begin with.

In the Netherlands there are two extras worth knowing about. Holiday allowance (vakantiegeld) is accrued across the year and usually paid as a lump sum in May, and some employers also pay a thirteenth month at the end of the year. Both are gross amounts that arrive taxed and irregular, so treating them as ordinary monthly income overstates a normal month, and forgetting them entirely understates the year.

A reliable approach is to budget on the net amount that lands in a typical month, and to record irregular payments separately as the one-offs they are.

Safe to Spend

Safe to Spend is a derived figure: the money you can spend freely for the rest of the current period once everything already committed has been taken out. It answers a question a bank balance cannot, because a balance is a snapshot of the past and says nothing about the direct debits queued behind it.

Calculating it honestly means subtracting several things at once. The bills due before the period ends but not yet paid. The amount your category budgets still expect to consume. Loan instalments and any savings contribution you have committed to. What remains, and only what remains, is genuinely uncommitted.

A well-behaved version is capped in two directions. It cannot exceed the room left in your budgets, because spending beyond a budget breaks the plan even when cash is available. And it cannot exceed the cash you will actually hold, because a generous budget is meaningless if the money is not there. The lower of those two is the honest answer. A figure that ignores either can be cheerfully positive right up to the moment a payment bounces.

It is a description of your own numbers, not a permission slip. If the underlying entries are incomplete, the figure is optimistic in exactly the amount you left out.

Sinking fund

A sinking fund is money set aside every month for a cost you already know is coming but that does not arrive monthly. Annual insurance premiums, road tax, new tyres, the boiler service, Christmas, a holiday, the laptop that will need replacing in about two years — all of them are certain, and none of them are convenient.

The arithmetic is deliberately dull: take the expected total, divide by the number of months until it is due, and put that amount aside. Nine hundred euros of car maintenance expected across a year is seventy-five euros a month. The bill does not get smaller, but it stops being an event.

The distinction from an emergency fund is knowledge. A sinking fund covers costs you can name and roughly date; an emergency fund covers the ones you cannot. Mixing them is a common way to end up with neither, because the emergency fund gets drained by predictable expenses and is empty when something genuinely unexpected happens.

The other habit worth noting is what happens after the bill is paid. A sinking fund usually restarts immediately, because the same cost will come round again next year. Treating it as a permanent line rather than a one-off project is what stops the annual premium being a surprise for a second time.

The monthly figure comes straight out of the savings goal calculator.

Zero-based budgeting

Zero-based budgeting means giving every unit of income a job until nothing is left unassigned. Income minus everything you have assigned equals zero. The method is borrowed from corporate finance, where each department rebuilds its budget from nothing every cycle instead of adjusting last year's figures.

The zero is the part people misread. It does not mean spend everything. Saving is a job. Repaying debt is a job. Sitting in a buffer is a job. A budget where two hundred euros is assigned to savings and nothing is left over is a completed zero-based budget, not a maxed-out one. What the method removes is unassigned money — the leftover that quietly disappears by the end of the month with nobody able to say where.

In practice it means listing income for the period, then allocating it across fixed costs, category budgets, loan payments and savings until the remainder is zero. When something unexpected turns up, you do not overspend; you move money from one assignment to another and watch what it costs. That trade-off is the entire point, and it is also why the method suits people with steady income better than people with volatile income, who may prefer to budget on the last confirmed amount rather than the expected one.

It pairs naturally with envelope budgeting: zero-based decides where the money goes, envelopes keep it there.