This might be a horrible thing to admit: when it comes to money, sometimes we forget the basics. Yes, thinking about finance sucks (big time), but avoiding the topic won’t help your career or your personal life.
Now, what money questions have you asked Google lately? Here are 4 straightforward concepts. It’s time to get answers.
1. What’s a Credit Score?
It’s like the number you got on school GPA, but in this case it grades you as a credit-worthy person. You’re going to need a Credit Score to do most big money-related commitments: renting an apartment, getting a car loan, etc.
How can you determine your score? Key factors include payment records, amount owed, length of history of your accounts and whether you’ve got a mix of different types of credit.
2. What’s Good Debt?
As simple as it sounds, debt is usually put in one category or another: good or bad. However, these two categories aren’t based on how you feel about debt, but rather, how it affects your credit.
Good debts usually have lower interest rates and are seen as investments, like a mortgage or student loan. On the other hand, bad debt is used to pay for things that won’t create value in the long run, such as consumer loans or credit cards.
3. What’s a 401(k)?
A 401(k) is a retirement savings plan sponsored by an employer. It basically lets you save and invest a portion of your paycheck before taxes are taken out. Most companies allow you to enroll in a 401(k) right away, although some smaller employers might make you wait up to a year.
How much should you put in? As much as possible, being mindful that you’ll need to have enough money to live, eat and pay down any debt you have.
4. What’s an IRA?
Short and sweet: it’s a savings account with big tax breaks. It stands for Individual Retirement Account and it’s a great way to sock away cash for your retirement.
If you still don’t have a 401(k), you absolutely need an IRA if you want to start saving and enjoy your retirement.
Any other questions we haven’t looked at? Let us know in the comments below.
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