You know what? School may teach us math, and it may teach us sums which have a dollar sign in front of them, it might teach us how much change we are entitled to from buying a few apples, but realistically, did we learn anything about money? When you enter the real world and all of a sudden need to know about credit scores, mortgages, even bail bonds, how are you supposed to know what each one is? If you need to get hold of money fast if you want to save money if you find yourself out of work and in debt, how are you to know what to do? Well here are the most frequently asked questions about money and hopefully the answers to help you along your way.
What is a Credit Score?
A credit score is numeric rating creditors use to assess borrower risk in making lending decisions. The most commonly used credit score is from FICO. This rating is defined by how much debt you have, whether you pay your bills on time, how many credit cards you have and any unpaid bills, among other factors. Your credit score can range from 300 to 850, and it affects most financial decisions such as if you want to buy a car, rent a home or get a loan. All of these things require credit reviews by the people or companies who you have borrowed money off before can, so annoying as it seems, to have not borrowed before, to have any credit history goes against you. You can check your credit score in addition to your credit report, which you should do at least once a year to make sure it’s accurate and reflects credit cards or debts you have. It’s essential that you know what your credit score is.
What is a 401(K)?
A 401(k) is a retirement plan offered by an employer that allows you take a percentage of your salary – however much you decide and put it aside for your retirement. This money usually gets invested on your behalf into a variety of stocks and shares so that your money can grow and create more wealth. You can choose your investments based on how much risk you’re comfortable with. Companies will vary with their 401(k) packages, but many of them offer “matching,” packages which means that they will match your contribution up to a certain percent.
What is an IRA?
IRA is an acronym for a section of the IRS Code, “Individual Retirement Arrangement” or “Individual Retirement Account.” It is a place to put money away for retirement that will then be invested for you. IRAs can be used in combination with a 401(k) or as an alternative to one if your company doesn’t offer a 401(k). The money will be invested across various stocks or shares that you choose so that it can grow over time.
What Does Investing Mean?
Investing means putting your money into a venture, it could be a company, a commodity or even property and it means that your money can make more money. The easiest way to begin investing is with your retirement account, but there are many ways to invest, and you don’t need a lot of money to do it. The best thing to do is to invest when you are in the right place with your savings, have paid off your debts and understand what you’re investing in.
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