Ever wondered how you could check your credit score or why you should? Or why your employer takes money off your paycheck month for you. Let’s find out:
What is a credit score and what do I need it for?
Credit is really important to your overall financial literacy. It’s a three-digit number, based on your credit history, that signifies your likelihood of repaying debt and it’s what banks use to decide if you’ll be approved for a credit card or loan. This number is influenced by factors like your debt load, if your bills are paid on time, your open lines of credit and more. A credit score ranges from 300 to 850.
You need your credit score for A LOT of things in life so learn how to nurture it. Bad credit can prevent you from owning your own home or even simply renting an apartment. It also can hinder your ability to lease a car, own a cell phone or borrow money from the bank for school. So treat your credit with care. The first step starts with learning your credit score – check it for free on Credit Karma.
What’s a 401K?
A 401K is the retirement savings plan that your employer sets aside for you each paycheck before tax. Since 2015, over 50 million workers participate in their employers’ 401(k) plans in America. Most plans offer a selection of mutual fund mix of stocks, bonds, and money market investments and you don’t pay tax on money accruing until you remove it.
Do I really need an emergency fund?
Yes. Here’s a calculator to find out what your emergency fund should be. Remember, you don’t contribute to an emergency fund forever – it’s only until you accumulate an amount that’ll keep you afloat during some bumps in the road. Once it’s fully funded you can direct the now excess money to another savings account or debt repayment.
Credit card balance – should I carry one?
Carrying zero credit card balance is the goal, it’ll keep your credit score the healthiest. You must pay your minimum payment, but include any extra you can spare until it’s down to zero. There are still some pervasive money myths that steer people to maintain a small balance – this is an incorrect way of thinking. The more consistently you pay off your credit cards in full, the higher your credit score will climb.
Should I really start saving for my retirement in my 20s?
You don’t really need a car to get places but it sure makes it easier. Starting young offloads pressure from your future that you’ll be glad you took off your back. People never regret saving money; it’s security and comfort. Plus, with the power of compound interest, at 65 you’ll have $528,000 from a $50 monthly investment earning 10% annually, starting from the age of 20.