4 Frequently Asked Questions About Money

1. What’s a credit score?
   1. A numeric rating creditors use to assess borrower risk in making lending decisions.
   2. FICO score: a rating defined by how much debt you have, whether you pay your bills on time, how many credit cards you have and other factors.
   3. Your credit score affects most financial decisions like buying a car or house
2. What is a 401(k)?
   1. A company-backed retirement account that takes a percentage of your paycheck and puts it aside for your retirement
   2. The money goes into your 401(k) and is taken from your paycheck before taxes reducing your taxable income
   3. Companies vary with their 401(k) packages, but many of them offer “matching” meaning that they will match your contribution up to a certain percent
3. What is an IRA?
   1. Individual Retirement Account: a place to put money away for retirement that will be then invested for you
   2. IRAs have contribution limits of $5,500 a year or $6,500 if you’re 50 or older
   3. Two types of IRAs:
      1. Traditional IRAs:
         1. The money you put in is tax deferred (you pay the taxes on it when you withdraw the money)
      2. Roth IRAs:
         1. Contributions are not tax deductible, but any money you withdraw is always tax free
4. What is investing?
   1. Using your money in a way that your money can make more money
      1. Invest when you are in a good place with your personal savings, have paid off your debts and understand what you’re investing in