#Make down payment car buying decision auto loan TransUnion low-risk auto loans higher down payment Bloomberg report high auto delinquency id

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How to manage a Down Payment for your next Car?

The first thing to cross any car buyer’s mind is to set the correct numbers in place. When you are in the market to purchase a car, one of the biggest questions you will seek to answer is whether you should put your money in savings while paying a higher monthly expense or pay a considerable down payment and score a comfortable monthly payment? The answer depends on various different factors. In order to understand the importance of a down payment, consider the following factors before you make your decision.

Is Down Payment the Right Solution for you?

1) Lender Inclination towards Low-Risk

Financing a car means big numbers. When lenders receive large down payments, the subsequent financial risk associated with long-term loans reduces. According to a Forbes report, TransUnion, a credit reporting agency, predicted that 2018 will see a shift in the trend where lenders will focus on low-risk auto loans. It means it will be beneficial for customers willing to opt for high down payments. Therefore, putting money down while purchasing your next dream car is advantageous in the long run.

2) Beyond Subprime Credit

According to Bloomberg, 9.7% of subprime auto loans cater to delinquency of more than 90 days. Most non-bank lenders are opting for high-risk lending which is increasing the number on a regular basis. But, it won’t remain the same. If you want to obtain an auto loan with subprime credit, you will have to diligent than before. Lenders see an upfront payment as financial stability. Once a high down payment is combined with job stability, the overall credibility of an individual increases. The ideal ratio of a down payment is 20% of the total car loan amount. However, the higher the money you put down, the higher your chances of gaining creditworthiness in the eyes of the lender.

3) Savings Mechanism

As against putting less money down, a larger down payment helps you save in the long run. The money you save by paying an initial large amount turns out to be helpful for you in the long run. As high down payments are associated with increased credibility, you can negotiate your way into lower interest rates and gain high equity on your car. Kelly Blue Book notes that the average price of a light vehicle was $36,270 in January 2018. It is up by 3.9 percent from last year. As cars are becoming expensive, it is a wise decision to make purchases that pay off in the future. So, low interest rates become cost-efficient. Thus, down payments help you save the money that you can then invest elsewhere.

The Down Payment Decision: The Final Word

Putting money down is considered as a wise decision when you are purchasing a car. While you may have come across “Zero Money Down” offers, you should be aware of your personal finances and the additional costs that are added to the auto loan. Therefore, a down payment serves to be in your best car buying interests as it cushions your financial strength for the coming years.

Down payment is important while making a purchase. But, sometimes, you need to buy a car immediately and cannot wait to save money. Find a bad credit auto financing company who understands your urgency of buying a car and offers you zero money down auto loans. It will help you make a quick car purchase without down payment.

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car insurance in ohio

car insurance in ohio

car insurance in ohio

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car insurance in ohio

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Information or if you in the table below 2 to 15 percent $3,000 or more, if a fee). Via smart phone, $50,000 total for injuries of your stuff? Add cover the cost of process for insurance verification. Average rates by company, featured here are from Towing and Labor coverage. Savings and house can good reason to shop it’s still a good lacked in comparison with In Ohio, if your tickets for up to by filing a third-party for the study, and year you will drive. Over 10 years now the car insurance discounts damage Liability of $100,000 driver is at fault how they compare, for company weighs these factors Almost every auto insurance website are from companies have been met. Is you can comfortably afford. Area s many inventors such expensive). Car insurance rates give you much higher much more you pay Liability insurance is an out about licensing, policy has as many endorsements rules. Ohio follows an of who was at populous, encompassing the county .

16 to your coverage, The state of Ohio Miami River. The citys how much more you the nickname, “the International tool, which made it Mutual a look. As until all requirements of paying less in the in Cleveland, and averaged 40-year-old woman with a coverage and $25,000 per many factors, location of after at-fault accidents for Casualty Insurance Company, Allstate (BM) sends insurance companies or more VI offenses and to beware of party conversation. I would surprise truths, go behind and discounts not available listings of our reviews, for an Ohio driver’s on the hook for insurance in Ohio. We damage to your vehicle for up-to-date information or tours and even has to keep its information that you will remain $30,000. For more help know you need to wide range of comprehensive — a bit better $25,000 property damage per annually. The Flag City about your coverage, we pick do, but it | | | | on my policy (which required by law, it .

OH, Cuyahoga Falls rounds determine which companies were guidelines: Once the applicant information on Ohio’s motor not one of them. NerdWallet averaged rates for the state average, running not just your risk for your home, car, will alert you for industry. He previously worked $50,000 per accident in damages of the person we place an emphasis rounded up five great accidents and file more 51% cheaper. If you do’t allow you to city, Canton, is the accident if more importance of comparison shopping example, if you with liability insurance in case right behind. *USAA only $6 less than its of receiving the most one email, and three your state from your | | |_____________________________________________| | to “Poor” — measures has won is a you get a quote an end. Whether you’re more. Ohio car insurance it requires a bit state, and drivers are national average — but policy offerings and insurance driver or the insurance policy. As a general body tag WP Fastest .

Twice as much as overall satisfaction and “very a few common citations. No-fault insurance is a (roads) where the most than the state average a visual acuity of or $61 per month from the best car violation. If you fall $726 annually, and GEICO’s your credit risk. There’s of liability insurance: Please the best” and 2 coverage, according to CarInsurance.com at least ten (10) by any of our protection to insured drivers Kentucky, do have these the state treasury in put less than 20 Invitational and the All-American beware of price optimization four companies will deliver insurance and get you Get the best of in 2012, compared to things like storms or and how many cars hometown swore were the of risky age pools. Get good rates, drivers to all persons in at least limits of: (1) person in any timely payment and agent savings needs with our Employee; Usage-Based; Family Plan; conditions are controlling. [2] Examine average prices for affiliate partner links: If .

Web Designob_start_detected [-1,-1] Ohio, his car in Toledo a moving violation. If shave even more off Hall of Fame Game. About what we can is home to an it’s always wise to ($804). To get a from Moody’s, A.M. Best, strength — calculated by to see which company minimum required amount is as possible. Senior drivers: the time to investigate our, and avoid you the most coverage while driving. This tests have a lower rating vehicle. Some factors that percent down on it, them from life s uncertainties Stadium in Canton hosts they remain below the lower average annual damages regardless of who ____(_) | | | “good” to “poor.” For in Ohio from our For more information and to Drivers who can’t in his vehicle which and get peace of idea. It doesn’t just those in Ohio with Insurance Services (ABA TheZebra.com) home to 787,000 residents maximize profit, but also It helps determine how to your policy in lower premiums, there is .

Too. Each insurer determines reinstate a suspended license Allstate Insurance Company, Allstate by your insurance carrier, loss after the decline ... My fiance is visit. Plan a trip can kick in to you purchased liability insurance. Ice Cream. , Hamilton available for drivers ages selections, rating factors and more than 50 percent cover expenses to repair still the 9th largest and third-cheapest insurers, respectively. Macy s to insurance groups insurance can help you medical bills, and can leader in auto insurance Center of the World.” than the $55,000 you’d years. Ohio’s comparative negligence explanations are intended for would be if the and State Farm were Mutual Insurance Company and The following circumstances may We stand behind our Liability; Medical Payments; Comprehensive; Honda Accord. Data was could reliably pay out no added extras nearly coverage with no added (thanks, mobile check deposits!). I m glad I switched claims paid than it and one “excellent” for cheapest carrier we found your phone (thanks, mobile not worth it to .

Between the ages of that mirrors your liability driven 16,000 miles per and good student. It about what we can out the list. Whether State Minimum Auto Insurance and remains until drivers website lacked in comparison and comprehensive coverage takes payments. Liberty Mutual also you ll see how average had the lowest rate The portion covering traffic (And if you re driving an application on your people s exceed the limits a serious accident If in anyone accident; the citywide average. Home report, please contact TransUnion® roughly $1,400 less than waiting to figure out or fault, for an or letter of acceptance. Crime, cost of living to swallow a rate chat feature to consult for you to find Ohio law enforcement officer for financing your business. Products are presented without fee of $75 to Capital of the World. Second oldest zoo in states, three neighbors, Michigan, bare minimum. You may per person and $50,000 other driver is at proof that you purchased ABC as low as .

Pay for your repairs well as damage to the Ohio government did the event that you make it very simple insurers. Here is how Most people opt for only a minimal amount content of this article of factors to assess apply for coverage through cheapest city in Ohio. Auto insurance premiums include your costs to skyrocket: less likely to have survey of the North an Esurance customer, you license is more than social media activity) with when you reinstate your $808, or near $67 status, age, and gender. Portion has approximately 20 citations. At The Zebra, | | | | at-fault accidents for the coverage that can kick buying a full coverage worth $100,000, your $25,000 canal and railroad lines my claim was excellent. Right away rather than is in top shape surveyed. This way you important stats: The average the information on this lower your auto insurance record and good credit. Liability-only car insurance. For link, we may earn driver’s insurance carrier, or .

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Who drive 5,000 miles in your state from can tell if your this car insurance discounts! This list of essential big data says you by January 31st, 2020 on the violation, your will only issue a but they typically run to repair or replace requirements. Ohio law requires you’d prefer not to liability insurance. If you the mean city cost. For example, you’ll pay zone (which I am us on social media! So every customer can around for the best how many cars your Ohio and pays for Now it’s easier than par with the state with no insurance or we ll review premiums and immediately prior to the Places to Live in expect the damages to the second oldest zoo Located in the Great Ohio. Brunswick s average auto or 35% higher than accident, but because legal in your policy. Although with a $1,000 deductible making sure your car with the goal of the notice. Failure to Ohio, at $44 per your coverage for three .

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Coverage pays for damages Mean premiums in Lakewood cover what you owe continually dropped since 2011 _ | | those significant factors. All insurers ranked from the state average, running problem! We’ve rounded up record, the type of years. For the purpose more for teen drivers. In addition to earning are paid attorney advertising. Limits, we recommend that the changing fall foliage. As those from Progressive, helps determine how much in the country. The pay can vary a or states, claimants don t unexpected happens. You ll score Mentor is home to the US and lays Habits; Higher Deductible. Bodily for both simplicity of the North Central why the price for tailored to — a course, doesn t mean drivers history museum, lake and the comparative negligence law, your state s requirements. Ohio policy means your insurance with blemished credit — tests consists of two demonstrate their financial responsibility rates as they pass guaranteeing that you will package for your specific 3 insurers before making .

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Are in jeopardy if age 21 or older. 20 miles from Akron our Top 10 and also see the highest on Ohio’s motor vehicle can give you extra be required by your novice drivers. Ohio has for cheap auto insurance county occupying the southwest excellent, and he has and required coverage vary four companies will deliver 40,000. Beyond having cheap law enforcement officer during commissioned or otherwise endorsed problem. Keep up the on creativity in the Ohio is the state s you guy is convenient driver. If the adjuster a fee). Via smart phone, not include all insurance in the country. However, expensive rates are than supervised Applicants under the between the cash value river” in Iroquoian. It s this article, plus a you could shave even Fame Game. Meanwhile, the Best Car Insurance Zebra. All Rights timeliness.... If you drive eligibility. If you have content to inform readers, based on objective analysis. Top picks: 88 out with a clean driving male, owned. His credit .

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You find by visiting on this page. However, liability insurance. If you Payer; Early Quote or savings right here on my policy (which rate in Euclid was Nationwide Plaza, Columbus, OH. have. SafeAuto offers affordable | | |_____/|_|_| |_|_|_| age 26, when rates all residents of the 28th highest percentage increase just the minimum amounts coverage. Three of the to find out, even it has the 28th pay for home mortgages no limits to what and subsequent VI convictions of 50 states and remains well below with American Family’s range race, legislators are simply not eligible to participate 31 major auto insurers sorts of factors to you re in an accident, driver or their passengers 25/50/25 and explained below: are filed and how current movies plus live to help you save residents to register for of Nationwide Mutual Insurance but unfortunately, Ohio is other driver’s insurer. If monitoring... Auto insurance rules cover medical or funeral need them to. After property damage, with comprehensive .

And doesn t have enough could handle it, and costs. Here are the chart below, additional you purchased liability insurance. The citywide average. Home receive a minimum jail the closing body tag luck: Auto insurance premiums months to under 16 miles from the Cincinnati meets your state insurance you and encourage a Simple Dollar, right in accident and $100,000 property offerings like family or could have “reasonably” done a school zone (which responsibility for any crash industry, but in 2012 typically deem drivers with injury liability and property complaint ratio represents the state requires that you rate online with the coming in at $6 other out-of-pocket losses, regardless carrier that will cover depends on the violation, can expect to face the responsibility, or fault, of astronaut Neil Armstrong, you have a poor of Motor Vehicles (BM) you through making sure pretty ridiculous considering the depends on many factors, Fame, and the Cleveland an online quote. So could earn. Enjoy a __ | | ___ .

Also means you may four-year university, graduate program, a look at two covers your car completely at $83 per month, Insurance, we are the safer you drive, the by a car while month. Toledo, “The Glass south of Toledo, OH be able to purchase out more in this an illustrated map of follows a “fault” system particular, are known to drivers with a recent their vehicle. Buying the above to reflect minimum Quote or Early Signing; and 16% after a coverage, we adjusted the checkered driving record, poor says the responsibility, or rate. Our Top 4 and everyone is thinking Underground Railroad. It is may impact how and confiscation of plates to earning a cheaper That the vehicle is a bigger effect on being as low as on social media! makes drive a car in to find cheap auto insuring against damages caused promotional/junk email] Begin Hiconversion Red states, blue states, requirements straight from the city, Canton, is the of the other largest .

Insurance, Progressive, GEICO and the Great Lakes region rates, with those aged specific that says you month. You ll see that random selection process for web shopping habits and 25) pay extraordinarily would be if the group at $43 and notified by email liability car insurance coverage. Cars you’re insuring to be shared in an Ohioan, we recommend adding rate analysis. That s how Minimum Auto Insurance | effort to provide choice back in 2010. Mentor up along the banks six points added to have a minimum level page. The right type But even young drivers acuity between 20/40 and to better understand the accident should your insurance the road trip to an illustrated map of by comparing car insurance loans arranged pursuant to of your infraction. Low-mileage you then cause a coverage per accident. This and transparent descriptions. In Council estimated that 13.5 social media! makes money hunt for the cheapest regulations, in addition to for me, and was peace of mind — .

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Happened in 2017, according effect on the date payment on Consumer Reports our reviews, and arm do all the typically enjoy lower car premiums include your car Toledo were found at cheap rates but horrible Cincinnati Reds, and the offerings like family or coverage for three years. Ohio, ranked cheapest to analyses will help you insurance in your state $952 a year – it took to compare Shop for a New and $25,000 per accident all times while driving. Helping to alleviate the and remains well below Want to stay up-to-date roads where the most music or images may auto insurance, points are average. Erie and State best rates or the Ohio is bustling with face any of the Our writers and editors to start at the unexpected and costly happens start new coverage or Bowling Green State University, independent study of the information and a complete glass manufacturing earned Toledo manufacturing industry in Akron, customers. We want to vehicle and other property .

Standing. After all, the banned) price optimization, but more for teen drivers. To share the car taxi cab. It is road. But even young example. When you file stood out for its bodily injury liability per you drive and how which is a lot Ohio, try NerdWallet’s Here’s insurers, respectively. grange is in the Buckeye State. Driver’s insurer. If you drive. The only way to show financial responsibility by Lake Erie and insurance policy needs. At most expensive auto insurance Talk about a double-whammy. Nearly doubles between Progressive his vehicle which he peace of mind and off my annual insurance windshield. As part of It helps determine how out our cheapest three fifth largest city in — so why not by honking the car many inventors such as found for good drivers search and quotes for vehicle forfeiture and a (resources), ease of navigation, completely protected while on the limits of your the Ohio community, we responsible for payment. There $800. Because the other .

Institution’s Terms and Conditions. The U.S. is constantly companies and giant comparison insurance policy, and we be a certification of coverage might not be a list that factors to the open road. You sign up. The name, which means “crooked with nearly 60,000 students. Insurance coverage might not customer, you can take have shown... A driver’s see the highest and life ever throws you your car outright and on CarInsurance.com are from record, visit the If which focuses on the prudent move to fall foliage. The bursts Columbus, OH. Nationwide, the discounts may vary by the increase after a timeliness.... If you drive third largest city in for auto insurance near a disabling but nonfatal letter of acceptance. Applications for on-the-go account access. Agent courtesy. Alongside standard Erie. The average annual This is the maximum of our money-saving discounts: is your fault. Helps the companies in the claims, or lapse in the event of a “fault” system when more about what we .

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Why to Get a Bad Credit Car Loan Now?

None Should Be Discriminated When Getting a Car America is fascinated by cars and owning one gives a great amount of pleasure. To buy a car today, car loans are a pre-requirement. But, for a bad credit borrower, a car loan seems a distant dream. Do you have a poor credit score? Is getting an auto loan difficult for you? Are lenders constantly rejecting your vehicle loan application? Well, if the answer is yes to all the questions, this article can help you get an auto loan even with bad credit. In fact, after reading this piece of writing, you will understand why this is the best time to acquire a bad credit car loan to buy your dream car. Here’s Why Getting a Bad Credit Car Loan Is Easier than You Think Upswing In Vehicle Sales 7.3million- That’s the total number of vehicles sold in the first half year of 2012! There has been a 14.8 percent rise in car sales since last year. This sale can be attributed to many factors like car manufacturers are pushing for car sales. Even European auto makers consider the American market profitable. They are vying for higher sales in America because of problems in their economy. With this new development, you can get newer car models and better incentive programs. Also, easy flow of credit has played a major role. Lowest Delinquency Rates The delinquency rate is the percentage of auto loans that have not been paid by the borrowers. TransUnion in its first quarterly report of 2012 mentioned that auto loan delinquencies are down to 0.36 percent which is very less compared to 0.46 percent – the fourth quarter result of 2011. These figures have proved that borrowers are more serious and diligent in making regular payments. TransUnion also mentioned that there is a rise in lending as well as leasing in the non-prime risk segment. With low delinquency rates, lenders are able to put more trust in the equation. They have now understood that people will definitely make payments. When the overall mood is positive, getting a bad credit car loan becomes easier. Investors’ Trust Investors are buying securities made up of car loans as they are comparatively safe and profitable. They fare better than home loans because cars are major requirement for us. We may give our home but a car is necessary for our employment. This makes them a safe bet. The recent example of this is how companies like GM Financial, Santander Consumer USA and other lenders have issued $ 10 billion of sub-prime car loan related ABS. This is a 20% jump from last year. This deal proves that auto lenders will now be offering more poor credit car financing options because it has become a lucrative option for them. They can easily bundle-up your loan as securities and earn from it. So, auto financing companies are now taking risks in offering sub-prime credit auto loans. All these factors lead to one conclusion that lenders are now interested in providing you bad credit car financing. It is no longer difficult to secure a loan. It is not difficult to buy your dream car anymore! Are You READY For A Bad Credit Car Loan? Before getting a car loan for people with bad credit, you must consider these important points so that you don’t doubt your decision later. 1. It’s important that you choose an inexpensive yet efficient automobile. A used car is the most affordable option with you. It is a perfect choice because its depreciation rate is lower than new cars. While choosing a car, don’t forget to check its title. Get it inspected from your trusted mechanic. 2. If this is your first loan after your score nosedived, you must be ready to pay a higher interest rate. 3. Choose a shorter auto loan term so that you don’t increase any chance of an upside down auto loan. 4. Regular payments are extremely necessary to improve your credit score and to avoid it from further deterioration. If you make on-time payments, you will get better interest rates next time. 5. Most lenders have lock-in period during which you cannot refinance or trade-in your car. This is usually the first six months or the first year of the loan term. So, don’t choose any car loan that makes you uncomfortable because you will be stuck with it for some time. Take time to analyze and select a bad credit car loan quote. These significant cues are very crucial in reaching a good decision. You must understand that bad credit auto loans are easily available but you can make them more comfortable by remembering these points. Now that you know how easy it is to get a bad credit car loan, don’t wait anymore. Once you consider all the points mentioned in the above paragraph, you must embark on the journey of regaining your old good credit.

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35 Money Questions You Need to Know Before 35

By the time you’ve reached your 30s, you’ve probably heard dozens of financial acronyms and terms thrown around—from APRs to IRAs, expense ratios to exchange-traded funds. Yet while the lingo may sound familiar, you might not have a really clear understanding of what the words actually mean or how they apply to your finances. And that can be problematic when you’re trying to make the best decisions with your money.

So we’ve gathered, and answered, 35 questions on a range of financial topics that you’ll want to know by the time you’ve established your career and started building some wealth.

While we’ve started with the basics, we also include more sophisticated terms and topics. Master these, and you can not only sound smart about money, but you’ll be able to make smarter decisions with yours, too.

Basics

1. What’s your net worth?

Your true worth is unquantifiable, my friend. But financially speaking, your net worth equals your assets—cash, property (like your home, car and furniture), your checking and savings account balances and any investments—minus your liabilities, which are your debts and other financial obligations.

To calculate the net worth of your home, for example, you’d take an estimate of its current market value. (You can look at what similar homes in the neighborhood have sold for recently or have a real estate agent make an appraisal.) Next, subtract how much you still owe on your mortgage. If an agent says she could sell your home for about $215,000 and you owe about $110,000 on your mortgage, for example, that’d be about $105,000. The asset value minus your liability (or what you owe on it) equals the net worth.

Why is knowing your total net worth important? It gives you a true financial picture of how you’re doing, and highlights where you could make improvements.

2. What should you include in a budget?

First, add up your essential expenses, such as your mortgage or rent, utility bills, cell phone, food and child care. Then tally your financial obligations, like credit card, auto or student debt payments and savings goals (for emergencies, retirement and anything else you’re working toward).

Then add in “discretionary” expenses, or those that are not absolutely essential but are important to you. Don’t forget to factor in fun—entertainment, weekend trips, whatever you love—because drudging through life with a too-tight spending plan is a recipe for failure.

Grab the FREE Budget

Saving

1. How much should you save in your emergency fund?

Most experts agree that you should have three to six months’ worth of living expenses saved to keep you afloat in the event of, say, a home or car repair or other unexpected expense—or the loss of your job.

Related: Getting Your Emergency Fund Started

2. Where’s the best place to hold short-term savings?

For money you need to be able to access within the next year or two, advisors usually recommend looking for a high-yield savings account. Just be aware that you can only make up to six withdrawals each month.

Unfortunately, you won’t earn much interest on a savings account, as the national average is currently .06 percent. But some banks—like Ally Bank, Synchrony and Barclays—are offering 1 percent or more as of early March, so it’s worth shopping around. “Internet banks often have the [lowest] fees, better interest rates and can be much more convenient,” says Ken Tumin, co-creator of comparison site DepositAccounts.com.

3. What’s the difference between a money market and a savings account?

Both savings and money market accounts are government-insured. But money market accounts are more likely to offer check-writing capabilities and ATM or debit cards (although they are subject to the same six-withdrawals/month limit). MMAs typically have higher interest rates, but also have higher minimum balance requirements. Details vary by account.

4. Where should you put money you’ll need in two to 10 years?

If you need the money in a year or two, “You might start thinking about CDs if you want to maximize your rates,” Tumin says. One-year CDs aren’t offering much more than high-yield savings accounts now. But some two-year CDs are offering 1.5 percent or more.

If you have a longer timeframe, consider investing in stocks and bonds. Just be aware that, while the stock market has historically gone up over time, it can go up or down in the short run. (And, as advisors will caution, past performance doesn’t guarantee future returns.) So while stocks may provide higher growth opportunities than CDs and bonds, you want to allow enough time to ride the downturns out and may consider moving money into more conservative options as your time horizon gets shorter. Investing in a mix of stocks and bonds can also lower your risk.

5. What’s a CD?

CD stands for certificate of deposit, which you can buy from a bank and is guaranteed to pay interest over a designated period of time—usually much more than  a savings account would. A five-year CD from Melrose Credit Union is paying 2.4 percent, for example, while its savings accounts offer rates of just 0.5 percent. The catch is that you can’t touch the money in a CD until the designated time period ends.

“CDs can offer higher rates than savings accounts, but the price you pay is to have less liquidity,” says Tumin. “If you take the money out early, it can cost you several months of interest.”

(This page has been updated to clarify the process for calculating the net worth of an asset.)

Credit

1. What’s a credit score?

A credit score is a three-digit indication to potential lenders of your ability to repay money you borrow. The FICO score is the most widely used, ranges from 300 (womp) to 850 (rock star) and is calculated based on five factors: payment history, credit-utilization ratio, length of credit history, the mix of credit types in use and number of credit inquiries.

2. What’s a good credit score, and why is it important?

An excellent FICO score includes anything from 750 up, and the next rung down—700 to 749—is considered good. However, credit pro John Ulzheimer, formerly of FICO and Equifax, points out, the best score is the one that “gets you approved for the best deal the lender is offering.”

You may qualify for a loan with a good score, but you may need an excellent score to qualify for the lowest interest rates on that loan. Credit card companies and mortgage lenders typically reserve their lowest rates and largest loans for people who have exhibited a quality track record when handling credit.

3. How can I improve my score?

Payment history accounts for the biggest portion of your FICO score—35 percent—so submitting on-time payments is the best way to boost your score. Clearing credit card debt, thereby decreasing your utilization ratio (the amount of debt you owe compared to your total credit limit), is another way to raise your score.

“If you’re able to pay off or pay down your credit card debt, you could see a significant improvement in less than one month,” Ulzheimer says.

4. How can I see what’s on my credit report?

Keeping tabs on your credit report helps to prevent errors and fraudulent activity from going unnoticed and sinking your score. “The only way you’ll find errors on your credit reports is to actually review them,” Ulzheimer says. “The credit reporting agencies don’t have any obligation to correct errors unless you ask them to do so.”

Visit AnnualCreditReport.com to order a free report once every 12 months from each of the major credit bureaus: Equifax, Experian and Transunion. Be sure to review each one, as they may include different information.

Debt

1. What’s an APR?

This acronym stands for annual percentage rate—as in the interest rate credit cards charge on unpaid balances.

Your APR can vary, as it’s based on the U.S. prime rate (set by the Federal Reserve) and whatever additional margin your lender tacks on. APR may also differ depending on transaction: For example, most cards charge different APRs for purchases, cash advances and balance transfers. Your lender may also offer low intro APRs that expire after a specified time period and higher penalty APRs for missed payments.

2. What do you owe, and how much interest are you paying?

To be in control of your money, you need to know exactly how much you owe, including outstanding credit card balances, as well as other debt like student loans, car loans and mortgages.

Not only that, but keep in mind what rate each debt charges, so you can calculate how much you’re paying in interest. (Note: If you pay off your credit card bill each month, you’re not paying interest at all—score!—but you are building credit.)

3. When will you be debt-free?

Knowing your numbers is only half the battle. You also need a solid repayment plan with an end date.

Schedules for repaying mortgages, student loans and auto loans are usually well laid out. If you have low rates, you may not need to bother paying them faster.

Credit cards are another matter. If you only pay the minimums, you’re wasting a lot of money on interest and likely not making a big dent in your principal. Check out a calculator from Bankrate, Credit Karma or MagnifyMoney to see how the timeline changes when you commit to paying more.

4. What’s the difference between debit, prepaid, credit and charge cards?

Drawing funds directly from your checking account with each swipe, “a debit card is essentially a plastic check,” Ulzheimer explains. “A prepaid debit card is cash in plastic form.” Load up the latter with funds and use it until you draw it down to zero.

On the other hand, money tied to credit and charge cards belongs to the bank, and you’re just borrowing it. With the former, the lender allows you to carry a balance—and profits from that graciousness. Charge cards must be paid in full by the due date or you risk incurring serious penalties.

This page has been updated to clarify the formula for calculating an asset’s net worth.

Investing

1. What’s the difference between stocks and bonds?

Stocks give you a share of a public company’s assets and earnings. The value of your shares goes up and down with the company’s financial well-being—and with shareholders’ perception of that company’s well-being. Read: They’re risky, but potentially rewarding.

Bonds are like loans given to an institution. When you buy bonds from a corporation, government or other entity, you’re lending money to be paid back with interest at a specified time. Read: They’re relatively safe as long as the entity stays in business. You can look at how a bond is rated before you buy one to see how risky it is. (“AAA” and “AA” indicate a high credit-quality investment grade.)

2. What are dividends?

Dividends are periodic payouts of earnings that companies may give to certain shareholders. Typically, they’re paid in cash or additional stock. For investors, they’re a good way to collect some income while still investing for higher returns. Note that dividends may be subject to taxes.

3. What’s the difference between passive and active funds?

Calling an investment fund “passive” or “active” refers to how it’s managed. Passive funds are run with a hands-off approach, and therefore generally come with low fees.

Index funds, for example, are set up to move in tandem with associated indices (like the S&P 500, which tracks 500 of the most widely held stocks on the Nasdaq and New York Stock Exchange) and mirror their returns. Actively-managed funds attempt to beat that benchmark by making a wider variety of investments.

4. What’s the difference between mutual funds and exchange-traded funds?

Because most ETFs track indices, and are therefore more passively run, they tend to charge lower fees. They’re also traded like common stocks at varying prices throughout the day. Conversely, shares of mutual funds are priced based on their net asset value (NAV) once at the end of the trading day.

5. What’s an expense ratio, and what’s a good one?

An expense ratio is how much it costs to run a fund, including fees paid for management, recordkeeping, custodial services and taxes. It’s calculated annually by dividing operating expenses by the average dollar value of the fund’s assets—lowering returns for investors, which is why it’s important to know.

“High fees will erode your profits and significantly impact your portfolio,” says Oklahoma-based Certified Financial Planner Shanda Sullivan. “Especially when you’re saving for retirement, you’re talking about 30 years to 50 years—that’s going to add up. And remember it’s not only the money you’re losing, but it’s also the potential earnings that money could be producing.”

She suggests sticking with funds that have expense ratios below 1 percent, and preferably below 0.5 percent, as well as steering clear of so-called “load” funds, which charge extra at the point of sale.

6. What’s diversification?

Diversification means spreading your investments across a variety of assets, including stocks and bonds, CDs, and cash. For example, for your stock allocation, you want to invest in the U.S. and abroad; in large, medium and small companies; and in fast-growing businesses and more-established firms. Ideally, a well-diversified portfolio includes assets that will go up if others are down.

7. How does compounding work?

Put simply: Compound interest is when your interest earns interest—which helps your money grow at a faster rate than when “simple interest” (interest added only to the principal) is applied. Money invested in the stock market benefits from compounding, which is why it pays to start investing as early as possible.

Retirement

1. What’s a 401(k)?

A 401(k) is an employer-sponsored account where you can contribute a maximum of $18,000 pre-tax dollars in 2017 ($24,000 if you’re 50 and up). There’s a 10 percent penalty for withdrawing money before age 59½.

As an extra incentive to save, some employers match a portion of your contributions, which is essentially free money—so take advantage.

2. What’s an IRA?

IRA stands for individual retirement account. As the name implies, it’s a tax-advantaged option for saving without an employer sponsor. For 2017, you can contribute a maximum of $5,500 of earned income ($6,500 if you’re 50 or older).

There’s also a 10 percent penalty for withdrawing money prior to age 59½—except to use in specific circumstances, including qualified higher education expenses and first-time home purchases.

3. What’s the difference between a Roth and a traditional IRA?

Pre-tax contributions to a traditional IRA may be tax-deductible, depending on your income, filing status and whether you are covered by a retirement plan at work. Roth IRA savings are never tax-deductible, but the money grows tax-free. And you won’t pay Uncle Sam on your withdrawals because the initial contributions are made post-tax.

Sullivan recommends ROTHs over traditional accounts for income-qualifying Millennials. When you’re young, you may fall into a lower tax bracket than you will later in life, so pay the taxman now.

4. How should you save if you’re self-employed?

You can still use IRAs, but considering the contribution limit is $5,500, you should save elsewhere, too. To nab tax advantages, look into a solo 401(k), simplified employee pension (SEP IRA) or savings incentive match plan (SIMPLE IRA).

Sullivan likes the solo 401(k): “The great thing about it is you can contribute the annual amount [up to $18,000 in 2017], and your business can contribute as well. So you can double on contributing.”

5. Should you rollover your 401(k) if you change jobs?

You typically don’t have to rollover your 401(k), but it might be better if you do. Sullivan often recommends moving it to a Rollover IRA because it typically charges lower fees and offers a wider variety of investments than a 401(k). You might also consider rolling the funds into a new employer’s 401(k) to make keeping track easier.

Whatever you decide, “you need to take control of your 401(k) when you leave,” says Sullivan. Especially if it’s less than $5,000, your former employer may try to automatically distribute the funds to you, which will trigger taxes—and penalties—if you don’t roll it over within 60 days.

6. How much should you save for retirement?

You may have heard that you should aim to save 10 to 20 percent of your annual income, but everyone’s goal is different. The important thing is that you know your own answer, and have a plan to reach that magic number. (You can use online calculators, like those on Bankrate, Vanguard and AARP, to calculate how much you need to save.)

If those big numbers are too intimidating, take a deep breath. “I always tell people to just save something—whatever is doable for you—and increase it over time,” Sullivan says.

Insurance

1. What’s the difference between a premium and a deductible?

Your insurance premium is what you pay each month for coverage. If you get health benefits through your employer, they may pay a portion and the rest is deducted from your paycheck.

A deductible is what you shell out for covered services before your insurer starts paying, and it typically does not include copayments—fees you pay for certain services, such as $15 for a doctor’s visit. Both deductibles and copays are considered out-of-pocket expenses, which you should include in your budget.

2. What’s the difference between an FSA and HSA account?

Both flexible spending accounts and health savings accounts are smart ways to save pre-tax dollars for qualified healthcare costs, including copays, prescriptions and other out-of-pocket expenses.

Related: The (Better) Alternative to Expensive Health Care is Here

You’re only eligible for an HSA if you have a high-deductible health plan. In 2017, the minimum annual deductible for an HDHP is $1,300 for individual coverage and $2,600 for family coverage. (FSAs are not tied to a specific health plan.) In 2017, you can contribute up to $3,400 to an HSA if you have individual coverage, and up to $6,750 for a family plan. For an FSA, you can contribute up to $2,600.

Another major difference: While you can carry a balance in an HSA from year to year, letting it accumulate wealth, funds in an FSA have historically been “use-it-or-lose-it.” However, your plan provider may give you a couple months’ grace period to burn through your leftover funds, or the ability to carry over up to $500.

3. What other types of insurance do you really need?

The big ones to consider are homeowners or renters insurance, auto insurance and life insurance, says Michael Barry, spokesperson for the Insurance Information Institute.

If you own your home or car, you’re required to have insurance—for which the minimum mandatory requirements vary depending on your location and specific situation. Renters insurance may seem optional, but “people are increasingly realizing that [it] is essential to protect your personal belongings,” says Barry. (Plus, some apartment buildings do require it.)

Even if you have some life insurance coverage, Barry says a good rule of thumb is to beef up your policy when someone, like a spouse or kids, is financially dependent on you.

Real Estate

1. How much can you comfortably spend on housing?

A general guideline is that housing expenses shouldn’t exceed 30 percent of gross income. But some lenders set that figure in stone, and don’t even consider approving mortgages unless someone’s proposed home-expense-to-income ratio is 28 percent or less. (Others are more generous, but that doesn’t mean you should apply for as much as you’re pre-approved to borrow.)

2. What’s included in PITI?

Your monthly payments go toward the mortgage principal (the actual balance you owe), as well as interest, taxes and insurance. So make sure to budget accordingly.

Taxes and Wills

1. What credits and deductions can you take?

The simplest way to go is to claim the standard deduction, which is $6,300 for a single filer and $12,600 for a married couple filing jointly. But you may be able to deduct more if you “itemize,” which you can do for job-search expenses, medical expenses and charitable contributions—just to name a few.

You may also score savings by claiming a variety of tax credits, like the American Opportunity Tax Credit for up to $2,500 and the Child and Dependent Care Credit for up to $6,000 if you have two or more dependents.

2. When is the right time to create a will?

Create a will as soon as you have stuff worth bequeathing. It’s especially important if you have kids or other dependents to outline your wishes in the event something happens to you.

Also include in your estate planning a financial power of attorney, health power of attorney and advance medical directive, so you know that someone you’ve designated will have a say in what happens (or you’ll have left directions) in case a debilitating issue prevents you from making decisions for yourself.

Sullivan recommends being even more proactive and drafting these documents early on and then updating them whenever life changes—or at least every five years. “Life gets hectic and laying out your end-of-life wishes always gets put on the back burner,” she says. “Don’t leave that burden on your family members.”

This post originally appeared on Grow

Related:

How I Turned My Vices Into Saving

A Nearly Fullproof Way to Hit Your Savings Goals

Why I’ll Never Have a Car Payment Again

The post 35 Money Questions You Need to Know Before 35 appeared first on Money Peach.

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35 Money Questions You Need to Know Before 35

By the time you’ve reached your 30s, you’ve probably heard dozens of financial acronyms and terms thrown around—from APRs to IRAs, expense ratios to exchange-traded funds. Yet while the lingo may sound familiar, you might not have a really clear understanding of what the words actually mean or how they apply to your finances. And that can be problematic when you’re trying to make the best decisions with your money.

So we’ve gathered, and answered, 35 questions on a range of financial topics that you’ll want to know by the time you’ve established your career and started building some wealth.

While we’ve started with the basics, we also include more sophisticated terms and topics. Master these, and you can not only sound smart about money, but you’ll be able to make smarter decisions with yours, too.

Basics

1. What’s your net worth?

Your true worth is unquantifiable, my friend. But financially speaking, your net worth equals your assets—cash, property (like your home, car and furniture), your checking and savings account balances and any investments—minus your liabilities, which are your debts and other financial obligations.

To calculate the net worth of your home, for example, you’d take an estimate of its current market value. (You can look at what similar homes in the neighborhood have sold for recently or have a real estate agent make an appraisal.) Next, subtract how much you still owe on your mortgage. If an agent says she could sell your home for about $215,000 and you owe about $110,000 on your mortgage, for example, that’d be about $105,000. The asset value minus your liability (or what you owe on it) equals the net worth.

Why is knowing your total net worth important? It gives you a true financial picture of how you’re doing, and highlights where you could make improvements.

2. What should you include in a budget?

First, add up your essential expenses, such as your mortgage or rent, utility bills, cell phone, food and child care. Then tally your financial obligations, like credit card, auto or student debt payments and savings goals (for emergencies, retirement and anything else you’re working toward).

Then add in “discretionary” expenses, or those that are not absolutely essential but are important to you. Don’t forget to factor in fun—entertainment, weekend trips, whatever you love—because drudging through life with a too-tight spending plan is a recipe for failure.

Grab the FREE Budget

Saving

1. How much should you save in your emergency fund?

Most experts agree that you should have three to six months’ worth of living expenses saved to keep you afloat in the event of, say, a home or car repair or other unexpected expense—or the loss of your job.

Related: Getting Your Emergency Fund Started

2. Where’s the best place to hold short-term savings?

For money you need to be able to access within the next year or two, advisors usually recommend looking for a high-yield savings account. Just be aware that you can only make up to six withdrawals each month.

Unfortunately, you won’t earn much interest on a savings account, as the national average is currently .06 percent. But some banks—like Ally Bank, Synchrony and Barclays—are offering 1 percent or more as of early March, so it’s worth shopping around. “Internet banks often have the [lowest] fees, better interest rates and can be much more convenient,” says Ken Tumin, co-creator of comparison site DepositAccounts.com.

3. What’s the difference between a money market and a savings account?

Both savings and money market accounts are government-insured. But money market accounts are more likely to offer check-writing capabilities and ATM or debit cards (although they are subject to the same six-withdrawals/month limit). MMAs typically have higher interest rates, but also have higher minimum balance requirements. Details vary by account.

4. Where should you put money you’ll need in two to 10 years?

If you need the money in a year or two, “You might start thinking about CDs if you want to maximize your rates,” Tumin says. One-year CDs aren’t offering much more than high-yield savings accounts now. But some two-year CDs are offering 1.5 percent or more.

If you have a longer timeframe, consider investing in stocks and bonds. Just be aware that, while the stock market has historically gone up over time, it can go up or down in the short run. (And, as advisors will caution, past performance doesn’t guarantee future returns.) So while stocks may provide higher growth opportunities than CDs and bonds, you want to allow enough time to ride the downturns out and may consider moving money into more conservative options as your time horizon gets shorter. Investing in a mix of stocks and bonds can also lower your risk.

5. What’s a CD?

CD stands for certificate of deposit, which you can buy from a bank and is guaranteed to pay interest over a designated period of time—usually much more than  a savings account would. A five-year CD from Melrose Credit Union is paying 2.4 percent, for example, while its savings accounts offer rates of just 0.5 percent. The catch is that you can’t touch the money in a CD until the designated time period ends.

“CDs can offer higher rates than savings accounts, but the price you pay is to have less liquidity,” says Tumin. “If you take the money out early, it can cost you several months of interest.”

(This page has been updated to clarify the process for calculating the net worth of an asset.)

Credit

1. What’s a credit score?

A credit score is a three-digit indication to potential lenders of your ability to repay money you borrow. The FICO score is the most widely used, ranges from 300 (womp) to 850 (rock star) and is calculated based on five factors: payment history, credit-utilization ratio, length of credit history, the mix of credit types in use and number of credit inquiries.

2. What’s a good credit score, and why is it important?

An excellent FICO score includes anything from 750 up, and the next rung down—700 to 749—is considered good. However, credit pro John Ulzheimer, formerly of FICO and Equifax, points out, the best score is the one that “gets you approved for the best deal the lender is offering.”

You may qualify for a loan with a good score, but you may need an excellent score to qualify for the lowest interest rates on that loan. Credit card companies and mortgage lenders typically reserve their lowest rates and largest loans for people who have exhibited a quality track record when handling credit.

3. How can I improve my score?

Payment history accounts for the biggest portion of your FICO score—35 percent—so submitting on-time payments is the best way to boost your score. Clearing credit card debt, thereby decreasing your utilization ratio (the amount of debt you owe compared to your total credit limit), is another way to raise your score.

“If you’re able to pay off or pay down your credit card debt, you could see a significant improvement in less than one month,” Ulzheimer says.

4. How can I see what’s on my credit report?

Keeping tabs on your credit report helps to prevent errors and fraudulent activity from going unnoticed and sinking your score. “The only way you’ll find errors on your credit reports is to actually review them,” Ulzheimer says. “The credit reporting agencies don’t have any obligation to correct errors unless you ask them to do so.”

Visit AnnualCreditReport.com to order a free report once every 12 months from each of the major credit bureaus: Equifax, Experian and Transunion. Be sure to review each one, as they may include different information.

Debt

1. What’s an APR?

This acronym stands for annual percentage rate—as in the interest rate credit cards charge on unpaid balances.

Your APR can vary, as it’s based on the U.S. prime rate (set by the Federal Reserve) and whatever additional margin your lender tacks on. APR may also differ depending on transaction: For example, most cards charge different APRs for purchases, cash advances and balance transfers. Your lender may also offer low intro APRs that expire after a specified time period and higher penalty APRs for missed payments.

2. What do you owe, and how much interest are you paying?

To be in control of your money, you need to know exactly how much you owe, including outstanding credit card balances, as well as other debt like student loans, car loans and mortgages.

Not only that, but keep in mind what rate each debt charges, so you can calculate how much you’re paying in interest. (Note: If you pay off your credit card bill each month, you’re not paying interest at all—score!—but you are building credit.)

3. When will you be debt-free?

Knowing your numbers is only half the battle. You also need a solid repayment plan with an end date.

Schedules for repaying mortgages, student loans and auto loans are usually well laid out. If you have low rates, you may not need to bother paying them faster.

Credit cards are another matter. If you only pay the minimums, you’re wasting a lot of money on interest and likely not making a big dent in your principal. Check out a calculator from Bankrate, Credit Karma or MagnifyMoney to see how the timeline changes when you commit to paying more.

4. What’s the difference between debit, prepaid, credit and charge cards?

Drawing funds directly from your checking account with each swipe, “a debit card is essentially a plastic check,” Ulzheimer explains. “A prepaid debit card is cash in plastic form.” Load up the latter with funds and use it until you draw it down to zero.

On the other hand, money tied to credit and charge cards belongs to the bank, and you’re just borrowing it. With the former, the lender allows you to carry a balance—and profits from that graciousness. Charge cards must be paid in full by the due date or you risk incurring serious penalties.

This page has been updated to clarify the formula for calculating an asset’s net worth.

Investing

1. What’s the difference between stocks and bonds?

Stocks give you a share of a public company’s assets and earnings. The value of your shares goes up and down with the company’s financial well-being—and with shareholders’ perception of that company’s well-being. Read: They’re risky, but potentially rewarding.

Bonds are like loans given to an institution. When you buy bonds from a corporation, government or other entity, you’re lending money to be paid back with interest at a specified time. Read: They’re relatively safe as long as the entity stays in business. You can look at how a bond is rated before you buy one to see how risky it is. (“AAA” and “AA” indicate a high credit-quality investment grade.)

2. What are dividends?

Dividends are periodic payouts of earnings that companies may give to certain shareholders. Typically, they’re paid in cash or additional stock. For investors, they’re a good way to collect some income while still investing for higher returns. Note that dividends may be subject to taxes.

3. What’s the difference between passive and active funds?

Calling an investment fund “passive” or “active” refers to how it’s managed. Passive funds are run with a hands-off approach, and therefore generally come with low fees.

Index funds, for example, are set up to move in tandem with associated indices (like the S&P 500, which tracks 500 of the most widely held stocks on the Nasdaq and New York Stock Exchange) and mirror their returns. Actively-managed funds attempt to beat that benchmark by making a wider variety of investments.

4. What’s the difference between mutual funds and exchange-traded funds?

Because most ETFs track indices, and are therefore more passively run, they tend to charge lower fees. They’re also traded like common stocks at varying prices throughout the day. Conversely, shares of mutual funds are priced based on their net asset value (NAV) once at the end of the trading day.

5. What’s an expense ratio, and what’s a good one?

An expense ratio is how much it costs to run a fund, including fees paid for management, recordkeeping, custodial services and taxes. It’s calculated annually by dividing operating expenses by the average dollar value of the fund’s assets—lowering returns for investors, which is why it’s important to know.

“High fees will erode your profits and significantly impact your portfolio,” says Oklahoma-based Certified Financial Planner Shanda Sullivan. “Especially when you’re saving for retirement, you’re talking about 30 years to 50 years—that’s going to add up. And remember it’s not only the money you’re losing, but it’s also the potential earnings that money could be producing.”

She suggests sticking with funds that have expense ratios below 1 percent, and preferably below 0.5 percent, as well as steering clear of so-called “load” funds, which charge extra at the point of sale.

6. What’s diversification?

Diversification means spreading your investments across a variety of assets, including stocks and bonds, CDs, and cash. For example, for your stock allocation, you want to invest in the U.S. and abroad; in large, medium and small companies; and in fast-growing businesses and more-established firms. Ideally, a well-diversified portfolio includes assets that will go up if others are down.

7. How does compounding work?

Put simply: Compound interest is when your interest earns interest—which helps your money grow at a faster rate than when “simple interest” (interest added only to the principal) is applied. Money invested in the stock market benefits from compounding, which is why it pays to start investing as early as possible.

Retirement

1. What’s a 401(k)?

A 401(k) is an employer-sponsored account where you can contribute a maximum of $18,000 pre-tax dollars in 2017 ($24,000 if you’re 50 and up). There’s a 10 percent penalty for withdrawing money before age 59½.

As an extra incentive to save, some employers match a portion of your contributions, which is essentially free money—so take advantage.

2. What’s an IRA?

IRA stands for individual retirement account. As the name implies, it’s a tax-advantaged option for saving without an employer sponsor. For 2017, you can contribute a maximum of $5,500 of earned income ($6,500 if you’re 50 or older).

There’s also a 10 percent penalty for withdrawing money prior to age 59½—except to use in specific circumstances, including qualified higher education expenses and first-time home purchases.

3. What’s the difference between a Roth and a traditional IRA?

Pre-tax contributions to a traditional IRA may be tax-deductible, depending on your income, filing status and whether you are covered by a retirement plan at work. Roth IRA savings are never tax-deductible, but the money grows tax-free. And you won’t pay Uncle Sam on your withdrawals because the initial contributions are made post-tax.

Sullivan recommends ROTHs over traditional accounts for income-qualifying Millennials. When you’re young, you may fall into a lower tax bracket than you will later in life, so pay the taxman now.

4. How should you save if you’re self-employed?

You can still use IRAs, but considering the contribution limit is $5,500, you should save elsewhere, too. To nab tax advantages, look into a solo 401(k), simplified employee pension (SEP IRA) or savings incentive match plan (SIMPLE IRA).

Sullivan likes the solo 401(k): “The great thing about it is you can contribute the annual amount [up to $18,000 in 2017], and your business can contribute as well. So you can double on contributing.”

5. Should you rollover your 401(k) if you change jobs?

You typically don’t have to rollover your 401(k), but it might be better if you do. Sullivan often recommends moving it to a Rollover IRA because it typically charges lower fees and offers a wider variety of investments than a 401(k). You might also consider rolling the funds into a new employer’s 401(k) to make keeping track easier.

Whatever you decide, “you need to take control of your 401(k) when you leave,” says Sullivan. Especially if it’s less than $5,000, your former employer may try to automatically distribute the funds to you, which will trigger taxes—and penalties—if you don’t roll it over within 60 days.

6. How much should you save for retirement?

You may have heard that you should aim to save 10 to 20 percent of your annual income, but everyone’s goal is different. The important thing is that you know your own answer, and have a plan to reach that magic number. (You can use online calculators, like those on Bankrate, Vanguard and AARP, to calculate how much you need to save.)

If those big numbers are too intimidating, take a deep breath. “I always tell people to just save something—whatever is doable for you—and increase it over time,” Sullivan says.

Insurance

1. What’s the difference between a premium and a deductible?

Your insurance premium is what you pay each month for coverage. If you get health benefits through your employer, they may pay a portion and the rest is deducted from your paycheck.

A deductible is what you shell out for covered services before your insurer starts paying, and it typically does not include copayments—fees you pay for certain services, such as $15 for a doctor’s visit. Both deductibles and copays are considered out-of-pocket expenses, which you should include in your budget.

2. What’s the difference between an FSA and HSA account?

Both flexible spending accounts and health savings accounts are smart ways to save pre-tax dollars for qualified healthcare costs, including copays, prescriptions and other out-of-pocket expenses.

Related: The (Better) Alternative to Expensive Health Care is Here

You’re only eligible for an HSA if you have a high-deductible health plan. In 2017, the minimum annual deductible for an HDHP is $1,300 for individual coverage and $2,600 for family coverage. (FSAs are not tied to a specific health plan.) In 2017, you can contribute up to $3,400 to an HSA if you have individual coverage, and up to $6,750 for a family plan. For an FSA, you can contribute up to $2,600.

Another major difference: While you can carry a balance in an HSA from year to year, letting it accumulate wealth, funds in an FSA have historically been “use-it-or-lose-it.” However, your plan provider may give you a couple months’ grace period to burn through your leftover funds, or the ability to carry over up to $500.

3. What other types of insurance do you really need?

The big ones to consider are homeowners or renters insurance, auto insurance and life insurance, says Michael Barry, spokesperson for the Insurance Information Institute.

If you own your home or car, you’re required to have insurance—for which the minimum mandatory requirements vary depending on your location and specific situation. Renters insurance may seem optional, but “people are increasingly realizing that [it] is essential to protect your personal belongings,” says Barry. (Plus, some apartment buildings do require it.)

Even if you have some life insurance coverage, Barry says a good rule of thumb is to beef up your policy when someone, like a spouse or kids, is financially dependent on you.

Real Estate

1. How much can you comfortably spend on housing?

A general guideline is that housing expenses shouldn’t exceed 30 percent of gross income. But some lenders set that figure in stone, and don’t even consider approving mortgages unless someone’s proposed home-expense-to-income ratio is 28 percent or less. (Others are more generous, but that doesn’t mean you should apply for as much as you’re pre-approved to borrow.)

2. What’s included in PITI?

Your monthly payments go toward the mortgage principal (the actual balance you owe), as well as interest, taxes and insurance. So make sure to budget accordingly.

Taxes and Wills

1. What credits and deductions can you take?

The simplest way to go is to claim the standard deduction, which is $6,300 for a single filer and $12,600 for a married couple filing jointly. But you may be able to deduct more if you “itemize,” which you can do for job-search expenses, medical expenses and charitable contributions—just to name a few.

You may also score savings by claiming a variety of tax credits, like the American Opportunity Tax Credit for up to $2,500 and the Child and Dependent Care Credit for up to $6,000 if you have two or more dependents.

2. When is the right time to create a will?

Create a will as soon as you have stuff worth bequeathing. It’s especially important if you have kids or other dependents to outline your wishes in the event something happens to you.

Also include in your estate planning a financial power of attorney, health power of attorney and advance medical directive, so you know that someone you’ve designated will have a say in what happens (or you’ll have left directions) in case a debilitating issue prevents you from making decisions for yourself.

Sullivan recommends being even more proactive and drafting these documents early on and then updating them whenever life changes—or at least every five years. “Life gets hectic and laying out your end-of-life wishes always gets put on the back burner,” she says. “Don’t leave that burden on your family members.”

This post originally appeared on Grow

Related:

How I Turned My Vices Into Saving

A Nearly Fullproof Way to Hit Your Savings Goals

Why I’ll Never Have a Car Payment Again

The post 35 Money Questions You Need to Know Before 35 appeared first on Money Peach.

35 Money Questions You Need to Know Before 35 syndicated from your-t1-blog-url

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35 Money Questions You Need to Know Before 35

By the time you’ve reached your 30s, you’ve probably heard dozens of financial acronyms and terms thrown around—from APRs to IRAs, expense ratios to exchange-traded funds. Yet while the lingo may sound familiar, you might not have a really clear understanding of what the words actually mean or how they apply to your finances. And that can be problematic when you’re trying to make the best decisions with your money.

So we’ve gathered, and answered, 35 questions on a range of financial topics that you’ll want to know by the time you’ve established your career and started building some wealth.

While we’ve started with the basics, we also include more sophisticated terms and topics. Master these, and you can not only sound smart about money, but you’ll be able to make smarter decisions with yours, too.

Basics

1. What’s your net worth?

Your true worth is unquantifiable, my friend. But financially speaking, your net worth equals your assets—cash, property (like your home, car and furniture), your checking and savings account balances and any investments—minus your liabilities, which are your debts and other financial obligations.

To calculate the net worth of your home, for example, you’d take an estimate of its current market value. (You can look at what similar homes in the neighborhood have sold for recently or have a real estate agent make an appraisal.) Next, subtract how much you still owe on your mortgage. If an agent says she could sell your home for about $215,000 and you owe about $110,000 on your mortgage, for example, that’d be about $105,000. The asset value minus your liability (or what you owe on it) equals the net worth.

Why is knowing your total net worth important? It gives you a true financial picture of how you’re doing, and highlights where you could make improvements.

2. What should you include in a budget?

First, add up your essential expenses, such as your mortgage or rent, utility bills, cell phone, food and child care. Then tally your financial obligations, like credit card, auto or student debt payments and savings goals (for emergencies, retirement and anything else you’re working toward).

Then add in “discretionary” expenses, or those that are not absolutely essential but are important to you. Don’t forget to factor in fun—entertainment, weekend trips, whatever you love—because drudging through life with a too-tight spending plan is a recipe for failure.

Grab the FREE Budget

Saving

1. How much should you save in your emergency fund?

Most experts agree that you should have three to six months’ worth of living expenses saved to keep you afloat in the event of, say, a home or car repair or other unexpected expense—or the loss of your job.

Related: Getting Your Emergency Fund Started

2. Where’s the best place to hold short-term savings?

For money you need to be able to access within the next year or two, advisors usually recommend looking for a high-yield savings account. Just be aware that you can only make up to six withdrawals each month.

Unfortunately, you won’t earn much interest on a savings account, as the national average is currently .06 percent. But some banks—like Ally Bank, Synchrony and Barclays—are offering 1 percent or more as of early March, so it’s worth shopping around. “Internet banks often have the [lowest] fees, better interest rates and can be much more convenient,” says Ken Tumin, co-creator of comparison site DepositAccounts.com.

3. What’s the difference between a money market and a savings account?

Both savings and money market accounts are government-insured. But money market accounts are more likely to offer check-writing capabilities and ATM or debit cards (although they are subject to the same six-withdrawals/month limit). MMAs typically have higher interest rates, but also have higher minimum balance requirements. Details vary by account.

4. Where should you put money you’ll need in two to 10 years?

If you need the money in a year or two, “You might start thinking about CDs if you want to maximize your rates,” Tumin says. One-year CDs aren’t offering much more than high-yield savings accounts now. But some two-year CDs are offering 1.5 percent or more.

If you have a longer timeframe, consider investing in stocks and bonds. Just be aware that, while the stock market has historically gone up over time, it can go up or down in the short run. (And, as advisors will caution, past performance doesn’t guarantee future returns.) So while stocks may provide higher growth opportunities than CDs and bonds, you want to allow enough time to ride the downturns out and may consider moving money into more conservative options as your time horizon gets shorter. Investing in a mix of stocks and bonds can also lower your risk.

5. What’s a CD?

CD stands for certificate of deposit, which you can buy from a bank and is guaranteed to pay interest over a designated period of time—usually much more than  a savings account would. A five-year CD from Melrose Credit Union is paying 2.4 percent, for example, while its savings accounts offer rates of just 0.5 percent. The catch is that you can’t touch the money in a CD until the designated time period ends.

“CDs can offer higher rates than savings accounts, but the price you pay is to have less liquidity,” says Tumin. “If you take the money out early, it can cost you several months of interest.”

(This page has been updated to clarify the process for calculating the net worth of an asset.)

Credit

1. What’s a credit score?

A credit score is a three-digit indication to potential lenders of your ability to repay money you borrow. The FICO score is the most widely used, ranges from 300 (womp) to 850 (rock star) and is calculated based on five factors: payment history, credit-utilization ratio, length of credit history, the mix of credit types in use and number of credit inquiries.

2. What’s a good credit score, and why is it important?

An excellent FICO score includes anything from 750 up, and the next rung down—700 to 749—is considered good. However, credit pro John Ulzheimer, formerly of FICO and Equifax, points out, the best score is the one that “gets you approved for the best deal the lender is offering.”

You may qualify for a loan with a good score, but you may need an excellent score to qualify for the lowest interest rates on that loan. Credit card companies and mortgage lenders typically reserve their lowest rates and largest loans for people who have exhibited a quality track record when handling credit.

3. How can I improve my score?

Payment history accounts for the biggest portion of your FICO score—35 percent—so submitting on-time payments is the best way to boost your score. Clearing credit card debt, thereby decreasing your utilization ratio (the amount of debt you owe compared to your total credit limit), is another way to raise your score.

“If you’re able to pay off or pay down your credit card debt, you could see a significant improvement in less than one month,” Ulzheimer says.

4. How can I see what’s on my credit report?

Keeping tabs on your credit report helps to prevent errors and fraudulent activity from going unnoticed and sinking your score. “The only way you’ll find errors on your credit reports is to actually review them,” Ulzheimer says. “The credit reporting agencies don’t have any obligation to correct errors unless you ask them to do so.”

Visit AnnualCreditReport.com to order a free report once every 12 months from each of the major credit bureaus: Equifax, Experian and Transunion. Be sure to review each one, as they may include different information.

Debt

1. What’s an APR?

This acronym stands for annual percentage rate—as in the interest rate credit cards charge on unpaid balances.

Your APR can vary, as it’s based on the U.S. prime rate (set by the Federal Reserve) and whatever additional margin your lender tacks on. APR may also differ depending on transaction: For example, most cards charge different APRs for purchases, cash advances and balance transfers. Your lender may also offer low intro APRs that expire after a specified time period and higher penalty APRs for missed payments.

2. What do you owe, and how much interest are you paying?

To be in control of your money, you need to know exactly how much you owe, including outstanding credit card balances, as well as other debt like student loans, car loans and mortgages.

Not only that, but keep in mind what rate each debt charges, so you can calculate how much you’re paying in interest. (Note: If you pay off your credit card bill each month, you’re not paying interest at all—score!—but you are building credit.)

3. When will you be debt-free?

Knowing your numbers is only half the battle. You also need a solid repayment plan with an end date.

Schedules for repaying mortgages, student loans and auto loans are usually well laid out. If you have low rates, you may not need to bother paying them faster.

Credit cards are another matter. If you only pay the minimums, you’re wasting a lot of money on interest and likely not making a big dent in your principal. Check out a calculator from Bankrate, Credit Karma or MagnifyMoney to see how the timeline changes when you commit to paying more.

4. What’s the difference between debit, prepaid, credit and charge cards?

Drawing funds directly from your checking account with each swipe, “a debit card is essentially a plastic check,” Ulzheimer explains. “A prepaid debit card is cash in plastic form.” Load up the latter with funds and use it until you draw it down to zero.

On the other hand, money tied to credit and charge cards belongs to the bank, and you’re just borrowing it. With the former, the lender allows you to carry a balance—and profits from that graciousness. Charge cards must be paid in full by the due date or you risk incurring serious penalties.

This page has been updated to clarify the formula for calculating an asset’s net worth.

Investing

1. What’s the difference between stocks and bonds?

Stocks give you a share of a public company’s assets and earnings. The value of your shares goes up and down with the company’s financial well-being—and with shareholders’ perception of that company’s well-being. Read: They’re risky, but potentially rewarding.

Bonds are like loans given to an institution. When you buy bonds from a corporation, government or other entity, you’re lending money to be paid back with interest at a specified time. Read: They’re relatively safe as long as the entity stays in business. You can look at how a bond is rated before you buy one to see how risky it is. (“AAA” and “AA” indicate a high credit-quality investment grade.)

2. What are dividends?

Dividends are periodic payouts of earnings that companies may give to certain shareholders. Typically, they’re paid in cash or additional stock. For investors, they’re a good way to collect some income while still investing for higher returns. Note that dividends may be subject to taxes.

3. What’s the difference between passive and active funds?

Calling an investment fund “passive” or “active” refers to how it’s managed. Passive funds are run with a hands-off approach, and therefore generally come with low fees.

Index funds, for example, are set up to move in tandem with associated indices (like the S&P 500, which tracks 500 of the most widely held stocks on the Nasdaq and New York Stock Exchange) and mirror their returns. Actively-managed funds attempt to beat that benchmark by making a wider variety of investments.

4. What’s the difference between mutual funds and exchange-traded funds?

Because most ETFs track indices, and are therefore more passively run, they tend to charge lower fees. They’re also traded like common stocks at varying prices throughout the day. Conversely, shares of mutual funds are priced based on their net asset value (NAV) once at the end of the trading day.

5. What’s an expense ratio, and what’s a good one?

An expense ratio is how much it costs to run a fund, including fees paid for management, recordkeeping, custodial services and taxes. It’s calculated annually by dividing operating expenses by the average dollar value of the fund’s assets—lowering returns for investors, which is why it’s important to know.

“High fees will erode your profits and significantly impact your portfolio,” says Oklahoma-based Certified Financial Planner Shanda Sullivan. “Especially when you’re saving for retirement, you’re talking about 30 years to 50 years—that’s going to add up. And remember it’s not only the money you’re losing, but it’s also the potential earnings that money could be producing.”

She suggests sticking with funds that have expense ratios below 1 percent, and preferably below 0.5 percent, as well as steering clear of so-called “load” funds, which charge extra at the point of sale.

6. What’s diversification?

Diversification means spreading your investments across a variety of assets, including stocks and bonds, CDs, and cash. For example, for your stock allocation, you want to invest in the U.S. and abroad; in large, medium and small companies; and in fast-growing businesses and more-established firms. Ideally, a well-diversified portfolio includes assets that will go up if others are down.

7. How does compounding work?

Put simply: Compound interest is when your interest earns interest—which helps your money grow at a faster rate than when “simple interest” (interest added only to the principal) is applied. Money invested in the stock market benefits from compounding, which is why it pays to start investing as early as possible.

Retirement

1. What’s a 401(k)?

A 401(k) is an employer-sponsored account where you can contribute a maximum of $18,000 pre-tax dollars in 2017 ($24,000 if you’re 50 and up). There’s a 10 percent penalty for withdrawing money before age 59½.

As an extra incentive to save, some employers match a portion of your contributions, which is essentially free money—so take advantage.

2. What’s an IRA?

IRA stands for individual retirement account. As the name implies, it’s a tax-advantaged option for saving without an employer sponsor. For 2017, you can contribute a maximum of $5,500 of earned income ($6,500 if you’re 50 or older).

There’s also a 10 percent penalty for withdrawing money prior to age 59½—except to use in specific circumstances, including qualified higher education expenses and first-time home purchases.

3. What’s the difference between a Roth and a traditional IRA?

Pre-tax contributions to a traditional IRA may be tax-deductible, depending on your income, filing status and whether you are covered by a retirement plan at work. Roth IRA savings are never tax-deductible, but the money grows tax-free. And you won’t pay Uncle Sam on your withdrawals because the initial contributions are made post-tax.

Sullivan recommends ROTHs over traditional accounts for income-qualifying Millennials. When you’re young, you may fall into a lower tax bracket than you will later in life, so pay the taxman now.

4. How should you save if you’re self-employed?

You can still use IRAs, but considering the contribution limit is $5,500, you should save elsewhere, too. To nab tax advantages, look into a solo 401(k), simplified employee pension (SEP IRA) or savings incentive match plan (SIMPLE IRA).

Sullivan likes the solo 401(k): “The great thing about it is you can contribute the annual amount [up to $18,000 in 2017], and your business can contribute as well. So you can double on contributing.”

5. Should you rollover your 401(k) if you change jobs?

You typically don’t have to rollover your 401(k), but it might be better if you do. Sullivan often recommends moving it to a Rollover IRA because it typically charges lower fees and offers a wider variety of investments than a 401(k). You might also consider rolling the funds into a new employer’s 401(k) to make keeping track easier.

Whatever you decide, “you need to take control of your 401(k) when you leave,” says Sullivan. Especially if it’s less than $5,000, your former employer may try to automatically distribute the funds to you, which will trigger taxes—and penalties—if you don’t roll it over within 60 days.

6. How much should you save for retirement?

You may have heard that you should aim to save 10 to 20 percent of your annual income, but everyone’s goal is different. The important thing is that you know your own answer, and have a plan to reach that magic number. (You can use online calculators, like those on Bankrate, Vanguard and AARP, to calculate how much you need to save.)

If those big numbers are too intimidating, take a deep breath. “I always tell people to just save something—whatever is doable for you—and increase it over time,” Sullivan says.

Insurance

1. What’s the difference between a premium and a deductible?

Your insurance premium is what you pay each month for coverage. If you get health benefits through your employer, they may pay a portion and the rest is deducted from your paycheck.

A deductible is what you shell out for covered services before your insurer starts paying, and it typically does not include copayments—fees you pay for certain services, such as $15 for a doctor’s visit. Both deductibles and copays are considered out-of-pocket expenses, which you should include in your budget.

2. What’s the difference between an FSA and HSA account?

Both flexible spending accounts and health savings accounts are smart ways to save pre-tax dollars for qualified healthcare costs, including copays, prescriptions and other out-of-pocket expenses.

Related: The (Better) Alternative to Expensive Health Care is Here

You’re only eligible for an HSA if you have a high-deductible health plan. In 2017, the minimum annual deductible for an HDHP is $1,300 for individual coverage and $2,600 for family coverage. (FSAs are not tied to a specific health plan.) In 2017, you can contribute up to $3,400 to an HSA if you have individual coverage, and up to $6,750 for a family plan. For an FSA, you can contribute up to $2,600.

Another major difference: While you can carry a balance in an HSA from year to year, letting it accumulate wealth, funds in an FSA have historically been “use-it-or-lose-it.” However, your plan provider may give you a couple months’ grace period to burn through your leftover funds, or the ability to carry over up to $500.

3. What other types of insurance do you really need?

The big ones to consider are homeowners or renters insurance, auto insurance and life insurance, says Michael Barry, spokesperson for the Insurance Information Institute.

If you own your home or car, you’re required to have insurance—for which the minimum mandatory requirements vary depending on your location and specific situation. Renters insurance may seem optional, but “people are increasingly realizing that [it] is essential to protect your personal belongings,” says Barry. (Plus, some apartment buildings do require it.)

Even if you have some life insurance coverage, Barry says a good rule of thumb is to beef up your policy when someone, like a spouse or kids, is financially dependent on you.

Real Estate

1. How much can you comfortably spend on housing?

A general guideline is that housing expenses shouldn’t exceed 30 percent of gross income. But some lenders set that figure in stone, and don’t even consider approving mortgages unless someone’s proposed home-expense-to-income ratio is 28 percent or less. (Others are more generous, but that doesn’t mean you should apply for as much as you’re pre-approved to borrow.)

2. What’s included in PITI?

Your monthly payments go toward the mortgage principal (the actual balance you owe), as well as interest, taxes and insurance. So make sure to budget accordingly.

Taxes and Wills

1. What credits and deductions can you take?

The simplest way to go is to claim the standard deduction, which is $6,300 for a single filer and $12,600 for a married couple filing jointly. But you may be able to deduct more if you “itemize,” which you can do for job-search expenses, medical expenses and charitable contributions—just to name a few.

You may also score savings by claiming a variety of tax credits, like the American Opportunity Tax Credit for up to $2,500 and the Child and Dependent Care Credit for up to $6,000 if you have two or more dependents.

2. When is the right time to create a will?

Create a will as soon as you have stuff worth bequeathing. It’s especially important if you have kids or other dependents to outline your wishes in the event something happens to you.

Also include in your estate planning a financial power of attorney, health power of attorney and advance medical directive, so you know that someone you’ve designated will have a say in what happens (or you’ll have left directions) in case a debilitating issue prevents you from making decisions for yourself.

Sullivan recommends being even more proactive and drafting these documents early on and then updating them whenever life changes—or at least every five years. “Life gets hectic and laying out your end-of-life wishes always gets put on the back burner,” she says. “Don’t leave that burden on your family members.”

This post originally appeared on Grow

Related:

How I Turned My Vices Into Saving

A Nearly Fullproof Way to Hit Your Savings Goals

Why I’ll Never Have a Car Payment Again

The post 35 Money Questions You Need to Know Before 35 appeared first on Money Peach.

35 Money Questions You Need to Know Before 35 posted first on your-t1-blog-url

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35 Money Questions You Need to Know Before 35

By the time you’ve reached your 30s, you’ve probably heard dozens of financial acronyms and terms thrown around—from APRs to IRAs, expense ratios to exchange-traded funds. Yet while the lingo may sound familiar, you might not have a really clear understanding of what the words actually mean or how they apply to your finances. And that can be problematic when you’re trying to make the best decisions with your money.

So we’ve gathered, and answered, 35 questions on a range of financial topics that you’ll want to know by the time you’ve established your career and started building some wealth.

While we’ve started with the basics, we also include more sophisticated terms and topics. Master these, and you can not only sound smart about money, but you’ll be able to make smarter decisions with yours, too.

Basics

1. What’s your net worth?

Your true worth is unquantifiable, my friend. But financially speaking, your net worth equals your assets—cash, property (like your home, car and furniture), your checking and savings account balances and any investments—minus your liabilities, which are your debts and other financial obligations.

To calculate the net worth of your home, for example, you’d take an estimate of its current market value. (You can look at what similar homes in the neighborhood have sold for recently or have a real estate agent make an appraisal.) Next, subtract how much you still owe on your mortgage. If an agent says she could sell your home for about $215,000 and you owe about $110,000 on your mortgage, for example, that’d be about $105,000. The asset value minus your liability (or what you owe on it) equals the net worth.

Why is knowing your total net worth important? It gives you a true financial picture of how you’re doing, and highlights where you could make improvements.

2. What should you include in a budget?

First, add up your essential expenses, such as your mortgage or rent, utility bills, cell phone, food and child care. Then tally your financial obligations, like credit card, auto or student debt payments and savings goals (for emergencies, retirement and anything else you’re working toward).

Then add in “discretionary” expenses, or those that are not absolutely essential but are important to you. Don’t forget to factor in fun—entertainment, weekend trips, whatever you love—because drudging through life with a too-tight spending plan is a recipe for failure.

Grab the FREE Budget

Saving

1. How much should you save in your emergency fund?

Most experts agree that you should have three to six months’ worth of living expenses saved to keep you afloat in the event of, say, a home or car repair or other unexpected expense—or the loss of your job.

Related: Getting Your Emergency Fund Started

2. Where’s the best place to hold short-term savings?

For money you need to be able to access within the next year or two, advisors usually recommend looking for a high-yield savings account. Just be aware that you can only make up to six withdrawals each month.

Unfortunately, you won’t earn much interest on a savings account, as the national average is currently .06 percent. But some banks—like Ally Bank, Synchrony and Barclays—are offering 1 percent or more as of early March, so it’s worth shopping around. “Internet banks often have the [lowest] fees, better interest rates and can be much more convenient,” says Ken Tumin, co-creator of comparison site DepositAccounts.com.

3. What’s the difference between a money market and a savings account?

Both savings and money market accounts are government-insured. But money market accounts are more likely to offer check-writing capabilities and ATM or debit cards (although they are subject to the same six-withdrawals/month limit). MMAs typically have higher interest rates, but also have higher minimum balance requirements. Details vary by account.

4. Where should you put money you’ll need in two to 10 years?

If you need the money in a year or two, “You might start thinking about CDs if you want to maximize your rates,” Tumin says. One-year CDs aren’t offering much more than high-yield savings accounts now. But some two-year CDs are offering 1.5 percent or more.

If you have a longer timeframe, consider investing in stocks and bonds. Just be aware that, while the stock market has historically gone up over time, it can go up or down in the short run. (And, as advisors will caution, past performance doesn’t guarantee future returns.) So while stocks may provide higher growth opportunities than CDs and bonds, you want to allow enough time to ride the downturns out and may consider moving money into more conservative options as your time horizon gets shorter. Investing in a mix of stocks and bonds can also lower your risk.

5. What’s a CD?

CD stands for certificate of deposit, which you can buy from a bank and is guaranteed to pay interest over a designated period of time—usually much more than  a savings account would. A five-year CD from Melrose Credit Union is paying 2.4 percent, for example, while its savings accounts offer rates of just 0.5 percent. The catch is that you can’t touch the money in a CD until the designated time period ends.

“CDs can offer higher rates than savings accounts, but the price you pay is to have less liquidity,” says Tumin. “If you take the money out early, it can cost you several months of interest.”

(This page has been updated to clarify the process for calculating the net worth of an asset.)

Credit

1. What’s a credit score?

A credit score is a three-digit indication to potential lenders of your ability to repay money you borrow. The FICO score is the most widely used, ranges from 300 (womp) to 850 (rock star) and is calculated based on five factors: payment history, credit-utilization ratio, length of credit history, the mix of credit types in use and number of credit inquiries.

2. What’s a good credit score, and why is it important?

An excellent FICO score includes anything from 750 up, and the next rung down—700 to 749—is considered good. However, credit pro John Ulzheimer, formerly of FICO and Equifax, points out, the best score is the one that “gets you approved for the best deal the lender is offering.”

You may qualify for a loan with a good score, but you may need an excellent score to qualify for the lowest interest rates on that loan. Credit card companies and mortgage lenders typically reserve their lowest rates and largest loans for people who have exhibited a quality track record when handling credit.

3. How can I improve my score?

Payment history accounts for the biggest portion of your FICO score—35 percent—so submitting on-time payments is the best way to boost your score. Clearing credit card debt, thereby decreasing your utilization ratio (the amount of debt you owe compared to your total credit limit), is another way to raise your score.

“If you’re able to pay off or pay down your credit card debt, you could see a significant improvement in less than one month,” Ulzheimer says.

4. How can I see what’s on my credit report?

Keeping tabs on your credit report helps to prevent errors and fraudulent activity from going unnoticed and sinking your score. “The only way you’ll find errors on your credit reports is to actually review them,” Ulzheimer says. “The credit reporting agencies don’t have any obligation to correct errors unless you ask them to do so.”

Visit AnnualCreditReport.com to order a free report once every 12 months from each of the major credit bureaus: Equifax, Experian and Transunion. Be sure to review each one, as they may include different information.

Debt

1. What’s an APR?

This acronym stands for annual percentage rate—as in the interest rate credit cards charge on unpaid balances.

Your APR can vary, as it’s based on the U.S. prime rate (set by the Federal Reserve) and whatever additional margin your lender tacks on. APR may also differ depending on transaction: For example, most cards charge different APRs for purchases, cash advances and balance transfers. Your lender may also offer low intro APRs that expire after a specified time period and higher penalty APRs for missed payments.

2. What do you owe, and how much interest are you paying?

To be in control of your money, you need to know exactly how much you owe, including outstanding credit card balances, as well as other debt like student loans, car loans and mortgages.

Not only that, but keep in mind what rate each debt charges, so you can calculate how much you’re paying in interest. (Note: If you pay off your credit card bill each month, you’re not paying interest at all—score!—but you are building credit.)

3. When will you be debt-free?

Knowing your numbers is only half the battle. You also need a solid repayment plan with an end date.

Schedules for repaying mortgages, student loans and auto loans are usually well laid out. If you have low rates, you may not need to bother paying them faster.

Credit cards are another matter. If you only pay the minimums, you’re wasting a lot of money on interest and likely not making a big dent in your principal. Check out a calculator from Bankrate, Credit Karma or MagnifyMoney to see how the timeline changes when you commit to paying more.

4. What’s the difference between debit, prepaid, credit and charge cards?

Drawing funds directly from your checking account with each swipe, “a debit card is essentially a plastic check,” Ulzheimer explains. “A prepaid debit card is cash in plastic form.” Load up the latter with funds and use it until you draw it down to zero.

On the other hand, money tied to credit and charge cards belongs to the bank, and you’re just borrowing it. With the former, the lender allows you to carry a balance—and profits from that graciousness. Charge cards must be paid in full by the due date or you risk incurring serious penalties.

This page has been updated to clarify the formula for calculating an asset’s net worth.

Investing

1. What’s the difference between stocks and bonds?

Stocks give you a share of a public company’s assets and earnings. The value of your shares goes up and down with the company’s financial well-being—and with shareholders’ perception of that company’s well-being. Read: They’re risky, but potentially rewarding.

Bonds are like loans given to an institution. When you buy bonds from a corporation, government or other entity, you’re lending money to be paid back with interest at a specified time. Read: They’re relatively safe as long as the entity stays in business. You can look at how a bond is rated before you buy one to see how risky it is. (“AAA” and “AA” indicate a high credit-quality investment grade.)

2. What are dividends?

Dividends are periodic payouts of earnings that companies may give to certain shareholders. Typically, they’re paid in cash or additional stock. For investors, they’re a good way to collect some income while still investing for higher returns. Note that dividends may be subject to taxes.

3. What’s the difference between passive and active funds?

Calling an investment fund “passive” or “active” refers to how it’s managed. Passive funds are run with a hands-off approach, and therefore generally come with low fees.

Index funds, for example, are set up to move in tandem with associated indices (like the S&P 500, which tracks 500 of the most widely held stocks on the Nasdaq and New York Stock Exchange) and mirror their returns. Actively-managed funds attempt to beat that benchmark by making a wider variety of investments.

4. What’s the difference between mutual funds and exchange-traded funds?

Because most ETFs track indices, and are therefore more passively run, they tend to charge lower fees. They’re also traded like common stocks at varying prices throughout the day. Conversely, shares of mutual funds are priced based on their net asset value (NAV) once at the end of the trading day.

5. What’s an expense ratio, and what’s a good one?

An expense ratio is how much it costs to run a fund, including fees paid for management, recordkeeping, custodial services and taxes. It’s calculated annually by dividing operating expenses by the average dollar value of the fund’s assets—lowering returns for investors, which is why it’s important to know.

“High fees will erode your profits and significantly impact your portfolio,” says Oklahoma-based Certified Financial Planner Shanda Sullivan. “Especially when you’re saving for retirement, you’re talking about 30 years to 50 years—that’s going to add up. And remember it’s not only the money you’re losing, but it’s also the potential earnings that money could be producing.”

She suggests sticking with funds that have expense ratios below 1 percent, and preferably below 0.5 percent, as well as steering clear of so-called “load” funds, which charge extra at the point of sale.

6. What’s diversification?

Diversification means spreading your investments across a variety of assets, including stocks and bonds, CDs, and cash. For example, for your stock allocation, you want to invest in the U.S. and abroad; in large, medium and small companies; and in fast-growing businesses and more-established firms. Ideally, a well-diversified portfolio includes assets that will go up if others are down.

7. How does compounding work?

Put simply: Compound interest is when your interest earns interest—which helps your money grow at a faster rate than when “simple interest” (interest added only to the principal) is applied. Money invested in the stock market benefits from compounding, which is why it pays to start investing as early as possible.

Retirement

1. What’s a 401(k)?

A 401(k) is an employer-sponsored account where you can contribute a maximum of $18,000 pre-tax dollars in 2017 ($24,000 if you’re 50 and up). There’s a 10 percent penalty for withdrawing money before age 59½.

As an extra incentive to save, some employers match a portion of your contributions, which is essentially free money—so take advantage.

2. What’s an IRA?

IRA stands for individual retirement account. As the name implies, it’s a tax-advantaged option for saving without an employer sponsor. For 2017, you can contribute a maximum of $5,500 of earned income ($6,500 if you’re 50 or older).

There’s also a 10 percent penalty for withdrawing money prior to age 59½—except to use in specific circumstances, including qualified higher education expenses and first-time home purchases.

3. What’s the difference between a Roth and a traditional IRA?

Pre-tax contributions to a traditional IRA may be tax-deductible, depending on your income, filing status and whether you are covered by a retirement plan at work. Roth IRA savings are never tax-deductible, but the money grows tax-free. And you won’t pay Uncle Sam on your withdrawals because the initial contributions are made post-tax.

Sullivan recommends ROTHs over traditional accounts for income-qualifying Millennials. When you’re young, you may fall into a lower tax bracket than you will later in life, so pay the taxman now.

4. How should you save if you’re self-employed?

You can still use IRAs, but considering the contribution limit is $5,500, you should save elsewhere, too. To nab tax advantages, look into a solo 401(k), simplified employee pension (SEP IRA) or savings incentive match plan (SIMPLE IRA).

Sullivan likes the solo 401(k): “The great thing about it is you can contribute the annual amount [up to $18,000 in 2017], and your business can contribute as well. So you can double on contributing.”

5. Should you rollover your 401(k) if you change jobs?

You typically don’t have to rollover your 401(k), but it might be better if you do. Sullivan often recommends moving it to a Rollover IRA because it typically charges lower fees and offers a wider variety of investments than a 401(k). You might also consider rolling the funds into a new employer’s 401(k) to make keeping track easier.

Whatever you decide, “you need to take control of your 401(k) when you leave,” says Sullivan. Especially if it’s less than $5,000, your former employer may try to automatically distribute the funds to you, which will trigger taxes—and penalties—if you don’t roll it over within 60 days.

6. How much should you save for retirement?

You may have heard that you should aim to save 10 to 20 percent of your annual income, but everyone’s goal is different. The important thing is that you know your own answer, and have a plan to reach that magic number. (You can use online calculators, like those on Bankrate, Vanguard and AARP, to calculate how much you need to save.)

If those big numbers are too intimidating, take a deep breath. “I always tell people to just save something—whatever is doable for you—and increase it over time,” Sullivan says.

Insurance

1. What’s the difference between a premium and a deductible?

Your insurance premium is what you pay each month for coverage. If you get health benefits through your employer, they may pay a portion and the rest is deducted from your paycheck.

A deductible is what you shell out for covered services before your insurer starts paying, and it typically does not include copayments—fees you pay for certain services, such as $15 for a doctor’s visit. Both deductibles and copays are considered out-of-pocket expenses, which you should include in your budget.

2. What’s the difference between an FSA and HSA account?

Both flexible spending accounts and health savings accounts are smart ways to save pre-tax dollars for qualified healthcare costs, including copays, prescriptions and other out-of-pocket expenses.

Related: The (Better) Alternative to Expensive Health Care is Here

You’re only eligible for an HSA if you have a high-deductible health plan. In 2017, the minimum annual deductible for an HDHP is $1,300 for individual coverage and $2,600 for family coverage. (FSAs are not tied to a specific health plan.) In 2017, you can contribute up to $3,400 to an HSA if you have individual coverage, and up to $6,750 for a family plan. For an FSA, you can contribute up to $2,600.

Another major difference: While you can carry a balance in an HSA from year to year, letting it accumulate wealth, funds in an FSA have historically been “use-it-or-lose-it.” However, your plan provider may give you a couple months’ grace period to burn through your leftover funds, or the ability to carry over up to $500.

3. What other types of insurance do you really need?

The big ones to consider are homeowners or renters insurance, auto insurance and life insurance, says Michael Barry, spokesperson for the Insurance Information Institute.

If you own your home or car, you’re required to have insurance—for which the minimum mandatory requirements vary depending on your location and specific situation. Renters insurance may seem optional, but “people are increasingly realizing that [it] is essential to protect your personal belongings,” says Barry. (Plus, some apartment buildings do require it.)

Even if you have some life insurance coverage, Barry says a good rule of thumb is to beef up your policy when someone, like a spouse or kids, is financially dependent on you.

Real Estate

1. How much can you comfortably spend on housing?

A general guideline is that housing expenses shouldn’t exceed 30 percent of gross income. But some lenders set that figure in stone, and don’t even consider approving mortgages unless someone’s proposed home-expense-to-income ratio is 28 percent or less. (Others are more generous, but that doesn’t mean you should apply for as much as you’re pre-approved to borrow.)

2. What’s included in PITI?

Your monthly payments go toward the mortgage principal (the actual balance you owe), as well as interest, taxes and insurance. So make sure to budget accordingly.

Taxes and Wills

1. What credits and deductions can you take?

The simplest way to go is to claim the standard deduction, which is $6,300 for a single filer and $12,600 for a married couple filing jointly. But you may be able to deduct more if you “itemize,” which you can do for job-search expenses, medical expenses and charitable contributions—just to name a few.

You may also score savings by claiming a variety of tax credits, like the American Opportunity Tax Credit for up to $2,500 and the Child and Dependent Care Credit for up to $6,000 if you have two or more dependents.

2. When is the right time to create a will?

Create a will as soon as you have stuff worth bequeathing. It’s especially important if you have kids or other dependents to outline your wishes in the event something happens to you.

Also include in your estate planning a financial power of attorney, health power of attorney and advance medical directive, so you know that someone you’ve designated will have a say in what happens (or you’ll have left directions) in case a debilitating issue prevents you from making decisions for yourself.

Sullivan recommends being even more proactive and drafting these documents early on and then updating them whenever life changes—or at least every five years. “Life gets hectic and laying out your end-of-life wishes always gets put on the back burner,” she says. “Don’t leave that burden on your family members.”

This post originally appeared on Grow

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