I don’t know much about finances, where can I start?
Don’t worry, you’ve come to the right place! Start with your budget, and understanding your spending. Before you try to improve your finances or make extra money, you have to understand what you’re spending and where. For beginners, follow our basic plan here.
Do I need to invest in stocks to be financially successful?
Investing in stocks can be a helpful part of your financial portfolio. However, they take time to understand, and many different trendy stock tips are popping up every day. Before you invest in stocks, I recommend you learn the tax implications and risks of these investments. If you’d like to learn more about stocks, read our full article on stock basics here.
What’s the difference between a 401k and a Roth IRA?
A 401k is an employer-based retirement savings account. Most employers offer some sort of match, meaning if you contribute 10% to your account, they will match up to 5%. This money comes out of your paycheck and is tax deductible for the next year. However, when you retire, you will treat your income from a 401k as a normal income, meaning you will pay taxes each time you withdraw. Roth IRA, on the other hand, is contributed post-tax from your paycheck (meaning you’ve already paid taxes on the money contributed). When you retire, you will not pay taxes when deducting these funds.
Both 401k and Roth IRA contributions have a limit to what you can contribute to each year. This can change from year to year (but usually increases), and maximizing savings is a great plan to save now, save on taxes, and save for your future.
What’s the difference between ‘good debt’ and ‘bad debt’ and why is it good or bad?
Some argue that there is no good debt or bad debt: “All debt is bad.” Some might consider good debt to be debt that produces positive outcomes, specifically debt that produces income-producing assets. However, regardless of opinions on this matter, we know that there is debt that is definitely worse than other debt. Credit card debt is some of the worst debt you can have. You’re likely paying a premium for every product you buy because of high interest rates, and it can take months or years to pay off. Student loan debt and car payment debt can also be categorized under bad debt. Many people view cars as a symbol of wealth when really cars are one of the biggest things in life that keep us poor. Regarding good debt, mortgages are quite often thought of as good debt. Some say “Your house is your biggest asset.” While this might be true on a balance sheet, generally homes do not produce income. Others view debt that produces passive incomes (mortgages on homes you’re renting or other investments) as good debt. Before getting involved with so-called “good debt,” we recommend that you have a strong budget, eliminate all bad debt, and have a strong plan that understands taxes and risk for your “good debt” investment.
