If you want to save for retirement stay away from savings accounts. I do like the 6-12 months expenses in a high yield savings account that’s good advice. A lot of this depends on how old you are. If you’re just starting in your early 20’s get the apps like digit, this will help you save for different things but the money doesn’t yield any interest really. The app called Betterment let’s you open IRA accounts and you can set up automatic contributions. You can also decide which how your money is allocated depending on your risk profile, if you’re young you want to be more risky because you have a long time until retirement. If you’re older maybe less risky. But the key is to be consistent and keep up never stop contributing to your future. Definitely if you have an employer that has a 401k use it! And if they have a match max it out and go beyond it just to help it grow. If you have access to an HSA account that is a really great way to help save for your health care needs now and for the future and you can use that when you retire. 401k’s and HSA’s through your employer are great because that money is tax free which means you’re keeping MORE of YOUR money. I did the math in my pre-tax contributions and found out I get to keep like $250 more each paycheck that would have gone to taxes by putting it into a 401k and HSA.
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Unfortunately, you do not always get taxes back (refund) after filing them. Your tax is figured like this:
Total of all your income items - some adjustments = adjusted gross income
Adjusted gross income - your personal exemption. Note: If you are someone's dependent than your exemption is 0.
Then - your standard/itemized deductions (standard for most people including students) = Taxable Income
+ some credits and - other taxes if applicable = your total tax owed
total tax is compared with taxes withheld on your W-2 and other forms
If too much taxes were withheld, you get a refund. If too little were withheld your owe more taxes.
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It is true that your credit score can fluctuate for different reasons. How hard it is to raise a score will depend on the reason for the fall. Below are some reasons why your score may fluctuate.
1. Changes in credit card balances - Charging more or paying credit card balances affects the credit utilization. One major component of your score is how much of your credit do you use. Ex: You have a credit card with a balance of $5k and a credit limit of $10k. Your debt utilization is 50% (5/10). In general, debt ratios greater than 30% is going to affect your score negatively. Lower is better.
2. Age of your credit history - The longer the better, so don't close out accounts that you no longer use. Keeping them open can positively affect your score.
3. Applying for new debt - This will temporarily lower your score. You now have added to your overall debt.
4. Late payments, bankruptcy, foreclosure - These are major negatives for your credit score. The will remain on your credit file for years. Late payments alone make up a big component of your score. Better to pay the minimum then to be late!
5. Quick way to raise score in few months- Ask for a credit limit increase on your existing credit cards, but only if you won't be tempted to charge more. This will cause your debt utilization ratio number to fall and the score to rise.
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The younger you are, the better a Roth vehicle is. Why? Because not only are you not taxed on the money you take out of the Roth (after age 59 1/2), but you are not taxed on the earnings. If you have put $50,000 in a Roth IRA over time, but this grows to be $150,000 over 30 years, then the $100,000 in gain is totally tax-free. You don't pay tax on the gain when it happens, nor do you pay tax on the gain when you pull it out of the Roth IRA upon retirement. If you have decades before retirement, the money in the Roth IRA can triple or quadruple over time - all tax-free! Compare this to a traditional IRA...yes, you get a $50,000 deduction when you contribute that $50,000 while you are working...but when you pull the $150,000 out of the IRA, you pay tax not only on the $50,000 you put in, but also on the $100,000 that you earned. Worse, even though you may have had capital gains on the money that you put into the IRA, you pay ordinary income rates on all gains, even the ones that would have otherwise been subject to the lower capital gains tax rates had the account been an after-tax account. You are delaying paying taxes on the IRA, but the tax rate is not the cheapest (unless your income is a lot lower after retirement).
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