Personal Finance
Welcome to the learn more page of Budget Buddy! Here we will walk through the common jargon of personal finance, so you we can assist you in your personal finance journey. Feel free to scroll and read!
Learn More: Emergency Funds
What is an Emergency Fund?
Description of Emergency Fund.
How much should one save?
Here is how much one should save.
Where do I store the money?
Money Market is probably fine.
When do I use the money?
Hospital visits, job loss, etc.
Learn More: Investments
Stocks
Bro go buy some stocks, # Buy High Sell Low
Index Funds
These are the best stocks to buy if you want to have safe growth.
Mutual Funds
Basically super duper big company buys a bunch of stocks for you and charges a small fee.
Learn More: Retirement
What is a retirement?
Anything referring to retirement are accounts that hold onto assets until a certain age (usually 65). Think of investments like coins and retirement accounts like pockets. We can put coins in our pockets, but the coins are the value. However, we are not allowed to put our hand in our pocket until retirement age. There are loopholes, but this is the majority of the case. So, within a retirement account, one chooses their investments and waits til' they grow old!
Traditional vs. Roth
This is a tax difference: tax-deductible vs. tax-free. Traditional means that you can deduct it from your Adjusted Growth Income so you don't have to pay as many taxes this year. Roth means that while you cannot deduct it this year, you will be able to pull the money out at retirement age and not pay taxes on any of it.
Individual vs. 401k
You can have both accounts (it is smart to). Individual are personal retirement accounts, while 401k are offered through jobs. You are legally allowed to contribute a lot more to a 401k, and jobs tend to match some of it. There are lots of limits on personal retirement accounts.
529
While not a retirement account, 529 act as growth accounts for your children. Once they reach college age, the money can go towards tuition, food, housing, equipment, books, electronics, etc. Pretty nifty way to set your kids up for life. The contribution limits on these are also very high.
Learn More: Taxes
What are taxes?
Taxes are anything we pay to a state entity. They vary based on why we pay that specific tax.
Income Tax
These are broken down into Federal, State, Medicaid, and Social Security expenses. Medicaid and Social Security are usually flat rates while federal and state are bracketed (state to state varies). These can even vary down to the zipcode.
Sales Tax
We get taxed on what we buy. The seller usually shares some of this burden as well. This is why something at the store is not 19.99 for real. It's usually a bit more.
Estate Tax
Gifts are taxed usually when they are above the sum of $10,000. It doesn't matter how you get it (cash, land, vehicle, stocks, etc.), you have to pay a percentage of it to the government. I know! Lame!
Tax Planning
This is the strategic planning of tax avoidance (don't confuse that with tax evasion). There are deductions and credits or loopholes in estate planning in order to avoid certain tax claims. One can learn these or get a great accountant!
Learn More: Debt
Mortgage
In this housing market, you don't need to know this definition. Stick to renting lol.
Auto
Don't do this. Just don't. It is never worth it. You are taking out a loan against an asset that depreciates faster than most olympic sprinters. Just buy a piece of junk that beats walking until you can pay in full for something else.
Credit
If you have credit card debt, don't have a credit card! Use an emergency fund for emergencies, not credit cards. This is the quickest path to broke for life.
Learn More: Credit Score
What is a credit score?
This is how lenders see how responsible you are. It's a score that ranges from 300 to 850. Ideally you should be at 750 or above.
How am I scored?
Certain factors are weighted and assigned to your final score. For example, late payments tank your score. Also, the length of your history with lenders betters your score. I will create a better explanation for this down the line. For now, just pay all of your debt on time and don't go opening too many accounts at once.