Mortgage rates, 401(k), IRA, credit scores, yikes! So many questions with so many scenarios. Even with a college degree, these concepts that force us into adulthood can seem puzzling. THANK GOODNESS for Mathew Zeitlin, Buzzfeed News Reporter, for simplifying these concepts and giving advice for grabbing adulthood by the horns!

 

 

What is the difference between a 401(k) and an IRA? Is one better than the other?

The main difference between a 401(k) and an IRA is who administers it. Your employer can run a 401(k) plan that you choose to sign up for, while an IRA is managed individually.

With 401(k) plans, you can contribute up to $17,500 in pre-tax income to your 401(k) and your employer can match your contributions. This is as close to free money as you can get and is by far the best deal in personal finance. Income on a 401(k) is pre-tax, meaning that for what you contribute up to the limit, your income for tax purposes goes down.

IRAs, on the other hand, have nothing to do with your employer. You have to sign up for one yourself through a bank or brokerage. Traditional IRAs have a similar tax advantage to 401(k) plans, but a lower contribution limit ($5,500).

 

So, how exactly does a credit score work?

There are five main factors to your credit score.

1)The first is payment history, which is a record of whether or not you’re paying your debts on time.

2)The second largest component is how much you owe, or “credit utilization.” Large balances, at or near your credit limit, hurt your credit score.

3)The third is how long you’ve had credit.

4)There’s also what’s known as the credit mix, which accounts for only 10% of the score.

5)And finally there’s “new credit,” which is a little more vague, but it’s basically bad to open a bunch of different lines of credit in a short time period.


 

Original Source:http://www.buzzfeed.com/matthewzeitlin/what-every-millennial-needs-to-know-about-saving-and-finance#.es6xgWeVe

About The Author

Texas raised with southern ways, transplanted into a San Diego, California daze! I have an itch for adventure and an undeniable want for leaps of faith! Looking for inspiration in each and every day and sharing a few Happy Healthy Wealthy Life Hacks I’ve found along the way :)

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