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Investing 101 Investing can be a great way to create money for your future. With the proper planning and considerations, investing can generate passive income separate from your salary and other revenue streams. While it’s not always the right time to invest, knowing the different options available to you is important.  Understanding the different investing options is critical to building your financial literacy toolbox and helping you reach your goals. Investing Considerations There are a few key considerations to reflect on prior to beginning your investment journey. First, it can help to determine your future goals and savings plan. Do you want to save up for a short-term emergency fund? Are you in it for the long haul and investing for retirement? Is one of your financial goals to make a major purchase in the future, like a house or car? Additionally, assessing your current expenses and debts can help make sense of your investments and determine how much you should be investing. If your expenses and debts are high, consider prioritizing long-term savings over short-term investments to ensure your immediate needs can be met. Finally, consider your risk tolerance – higher-risk investments can offer higher returns, but lower-risk investments can provide more peace of mind. It’s up to you to decide how much risk you are willing to take. Below, we’ll explain two of the most popular options for investing your money: stocks and bonds. Investing in Stocks Investing in stocks is a way to own part of – or a share in – a company. If the company that you are invested in performs well and the value of your stocks increases, you can sell your stocks for more than you bought them. This is how you make money by investing. Some companies also pay dividends to individuals that own stocks. This means that a portion of the companies profits are paid to shareholders. Dividends can be a source of more immediate income from owning a stock but keep I mind, these tend to be paid in very small amounts. The value of stocks might go up significantly, meaning that the owners of the stocks can make a good deal of money. However, stocks are also riskier than some other investment options because they are tied to the performance of a single company. If that company performs poorly, the price of the stocks may go down and owners of the stocks lose money. You have to be prepared for either outcome. Investing in Bonds Bonds, on the other hand, are less risky and more stable. Bonds represent government debt. When you buy a bond, you are loaning the government money for a specified period, and the interest is paid to you over time. Bonds typically pay out relatively small amounts so the earning potential is limited compared to stocks. However, since bonds pay an amount guaranteed by the government, they are not exposed to market risks and therefore are less risky investments. Building a well-diversified portfolio of investments is the best strategy, which means investing in a mix of stocks and bonds. Professional guidance can help you determine what the right mix is to help you meet your financial goals. Investing For Retirement 401(k)s and IRAs are the two major types of retirement accounts. The money you save in these accounts is invested by fund managers who control those accounts. Both types of accounts have things in common, such as penalties for early withdrawal of funds, however there are some key characteristics that set each apart. If you are employed at a salaried job, your employer might offer a 401(k) as a retirement option and may even match your contributions. The money you put into your 401(k) is “pre-tax,” meaning you pay tax on that money when you withdraw it. Investment options can vary for these plans, but investment gains you make within your 401(k) are never taxed. Additionally, these accounts have higher contribution limits than IRAs, meaning that you can invest more money in your 401(k) if your budget allows. Investing in an IRA IRA stands for Individual Retirement Account. Typically, IRAs aren’t employer-sponsored, meaning the account is set up by you the account holder rather than the company or organization you work for. Like 401(k)s, earnings on IRAs are not taxed, but for most IRAs, taxes are paid on withdrawals.  IRAs generally offer more investment choices than 401(k)s, but there are stricter rules on how much you can contribute to that account. Additionally, simplified employee pensions (SEP) and SIMPLE IRAs are two types of IRAs designed to allow smaller businesses and to offer retirement plans for employees. SEP IRAs can only be contributed to by employers and have higher contribution limits than standard IRAs; in fact, employer contributions can be up to 25% of an employee’s gross salary. SIMPLE IRAs are set up differently – your contributions as an employee can either be matched up to 3% by your employer, or your employer can contribute an amount equal to 2% of your salary, which does not require you to contribute at all. While there is no right answer for which type of investments to pursue and when, knowing your options is important to building a robust financial knowledge toolbox. Being familiar with all the tools available to you is key to meeting your financial goals. Master Your Card provides a database of resources to support your financial empowerment journey, so you can feel more confident in managing your money today.

While filing taxes can be one of the more arduous parts of personal finance, there are ways to make the process work for you. Regardless of whether you’re traditionally employed or work freelance, receiving a credit or deduction on your taxes can be an easy way to get some extra cash – here are some easy tips to lower your tax bill and make tax season a little more enjoyable.  Understand how taxes are determined  The United States uses a progressive tax system, which means that those with higher taxable incomes pay more in taxes. The government determines how much you owe by breaking up your taxable income into brackets, each of which is taxed at the corresponding rate. Thanks to this system, you won’t pay those rates on your entire income.   Income from jobs, tips and bonuses, investments, social security, pensions, real estate, unemployment, inheritances, and dividends can all contribute to your gross income.  Adjusted gross income (AGI) is your gross income minus certain payments made throughout the year, such as student loan interest or contributions to individual or health savings accounts.  Allowable deductions and adjustments turn AGI into taxable income.  Maximize your tax deductions  You can claim credits and deductions when you file your tax return, which can reduce the amount of tax you owe. Both reduce your tax bill, but in very different ways.  Tax credits directly reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability. For example, a tax credit of $100 will reduce your tax bill by $100.  Tax deductions, indirectly reduce the amount of tax you owe by lowering your taxable income (the income amount that your tax bill is based on) by the percentage of your federal income tax bracket. So if you fall into the 22% tax bracket, a $100 deduction saves you $22.  While credits can make a bigger dent in your tax bill than deductions, both are ways to save money on taxes.   Getting a sense of what credits and deductibles you are eligible for in advance of filing, can help streamline the taxation process when it is time to file. To start, look into the eligibility requirements for different forms of tax credit: saver’s credit, student loan interest, charitable deductions, and freelance expenses if you are self-employed. Additionally, for 2021 taxes, you could qualify for child tax credits, child and dependent care credit, earned income credit, and adoption credit.   For Gig workers, different deduction options may apply; expenses like mileage, cell phone bills, work supplies, internet and computer-related expenses, and monthly health insurance premiums can all generate deductions. Using an expense tracker can help you identify opportunities for deductions and credits more quickly when tax season arrives. Check the IRS website for more information on eligibility for credits and deductions.   In most cases, you’ll receive your refund within 21 days; however, you can track your tax return on the IRS website. The fastest way to receive your refund is by filing taxes online and requesting your refund via direct deposit.   Prepare to file your taxes  Once you gather the necessary paperwork – depending on your source of income, this can include a W-2, 1099, 1099-INT, 1095-A, or a 1098 – you’re ready to get started on filing your taxes.   There are several ways to file your taxes, depending on how much you earn and where your income comes from. The IRS has free software that can lets those below a certain income level “free file,” making it easier to identify any eligible deductions or credits.   For those above that limit, you can file virtually with the IRS for free, or use a tax preparation software which may come at cost. Another option is to get support from a firm or accountant; the IRS directory is a great resource to find a verified tax preparer.   If you’re a freelancer, you’ll need a 1099 form and a thorough record of your expenses. Consider using tools like H&R Block and Stride, which can help gig workers track expenses and keep tax bills low. Additionally, unlike traditional workers, you may be required to pay quarterly estimated taxes, which are based on how much net income you expect to earn this year. Estimated taxes can help you to avoid penalties and can spread out your bill over time.  Still have questions about taxes, deductions, or filing as a gig worker? Master Your Card is here to help make your taxes work for you. For more resources, head to our Resource Center, where you’ll find informational videos, courses, and articles to demystify taxes and support you in feeling more confident about the process.  

Pursuing a college degree is a challenging yet rewarding undertaking; between classes, extracurriculars, social activities and self-care, it can be easy to overlook the importance of building financial literacy. However, while you’re getting an academic education, your financial education is just as important. From managing your student loans to understanding how to budget, Master Your Card is here every step of the way to help you confidently build your financial foundation and set your personal finances up for stability and success after graduation. Personal Finance Tip #1: Manage your student loans When planning how to pay for your education, it’s likely you’ve considered student loans. While these are an incredibly helpful way to finance a degree, understanding how they work is key to successfully navigating what might be your first line of debt. There are two types of student loans: federal and private. Federal student loans come from the government and are either subsidized (meaning no interest will accrue on the loan until you graduate) or unsubsidized (interest begins right away). Private loans come from independent providers or banks. There are pros and cons to both options, so consider your unique situation to decide which is best for you. If you have already taken a student loan, you may be wondering how you’ll pay it off. Keep in mind that interest compounds on principal, which is the amount of the loan, and that paying down principal whenever you’re able will prevent snowballing interest. Additionally, paying off high-interest loans first will save you money in the long run. Personal Finance Tip #2: Understand credit Building good credit while in college will allow you to get credit cards, take out loans, and get approved for leases, among many other important things after graduation. Credit scores are determined by credit history length, credit utilization, payment history, credit mix and new credit. While in school, there are a few things you can do to maintain good credit: Make your payments on time. Missing a payment can seriously dent your credit score. Autopay is a great option for recurring payments, when available. Try to keep your credit utilization below 30%, meaning that no more than 30% of your credit limit is spent without paying it off. Make small purchases and pay them off often. If you have an older credit card, keep it open to use occasionally for these purchases. Personal Finance Tip #3: Make – and stick to – a budget With all the new opportunities and independence that comes with college, it’s easy to lose track of spending. Creating a budget starts with separating financial needs and wants – for example, costs like rent and utilities are unavoidable, but going out for drinks and dinner is more negotiable. From there, determine what your sources of income are and build a savings plan. Try tracking your spending for a month and use that information to determine a realistic, sustainable budget plan for you. The most important part of budgeting is sticking to your plan. While it can be a challenge, staying focused and true to your budget will allow you to create good habits and financial success in the long run. For more personal finance tips and resources, follow us on Instagram at @masteryourcard!