35 Money Questions You Should Be Able to Answer By 35

Stacy Rapacon

Stacy Rapacon


By the time you’ve reached your 30s, you’ve probably heard dozens of financial acronyms and terms thrown around—from APRs to IRAs, expense ratios to exchange-traded funds. Yet while the lingo may sound familiar, you might not have a really clear understanding of what the words actually mean or how they apply to your finances. And that can be problematic when you’re trying to make the best decisions with your money.

So we’ve gathered, and answered, 35 questions on a range of financial topics that you’ll want to know by the time you’ve established your career and started building some wealth.

While we’ve started with the basics, we also include more sophisticated terms and topics. Master these, and you can not only sound smart about money, but you’ll be able to make smarter decisions with yours, too.


1. What’s your net worth?
Your true worth is unquantifiable, my friend. But financially speaking, your net worthequals your assets—cash, property (like your home, car and furniture), your checking and savings account balances and any investments—minus your liabilities, which are your debts and other financial obligations.

To calculate the net worth of your home, for example, you’d take an estimate of its current market value. (You can look at what similar homes in the neighborhood have sold for recently or have a real estate agent make an appraisal.) Next, subtract how much you still owe on your mortgage. If an agent says she could sell your home for about $215,000 and you owe about $110,000 on your mortgage, for example, that’d be about $105,000. The asset value minus your liability (or what you owe on it) equals the net worth.

Why is knowing your total net worth important? It gives you a true financial picture of how you’re doing, and highlights where you could make improvements.

2. What should you include in a budget?
First, add up your essential expenses, such as your mortgage or rent, utility bills, cell phone, food and child care. Then tally your financial obligations, like credit card, auto or student debt payments and savings goals (for emergencies, retirement and anything else you’re working toward).

Then add in “discretionary” expenses, or those that are not absolutely essential but are important to you. Don’t forget to factor in fun—entertainment, weekend trips, whatever you love—because drudging through life with a too-tight spending plan is a recipe for failure.


1. How much should you save in your emergency fund?
Most experts agree that you should have three to six months’ worth of living expenses saved to keep you afloat in the event of, say, a home or car repair or other unexpected expense—or the loss of your job.

2. Where’s the best place to hold short-term savings?
For money you need to be able to access within the next year or two, advisors usually recommend looking for a high-yield savings account. Just be aware that you can only make up to six withdrawals each month.

Unfortunately, you won’t earn much interest on a savings account, as the national average is currently .06 percent. But some banks—like Ally Bank, Synchrony and Barclays—are offering 1 percent or more as of early March, so it’s worth shopping around. “Internet banks often have the [lowest] fees, better interest rates and can be much more convenient,” says Ken Tumin, co-creator of comparison site DepositAccounts.com.

3. What’s the difference between a money market and a savings account?
Both savings and money market accounts are government-insured. But money market accounts are more likely to offer check-writing capabilities and ATM or debit cards (although they are subject to the same six-withdrawals/month limit). MMAs typically have higher interest rates, but also have higher minimum balance requirements. Details vary by account.

4. Where should you put money you’ll need in two to 10 years?
If you need the money in a year or two, “You might start thinking about CDs if you want to maximize your rates,” Tumin says. One-year CDs aren’t offering much more than high-yield savings accounts now. But some two-year CDs are offering 1.5 percent or more.

If you have a longer timeframe, consider investing in stocks and bonds. Just be aware that, while the stock market has historically gone up over time, it can go up or down in the short run. (And, as advisors will caution, past performance doesn’t guarantee future returns.) So while stocks may provide higher growth opportunities than CDs and bonds, you want to allow enough time to ride the downturns out and may consider moving money into more conservative options as your time horizon gets shorter. Investing in a mix of stocks and bonds can also lower your risk.

5. What’s a CD?
CD stands for certificate of deposit, which you can buy from a bank and is guaranteed to pay interest over a designated period of time—usually much more than  a savings account would. A five-year CD from Melrose Credit Union is paying 2.4 percent, for example, while its savings accounts offer rates of just 0.5 percent. The catch is that you can’t touch the money in a CD until the designated time period ends.

“CDs can offer higher rates than savings accounts, but the price you pay is to have less liquidity,” says Tumin. “If you take the money out early, it can cost you several months of interest.”



1. What’s a credit score?
A credit score is a three-digit indication to potential lenders of your ability to repay money you borrow. The FICO score is the most widely used, ranges from 300 (womp) to 850 (rock star) and is calculated based on five factors: payment history, credit-utilization ratio, length of credit history, the mix of credit types in use and number of credit inquiries.

2. What’s a good credit score, and why is it important?
An excellent FICO score includes anything from 750 up, and the next rung down—700 to 749—is considered good. However, credit pro John Ulzheimer, formerly of FICO and Equifax, points out, the best score is the one that “gets you approved for the best deal the lender is offering.”

You may qualify for a loan with a good score, but you may need an excellent score to qualify for the lowest interest rates on that loan. Credit card companies and mortgage lenders typically reserve their lowest rates and largest loans for people who have exhibited a quality track record when handling credit.

3. How can I improve my score?
Payment history accounts for the biggest portion of your FICO score—35 percent—so submitting on-time payments is the best way to boost your score. Clearing credit card debt, thereby decreasing your utilization ratio (the amount of debt you owe compared to your total credit limit), is another way to raise your score.

“If you’re able to pay off or pay down your credit card debt, you could see a significant improvement in less than one month,” Ulzheimer says.

4. How can I see what’s on my credit report?
Keeping tabs on your credit report helps to prevent errors and fraudulent activity from going unnoticed and sinking your score. “The only way you’ll find errors on your credit reports is to actually review them,” Ulzheimer says. “The credit reporting agencies don’t have any obligation to correct errors unless you ask them to do so.”

Visit AnnualCreditReport.com to order a free report once every 12 months from each of the major credit bureaus: Equifax, Experian and Transunion. Be sure to review each one, as they may include different information.


1. What’s an APR?
This acronym stands for annual percentage rate—as in the interest rate credit cards charge on unpaid balances.

Your APR can vary, as it’s based on the U.S. prime rate (set by the Federal Reserve) and whatever additional margin your lender tacks on. APR may also differ depending on transaction: For example, most cards charge different APRs for purchases, cash advances and balance transfers. Your lender may also offer low intro APRs that expire after a specified time period and higher penalty APRs for missed payments.

2. What do you owe, and how much interest are you paying?
To be in control of your money, you need to know exactly how much you owe, including outstanding credit card balances, as well as other debt like student loans, car loans and mortgages.

Not only that, but keep in mind what rate each debt charges, so you can calculate how much you’re paying in interest. (Note: If you pay off your credit card bill each month, you’re not paying interest at all—score!—but you are building credit.)

3. When will you be debt-free?
Knowing your numbers is only half the battle. You also need a solid repayment plan with an end date.

Schedules for repaying mortgages, student loans and auto loans are usually well laid out. If you have low rates, you may not need to bother paying them faster.

Credit cards are another matter. If you only pay the minimums, you’re wasting a lot of money on interest and likely not making a big dent in your principal. Check out a calculator from Bankrate, Credit Karma, Moneysavingpro.com or MagnifyMoney to see how the timeline changes when you commit to paying more.

4. What’s the difference between debit, prepaid, credit and charge cards?
Drawing funds directly from your checking account with each swipe, “a debit card is essentially a plastic check,” Ulzheimer explains. “A prepaid debit card is cash in plastic form.” Load up the latter with funds and use it until you draw it down to zero.

On the other hand, money tied to credit and charge cards belongs to the bank, and you’re just borrowing it. With the former, the lender allows you to carry a balance—and profits from that graciousness. Charge cards must be paid in full by the due date or you risk incurring serious penalties.


Read more at Forbes.com