Job interviews are no different. The more insight you have into your position and the company you’re interviewing for, the more poised you’ll be during your talk with the hiring manager. Do your homework before the day and you will be more confident, because you’ll be prepared for your job interview.

How to prepare for a job interview

Our friends at NerdWallet suggest you do these five things before setting foot in the interview room:

1. Study the job inside and out.

In the days leading up to your interview, the job description should become your best friend. Study it closely to get a better sense of the skills the hiring manager is seeking.

“Before an interview, pore over the job description and pick out the five most important duties or skills,” says Pat Joachim Kitzman, former director of career and professional development at Central College. “Think of examples of when you have successfully used those skills during an internship, part-time job or volunteering [experience].”

Julia Browne, associate program director of career competencies at The George Washington University, advises interviewees to think about how skills they’ve picked up over the last four years “translate into the ‘value add’ they bring to the workplace.”

For recent graduates, talking about a particular project or paper can highlight what you’ve learned over the last four years, which can segue into a discussion about how those newly attained skills “would be of value to the company and/or the job for which you are interviewing,” says Mary Spencer, Ed.D, who serves as project manager at CORE Consulting LLC.

2. Research the company to prepare for your job interview.

Although you’ll learn a lot about the organization during the interview, be sure to do some investigating beforehand. Familiarize yourself with the company’s mission statement and culture by checking out its website and social media platforms. Companies are working increasingly hard to hire not only the right employees, but the right people. Being a good cultural fit can go a long way in securing a job.

“Candidates for jobs, especially new or upcoming college graduates, need to use social media to connect with a future employer,” Kitzman says. “Perusing a company’s Facebook page, liking a couple of features and adding a short comment is an excellent way to demonstrate interest in the employer.”

Jon Neidy, Ph.D., interim vice president of student success at Illinois Central College, urges applicants to “be prepared to explain what specifically attracts you to the company and why you think you would be a good hire for them.”

3. Tap into your network of contacts.

Speaking of social networks, don’t forget to make use of your own collection of contacts. Reach out to your school’s alumni to see whether anyone has experience in your field of interest. Or, if you know someone employed by the company you’re interviewing with, arrange an informational session with them. If all goes well, that person will probably put in a good word for you.

“Tap your network of contacts,” says Twyla Hough, a doctoral student at Texas Tech University’s College of Human Sciences. “Depending on the alma mater, the employer may have alumni working for them. These individuals can be a great resource for preparing for a strong interview. Look them up in LinkedIn alumni groups or through the university alumni office.”

4. Prepare interview questions for the job’s hiring manager.

A successful interview will feel more like a conversation than a one-sided interrogation. Although Browne advises students to rehearse short elevator speeches that can be used if the hiring manager asks them to talk about themselves, it’s equally important to have additional questions ready. Ask for more detail about your potential role, the company and the interviewer’s experience at the organization.

“Have questions for the interviewer, but not questions that have already been answered in the job description or that are easily found on the website,” Hough says.

Neidy notes that “the more insightful and thoughtful the questions, the more interested you will appear in the company.”

As well as highlighting a genuine interest in the job, asking questions will buy you some time to collect your thoughts while giving you an opportunity to take a deep breath or two.

5. Use positive body language during your interview.

Parents don’t prod their kids to sit up at the dinner table for no reason. In an interview room, good posture matters. Plus, the way in which you deliver your responses to questions is nearly as important as the answers themselves. “Body language and attitude speak volumes,” Spencer says. “Show interest and enthusiasm for the company and the position.”

Because this doesn’t come naturally to everyone, take time to practice in front of a mirror or with a friend. You want to come off as professionally as possible.

“This includes emails, phone calls and in-person to anyone with whom [interviewees] come in contact with during their meeting,” says Alana Klass, senior associate director and counselor at Lafayette College’s Gateway Career Center. “Many people miss these little nuances that can make a difference.”

You might not be able to eliminate them, but you can decrease your preinterview anxieties by preparing for your job interview. Making the effort to get as ready as you can be should leave you feeling more in control. And that’s something that a hiring manager will pick up on the minute you enter the room.

This article originally appeared on NerdWallet. Tony Armstrong is lead assigning editor of the banking team at NerdWallet.

This article was published in April 2015 and has been updated. Photo by Monkey Business Images/Shutterstock

The post 5 Things to Do Before Your Next Job Interview appeared first on SUCCESS.

Did you know that lenders and landlords often consider an applicant’s credit score before approval? Being rejected due to bad credit is never fun—especially if you didn’t know it was less than stellar.

The good news is that the credit-scoring process is fairly transparent, and by correcting some bad habits, your score can improve.

Here’s what you’re probably doing wrong, and how you can fix it:

1. Late payments cause a bad credit score.

Paying bills late is by far the biggest drag on your credit. Payment history determines 35% of your FICO score, and for good reason. If someone has failed to pay their bills on time in the past, they will probably continue to do so.

You can make sure you pay your bills on time by setting up payment alerts. If you know exactly when your bills are due, you’ll at least have the opportunity to pay them on time.

2. Using too much credit isn’t good.

Your credit utilization ratio is another major factor that determines your FICO score and, therefore, your overall credit health. This number comes from two semi-independent figures:

1. Total amount of credit in use divided by total amount of credit available.
2. Credit in use on individual cards divided by amount of credit available on each card.

When lenders see you’re using a high percentage of your available credit, they assume you may have difficulty paying off more credit, should you have access to it. This is why your credit utilization ratio affects your overall credit and why maintaining a lower ratio is always better.

To prevent your credit utilization ratio from getting out of hand, consider setting up account alerts through your issuer. The reminder will let you know when the proportions are getting lopsided so you can adjust accordingly. Also, check your account manually once a week or so. Five minutes of time could save you years of headache trying to repair a bad credit score.

3. Accounts in collection cause a bad credit score.

If you pay your bills on time while keeping your card balances low and your credit is still bad, it’s time to pull your credit report. You may have forgotten about an old account in collection, but the credit bureaus haven’t. Whether it’s from a medical bill, an old credit line or perhaps from something you co-signed on years ago, unpaid debt that has gone to collections can be a major drag on your credit score. Fixing or managing this information is extremely important.

For starters, you’ll need to know specifics about outstanding debt before you can address it. You can access all of the information used to determine your credit score for free once a year on your credit reports at AnnualCreditReport.com. Here you’ll find credit card information, loans and, of course, any accounts in collection.

If you find any erroneous information on your report, you can:

1. File a dispute directly with the credit bureau(s) reporting the error.
2. File a dispute with whoever is holding the debt (bank, credit card company, collection agency, etc.).
3. Offer supplementary supporting information to the Consumer Finance Protection Bureau.

It’s usually best to do all three to ensure all parties are not only aware of the error, but also have enough information to judge it accurately.

If the collections data is accurate, it’ll usually remain on your credit report for seven years from the date of issue. During this period it’s important to ensure you make all credit payments on time, that you maintain a low overall credit utilization ratio and that you restrict opening new accounts that result in a hard credit pull.

Having bad credit will likely present certain temporary borrowing limits, but you can overcome it by avoiding the causes of a bad credit score. If you’re smart about promoting habits that result in credit improvement, this period can be shortened dramatically, making bad credit a thing of the past.

This article originally appeared on NerdWallet. Kevin Cash is a former staff writer for NerdWallet. 

This article was published in May 2015 and has been updated. Photo by Kite_rin/Shutterstock

The post Bad Credit 101: The Small Mistakes That Are Killing Your Score appeared first on SUCCESS.

It’s time to dive into what the website’s known for: networking. Sure, it can be intimidating, especially when you don’t have a ton of professional connections yet. But with confidence, creativity and some LinkedIn wisdom on your side, you can build a network, one that might even lead you to your dream job.

Ready?

1. Think outside the box when making connections.

You know those people who have “500+ connections”? How can you reach that number? Maybe you’re new to LinkedIn or you don’t have much work experience yet. It’s all about getting creative, says Rick Sass, a career coach and LinkedIn expert at Lee Hecht Harrison in Bellevue, Washington.

Start connecting with classmates, alumni and professors, plus former bosses, supervisors and colleagues. Then branch out to less obvious potential connections, like your neighbors when you were growing up and your parents’ friends.

A good rule of thumb is to have 10 connections for every year of your age, Sass says, or 200 connections if you’re 20 and 240 if you’re 24. LinkedIn connections are helpful if they work at companies you’d be interested in joining. Or they might switch jobs eventually and land at an organization you love, or connect you with someone else who is in a role you’re excited about.

“You never know who knows who and you never know who somebody’s going to become,” Sass says.

2. Personalize your requests to connect on LinkedIn.

LinkedIn includes a pre-filled message when you send out a request to connect, usually “I’d like to add you to my professional network on LinkedIn.” Don’t miss this opportunity to craft a personalized note within your request. It will give your connection a warm reminder of how you met and why it’s helpful for both of you to be in touch. Keep it short and sweet: “It’s not a cover letter,” Sass says.

If you spoke for the first time with a fellow alum at a college networking event, for instance, say, “Hi, Matt. It was great meeting you at Alumni Day this weekend and hearing about your exciting work at IBM. Looking forward to staying in touch. See you at the robotics conference in September!”

3. Give and get recommendations and endorsements.

Once you’ve connected with people, make your profile more robust with personalized recommendations from people you’ve worked or studied with. They serve as testimonials or first-person character references that give your profile an extra boost of legitimacy and specificity. Employers will be impressed to read how well you work with others and that someone went out of his or her way to talk you up on LinkedIn. Give others recommendations and ask if they can do the same for you.

Endorsements are less labor intensive, but like recommendations, they’ll help you come up higher in recruiters’ searches, Sass says. Add skills to your profile, like “event planning,” “legal research” or “grant writing,” in the section called “Skills & Endorsements.” Your first-degree connections will have the option to click on that skill and “endorse” you for it, meaning they’ve seen firsthand that you excel at that particular talent. Endorse your connections’ skills and they’ll probably be more likely to endorse you back.

4. Join and actively contribute to LinkedIn groups.

Industry and alumni groups are an invaluable way to develop professional connections and stay on top of trends in your field. Watch the groups for the first few weeks after you join them to see how they operate, Sass says, then start liking and commenting on posts and articles others link to. Start posting relevant resources yourself. Recruiters will like that you’re a curious and active participant in your industry, which will make a difference in your LinkedIn job search.

“They understand you’ve got skin in the game, you’re interested, you’re focused, you’re engaged,” Sass says.

Many LinkedIn members don’t realize that you can directly message members of groups you’re in even if you’re not otherwise connected. When you join groups relevant to jobs you’re targeting, you can then talk directly to members about an article they posted or an interesting project they’re working on.

5. Connect with alumni who work at your dream company.

Build your network by connecting with people who you have something in common with. For recent grads, the best LinkedIn members to network with are those who graduated from your school, since they’re more likely to meet in person and give you guidance.

Say you went to New York University and you’re interested in a job at Google. From your profile, click on the name of your university. On the next page, click “Students & Alumni” on the top menu. LinkedIn will show bar graphs with a breakdown of where alumni live, where they work and what their job titles are.

Click on “Google” under “Where they work,” and LinkedIn will show only the alumni who work at Google below the graph of results. Click on “Greater New York City Area” and you’ll see only NYU alumni who work in Google’s New York offices.

You’ll be able to see how many connections you have in common with each member. Ask those connections for an introduction, or request to connect with the Google employee directly—using a personalized message asking to meet for coffee to talk more about his or her role. Make sure to say where you graduated from and when, and keep it casual. At this stage, you’re not sharing your résumé with them or treating your meeting like a job interview. But you’re keeping the door open for a future opportunity and growing your confidence as a LinkedIn connoisseur at the same time.

Don’t know if your page is up to par? Check out 5 tips to build a LinkedIn profile that’ll get you noticed.

This article originally appeared on NerdWallet. Brianna McGurran is a staff writer covering education and life after college for NerdWallet.

The post 5 Tips for Networking Your Way to a Job on LinkedIn appeared first on SUCCESS.

“If you don’t have a presence on LinkedIn, you stand a strong chance of being overlooked,” says Rick Sass, a career coach and LinkedIn subject matter expert at Lee Hecht Harrison.

Whether you just graduated or are on the hunt for a new job, you can make your life as an applicant a whole lot easier by customizing your profile and making it stand out. Use these five strategies to optimize your LinkedIn profile, and employers will be more likely to find and hire you.

1. Write an eye-catching, descriptive headline.

LinkedIn automatically defaults the introduction beneath your name to your current job title. Optimize your LinkedIn profile and set yourself apart with a more creative description.

“Define yourself using nouns that describe what it is you do and what it is you want to do,” Sass says.

Try not to default to your job title even if you’ve landed a fabulous first job. “Marketing analyst” might be the name of your position, but “Quick-thinking marketing pro with an eye for catchy, viral content” will tell a recruiter that they should learn more about you.

2. Choose a professional, approachable headshot and background image to optimize your LinkedIn profile.

“The first thing people are going to look at is the visual,” Sass says. Your background image is an opportunity to share your interests or add another connection to your career. Choose a landscape photo of your favorite place to ski or hike if you’re outdoorsy, or a baseball diamond if you like sports. Depending on your career, you could consider adding a photo of your workspace, tools or products. Avoid potential copyright issues by taking the photo yourself or choosing from a website such as Flickr’s Creative Commons database—ideally only a photo with a “commercial use allowed” license, to be cautious.

Your profile photo is even more important. Recruiters are more likely to read through your professional experience if you have a headshot on LinkedIn, Sass says. It should feature your head and shoulders against a plain background. Make sure to smile; recruiters subliminally think to themselves, “I want happy, smiley, approachable people on my team,” Sass adds.

3. Use keywords in your ‘Summary’ section.

The summary is what makes your optimized LinkedIn profile better than a résumé. It’s a place where you can turn your unique educational and professional experience into a compelling narrative for employers.

“Unlike your résumé, your summary needs to basically tell me a little bit about your personality,” Sass says.

Tell recruiters what you love to do, what you do now and where you want to go next. If you’re looking for a graphic design job, say, “I am a collaborative, outside-the-box thinker who loves using design to make digital products come alive for users.” Format your summary into a few short paragraphs to make it more readable, Sass says.

Most importantly, add a section at the bottom of your summary called “Specialties,” he recommends. Employers can search for potential job candidates on LinkedIn using keywords specific to the industry they’re recruiting for. Find keywords your employers might search for in job descriptions, on recruiters’ own profiles and on the profiles of candidates similar to you. If you work in marketing, for instance, the bottom of your summary could read: “Specialties: digital marketing, social media marketing and data analysis.”

4. Optimize your LinkedIn profile by demonstrating transferable skills.

Your “Experience” section is the one closest to a traditional résumé. It’s where you’ll list all the jobs (both full- and part-time) and volunteer experiences you’ve had until now. After your summary and headline, Sass says, the titles in your experience section are the most important factors in LinkedIn’s results when employers search for candidates.

When writing this section, it’s OK to use “I” and to maintain a slightly more conversational tone, and you can go into more detail about each job you’ve had than on your résumé. Don’t be afraid to include jobs outside your field, Sass says. Speak confidently about the skills you developed in those positions and how they’ll apply to the job you want.

5. Show measurable accomplishments.

It’s great to tell employers what you’re good at, but specific, numerical accomplishments may say more than words can. Demonstrate to employers how your work had an impact. Maybe you exceeded a sales goal or increased your company’s social media follower count.

Not only should you include in the position descriptions what part you played in developing projects, but LinkedIn also allows you to optimize your profile by embedding links to samples of your work in your featured section. Work samples are yet another way to make yourself stand out in the sea of job seekers on LinkedIn.

Take advantage of the space and flexibility LinkedIn provides to show what value you’ll bring to a potential job, Sass says.

“Traditionally you have to do push marketing with hiring managers,” he explains, meaning it’s up to you to get your résumé in front of them. “This is pull marketing. They’re going to find you, and you give them samples of your work and why you’re good at it.”

This article originally appeared on NerdWallet. Brianna McGurran is a former staff writer and columnist for NerdWallet. This article was updated July 2023. Photo by Viktoriia Hnatiuk/Shutterstock

The post 5 Tips to Optimize Your LinkedIn Profile and Get You Noticed appeared first on SUCCESS.

You’ll likely make more than a few mistakes as you start out, and for some of you, that will be the death of your initial business venture. But a lack of experience doesn’t have to derail you. Taking advice from people with more experience and know-how is a good place to start to improve your chances of success.

NerdWallet reached out to educators who teach business and entrepreneurship or who lead entrepreneurship centers at universities across the country. Here, seven of these experts talk about some of the most common mistakes they’ve seen made by first-time entrepreneurs—and their advice for avoiding such blunders:

1. They fall too in love.

“The most common mistake is that they fall too in love with their startup idea…. The fledgling entrepreneur lives in the glow of giving birth to a beautiful dream of an innovative product or service, and he or she does not want to hear that the baby is ugly. Carried away with the idea, the new entrepreneur overlooks how and when he or she can actually execute this idea and turn a profit. Unless the idea can make money, you don’t have a business—just a money pit.

“What successful entrepreneurs know is that launching a business is all about execution: figuring out how to get a product or service to market, if there is customer demand for your product, and if you can turn a profit in a reasonable amount of time. Add to that getting your service or product to market as soon as possible and beat the competition.

“Entrepreneurs must also be nimble and flexible and opportunistic and willing to modify or change their business model as they gain more market intelligence.”

The lesson: Be realistic about your business. How? Making connections can help.

“Constantly network with other entrepreneurs and also get out and do an enormous amount of market research. If you’re a student, connect with your university’s entrepreneurship program, which has myriad resources to help you to succeed. If you have already graduated college, connect with your alumni network and find alumni entrepreneurs, who are often very willing to help new entrepreneurs. There are entrepreneur’s meet-up groups of all sorts springing up. Check out the U.S. Small Business Administration, your state’s economic development resources, accelerators, incubators, etc.”

—Susan Scherreik, director of the Center for Entrepreneurial Studies at the Stillman School, Seton Hall University

2. They lack support.

“A very common mistake is not developing a strong support network. This can be avoided with: a partner(s) with complementary strengths and skill sets; an informal set of advisors, both technical and business; and a formal board of directors.”

The lesson: Create your own support group. Also, practice, practice, practice.

“The skills to become a successful entrepreneur can be learned. Think of these skills like the building blocks of a sport. You need to learn them correctly and practice them regularly.”

—Nik Rokop, industry assistant professor of entrepreneurship at the Illinois Institute of Technology

3. They don’t know money.

The most common mistake “is almost always a lack of cash flow management. This could be in terms of operational choices (rent versus purchase, used versus new, etc.) and forecasting (not understanding how to create a reasonable revenue projection).”

The lesson: Don’t get caught in cash flow chaos. What helps? Seeking advice, then taking it.

“Work in the industry first in order to understand typical business operations. Maintain a positive outlook while paying attention and responding to expert feedback, which you should seek and then take seriously, especially when it comes to the relative competitive advantage and value added of your product or service.

“Create a business plan, even if it consists only of a competitor analysis/market niche strategy and your financial forecast, along with assumptions. Remain flexible. Expect to work a lot of hours, especially in the first three to five years. If your business depends on intellectual property, protect it. Read and carefully consider every contract before you sign it.”

—Anne York, associate professor of entrepreneurship and strategy, and director of the Bioscience Entrepreneurship Program, at Creighton University

4. They think in now.

“Many of the early startup mistakes you can undo. But the hardest one to undo is determining who owns what…. It’s really easy for me and you to, over beers, say, ‘We’re going to start a company—you get half and I get half.’ Then everything’s good. And then a few months into it, you’re working late at your other job and I’m working Saturdays on the new company, and I say, ‘Wait a minute, how is it I’m doing all the work and this guy owns half,’ and that’s the hardest thing to undo.”

The lesson: “Have an agreement early on: What is the amount of work we’re going to commit to doing and how much ownership is each of us going to get. It’ll save you a ton of headaches down the road.

“Another mistake people often make early on is treating all founders the same. In most cases, people bring different value to the table. Companies with a lot of potential fall apart because this wasn’t worked out, and they get three, six, nine months into it, and people are already disgruntled…. Because they didn’t have a discussion ahead of time, there’s no way to say, ‘Hey, you’re out of the company; you can leave with the shares you’ve earned over the past six months, but you’re not leaving with all of them.’”

—Brad Treat, instructor of entrepreneurship at Ithaca College and entrepreneur in residence at Rev: Ithaca Startup Works

5. They have plans for “perfect.”

“One of the key mistakes entrepreneurs make is they believe it’s one lap around the track and it’s the finish line, and so they try and make a perfect product and have a perfect plan, and try to get the right amount of funding. But what they soon find out is that it’s a multi-lap race, and their plans don’t cover that, their funding doesn’t account for the longer race.”

The lesson: The plan? That’s quickly irrelevant.

“A lot of people say, ‘Come up with a better plan.’ But most people who have a lot of experience know that the plan is pretty much irrelevant the first day the business tries to operate…. In this new theory called lean innovation, what we do is, we show people how they can build something quickly—usually within a day—and get out to the customer and show those early models to possible customers, to find out, ‘Are they even on the right track?’

“The question of ‘should you do something’ is so much more important in the early stages of a business than ‘can you do it.’ But so many businesses get the cart before the horse. They spend so much money on perfecting that product or prototype and they’re out of money. And it turns out that they launched a product customers don’t want and the market isn’t looking for.”

—Gary Lynn, professor at Stevens Institute of Technology and the chairman and founder of Breakthrough Technologies Group

6. They forget to ask, Will people pay?

“In some cases, the [business] idea is not a solution to a vexing problem that people are willing to pay money for. The other mistake I see is that people are not able to monetize the idea easily. For example, most phone apps today are free and much harder to monetize given the large number of them in the two primary app stores.”

The lesson: Consider who would be willing to invest.

“You need to have a little bit of money to make money. Many entrepreneurs think others will give them money for very basic expenses, such as getting the company incorporated or building the initial prototype. Typically, the only money available early on is from family and friends, and if they will not invest in your idea (and you wouldn’t, either) then why would someone who doesn’t know you?”

—Ron Vetter, professor of mathematical and computer sciences at the University of North Carolina Wilmington

7. They aren’t flexible.

The most common mistake is “not being flexible. You need to test assumptions in the marketplace early, be willing to pivot, and redesign a product or service until the proof of concept is established. This is a continuous process and needs to be done before asking for external funding. Following a strict entrepreneurship model early on is important to flexible thinking.”

The lesson: Have a flexible brain—and do a personal assessment.

“Assess yourself personally. Do you have the risk profile? Ability to be flexible? Are you able to work with people? Do you have some experience in the field you are going into? Are you coachable? Also learn basic accounting and be able to understand the numbers in a meaningful way. And always remember that you personally do not need to come up with the new idea—you can always license technology or form partnerships with others who have the idea. It is a team effort that needs to be the entrepreneurial package.”

—Craig Galbraith, interim director of the University of North Carolina Wilmington’s Office of Innovation and Entrepreneurship

Find out what successful entrepreneurs do on their weekends—and make sure you’re not wasting yours.

This article originally appeared on NerdWallet. Steve Nicastro is a staff writer covering personal finance for NerdWallet.

The post The 7 Most Common Mistakes First-Time Entrepreneurs Make appeared first on SUCCESS.

Withdrawing from your 401(k), draining your emergency fund or ignoring your monthly bills in the name of paying off your credit card debt may seem like good ideas in the moment, but they can have adverse consequences in the long run.

Here is why you shouldn’t…

1. Dip into your 401(k):

There are plenty of reasons not to use your 401(k) to pay off debt, but let’s start with the potential financial ramifications. If you take money out early—that is, before age 59½—not only will that money be taxed at your current income tax rate, but you’ll also pay a 10 percent penalty.

If your 401(k) has a loan provision, it is a more affordable way of paying off your debt. However, 401(k) loans also have downsides. For one thing, any money you borrow won’t be earning a return until you repay it. If you quit or lose your job before repaying the loan, the entire balance will come due soon after. And if you can’t pay it off in full, it will be treated as a distribution—meaning you’ll incur the taxes and penalties of an early withdrawal. It’s a risky move.

Finally, by using your retirement funds to pay off your credit card debt, you’re potentially setting a dangerous precedent. You’re making tapping into your retirement fund an option for sticky financial situations, which could help you justify withdrawals in the future, even if they aren’t absolutely necessary. Unless you’ve exhausted all other legal options, try to leave your retirement savings alone for Future You.

2. Drain your emergency fund:

Because of high interest rates on credit cards and low interest on savings accounts, it isn’t wise to keep a large cash reserve while carrying credit card debt from month to month. However, it’s also not a good idea to drain your cash reserves completely to wipe out your debt. Emergencies happen, and you need to have some savings in place to deal with them, because a credit card isn’t an emergency fund.

The amount of emergency savings you should keep depends on your personal situation. As a starting point, everyone should have $1,000. Some people—like small-business owners, custodial parents or sole breadwinners—may need more, while a single young professional without a mortgage will probably be fine with a small fund. Any savings greater than what you need for emergencies can be put toward debt, but don’t drain your entire rainy-day fund.

3. Neglect your current bills:

When you’re anxious to get rid of your debt for good, it may be tempting to cut corners elsewhere to pay it off as soon as possible. But ignoring your monthly payment obligations to pay down debt isn’t a sound approach. You’ll likely get hit with fees, and your late payments may be reported to the credit bureaus and remain on your credit reports for seven years.

Instead, pay your bills and minimum debt payments first. Then, provided you have a small emergency fund already, put the excess toward extra debt payments.

So, pay down your credit card debt aggressively, but don’t hurt yourself financially to do it. Instead, aim to bring down your debt by making more or spending less, and allocating the extra funds to your credit card bills.

Learn the 4 financial habits of people with excellent credit—and start improving yours. 

This article originally appeared on NerdWallet. Erin El Issa is a staff writer covering personal finance for NerdWallet.

The post How Not to Pay Off Your Debt appeared first on SUCCESS.

The trick is to start contributing now, even if it’s just a little bit every month. It could make all the difference in what your postretirement years look like.

Here’s what you need to know:

What is a 401(k)?

It’s an employer-sponsored retirement account that you can contribute to straight from your paycheck. 401(k) plans get their name from the section of the IRS tax code that authorizes them. The 401(k) equivalent for nonprofit, religious organization and education employees is a 403(b), and the equivalent for government employees—and potentially independent contractors—is a 457(b).

Opting into a 401(k) or a similar employer-sponsored account is a great way to save for retirement without having to think too much about it, says Garrett Prom, CFP®, EA, CRPC®, founder of Prominent Financial Planning LLC in Austin, Texas.

“It’s very automatic, and people generally don’t miss that money as much as they do if they’re writing a check,” he says.

How does it work?

Your human resources manager or employee handbook may tell you if your company offers the option to contribute to a 401(k). When you sign up, you’ll choose a percentage of your salary to chip in each pay period. It’s called “salary deferral,” since you’re essentially choosing to get paid later on, when you retire, instead of right now. Your contribution will come out of your earnings before federal income taxes are taken out, but it will be subject to Social Security, Medicare and federal unemployment taxes.

Your employers may also offer a “match,” meaning the company will match your 401(k) contributions with the company’s own funds—in other words, you receive free money that will make your account grow faster. The best thing you can do for your retirement savings is to contribute at least the maximum percentage of your salary that your employer will match, says Steven Podnos, M.D., CFP®, principal of Wealth Care LLC in Merritt Island, Florida.

“Make sure that you are salary deferring enough to get every dollar and match that you possibly can,” he says. “Because the return is spectacular.”

Say your company will match your 401(k) contributions up to 3% of your income. If you make $40,000 a year, that’s $1,200 that your employer will automatically contribute if you put in at least that much from your own pay. So when it’s time to fill out your 401(k) paperwork, elect to contribute 3% of your earnings and you’ll actually put away $2,400 a year in retirement savings. Keep in mind that some companies will match only 50% of your contributions, so you’d have to contribute 6% of your salary to get a 3% company match.

Where does my 401(k) money go?

Your 401(k) isn’t a static bundle that grows at the same interest rate each year. It gets invested, and you choose how your money is allocated: in stocks or bonds, for instance, or in a target-date fund that changes the type of investments you make as you get closer to retirement. Where your money goes—and how risky that investment is—dictates how high your rate of return will be, or how much your money will grow over time.

How do I choose where to put the money in my 401(k)?

The investment choices in your 401(k) may seem overwhelming, especially if you’re new to the process. Your best bet is to read carefully through all the options you have, research online on your own and ask your plan administrator or broker for help.

There are some tried-and-true avenues you can take, too. For instance, stocks are riskier investments, so traditionally they bring you a higher rate of return. “You can’t beat the return of stocks over a long period of time,” Podnos says.

And if you’re young, you have less to lose investing primarily in stocks now. One option for workers in their 20s, Podnos says, is to choose a low-cost index fund that reflects the ups and downs of the S&P 500 stock market index. It’s a good idea to choose one with maintenance charges of less than 3% per year, composed mostly of stocks from all over the world so it’s diversified, he continues.

When can I start using my 401(k) money?

You can withdraw money from your 401(k) without penalty when you’re 59½. If you dip into it before then, you’ll pay a 10% penalty—save for the exception offered by the “rule of 55.” In either case, you’ll pay income tax on your contributions and interest earned based on the tax bracket you’re in when you withdraw. Since many retirees make less income after retirement, waiting to withdraw is a good idea.

Also, it depends on your company’s 401(k) rules for how soon you can contribute to your plan and what happens to your money when you leave. At some companies, for instance, if you are not “fully vested” in the matching plan before you leave the company, you may not be able to use all of the money your employer added as part of their match.

Do I really need to save for retirement now?

Absolutely! It all comes down to compound interest. Instead of earning the same amount of interest every year, your interest rate will increase based on the amount of money in your account. So the more you put in, the more interest you’ll earn.

For instance, the 10-year average of how much the stock market has gone up is around 10% per year. You can use this number as the likely rate of return on a 401(k) if you choose to put much of your money in stocks. 

But how much will you make, exactly? Try using NerdWallet’s retirement savings calculator to play around with different retirement scenarios. It might be all the proof you need to start saving… right now.

This article originally appeared on NerdWallet. Brianna McGurran is a former staff writer and columnist for NerdWallet. This article was updated June 2023. Photo by Daniel Hoz/Shutterstock

The post What Is a 401(k)? Everything You Need to Know About This Retirement Account appeared first on SUCCESS.

Experian examined consumer data based on the different tiers of VantageScore to give consumers an idea of which behaviors are necessary for building great credit. And as it turns out, there’s no magic to it—good credit is simply a matter of learning good habits and practicing them.

VantageScore is a credit-scoring model developed by the three major credit reporting bureaus: Experian, TransUnion and Equifax. It ranges from 300 to 850 and is separated into five tiers:

300-499: Deep subprime
500-600: Subprime
601-660: Nonprime
661-780: Prime
781-850: Super prime

While the VantageScore isn’t as widely used as the FICO score, it’s calculated with many of the same factors and is a good indicator of overall credit health. That being said, the following habits can help you establish excellent credit regardless of which scoring model you use.

So, what do people with excellent credit do?

1. They pay bills on time.

Making payments on time is one of the most important ways to build good credit. The Experian data supports this notion, showing that 100 percent of super prime consumers and 97 percent of people with prime credit have no late payments on their credit reports.

Takeaway: Make a habit of paying on time, every time. If you do have any delinquent bills, get caught up as quickly as possible. Late payments can stay on your credit for up to seven years, but your recent payment history has a greater effect on your score.

2. They keep their credit card balances low.

How much debt you carry on your credit cards relative to your available credit—also known as credit utilization—is a good indicator of how easily you can make your debt payments. Although it’s typically recommended to keep your utilization under 30 percent, the lower the better. For example, prime consumers have an average utilization of 30 percent, whereas the super prime credit tier averages just 8 percent.

Takeaway: Credit card companies typically report to the credit bureaus once a month, so a good way to keep your credit utilization down is to find out when your issuer reports your information and make a payment before that date. Another option is to make payments more than once a month.

3. They apply for credit infrequently.

Every time you apply for credit, it results in a hard inquiry on your credit report, which can ding your score. Only 31 percent of people with super prime credit and 38 percent of people with prime credit had a hard inquiry on their reports in the past year. Having multiple credit inquiries in a short period of time may signal that you’re struggling financially and are using credit to get by, or you are living beyond your means.

Takeaway: Apply for credit only when you need it. Try to limit applications to once every six months to be safe.

4. They have patience.

Lenders are likely to consider you a risky borrower if you have little to no credit history. The longer you’ve been using credit, the easier it is for them to gauge how responsible you are. On average, super prime consumers opened their oldest credit account 27 years ago, while prime consumers started using credit 19 years ago.

Takeaway: While the length of your credit history isn’t as important as your payment history or credit utilization, you can benefit from keeping old credit card accounts openand using them regularly and responsibly.

There’s no get-excellent-credit-quick scheme. Rather, it’s important to establish these credit habits over the long run. The good news is that it’s never too late to improve your credit. While negative marks may stay on your report for years, recent good habits usually overshadow old bad ones.

What can Pop-Tarts teach you about personal finance? A lot, actually. Check out 4 sweet money lessons straight from the toaster.

This article originally appeared on NerdWallet. Ben Luthi is a staff writer covering personal finance for NerdWallet.

The post 4 Financial Habits of People with Excellent Credit appeared first on SUCCESS.

If you freelance, your clients might not need you to be ready for battle, but you will need to be ready to run a business.

Being a freelancer is, in fact, one of the easiest ways to start a company. If you find clients to contract with you for a skill that you offer, then you’ve basically formed a business. A survey from the nonprofit Freelancers Union found that in the United States, about 53 million people do some sort of freelancing. Less than half of them work full-time for multiple clients, but they’re all entrepreneurs in the eyes of the law.

“The term ‘freelancer’ has no legal meaning, but it is generally understood to be an individual who runs a business providing services,” says Stephen Fishman, an attorney and the author of Working for Yourself: Law & Taxes for Independent Contractors, Freelancers and Consultants. “It’s a pretty straightforward type of business to start,” he says.

But how do you know if you’d be a good candidate?

A freelancer business might work for you if:

• You crave more freedom and flexibility than you can get working for a single company. As a freelancer, you set your own hours and can choose which assignments to accept and reject. You also decide where you’ll work and what equipment you’ll use for your jobs.

• You don’t want to rely on a boss for a raise.You can choose to work more hours to get more business or market yourself to higher-paying clients to make increased income. You may be able to make more money per hour than an employee in the same position because companies won’t have to pay benefits when they hire you—you’re responsible for your own taxes and insurance.

• You enjoy working with different people.Chances are you’ll be working with new clients on a regular basis. In fact, one major benefit of being a freelancer and having several clients is that even if you lose one gig, your income won’t drop to zero. A client’s layoffs or firings won’t affect you the same way they’d affect an employee.

• You like working from home. When you’re a freelancer, you choose where your office is located, and many times the cheapest and most practical place is a room in your home.

• You have home office expenses. Freelancers have more freedom than employees to deduct expenses from income, as long as those expenses are ordinary and necessary for business. Examples include cleaning costs for the home office, magazine subscriptions and the cost of creating a website. They could also include trips to restaurants and sports events with clients and potential clients.

A freelancer business might not work if:

• You require a steady paycheck from Day One. Like any business owner, as a freelancer, you probably won’t have regular income when you start. You’ll do a lot of marketing and it might take time to build up a client base. Even when you do get work, you might have to chase down payments from some clients.

• You don’t have a savings cushion or other source of income to rely on while you get your business off the ground. You should probably keep your day job and save money (enough to cover expenses for a few months) before starting a company.

• You don’t want to spend money on equipment and permits. As a freelancer, you’ll need to pay for business licenses and certifications. You’ll also need to provide your own gear and buy your own insurance.

• You want to avoid self-employment tax. If you have a sole proprietorship, you’ll need to pay Medicare and Social Security tax on your income. This is in addition to the regular income tax you would owe. Of course, as an entrepreneur, you get to decide your business structure: sole proprietorship, partnership or corporation. If you decide to go with another choice, you might not owe as much self-employment tax, but you’d have more paperwork to manage.

• You prefer job security. While there’s less risk of being fired or laid off, as a freelancer, your assignment may be among the first to end if a client is trying to cut costs. And as an independent contractor, you’re generally not entitled to worker’s compensation or unemployment benefits.

• You’re really an employee. Your job shouldn’t be confused with that of a company hire. A freelancer is a type of contractor. If your client’s providing you with the tools to do your work, telling you when to work and controlling how you work, then you may be an employee, not a freelance contractor. The client could face stiff penalties from the IRS if it’s determined that you’ve been misclassified.

• You’re an entrepreneur, but you don’t really freelance. If you plan to sell products and keep inventory, you probably wouldn’t refer to your company as a freelance business.

So, what’s the verdict?

If you’re ready to add “freelancer” to your résumé, here’s how to get started:

• Decide the type of business structure you want for your freelancer small business: sole proprietorship, partnership or corporation. You should also decide if you want your business to be an LLC, which could reduce your liability if your company were ever to be sued. “Most freelancers are sole proprietors because that’s the cheapest and easiest way to go,” Fishman says. But you should learn about all the business types before making a decision.

• Contact your secretary of state and city or county clerk to get necessary licenses and permits. Many cities require them, even for home-based businesses.

• Apply for a free Employer Identification Number from the IRS, so you won’t have to give out your Social Security number to the clients you invoice.

• File for a fictitious business name (also called “Doing Business As” or DBA) if you choose not to form an LLC. This can be done with your local municipality.

• Open a business checking account and consider getting a credit card for your freelance business. This will help you keep business and personal finances separate. Make sure you keep good financial records.

• Create a business plan that includes a great marketing strategy—and follow it.

Are you a writer? Find out how to start a career in freelance writing.

This article originally appeared on NerdWallet. Margarette Burnette is a staff writer covering personal finance for NerdWallet.

The post 5 Signs You’re Cut Out to Be a Freelancer appeared first on SUCCESS.

Meeting your savings goals in your 20s may be a difficult task if you only have an entry-level salary to cover all of your expenses, not to mention if you’re among the roughly 43 million Americans with federal student loan debt, according to Bankrate. But by taking some time to examine and understand where your money goes, you can set up a spending and saving plan that fits your lifestyle.

Here are three steps you can take to live (and thrive) on an entry-level salary:

1. Pick a split that works for your entry-level salary.

Experts often suggest splitting where your money goes into three categories: fixed costs (about 50%), savings/investments (about 20%) and spending money (about 30%), or the 50/30/20 rule. Maybe that works for you, maybe it doesn’t. It all depends on your financial goals.

The idea is to understand your costs and plan for them accordingly. If you expect to live at home for a bit, you can generally lower your fixed expenses and increase your savings. If you’re going to live in the city, plan to put a bigger portion of your entry-level salary toward your fixed expenses to cover rent.

2. Add up your monthly fixed costs.

What do you spend money on? Maybe more than you realize. Print out your debit or credit card statements for the past three months and make a list. Here are a few things to help you get started.

I need these:

• Housing
• Groceries
• Clothes

I wish I didn’t have to spend money on these, but I do:

• Cellphone
• Utilities (power, water, internet service)
• Transportation (gas, car insurance, bus pass, taxis, bike-share membership)
• Moving costs
• Health insurance (if not taken out of pay)
• 401(k) contributions
• Student loan repayments
• Rainy day fund contributions

3. Subtract your costs from your income.

Where do you stand?

Say your entry-level salary is $45,500 annually and you take home $3,600 each month before taxes. Subtract your fixed expenses from that amount. If the costs listed above come to, say, $1,800, then what you’re left with is what you’ll divide between extra costs today and putting away for the future.

Extra costs:

• Haircuts
• Toiletries
• Gym memberships
• Manicures/pedicures
• Doctors’ bills and copays
• Streaming services
• Travel and event tickets
• New gadgets

If you don’t already use a money-management app—for example, Mint—check to see whether your bank lets you sort your statements by category. This will help you to see where all of your extra cash is going.

This article originally appeared on NerdWallet. Alexandra Rice is a former editor and content strategist for NerdWallet. This article was updated July 2023. Photo by Ground Picture/Shutterstock

The post 3 Steps to Surviving on an Entry-Level Salary appeared first on SUCCESS.