Question 1

What is the snowball method?

Accepted Answer

Pay off smallest balance first while making minimums on others. Once paid, roll that payment to the next smallest. Quick wins build momentum.

Question 2

What is the avalanche method?

Accepted Answer

Pay off highest interest rate first. Saves the most money mathematically, though progress may feel slower initially.

Question 3

Which method is better?

Accepted Answer

Avalanche saves more money. Snowball provides faster wins for motivation. Pick based on what keeps you going.

Question 4

What is PITI?

Accepted Answer

Principal, Interest, Taxes, and Insurance—the four parts of your monthly mortgage payment.

Question 5

How much should I put down?

Accepted Answer

20% avoids PMI, but 3-5% is common. FHA allows 3.5% down. More down = lower payment and less interest.

Question 6

What's included in my payment?

Accepted Answer

Principal (loan balance), interest (lender's fee), property taxes (often escrowed), and homeowner's insurance.

Question 7

What is compound interest?

Accepted Answer

Interest on your principal plus accumulated interest. Your money earns money, then that money earns money.

Question 8

What is the Rule of 72?

Accepted Answer

Divide 72 by your interest rate to estimate years to double your money. At 7%, money doubles in ~10 years.

Question 9

How often should interest compound?

Accepted Answer

More frequent = slightly better returns. Daily beats monthly beats annually. Most savings accounts compound daily.

Question 10

What are 2025 contribution limits?

Accepted Answer

$23,500 standard limit. $31,000 if you're 50+. Ages 60-63 get a special $11,250 super catch-up.

Question 11

Should I max out my 401(k)?

Accepted Answer

At minimum, contribute enough to get full employer match—that's free money. Max out if you can afford it.

Question 12

Traditional vs Roth 401(k)?

Accepted Answer

Traditional: tax-deferred now, taxed later. Roth: taxed now, tax-free later. Choose based on current vs future tax rates.

Question 13

What is a break-even point?

Accepted Answer

When your monthly savings equal the closing costs you paid. Stay past break-even and refinancing saves money.

Question 14

What closing costs should I expect?

Accepted Answer

2-5% of loan amount: appraisal ($300-500), title insurance, origination fees, and other charges.

Question 15

When does refinancing make sense?

Accepted Answer

Rate drop of 0.5-1%+, you'll stay past break-even, and closing costs are reasonable.

Question 16

What costs are included in buying?

Accepted Answer

Mortgage, property taxes, insurance, HOA, maintenance (1-2% annually), and opportunity cost of down payment.

Question 17

How is appreciation calculated?

Accepted Answer

Historical average is 3-5% annually, but varies hugely by location. Don't count on appreciation alone.

Question 18

What about tax benefits?

Accepted Answer

Mortgage interest and property tax deductions—but only if you itemize. Many homeowners take standard deduction instead.

Question 19

What is an amortization schedule?

Accepted Answer

Month-by-month breakdown showing how much of each payment goes to principal vs interest.

Question 20

Why do I pay more interest early on?

Accepted Answer

Interest is calculated on remaining balance. Higher balance = more interest. It flips over time.

Question 21

How can I build equity faster?

Accepted Answer

Extra principal payments, shorter loan term, or biweekly payments (26 half-payments = 13 monthly payments).

Question 22

What are 2025 Roth IRA limits?

Accepted Answer

$7,000 ($8,000 if 50+). Income limits: single filers phase out at $150,000-$165,000 MAGI.

Question 23

Roth vs Traditional IRA?

Accepted Answer

Roth: pay tax now, tax-free later. Traditional: deduct now, pay tax later. Roth is usually better for younger workers.

Question 24

Can I withdraw Roth contributions?

Accepted Answer

Yes, contributions (not earnings) can be withdrawn anytime tax and penalty-free. Earnings have rules.

Question 25

When do RMDs start?

Accepted Answer

Age 73 if born 1951-1959. Age 75 if born 1960 or later. First RMD due by April 1 of the following year.

Question 26

How is my RMD calculated?

Accepted Answer

December 31 account balance divided by IRS life expectancy factor for your age.

Question 27

What if I miss an RMD?

Accepted Answer

25% penalty on the amount not withdrawn. Reduced to 10% if corrected promptly.

Question 28

How much should I tip?

Accepted Answer

15-20% for good service. 18-20% for excellent. Some tip 25%+ for exceptional service.

Question 29

Should I tip on tax?

Accepted Answer

Traditionally on pre-tax amount, but many tip on total for convenience. Either is fine.

Question 30

How do I split a bill?

Accepted Answer

Add tip to total, divide by number of people. Our calculator handles it automatically.

Question 31

How do I calculate percent off?

Accepted Answer

Multiply price by discount percentage, subtract from original. 20% off $100 = $20 discount = $80 final.

Question 32

How do stacked discounts work?

Accepted Answer

Applied sequentially. 20% off then 10% off = 28% total (not 30%). Order doesn't matter for percentages.

Question 33

Markup vs margin?

Accepted Answer

Markup: percentage added to cost. Margin: profit as percentage of price. 50% markup = 33% margin.

Question 34

What are tax brackets?

Accepted Answer

Tax brackets are ranges of income taxed at increasing rates. Progressive tax system means higher income is taxed more.

Question 35

How do marginal vs effective rates differ?

Accepted Answer

Marginal rate is the tax rate on the next dollar earned. Effective rate is the average rate paid on all income.

Question 36

Why is it important to understand tax brackets?

Accepted Answer

Understanding tax brackets helps in planning deductions, contributions, and overall tax strategy effectively.

Question 37

What's the typical recommendation for an emergency fund?

Accepted Answer

Most experts suggest saving 3-6 months of essential living expenses.

Question 38

What counts as an 'essential' expense?

Accepted Answer

Housing, utilities, food, transportation, insurance, minimum debt payments, and other necessities.

Question 39

Where should I keep my emergency fund?

Accepted Answer

In a safe, easily accessible place like a high-yield savings account, separate from your checking.

Question 40

What is DTI?

Accepted Answer

Debt-to-income ratio, a measure of your monthly debt payments compared to your gross monthly income.

Question 41

What's a good DTI for a mortgage?

Accepted Answer

Lenders prefer below 43% back-end DTI, and often look for front-end DTI (housing costs) under 31%.

Question 42

Does DTI include credit card payments?

Accepted Answer

Yes, it includes minimum payments on all recurring debts, including credit cards, loans, and mortgages.

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