<prompt> Human: Here is a list of some of the most common questions that pop up in rpersonalfinance, and the common rebuttals. Dont let this be you!Emergency Funds Why do I need an emergency fund? I have credit cards!Credit can be extended or withdrawn at any time by the card issuer, and not all emergencies are payable with credit. You should not rely on your credit lines as an emergency fund. Should I invest my emergency fund in something with more riskmore return? Bank account interest doesnt even keep up with inflation.As a general statement, no - emergency funds are best held in highly liquid, low risk accounts like savings or certificates of deposits. The statement about inflation isnt universally true either, as the inflation rate is not steady and recently has been quite low Your emergency fund is not going to make or break your retirement, so returns are a secondary concern compared to having a cushion to fall back on if things go south. Insurance and investments dont mix, and your emergency fund is insurance. Do I even need a big emergency fund? My job is stablenothing will ever happen to meIm in great healthetc.Everyones job is stable until it isnt. Nothing ever happens to anyone before something happens. Everyone is in great health until they arent. Financial emergencies are unpredictable by definition, and half of a proper defense is to be prepared with an emergency fund the other half is to be properly insured. Nobody who has ever had to use an emergency fund regretted having one, and credit to them who checked their egos at the door and took the right stes to prepare themselves. Investing Do I need to speak to a financial advisor?You probably dont. The vast majority of people asking this question in rpersonalfinance have simple situations that dont require any professional expensive advice after an hour or two of reading this for example. Unfamiliarity with personal financial issues is not the same as inability to deal with them. My situation is unique, heres a wall of text explaining why. Can you help me?Its probably not that unique. Please read the information found in the FAQ particularly I Have X ... What Do I Do With It?! You may find Your IRA and You: Basic Information and Your 401k and You: Basic Information worth a read as well. Use that as a starting point and explain why your situation is different. I know I cant time the market, but should I try timing the market?Every time the market takes a dip we get a litany of these kinds of posts. The market looks bad today because of Greecethe FedChinathe debt ceilingthe government shutdownwhatever - should I wait to invest??? Market timing doesnt work, not now, not ever. You can never perfectly time your investments to coincide with local or absolute minmimums in the market, and you cannot do it consistently. It is always the right time to invest according to your asset allocation and risk tolerance. Trying to time the market is an exercise in futility. How can I maximize my returns without any risk?In short, you cant. There are no low risk, high return investments - if there were everyone would do it and eliminate the advantage. You dont get the possibility of higher returns without taking on higher levels of risk. If youre looking for low risk, go with a savings account, CD, or treasury. If youre looking for the possibility of higher returns a stock market index fund may be appropriate for you. Also note that you need to match your risk tolerance to the time frame of your investment goals. Someone buying a house in a year should not be investing their down payment money on small cap stocks. Someone investing for retirement in 40 years can likely not afford to be plowing their entire nest egg into a savings account. I just got a cold call from my wifes cousin who works for Northwestern Mutual. Is whole life insurance as good an investment as they make it sound like?Permanent life insurance is a terrible investment for almost everyone except the person selling it. See the FAQ entry on life insurance If you have a need for life insurance at all, buy term and invest the difference. Dont get suckered into the sales pitch.Credit Should I keep a small balance on my credit cards to build credit? I heard from a friendcoworkerrelative that you have to in order to build credit.This is completely false. If you are using your credit cards properly you are paying off your bills in full, every month, no exceptions. You do not need to pay a single cent of interest to build a great credit score. CreditKarma says my score dropped 5 points, what should I do???CreditKarma is a simulated credit score and a drop of 5-50 points is virtually meaningless. Stop worrying about your credit score. If you are paying your bills off in full, every month, no exceptions by the statement due date you are doing things right, and your score will gradually improve. Ignore short term, small scale fluctuations. Will my credit score take a dive if I go over 30 utilization???Stop worrying about your utilization ratio. Utilization has no memory and takes one billing cycle to reset. If you are paying your bills off in full, every month, no exceptions by the statement due date you are doing things right. I have enough money to pay off my debts. Should I pay them off slowly to build my credit historyimprove my credit score?You should never extend the life of any loan just because you think it is going to help your credit score. Great credit scores can and should be built for free. You may decide to delay paying down a loan in full if the interest rate is low enough. See I Have X ... What Do I Do With It?! step 3.Banking Should I join a Credit Union instead of a bank?Credit unions are not inherently better than banks, and banks are not inherently worse than credit unions. The bottom line is you should decide on the banking services you need Need a large ATM network? A bank is probably better. Great customer service in a certain locale? Maybe a CU is better and go with whatever banking institution offers them for the lowest cost. For basic services both credit unions and banks are pretty much the same. I signed up for something but now Im being held to terms and conditions I didnt know about. Is this legal?Yes, it is legal for a company to enforce the terms and conditions you agreed to yet might not have read thoroughly. You should always read any agreements you sign for pitfalls. One of the most common is the clause in the 0 interest promotional periods that says if you miss a payment or havent paid down the balance in full by the end of the promotion period, you will be charged back interest.Taxes Is it even worth working overtime or getting a raise? It will put my in the next tax bracket.Tax brackets are marginal, meaning only the amount above the threshold is taxed at the higher rate. You never net less money by earning more. I got a bonus, why was it taxed at over 40??!No, 40 of your bonus was withheld. See taxes withheld vs. actual tax burden Your bonuses are not taxed any differently than your normal income, but they may be withheld differently. You can either wait until tax time to settle with the IRS, or use the IRS Withholding Calculator to determine if you need to submit a new W-4 to your employer to change your withholdings.I probably forgot some, but these are the posts I find myself answering over and over again. User-suggested additions: I make minimum wage and have no credit. Can I afford a 40K car?No. Even if you could, new cars are extremely efficient wealth-destroyers. Consider a used car you can actually afford instead of a new one that you cant. ulava_lice My bankrupt relative wants me to cosign. Should I do it?Cosigning a loan makes you liable to pay in the event that the original signer cannot. The creditor is saying that the borrower is not trustworthy enough to be extended a loan on their own, and they need additional guarantees that their loan will be repaid. If youre OK with being on the hook for all of your relativefriends debt, go for it. In general this is an absolutely terrible idea. ulava_lice  <response>: Credit Karma is a simulated credit scoreThis is incorrect and a common misconception. Credit Karma uses VantageScore 3.0, which was jointly created by Experian, Trans Union, and Equifax as a competitor to the FICO score. It is a legitimate credit score and many lenders use VantageScore as a basis for rendering a credit decision. It is just not as heavily marketed as FICO, which is why pretty much everyone views it as a fake score.Although VantageScore uses the same score range as FICO 300 to 850, they use a different algorithm than the FICO model which is why the scores you recieve arent exactly the same. 