Artists need to know topics
Posted May 25, 2011 - Question: So you always hear about the importance of credit scores, right? So how do credit scores work?
Answer: In order for a potential lender to decide whether you’ll pay them back, a system of evaluating your creditworthiness developed over the years. Creditworthiness is basically about how good someone is at paying off their loans on time and in full. Most people in the US, sometime during their late teenage years to early twenties, began to establish evidence of their creditworthiness (called a credit history). You, without even knowing it, have left behind you a trail of evidence as to your credit worthiness.
There are three bureaus gather and compile this type of information. These three bureaus are Equifax, Experian, and TransUnion. Then, the Fair Isaac Corporation uses this info to create a number that lenders (such as banks, credit card issuers and the like) use to evaluate your credit risk. This score is called your FICO score.
There are several things that matter in your credit score (or your FICO score). According to the myFICO website, 35% of your score is from your payment history (on things like rent, debt payments, cell phone payments), 30% is how much you owe, 15% is the length of your credit history, 10% is the amount of new credit, and 10% is the types of credit used. Remember credit means the same thing as loans or debt
Posted May 6, 2011: Question: Okay, so what exactly is a mutual fund, anyway?Answer: A mutual fund an investment that you can put money into if you want an easy way to diversify your investment. Basically, if you have say $1000 to invest, it might be hard for you to diversify that investment: it'd be difficult to buy shares in 100 different companies with your one grand. Mutual funds do this for you. They take your one thousand dollars and pool it with money from many other investors. Then they invest that larger pool of cash into a diversified portfolio. There are many types of mutual funds. Which fund is for you is a matter of preference and depends upon things like your age, how much risk you want, how sensitive you are to volatility and fees, etc. Go to the section called The Dark Alchemy of Investing to learn more.
Posted April 25, 2011: Our characters speak!
Our cast of characters (from the case studies on this site) speak. In this clip, they offer their thoughts about money. Any of this sound familiar?
Posted April 13, 2011 - Question: As long as we're at it, just what is a stock?
Answer: A stock is a part ownership in a company. Every company has a certain monetary value (or, each company is worth a certain amount of money). Say you figured out the value of a company. Divide this value into a number of equal parts (say a thousand parts, or a million). Then these parts, called "shares," can be sold to investors. Each investor becomes part owner of the company, according to the number of shares they bought. The company can use the proceeds from selling shares to fund their business operations. Private companies sell shares to a small circle of investors. Public companies sell shares on open markets, called exchanges (such as the New York Stock Exchange or NASDAQ, there are many exchanges in the US and abroad). For more info, see the investment terms or read the section called The Dark Alchemy of Investing.
Posted March 31, 2011 - Question: Okay, so just what is a bond anyway?
Answer: A bond is something you can put your money into in order to achieve a (hopefully) safe and predictable return (or interest rate). The interest rate you receive for holding a bond varies depending upon two factors: the length of time you have to hold the bond until it matures and whether or not the bond is risky. Essentially, when you "invest" in a bond, you are making a loan to the issuer. They, in turn, pay you interest for using your money. Most investors either invest in a bond through a brokerage account, or via a bond-focused mutual fund.
Posted March 21, 2011 - Question: Is it a good idea to start an artist co-op?
Answer: Could be a great idea, so long as the artists involved talk and talk and talk and talk and talk... about everything. Utopian communes can come apart and cause bitterness if everyone's voice isn't being heard and goals of different members aren't understood. See the case study on this topic if you want!
Posted March 14, 2011 - Question: Your business-guy brother says you should invest in stocks. Your aging hippy parents say that the system is a conspiracy and you should use your money to start a commune. Who's right?
Answer: They're both right. Well... sort of. Stocks, over the long run (as in thirty years) provide a better return than other asset classes. So your brother has a point, in spite of (or because of) his blind faith in the corporate world. As for your hippy parents, "conspiracy" implies a degree of intentionality and coordination that you just can't believe... But then you consider all you've read and heard about Wall Street traders and CEOs... and a bucolic hippy love commune doesn't sound so damn crazy after all.