Part of my plan to overcome debt is to increase my financial IQ. It is important to know and understand the different ways I can invest my money and to be familiar with the terminology involved.

I have been investing in a 401k with my employer for the last 7 years and have recently used a portion of it to pay off a some of my credit card debt.

I know some of you may just be starting out in your careers or you have been working for awhile without planning for your retirement. A 401k plan is a great way to save money with pre-tax dollars! Simply put, a 401k is a retirement savings account offered by your employer.

With a 401k plan you can authorize your employer to deduct a certain percentage of pre-tax dollars from your paycheck, and to invest it in the 401k . Your money is invested in investment options that you choose from the ones offered in your plan.

The money you invest into your 401k is deducted from your paycheck before income taxes are taken out. This means that by contributing to your 401k you can actually lower your taxable income for each paycheck. For example, if you earn $1,000 each paycheck, and you contribute, 5% ($50), you are only taxed on $950.

Most employers also offer employee matching for contributions to your 401k. My work matches 3% of my monthly contribution. I currently deduct 6% from my paycheck and with the 3% employer matching, I really am saving 9% of my income each paycheck.

At my current rate, when I am retirement age I will have over $1,367,000 in my 401k account.

I want to encourage you to invest into a 401k and plan for your future!