6 Ways to Leverage Your Commute Budget While Working from Home
Working remotely—whether it’s a temporary arrangement or your everyday reality—has its perks. Being at home for the workday can offer more flexibility in your schedule and it can also bring more opportunities to save money.
When your commute budget all but disappears because you’re no longer spending on gas, parking, tolls, or public transportation the result can be a savings windfall. But what’s the best way to put those savings to work when your daily commute is on hold?
Here are six ways to get more mileage from the money you’re saving.
1. Fattening Up Your Emergency Fund
Having an emergency fund can be a stress-reliever when a crisis hits. According to research from Pew Social Trends, just 23% of low-income and 48% of middle-income Americans had a rainy day fund big enough to cover three months’ worth of expenses at the onset of the coronavirus pandemic.
If your emergency savings could do with a little help, it could make sense to funnel some of your commute budget into building it up. Here are some tips for growing your emergency fund:
• Setting your savings target. Decide how many months’ worth of expenses you want to save so you have a set dollar amount to work toward. Typically, recommendations suggest saving somewhere between three and six months worth of expenses, depending on your financial situation.
• Choosing the right place to save. A cash management account like SoFi Money®, can offer easy access to your money along with competitive interest rates.
• Automating and being consistent. Adding money to your emergency fund regularly is key to helping it grow and making deposits automatic is an easy way to do it.
2. Paying Bills a Month Ahead
If you’ve got your emergency fund covered already, you could use some of your commuter budget funds to pay your bills ahead. That may be worth considering if there’s a possibility that your income might drop.
For example, COVID-19 left millions of Americans unemployed and underemployed as companies cut hours. According to the most recent data from the Federal Reserve, nearly 20% of Americans had their income or employment impacted as a result of the pandemic, and of those, nearly a third were having trouble paying their regular household bills as a result.
Paying a month or more ahead on your mortgage, student loans, credit cards, and other bills can give you a cushion in case something changes with your income because your hours are reduced or you’re laid off.
You’d have a little time to rethink your budget and create a strategy for managing bills without worrying about falling behind on payments.
3. Making a Dent in Your Debt
If you have money to spare because you’re commuting less or not at all, you could use it to wipe out some of your debt.
Student loans, credit cards, car loans—they can all cost you money in interest and fees and keep you from pursuing other financial goals. If you’re interested in using some of your commute budget to pay down debt, consider how you can get the most from your money.
For example, if you have high-interest credit card debt that might be your first target. Or if you’re just ready to get rid of your student loans once and for all, you may allocate most of your commuter budget savings to pay off those debts.
When using extra savings to pay down debt, keep these tips in mind:
Consider taking advantage of balance transfer credit cards that offer a lower interest rate temporarily. This can be a worthwhile move if you’re able to pay off the debt before the low introductory rate ends.
Look into refinancing private student loans to see how much you could save with a lower interest rate. Refinancing won’t be for every borrower. Refinancing federal student loans eliminates them from federal borrower protections and benefits.
Consider consolidating federal loans to streamline monthly payments. This won’t result in a lower interest rate, but having just one monthly payment to track can make it easier to manage. Learn more about the difference between student loan refinancing and consolidation here.
Enroll in autopay for federal and private student loans. This can help you avoid missing payments, and some loan servicers offer an interest rate discount for doing so. The discount will depend on the loan servicer, but federal student loan holders enrolled in autopay may qualify for a 0.25% interest rate reduction.
Also, give some thought to your debt payoff method. The debt snowball, for example, prioritizes paying off debt from the lowest balance to highest while the debt avalanche suggests paying debt off starting with the highest annual percentage rate (APR) first—while still making minimum payments on all other debts, of course.
Whichever method you choose, remember that it’s consistency that counts in the long run.
4. Saving for Long-Term Goals
Aside from emergency savings, there are other things you might want to save money for.
For example, those things might include:
• Buying a car
• Starting a business
• Taking a vacation
• Buying a home
• Doing home repairs or improvements if you already own a house
If you’ve got extra money left over from your commute budget, you could use it to save for any of those goals. You can set up individual savings accounts for each goal and add money to them regularly. With a SoFi Money® account, you can set up individual savings goals in a single account. These Money Vaults can make it easy to streamline your savings.
Another option might be to consider opening a CD or Certificate of Deposit, for goals with a specific timeline. CDs are time deposits, which means you have to leave your savings in them until they mature. You won’t be able to touch the money in a CD before it matures without incurring penalties. Some CDs can offer a higher interest rate than you might find with a typical savings account so consider shopping around and comparing different rates to find the best account for your goals.
5. Increasing Retirement Account Contributions
Saving for retirement may be another financial priority and there are multiple ways to grow wealth for the future, starting with your workplace plan.
If you have access to a 401(k), you could bump up your contribution rate for the year to put away the money you’re saving on commuting expenses. At the very least, it’s generally a good idea to contribute enough to qualify for the full company matching contribution, if your employer offers one.
You can also save money in an Individual Retirement Account if you don’t have a retirement plan at work. A traditional IRA offers the benefit of tax-deductible contributions while a Roth IRA allows for 100% tax-free distributions in retirement.
For 2020, you can add up to $6,000 to a traditional or Roth IRA, which increases to $7,000 for people aged 50 or older. Many financial institutions offer IRAs. Take a look at the retirement accounts offered through SoFi Invest®.
Another way to save for the future and snag some tax benefits is a Health Savings Account. You may have access to an HSA if you have a high deductible health plan. HSAs offer:
• Tax-deductible contributions
• Tax-free growth
• Tax-free withdrawals when the money is used for qualified health care expenses
If you have the option, saving in one of these accounts can help you work toward your retirement savings goal.
6. Investing in Yourself
Working remotely can mean having more free time if you’re able to get your work tasks done faster than you would in a regular office setting. Investing in yourself can be a great way to make use of that time and the money you’re saving.
For example, you could take an online class to improve your skill set, sign up for a webinar if it offers a chance to do some professional networking or start a side hustle. Or you could go even further and look into getting an advanced degree or starting a full-scale business.
Using your commute budget savings to invest in yourself could pay dividends if the investments you’re making allow you to grow your income or take steps forward in your career.
Don’t Let Commute Budget Savings Go to Waste
Working remotely can be a gift to your bank account if you’re able to keep more of your hard-earned dollars. What you do with that money matters and there are plenty of ways to make your savings work harder for you in the short- and long-term.
And if refinancing student loans is on your financial to-do list, consider the refinancing options available through SoFi.
You can get a rate quote to see how much money you could save by refinancing your student loans in just two minutes.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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