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How to Get by on a Medical Resident Salary

Television shows often feature medical school residency as a stage for exploring young professional life—with no shortage of soap opera melodrama. There always seems to be an angry surgeon, overworked residents, and a love triangle or two.

But from the sound of it, the reality of resident life is really quite different. Yes, residents often work long hours—the shows get that right—but residents also have families and outside lives and worry about normal stuff like paying rent and student loans.

How Much Do Medical Residents Make?

So, how much do doctors make during residency? According to the Association of American Medical Colleges, the average medical resident salary was $54,600 in 2017 and is projected to be $55,700 in 2018. After (national average) federal and state taxes, this leaves the average medical school resident with $3,280 to spend each month.

Getting a stipend may feel like a relief for some residents fresh out of medical school, but making that money stretch can be a challenge—especially in high cost-of-living areas. To help, here are seven tips for getting by (and even thriving) while living on an average resident salary.

1. Make a Simple Budget

The average resident has little time to keep track of their expenses, but building a simple budget could be the difference between making it work and ending up short. Your first step should be to make a list of all “necessary” spending, such as rent, utilities, and groceries.

Compare that to all sources of income, including your resident salary and any family help. What amount is left over? That’s how much you have to spend on “extras” each month. You can either set limits for each category (for example, $100 for eating out) or you can monitor your spending as the month progresses. Or, you can do both.

2. Consider Personal Preferences and Trade-Offs

A budget can feel like a buzzkill, but if you do it right, it can also be freeing. By knowing exactly how much you can spend, you can then decide what’s important for you to prioritize and what can be ruthlessly eliminated.

Maybe you’ll decide that you want to cut cable but can’t give up going out to your favorite local wine bar. Or perhaps you’ll give up eating out so that you can spend more on rent. Really, spending money is just analyzing each trade-off; ask yourself “do I want this, or something else?” Even committing to something as simple as brewing coffee at home could save $100 per month or more.

3. Focus on Fixed Costs

One big way you can make an impact on your budget is by making “big wins” on fixed costs, such as insurance or utility bills. For example, lowering a bill by $20 each month is going to have a bigger effect that saving a few dollars on small purchases. Looking at your own fixed spending, where could you ask for better rates? Or cut back entirely?

While you’re at it, check your subscription services and other memberships. Though not often considered a “fixed cost,” they become one once they withdraw money from your account each month. Subscriptions and memberships are sneaky; check yours to make sure you’re not paying for a service that you’re not able to use because you’re so busy; try to eliminate one or two for automatic monthly savings.

4. Share a Living Space

When it comes to getting a big win, there’s usually no win that’s bigger than saving on your rent. To do this, you can move into a more affordable place, live with roommates, or rent out a room out at your place. Not only could a roommate help you save on rent, but on utilities like water, electric, and cable.

Some folks don’t like the idea of having roommates, but it can be worth considering that living alone is a pretty recent luxury. This is partly due to the increased number of people who aren’t getting married, but either way, having a place to yourself hasn’t always been the norm. While you need to do what keeps you sane throughout your residency, you might consider a roommate—especially if you’re not home that often.

5. Choose Less Expensive Transportation

If you have a car, it’s worth questioning whether you really need it, and in what capacity. For example, could you get rid of your car altogether, and use public transportation, a bike, and ridesharing instead? (Check and see if Uber or Lyft are offering a flat-rate, monthly pass option in your city or area.)

If you’re not ready to sell your car quite yet, simply try using it less. Even this small act may save you money each month. For example, if you’re spending $120 per month on gas but could ride public transportation for $30 per month, you may save over $1,000 on transportation in a year.

It might be a difficult transition at first, but you may find that you appreciate the time you aren’t behind the wheel. Another potential way to save money on transportation is by shopping around for car insurance. If you haven’t done so in the last several years, it could we well worth it—especially if you have a good driving record.

6. Cook at Home

You’re likely overworked and need to rest during your off hours, and it’s hard to find the time and energy to cook. But eating out is expensive. While it would be unreasonable to think that a medical resident could cook food for every meal, it may be worth taking a few hours each week to cook up a soup or casserole that can be eaten throughout the week. Alternatively, you can freeze individual grab-n-go meals. Making large batches of food could potentially save residents hundreds of dollars a month.

7. Refinance Medical School Loans

Like most people who attended medical school, there’s a very likely chance you took out student loans. Managing these loans while you’re living on an average resident salary may be important for your financial success. It is important to understand your loan repayment options as a medical resident. One of the first decisions you may want to make is whether you want your loans to go into forbearance or to make payments on your loans during residency.

Student loan forbearance may seem like an ideal option for a person on a medical resident salary, but that might not always be the case: Federal medical school student loans accrue interest during that time, and that interest is added to your balance at the end of your forbearance period. This is called compounding, or capitalization, and means that you’re paying interest on top of interest.

You may want to consider refinancing your medical resident student loans with a company like SoFi, that offers programs designed for medical school residents. Refinancing is the process of paying off one loan (or many loans) with another, generally to lower your overall interest rate or to change the terms of your loan.

Refinancing student loans won’t be for everyone, as you will lose access to federal loan programs such as Public Service Loan Forgiveness (PSLF). SoFi’s medical school loan refinancing offers monthly payments as low as $100 per month during residency, while no interest capitalizes during that period.

Additionally, with SoFi, you might be able to lower your overall interest rate as well, which could potentially save you thousands of dollars over the life of your loan. Learn more about SoFi’s medical resident loan refinancing rates and terms.

It’s easy to see if SoFi’s medical school loan refinancing is right for you; checking takes as little as two minutes. See what interest rate you qualify for when you refinance with SoFi.


SoFi does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Getting Approved for Personal Loans after Bankruptcy

Filing for bankruptcy can be one of the most devastating experiences of your life. The financial impact is far-reaching, from hurting your credit to potentially losing some of your assets. But the emotional consequences can feel even more intense. Many people who file for bankruptcy can have a sense of failure and hopelessness, not to mention the mental toll of dealing with creditors and the legal process.

While bankruptcy can feel like an isolating experience, it’s not uncommon. In 2017, more than 740,000 people filed for personal bankruptcy.

Back in 2010, after the Great Recession, there were nearly 1.6 million bankruptcy filings , and there are still 1.7 million ongoing bankruptcy cases in the U.S.

For those recovering from bankruptcy, you should know that bankruptcy does harm your credit score and can make it more difficult to take on new debt at reasonable interest rates. Here are some key things you need to know if you’re looking to qualify for a loan after bankruptcy, whether you filed for Chapter 7 or Chapter 13. But of course, this information isn’t intended to serve as legal or tax advice—SoFi always recommends that you consult your own attorney and/or tax advisor.

Types of Bankruptcy Filings

Filing for bankruptcy involves bringing a case under federal law in order to wipe out your debts. This process gives people who are overwhelmed by debt a way to deal with their burden and start over, while allowing creditors to be treated fairly. There are two main types of bankruptcy available to individuals:

Chapter 7 bankruptcy

A trustee takes over your assets and liquidates them, or turns them into cash. The money is then doled out to creditors based on priorities in the federal Bankruptcy Code. You may be able to keep certain assets, such as your home, clothing, or furniture, depending on your state. After the bankruptcy process is complete, most of your unsecured debt is wiped away, giving you the opportunity for a fresh start.

Chapter 13 bankruptcy

You can keep your assets but must agree to a repayment plan for a period of three to five years. A trustee collects the money and pays your creditors, as well as ensuring you honor the repayment plan. Once you’ve met the terms of the plan, most of the remaining debt is erased.

This type of bankruptcy is available to people who have a regular income with debt that fall below a certain limit (currently, that’s around $1.18 million in secured debts, such as mortgages, and $394,725 in unsecured debts, such as personal loans or credit card bills). You usually have to file for Chapter 13, rather than Chapter 7, if you make more than your state’s median income.

Certain debts can’t be eliminated, or “discharged” through a court order, even in bankruptcy. These include most student loans, most taxes, child support, alimony, and court fines, among other things. You also can’t discharge debts that come up after the date you filed for bankruptcy.

Can You Get Approved for a Personal Loan after Bankruptcy?

It depends. But remember that depending on the type of bankruptcy you file, bankruptcy can negatively impact your credit score for years .

Bankruptcy can put you at a disadvantage when it comes to qualifying for new credit cards or loans, and some lenders don’t offer personal loans at all to people with a bankruptcy on their records. Even if you get approved, it can be difficult to get loans with favorable terms or low interest rates.

Lenders who check your credit report will learn about a Chapter 7 bankruptcy for up to 10 years after the filing, while a Chapter 13 bankruptcy will stay on your credit report for up to seven years.

Still, filing for bankruptcy doesn’t mean you can’t ever get approved for a loan. Even though your credit score might take a dip after filing for bankruptcy, it may improve shortly thereafter, especially if you stay up to date on your repayment plan or your debts are discharged.

One study found that people in Chapter 13 bankruptcy protection saw their credit scores increase by 17 points over the first five years after filing.

You may even be able to help your credit score during bankruptcy by making the required payments on any outstanding debts, whether or not you have a repayment plan. The faster you can take steps to improve your credit, the sooner you can feel like your financial life is back on track.

Should You Apply for a Personal Loan after Bankruptcy?

Before you submit your applications, it’s a good idea to get copies of your credit report from the three major credit reporting agencies: Equifax, Experian, and TransUnion. Make sure that your reports represent your current financial situation, and check for any errors.

If you filed for Chapter 7 bankruptcy and had your debts discharged, they should appear with a balance of $0. If you filed for Chapter 13, the credit report should accurately reflect payments that you’ve made as part of your repayment plan.

Next, you can consider applying for personal loans, and do so with several lenders, whether traditional banks or online, so that you can compare offers. The lenders will likely ask you to supply contact and personal information, as well as details about your employment and income.

Make sure you’re ready to show evidence of your income, and don’t forget to include all sources of cash, including a side hustle. Of course, the lender will likely also consider your credit history and debt-to-income ratio.

What to Do if You Get Approved for a Personal Loan

Before you sign on the dotted line, it’s smart to take the following steps:

Read the fine print.

Since you have or had a bankruptcy on your record, the terms of your offer may be less than favorable, so consider whether you feel like you’re getting a reasonable deal. People with “average” or “poor” credit might see average annual percentage rates on their personal loans ranging from 18% APR to 32% APR. Make sure you are clear on your interest rate and fees, and compare offers from different lenders to make the choice that works for you.

Avoid taking out more than you need.

You’re paying interest on the money you borrow, so it’s generally better to only borrow funds that you actually need. Further, it’s probably wise to only take out as much as you can afford to repay on time, because paying on time is an important key to rebuilding your credit.

What to Do if You Don’t Get Approved for a Personal Loan

If you are denied a personal loan, don’t despair. You may have several options for moving forward:

Appealing to the Lender

You can try to explain the factors that led you to file for bankruptcy and how you have turned things around, whether that’s a record of on-time payments or improved savings. They may not change their minds, but there’s always a possibility they can adjust their decision on a case-by-case basis.

You likely have the best chance at an institution that you’ve worked with for years or one that is less bound to one-size-fits-all formulas—such as a local credit union, community bank, online lender, or peer-to-peer lender.

Applying With a Co-signer

A co-signer who has a strong credit and income history may be able to help you qualify for a loan. But keep in mind that if you can’t pay, they will be responsible for paying back your loan.

Building Your Credit

It’s okay to take some time to try to improve your credit score before re-applying for a personal loan. You still have a chance to work toward reducing your other debt, such as credit card balances or student loans.

About SoFi

SoFi is a modern finance company specializing in accessible, online financial products. We’re a full-service lender—but you can apply for a loan from your couch, which is a nice perk. And speaking of nice perks, SoFi members have complimentary access to our team of financial advisors who can help you budget, invest, and get your financial life on track.


This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice about bankruptcy.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC .
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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10 Financial New Year’s Resolutions You Can Actually Stick To

New Year’s resolutions can be overwhelming. After all, around 80% of them fail by February . But if you keep them reasonable and attainable, it should be easier to make them work.

And if saving more or making your dollar go further are on your to-do list, we are here to help. Here are 10 attainable financial resolutions that could potentially make this year a great financial year.

Creating a Budget and Sticking to It

Creating a budget allows you to look back and see exactly what you’re spending too much money on and where you could be saving more. It can also help ensure you stay well within your means and put aside more for the future. Creating a budget doesn’t have to be difficult.

Start by gathering all your financial documents, including all of your monthly bills. Next, create a list of all of your monthly financial needs like rent, groceries, bills, and an entertainment budget. Finally, compare it to your income stream, review, and adjust from there. For more information, check out SoFi’s six simple steps to creating a budget you can actually stick to.

Automating Your Payments

From your credit card bills to rent, student loans to your heating bill, almost all of your bills can now be automated.

Just make sure you pick a date each month that works for you (say, a day or two after you know you’ll receive a check) to better ensure you have enough funds to cover the cost. This way, you can set it and forget it.

Building an Emergency Fund

We know, the idea of building an emergency fund can feel wildly daunting. However, you’ll probably be extremely happy you have it if you ever need it. To find the right emergency fund savings goal, you can calculate your expenses for about three to six months (this is where your budget should come in handy).

Then, try to set aside a little each month into this fund until you hit your target. This way, if you have an unexpected health emergency, your car breaks down, or you lose your job, you can have a cushion to fall back on.

Attempting to Pay off Your Credit Card — in Full — Every Month

Credit cards are notoriously difficult to pay off thanks to compounding interest . If you can, try and pay off your credit card debt, then stay within your budget so you can pay your balance off in full each month.

This could help raise your credit score and can give you more peace of mind knowing you don’t have any looming debt hanging over your head.

Putting a Bit More Toward Your Student Loans Each Month

Being able to finally pay off your student loans is a great feeling. Help accelerate that process by adding just a few dollars to your student loan repayment each month. Even $20 can help you pay off the interest and principal of your student loan that much faster. (And hey, you can even automate this payment, too.)

Checking Your Credit Report More Often

You are your own best friend when it comes to credit monitoring. Credit scores play a huge role in borrowing and lending. If you go to buy a home, a car, take out a loan, or even to refinance, chances are your credit score will play a role in the approval process.

By checking your credit score often (this is different from pulling your credit report ) you can stay on top of any changes or discrepancies, and make decisions to improve your score in the future.

Taking a Finance Course

If you’re really looking to take your financial know-how to the next level try enrolling in a financial education course. Through one of these courses you have an opportunity to learn everything from budgeting and saving, to investing and financial family planning.

Many of these courses are offered for free on the internet, meaning you don’t even have to get off the couch to help improve your financial future.

Thinking About Adding a Side Hustle to Your Income Stream

Having a side hustle is all the rage and for good reason. It’s an excellent way to supplement your income so you can save more, pay off debt, grow an emergency fund, or just use it as fun money to live your life.

Best of all, there’s a side hustle for everyone. If you like talking to new people, maybe driving with a ride-sharing service is for you.

Or if you’re handy, websites like TaskRabbit may help you make a little extra money with your skills. Freelancing with your graphic design, photography, writing, or other creative talents can also bring in some cash.

Asking for a Promotion or a Raise

If you’ve been with the same company for more than a year, it’s time to think about asking for either a promotion or a raise. The best way to do this is to go in prepared. Start by gathering documentation of all the good things you’ve done in your job over the last year and be prepared to discuss how they’ve helped the company’s bottom line.

Next, take a look at what others are making in your same field by searching websites like Glassdoor and PayScale to find comparable data. Finally, be prepared for a bit of pushback and get ready to negotiate what you really want.

Adding Just 1% More to Your Retirement Account

If you’re already putting away money into a 401(k) or an online individual retirement account, that’s wonderful news. Now, do you think you can add just 1% more of your income to that account? Odds are you can, and those savings can seriously add up.

For example, NerdWallet crunched the numbers and found that if a person is making $40,000 a year and puts away 6% of their paycheck starting at age 22, they could save $551,199 by the time they reach a retirement age of 67.

Not bad. But, if that same person increases their retirement allocation by 1% a year to a maximum of 20%, they’d be able to save a whopping $1,364,292, accounting for a $813,093 difference. The calculations above assume a 6% annual return.1

Bonus: Thinking About Taking Out a Personal Loan to Pay off Remaining Debt

It may sound counter-intuitive, but one way to shore up your debt is to take out a personal loan, and consolidate your credit card debt into one loan. With a SoFi personal loan, you may even be able to get a lower interest rate, which means you could pay less interest overall.

Best of all, it’s easy to see what rates you may get when you apply, you can automate payments, and make that ever important budget just a little bit simpler each month.

Looking to do something great with your money? Check out SoFi personal loans to kick off the new year right.


1 IMPORTANT: The projections or other information above regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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How to Avoid 401k Fees

As Bob Dylan so aptly put it, “The times they are a-changin’.” Gone are the days of starting and finishing your career with the same company. In previous generations, the chances of getting a job, and working at the same company for the entirety of your career were far more likely than today.

And according to the Bureau of Labor Statistics , most employees stay in the same job for only about four years.

While the increased job mobility has its benefits—it can be great for your annual salary—it could impact your 401k savings. When you leave your current employer, you’ll also have to deal with changes to your 401k plan. You’ll be responsible for paying any 401k fees associated with maintaining your account.

What most of us don’t realize is that these sneaky 401k fees can add up over time to hundreds of thousands of dollars and cut into our retirement savings.

The typical 401k plan charges a fee of 1% of assets managed. While that might not seem like a lot of money, it can easily add up to $100,000 or more over your lifetime—and that’s the amount on just one account. According to CNBC, “a 1% reduction in fees can add an additional 10 years to your retirement income.”

Consider this: If you’ve changed jobs multiple times, and each time leave your 401k plan with your former employer, then you are paying 401k fees on multiple accounts. In addition, your ex-employer might be charging you an administrative fee for the privilege of staying in the company’s 401k plan now that you are no longer an employee.

Perhaps then it’s not surprising that Federal Reserve’s 2017 Survey of Consumer Finances , finds that the typical couple nearing retirement will only receive $600 per month from their 401(k) plans and individual retirement accounts (IRAs) combined.

If all this talk of hidden fees has you thinking that next time you switch jobs, you’ll just liquidate your account, think again. If you are under the age of 59 ½, early withdrawal penalties can throw a wrench in that plan. You’ll be taxed on that money as if it was ordinary income and there will most likely be to a 10% federal tax penalty.

Fortunately, there are steps you can take to avoid 401k fees. The next time you switch jobs, pay attention during your exit interview. Your human resources representative should go over your options for managing your 401k plan.

You aren’t required to keep your account with your former employer, and you won’t be forced to liquidate it. Instead you could transfer your 401k money by either rolling it into your new 401k plan with your next employer, or rolling it over into an IRA. Transferring a 401k is simple: It typically requires a phone call and some paperwork.

The benefit of setting up a separate account is that the next time you change jobs, you will automatically have somewhere to rollover your 401k. With your money in one place, you can easily see whether you are on track to reach your retirement goals.

If you rollover your 401k to a separate account or to your new employer’s 401k, you might find that over time you have more money in your retirement account, because the savings on fees will compound over time. The sooner you avoid sneaky fees, the better.

Before you decide where to move your 401k, here are some questions to ask yourself.

What Are Your Investment Choices?

In some ways, your 401k plan is only as good as its investment choices. While the average 401k plan offers 8-12 investment choices , many smaller employers may offer fewer options. While too many options may be overwhelming, it’s important that you have enough the opportunity to diversify your portfolio.

If your new employer’s 401k plan only offers a handful of investment options, consider starting a separate account for 401k transfers.

Are There Fees Associated with the Plan?

If you keep your retirement account in your former employer’s 401k plan, you’ll be charged a fee that will add up over time. Setting up an IRA account might cost you $50 or more a year in maintenance fees. On the other hand, you can look for a invest account that comes with no fees—and no strings attached.

How Easy Is It to Make Changes to My Account?

While you probably don’t want to change your investments every quarter without good reason, its a good idea to evaluate your investments at least once a year. In fact, your SoFi investment advisor will look at your account once a quarter to determine if it needs to be rebalanced. You can easily access your account online and through the SoFi app.

Setting Up Your New Retirement Account

If you plan to rollover your 401k plan, make sure the funds are being directly transferred from your old account to your new account. It’s usually not a good idea to take ownership of your retirement savings: Instead, you want to make the check out to administrators or guardians of the new account.

That means the check should not be made out in your name, otherwise the IRS will count it as income and charge you a penalty. If you need help rolling your old 401k into a SoFi Invest® account, we offer complimentary support from our team of financial advisors.

We can take a look at your current 401k plans and determine how much you are getting charged in management fees. Did you know that with SoFi Invest there are no management fees? Sign up for an appointment today to get started.

Thinking about rolling over your old 401k plan? Consider opening a SoFi Invest account and avoid the 401k fees.


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SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
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Is Your Savings Account Interest Rate Low? Here’s What to Do.

To get the most value out of your money, it’s natural to want the lowest rates on the loans you take out and competitive savings account rates to grow your liquidity.

And which one of these two goals is easier to achieve depends upon current economic conditions—because savings and loan rates rise and fall in tandem. Right now, the bigger challenge may be to earn enough interest on a savings account—and we’re ready to tackle that challenge, sharing strategies to help you get the most for your money.

We’ll first share why savings account rates are so low, and how, in general, financial institutions set their savings and lending rates. We’ll also provide a four-part strategy to get the most from your money, ways to get savings rates, and how SoFi can be part of your strategy.

In fact, this post is one way we’re sharing a debuting product that will help you with your money in a new and highly practical way.

Why Are Savings Rates So Low?

Although, in theory, financial institutions have a significant amount of freedom to offer whatever rates they want on their savings products, it doesn’t really work that way. Here’s why: Financial institutions take in money as people deposit their funds in checking accounts, savings accounts, certificates of deposit, and so forth.

In return, the depositors often get interest on their money, while the financial institutions use funds from the deposits to lend out dollars to people who are approved for loans. The interest rates charged on the loans are higher than what is being paid out in interest for the various types of savings products.

Then, the difference in interest being charged and being paid out is used to help support the financial institution—paying salaries, building costs, equipment costs, and so forth. Financial institutions are also required to maintain a cushion of funds to ensure that people can have access to their money when needed.

This is a highly simplified overview of how money is managed at financial institutions, but it does illustrate the main point we’re making— that, while in theory, financial institutions can just increase savings rates, they actually some have pretty tight parameters to follow.

Federal Discount Rate and Federal Funds Rate

Rates, whether set for savings products or loans, aren’t randomly chosen. They depend significantly upon the rate that the Federal Reserve Bank charges when lending money to financial institutions. This rate is known as the Federal Discount Rate.

The Federal Reserve Bank also controls the rate at which banks can loan money to one another, and this is known as the Federal Funds Rate. This latter rate is usually a little bit lower than the Federal Discount Rate, which encourages banks to help one another out. When, however, some banks need more money, but other banks aren’t in a position to lend them the funds, the Federal Reserve then needs to make more funds available to the banks.

When the national economy is sluggish, the Federal Reserve usually lowers interest rates. That way, the lending of money among banks is further facilitated. If the economy is booming, the Federal Reserve typically raises the rates to control inflation.

Making the Most of Your Money

Armed with that knowledge, here is a high-level, four-part strategy that we recommend:

1. Reduce the interest rates you’re paying on your debts.
2. Pay off debts, both revolving (such as credit cards) and installment (such as personal loans, student loans and car loans, as three examples).
3. Build up an emergency savings account, about three to six months’ worth of living expenses, in an account with the best rate you can get. The goal is to keep this money in an account that offers easy liquidity, so you can access it when you need it.
4. Focus on growing your worth and wealth. Once you’ve got solid savings in place for emergencies and unanticipated expenses, then you can focus on boosting your wealth in investment vehicles that aren’t as liquid as a savings account. (That’s why we created SoFi Invest®.)

The rest of the post focuses on the first three parts of the strategy (since the goal is to help you build up your savings as a precursor to greater wealth building).

In the summer of 2018, the average credit card had an APR of 16.83% . So before trying to nudge your savings account interest rate up, create a plan to pay off these cards. To make that happen, including consolidating your credit card debt into a lower-interest personal loan. The third prong of this three-part foundation strategy, then, is to build up savings for emergencies. As you pay down debt, next increase the amount you’re saving.

But, now, how exactly do you get the best interest rate for your savings?

Finding the Best Savings Interest Rates

The internet makes it very easy to compare rates, so shop around. Note that, many times, financial institutions that offer the best rates are online only. That’s because their lower overhead costs allow them to pass some savings onto their customers.

When you find a high-interest savings account (or checking account, for that matter), take a look at the fine print. What conditions are attached for you to get that rate? The financial institution may require you to have a certain amount of money deposited into that account each month, maintain a certain balance or have your bills automatically deducted from it. You may need to use your debit card a predetermined number of times, as yet another example—or be limited in the number of transactions that can take place each month.

What About Certificates of Deposits?

Some people put part of their savings dollars into a certificate of deposit, also called a CD. This is a type of investment and savings product that typically offers a higher interest rate than the average savings account, but it isn’t as liquid as an actual savings account. With a CD, you agree to leave your money in the account for a certain term, and the interest rate you’re given is tied to that term.

The longer the term, the better the rate; but in today’s economy, you’ll probably need to tie up the money for a long period of time to get much of an increase in the interest rate. Plus, you wouldn’t be able to access money in a CD for an emergency unless you pay a penalty.

Once you have three to six months’ worth of living expenses in your emergency savings account, it does make sense to look for other ways to grow your money. But, you may want to choose short-term investments like bond ETFs instead, funds that invest in bonds that are due in three years or less.

Finally, here’s another strategy to consider.

Open a SoFi Money™ Account

SoFi Money is tailored to simplify your money. It is a cash management account that doesn’t have any account fees. With SoFi Money, you can save, spend, and earn all in one place.

Here are more benefits of SoFi Money:

•  No account fees (subject to change). We believe your money should earn you money, not cost you money.

•  You can also benefit from complementary career coaching, SoFi community resources and more, including some cool swag.

•  You’ll also receive a debit card, have the ability to make mobile transfers and photo check deposits, along with customer service.

•  Plus, you can count on secure SSL encryption, fraud protection, and FDIC insurance up to $1.5 million.

Ready to open a SoFi Money account? Sign up today!



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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
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