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How Much Mortgage Can I Afford?

If you’re considering buying a home, you’ve probably done some research on home prices and how much home you can afford. This is a common first step. Generally, folks like to kick off the process by looking at home prices in their neighborhood of choice. And while it’s fine to scan Zillow for the perfect A-frame in your favorite area, shopping around doesn’t actually help you figure out what you can afford.

First-time home buyers can be bamboozled by the true cost of buying a home, because there’s a lot more to consider than just principal and interest. Before buying a home, you should crunch and become familiar with the numbers for the total cost of your mortgage, including insurance, taxes, fees, bills, furniture, and so on. Only with a good grasp of what each line item will run can you make an estimate about the size of the mortgage, and therefore the home you can afford to buy.

Post-Redfin dreamin’, your next step is to determine how much you are willing to spend each month on all housing costs—without even knowing what those might be. Your total housing costs, ideally, should be no more than 28% of your total gross pay (before taxes). So where does 28% put you? Let’s find out by calculating your total mortgage costs.

Calculate Your Total Mortgage Cost

If you have been looking at homes, you’ve probably plugged your information into a mortgage calculator at some point. This is a fine place to start, but as mentioned, this number is far from all-inclusive. Still, it’s good to be familiar with the tool.

With any mortgage calculator, you will be asked to input hypotheticals, like the cost of your future home, your down payment, and the interest rate on your home loan. You’ll also need to choose which type of loan you plan to take out; It will likely be a 30-year fixed-rate mortgage.

Using your hypotheticals, the calculator will tell you what you’re likely to pay each month. It should also provide the breakdown between what is paid to interest versus what goes toward the principal. An amortization graph shows how payments shift from being very interest-heavy at the beginning to covering mostly principal toward the end of your loan.

Mortgage CalculatorMortgage Calculator

Factoring Insurance and Taxes Into Your Mortgage

Have you heard of the acronym PITI? It stands for principal, interest, taxes, and insurance. It’s is often pronounced “pity” and is therefore used endlessly in corny jokes by folks in the finance biz. Anyway, the PITI acronym includes the four major costs that every homeowner must pay. With our mortgage calculator, we determined the “P” and “I” of PITI. Next, let’s consider the “T” and second “I.”

Mortgage Taxes:

Property taxes are determined by your state and county, and they are based on the assessed value of your home and land. Generally, property taxes are paid to your city, county, and local school board. Because each county has their own methods for calculating and assessing property taxes, you’ll have to check with a realtor or look online at the county’s website to get a better idea of what they might run you. To help your calculations, 1% is a rough national average for property taxes. That means you’d probably pay $5,000 in annual property tax on a $500,000 home.

Homeowners Insurance:

Homeowner’s insurance depends on several factors like the value and condition of the property, and how much coverage you need. For example, a home in a state with a history of tornadoes or hurricanes will likely charge more than a state that’s less prone to such natural disasters.

As with property taxes, homeowner’s insurance may be collected by your lender and deposited into your escrow account, and other times you take care of the bill on your own. (You’ll want to ask your lender to be sure.) The national average for homeowner’s insurance in 2016 was $1,083 per year, or $90 per month.

Keeping Track of All Other Mortgage Fees

Private Mortgage Insurance:

If you put less than 20% toward your down payment, you may have to pay Private Mortgage Insurance. Why? Essentially, borrowers who put down less than 20% are considered a slightly higher risk because they do not have as much equity in the house.

The cost of PMI is usually determined by your credit score, the percent of your down payment and the amount of coverage required by your lender. Your lender will be able to provide you with an estimate. In general, you can expect your monthly PMI payments to run from $25 to $75 per $100,000 you borrow. The Homeowners Protection Act requires that lenders cancel your PMI when your loan-to-value ratio reaches 78%.

HOA Costs:

Homeowner’s Association fees are charged by condominiums, townhouses, and other shared-community developments, and are used to maintain common areas, provide security, manage amenities, and enforce HOA rules. HOA fees can vary depending on a number of factors, so it’s important to educate yourself on the costs and coverage before buying a property. The HOA for a single-family home in a closed neighborhood might run $50 per month, but a villa in an upscale ski town could cost $1,500 per month.

Utilities:

Don’t forget your monthly bills. For utilities, research what similar-sized homes in the area are spending on energy, garbage, water. Factor in cable, Wi-Fi, and any other utilities you’re accustomed to.

Closing Fees:

Though not a monthly fee, you’ll also want to be prepared to cover closing costs, which may include loan origination fees, appraisal fees, title insurance , taxes, deed-recording fees, and other charges.

Closing costs can run anywhere from 1% to 5% of the value of the mortgage loan, and can be paid by either the buyer or the seller. And remember, it is always, always recommended that potential homebuyers build up a significant emergency fund for repairs. When you’re a homeowner, there’s no one else to come and deal with rusty pipes or broken heaters!

Are You Ready to Afford a Mortgage?

Feeling overwhelmed by all the expenses we just laid out? The good news is there are ways to save money on these costs: You can and should shop around for homeowner’s insurance rates. Improving your credit score will get you a better interest rate on your home loan, which could save you thousands. Not all lenders are created equal, and you should get quotes from several financial institutions before deciding who you want to work with.

Are you ready to explore SoFi’s competitive mortgage rates with no hidden fees? Get a rate quote in just a few minutes (and no, it won’t hurt your credit score).


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.
SoFi Mortgages not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com for details.

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Buying a Car with a Personal Loan

Buying a new car is a financial commitment. Sure, it’s not a house, but it’s still something that typically requires a loan you would be paying off for a while. According to an analysis from Kelley Blue Book , the average car price less than 6 months ago was $34,861. This price leveled off slightly from previous months, but has generally risen over the last few years.

When you factor in depreciation, insurance, maintenance, and gas, having a car isn’t cheap. AAA found the average cost of owning and operating a new car in 2017 was $8,469 annually. Small sedans were the cheapest to operate, while pick-up trucks were the most expensive.

Because depreciation is one of the biggest annual costs, the longer you own your car, the more that initial investment pays off. According to Edmunds, a new car depreciates 15% to 25% every year during the first five years (half of which happens immediately after you drive off the lot). However, maintenance costs can obviously go up as a car ages. These are all things to consider when you head to the dealership to purchase your new car.

When you do, odds are you won’t just have $35,000 in cash lying around. That means you’ll likely need to take out an auto or personal loan to buy your car. Deciding which car to buy, understanding how much it’s worth, and choosing a payment option can seem overwhelming, but it doesn’t have to be.

Figuring out the Value of a New Car

To start: What will you use your car for? How much do you drive? Do you need certain features or capacity? These are all questions you should answer for yourself first, and then do research on which cars meet your requirements and fit your lifestyle.

Fortunately, there are a number of well-respected pricing guides to consult for an appropriate price range once you narrow down your car choices: Edmunds’ offers a True Market Value guide ; Kelley Blue Book has suggested price ranges for various cars (particularly useful for used cars); the National Automobile Dealers Association’s guide is dealer-focused; and Consumer Reports provides detailed reviews and reports about specific makes and models.

These all simply offer a price range for the car you want. You’ll also want to investigate any incentives or financing deals that dealers are offering. You can even call around for price quotes, so you’ll be informed by the time you walk into the dealer.

As already mentioned, the value of your car goes down over time. The costs of depreciation are usually spread over a five-year period, with the car depreciating further each year. The other factor when considering the true cost of your car is the potential increasing maintenance costs over five or 10 years. The biggest ongoing cost of the car, though, is the car loan itself, which brings us to the next step in your car buying process.

How to Get a Car Loan

Once you know which car you want and what you can afford, how do you pay for it?

For most of us, the negotiation part of buying a new car is the most daunting. This is why you want to go in understanding the price range for your desired car—ideally, you’ll also be equipped with a few comparable quotes from other dealers.

It’s a good idea, when speaking with a car salesperson, to ask for the actual sales price instead of monthly payments, because it can be difficult to keep track of the overall price when talking about monthly payments and payment periods. And don’t rush: Test-driving, negotiating, and finishing all the paperwork will take some time, and that’s okay.

One of the final factors in the process is deciding on a payment option. Car loans are usually offered by car dealers on 36, 48, or 60-month payment plans, but you can also obtain one—sometimes at more favorable terms—from a bank or private lender. Car dealerships are typically set up to get you a car loan quickly you could even sign the auto loan and drive off the lot that day.

However, banks or private lenders may offer better interest rates and more favorable terms, though they have their own eligibility criteria. The average interest rate in 2017 was 4.2% on a 60-month auto loan and the average is a 12% down payment on your car loan. That interest rate varies based on a variety of factors.

Car Loans Versus Personal Loans

As the names imply, personal loans can be taken out for any number of personal expenses—home improvements or a vacation, for example—whereas a car loan can only be taken out to pay for a car.

In essence, a car loan works much like a mortgage. It is paid for in monthly installments and the asset isn’t fully yours until the final payment is made. The car is the asset that secures the loan, which means if you default on payments, then the lender could seize your car. Because it’s a secured loan, that also means interest rates tend to be different than unsecured loans. However, there’s no getting around the fact that the car loan is tied directly to the car.

Funds from a personal loan can be much more flexible, meaning it can be used not just for purchasing your car, but for the other costs of owning a car as well. Personal loans can also be secured or unsecured. If you choose an unsecured personal loan the repayment would not be tied directly to the car, as it would for a secured loan, so it means your car won’t necessarily be seized if you miss a payment. Personal loans also generally have fixed interest rates that don’t change over the life of the loan. While a car loan at the dealership can be obtained faster, if you have your personal loan approval in hand before you go to the dealership, it also can take a step out of the negotiation process.

Even if you have already purchased a vehicle, a personal loan could be a good low-interest (and less expensive) way to pay for your car and car expenses. Refinancing a car with a personal loan can save you some serious cash in the long run. Plus you get the advantages of an unsecured loan, meaning your car isn’t on the line.

If you’re interested in taking out a personal loan to buy a car, find out if SoFi’s personal loans are right for you, by checking out SoFi’s low fixed rates.


SoFi Lending Corp. is licensed by the Department of Business Oversight under the California Financing Law, license number 6054612.
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.
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How to Combine Your Finances: 3 Approaches to Consider

Whether you’re engaged, married, or simply spending all of your time with someone, figuring out what to do with your bank accounts as a couple can be a challenge. As your relationship becomes more serious, the conversation often moves from “Who’s paying for drinks?” to “How are we going to split rent payments?” to “How are we going to save for the down payment on a house?”

When the stakes get higher and your joint expenses become larger and more complicated, pressure and anxiety can rise, too. Which is why it’s important to have a financial plan. Not sure where to start? Don’t worry: You’ve come to the right place.

There are three types of paths that you can take as a couple: completely separate accounts, completely joint accounts, or a combo (having both joint accounts and personal accounts). How do you know which strategy is best for your particular scenario?

“The trend is to move toward combining at least some accounts, especially if you get married, because your financial life tends to be more complex at that point in time, but it’s not necessary. It’s more important that you understand day-to-day money management, whichever way you decide to go,” says Alison Norris, a Certified Financial Planner at SoFi.

Take a closer look at the pros and cons of each approach so you can stress less and get excited about what the future holds for both of you.

Completely Separate Accounts

This is most common among people who aren’t married, especially among those who haven’t been dating for very long, says Norris.

Pros: You don’t necessarily have to open up any new accounts, so you can continue doing whatever you’ve always done. You predetermine which expenses each of you covers. You can still split expenses with your partner (say, splitting rent 50/50, or a percentage that reflects both of your incomes), you’ll just pay for things from your different accounts.

There’s also less judgment about your spending habits since your partner isn’t logging in and looking at your bank statements. You have full control over your money and you don’t need to check in with anyone to spend it as you see fit.

Cons: If you have a joint savings goal—such as trying to save for a vacation or wedding—it’s harder to know right away whether or not you’re making progress. You have to communicate more with your partner and make sure you’re both contributing in the way that you’ve agreed upon.

Some Joint Accounts, Some Personal Accounts

This is what Norris does with her partner, and it’s the approach that she sees couples take most often.

Pros: You might see this as the best of both worlds, because you can keep your individual accounts for judgment-free discretionary spending. But you can also have joint investment or savings accounts for things like a down payment or a shared car. With joint accounts, you can always see how much your partner is contributing to make sure you’re on track to meet your goals. You get the feeling of teamwork without losing all of your financial independence.

Cons: You’ll have to open some more accounts, which will make your finances a little more complicated than they were before. Beyond just remembering more user names and passwords, you’ll need to monitor all those accounts regularly to have a complete picture of your finances. It requires a little more time and effort than the first approach.

Completely Combined

This means combining every single account that you have—all checking, savings, and investment accounts—except your retirement savings accounts (government regulations mean those have to be individual).

Pros: It’s simple in the sense that once you make the switch, you have the smallest number of accounts to monitor and you have the clearest picture of how you’re doing financially as a couple.

Cons: It may feel drastically different from what you’ve been doing in the past—and more limiting. For instance, sharing a cash management account can be tricky if you don’t budget ahead of time with your partner. Let’s say you have $800 in the account, and you each go out and make a $500 purchase without consulting each other—you’re looking at overdraft fees.

Another downside: In this scenario, your partner can see every single transaction that you make and you may not want him or her weighing in on your discretionary spending. Does he really need to know just how often you hit up Starbucks or what your regular haircut actually costs?

Questions To Ask Yourself

Before you make a decision, consider these factors.

1. Are you 100% comfortable giving your partner insight into all of your purchases? If so, then #3 may be best for you. If not, then go with #1 or #2.

2. Are you actively saving for something large and further down the horizon beyond just next month’s rent? That’s a scenario in which having at least one joint account may be helpful, so you might want to consider #2 or #3.

3. Are your incomes and expenses roughly the same, or very different? If the latter, try to find a way that you are both able to save a proportional amount of your income. Consider your take home pay minus fixed expenses and minimum debt payments. Then use that figure to determine who should pay for what. Remember that fair doesn’t always mean equal, and you will likely keep separate debt obligations and retirement accounts for all options.

No matter which strategy you choose, make sure that you and your partner are both comfortable with it, and set up ground rules. The goal is having clarity about your financial situation so there’s no confusion or resentment. Communicating about it might feel awkward at first, but it can help reduce friction down the line.

And if you’re not sure which way to go, meet with a financial advisor like Norris who can take a look at your specific financial situation and give you advice. SoFi’s team of licensed financial advisors is here to help—and it’s absolutely complimentary.


SoFi Wealth, LLC 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.
The SoFi Wealth platform is operated and maintained by SoFi Wealth LLC, an SEC Registered Investment Advisor. Brokerage services are provided to clients of SoFi Wealth LLC by SoFi Securities LLC, an affiliated broker-dealer registered with the Securities and Exchange Commission and a member of FINRA / SIPC. Investments are not FDIC Insured, have No Guarantee and May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Clearing and custody of all securities are provided by APEX Clearing Corporation.
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. Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
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Strategies for Lowering Your Student Loan Interest Rate

When you’re in college, you don’t necessarily have a lot of control over the interest rates on your student loans.
With federal loans, the U.S. Department of Education sets the rate each year for all borrowers. And if you get private student loans, limited credit history can make it hard to score favorable terms.

But once you graduate, there are a few things you can do to try and save money. Here are a few tips that may be able to help you lower your interest rate on student loans.

Choosing the Right Repayment Plan

If you don’t choose a specific repayment path, you’re typically opted into the standard repayment plan. For a standard repayment plan, your payments are generally based off a 10-year timeline. But this one-size-fits-all repayment plan might not be best option for you.

One money-saving repayment option for federal student loans is the Public Service Loan Forgiveness program.

If you work in a qualifying public service job—for the government or for some non-profit organizations—you might be eligible to have your student loans forgiven after 10 years of service. You can confirm whether your work qualifies here. You’ll want to submit an Employment Certification as soon as possible to be sure that you’re on track to qualify.

The federal government also offers four income-driven repayment (IDR) plans, wherein the monthly payments are based off your income and family size. While choosing one of these plans may help to lower your monthly payments, it will likely not alleviate how much interest you pay over time—you might even pay significantly more, in fact.

After 20 or 25 years, depending on the plan, the remainder of your balance will be forgiven if your federal student loans aren’t fully repaid. However, the balance you’re forgiven is may be considered taxable income by the IRS, so even though your student loans will go away, you might have to prepare for a big tax bill that year.

Consolidating Your Student Loans

Have multiple student loans floating around that you’d love to smush together into one? You could consider loan consolidation, where you’ll combine all your student loans into one easy monthly payment with a single interest rate. Here’s the rub, though: Consolidation alone does not necessarily get you a better interest rate on your student loans, it just offers you one payment instead of multiple.

When consolidating federal student loans, you can use a Direct Consolidation Loan , which is specifically to consolidate your federal student loans. They simply take a weighted average of all your student loan interest rates and create a new loan.

The weighted average of your loan rates might be a touch higher than the interest rates you were paying previously. Often folks utilize consolidation to stretch out the life of their student loan, which lowers your payments now, but may increases the amount you owe over time.

Even though consolidation itself is not a direct way to get a better rate on your student loans, it could be helpful if you’re having trouble keeping track of your monthly payments. Consolidation may also be useful if you want to merge non-direct federal loans (like Perkins loans) with direct loans, in order to qualify for income-driven repayment and/or loan forgiveness programs.

Also, the term “consolidating” is often used interchangeably with “refinancing,” but they technically mean different things. When you refinance multiple student loans, you also happen to be consolidating, but it is done with the goal of achieving a more favorable interest rate on your student loans.

Setting Up Automatic Payments

Many student loan servicers—both federal and private—offer an interest rate discount if you opt to set up autopay on your account. Depending on the servicer, you could lower your student loan interest rate. SoFi, for example, offers a 0.25% autopay discount.

The reason servicers offer this discount is that by setting up automatic payments, you’re less likely to miss payments and default on the loan.

In addition to getting a lower student loan interest rate, you’ll also (hopefully!) have peace of mind knowing that you won’t accidentally miss a payment. Check with your loan servicer to see whether they offer an autopay discount.

Getting a Loyalty Discount

In addition to an autopay discount, some private student loan companies also offer a loyalty discount when you have another eligible account with them. If you’re already a member with SoFi, for instance, you receive an interest rate discount of 0.125% on all new loans.

Other lenders may require that you have an eligible checking or savings account with them to qualify for the bonus, and you may even get a bigger discount if you make your monthly payments from that account.

To get an idea of how a change in interest rate would impact your loan, take advantage of a student loan refinance calculator to see what your new payments could be.

Refinancing Your Student Loans

Scoring discounts with your current servicer can help you get a lower student loan interest rate, but there is another option you can consider trying. Depending on your financial profile, you could qualify for a lower student loan interest rate than what you’re currently paying with student loan refinancing.

By refinancing, you could potentially lower your interest rate by bundling your student loans (federal and/or private) into one new loan. And if you shorten your loan term, you may be able to pay off your student loans much faster and pay less in interest over the life of your loan.

Student Loan RefinancingStudent Loan Refinancing

Student loan refinancing is ideal for borrowers with high-interest student loans, who have good credit scores, and know they won’t use any of the federal loan benefits, like student loan forgiveness. (All federal loan benefits, including income-based repayment, will be lost if you refinance.)

To see if you qualify to save some money on your student loan(s), start by getting quotes and asking questions from a few banks. Online lenders may offer competitive rates and more flexibility than traditional banks, but it’s still worth it to compare competitive rates and more flexibility than traditional banks, but it’s still worth it to compare student loan refinancing, but it’s often based on credit score, credit history, and income to name a few. It usually takes a few minutes to get a quote.

Once you’ve decided on a bank or online lender, the process can move quickly. You’ll have to fill out paperwork and the bank will do some final checks on their end, but before long you could be all set up with your refinanced student loan at a better rate. All that’s left after that would be to enjoy having that extra cash (or speedier timeline)!

Here are a few things that may help you improve your chances of getting a lower student loan interest rate with refinancing:

•   A high credit score: Lenders typically have a minimum credit score requirement, so the higher your score, the better your chances of getting a low rate usually are.
•   A low debt-to-income ratio: Your income is also an important factor that lenders consider, especially as it relates to your overall debt burden. If a smaller portion of your monthly income goes toward debt payments, it shows you may have more income to dedicate to your new loan’s payments.
•   A co-signer: Even if your credit and income situation is in good shape, having a co-signer with great credit and a solid income might help your case.
•   A variable rate: Some student loan refinance lenders offer both variable and fixed interest rates. Variable interest rates may start out lower but increase over time in accordance with market fluctuations, unlike fixed rates, which stay the same over the life of the loan. If you’re planning on paying off your student loans quickly, a variable rate might save you money.
•   The right lender: Each lender has its own criteria for setting interest rates, so it’s important to shop around to find the best lender for your needs. Some lenders, including SoFi, even allow you to view rate offers before you officially apply.

Lowering Your Student Loan Interest Rate

There aren’t a lot of ways to get a lower student loan interest rate, but the options that are available don’t require too much up front legwork.

With the first two options, it may be just a matter of calling your servicer to find out what discounts are available.

If you’re considering refinancing your student loans with SoFi, you can check your new rate in just a few minutes. This process will let you know if you might qualify for a lower student loan interest rate. If you do, it won’t take much time beyond that to officially apply.

Depending on which refinancing options you choose, you could potentially save money on interest over the life of the loan.

Take control of your student loan debt by refinancing with SoFi. See if you qualify to secure a lower student loan interest rate in just two minutes.


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.
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.
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.
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4 Things to Do for Your Finances Before the End of the Year

If you didn’t get around to some of the things you planned to do this year, there’s probably no real consequence. You can always run that 10K or clean out your storage unit in 2018, right?

But when it comes to your annual financial to-dos, procrastinating can backfire (big time).

“There are a few situations where the clock really is ticking and you should consider doing them by the end of the calendar year,” says Katy Song, a Certified Financial Planner at SoFi.

So before you grab that glass of champagne on December 31, doing these four things may help you celebrate guilt-free.

1. Max out Your 401(k)

You can put up to $18,000 into an employer-sponsored 401(k) in 2017, and if you can afford it, most financial planners recommend contributing the maximum.

What many people don’t know is that the contributions don’t have to be in even, biweekly or monthly chunks. So if you haven’t been contributing much (or anything)—or if you started a new job and weren’t eligible to contribute to a 401(k) for a few weeks or months—there is still time to make catch-up payments. But you need to hurry.

Here’s an example of what that might look like: If your annual salary is roughly $108,000 or more, and you haven’t contributed anything from January through October, you could contribute $9,000 this November and $9,000 this December to hit the maximum for 2017.

One caveat: All of the money that goes into your 401(k) has to come directly from your paycheck. In other words, it would be smart to first make sure that you have enough money in your savings account(s) to cover your living expenses for November and December before making additional payments.

Even if you can’t contribute the maximum amount this year, anything is better than nothing because of the tax benefit, Song recommends. “Also, keep in mind that Congress is working on tax reform right now, so these rules could potentially change in the future. That’s another reason to take advantage of them now.” Just keep in mind that there’s a penalty for withdrawing from your 401(k) early, so don’t put in anything you might need sooner rather than later.

Don’t have a 401(k) plan, or already maxed yours out? You’ve got options, which brings us to:

2. Open (and Fund) an IRA

An Individual Retirement Account, or IRA, is another type of account that you can open and contribute to annually to save for retirement. If you have an employer, Song says it’s probably best to take advantage of whatever plan your employer is offering first and then consider opening a Traditional or Roth IRA on top of that, if you can, for extra retirement income. The difference between the two? Eligibility requirements and tax treatments. Read more about Traditional vs. Roth IRAs to see which is right for you.

If you work for yourself (or even have a side gig or do freelance work) consider opening a SEP IRA because, depending on your income, you can often contribute more money each year to a SEP IRA than you can to a Traditional or Roth IRA. With a SEP IRA, you can contribute up to 25% of your net business income, up to a maximum of $54,000 this calendar year. For instance, if your net business income this year is $50,000, you can put up to $12,500 into a SEP IRA, which is more than twice what you can put into a traditional or Roth IRA.

“The cool thing is that if you have a day job with an employer that provides W-2 income, you can likely contribute to a 401(k) at your office, and if you have a side gig on top of that—like consulting or freelancing—then you can also open a SEP IRA on top of that and max out both,” says Song.

Technically, you can open an IRA and contribute to it for 2017 up until you file your 2017 taxes in the spring of 2018. So you don’t have to make this particular move by December 31 of this year, but the sooner you open one, the sooner you can contribute to it and the more money you can potentially earn over time. Not sure which IRA account is right for you? Use our IRA calculator for more information!

3. Spend the Money in Your Flexible Spending Account

If you participate in a Flexible Spending Account (FSA) through your employer, you have to spend almost all of that money by the end of the calendar year or else you will lose it. (You can roll over only $500 of it to 2018.) You don’t have to process all the paperwork until March 31, 2018 but you have to make the purchases by the stroke of midnight on December 31, 2017.

It’s important to note that a FSA is different from a Health Savings Account (HSA). If you have a HSA, you don’t have to rush to spend your money because you won’t lose any of it next year. Most people who work for an employer that offers health insurance are eligible to enroll in an FSA, even if they don’t use their company’s health insurance plan. However, HSAs are generally offered only to people who have high-deductible health insurance plans.

Not sure what to spend the rest of your FSA money on? If your FSA is for medical expenses, go to a site like FSA Store that features eligible purchases, such as sunscreen, insect repellent, bandages, contact lens solution, heating pads, thermometers, eye drops, condoms, pregnancy tests, prenatal vitamins, breast pumps, children’s medications, prescription glasses, and more.

Or talk to your dental office to see if there are any teeth-related procedures that might be covered (for instance, whitening is generally not covered because it’s considered cosmetic, but a root canal or crown might be).

“If your FSA is for dependent care and you’re not already spending all of it on preschool or a nanny, think about pre-paying for a children’s camp over winter break or spring break if school will be out but you and your partner will be working during that time,” says Song.

4. Create a Holiday Game Plan

“People tend to overspend around this time of year, so proactively plan how much you’re going to spend on holiday travel, entertaining, gift giving, and charitable giving,” says Song. “Think about it now, before the lights get all shiny in the stores, so you can stay on track financially.”

If you want to spend more in November and December than usual but your income is stagnant, check whether you’ve accumulated any credit card rewards points, and see if you have any old gift cards in your wallet that you’ve forgotten about that haven’t yet expired.

And don’t just think about your spending—think about how much more you can save or invest, too. If you tend to get an end-of-the-year or holiday bonus, think about your biggest financial goals, like going on a vacation or saving for a down payment, and talk to a SoFi financial advisor about the smartest way to reach them.

Need some help on your end-of-year financial planning? SoFi Wealth is all about empowering you and your financial future, and we’re here to help. Schedule a free personal consultation with one of our licensed financial advisors who can help you plot your path forward.


SoFi Wealth, LLC 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.
The SoFi Wealth platform is operated and maintained by SoFi Wealth LLC, an SEC Registered Investment Advisor. Brokerage services are provided to clients of SoFi Wealth LLC by SoFi Securities LLC, an affiliated broker-dealer registered with the Securities and Exchange Commission and a member of FINRA / SIPC. Investments are not FDIC Insured, have No Guarantee and May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Clearing and custody of all securities are provided by APEX Clearing Corporation.
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