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It’s probably a familiar scenario: You think you’ve been careful with your spending, but then a steep credit card bill arrives and throws you into a tailspin. Or you check your bank account balance and realize you’re perilously close to overdrafting.

Wrangling one’s cash flow and meeting financial goals is no easy task…if you’re operating without a budget. But if you do have a budget (a method of tracking and tweaking your money coming in and going out), you can likely sidestep many hassles and hiccups.

While sitting down with receipts, credit card statements, and spreadsheets might not sound like your idea of a good time, it can help you figure out how much you’re spending each month.

And that, in turn, can help you create a realistic budget. Focus on how great it will feel to pay down debt and have a flourishing savings account. Creating a household budget could get you one step closer to achieving your goals.

Here, the 11 steps that will make it happen.

11 Steps on How to Create a Household Budget

If you’re ready to dive in and start setting up a household budget, here are the 11 steps to take. Have a partner? Collaborate on your household budget together so you can be aligned on establishing your financial management.

1. Set Your Goals

To get started, think about your big-picture goals. What are your financial hopes? Do you want to have a healthy emergency fund saved within a year or two? Pay off your student debt early? Stash away enough cash for a down payment on a house within the not too distant future? Or just control your spending so you aren’t living so paycheck-to-paycheck every month?

Write down your top few goals and the issues you need to overcome (i.e., carrying too big a balance on a high-interest credit card). Be as detailed and specific about amounts you want to pay off or save and by when. This can help guide you as you start your household budget.

2. Find the Right Method

The next move in how to create a household budget is to pick a good system. There are many ways to budget, and the right one is the one that works for your personal money style and financial goals. It can be helpful to review some of the options such as:

•   The 50/30/20 budget rule

•   The envelope budgeting method

•   The zero-sum budget

You will also likely find that your financial institution offers tools to help you budget effectively. In addition, there are apps and websites that offer advice and tactics to help you budget, as well as books and podcasts.

Review a few, and pick what looks like the right fit. Or create your own method that uses the best of various techniques.

3. Get the Right Tools

You may also want to select the right gear to help you budget. For some people, this might mean setting up a budget in Excel. For others, it could lead to buying a notebook and colored pens. Or an accordion folder to keep receipts.

These tools can help motivate you to dive in, similar to the way buying back-to-school supplies used to get you psyched up for the start of classes.

4. Calculate Your Income

The next step in creating a household budget is to dig in and account for all the money you have coming in. Tally up how much money you have coming in every month from your job(s), any side hustles, gifts, interest or dividends, and bonuses.

You want to have more money coming in than you have going out every month, so it’s important to know the baseline you have to spend. Look at after-tax dollars to best assess your resources.

5. Identify Your Expenses

Now, you need to see where that money goes as it flows out of your checking account. Going through one month of expenses and dividing everything into categories can help you figure out exactly what your expenses are. You could divide your spending into categories like these:

•   Food

•   Entertainment

•   Education

•   Housing

•   Utilities (Electricity, WiFi, etc.)

•   Transportation

•   Clothing

•   Healthcare and personal care

•   Travel

One important category not to overlook: debt. Make sure to include such expenses as credit card payments, student loans, car payments, and the like.

6. Account for Irregular Expenses

As you consider your spending, don’t forget about those annual or somewhat random expenses that crop up, such as homeowners or renters insurance payments, money for holiday and birthday gifts, and car repairs.

You’ll want to do your best to accommodate those expenses. If you don’t budget for them, you could wind up dipping into savings or adding to any credit card debt you are carrying.

Recommended: 10 Most Common Budgeting Mistakes

7. Determine Your Needs vs Wants

Reviewing your spending is often an eye-opening experience. Do you really spend that much on takeout coffee, streaming stations, or shoes? Did that weekend away with your best friends really total twice what you expected?

Looking at your expenses lays the foundation for separating out your needs in life from your wants.

•   Your needs are things you require to survive: food, shelter, utilities, transportation, covering your student debt, and so forth.

•   Your wants represent spending that reflects “nice to have” items and experiences: concert tickets, another pair of black boots, some flowers to brighten your coffee table.

Think carefully about what in your spending is a need vs. a want. Groceries are needs; dining out on a pricey plate of pasta is a want. A tankful of gas to get to work for a week is a need; an Uber because it’s raining out is a want.

This information will help you determine the proper amount of spending as you create your budget.

8. Allocate Savings

As you look at your goals, your income, and your spending, consider your short-, medium-, and long-term savings goals. Many people believe saving 20% of their income is wise.

As you look at how to set up a household budget, also consider where you want your savings to go. You might be stashing away money for a vacation, a down payment on a home, your child’s college education, your retirement plan, or any combination of aspirations. Once your budget is established, you may want to set up automatic transfers from your checking account to savings accounts to make this process simpler.

9. Do the Math

The next step in setting up a household budget is to enter all the information into your chosen budgeting system (spreadsheet, journal, app). Yes, you need a line for every bucket, from student loans to rent to entertainment to groceries to dining out. Having a line item budget laid out will really acquaint you with where your money is currently going.

Subtract your expenses and savings from your income and see where you land. Do you have money left over? Great. Are you in debt? Not so good.

Seeing how you are tracking is a vital step to knowing how to improve on your current situation with a budget in the next step.

10. Create Your New Plan

Next, take a look at how much is coming in and going out and set some new goals. For each of your spending categories, consider setting a realistic limit for yourself. And keep in mind that cutting back on some expenses might mean you have to increase your budget in other places.

For example, say you currently spend $400 on eating out every month and $400 on groceries, for a total food budget of $800. If you’d prefer to spend closer to $200 eating out each month, you may have to increase your grocery spending.

Do you think you could spend $200 on eating out and increase your grocery spending to $500? If so, your total food budget would come down to $700, saving you $100. Could that go towards paying off some debt sooner?

As you work to create a balanced budget, with specific amounts for each category, you may need to:

•   Eliminate some expenses, like a gym membership, and try out free workouts on YouTube instead.

•   Cut back on spending, such as saving money on streaming services by dropping a channel or two, or getting lattes only on Fridays vs. everyday.

•   Consider how to minimize some costs via negotiation and other tactics. Can you get your credit card issuer to lower your interest rate or get a balance transfer credit card to help you pay down your debt?

•   Determine if you can raise your income. You might ask for a raise or start doing some gig work via a low-cost side hustle.

Your goal is to know how much you can spend every month on your expenses (needs and wants) while ensuring you are saving towards goals and hopefully building wealth as well. Remember: Every budget needs a little fun in it. Knowing you have, say, $20 a week to buy yourself a small treat can go a long way towards keeping you from overspending elsewhere.

11. Modify Your Budget As Needed

Setting up a budget is all about providing guidance and guardrails for managing your money. It helps you keep spending in check and achieve your financial goals.

But it often takes a couple of tries to get right. For instance, with inflation surging, you may find expenses like groceries, gas, and utilities rising. You might have to trim elsewhere to keep your budget humming nicely along. Or life happens: Your sister gets engaged, and you run out and buy her a great gift that requires some budget retooling.

You might find a lower-priced health insurance and be able to sock the savings into your emergency fund and check off a short-term goal. It can be wise to check in with your budget every week or so to see how you’re tracking and make any tweaks needed.

Or you might discover that you’ve made your home budget too intricate and you are avoiding it. If that’s the case, switch to a different system.

At the end of the day, how to set up a household budget is about making your money work for you, so that you can spend it on the things (and people) you love. Make changes as you see fit. Flexibility in a budget is important to its success.

The Takeaway

Tracking your budget regularly could help you see measurable progress as you work toward financial goals. Setting up a household budget can help you better understand your cash flow, manage expenses, lower debt, and meet your saving goals and build wealth.

The right banking partner can help you on your financial journey, too. When you open an online bank account with SoFi, you’ll spend and save in one convenient place and enjoy a suite of tools that can help you budget better. You’ll also earn a competitive APY and pay no account fees, both of which can help your money grow faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies 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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Are you a certified cheapskate, a modern-day Scrooge? Or are you frugal in a smart, reasonable way that doesn’t reflect badly on you or cause those around you some pain? These two classifications differ greatly. With careful introspection, you can learn which side you’re on and go from there.

But this is not just a quiz or a game to find your fun profile. Penny-pinching, or being a cheap person, can be painful for friends and family and also for you. It can stir up feelings of deprivation and insecurity; possibly even dishonesty. Whether you take a pocketful of “free” peppermints from a cafe or stiff your waitress, the consequences can add up, impacting your well-being across the board, from finances to relationships. On the flip side, being frugal means having a levelheaded (and even generous) attitude about money. Frugal people are usually respected and appreciated.

Need more cheapskate identifiers? Read on to learn 15 signs you are cheap, including:

•   Hoarding possessions because you think they might be worth money

•   Stealing things, from Post-its at work to a bagful of granola bars at a social function

•   Skimping on restaurant tips

What Is a Cheapskate?

A cheapskate is a person who is extremely stingy with their money and time. Take a closer look if you want to answer the question “Am I too cheap?”

•   Are you so tight-fisted that instead of paying postage, you mail things from the office, so your employer foots the bill?

•   Do you (over)help yourself to “free” food but refuse to buy a snack or drink at a movie theater?

•   Are you stingy with your time, never volunteering for a good cause or putting in extra hours when your work team is in a crunch?

•   If the kids’ menu is for ages 12 and under, do you lie about how old your children are so they can partake for less?

If, in these and other ways, you think your personal profit is more important than everyone else’s losses, then yes, it’s safe to say you are a cheapskate.

How Does a Cheapskate Differ from a Frugal Person?

Cheapskates want, at all costs, to keep cash in their own wallets and bank accounts. Frugal people, on the other hand, think calmly and clearly about how to spend mindfully.

A cheapskate might go out to dinner with friends and “forget” to bring his money to chip in. A frugal person might suggest the group goes to a mid-priced restaurant (not one with $15 cocktails), and make other careful choices. Then, at the end of the month, they may have enough money for something meaningful, such as a soup kitchen donation or a lavish Mother’s Day experience for Mom and Grandma.

A frugal person tries not to waste money on frivolous purchases but also has a sense of generosity. Guess who’s more fun to be around?

15 Signs You Are Being a Cheap Person

A few examples of being a cheapskate were mentioned above. Here, we’ll dig into signs of a cheap person in more detail. Watch for these red flags in the game of life. No one wants to be bad with money, but taking scrimping and saving too far can also be an issue.

1. Letting DIY Turn into BIY (Break It Yourself)

Unless you’re an expert, taking the DIY route on repairs can be a sign you are cheap. These fixes are often bad and flimsy, leaving you with leakier pipes or unsafe wiring. Reputable professionals may charge a lot but will stand by their work.

For example, if you go the cheap way and try to fix a car problem by watching a YouTube video before taking a road trip, you could find yourself paying dearly for it. If the vehicle winds up breaking down, it will throw a wrench in your plans and cost you time and money as you get towed, pay for repairs, and have to Uber around while waiting for your car to be road-ready again.

2. Sneaking Refreshments Into Movies

Some people do bring their own snacks due to health reasons. But if you have to sneak something in under cover, it’s probably dishonest. Do you feel guilty spending $7 on a small pack of candy? Yes, it’s cheaper elsewhere, but going to the movies is a little splurge, and the treats are part of the fun. It’s also partly how the theaters stay in business.

While many movie theaters allow patrons to enter with their own beverages, that doesn’t mean you should bring all your bffs and not spend a penny on refreshments.

Recommended: Why Do People Feel Guilty After Spending Money?

3. Hoarding at Home

Many people hoard because they don’t want to part with things that might be valuable. But how many samples of shampoos and makeup, t-shirts, skeins of yarn (in case you take up knitting), Christmas ornaments, and reusable water bottles can you keep? Letting go can be freeing and it feels even better if you donate items to charities that will sell them and give them a second life.

4. Stockpiling Condiments

The 2021 pandemic-drive ketchup shortage led to people selling Heinz packets on eBay for a profit. But it’s cheap behavior to squirrel bagfuls away in your cabinet. Will you ever use them? The same holds true for sugar, soy sauce, and salt and pepper packets. Snagging them for free and hoarding them can be a sign you are a cheapskate.

5. Reusing Paper Goods

Some people save paper cups that still look pretty clean and recycle soiled paper towels for another chore. But that’s a cheapskate way of living that likely doesn’t save you much. Better to buy recycled paper products to help save energy, water, and trees. Get dishwasher-safe, reusable party plates; they are sturdy enough to hold large pizza slices and the like.

6. Doing Only Free Activities

Free activities are wonderful and a part of a smart, frugal lifestyle. But cheapskates take this to extremes and only want to go somewhere if it doesn’t cost money. This limits their plans accordingly. For instance, if you only go to the beach after 5 pm, when there are no entrance fees, you will never experience a classic sunny day. Plus, there probably aren’t any lifeguards on duty.

In life, balance is best. There’s no sense being miserly vs. having fun and staying safe. Paying the fee to visit, say, a beach or a majestic national park could provide a view worth a million bucks and a lifetime of great memories.

Recommended: Ways to Be a Frugal Traveler

7. Being Nosy about Other People’s Money

Cheapskates dwell on what other people spend, gossiping about or criticizing their purchases, such as a designer handbag or resort vacation. But maybe the buyer is a frugal person who has a solid money mindset and saved for a year to afford those nice things. Frugal does not mean cheap, and judging others’ spending can say more about your own financial habits than theirs.

💡 Quick Tip: If your checking account doesn’t offer decent rates, why not apply for an online checking account with SoFi to earn 0.50% APY. That’s 7x the national checking account average.

8. Always Snagging Leftovers

It’s one thing to take home the restaurant meal you couldn’t finish but another to make off with the leftover shrimp at a friend’s party. If the host invites you to take some food, great. But don’t push it. You are a guest, after all.

It’s also a classic cheapskate move to take back anything you brought that wasn’t entirely devoured. If you brought two bottles of wine and only one was opened, the other one stays put, as a gift to your host for welcoming guests.

9. Saving Almost Spoiled Food

Many people look for ways to save money on food. But safety comes first. No matter how expensive that deli meat was, if it’s past the date that tells you it’s safe to consume, throw it out. That’s a risk we take when we buy food, from fresh produce to chicken: Use it or lose it. If yogurt or cheese grows a layer of mold, out it goes. Only an ultracheap person would cling to it, eat it, and risk their health.

If you’re not sure how long food stays safe in the fridge, open a tab and search. There are many sites that share the full details.

10. Regifting Thoughtlessly

It’s okay to pass along (with honesty) a gift you cannot use or that doesn’t suit your needs, such as a pound of rocky road fudge when you’re avoiding sugar or a sweater that’s not your color. But it’s hurtful to wrap up something you have around, like an extra college sweatshirt or a set of mugs, and pass them off to a friend or relative as a new gift. That’s just plain cheap.

11. Buying Cheap Quality

If you buy cheaply made clothing, it will likely fray, fade, and fall apart way before good quality items do. Same with ultra low-priced bedding and towels. Likewise, if you invest in a good pair of shoes, they will stand up to new heels, soles, and repeated polishing. A cheap pair won’t go the distance.

Keep in mind that the same holds true with household purchases: Cookware with a rock-bottom price tag is likely to disappoint you, and the same may hold true with furnishings. Read reviews before you buy, and snag a good-quality item that’s a little pricier but more reliable.

Recommended: Guide to Practicing Financial Self-Care

12. Depriving Others While You Amass Money

Another sign you are a cheapskate can be that you are totally focused on your own wealth management and never help others. Maybe a miser could make a payment to help a cousin or niece with a heavy student loan debt. That kind of money magic fills the heart of the giver and the recipient. Being selfishly cheap just leaves you with a heart tightened like a fist.

Recommended: Common Money Fights

13. Haggling Over Every Transaction

Bargaining nonstop can make everyone uncomfortable, except the cheapskate. The salesperson, other customers, and especially the cheapskate’s friends and family who are present may want to vanish.

There are times and places where haggling is appropriate and can improve your financial life. Overstepping those boundaries can be a sign you are a cheapskate.

14. Helping Yourself to Office Supplies

It’s one thing to take a pad personalized with your name or a paperweight that was a gift from the boss. But it’s another to stock your home office or a kid’s back-to-school list from the office supply closet. Just don’t. It’s veering into stealing.

Same goes for taking condiments and coffee supplies from the staff break room or raiding the bathroom for toilet paper so you don’t have to buy any.

Recommended: 17 Ways to Make Financial Freedom a Reality

15. Being a Bad Tipper

This may be the most obvious and most common sign of a cheapskate. They look for any reason to reduce the gratuity after a meal, from too few sugar packets on the table to the entree arriving too quickly or too slowly. Waiters and waitresses often manage many tables and make a low hourly wage. They count on tips to bring up their earnings.

If the food and/or service is awful, it makes sense that the tip would reflect that. But for a typical meal with perhaps a tiny glitch, not leaving a tip can be a giveaway that someone is a miser.

Tips to Avoid Being a Cheapskate

Try to remember this advice next time you feel your inner cheapskate emerging.

•   Give yourself a fun budget: Find a little breathing room in your budget for things that bring you pleasure even if they are not great bargains. Maybe a fancy coffee on Friday mornings, to end the work week on a high note, can be a nice self-reward.

•   Shift your focus from cash. Consider rewards that have no set price attached to them. That means enjoying a movie plus popcorn with your best friend. Or the smile on your mother’s face when you bring her flowers.

•   Set up a separate bank account for generosity. Put a certain amount of money in every week, even just $50 or $10 can make a difference. Then, at the end of the month, do something kind for someone. This can help offset any cheapskate tendencies.

•   If you are dining out or getting coffee, build extra bucks into your budget ahead of time for the tip.

•   Instead of clinging to your money, think about how hard behind-the-scenes people work. The staffers who put out the free hotel breakfast buffet, the shampoo girl at the salon: Appreciating their work with a tip goes a long way to make both you and them feel better.

The Takeaway

Knowing the difference between being a cheapskate and being frugal is an important life lesson. The former leans toward miserly and is unpleasant to be around, while the frugal person usually spends mindfully and can afford to be generous in meaningful ways.

When you understand the signs of being cheap, you can likely stop yourself and become better at a healthy financial mindset. It’s not just “mine, mine, mine,” but sometimes “yours, mine, and ours.”

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Are there benefits to being a cheapskate?

A true cheapskate may be able to reach financial goals, which is a benefit. But they might be so focused on saving that they cannot enjoy life. They are likely so busy not spending that they don’t know how to give back, chip in, be honest, and have fun with loved ones.

Is being cheap a personality trait?

Being cheap can be a personality trait, but it need not be a permanent one. It could be a habit developed because you grew up poor and wished for more money or possessions or it can stem from other insecurities. It’s possible to change this behavior if you become more aware of it and are motivated to be less stingy.

How do you deal with cheap people?

If you value the person and your relationship with them, do your best not to argue with them. That is unlikely to get them to spend more freely. Set expectations on get-togethers early; if something sounds too pricey for them, make another, less expensive plan. Avoid those situations that are likely to provide a forum for their cheap tendences.

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Photo credit: iStock/Morsa Images

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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Inflation, or a rise in prices and decrease in buying power, is hitting American families hard. Rates have been spiking for months and currently stands at 7.7%. When it will slow down is anybody’s guess. This makes it increasingly difficult to afford necessities like food, transportation, and housing. Put simply, when inflation is escalating, your dollar buys less than it did in the past.

How much of an impact has inflation had on the U.S. and where is it at its worst? A report from the Joint Economic Committee provides up-to-date data as of July 2022 on how much prices have changed for everyday items, for an average family, in each state since January 2021.

This information can help you make informed decisions about your spending and your future. If you’re living in a state with surging inflation, you may want to pay special attention to balancing your budget so you don’t wind up depleting your emergency savings or ringing up credit card debt.

According to the report, these are the 25 states with the highest inflation rates over the year reviewed, arranged in descending order, with the steepest figure at the top. They are ranked by the impact on monthly spending in dollars vs. the percent of inflation.

Read on to see if your state made the list.

25 Highest Inflation Rates by State

1. Washington D.C.

OK, it’s not technically a state, it’s a district, but our nation’s capital tops the list of locations feeling the impact of inflation. With an inflation rate of 13.9%, DC saw a monthly uptick in expenses due to inflation at an eye-watering $1,037 in the year studied. That kind of impact can certainly give a household reason to take a fresh look at making a budget and perhaps even consider moving to a less expensive area.

2. Colorado

There are several main causes of inflation, and they seem to have conspired to raise prices in Colorado. There, the cost of living has increased by a staggering 15.4% since January 2021. This means that the average household in the state will spend about $937 more this year than last year. The main driver of this inflation is transportation costs, representing an increase of $410/mo.

3. Utah

In Utah, inflation has been rising, with the total inflation up 15.4% or $910 per month for the average family. While this may not seem like a lot if you earn a high salary, that kind of price hike can significantly impact residents, particularly those on a fixed income.

4. Arizona

Arizona has seen a significant increase in inflation over the past year, with prices rising by $833. This figure represents a significant burden for residents and may well encourage them to find ways to save money daily.

While the cost of living in Arizona is still relatively low compared to other states, the increasing cost of goods and services puts pressure on households as the prices have increased at what is among the highest rate in the United States, a challenging 15.4%.

5. Nevada

Inflation has been rising by 15.4% in Nevada, with families now shelling out an average of $831 more per month than in January 2021. Rising energy and transportation costs seem to be fueling this surge.

Additionally, many goods and services have become more expensive as businesses attempt to offset their own rising costs. This has decreased purchasing power for Nevada residents, making them adjust their budgets and spending habits to keep up with inflation.

Although it can be challenging to cope with rising costs, it’s important to remember that there are pros and cons of inflation. It is a natural part of the economy and will continue to fluctuate over time.

6. Minnesota

Life has gotten considerably more expensive in Minnesota. With inflation soaring 13.8% over a recent year, residents are shelling out $831 more just to keep up.

With this kind of price trajectory, it can be worthwhile to consider whether to pay down debt or save money when trying to make ends meet. When your money doesn’t go as far, you need to be smart about prioritizing your available funds.

7. Wyoming

Average monthly expenses in Wyoming hiked up $812 a month as of July 2022, compared with January 2021, putting it the seventh highest position on the ranking of U.S. states.

The main drivers behind this increase have been higher transportation, energy, and housing costs. These factors can put a strain on Wyoming households already struggling to make ends meet and can also leave other families with less disposable income to put towards long-term money goals, such as investing for retirement.

8. California

America’s most populous state with more than 39 million residents, California clocks in as the 8th most inflationary state in the nation. Residents paid an average of $794 in monthly expenses in July 2022 vs. January 2021. That’s a lot of people feeling the pinch at the gas pump, supermarket, and elsewhere.

9. Alaska

Our northernmost state has experienced intense inflation over the past year or so. The average Alaskan household is now spending 12.5% more, which equals an additional $790 per month. Of that figure, $345 went to rising transportation costs and $197 towards energy costs.

10. Montana

Inflation in Montana is up 15.4 percent, or $790 per month for the average family, which puts the state in the number 10 position of states being hit hardest by rising prices.

When dealing with this kind of pressure on your income, it may be wise to think about bringing in more income. That’s one of the benefits of a side hustle and can help make ends meet when prices zoom upward.

11. Illinois

The cost of living in Illinois has been increasing steadily over the past few years; between January of 2021 and July of 2022, the typical household is shelling out $787 more per month to pay for the same expenses. That reflects rising costs of housing, energy, and transportation, among other factors, to the tune of 14.1%.

If you are grappling with the impact of inflation and feel as if you can’t keep up with bills, especially credit card charges with their high interest rates, you might consider a balance transfer credit card. These can give you a reprieve from high interest rates for a period of time, which may help you pay down your debt.

12. Florida

Since January 2021, inflation has increased significantly in Florida, with the average Sunshine State household paying $784 more every month to maintain their standard of living. This is a significant increase of 13.9% and can certainly have an impact on how far one can stretch a salary.

If you’re a Floridian looking for ways to enhance your income, you might consider downsizing some of your gently used possessions (clothing, electronics, etc.); there are many options for places to sell your stuff that’s no longer wanted.

13. Maryland

Brace yourself, Marylanders: You’re paying $774 more for your living expenses over the past year and change. That represents inflation of 13.9%, and it can certainly stress a budget.

If you’re residing in Maryland, now might be a good time to review your outflow of cash and see where you might economize. How many streaming platforms do you have vs. really need? How many fancy coffees and take-out dinners are you paying for? A bit of belt-tightening can help bring expenses back under control

14. Hawaii

While the rate of inflation in Hawaii is “only” 12.5% currently, the fact that the Aloha state has such a high cost of living to start with means it’s number 14 on the list. Every month, inflation has lifted household costs on an average of $768.

15. Idaho

Next up is Idaho, a state that has been hard hit by inflation. Prices have increased by 15.4%, or $763 per month for the average household. This spike reflects a combination of factors, including the state’s growing population, which is driving up demand for goods and services.

16. Delaware

In Delaware, the average family is paying $760 more per month for their expenses than in January 2021, representing an uptick of 13.9%. With rising gas prices and housing costs, many families may have to slash their budgets. When doing so, it’s worthwhile to research tips to hedge against inflation.

17. North Dakota

If you live in North Dakota, you’ve likely felt the pinch over the past year and change as inflation has zoomed up 13.8%. For the average family in the state, that means they are spending $760 more per month to make ends meet and pay their bills.

18. South Dakota

Right behind its neighbor to the north comes South Dakota. Here, prices have also ticked up 13.8%, resulting in $759 more being paid out per average household. That’s a whole lot more money for most families to come up with.

If you live in South Dakota or elsewhere and feel stretched too thin, it can be wise to look into how to pay off outstanding debt and open up some breathing room in your budget.

19. Nebraska

Things have gotten pricier in the Cornhusker state: With an inflation rate of 13.8%, the typical household is shelling out an additional $754 a month in July 2022 vs. January 2021. That’s a steep increase and could inspire a person to look for a low-cost side hustle to bring in some additional income.

20. Texas

Inflation has been on the rise in Texas, with the total inflation coming in at 14.8%. If you’re a Texan, that means you are likely needing to come up with an extra $747 per month to make ends meet. Every time you fill your vehicle’s gas tank and pay your energy bill, you may well realize that the amount is significantly higher than before.

21. Virginia

Inflation is a significant problem in Virginia. Prices have ratchet up by 13.9% since January 2021. This means, for instance, that $20 buys less gas than it used to, and residents’ grocery bills are likely to be noticeably higher since they aren’t protected from inflation. It may be a struggle to make ends meet as the average household is forced to come up with an additional $741 per month to cover their expenses.

22. Missouri

Missouri comes in at number 22 on the list of states feeling the impact of inflation. With the inflation rate hitting 13.8%, that means a typical family has to shell out $737 more per month to buy the same goods and services vs. January of 2021.

That can put a tremendous amount of stress on one’s pocketbook. This can be a good moment to review discretionary spending and look for easy ways to save money.

23. Kansas

The next hardest-hit state in terms of inflation is Kansas, according to the Senate’s Joint Economic Committee. The rate of prices rising is 13.8%, with the average household needing to spend $730 per month more to afford the same expenses as in January of 2021. Whether purchasing food or gas, paying rent or the energy bill, costs are rising at a notably high rate.

24. Massachusetts

While the rate of inflation is “only” 10.7% in Massachusetts, that calculates as a $726 expense hike for the typical family, which is significant.

To push back against inflation, you might consider trying to lower some bills. Perhaps you can get your credit card interest rate taken down a notch or negotiate your medical bills to help bring costs under control. It never hurts to inquire and could help you reap savings.

25. New Mexico

Inflation has increased in New Mexico by a significant 15.4%. This represents an average of $720 in additional monthly spending for the average household. The main reason for this price hike lies in the rising cost of energy and transportation.

The Takeaway

Inflation has been in the news over the past year or so, and for good reason: It’s making life more expensive for Americans. Some states have been hit harder than others by this inflation, which means certain households are shelling out even more than others for the same typical monthly necessities, like housing, utilities, food, and transportation. This article shows whether your state lands in the top half of locations most impacted by inflation.

Regardless of where you live, you probably are grappling with the impact of inflation. One way you can push back is with the right banking partner. When you open an online bank account with SoFi, you’ll earn a hyper competitive APY and pay no account fees, which can help your money grow faster so you can pay those bills. Plus, with our Checking and Savings, you can spend and save in one convenient place.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

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Photo credit: iStock/VioletaStoimenova

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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Many Americans would like to get on top of their spending and control their debt, but it can be a struggle. The most recent numbers show that in the U.S., credit card balances rose $121 billion to a staggering total of $925 billion in a single year.

How can you do your part to get on top of your spending and debt? With a budget. Think of it as both guidance to reach your financial goals as well as guardrails to keep your spending and saving on track. Finding the right system to suit your style can take a bit of experimentation, and one path definitely worth considering is the envelope budgeting system. This is a very tangible, physical system in which you divide up a month’s worth of cash to be spent into (you probably already saw this coming) good old-fashioned envelopes, organized by category.

This method can be a great way to literally get in touch with your money and see how it’s spent.

Here, you can take a closer look at this system:

•   What is the envelope budgeting method?

•   How does the envelope budgeting method work?

•   What are the pros and cons of the envelope budgeting method?

What Is the Envelope Budgeting Method?

There are many methods to help you build a budget. The envelope method for budgeting money (also sometimes called the envelope saving method) is a system that helps you track your spending by limiting it to cash transactions. In this way, an otherwise fairly abstract concept — your spending — is turned into something you must literally hold in your hands.

You determine your spending categories, such as entertainment, food, and so forth. You label an envelope for each, and then you divide your monthly available money into the appropriate categories.

Then, as the month goes by and bills come in, you pay with the funds allocated in each envelope. Here’s one of the key points for envelope method budgeting: When the money is gone, it’s gone. The idea is to not dip in elsewhere to come up with cash for, say, a pricey sushi dinner you indulged in on impulse. The point is to get used to sticking to your budget.

Next, you’ll learn the steps to setting up an envelope budget.

How Does the Envelope Method of Budgeting Work?

Here’s a look at how the envelope method of budgeting works.

1. Determining Your Discretionary Income

The envelope method usually works best when you use it to budget for discretionary spending. Your discretionary spending is the money you spend on things you may not really need, such as entertainment.

To determine your discretionary income, take your monthly income and subtract any necessary expenses, including things like housing costs, utilities, and insurance payments.

You may want to include debt payments and savings goals in this category as well. Anything you have left over is your discretionary income.

Budgeting rules of thumb, such as the 50/30/20 rule, can help you determine your discretionary spending as well.

2. Deciding on Budget Categories

Once you have a total for your discretionary income, you can begin to break it down by category. The spending categories you choose will depend on your own habits.

You may want to pay special attention to areas where you already have trouble with overspending. Eat out too much? Grab a latte almost daily? Consider this an opportunity to put a cap on that spending.

Other common areas to consider include groceries, entertainment, clothing, and gas money. You may want to build in a catch-all category that gives you some money to use for fun as well.

Assign a dollar amount to each category. Consider reviewing past bank statements to help you figure out what you normally spend.

Your bank or credit card may even break out your spending into categories for you, making it easy to tell where you typically spend. If you’re trying to cut back, assign dollar amounts that are lower in the categories where you can.

Recommended: Guide to Practicing Financial Self-Care

3. Withdrawing Cash and Putting it into Envelopes

The next step in an envelope method budget is to get one envelope for each category. Write the name of the category on the envelope and the dollar amount you have assigned to it. At the beginning of the month, withdraw enough cash to fill each envelope.

Depending on your situation it may work better for you to spread your withdrawals out to align with your paycheck. If this is the case, you could take half the money out at the beginning of the month and the remaining half when you receive your next paycheck.

When you go to the bank, get the exact denominations that you need. For example, if you assigned $55 to your entertainment budget, make sure you get exactly $55 dollars. Make change if you use an ATM that only spits out $20s. With exact amounts, you’ll avoid the extra work of remembering where you need to shuffle dollars around.

If having a pile of envelopes feels too disorganized, consider using a coupon organizer. These look like little divided wallets or small accordion files. The idea here is the same as with the envelopes, and you should label each section with the category and dollar amount.

4. Spending Only Cash

Then, for the month ahead, the envelope method budget means that when you need to buy something, you take money from the appropriate envelope. You may not want to carry the envelope around with you, which could mean spending more than you need to or risking losing it. If you only bring $50 to the grocery store, make sure that your total doesn’t go beyond $50. Some tips to help this process:

•   Try to avoid the temptation to spend with your credit card too. It might help to remove your credit card out of your wallet while you use the envelope method. If you choose to do this, consider storing the card in a secure place where you can access it when you absolutely need it.

•   If you choose to purchase something on the internet, such as concert tickets, for example, note the purchase on your envelope immediately. You can then remove the cash you spent online from the envelope.

•   When buying things online, continue to keep in mind the dollar amount you set for that category. Try your best to avoid overspending, based on the limits you set for each envelope at the beginning of the month.

Recommended: 18 Common Misconceptions About Money

5. Once Your Cash Is Gone…It’s Gone

Here’s where the real discipline comes in with the envelope method. Once you’ve used up the cash in a given envelope, it’s time for a full stop.

This means no more spending in that specific category for the rest of the month. Remember, you’re trying to control your spending, so avoid borrowing from other categories.

If you deplete your entertainment budget, look for ways to save money on streaming services. Try free alternatives like watching movies at home. If you run out of money for groceries, get creative with leftovers and try to use up whatever food you have left in your cupboards and fridge. These exercises should hopefully help you begin to spend more and more intentionally as time goes on.

Here’s where the real discipline comes in with the envelope method. Once you’ve used up the cash in a given envelope, it’s time for a full stop.

This means no more spending in that specific category for the rest of the month. Remember, you’re trying to control your spending, so avoid borrowing from other categories.

If you deplete your entertainment budget, look for ways to save money on streaming services. Try free alternatives like watching movies at home. If you run out of money for groceries, get creative with leftovers and try to use up whatever food you have left in your cupboards and fridge. These exercises should hopefully help you begin to spend more and more intentionally as time goes on.

Pros of the Envelope Budgeting Method

Here are some of the most important benefits of the envelope budgeting system:

•   It makes spending tangible. Buying things with plastic can make it feel as if you haven’t spent any money at all. When you pay with cash, you’re forced to consider your spending and may spend less.

•   This system helps realize just how much you are spending on various expenses. For instance, you may not have realized how much you spend on take-out lunches until you see that $20 bill leave your hands every weekday.

•   This budgeting technique also makes it all but impossible to overspend, since you have a hard and fast budget limited by the cash in your envelopes.

Recommended: 5 Ways to Achieve Financial Security

Cons of the Envelope Budgeting Method

Yes, there are good reasons to try this budget system. However, it’s worthwhile to know some disadvantages before you dive in:

•   Carrying cash to pay for your daily expenses as part of this system can be risky; you might lose the money or, in rare cases, be robbed.

•   The cash-centric nature of the envelope budget can be difficult for people who do a lot of online transactions, like to use a debit card, and/or patronize shops that are cashless.

•   If you like to use plastic and get cash-back rewards or other perks, you will not be able to accrue those benefits while following the envelope budgeting method.

Recommended: 23 Tips on Saving Money Daily

The Takeaway

All budgets can require discipline and sometimes a certain level of discomfort as you’re forced to make compromises. But they can also help you better understand your money style, keep your spending in check, and reach your financial goals. The envelope budgeting system is one method that can guide you on your financial journey. By putting cash into envelopes marked for specific purposes, you can gain insight into where your money goes and hopefully rein in areas where you can cut back.

Another way to take control of your money is to find the right banking partner. When you open an online bank account with SoFi, you’ll have access to a suite of tools that help you see where your money goes. In addition, you’ll earn a super competitive APY and pay no account fees, both of which can help your money grow faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOBK1122022

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For many people, clothing is a favorite purchase, and shopping for new looks is practically a hobby. Fashion is a way to express your personal style; a new pair of jeans or boots can be a major mood-lifter.

But let’s face it, clothes can be expensive. If fashion is your weakness, it can take a big bite out of your budget. According to the Bureau of Labor Statistics, the average American household spends $1,754 a year on apparel and related services. A survey by Credit Donkey found women spend an average of $571 per year on clothing, compared to men who spend an average of $323 per year.

But some people spend considerably more, ringing up bigger bills by buying the latest handbag or designer clothes that can add the equivalent of a student loan payment to your monthly bills.

These purchases can add up over time and feel like a waste of money of your hard-earned cash. So here, learn some ways to reduce the amount you spend on garments, including:

•   How to save money on clothes

•   How to know when to shop to get the best deals

•   How to trade what you own (but are tired of) for new gear

•   How to care for your clothing so it lasts longer.

Money-Saving Tips for Buying Clothes

There are ways you can cut down on your clothing expenses but still score some pieces you can’t wait to wear. Here’s 15 suggestions on how you can save money on clothes without feeling deprived or out of sync with the latest styles.

1. Shop the End-of-Season Sales

Ever notice how spring and summer clothing seems to go on sale in June or July? Or fall and winter clothes in January? The reason is because stores need to sell that merchandise so they can make room for next season’s items. Time it right, and you can scoop up current seasonal clothing at steep discounts. Just don’t go shopping the second that next season’s looks hit the racks.

2. Host a Clothing Swap

You know the saying, someone else’s trash might be your treasure. A cost-free way to get some new pieces is by arranging a clothing swap. The ground rules: Everyone brings clean, gently used clothes they’re looking to unload, and attendees get to sift through other’s clothing and add to their wardrobe for free.

A clothing swap is a great way to combine socializing and “shopping.” If you want to host one, heed this advice:
Make sure you’ve got a big enough space where everyone can comfortably peruse and try on items.

•   Invite people who are roughly the same clothing size.

•   Set a minimum number of pieces they need to bring.

•   Don’t feel like being the coordinator? Check out Meetup.com and Eventbrite.com to find swaps near you.

3. Ask for a Discount on Damaged Clothing

Here’s how to save money when shopping for clothes: If you find something you love but notice slight imperfections such as a small tear, loose thread, or a flaw in the fabric, bring it to the attention of a store employee. You might be able to get some dollars knocked off the retail price. If the salesperson doesn’t offer this, you can politely ask if the price can be lowered to reflect the garment’s condition.

Think it’s not worth the trouble? Remember why saving money is important. Every little bit of extra cash you sock away can be used to pay down debts or go towards a goal like funding a summer vacation.

4. Look for Coupon or Promo Codes

Before making a purchase, search the internet to see if the retailer offers a store coupon or promo code you can use when shopping online. You can find available coupon or discount codes at sites such as Retailmenot.com, Rakuten.com and BeFrugal.com, which all offer cash back for purchases made. Many times, if you are a first-time customer, you can snag a discount and/or free shipping by signing up for email announcements.

Quick Money Tip:Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. An online bank account is more likely than brick-and-mortar to offer you the best rates.

5. Mend Your Clothes

Are there things hanging in your closet you’re not wearing simply because a button is missing or the garment has a small hole? Instead of taking it to a tailor, buying something new, or avoiding it altogether because it needs repair, try fixing it on your own. Basic mending doesn’t require a lot of tools and is pretty easy.

As long as you’ve got the basics such as a needle, thread, scissors, or buttons if needed, you’re good to go. If you’re not sure about your hand sewing skills, you can find a slew of how-to videos on YouTube.com. Also check out Japanese mending, which elevates visible mending into an art form.

5. Buy Generic Brands for the Basics

When it comes to certain articles of clothing, purchasing a generic brand over a name or designer one can save you money without jeopardizing your style. Any item you wear under something, like a tank top or a tee shirt, doesn’t need a fancy label to serve the purpose. Why buy a white tee at a high-priced store for $50 or $90 when a similar one at a national chain retailer costs only $5?

Recommended: Tips for Overcoming Bad Financial Decisions

6. Create a Capsule Wardrobe

Having a capsule wardrobe means you’ve created a streamlined clothing collection that features well-made, non-trendy pieces that can all be mixed and matched. The idea is to spend a little more on the items initially. In the long run, however, you save money because these higher quality garments will last longer and not have to be replaced every few months.

A capsule wardrobe also offers timeless, versatile clothing choices instead of a closet full of flash-in-the-pan styles. Not having a large wardrobe may also benefit your overall wellness. One study found 37% of people said minimizing their wardrobe would reduce the stress of getting ready every day.

7. Wash Your Clothes Properly

Laundry mistakes can damage your clothes. For instance, washing certain fabrics in hot water can cause shrinkage, fading, and wrinkling, as well as can trigger dye to run. However, using cold water is much more clothing-friendly so you won’t be in danger of destroying a garment. You can also save on your gas or electric bill since an estimated 75% to 90% of all of the energy used in your washer goes to heating up the water.

Another way to extend the life of your clothes is by not washing every single item after one wear, with the exception of course, of underwear and socks. Why? Each time you wash your clothes, you’re putting stress on the fabric. By wearing your clothes a few times before washing, you can minimize any damage. Doing so will not only save your clothes, but you’ll also spend less on laundry detergent.

8. Borrow from a Friend

Going to a gala event or attending a wedding but can’t afford to buy anything? Consider asking that generous, stylish friend if you might be able to borrow from their closet. This can spare your bank account and allow you to get dressed up in something new and fresh to you. The only cost you might incur is taking the garment to the dry cleaners after.

Don’t have a friend with a fab wardrobe? Consider renting an outfit for your big night out.

Recommended: 18 Common Misconceptions About Money

9. Figure Out Cost Per Wear

Looking for more ideas for how to save money on clothes? Maybe it’s time for a bit of easy math. Since you likely want to feel as if you’re getting your money’s worth when you buy an article of clothing, pay attention to how often things get worn. If a piece is costly and you’ve only worn it once, you’re not reaping its full value.

You can figure out if your money was well spent by calculating the cost-per-wear ratio. Just divide the item’s cost by how many times you wear it. For example, if you buy a coat for $100 and wear it 100 times, your cost per wear is $1. On the flip side, if you’ve only worn it five times, each wear is equivalent to $20 which probably hasn’t given you the most bang for your buck. Before you buy the clothing, take time to do the math to assess how many times you realistically expect to wear it.

10. Upcycle Your Clothes

Upcycling clothing is taking something old, recycling it, and making it into something new to wear. Repurposing clothing is one of the many interesting ways you can save money.

Upcycling clothes can include sewing, cutting, dyeing, or even updating a cardigan with new buttons. Fun examples of upcycling include hand-painting a jean jacket, cutting a pair of jeans into shorts, creating a tote bag from a sweatshirt, or transforming a wool blanket into an autumn coat or cape.

Upcycling is also eco-friendly. According to the Council for Textile Recycling, the average American throws away 70 pounds of clothing and other textiles every year. Not only does upcycling help you buy less and keep excess fabric out of landfills, it’s a way to save money and live sustainably.

11. Retool Your Clothing Budget

One way to stop overspending on clothing is to figure out how much you’re actually shelling out each month and then set a limit. There are several different budgeting techniques, such as the 50-30-20 rule. This divides your take home money into three categories: needs (50%), wants (30%) and savings and debt repayment (20%). ****

The needs category encompasses expenses you can’t avoid like groceries, housing, and utilities. Generally clothes fall into the discretionary wants group along with entertainment, dining out, monthly subscription expenses. Some financial experts suggest limiting clothing spending to 2 to 2.5% of your take-home pay which equals between 6 to 8% of the 30% of non-essential purchases. If you make $4,000 a month, 30% of that amount equals $1,200. 6 to 8% of that figure equals an allotment of $72 to $96 a month for apparel. If that doesn’t sound like enough, you’ll want to see what other non-essentials in the wants category you can scale back.

Recommended: Guide to Practicing Financial Self-Care

12. Go Shopping in Your Own Closet

Do you really know what’s in your closet or tucked into all your dresser drawers? Go through your entire wardrobe, and you might find things you forgot you had or thought you got rid of years ago. Unearthing items you haven’t seen or worn in awhile can spark creativity with clothing combinations and stretch your wardrobe.

On the other hand, you may realize some pieces lingering in the corners of your closet hold no interest. If that’s the case, keep reading for details on how you might get some money for it.

13. Buy and Sell Used Clothing

There’s no question you can save money by shopping for second-hand clothing. You can find bargains at a variety of places including thrift stores, consignment shops, garage, yard, or stoop sales, and even for free through community groups such as Buy Nothing. Two sites, among others, where you can sell your old stuff are Poshmark.com and Depop.com. Both are great for finding brand-name and designer garb for cheap.

And, the pickings are plentiful since secondhand shopping is at an all time-high with 82% of Americans buying or selling used goods, according to OfferUp’s Recommerce Report.

What’s more, some vintage and used clothing shops also buy from people like you. Check out Buffalo Exchange and Crossroads Trading; you might get cash for your gear or be able to swap it for pieces you love.

Recommended: Tips for Using a Credit Card Responsibly

14. Don’t Give into Temptation

One way to curb clothes spending is to put a temporary kibosh on shopping for these items. Try not to put yourself in situations where you may feel the urge to buy clothing. For instance, many people spend money when bored. Instead of going shopping when you have an unplanned afternoon, perhaps you could explore new hobbies.

Also, when you find yourself with the urge to shop, stop and ask yourself, “Do I truly need this or do I simply want it?”

You can also commit to a 30-day no-spending challenge on shopping for anything to wear. You may notice you have more money, less credit card debt, and don’t feel the need to buy unnecessary clothing items after you see the rewards of this month of not buying.

Recommended: Questions You Should Ask Before Making an Impulse Buy

15. Learn When Retailers Have Their Biggest Sales

Start paying attention and you’ll see a pattern as to when major retailers host their big sales. Holiday weekends such as Martin Luther King Jr.’ Day, Memorial Day, Labor Day, and the Fourth of July are popular times for stores to feature great buys along with Black Friday. For online shopping, check out deals on Cyber Monday (the Monday right after Thanksgiving) and Amazon Prime Day.

You can also ask a salesperson at your favorite stores to give you the inside scoop on when certain items might be going on sale.

The Takeaway

Clothes shopping can be fun and an ego boost, but if you’re not mindful, it’s easy to rack up the bills and possibly find yourself mired in unnecessary debt. Many times, there are ways to cut back on buying clothes, make the pieces you have last longer, and breathe new life into your wardrobe without going broke. With creativity, knowledge, and some smart moves, you can still feel good about what you wear without spending as much.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How can I stop spending money on clothes?

One of the best ways is to simply remove the temptation, especially if you’re prone to impulse spending. If you like to shop online, unsubscribe from retailer emails so you won’t be alerted to new items and sales. Feel the itch while scrolling your phone? Put it down; pick up a book, or watch a movie instead. When you’re out and about, resist going into your favorite stores. Vow to commit to a 30-day shopping sabbatical and see how much money you’re able to save as a result.

Are there ways I can take better care of my clothing so they’ll last longer?

Yes. Follow the washing instructions carefully, let items air-dry when possible (instead of exposing them to a hot dryer), and store them in a cool, clean, and dry environment out of the sunlight, which can cause fading. Also fold heavy sweaters instead of hanging them to prevent the fabric from stretching.

Should I only buy cheaper clothes?

No. Sometimes spending more means you’ll get a well-made, high-quality garment that will last for years. Look for these pieces on sale at major department stores and at discount retailers such as T.J. Maxx and Marshalls.

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Photo credit: iStock/Phiwath Jittamas

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOBK1022006

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