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Buying health insurance can be intimidating when you’re not under an employer’s umbrella. The various types of health insurance plans, the wide range of costs, and the numerous ways to research and buy a policy can make the process daunting at first.

Here’s a guide to help you sort through the basics to find the plan that’s right for both your budget and your health needs.

What Is Individual Health Insurance?

The term “individual health insurance” is a little confusing. In most cases it means a policy purchased by an individual. But individual insurance also includes family coverage. Depending on your situation, you could be buying an individual health care plan that covers just you, or your spouse and dependents as well.

You may find yourself shopping for private health insurance for you and your family if you no longer have employer-based insurance.

Young adults aging out of coverage under their parents’ plan may also need to buy individual health insurance.

Types of Individual Health Insurance Plans

When you start your search for health insurance, prepare for alphabet soup—HMO, PPO, HDHP. Individual insurance comes in a lot of forms.

Choosing the right coverage for you starts with determining which type of plan best meets your needs. Here’s a quick look at the different types of health plans available and who might benefit most from each.

HMO

These plans limit coverage to health care providers who are under contract with the health maintenance organization.
You usually need to have a referral from your primary care doctor to receive care from a specialist or other provider in the HMO network.

Care from providers out of the HMO network is typically not covered, except in the case of an emergency and for routine services with an obstetrician/gynecologist. HMO coverage is usually confined to specific geographic areas.

Some insurers offer a similar setup called exclusive provider organization plans, with coverage only if you use doctors, specialists, or hospitals in the plan’s network, with the exception of emergencies.

May be best for: People looking for the lowest cost plans, who don’t need coverage outside their geographic area and who don’t mind changing doctors to stay in the HMO network.

PPO

Members of preferred provider organization plans pay less when they use network providers. Care outside the network is covered but at an additional cost. No referrals are necessary.

Some insurers offer a similar type of plan called point of service. As with a PPO, plan members pay less for care from network providers, but they are free to go outside the network. Like an HMO, they must use a network primary care doctor and get a referral to see a specialist.

May be best for: Individuals who can afford higher premiums and perhaps higher out-of-pocket costs in return for the freedom to see specialists and other providers outside the network.

High-Deductible Health Plan

This is a health plan that charges a deductible of $1,400 or more for an individual or $2,800 or more for a family for 2021. A deductible is the amount you pay out of pocket for health care costs before insurance coverage kicks in.

In return for higher deductibles, these plans usually charge significantly lower premiums. (Preventive care is usually covered at 100% when you stay in the network.)

You can combine a high-deductible health plan with a tax-advantaged health savings account. Contributions to an HSA are tax-free and can be used to pay for qualified medical expenses.

May be best for: People who don’t use a lot of health care services and are willing to risk high out-of-pocket costs, and those who are looking to start an HSA to save for future health care expenses.

Catastrophic

These low-premium, very-high-deductible health plans are designed, as the name implies, to cover only dire circumstances.

The plans cover the essential benefits defined by the Affordable Care Act, though there may be limits on preventive care and the number of covered visits to a primary care provider.

Deductibles are, well, high: in 2021, $8,550 for an individual, according to healthinsurance.org.

The plans will help if you become seriously ill or are injured, but you’ll pay out of pocket for many other health care costs.

Catastrophic plans are only available to people under age 30 and to people with a hardship or affordability exemption. They can be purchased on healthcare.gov or directly from carriers.

May be best for: People in between coverage plans looking for a short-term buffer against large medical bills should an accident or serious illness occur. These plans are generally not viewed as suitable for anyone looking for traditional health care coverage.

Short-Term Health Insurance

Short-term plans are designed to provide temporary emergency coverage when you are between health plans or outside enrollment periods. Depending on what state you live in, short-term coverage can last up to 12 months, sometimes with the possibility of renewal for up to 36 months.

Short-term plans are not compliant with the Affordable Care Act and therefore do not have to provide essential coverage such as preventive, maternity, and mental health care and treatment for preexisting conditions.

Deductibles and out-of-pocket costs can be significantly higher than those of traditional health plans.

May be best for: Like catastrophic insurance, this is generally considered suitable only for people looking for stopgap coverage while they are otherwise uninsured.

Choosing an Individual Health Plan

It’s best to consider a number of factors beyond the premium price to determine the most affordable choice that meets your needs.

Consider how you typically use health care: Are you generally healthy and only need to go to the doctor for annual physicals? Or are you treating a chronic condition that requires consistent care?

It might be a good idea to try to project what the coming year will look like in terms of how you use health care. From there you can take into account what’s most important to you, including costs, providers, and pharmaceutical coverage.

Some questions to possibly ask as you compare plans:

What would my cost-sharing be? This includes out-of-pocket costs such as deductibles, copays, and coinsurance.

Does the plan have an annual or lifetime limit on how much I’d spend out of pocket? Every plan that is ACA compliant must publish a summary of benefits and coverage that you can check to see how the plan covers costs. In addition, most insurers and health care organizations have online tools that can help you compare plan costs.

Are my doctors in the plan’s network? You can check with the insurers or directly with your providers. If your providers are not in the network of the least expensive plans, ask yourself what is most important to you: lower costs and changing doctors or higher costs and keeping current providers.

Are my medications covered? Most plans have a formulary, a list of drugs that are fully or partly covered under the plan. You can access the plan’s formulary on the insurers’ websites. The lists change from year to year.

An experienced agent or broker who sells plans that are on the Health Insurance Marketplace® and off the exchange can help you compare the broad range of plans to determine which one is right for your needs. (Agents and brokers often get a commission from insurance companies for selling plans, but the customer does not pay extra for enrolling with them.)

Or you can shop on your own for exchange plans and determine if you qualify for premium subsidies on healthcare.gov . You can compare off-exchange plans through one of the many online brokers or directly with insurers.

The Takeaway

Shopping for an individual health insurance policy requires time, knowledge, and patience. But armed with the basics and some tools, you’ll have the best chance to find coverage that will meet your health care needs.

If you’re thinking about how to protect your loved ones in the future, you might consider life insurance options with SoFi Protect. SoFi and Ladder offer plans to cover you for your own unique needs. It’s quick to set up and you can get your quote in minutes.

Find your rate on life insurance plans with SoFi Protect.

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Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLife^TM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
External Websites: 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.
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 or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SOCO21018

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Life can be unpredictable, and financial setbacks can crop up at any time–whether that’s a job loss, medical or dental bills, a fender bender, or a major appliance that suddenly stops working.

An emergency savings fund is a lump sum of cash set aside to cover any unanticipated expenses or financial emergencies that may come your way.

Besides offering peace of mind, an emergency fund can help save you from having to rely on high interest debt options, such as credit cards or unsecured loans, or needing to undermine your future security by tapping into retirement funds.

If you don’t yet have any emergency savings set aside, however, there’s no need to stress. Below, we break down why an emergency fund can be a key part of financial planning, how large it should be, and how to start building it up.

Why Do You Need an Emergency Fund?

An emergency fund can be thought of as a kind of self-funded insurance policy. Instead of paying an insurance company to back you up in case something goes wrong, you’re paying yourself by setting aside these funds for the future.

Having financial back-up comes with a range of benefits. Below are some of the key perks of having an ample emergency fund.

It Can Help Keep you From Going into Debt (or Making Costly Financial Decisions)

Yes, there may be other ways to quickly access cash to cover the cost of an emergency, such as credit cards, unsecured loans, home equity lines of credit, or pulling from other sayings, like retirement funds.

But these options typically come at high cost in the form of high interest fees or penalties. Though there are many reasons for having an emergency fund, preventing debt is among the most important.

It Can Provide Peace of Mind

Living without a safety net, and simply hoping to get by without running into a crisis can cause you to worry about what would happen if you got hit with a large, unanticipated expense.

Being prepared with an emergency fund, on the other hand, can give you a sense of confidence that you can tackle any of life’s unexpected events without experiencing financial hardship.

It Can Help You Ride Out a Period of Unemployment

Unemployment benefits, if you are entitled to them, can help you afford some of your daily expenses, but generally it’s not enough to cover your entire cost of living.

If you have an emergency fund, you can tap into it to cover the cost of everyday expenses, like utility bills, groceries, and insurance payments, while you’re unemployed.

Starting an emergency fund also gives you the freedom to leave a job you dislike by choice, without having to secure a new job first.

It Can Help You Make Better Spending Decisions

Having extra cash set aside in an emergency fund helps keep that money out of sight, and also out of mind.

Keeping the money out of your immediate reach can make you less likely to spend it on a whim, no matter how much you’d like to.

Also by having a separate emergency account, you’ll know exactly how much you have—and how much you may still need to save.

How Much Emergency Savings Should I Have?

The size of your emergency fund will depend on your income and expenses, but a common rule of thumb is to have enough money to cover three to six months of living expenses.

If you are part of a two-income household, three months of expenses may be sufficient. If you live alone, or you are the only earner in the household, on the other hand, you may want to shoot for closer to six months.

To calculate what that amounts to, you may want to look through bank and credit card statements for the past few months and list all of your essential monthly expenses, such as housing, food, insurance, utilities, transportation, and debt.

Recommended: How Much Should I Have in Emergency Savings?

You would not need to include expenses for anything you’d cut from your monthly budget in the event of a job loss or other financial emergency, such as dining out, entertainment, vacations, nonessential shopping, or saving for college.

Once you’ve assessed the minimum it costs for you to live for a month, you can multiply that number by however many months you feel would give you a comfortable financial cushion.

If the number you come up with seems intimidating, it can help to keep in mind that you don’t have to create your emergency fund overnight.

You can build it slowly by stashing away small amounts on a regular basis, like every paycheck or every month. If you keep it up, over time you’ll eventually meet your goal.

Where Should I Keep My Emergency Fund?

It can be a good idea to keep your emergency fund in a separate, safe, and liquid account, rather than mixed in with your spending money or other savings. This way you know it’s earmarked for a specific purpose.

Good places to build your emergency fund include: a high-yield savings account, online savings account, money market account, or a cash management account.

These accounts can help your savings grow (since interest tends to be higher than with a traditional savings account), but also keep your money liquid–meaning you can access the money when you need it.

Building Your First Emergency Fund

A good first step to starting, and building, your emergency fund is to create a simple budget. This entails looking at what is currently coming in (i.e., your take-home income) and currently going out (all of your essential and nonessential spending).

If there isn’t much leftover after subtracting spending from income to siphon into savings, you may want to rejigger your spending.

You can do this by honing in on nonessential expenses and seeing where you may be able to cut back, such as eating out less often, ditching a pricy cable package, or getting rid of subscriptions and services you no longer value.

Using your budget, you can then come up with a set amount of money (and it’s fine to start small) that you can put into your emergency fund each month.

It can be a good idea to automate your savings process by setting up a recurring deposit from your checking into your emergency fund savings account on the same day each month, perhaps after your paycheck gets deposited.

If you receive an unexpected lump sum of cash, such as a tax refund, bonus, inheritance, or cash gift, you might consider putting at least a part of it into your emergency fund to help you reach your goal faster.

The Takeaway

Without savings, a financial shock—even minor—could set you back, and if it turns into debt, it can potentially have a lasting impact.

That’s why it can be wise to make building an emergency fund one of your highest savings priorities.

Even if you’re currently living paycheck to paycheck, you may be able to slowly start building a buffer against emergency expenses.

If you haven’t yet set up an emergency fund, it’s easy to create one with SoFi Money®.

SoFi Money is a cash management account where you can earn competitive interest, spend, and save–all in one place.

With SoFi Money’s special “vaults” feature, you can create an emergency fund that is separate from your spending, and also sign up for recurring deposits to help build your back-up faster.

Start building your emergency fund with SoFi Money today.

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SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.

SOMN19007

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It can be exciting to get your first paycheck, but it can sometimes be a little bit disappointing when you find out exactly how much you are taking home.

Looking more closely at your paystub or direct deposit slip, you’ll see several line items that are called “deductions.”

Deductions are all of the things that were taken out of your gross pay, leaving you with your net pay, or take-home pay.

While there are some deductions that are required by law and are out of your control, others are part of your employee benefits package, which means that you may be able to adjust them according to what works for you and your budget.

Read on for a paycheck breakdown that can help you understand exactly what is coming out of your paycheck and why.

What is Net Pay?

Whether you’re paid hourly or by salary, your rate of pay is the compensation that you and your employer agreed upon when you accepted the job.

This number appears in official contracts and is referred to as gross pay. However it does not represent the actual amount that will be paid out.

Net pay, also referred to as take-home pay, is the actual amount of compensation that is paid out via check or direct deposit to an employee. It is your gross pay with all the deductions taken out.

By law, an employer must subtract various mandatory federal and state tax withholdings. They will also subtract costs for employer-sponsored offerings that the employee takes part in, such as healthcare, life insurance, and retirement.

Types of Paycheck Deductions

Your pay stub will list all the deductions that are being taken out of your gross pay. Below are some of the most common paycheck deductions explained:

Federal Taxes

Federal taxes include all the taxes you are required by law to pay to the federal government. These taxes help fund the federal government, allowing them to invest in things such as infrastructure, education, and national defense, and provide services to the American people.

When you were first hired, you likely filled out an Employee’s Withholding Certificate or W-4 form form and claimed the number of tax exemptions you have. This amount tells the federal government how much money to take out of each paycheck to cover your taxes. The more allowances you take, the less federal income tax the government will take out of your paycheck.

One way to ensure that you have the right amount of tax withheld for each pay period is to use the IRS Tax Withholding Estimator , or speak with someone in your company’s HR department. You can tell them if you’re single or married, how many dependents you have, and if you have any other sources of income, and they should be able to help you fill out your form accurately.

It’s also a good practice to revisit your W-4 selections annually as significant life events may change your withholding and also because the W-4 form is periodically updated.

During tax season of each year, individuals who have overpaid in federal taxes receive a refund from the government, and those who’ve underpaid are required to pay additional funds, and possibly a penalty.

State and Local Income Taxes

Many states require a state tax to help fund government projects and services, which can range anywhere from 3% to 13%. To learn more about your state’s taxation policy, you can visit the IRS’s Government Sites page and click on your state.

Just as with federal taxes, your state income tax will get deducted from your paycheck to cover taxes you may owe at the end of the year.

Social Security and Medicare

Social Security and Medicare taxes are part of the Federal Insurance Contributions Act (FICA) tax, a group of payroll taxes collected from both the employer and the employee.

The tax rate for social security is currently 6.2%, and Medicare receives an additional 1.45% (employers match these tax rates, bringing the total of FICA tax contributions to 15.3%).

The Social Security and Medicare programs are in place to help with your income and insurance needs once you reach retirement age.

Wage Garnishments

Wage garnishments are legal procedures designed to repay delinquent, outstanding debts, such as unpaid child support, overdue credit card payments, or even unpaid taxes.

Most wage garnishments are initiated by court order, however the IRS and other tax collection agencies also levy for unpaid taxes in the form of wage garnishment.

Garnishments are made on earnings leftover after all legally required deductions are made. The actual amount of any garnishment will depend on the amount of debt owed and income earned.

Employee Benefits

Depending on where you work, you may be able to opt into a variety of benefits, and have these costs automatically deducted from your paycheck.

If you sign up for your employer-provided health insurance, at least some of the cost is likely to come out of your paycheck.

Under the Affordable Care Act, employers with 50 employees or more must offer affordable health insurance. As part of an employee’s compensation package, many companies will pay half, or another percentage, of the insurance premiums. The employee’s portion of those premiums is represented on a pay stub as a deduction.

Other benefits, like flexible spending plans, commuter plans, and life insurance, may also be deducted from your pay, depending on whether or not you opt into them and if your employer picks up the bill fully or partially.

Health insurance and other benefits typically come out before your taxes, and you may be able to reduce your taxable income by signing up for them.

Retirement Contributions

Employee savings plans such as 401(k)s are a common benefit offered in the workforce.

If you opt into this benefit, your employer will deduct funds from your wage earnings and deposit them into a retirement account.

Employees are typically able to choose the amount they would like deducted from their earnings for retirement savings. In some cases, employers may contribute an additional percentage of your salary into your retirement account.

Contributions to your 401(k) not only help you save for the future, but lower your taxable income, since they come out of your paycheck before taxes get assessed.

You’ll want to keep in mind, however, that there are yearly retirement plan contribution limits set by the federal government through the IRS.

The Takeaway

While you may be surprised to see all the deductions coming out of your first paycheck, once you know what number to expect to see landing in your bank account each pay period, you’ll be able to plan your spending and budget accordingly.

It’s a good idea to check your pay stubs periodically to ensure that the deductions being taken out are accurate and align with your financial goals.

If you haven’t maxed out your 401(k) contributions, for example, you may decide to increase them as your income grows and you become more financially stable.

To make sure the appropriate amount of taxes are being withheld from each paycheck, you may also want to revisit your W-4 annually and make any adjustments as your circumstances change.

Another good way to keep close tabs on your earnings and spending is to sign up for SoFi Money®, which is a mobile-first cash management account.

With SoFi Money, you can earn a competitive interest rate, spend, and save (all in one account), and also track your weekly spending on your dashboard in the app.

It’s also simple to add your SoFi Money account as an option for your direct deposit.

Check out everything a SoFi Money cash management account has to offer today.

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SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
External Websites: 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.
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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOMN21014

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New babies bring so much to life—unconditional love, the joys of parenthood, snuggles, and a lifetime of new memories. But they also bring an entirely new set of responsibilities, lifestyle adjustments for their parents, and a swift and immediate knowledge on new topics like diapers (and their contents).

And it’s true that every new parent’s experience is as different as the babies they welcome to their lives, but we’re willing to guess that no matter which part of the planet they call home, every one of them asks themselves the same question at some point:

Can I afford a baby?

The Costs of Having a Baby

The exact cost of having a baby varies depending on health insurance, state and local cost of living, level of prenatal care, and a number of other factors. But according to the most recent report from the U.S. Department of Agriculture (USDA), a middle-income family in 2015 could expect to spend just under $13,000 per year per child.

For couples who conceived naturally, without the added costs of fertility treatments or adoption, that first expense might include a trip to the pharmacy for a pregnancy test. From there, they grow to include prenatal care for mom and baby and an ever-expanding checklist of purchases, to-dos, and decisions—all within the next nine months or so.

Here’s a look at some of the common expenses that can crop up, from pregnancy through baby’s first birthday.

Before Birth

Parents-to-be may find that some of the biggest costs of having a baby happen before the baby is born. Prenatal care, for example, can begin within weeks of conception. At first prenatal appointments may be likely to take place once a month, but they can increase in frequency as mom’s due date gets closer. Some good news here for parents with good health insurance: Oftentimes, prenatal care and its associated diagnostic tests may be considered preventative care that’s covered by health insurance.

For those without health insurance, however, the average cost of prenatal care is reported to be around $2,000 . And, regardless of health insurance, extra services like 3D ultrasounds may not be covered.

A typical parent-to-be might also have a shopping list that includes a car seat, stroller, crib, diapers and wipes, more diapers and wipes, a changing table, clothes, toys, a baby monitor, bottles, and more diapers and wipes.

Depending on mom’s preference for breastfeeding or formula feeding, the list might also include a breast pump and related supplies or formula (or sometimes both).

During Birth

When it comes time to welcome your new bundle, the average cost is reported, on average, to be around $10,808 . Natural, vaginal births are usually the most affordable, with costs increasing alongside complications or procedures like c-sections, and actual costs swing widely by state.

According to numbers from Fair Health and reported by Business Insider, the most expensive state to have a baby is Alaska, where an uncomplicated vaginal birth averages around $11,610 with health insurance and $20,243 without. Conversely, the same delivery in Alabama costs around $5,230 with insurance and $9,516 without.

If complications are involved, or if the birth is performed via cesarean section, the costs can go up significantly. In Alaska, for example, a c-section with insurance can average around $16,707, and $28,617 without.

That’s an enormous amount of money for some new parents, especially those who face an emergency delivery with no other option. Still, the instances of c-section deliveries have gone up as much as 500% since the 1970s in the U.S.

After Birth

Once mom and baby leave the hospital, they start to create a new normal for two. For mom, it can include postpartum doctor visits to monitor healing or remove stitches, and for baby it can include regular, frequent checkups, starting within three to five days of birth

If both parents decide at some point to return to work, the cost of daycare might be the next large, recurring expense. And for better or worse, newborns and infant rates are usually the most expensive (although it does tend to decrease as kids get older and more self-sufficient).

Just like other figures, the actual costs vary by state, but one study found that center-based child care for an infant was higher than in-state tuition and fees at public, four-year colleges across 30 states and Washington, D.C.

In day-to-day life, another prominent cost is likely to include diapers, wipes, and formula. For an idea of just how much those essentials might cost, Walmart put together a cost breakdown of those three items for baby’s first year. Its grand total for basics and some gear? $2,700 .

Combined with groceries, bills, and other aspects of pre-baby life that still go on, the thought of managing it all might feel overwhelming.

Here are some ways it’s possible to cut corners, get creative, and save money.

Finding Extra Money for Baby

More and more employers are offering paid maternity (and paternity) leave, but beyond 12 weeks of unpaid leave offered by the Family and Medical Leave Act (FMLA), receiving pay while caring for a newborn isn’t guaranteed. For many Americans, that means saving up for a baby is more important than ever. Some people take out adoption loans to help cover costs for a new baby.

Facing a heap of new expenses while at the same time losing income may be a scary thought, and getting through it could require a heart-to-heart between partners and a lot of teamwork. But here are some strategies that may help ease the financial burden of saving for a baby.

1. Starting a Stockpile ASAP

One way to save early and often is to think of those nine months between the start of a pregnancy and the due date as time to stock up and save. Consider the financial difference between adding one box of diapers or wipes to a regular grocery trip vs. waiting until the baby arrives.

Adding items to your inventory a bit at a time—especially when they’re on sale—could be a lot easier on the wallet than an emergency trip when they’re needed ASAP. (Here’s a handy tool for calculating how many diapers of each size the typical baby will use.)

The same strategy could be used for cash, too. Every day, week, or month, parents could set aside as much as possible in an emergency baby fund. Having a specific account dedicated to baby’s needs could mean that the regular budget for paying bills and other grownup expenses isn’t as heavily affected.

2. Cutting Extra Costs

If a new, baby-friendly budget is in the works, parents might want to consider ways to cut costs—starting with areas that are the least painful. Take fees, for example. Eliminating credit-card fees, ATM withdrawal fees, or late-payment penalties are some of the easiest ways to improve cash flow. If bills tend to be incurring late fees, automatic drafts or reminders are potential ways to help make sure they’re on time.

Some other, not-so-painful ways to cut costs might include looking at where unused subscriptions can be canceled and valued ones can be lessened but still exist.

Netflix, for example, has several subscription options, including a lower monthly price for streaming in lower quality on only one screen at a time. It can also be smart to check bills that have similar options, such as high-speed internet or cell phone. Is it possible to move to a less expensive plan that will still work vs. giving it up entirely?

Parents might also consider buying products that do more than one thing, such as convertible car seats that turn into boosters, strollers that expand to fit more than one child, or cribs that convert into beds.

Even kitchen items can be purchased that have multiple uses, which can offer more bang for the buck—especially if homemade baby food is on the menu.

3. Opening a Health Savings Account

A health savings account (HSA) is usually offered alongside a high-deductible health plan (HDHP), and when used how it’s intended could bring new parents some significant perks: Money that’s placed into the account is pre-tax (and can include employer contributions), and it can be used to cover out-of-pocket medical expenses, such as office copays. If the HSA provider issues funds via debit card, it’s one easy way to keep health expenses entirely separate from the day-to-day budget.

But it’s not just doctor’s visits that are covered by HSA funds. Depending on individual plans, some can also be used to pay for health memberships, chiropractic treatments, breast pumps, and other items not covered by regular health insurance.

And, although HSAs are traditionally offered through employer health plans, freelancers and other self-employed workers may be eligible to open an account, too.

4. Getting Creative

A newborn’s essentials list may be significantly shorter than mom and dad’s: They need diapers, clothes, food, a safe place to travel and sleep, and parent cuddles—that’s it. The rest? The fancy diaper bag, the 100-in-1 stroller, the matching outfits, even shoes before the baby leans to walk, can be more like nice-to-haves.

To save money on needs vs. wants, parents could consider putting “gift” items on a baby-shower registry—if they’re purchased, great! No unnecessary strain on the budget.

Also remember that newborns aren’t concerned with hand-me-downs (they don’t even know they have hands). Checking social media marketplaces can lead to entire lots of baby clothes that are being sold by parents who need to make room for the next size up.

Remember that newborns are also color-blind, so especially if another child might join the mix one day, gender-neutral colors and clothes will be easier to pass down. This goes for everything from clothes to cribs to toys.

Understandably, some baby-related costs can’t be cut. Car seats, for example, have expiration dates and are not allowed to be sold second-hand. And some mothers may have reservations about purchasing a second-hand breast pump.

But if there’s opportunity for “like new” vs. “new,” children’s consignment stores can be another place to get good-quality baby clothes, diaper bags, and gear—even the fancy, high-end items—at far less than retail.

5. Putting Your Savings to Work

The USDA estimates that middle-income, married couples may expect to spend $233,610 to raise a child to adulthood—and that doesn’t include college tuition.

One way to make your savings work hard for you is to set up a SoFi®️ Money account. There are no account fees, you’ll earn cash back when you spend with partner brands, and earn a higher interest rate than most traditional banks. SoFi Money®️ also offers joint accounts, so two-parent households can save using one account.

Ready to start saving for your little one? Check out SoFi Money®️.

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SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
External Websites: 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.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

SOMN20018

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Everyone has different needs, responsibilities, and spending and saving habits. Still, you may wonder how your spending lines up with everyone else’s.

Or, if you’re in the process of creating a monthly budget, you may be looking to see roughly how much of your take-home income you should be setting aside for various living expenses.

To help you get a better sense of the cost of living for one person, we’ve assembled a list of the most common average monthly expenses.

Housing

We generally all need a roof over our heads, and housing tends to consume the highest portion of monthly income.

Indeed, according to the U.S Department of Labor , single people living alone (or with others but paying their own) may devote, on average, 35.9 percent of their monthly income to housing.

Government stats also show that the average household (from singles to families) spends about $1,723 per month on housing costs, including rent or mortgage, property taxes, maintenance and insurance fees, where applicable.

Of course, monthly housing costs may be less if you’re single, and can also vary significantly depending on where you live.

A single person living in a studio in New York City, for example, can expect to spend around $1,514 on rent, whereas someone renting a one-bedroom in Roanoke, VI, can expect to pay around $713 on monthly rent.

Transportation

Transportation costs can vary depending on your mode of transport (i.e., car vs. bus vs train), as well as what region of the country you live in.

But one thing that holds true for many of us–transportation often accounts for the second-largest budget item, after housing.

The average household shells out around $813 per month on transportation, including car or public transportation, gas, insurance and other related expenses.

Other transportation expenses to note:

•  Americans spend an average of $550 per month on new car payments.
•  Gas and fuel run around $176 per month on average.
•  Car insurance payments average $119 monthly.

Health Care

Health care expenses can vary depending on each individual’s circumstances, and can also rise and fall from one month to the next.

For example, there may be some months where unexpected medical costs crop up (such as emergency care), and other months where you only need to cover insurance premiums and preventive care appointments.

Cost also varies by location.

For instance, a single adult living in New York City can expect to pay about $425 a month on health care (including insurance premiums for the lowest tier plan, as well as out-of-pocket costs).

A single adult living in Boise, Idaho, on the other hand, can anticipate shelling out roughly $342 per month for those costs.

Food

Everyone’s gotta eat–and the average single person spends about $198 per month in groceries and $172 per month outside the home, for a total average of $370 per month.

This figure can range, however, anywhere from under $200 to over $700, depending on your age, income, gender, eating habits, and where you live.

The wide variability in spending in this category shows that food can be an area where consumers can find savings if they need to reduce monthly spending (such as eating out less, meal planning, and choosing lower cost brands at the supermarket).

Cell Phone

Average monthly wireless fees run between $35 and $140 for a family plan.

The good news? If your budget is particularly tight, you could spend as little as $10 a month for basic service with no data.

Utility Bills

After you’ve saved up and carefully budgeted to buy a home, you probably don’t want to be surprised by a higher-than-expected utility bill.

A number of factors go into utility costs, including home size, where you set the thermostat, type of insulation you have, the climate, as well as what part of the country you live in (since rates vary across the country).

New Mexico residents, for example, pay the least for natural gas (on average, $50 per month) and electricity (an average of $79.16 per month), while Hawaiians pay the most–due to the remote nature of the islands, electricity averages $149.33 per month and natural gas averages $223.07 monthly.

Clothing

The average adult aged 25 to 34 spends about $161 on clothing per month. Adults aged 35 to 44 spend a bit more, averaging $209 per month.

If your budget is tight, this is one category where you can often pare back spending–whether by shopping your closet, hitting the sales racks, or bringing older clothes that need repairs or fit adjustments to the tailor.

Gym Memberships

The average gym membership runs $58 per person, which could be a good deal if you use it regularly.

But weighing in at $696 per year, it’s a hefty price to pay if you rarely see the inside of that gym.

There are some great options for exercising on a budget, such as going outside and hitting the pavement, joining an exercise meetup group, watching YouTube videos, and/or picking up some dumbbells and exercise bands to workout at home.

Getting Your Monthly Expenses in Check

Knowing the average cost of living can be helpful when you’re trying to determine how much of your budget you may need to allocate to different spending categories.

However these average monthly expenses are just that — averages.

To fine-tune your budget, and make sure your spending is in line with both your income and your goals, it’s a good idea to track your own spending (which means every cash/debit card/credit card payment and every bill you pay) for a month or two.

There are a few options for tracking spending. One easy method is to make all purchases for the month on one debit card or credit card, then, at the end of the month, taking note of all the purchases made.

Another option is to log expenses as you pay them–you can carry around a notebook or keep all your receipts and list them later on paper or in a computer spreadsheet.

At the end of the month, you can then tally up everything you spent, as well as allocate each expense into key categories, such as housing, transportation, food, health care, etc.

You can then see how your spending compares to national averages, as well as where you might want to tweak things.

For instance, if you don’t have enough at the end of the month to put any money away into your retirement fund and/or an emergency fund or other savings goal, you may want to re-examine your nonessential spending (such as restaurants, clothing, gym memberships) and finds some ways to pare back.

The Takeaway

Whether you’re creating a new budget or refreshing an old one, you’ve probably noticed how important–and tricky–it is to get your monthly expenses right.

Knowing the average amount people spend to live can help you figure out how your spending stacks up and, if you’re just starting out, help to ensure you’re budgeting enough for each category.

To see how your actual spending compares to national averages, you may want to track your daily spending for a month (or more), and then put all your expenses into categories.

You may then decide to set up certain spending limits to keep your spending in line with your income, as well as your savings goals.

If you need help with tracking your spending, a SoFi Money® cash management account may be a good option for you.

With SoFi Money, you can easily see your weekly spending on your dashboard, which can help you stay on top of what you are spending and make sure you are on track with your budget.

Learn more about how SoFi Money could jumpstart your financial management today.

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SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: 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.
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.

SOMN20122

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