What Does It Take to Be in the Top 1%_780x440

What Does It Take to Be in the Top 1%?

Being in the top 1% for net wealth depends on where you live. In ritzy Monaco, you’d need $7.9 million, according to the Knight Frank 2021 Wealth Report , In Switzerland, you’d need a net wealth of $5.1 million.

In the U.S.—the third highest on the list—it takes a net worth of $4.4 million to land you in that elite group.

For most people, the 1% might seem like a pipe dream or a headline in the news. Or perhaps it’s not as steep as you’d imagined, considering the spate of billionaires who occupy the highest net worth percentiles (more like the top 0.01%).

In early 2021, Amazon founder Jeff Bezos held the title of the richest man in the world, with a net worth of $185 billion.

What Does it Mean to be in the Top 1%?

While many people might think “top 1%” and immediately imagine a CEO whose salary is in the tens of millions, the top 1% in terms of net worth aren’t necessarily the people who earn the most.

Net worth refers to the value of the assets a person owns (which includes checking and savings account balances, the value of securities such as stocks or bonds, real property value, the market value of automobiles, etc), minus the liabilities (or debt, like mortgages,loans, credit card balances) they owe.

A deeper view of the top 1% indicates that this wealth accumulation is spurred by more than one source: Income, investments, tax breaks that help the wealthiest keep more of their money, property, and more. All of these help make up the resources a household or individual has socked away as net worth.

The Income and Savings of the 1%

Income and wealth do correlate, although researchers say it’s not as close a correlation in the U.S. as it may be in other countries.

Earning more may mean you can spend more or live a more lavish lifestyle—but it can also contribute to saving more. The top 1% of wage earners in the US earned on average $758,434 in 2019, according to the Economic Policy Institute .

The same year, the average US income was $57,535. The top 1% of wage earners brought in just over 13 times as much as the average American household.

The average savings rate in the US hovers around 7.7%. (The saving rate shot up to 33% in April 2020 due to the pandemic, but is now trending back down toward pre-pandemic levels) If the average American saves just under 8% of their income and earns, on average, $57,535, they are putting away about $4,400 per year.

If the top 1% of wage earners saved at the same rate, they would sock away about $58,400 annually—more than the average worker earns in a year.

But research shows that the top 1% of earners save, on average, a whopping 38% of their income–an astounding $288,200 per year.

Is There a Formula for Becoming Part of the 1%?

There’s no one formula for joining the 1%, but several factors appear to play a role in the rise of many one-percenters. These include:

•   Saving. Many people who save through traditional 401(k)s and other vehicles tend to save up to, say, a match from an employer. That can be as little as 3% or 4%. Saving more—the max allowed in a 401k and additional after-tax contributions—builds net worth faster.

•   Starting early. The earlier you start saving and investing, the more you stand to gain due to compound earnings, which is when any returns you earn are reinvested to earn additional returns. This “interest on interest” can help your wealth snowball over time.

•   Income consistency and growth. Imagine graduating from college and earning $200,000 per year—not including bonus or incentive pay—from the start? That’s not uncommon at tech firms. Or, consider investment banks, which pay first-year analysts
$150,000 to $170,000 (including bonuses)—with earnings potential that rises exponentially over the years. The more you earn and the more that grows over time, the more likely your household will be to enter the top 1% of wage earnings.

•   Frugality. You’ve heard that Warren Buffett wears outdated suits and lives in a house he paid $31,500 for in 1958. He’s worth $96.6 billion. He also buys reduced-price cars, doesn’t spend big on expensive hobbies and he even clips coupons. Not all 1% are spending lavishly on yachts and third and fourth homes. If you want to be a part of the 1% and you didn’t invent the best thing since sliced bread, it may be helpful to prioritize saving money overspending.

•   Family history/Luck. Having a head start can certainly help. However, research indicates more than 60 percent of 1%-ers are self-made. Finding the right solution for a big problem at the right moment can lead to a big windfall in a new company, or, starting the next Facebook or Amazon is a little bit luck, a little bit skill.

Recommended: Investing vs. Saving: How to Best Grow Your Money

Moving Towards the 1%

Thomas Stanley, author of The Millionaire Next Door, identified the seven characteristics of people who become big accumulators of wealth—and thus have a chance to build the wealth it takes to be in the top 1%. These common traits include:

1. They live below their means.
2. They allocate their money, energy, and time in ways that contribute to building wealth.
3. They believe that financial independence itself is more important than appearing to have a high social status.
4. Their parents did not provide money for their basics in adulthood.
5. Their adult children are self-sufficient economically.
6. They understand how to target economic opportunities.
7. They choose the right occupation.

Not all of these are factors one can fully control—and not everyone has a knack for targeting economic opportunities. In addition, many people choose an occupation around a passion, not around wealth-building. That doesn’t mean you can’t get there—or get close.

The Takeaway

Being part of the 1% appears to take a combination of luck, talent, hard work, and determination. Being diligent about saving is also a key way to grow your net worth over time. The more you can sock away, the better off you will likely be in the future.

Looking to start saving? SoFi Money® is a cash management account where you can earn a competitive interest rate, spend, and save all in one account.

With SoFi Money’s “vaults” feature, you can separate your savings from your spending and also set up recurring deposits to help you reach your savings goals faster.

Check out how SoFi Money can help you manage your spending and saving today.



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 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.
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.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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25 Things to Know When Renting Out an Airbnb

25 Things to Know When Renting Out an Airbnb

It can be tempting to rent out part, or all, of your home on a rental platform to bring in extra income.

While renting out extra space can be a lucrative sideline for those who are willing to put in the effort to create and maintain a welcoming space for guests, it could potentially backfire if you side-step some key steps.

To help ensure your venture is a success, here are some things you may want to consider before you start renting on Airbnb or a similar site.

1. Understanding Local Rental Laws

Before listing your home on a home-sharing site, it’s a good idea to research and make sure you fully understand local laws regarding renting out your home.

Laws that govern home shares vary around the country. In some cities, for instance, it’s illegal to rent a home as an Airbnb unless it’s your primary residence. In others, hosts can only rent out a portion of their home, and must be present during the guests’ stay. Laws about short-term rentals are also constantly changing.

If you own a condo or belong to a HOA, there may be other legal hoops to jump through, since you will likely need to get permission before opening your doors.

2. Checking With Your Landlord (if You’re Renting)

Looking to rent out a room in a home you rent? It can be wise to first carefully read through your own rental agreement first.

Leases and agreements can contain language barring renters from subletting the home outright or without the express consent of the landlord. If you’re unsure even after reading the fine print, you may want to have a conversation about it with your landlord.

3. Talking to Your Neighbors

While neighbors can’t tell you what you can and can’t do on your own property, they can make things difficult for you.

Prior to renting out your home, you may want to do the neighborly thing and pop in or give them a call to let them know what you are planning and do your best to ease any of their concerns. Who knows–they might even end up keeping an eye on the property for you while you’re away.

4. Being Prepared to Pay Taxes

Sure, renting your home on Airbnb may bring in a nice source of passive income. Like all income, however, this may be subject to state and federal taxes. It’s also possible that the additional income could push you into a different tax bracket, meaning all of your income could be taxed at a slightly higher rate.

Airbnb even created a booklet to help people renting their home become more familiar with how they may be taxed.

5. Considering All the Expenses Involved in Renting

While it may be more fun to think about the residual income (or extra income) that could result from your home rental, it can also be important to think about all the expenses involved.

For example, you may have to purchase items to get the space ready, along with any amenities you will offer guests (like toiletries or coffee), and cleaning supplies (or, pay for a cleaning service), and more.

You may want to make a list of all your potential expenses and consider how it will affect your potential profits.

6. Finding a House Manager if You’d Rather Not do all the Work

Does managing your listing, bookings, and maintaining your rental property
property sound like a lot? You might consider hiring a manager to do it for you.

There are a number of property management companies around the country. that specialize in managing short-term home rentals.

These agencies will handle everything from writing or boosting the exposure of your listing to communicating with guests to cleaning and taking care of repairs. Some charge a commission (i.e., a percentage of bookings), while others charge a flat monthly service fee.

7. Making Space for Guests

Prior to accepting your first guests, it’s a good idea to make sure you have room for them–and that typically means more than just a clean, freshly made bed.

You may also want to offer some empty drawers so that guests can unpack their clothing, and possibly also a free shelf in the bathroom for their toiletries.

8. Putting Away Valuables

While it’s nice to think that everyone is trustworthy, that may not always be the case. It can be a good idea to safely stow away any valuables when you are opening your home to people you don’t know.

You can do this by getting a heavy-duty safe. Or, you might want to lock off one room of the home as an “owner’s closet” that guests cannot access.

9. Checking With Your Insurance Company

Airbnb offers its hosts its own insurance known as Host Protection . Though this covers a wide array of potential issues, including bodily injury to guests and any damage to the property, it may not cover everything. Plus, different home-rental platforms may offer different levels of insurance coverage.

It can be a good idea to also check in with your own homeowners or renters insurance to see what type of coverage these policies offer.

10. Writing a Detailed Description

Ready to list? When it’s time to write a description of your home, it’s a good idea to make your listing as detailed as possible, and even include the flaws of your home. A home need not be perfect to list on Airbnb. However, the company suggests that honesty is the best policy.

It can be a good idea to tell guests exactly what they’ll find when they arrive, as well as highlight your home’s special features, such as the location or unique amenities of your space. For more ways to make your listing stand out, you may want to check out Airbnb’s writing tips .

11. Taking High Quality Photos

Before taking photos of your space, you may want to spend some time arranging everything as if you were getting ready to welcome your first guest. This can help showcase your space to its best advantage, and also help set your guests’ expectations before they book.

It’s also a good idea to shoot in landscape format (photos in search results are all displayed in landscape, so vertical photos won’t showcase your space as well), shoot in the middle of the day when there is plenty of light, and to highlight any unique features or amenities.

12. Creating an Information Binder

It can be helpful to make a packet of information for your guests which includes key information, such as the Wi-Fi password, your contact number, and house rules (such as check-out time and anything that guests need to take care of before they leave).

You may also want to include instructions on how to work on anything quirky, such as the television or coffee maker, as well as local entertainment and restaurant options.

13. Offering A Few Extra Amenities

There are millions of listings on Airbnb. If you’re hoping that your rental will make financial freedom a reality, you’ll want it to stand out from the crowd.

Throwing in some extras can help encourage guests to choose your home over others. Are you near a popular beach? You may want to consider keeping some beach chairs and sand toys stored in the garage for guests to use.

Simple add-ons, like the use of your bicycles or a parking tag, may not cost you much (or anything) to offer, yet significantly increase the popularity of your listing–along with your earnings.

14. Making a Decision about Pets or No Pets

Before you list your property it’s a good idea to decide if you want your home to be a space for pets or not.

This is a personal decision, but you may want to consider whether or not your space is well-suited for pets (a light suede couch, for example, might not last very long). If you do decide to make your home pet-friendly, you could add in an additional fee for cleaning.

15. Learning How to Price a Property Right

You may think your home looks and feels like a million bucks, but that doesn’t mean travelers will pay a premium.

To understand how to price an Airbnb listing correctly, it’s a good idea to comb through comparable listings in your area to get a sense of what other people are charging.

You can also use a free calculator like airDNA . You just need to input all your data, including home size, if it’s pet-friendly, location, etc., to get a recommended price for your listing.

16. Deciding How You Want to “Screen” Guests

It is against Airbnb’s nondiscrimination policy to decline a booking based on “race, color, ethnicity, national origin, religion, sexual orientation, gender identity, or marital status” or impose different standards for specific guests.

What hosts can screen for are people who may not be a good fit for their property by being as descriptive as possible in their listing. If your home is not a good fit for children, you may want to make that clear in your listing.

Do you want to limit the noise after specific hours to respect neighbors? You may want to be specific about that in your listing so you bring in the type of customer you are hoping to attract.

17. Learning About Enhanced Cleaning Standards

Airbnb, along with other rental platforms, has asked hosts to use an enhanced five-step cleaning protocol , which was developed in partnership with experts in an effort to curb the spread of COVID-19.

The protocol includes special measures, such as using disinfectants approved by your local regulatory agencies for use against COVID-19 on all high-touch surfaces (and letting them stand for the amount of time specified on the label) and washing all dishes and laundry at the highest heat setting possible.

Airbnb gives hosts who commit to the 5-step cleaning process a highlight on their listings to let guests know these hosts are committed to the enhanced cleaning protocol.

18. Thinking About Turnover Time

Before you rent all or part of your home on a rental platform you will want to think about not only when you want to rent your home out, but also how long it will take you to get it properly cleaned (using the 5-step protocol) and ready for the next guests.

Will you need 24 hours between guests or can you get the home ready in just a couple of hours? This will determine exactly what dates you are able to accept guests, as well as what check-in time you want to put in your listing.

19. Testing Your Rental With Friends

When you’re getting close to listing your space, you may want to try testing out the system with a few friends.

Inviting people you know and trust to rent your space (free of charge or for a low fee) won’t do much to get that extra income stream flowing, but it can help you work out the kinks, as well as garner you some (hopefully positive!) reviews.

Friends can also tell you honestly what you might do differently or change to improve the rental experience. This way, you’ll feel confident once people you don’t know arrive.

20. Being Ready for Bookings Right Away

With millions of users all over the world, it may be a good idea to go into listing your property believing you’ll receive guests right away.

While this may not happen, it’s better to be prepared for visitors, than wait to see how your listing performs before readying your space for guests.

21. Looking At Your Reviews

After guests depart they may leave you a review of their stay. It’s a good idea to not only look at the reviews but to take them to heart. Reviews can make or break Airbnb rentals.

While it can be tough to digest criticism of your home, if guests complain about something that can be easily fixed, it can be in your best interest to fix it.

Reading positive reviews can be a good way to see your rental from an outsider’s perspective and make changes to improve your listing.

22. Accepting the Fact You Can’t Please Everyone

Sometimes, people are just difficult, or nitpicky, or just aren’t the right match for your listing and will leave a nasty review that feels unwarranted.

If you see a review that falls into that camp, it can be wise to just forget it and move on. This can often be a better approach than starting a fight in the comment section, which may only end up making you look bad to potential future guests.

23. Working Toward Superhost Status

Becoming an Airbnb superhost can increase your earnings by giving your more visibility and letting guests know that they can expect the best when staying with you.

Superhosts are featured in search results and get a Superhost badge on their profiles and listings to help them stand out. After each year as a Superhost, they’ll get a $100 travel coupon.

To become a Superhost, hosts must complete at least 10 stays in the past year (or 100 nights over at least 3 completed stays), have a 4.8 or higher average overall rating, respond to 90% of new messages within 24 hours, and cancel bookings less than 1% of the time.

24. Deciding If Airbnb Is the Only Platform for You

After deciding to list on Airbnb, it’s then time to decide if that’s enough. There are, after all, a number of other home rental platforms to choose from, including Vrbo , Booking.com , and Flipkey . It’s up to you how many different listings you’re willing to maintain.

25. Keeping Your Calendar Up to Date

Once you list your home on Airbnb (or any other rental platform), it can be wise to keep your rental calendar as up-to-date as possible. This way, guests don’t accidentally book a stay when you have your in-laws visiting or when you otherwise want to use your own space.

If a date looks to be free to a potential guest but you forgot to mark it as unavailable, it can become a frustrating experience for both parties.

The Takeaway

If you have an extra room, or your home is vacant for several months out of the year, you may be tempted to list it on a home rental site.
But before you start posting photos on Airbnb, there are several things you may want to think through–from legal and insurance issues to the time and expense involved in getting (and keeping) your space ready for guests.

Did your homework and you’re ready to take the plunge? You may also want to look for a good place to put your new source of income.

SoFi Money® is a cash management account that allows you to earn competitive interest, spend, and save–all in one account.

Plus with SoFi Money, you’ll be able to track how much you are spending and earning on your new rental right from the dashboard in the app.

Check out everything SoFi Money cash has to offer today.



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 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.
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.
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.

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x Steps for Balancing a Checkbook

4 Steps for Balancing a Checkbook

With fewer people writing checks and mobile banking becoming the norm, you might think that balancing your checkbook is a skill that has lost its usefulness.

But the process of balancing your checkbook is still a necessary part of maintaining your checking account–even if you don’t carry around a checkbook and rarely, if ever, write a paper check.

That’s because it’s still important to keep a close eye on what’s coming in and going out of your checking account. This allows you to track your spending, avoid bouncing checks, and also catch errors or suspicious activity on your account right away.

Fortunately, balancing, also known as reconciling, your checking account is an easy skill to master.

And, once you get into the habit, it may only take you a few minutes once a week or so to keep tabs on your money.

What Does Balancing a Checkbook Mean?

The task of balancing a checkbook actually doesn’t have anything to do with the checkbook, although your checkbook register is still a great tool for doing the job.

Rather, balancing a checkbook refers to the process of reconciling and cross-checking the many transactions that occur in your checking account.

This means recording all of your deposits and withdrawals on a daily or weekly basis, adding and subtracting them as you go, and then regularly comparing your numbers to the bank’s to make sure they agree.

Why should I Balance my Checkbook?

Balancing your checkbook comes with a number of key benefits. These Include:

Knowing Your Balance in Real Time

When you log every transaction, and then add it to your balance if it’s a deposit or subtract it from your balance after paying a bill, you are able to know the true balance of your account–which may not yet be reflected online or in your app.

That’s because when you write a check against your account, the bank won’t deduct those funds from your account until the person you gave the check to deposits it.

Your bank app may show you have $2,000 in your account but if you wrote a $1,000 check yesterday, you actually only have $1,000 available to spend.

Tracking Your Spending and Sticking with Your Budget

During the balancing process, you look at every transaction in your checking account for a period of time, whether it’s a day, a week, or a month.

You might find that you’re spending more than you thought, or taking out more cash from the ATM each month than your current budget allows.

Balancing your checkbook on a regular basis can help you monitor your spending, and help to ensure you’re able to maintain your savings goals.

Reviewing Your Account for Errors, Fraud, or Billing Changes

Regular reviewing and tracking of your account’s expenditures can help you immediately spot any purchases or transfers of money that you don’t recognize.

You may also pick up on fees your bank is charging that you weren’t aware of, or that are new.

Or, you might notice that one of your auto-pay bills has gone up in price. If your payments are processed automatically without your review, those increases could go unnoticed, and unaddressed, for months, disrupting your cash flow and possibly causing other financial issues down the line.

How to Reconcile Your Checkbook

In the past, balancing your checkbook was often done after receiving your monthly paper statement from the bank.

You could then use the statement to compare the transactions you had listed by hand in their checkbook register with those shown in your bank statement.

The process of balancing your checkbook may be a little different today but the basic tenets are the same.

Here’s an easy step-by-step.

1. Recording Your Current Balance

You can quickly find your checking account balance by going on your bank’s website or using its mobile app.

If you’re using a paper checkbook register, you can then record this number in the top spot above the spaces you use to log your transactions.

If you don’t have a register or prefer to go digital, you can create your own register on your computer, or use an open source spreadsheet platform, such as Google Sheets. An online spreadsheet has the advantage of being accessible anytime from any device.

2. Recording any Pending Transactions

These are transactions that you know are coming, but have not yet cleared.

For example, when you deposit a check, your bank might release only part of the funds immediately, placing a hold on the rest of the money until the check clears.

Similarly, when you pay for something with your debit card or a check, the transaction may take a day or two to go through.

You can write down the date of the transaction and a brief description and, if it’s a check, the check number.

Starting with the first transaction you enter, subtract the amount from your available balance, or, in the case of a deposit, add it to the balance.

Then record the new amount on the next line of your register. You can continue doing this until all transactions are reconciled.

The final number is your current available balance–the actual amount you have in the account to spend.

3. Continuing to Record Transactions

As you continue to make transactions, you can then record them in your register or spreadsheet so you have a running tally of your debits, credits, and current balance.

You can do this as you go, or you can collect your receipts and record them in your checking register or spreadsheet at the end of the day or week.

4. Comparing Your Numbers

Once or twice a month, it’s a good idea to log on to your account and compare your bank’s total withdrawals and deposits and balances with your own records. If they match, you’re in good shape–you have a balanced checkbook.

If the numbers don’t align, you may then want to go back through your records, as well as the bank’s transaction history, to see where the discrepancy lies.

You may find that you forgot to record a transaction or you wrote down a number incorrectly, or made a simple math error.

Or, you might pick up an error on the bank’s part, a change in the amount a vendor is billing you, or a potentially fraudulent charge.

Generally, the quicker you pick up and address any discrepancies the better, particularly in the case of fraud or identity theft.

The Takeaway

Even in an increasingly paperless world, it can still be important to balance your checkbook.

Regularly balancing your checking account can give you a clear sense of not only how much money is in your bank account, but where your money goes.

This can help you track your spending, avoid bouncing checks, detect billing changes, and also spot errors or even fraudulent charges as soon as they happen.

Looking for Something Different?

If you’re looking for an easy way to keep tabs on your money, you may want to consider signing up for a SoFi Money® cash management account.

With SoFi Money, you can get all the numbers you need to track your finances at a glance and on the go using the SoFi app.

See how easy it is to manage your finances with SoFi Money today.



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 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.
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.

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25 Ways to Cut Costs on a Road Trip_780x440

25 Ways to Cut Costs on a Road Trip

An impromptu road trip can sound exciting and spontaneous. But if you’re wondering how to save money on a road trip, a little bit of planning can go a long way.

While a road trip can be a low-cost way to travel, keeping expenses in check often means deciding where you want to go, the vehicle you’ll take, where you’ll be stopping on the road trip, and your overall budget.

Here are some easy ideas for road tripping on the cheap.

1. Choosing a Fuel-Efficient Car.

If you have a choice of cars to take, you may want to go with one that is large enough to be comfortable, but also gives you the best gas mileage.

You can use FuelEconomy.gov’s Trip Calculator to determine which car will cost you the least in gas. This tool helps estimate fuel consumption and how much it will cost for a particular route using a specific car.

2. Driving at or Below the Speed Limit

This cautionary measure can help you save money in two ways. For one, you’ll be less likely to get pulled over and slapped with an expensive speeding ticket.

For another, observing the speed limit can actually reduce your gas consumption. In fact, you can save 17 cents a gallon on highways for every five miles per hour you slow down.

3. Packing your Car Wisely

You can also cut your gas costs by placing items inside the car or trunk rather then piling them on your roof. By reducing drag, this move can increase your fuel economy by as much as eight percent in city driving and up to 25 percent on highways.

If you’re out of room in the car, using a rear-mounted cargo box or tray instead of a roof rack can improve your fuel economy by up to 12 percent.

4. Setting a Road Trip Budget

When you first start talking about the road trip, you may want to roughly map out where you want to go, how long it’ll take to get there, and if you’ll need hotels or motels. From there, you can calculate the approximate cost of gas (FuelEconomy.gov can help) and tolls (try Tollsmart ), as well as food and fun.

Once you’ve established an overall budget for the trip, you start creating a travel fund.

5. Bringing Your Own Food and Supplies.

Packing a cooler with water bottles, drinks, hand-held snacks, and sandwiches before leaving home is proven frugal traveler trick. You can end up saving a sizable chunk of cash by not having to buy drinks and snacks at rest stops, vending machines, and drive-throughs.

You’ll also have a quick solution the next time someone in the car wants to pull over because they’re hungry.

6. Signing up for an Electronic Toll Account

Depending on which state(s) you are traveling through, you may be able to save a fair amount of money on tolls by getting the region-appropriate quick pass (or transponder) for your car. In New York, for example, drivers with EZ-Pass can save about 30 percent on tolls.

7. Avoiding Tolls Altogether

When your road trip isn’t on any set schedule, you may want to take the scenic route and completely avoid tolls. You can do this by setting your GPS app to “avoid tolls.”

If you’re in a location with pricey bridges and highways, your savings could really add up. You may want to make sure, however, that avoiding tolls doesn’t take you so far out of your way that you’re spending a lot more on gas.

8. Looking for Hotels that Offer Free Breakfasts

If you’re comparing two hotels in a similar price and quality range, one way to save on road trip expenses is to choose the hotel with a free breakfast.

Not only will you probably get a large, filling meal, but you might even be able to take a piece of fruit or cereal box as a snack for later on in the trip.

9. Packing Reusable Water Bottles for Everyone

You’ll no doubt get thirsty while driving and sightseeing, and buying water or drinks can put a major dent in your road trip budget.

Making sure everyone in the car has a large reusable water bottle (or two) to fill up at rest stops and in restaurants can help you avoid spending money on drinks, and also create less plastic waste.

10. Buying a National Park Pass

If you’re going to be road-tripping across the U.S. and visiting a few National Parks, you may want to consider getting an America the Beautiful pass.

The pass (which costs $80 per year and $20 for seniors) covers entrance, standard amenity, and day use fees for a driver and all passengers in a personal vehicle (up to 4 adults) at more than 2,000 federal recreation sites.

11. Hitting the Grocery Store

Once you’ve run out of your cooler meals and snacks, consider re-stock up at a local grocery store while en route so you don’t have to resort to rest stops and fast food for the rest of your trip.

This is also a good strategy if you’re going to be staying at a hotel for a few nights. Making good use of a hotel kitchenette and fridge can help you avoid having to eat out for every single meal.

12. Pre-Booking Your Hotels

Spontaneity is great, but if you’re looking to save money on accommodations, it can be wiser to book ahead of time and stick to your plan. You can often secure a better rate by booking in advance (and online), than by showing up without a reservation or booking last minute.

13. Looking Beyond Hotels

Your first thought when looking for roadside accommodation may be cheap hotels or motels. But you sometimes find a better deal (or a nicer option for the same price) using a home rental site, such as Airbnb, VRBO, HomeAway, or FlipKey, especially if you’re staying for more than one night.

You could even explore the CouchSurfing Travel app, or let friends on Facebook or social media know you’re going to be traveling to their area to see if they have a recommendation on where to stay for a good price.

14. Planning to Visit Free Attractions

Part of the fun of a road trip is to enjoy the journey and scenery while en route to your final destination.

As you travel (or before you go), you may want to research free attractions, such as a hike, walk on a beach, or a free museum, on your route for times when you need to stretch and take a driving break.

You can also look for festivals and local events by checking out the online events calendar for the towns you’ll be visiting that day.

15. Planning Gas Stops in Advance

Getting stuck in a big city with the tank close to empty can be costly. To avoid overpriced gas, you may want to use a gas app like Gas Guru or Gas Buddy, which can help you compare prices and find affordable gas no matter where you are.

16. Setting a Daily Spending Limit

You can use your overall budget to get a rough idea of how much you can spend on the road trip each day. This can help you avoid blowing through your whole travel fund before the end of the trip.

A spending plan can also let you know when you can splurge a bit and when you’ll have to reign it in with a meal, activity, or lodging. You may also want to set aside some of your budget for the unexpected, such as the car getting a flat and needing to be towed, or discovering the cheap hotel you planned to stay in is a total dump.

17. Entertaining the Kids on the Cheap.

Kids have a tendency to get bored, tired, and antsy on a road trip. To avoid giving in to impulse toy purchases, you may want to bring along their favorite toys and also pick up a variety of new ones at the dollar store before you leave.

Good choices include coloring books and games they can play in the car that won’t create a mess. You might also consider borrowing audio books or DVDs from the library to give yourself an hour or so of peace and quiet.

18. Searching Online for Local Coupons and Passes

It can be worthwhile to research online coupons and discount codes for local attractions and restaurants at some of your scheduled stops.

Consider checking Groupon or LivingSocial for deals and steals. Sometimes booking online ahead of time saves you money and it’ll give you a reason to try to reach a specific destination by a certain day.

19. Saving on Alcohol

Sipping a cold beer or glass of wine at a local bar at the end of your long drive might sound like the perfect way to unwind.

But alcohol costs can quickly add up on a road trip vacation. Consider buying a few local beers or a small bottle of wine that’s native to that area to enjoy in your hotel room. You’ll save money on tipping too.

20. Volunteering at a Festival

Yes, you read that correctly. Some festivals and special events offer discounts or free admission to volunteers. You can look up events taking place in the town you’ll be visiting and reach out to the event organizer to see if they need help.

21. Signing up for a AAA Membership

An auto club like AAA can save you time, money, and hassle should you run into car trouble during your trip. What’s more, a membership (often around $4 to $7 a month) gives you access to discounts at hotels, restaurants, and many retailers nationwide.

22. Traveling During the Off-Season

Visiting National Parks when the kids are back in school can often help save money on lodging and activities. Planning a road trip to a destination like Disney World or Disneyland? You’ll likely find better deals if it’s not during a spring break or other school break.

You can often also save money by visiting warm weather locations during “shoulder seasons.” This is the period in between a destination’s low and high seasons of tourism, when prices for hotels tend to be lower, and crowds tend to be smaller, at popular attractions.

23. Doing Some Camping

Outdoorsy road trippers might enjoy setting up a tent at a free or low-cost public campsite (You can find out more on the Bureau of Land Management site.)

This can end up saving you a lot of money on hotel costs, provided you don’t go out and buy a lot of expensive camping equipment.

If you don’t have any camping gear, you may want to consider renting equipment from an outdoor specialty store or asking a friend who regularly goes camping if you can borrow their equipment.

24. Eating Out for Lunch Instead of Dinner

If there are special restaurants you want to try without breaking the bank, consider going there for lunch. You might get a slightly smaller portion than you would if you ordered it off the dinner menu, but the price will likely be more affordable.

25. Taking Advantage of Loyalty Programs

Booking with the same hotel chain as often as possible and signing up for their member loyalty (or “points”) program may net you a free night after a few stays.

Travel booking services, such as Expedia, Travelocity, or Hotels.com, may also offer discounted rates and free nights for loyal customers.

The Takeaway

A car trip might sound much more affordable than traveling by plane. However, gas, food, and accommodations can add up.

One of the best ways to cut road trip expenses is to plan out your trip and research deals, coupons, and discounts ahead of time. Packing wisely and loading up on drinks, snacks, toys, and activities can also help cut costs once you’re out on the road.

Ready to start planning–and saving for–you next road trip? Consider signing up for a SoFi Money® cash management account.

SoFi Money has a special “vaults” feature that allows you to separate your savings from your spending, while earning competitive interest on all of your money. You can even set up a separate vault for your travel fund.

Start saving for your next road trip with SoFi Money.



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 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.
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.

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How to Open Your First IRA

How to Open Your First IRA

Update: The deadline for making IRA contributions for tax year 2020 has been extended to May 17, 2021.

Saving for retirement may be the biggest financial goal many of us will ever set. So it makes sense to explore all retirement savings options, including an IRA. The sooner you open your first IRA, the more opportunity your savings have to grow over time, potentially leading to a nice nest egg upon retirement.

There are other benefits to opening an IRA. It can deliver attractive tax perks—either up front or in retirement—and can be especially attractive to individuals who don’t have an employer-sponsored 401(k), or have maxed it out already.

This article will walk you through the steps of opening an IRA—whether a traditional, Roth, or SEP IRA.

What Is an IRA?

An IRA, or individual retirement account, is a retirement savings account that anyone with an income can open on their own (rather than through an employer, as with a 401(k)). This account can potentially grow funds through investment, and typically offers tax breaks, either up front, or upon withdrawal in retirement.

When people ask “what is an IRA” they might be wondering what types of IRA there are to choose from. There are three basic types of individual retirement accounts: a traditional IRA, a Roth IRA, and a SEP (Simplified Employee Pension) IRA. (There is also a SIMPLE IRA, for small business owners and their employees.)

How to Open an IRA in 4 Steps

Step 1: Choose the IRA That’s Best for You

Of the several types of IRAs, traditional and Roth IRAs are the most common types. Both allow you to put a certain amount toward retirement each year and invest in an array of assets. When it comes to choosing a traditional IRA vs. Roth IRA, it helps to be aware of their key differences.

Traditional IRA Accounts

If you earn a taxable income, you can open a traditional IRA regardless of how much you make per year.

One notable difference between traditional and Roth IRA accounts is that traditional IRAs allow you to deduct your contributions on your tax returns now, meaning you pay taxes on distributions when you retire.

You’ll also pay a 10% penalty tax (in addition to regular income tax) on any money you withdraw money from your traditional IRA before age 59 1/2, with a few exceptions.

It may be better to go with a traditional IRA if you pay a lot in taxes now and think you’ll be in a lower tax bracket after retirement. This is because you’ll be saving on a higher tax you’d be paying earlier (vs. the lower tax you’d be paying later, since you’d be in a lower tax bracket).

Roth IRA Accounts

Unlike traditional IRAs, there are income limits on who can open a Roth IRA. For 2021, individuals can only contribute the full amount—$6,000, with an additional $1,000 for people over age 50—to a Roth IRA if their income is below $125,000 for single people (people earning more than $125,000 but less than $140,000 can contribute a reduced amount); for married people who file taxes jointly, the limit is $198,000 (those who earn up to $208,000 can contribute a reduced amount).

Roth IRA contributions are made with after-tax income. While that doesn’t offer any tax advantages now, it does mean that when you withdraw money upon retirement, you won’t have to pay taxes on it.

While IRAs are intended to serve as retirement savings, it’s typically easier to withdraw contributions in an emergency from a Roth IRA than from a traditional IRA. While contributions won’t be taxed upon withdrawal, any withdrawn earnings would be taxed and possibly subject to a 10% penalty.

A Roth IRA may make sense for eligible individuals who typically get a tax refund and expect to be in a similar or higher tax bracket when they retire (for example, if they plan to have substantial income from a business, investments, or work).

Still confused? Consult our IRA Calculator for help deciding which account may be right for you.

Related Content: How IRAs Work

SEP IRA Accounts

With the number of self-employed workers on the rise, it’s worth mentioning that there’s a third type of IRA that may be worth considering: a SEP IRA. A SEP IRA, or simplified employee pension, can be set up by either an employer at a small business or by someone who is self-employed.

For employers, it gives them a tax deduction when they contribute to their employees’ IRAs, and also lets them contribute on a “discretionary basis” (meaning that the employer doesn’t have to contribute in years where it’s not as financially feasible for the company.) This option may also allow you to contribute more than other IRAs, depending on your income.

Step 2: Open an Account

You can open an IRA at a bank, a brokerage, mutual fund company, or other financial services provider. Typically, the more personal care and advice you get, the higher the fees will be. A robo-adviser, for instance, might charge lower fees than a brokerage.

SoFi Invest® streamlines the process of opening an IRA online, allowing investors to transfer money from their bank electronically.

Rolling Over a 401(k) Into an IRA

If you are leaving a job with an employee-sponsored retirement plan, you can roll over your 401(k) into a traditional IRA to potentially give yourself better investment options and lower fees.

When you roll money over from a 401(k), there’s no limit to how much you can add to an IRA at that time. Going forward, additional contributions will be capped at the typical IRA contribution limit.

Step 3: Make Contributions

As of 2021, you can contribute up to $6,000 a year to a traditional or Roth IRA, or up to $7,000 if you’re 50 or older. If you take home more than the maximum earnings allowed for a Roth IRA but still prefer a Roth over a traditional account, you might be able to contribute a reduced amount.

In many cases, it’s a good idea to invest as much as you can up to that amount each year to take full advantage of the power of compound interest.

A retirement calculator can help you figure out whether you’re on track for retirement. A quick rule of thumb: By the time you’re 30, it’s typically good to have the equivalent of one year’s salary saved.

Step 4: Invest Your Funds

Investors can choose to invest in stocks, bonds, mutual funds, low-cost index funds, or exchange-traded funds (ETFs)—or a combination thereof.

One popular type of investment fund geared toward retirement savings is a “target date fund.” A target date fund is calibrated to the year you plan to retire, and is meant to automatically update your mix of assets like stocks and bonds so they’re more aggressive earlier in life and more conservative as you approach retirement.

Ultimately, the mix of investments in your IRA should depend on your personal risk tolerance, lifestyle, and retirement goals.

The Takeaway

Opening your first IRA is simple—possibly the biggest work involved is in deciding which IRA suits your personal situation and retirement goals best: a traditional, Roth, or SEP IRA.

Getting started on saving for your retirement doesn’t have to be difficult. SoFi Invest makes opening an IRA simple. Sign up for an investment account with SoFi online, in less than five minutes.

You can be as involved in the investment process as you want to be—either with hands-on investing, or by using our automated investing technology, in which our algorithm will suggest an appropriate mix of investments based on your age and retirement goals. For a limited time, opening an account gives you the opportunity to win up to $1,000 in the stock of your choice. All you have to do is sign up, play the claw game, and find out how much you won.

Download the SoFi Invest app to start an IRA and start trading today.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Claw Promotion: For the full terms and conditions of SoFi’s Claw Promotion, click here. Probability of a customer receiving $1,000 is 0.028%.
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.
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.
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.

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