Ultimate College Application Checklist

In many ways, the college application process is like a final project before graduating from high school. It requires students to use the skills they’ve learned—and the hard work they’ve already put in—to build their case as a strong applicant. Once the application is filed, students receive a “grade”: accepted or denied.

Like with any project, it’s important to take a meticulous approach when putting together a college application. Any forgotten detail, even small details, could make the difference between a yes or a no—between getting into a safety school or a dream school.

Having a checklist of to-dos and action items can have a variety of benefits (like helping to reduce stress or improving time management). It creates a guideline for everything that needs to get done so you have an idea of what you still need to check off.

The college application process can be a doozy, and making a list could help keep the process streamlined. You can use these guidelines to develop a personalized checklist for the schools you are interested in applying to.

The College Application Checklist

If you’re looking for a handy-dandy section to print out and check off as you go, here’s where you can start. Then, you can read on for more details on how you might go about accomplishing these tasks.

•   Gather test scores (SAT®, ACT®, etc.) if prospective schools require them
•   Ask for reference letter(s)
•   Write personal essay (if needed)
•   Create a filing system for schools organized by the application deadline
•   Set reminders for application deadlines
•   Fill out the Free Application for Federal Student Aid (FAFSA®)
•   Research scholarships
•   Exercise patience (Okay, that doesn’t need to be checked off, but you might want to plan some fun activities that don’t involve watching your inbox for acceptance letters.)

Planning Ahead

Most college applications have a few major components. Some of the most common are test scores, references, and personal essays. These take time to put together and need to be planned for well in advance.

Admissions committees will also generally look at a student’s academic record and extracurricular activities. That volunteering you did as a sophomore at the animal shelter? That wasn’t just for the dogs.

Taking the Tests

Standardized tests like the SAT® and ACT®, which are required for most school applications, have set dates and deadlines that require students to register about a month in advance. (If you’re reading this around the date this post was originally published, SAT and ACT test dates have been delayed due to the pandemic, so be sure to check the testing websites for the latest news.)

For the SAT, it typically takes a couple weeks for scores to be distributed. Colleges typically receive scores 10 days after they are delivered to students. Similarly, the ACT has standard dates for delivering scores.

There are some schools that don’t require the SATs or have more flexible testing policies, so check with the schools you plan to submit applications to if you’re considering skipping a standardized test. Thanks to COVID-19, some universities are waiving their usual standardized testing requirements altogether.

Generally, however, if the college application deadline is in January , you should plan to take the SAT or ACT tests with enough time to receive and send your scores along with the application.

In addition, you might want to note the schedules for the tests and give yourself enough time to take the test again if the first round didn’t go so well. Work backward from each deadline and give yourself more time than you need.

Gathering Reference Letters

When asking for a reference letter, keep in mind that teachers and coaches are usually very busy and are also likely being asked by multiple students. If possible, give them at least a month to write a reference letter.

But really, the earlier the better. Some schools require recommendations from teachers in specific subjects, so be mindful of similar requirements.

Other Deadlines

You might want to consider other deadlines as well, such as applications for special dorms, department-level scholarships, registering for summer activities, and more. These things can end up coloring the college experience just as much as which university you get accepted to.

In many cases, dorms are available on a first-come, first-served basis, so applying early could mean getting the specific type of dorm you want, such as co-ed, separated by gender, or substance-free.

Staying Organized

Applying for college can be complicated and time-intensive. Creating a system to help keep you organized could help prevent important pieces from slipping through the cracks.

Before you start printing out forms and stashing away brochures, it could be helpful to create a folder for each school and make a list on the front with important information, such as:

•   College name
•   Application deadline
•   Type of deadline (early decision, early action, regular decision, or rolling admission)
•   Application fee
•   Application requirements (form, essay, references, etc.)

This could help you streamline your materials and monitor submission deadlines. Use one system to monitor submissions and deadlines, and make sure you and your parents can access that information.

One method of organization could be to organize the folders by deadline dates rather than school names to ensure you get all the information to each school on time.

You could keep copies of important documents, such as reference letters and student housing information, in each folder. Most early decision or early action deadlines are in November , while regular decision applications are usually due in January .

You might want to make a note of any schools that have extra forms, or a particular department within the college that has its own set of requirements. The university likely has a list of scholarship deadlines, which may be the same or different than its application deadline.

College application deadlines tend to be set in stone, and admission officers may even frown upon those who wait till the last minute to submit their applications—they might question your interest in attending if you wait so long to apply. It may be helpful to set reminders in your phone, computer, or on the kitchen calendar.

Schedule reminders for at least a month before the real deadline so there’s plenty of time to ask questions, make adjustments, and get your application in well before the deadline.

Consolidate tasks whenever possible. If you need a reference for an extracurricular activity, don’t ask the softball coach and the band conductor. Pick one and ask for a reference letter they can easily customize for both schools.

Even the simplest college application is made up of multiple forms. You can use a physical filing system or cloud-based storage to store forms, reference letters, and more. Divide everything into folders for each college and label PDFs accurately.

Applying for Financial Aid

While you’re gathering all the information for colleges, you might also want to be thinking about how to pay for it. Start with the Free Application for Federal Student Aid or FAFSA ®, the form that parents and students must fill out to be eligible for federal student loans and aid. Many colleges also use the FAFSA to decide if a student qualifies for its own grants and scholarships.

A university may offer both need-based and merit-based aid. Need-based aid is determined by a family’s income, while merit-based aid is determined by academics, athletics, and other talents. The FAFSA can help colleges determine how much need-based federal aid a student qualifies for.

The FAFSA application is generally available starting in October, and the due date varies by state . It can help to apply as early as possible since some financial aid is awarded on a first-come, first-served basis.

One common misconception is that the FAFSA is a one-time deal. In reality, the FAFSA must be filled out every year to account for any changes in income or other circumstances. For example, if one of your parents gets laid off from their job, you might qualify for more need-based aid.

For some students, federal aid (including federal student loans) isn’t enough to cover the full cost of attendance. If that’s the case, it may be time to look into some additional sources of funding.

Additional Funding Options

Some families are able to fill the gap in tuition costs with money they’ve saved up. Some parents may take out loans in their own name(s) to help their children pay for college as well.

Other students are able to pay for a portion of their tuition with scholarships or grants. Scholarships and grants may require those interested in applying to invest some time filling out an application (or writing an essay). They can be a useful way to cover education costs since they don’t need to be repaid.

There are quite a few scholarship databases to peruse to find some that may fit with your background and interests.

If you’ve exhausted your federal aid opportunities and are still looking to fill the gap, private student loans are an option to consider. While they don’t come with the same benefits as federal student loans (such as income-driven repayment plans and loan forgiveness options), they could be used to help pay for education expenses.

Unlike most federal student loans, the private student loan application process generally requires a credit check. Some students may find they need a co-signer, which is someone who would be held responsible for the loan in the event the primary borrower fails to make payments.

College can be a stressful time but financing it doesn’t have to be. SoFi offers private student loans with no fees and flexible repayment plans. The application process can be completed entirely online. If interested, start by finding the rates you could pre-qualify for (without it impacting your credit score).1

Learn more about private student loans with SoFi.


1Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SAT® is a trademark registered and/or owned by the College Board, which was not involved in the production of, and does not endorse, this product. ACT® is a registered trademark of ACT, Inc. which was not involved in the production of, and does not endorse, this product.
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SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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Do You Need a Rainy Day Fund?

Imagine you’ve just paid your rent, put a little cash towards your credit card bill, and budgeted out your remaining paycheck to cover groceries, bills, your share of a weekend at the beach. Then the next day your tire goes flat on the freeway and you find out your dog needs emergency surgery.

Are you prepared to cover those sudden, unexpected expenses? Unfortunately, financial emergencies can sometimes have the power to send finances into a downward spiral. One way to combat this is with a rainy day fund.

What Is a Rainy Day Fund?

A rainy day fund is a type of short-term emergency fund designed to make sure that financial setbacks, like four new tires or Buster’s broken paw, don’t send you into a financial spiral.

According to the Federal Reserve Board’s Report on the Economic Well-Being of U.S. Households , 12% of American adults wouldn’t be able to pay all of their current month’s bills in full if they had to pay for an unexpected $400 emergency.

A rainy day fund can help you avoid having to face that difficult situation. In short, a rainy day fund might help you weather those unexpected costs and keep your finances sailing smooth.

How Much Money Should I keep in a Rainy Day Fund?

How much money should be in your rainy day fund? In general, you may want to consider keeping about one month’s worth of expenses in your rainy day fund.

Saving the equivalent of one month’s worth of expenses can help cover medical bills, home repairs, car trouble, or even emergency plane tickets to visit a sick family member. While the exact amount is up to you and depends on your specific circumstances, one month is a good baseline goal to get most people started.

In order to figure out what one month’s worth of expenses looks like, take a look at your budget. If you don’t have a budget in place, take a deep breath and grab that stack of monthly bills or pull up your online banking account.

You should be able to get a good idea of your monthly expenses by looking at the money you spent last month keeping you and your family fed, clothed, and housed.

Look at rent or mortgage payments, healthcare, utilities, car payments, food costs, and any loans you’re working on repaying. That total is about what you would need to survive for a month and can serve as the baseline goal for the rainy day fund.

Once you’ve got one month’s worth of expenses saved, you may want to consider keeping more substantial emergency savings in a “freedom fund,” designed to give you the freedom to walk away from a bad work environment, cover larger emergencies, or pay yourself if you’re unexpectedly let go from your job.

Freedom funds are generally larger than rainy day funds because they’re intended to protect you for a longer period. Together, a rainy day fund and a freedom fund could serve as a safety net to help you if you face unexpected expenses.

Knowing that you can fall back on those reserves could give you some peace of mind—if the worst happens, you won’t have to worry about maxing out your credit card or over-drafting your bank account.

How to Save Up a Rainy Day Fund

Saving can be hard. After all, who wants to put money away from later when there is avocado toast and flavored seltzer to buy and fancy brunch to eat?

However, there’s a lot to be said for the delayed gratification that comes with building up a healthy savings account. But how do you start saving a rainy day fund?

The simplest way is to start stashing away money for a rainy day is as simple as setting aside a dedicated amount every week or month. Take a look at your budget and see what you have left after you take care of all your monthly expenses.

This money—the difference between your take-home pay and your cost of living—is your discretionary income, which comes with some flexibility and you can save (or spend it) as you see fit.

Allocating some of this discretionary income to start your rainy day fund could be one way to start building your safety net. Whether it’s $20 a week or $200, putting a little bit away at a time can pay off when those emergencies inevitably happen.

Storing Your Rainy Day Fund

But don’t just stick a few bucks in a coffee can and call it a day. While having cash on hand can be convenient, it may be better to store your rainy day fund in a secure place. Storing money away under your mattress won’t earn you any interest either, which means your rainy day fund could actually depreciate over time.

But when it comes to saving for an emergency you want the money to be easily accessible, the last thing you want when trying to send money to your sister for an emergency plane ticket home is to have to attempt to pull money out of an inaccessible savings or investment account.

One solution that is more secure than cash without sacrificing ease-of-access is a cash management account like SoFi Money®. There are also no account fees (subject to change), which means that you can focus on growing your savings, not paying to keep your account open.

Plus, with financial planning tools, SoFi Money could help you stay on track when it comes to saving up for a rainy day.

No one wants to imagine an emergency happening to them, but being financially prepared with a rainy day fund could help you weather the storm, whether it is as simple as a new pair of tires, or as serious as an unexpected layoff.

Learn more about starting a rainy day fund with SoFi Money.


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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.

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How to Calculate Stock Profit

You’ve just sold some of your stocks and were lucky enough to make a profit. Now, like Scrooge McDuck rubbing his hands together with dollar signs in his eyes, it’s time to find out exactly how much money you made.

Doing so not only helps you understand how much cash you’ll have to spend, more important, it tells you how much money you owe in taxes so you don’t run afoul of good old Uncle Sam.

Calculating Your Profit

How investors receive returns varies depending on the investments they hold. One way investors make a profit from stock investments is by selling appreciated stocks—those for which the stock price has risen since the shares were purchased.

To calculate your total profit you first need to know where you started. Once you identify the price per share that you paid when you initially bought your stock, you could then multiply the number of shares you own by this starting share price.

The resulting number is what is known as the basis. If you bought shares of a company at different times and prices, this calculation should be run separately for each transaction.

Next, you could multiply the number of shares you sold by the price per share at the time of the sale to find your total proceeds from the sale.

You can subtract the cost basis from total proceeds to calculate what you’ve made. If the proceeds are greater than the cost basis, you’ve made a profit, also known as a capital gain.

At this point, the government will take a slice of the pie—you’ll owe taxes on any capital gains you make. It is also possible that the cost basis could be greater than the proceeds, in which case profit will be negative, also known as a capital loss.

Uncle Sam isn’t the only one who might take a bite out of profits. The basis calculation most likely includes brokerage fees or commissions that you might have paid when you bought the stock.

You may have already forgotten about these costs, but they do have an effect on your investment’s profitability and depending on their size, could make a profitable trade unprofitable. You could tally all the fees you paid and subtract that sum from your profit to find out what your net gain was.

Note that your brokerage account may do these calculations for you, but you might want to know how to do them yourself to have a better understanding of how the process works.

Before you bust out a pen, paper, and calculator, however, it might be easier to check and see if an online calculator option is available through your broker.

You could also do these calculations before you sell your stocks to help you figure whether it makes sense to do so based on the potential return on investment.

In that case, you could replace the sale price in the above calculations with current market value. Market value is constantly fluctuating a little bit, so this calculation might only give you a close approximation of what your profit would be if you were to sell your stocks at that moment.

Calculating Gain as a Percentage

Calculating your profit can tell you how much money you made and could help you figure out how much you owe in taxes. However, it doesn’t tell you much about how well your stock performed. Calculating percentage gain and loss could be an important tool when comparing how one stock fared against another.

The calculation is simple. First, calculate gain, subtracting the basis from the price at which you sold your stock. Remember that if you took a loss, this number could be negative. Now, divide the gain by the original amount of the investment. Multiply by 100 to get a percentage that represents the change in your investment.

With this percentage in hand, you now might have an idea of how different stocks you’ve sold performed against each other. For example, if one stock had a percent gain of 15% and another had a percent gain of 12%, you could quickly tell that the first stock performed better assuming they were purchased and sold at the same times.

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Capital Gains Taxes

Capital gains tax is the tax you pay on the profit from selling your stock, in addition to other investments you may hold such as bonds and real estate. You are only taxed on a stock when you sell and realize a gain, and then you are taxed on net gain, which is the difference between gains and losses.

You can deduct capital losses from your gains every year. So if some stocks sell for a profit, while others sell for an equal loss, your net gain could be zero, and you’ll owe no taxes on these stocks.

There are two types of capital gains tax that might apply to you: short-term and long-term capital gains tax. If you sell a stock you’ve held for less than a year for a profit, you realize a short-term capital gain.

If you sell a stock you’ve held for more than a year and profit on the sale, you realize a long-term capital gain. Short-term capital gain tax rates can be significantly higher than long-term rates. These rates are pegged to your tax bracket, and they are taxed as regular income.

So, if your income lands you in the highest tax bracket, you will likely pay a short-term capital gains rate equal to the highest income tax rate—which is quite a bit higher than the highest long-term capital gains rate.
Long-term capital gains, on the other hand, are given preferential tax treatment.

Depending on your income and your filing status, you could pay 0%, 15% or a maximum of 20% on gains from investments you’ve held for more than a year.

Investors may choose to hold on to stocks for a year or more to take advantage of these preferential rates and avoid the higher taxes that may result from the swift buying and selling of stocks inside a year.

Understanding Capital Losses

So far we’ve mentioned capital losses a couple of times – let’s take a closer look at them. You may be wondering why it would ever make sense to take a capital loss since they are essentially a negative profit. However, capital losses could be an important tool to help you manage your taxes.

Capital losses can be used to offset gains from the sale of other stocks. Say you sold one stock for a profit of $15 and stock from another company for a loss of $10. The resulting taxable amount is now $5, or $15 minus $10.

In some cases, total losses will be greater than total gains. When this happens, you may be able to deduct excess capital losses against other income.

The amount of losses you can deduct in a given year is limited. However, if you go over this limit, any excess to reduce capital gains in subsequent years could be rolled over into the next year.

There are other limitations with claiming capital losses. The wash sale rule, for example, prohibits claiming a full capital loss after selling securities at a loss and then buying “substantially identical” stocks within a 30-day period.

The rule essentially closes a loophole, preventing investors from selling a stock at a loss only to immediately buy the same security again, leaving their portfolio essentially unchanged while claiming a tax benefit.

Tax laws can get a bit complicated. You may want to consult a tax professional to help you decide whether tax strategies involving capital gains and losses are right for you.

When Capital Gains Tax Doesn’t Apply

There are a few rare instances when you don’t have to pay capital gains tax on the profits you make from selling stock, namely inside of retirement accounts.

The government wants you to save for retirement, so they’ve come up with tax-advantaged investment accounts to encourage you to do so, including 401(k)s, IRAs, and Roths.

You fund tax-deferred accounts such as 401(k)s and traditional IRAs with pre-tax dollars, which helps lower your taxable income in the year you make a contribution. You can then buy and sell stocks inside the accounts without incurring any capital gains tax.

These tax-deferred returns can give your savings an extra boost, potentially helping it grow faster than it would it a regular brokerage account. As tax-deferred returns are reinvested, investors are able to take greater advantage of the magic of compounding interest—the returns investors earn on their returns.

Tax-deferred accounts don’t allow you to escape taxes entirely however, when you make qualified withdrawals after age 59½, you are taxed at your regular income tax rate. Roth accounts, such as Roth IRAs function slightly differently. You don’t escape taxes here either, but you fund these accounts with after-tax dollars.

Then you can then buy and sell stocks inside the account where they can grow tax-free. Once again, you won’t owe any capital gains on returns you make inside the account, and when you make withdrawals at age 59½, you won’t own any income tax either.

Other Income From Stocks

You may receive income from some stock holdings in the form of dividends, which are unrelated to the sale of the stock. A dividend is a distribution of a portion of a company’s profits to a certain class of its shareholders. Dividends may be issued in the form of cash or additional shares of stock.

While dividends represent profit from a stock, they are not capital gains. Dividends can be classified as either qualified or ordinary dividends, which are taxed at different rates. Ordinary dividends are taxed at regular income tax rates.

Qualified dividends that meet certain requirements are subject to the preferential capital gains tax rates. Taxpayers are responsible for identifying the type of dividends they receive and reporting that income on Form 1099-DIV.

When to Consider Selling a Stock

There are a number of reasons investors may choose to sell their stocks and collect a profit. First, they may simply need the money to meet a personal goal, like making a down payment on a home or buying a new car. Investors with retirement accounts may start to liquidate assets in their accounts once they retire and need to make withdrawals.

Investors may also choose to sell stocks that have appreciated considerably. Stocks that have made significant gains can shift the asset allocation inside an investor’s portfolio. The investor may want to sell stocks and buy other investments to rebalance the portfolio, bringing it back in line with their goals, risk tolerance, and time horizon.

This strategy may give investors the opportunity to sell high and buy low, using appreciated stock to buy new, potentially cheaper, investments. That said, investors might want to avoid trying to time the market, buying and selling based on an attempt to predict future price movements. It’s hard to know what the market or any given stock will do in the future.

As a result, timing the market could backfire, leading investors to make expensive mistakes like selling when prices are low and buying as prices are reaching their peak.

Sometimes investors may decide that buying a certain stock was a mistake. It may not be the right match for their goals or risk tolerance, for example. In this case, they may decide to sell it, even if it means incurring a loss.

Investing With SoFi

No matter what you need the money for when you sell a stock, you might want to set aside a portion of the proceeds to cover whatever taxes you’ll owe after you sell.

Ready to start online investing? You can invest your way—all in one place with SoFi Invest®. Do it yourself by choosing stocks, ETFs, and crypto, or let us build a portfolio for you with automated investing.

Learn more about buying and selling stocks and how to invest with SoFi.


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.
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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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Investing in Private Companies

The goal of investing is to grow money for long-term goals like retirement, and do it strategically so that it can work for you while you’re out living your life.

There are a variety of strategies when it comes to investing—and it’s important to get as much information as possible so you can decide what would be the best fit for your life and goals. And, just as there are several different ways to invest, there are also different types of companies that you may consider investing in.

Broadly speaking, there are two types of companies: public and private. And while you are likely more familiar with public-company investments—stocks traded on stock exchanges—there are also investment opportunities to be had with private companies.

There can be benefits that come with investing in privately held companies. Depending on your current circumstances, risk tolerance, and financial goals, you will likely approach the types of companies you consider investing in differently. And it’s important to understand that there are significant risks involved, and develop your expectations accordingly.

Read on to learn some basics of investing in both public and private companies, pros and cons of investing in private companies, and more.

The Difference Between Public and Private Companies

Typically, when most people think about investing they think about the stock market, where the companies are publicly held.

A public company has undergone an initial public offering (IPO), which means that it has publicly issued stock in hopes of raising more capital and making more shares available for purchase by the public. IPOs are usually underwritten by an investment bank—or broker dealers—which purchase shares from the company and then sell them to investors. As a general rule of thumb, until a company has an IPO, it’s considered private.

The world of private investment often seems exciting, and there can certainly be some big payoffs. Some investors might lament that they missed the chance to invest in a company like Uber back in its early days, when it wasn’t yet public. After all, the transportation giant had an estimated valuation of over $80 billion at its IPO.

Unlike the world of public investing, private investing happens off of Wall Street and takes place anywhere new, buzzy ventures are cropping up. However, for every company that hits it big, there are several companies that go bust. Take, for example, the blood-testing startup Theranos, which in its heyday was worth $9 billion and is now worth nothing.

Public companies, especially ones that are bigger, are more easily bought and sold on the stock market, and individuals are able to invest in them. These companies are also regulated by organizations like the Securities and Exchange Commission (SEC).

The SEC is a government body that makes sure these businesses stay accountable to their investors and shareholders, and it requires publicly traded companies to share how they are doing, based on their revenue and other financial metrics.

In contrast, a privately held company is owned by either a small number of shareholders or employees and does not trade its shares on the stock market. Instead, company shares are owned, traded, or exchanged in private.

The landscape of investing in private companies can sometimes be mystifying, in part because private stock transactions happen behind closed doors. But even though private companies may be less visible than their public counterparts, they still play an important role in the economy and can be a worthwhile investment.

Investing in a private company can also be incredibly risky, and it’s important to understand some of the pros and cons of investing in this landscape.

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Pros of Investing in Private Companies

Before considering the potential benefits of investing in private companies, it’s important to understand how venture capitalism works, and what a venture capitalist is. Essentially, a venture capitalist (VC) is an investor with capital, be it an individual with wealth to spare, an insurance company, a foundation, and so on.

These investors may contribute money to a venture capital fund, usually led by a management team. Together, a committee of members led by investment managers will choose businesses to invest in—often ones with high risk, but also high potential payoff. (It’s important to note that individual investors often have amassed a large amount of wealth, and can invest a large amount into the firm.)

Because private companies are often smaller businesses, they may offer investors an opportunity to get more involved behind the scenes. This might mean that an investor could play a role in operational decisions and have a more integrated relationship with the business than they could if they were investing in a large, public company.

In an ideal scenario, if you invest in a private company, you’ll get in earlier than you would when a company goes public. (Note: This is the ideal scenario.) And getting in early can potentially produce impressive results—if you’ve made a sound investment decision.

Another possible benefit of investing in a privately traded company is that there is generally less competition for equity than with a public company. This means you could end up with a bigger slice of the pie.

Investing in a private company might also mean that you are able to set up an exit provision for your investment—meaning you could set conditions under which your investment will be repaid at an agreed upon rate of return by a certain date.

Generally speaking, investing in a private company can have some strong benefits, including increased potential for financial gain and the opportunity to become more involved in the future of a business. However, there are also some major risks involved, and it’s important to understand them before handing over your cash.

Cons of Investing in Private Companies

One of the biggest risks involved in investing in a private company is that you may have less access to information as an investor. Not only is it more challenging to get hold of data in order to understand how the company performance compares to the rest of the industry, private companies are also not held to the same standards as publicly-traded ones.

For example, because of SEC oversight, public companies are held to rigorous transparency and accounting standards. In contrast, private companies generally are not. From an investor’s standpoint, this means that you may sometimes be in the dark about how the business is doing.

In addition to this, many private companies may lack access to the capital they need to grow. And even though there may be an opportunity to set up an exit provision as an investor in a private company, unless you make such a provision, it could be a huge challenge to get out of your investment.

Knowing Your Business Categories

If you have decided to move forward and start investing in private companies, a good place to start is by understanding different business categories as well as the risks and rewards involved. Some of these categories include startup, turnaround, and growth-opportunity companies.

In broad terms, startups are typically higher risk than other business categories as they are new and may have no track record or effective business model. It’s worth noting that most startups fail, so investing in this space can be tricky.

Turnaround companies are failing companies that need intervention. When it comes to investing in this category, it may be important to identify whether cash flow or poor management are to blame for the difficulties the business is experiencing.

If it’s the former, it may be a sound investment; if it’s the latter, it might be worth further investigation, or just passing on the investment.

Businesses in the growth-opportunity stage are companies that are being stunted due to lack of access to capital. If you’ve done your research and identified that a company and its team are solid and in a good position to handle a growth spurt, it may be a great opportunity for investment.

These are just some of the possible categories you may encounter, and there are many more. Once you have an idea of the type of category you’d like to go after, it’s important to get to know the specific company you want to invest in. This could mean paying a visit to the offices and seeing the operations close up.

It could also mean combing through bank statements, financial reports, and developing a thorough understanding of the company team and their track record. Make sure to research the company thoroughly—even if it’s one that you already know you love.

Deciding What Type of Investor You Want to Be

Once you have established what type of business you would like to invest in, you may also need to decide what type of investor you want to be and how involved you would like to get.

You will likely also need to decide whether you are looking to be a majority or minority owner, and understand both the risks and responsibilities that come along with each level of involvement. For some context, a minority interest typically means ownership of less than 50% of a company.

Some investors may choose to play a more active role in the operations and decision-making processes of a private company they invest in, others may prefer to take a back seat.

From here, it may also be a good idea to familiarize yourself with the market niche and have a good understanding of the competition that may be involved, as well as trends and projected revenue. All of these pieces of information can clarify the role you may play as an investor in the company.

Understanding the Risks Involved

Even if the company you are thinking of investing in seems solid, it’s important to have an understanding of the challenges that may come up along the way. There are some red flags to look out for, such as a company whose revenue is earned from just a couple of clients—or just one client—as opposed to several.

In order to make sure you’re staying on top of things and are able to keep an eye on potential risks and build better strategies, you may want to consider building relationships with experts and industry players who can help you optimize your investment strategy.

Investing in What’s Right for You

Investing can be a crucial tool in building long-term wealth. So it may be worth familiarizing yourself with different strategies and approaches and find the one that works best for you.

Ultimately, no investment is free of risk, but there are certain steps you can take to make sure you have a good idea of what you’re getting into. The world of private investment isn’t for everyone, but if done properly it might mean the ability to reap greater financial rewards.

At the end of the day, you might decide that investing in private companies feels too risky, you have other investment options—one of which is SoFi Invest®.

SoFi offers options for the more hands-on investor, with active investing, and for the hands-off investor, with the automated investing platform. Either way, you have access to financial advisors and up-to-date market news to help inform your investing strategy—all for zero management fees.

Think you might be interested in potentially building long-term wealth through investing? SoFi Invest® provides learning tools to help get you on your way.


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

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.
IPOs: Investing early in IPO stock involves substantial risk of loss. The decision to invest should always be made as part of a comprehensive financial plan taking individual circumstances and risk appetites into account.

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Why Saving Money is Important

You’ve probably heard that you should be saving money each month. It’s one of those things that’s just supposed to be good for you, like eating broccoli or flossing before you go to bed. But why is it important to save money? And even if you plan to start putting away cash someday, why should it be something you prioritize now?

For many people, it can be hard to muster up any extra funds after paying for the daily necessities of life. Housing, healthcare, and childcare have all gotten more expensive in recent decades, and most young people are struggling with mountains of student loan debt.

Then there are other things you can’t do without, like food, clothing, and toiletries. And most people want to have some fun on occasion, which can mean paying for bar tabs, concert tickets, or vacation flights.
In light of all these expenses, storing away cash can feel like an impossible dream, or something that requires too much sacrifice.

Even if you theoretically want to try saving, it can be tough to figure out how to achieve it in practice. Understanding why saving is actually important—and how to make it happen—might be the fuel you need to get started.

Reasons Why Saving Money is Important

It can be hard to get motivated to save money just because it’s the “responsible” thing to do. But you may see the appeal once you understand the huge advantages that saving offers.

One major benefit of saving is the potential to avoid debt. Life is full of surprises, from getting laid off, to breaking up with your partner, to running into unexpected medical bills, to suddenly having to care for a dependent.

If you don’t have any money saved, these situations have the potential to upset your financial plans. Some may have to turn to high-interest credit cards or payday loans. With an average interest rate of 16% as of June 2020, even a modest credit card balance can quickly balloon into unsustainable debt.

If you miss payments, your credit score could suffer (making it harder to take out loans with good terms down the line). Many recommend building up an emergency fund of at least three months worth of living expenses to prepare for financial surprises.

Saving is beneficial for non-emergencies, too. Say you have a major expense on the horizon, whether that’s a wedding, big vacation, home renovation, or sending a kid to college. You could finance these big-ticket items with debt, whether through credit cards, loans, or a home equity line of credit.

However, borrowing generally means that you’ll be paying more than you borrowed thanks to interest that accrues. If you save up for your dream in advance, you can side-step this issue, which can help save a significant amount of cash in the long run.

Another big incentive to save is the power of compound interest. Compound interest means you earn a return not just on the amount you originally put away, but also on the interest that accumulates.

Over time, that means you can end up with much more than you started with. And the earlier you start saving, the more your money grows, since compound interest is able to work its magic over a longer time horizon.

Let’s use an example from financial expert Suze Orman. If you start putting just $100 a month into a retirement account when you’re 25 years old, and do so for 40 years, you’ll have just over $335,000 by the time you retire at 65 (assuming an 8% average annual return).

If you start doing the same thing at age 35, you’ll only have $146,000 or so by the time you’re 65. As she told CNBC, “Those 10 years just cost you $200,000.” That’s a pretty good incentive to start saving as soon as possible, even if you start small.

How to Get Started with Saving

If you’re convinced that saving is the right move, how do you actually do it? The key is to make a budget and make sticking to it easy.

This doesn’t have to be intimidating. The key is to get familiar with what you owe, what you spend, and what your goals are. Here are some steps you could take to help get started:

Figuring out What You’re Saving For

Is it a long-term goal, like retirement or your kids’ college tuition? A short-term goal, like an emergency fund? Or a medium-term goal, like a wedding or home renovation? Get a clear sense of how much you need to stash away and by when.

The point of this is twofold: First, you can divide the amount you need by the months left until your deadline to get a clear picture of how much you’ll need to save each month.

Second, you will know where to put your money. If your goal is less than a couple of years away, you may want to keep your savings in a high-yield savings or money market account.

That’s because you’ll need access to it, and you don’t want to risk losing money in a short-term downturn. If your goal is in the distant future, you might want to invest the money in a retirement account, 529 college savings plan, or brokerage account so that it has the chance to grow over time.

Sticking to a Budget

You don’t really know where your money is going unless you track it. For a month or two, take note of all your expenses. Then, you can make a monthly budget that reflects your average spending. Include fixed expenses—the ones that stay the same each month, like rent and utilities—and discretionary expenses—like eating out or a gym membership.

Next, take note of your net monthly income, meaning what goes into your account after taxes and deductions. The difference between your monthly income and expenses is what you have left over to save. If there’s not enough left over, you can work on finding ways to cut spending or increase your income.

SoFi Relay® is a no cost app that makes it easy to track and categorize your spending in real time, find ways to save, and monitor your progress toward your savings goals.

Putting Your Savings on Autopilot

If you’re manually putting cash away every month, it can be easy to fall behind. For one thing, you may forget to move money into savings regularly amid your busy schedule. And unless you protect the money in advance by transferring it to a different account, you may accidentally spend it.

One way to avoid this is to set up automated savings through your bank account or retirement plan. If you’re putting away the amount you identified you need for your goal, you may get there without even thinking about it.

How SoFi Money Can Put Your Savings to Work

If you’re saving for a goal that’s in the relatively near future, SoFi Money® can be a great place to house your savings. With this cash management account, you can spend, save, and earn all in one place.

Once you’re ready to start saving, SoFi Money helps you get the returns you deserve.


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.
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.

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