Family Finances Archives

Jun

2025

Checking Account Pros and Cons

By Janet Siroto | Budgeting & Goals, Family Finances, money | Comments Off

Table of Contents

What Is a Checking Account?
Benefits of Checking Accounts
Cons of Checking Accounts
When a Checking Account Makes Sense
When Other Accounts May Be Better
Checking Account Features To Consider
FAQ

A checking account can be a convenient place to store your cash and manage daily transactions. Among its benefits: You can usually make as many transfers in and out of the account as you like. Also, your funds are likely to be insured.
There are, however, some cons, too. You probably won’t earn much or any interest for parking your money in a checking account, and you may be hit with an array of fees that nibble away at your funds.

Here, take a closer look at checking account pros and cons so you can pick the right financial product to suit your needs.

Key Points

• A checking account provides security and easy access to funds.

• Checking accounts can support direct deposits and convenient bill payments.

• A benefit of a checking account can be a small amount of interest, plus rewards and sign-up bonuses.

• Potential drawbacks include low interest and fees.

• Alternatives to checking accounts include prepaid cards and digital payment services.

What Is a Checking Account?

Simply put, a checking account is a safe place to stash funds and enable the flow of money in (what you earn and receive) and out (what you spend).

Whether held at a brick-and-mortar bank, an online bank, or a credit union, a checking account is often the hub of a person’s financial life. Your pay can be seamlessly direct-deposited, if you like.

For your everyday spending, you might schedule automatic payments for your mortgage and utilities, write a check when paying for a doctor’s appointment, and tap your debit card when treating yourself to a wine tasting with friends on the weekend.

Benefits of Checking Accounts

Here’s a closer look at the pros and cons of a checking account, starting with the upsides.

Security

Yes, you could stuff your money under the proverbial mattress, but with a checking account, you have a secure spot for it, where it can’t get lost, stolen, or damaged.

If your bank is insured by the FDIC (Federal Deposit Insurance Corporation) or, in the case of a credit union, the NCUA (National Credit Union Administration), your account will typically be covered up to $250,000 per depositor, per insured institution, for each account ownership category.

Easy Access to Cash

Checking accounts allow you to access your money quickly and easily, whether you need to pay for a meal or something unexpected, like a school donation. Setting up direct deposit allows your paychecks to be transferred directly into your checking or savings account, with some banks offering access to cash up to two days early.

You can then tap your funds by using your checking account’s debit card, writing checks, snagging some cash from the ATM, or making a transfer.

Pay Bills Conveniently

Here’s another benefit of a checking account: Having a checking account means you can get your bills taken care of without much effort. You might set up recurring payments to a car loan, for instance, or use a digital payment app to send money to your roommate, a friend, or your yoga teacher. You can also typically move funds quickly via wire transfer, which can be especially useful for international transactions, and other methods as well.

Debit Card for Purchases

When you open a checking account, you’re usually provided with a debit card that’s linked to the account. Similar to a credit card, you can typically use your debit card to pay in person or online for anything from this week’s groceries to a cool new pair of shades to a matcha latte.

Unlike a credit card, however, debit cards pull funds directly from your checking account. They usually only let you dip into funds you actually have on deposit, which can help you keep spending in check and stay on budget, not to mention avoid credit card debt.

Rewards

Some checking accounts come with rewards that can be a nice perk. For example, when you open an account, you might get a sign-up bonus. Who doesn’t like free money? Or your debit card may carry rewards, similar to those of a credit card, such as cash back.

Direct Deposit Benefits

Direct deposit can be a seamless way to get paid; in fact, more than 95% of Americans get paid this way, according to National Payroll Week. Direct deposit sends cash, ready to spend, straight into your bank account, so you don’t have to deal with depositing a check or cash.

FDIC Insurance Protection

As noted above, most financial institutions (but not all) are insured by either the FDIC or NCUA. In the very rare event of a bank failure, you would be protected from loss up to those limits of $250,000 per depositor, per account ownership category, per insured institution. Note: Some institutions offer programs that provide even more than $250,000 in insurance.

Cons of Checking Accounts

As you might guess, there are advantages and disadvantages to checking accounts, as is the case with most financial products. Checking accounts are designed to serve customers’ everyday, short-term money needs and can have a few potential downsides to consider.

Low or No Interest Earned

While your money is sitting in your checking account, it is probably earning very low, if any, interest. For instance, as of June 2025, the average interest checking account rate was a meager 0.07% of one percent, according to the FDIC. Translated into dollars and cents, that means that if you kept $5,000 in your checking account for a year, you would only earn $3.50 in simple interest.

That said, there are high-yield and premium checking accounts available that pay heftier interest rates. These may come with minimum deposit and balance requirements. Online-only banks frequently offer these accounts without those barriers, however, and with interest rates that are several times higher than the national average.

Potential Overdraft and Other Fees

Sooner or later, many people will try to transfer more money out of their checking account than they actually have on deposit. It could be a simple math error, or they might have forgotten about that on-the-fly payment they made to contribute to, say, a friend’s baby shower gift.

Not having enough money in your checking account can lead to overdraft fees. The average charge currently stands at a steep $25 to $35, with an average (as of 2024) of $27.08. Also, even if you have overdraft protection — meaning you have linked accounts so that money can be pulled from savings into checking to cover payments, if needed — you may still be charged a fee. However, it’s likely to be lower than an overdraft charge.

Also, check the fine print when signing up for a new checking account: There can be other fees, such as account maintenance and out-of-network ATM fees (more on those below).

Security Risks

While banks are extremely safe overall, there is always a small possibility of a security risk (such as a hack). Losing or having your debit card stolen and used without your authorization is another concern— and it can be a common one. A card thief could potentially gain access to the funds in your checking account.

It’s vital to report the issue within two days of noticing the card is missing so that you’ll be liable for no more than $50 in unauthorized usage. Otherwise, you could be liable up to $500 or more depending on the circumstances.

Minimum Balance Requirements

Some checking accounts require the account holder to maintain a certain balance to avoid monthly account fees. Or they might want account holders to keep a certain sum on deposit in order to earn a premium interest rate. Depending on the institution, this minimum deposit could be several hundred or more than a thousand dollars. If your balance dips below this amount, you could be hit with fees and/or lose your interest rate.

Recommended: Ways to Manage Your Money

When a Checking Account Makes Sense

Quite simply, checking accounts make sense for the vast majority of Americans. It typically serves as the hub of one’s daily financial life.

Some people, though, are unbanked, meaning they have not (or are not able) to access the usual banking services. If you are seeking a checking account and haven’t been able to secure one, you can try a few other options:

• It might be easier to get an account at a credit union, if you qualify for one based on where you live, your profession, or other factors.

• Your banking history may reveal some issues, such as multiple overdrafts, as tracked by ChexSystems (a kind of reporting agency for the banking industry). In this situation, you might qualify for a second-chance account. This kind of account may have higher fees and/or minimum balance requirements, but it can be a good way to show that you can handle an account responsibly. In some cases, a second-chance account can be a stepping stone to a standard checking account.

When Other Accounts May Be Better

There are some situations in which another kind of account could be better than a checking account. A few scenarios to consider:

• If you are hoping to park your money for a while and earn interest vs. spend it, a savings account can be a good bet. Some savings accounts have limits on how many transactions can occur per month (check the fine print). Whether or not that applies, you will likely earn a higher interest rate than you would with a checking account. For instance, the current average interest rate for a savings account is 0.38% vs. 0.07% for checking.

• For those who want their money to earn still more money, a high-yield savings account can offer still more earning potential. At the time of publication, some online-only banks were offering rates in the range of 4.5%.

• A CD (or certificate of deposit) can be another way to earn a higher return on money you keep in a bank. However, these don’t offer the accessibility of a checking account. You agree to keep your funds on deposit in return for the bank guaranteeing a certain interest rate and are usually penalized if you withdraw funds before the end of your time.

• For those who want spending power without a checking account, prepaid debit cards can deliver. You load funds onto them and can then spend or pay bills with them. They are typically backed by a major network, like Visa or Mastercard.

• One other option is to use digital payment services, such as Venmo and PayPal. These can allow you to move funds to shop and otherwise spend without a bank account.

Checking Account Features To Consider

If you are looking for a checking account, you may want to focus on these three considerations:

ATM Access and Fees

Since accessibility is a key selling point of checking accounts, you likely want your money to be within easy and affordable reach. Check out a financial institution’s network of ATMs and make sure they are near your usual haunts.

Also see what the charges are for using an out-of-network bank: Certain banks (especially online-only ones) may waive those usual out-of-network fees that can ding you; these currently average $4.77 a pop.

Online/Mobile Banking

Today, it’s par for the course for financial institutions to provide online banking features and mobile banking apps, but some provide more robust, user-friendly digital services and offer them for free.

As you consider your options, you might look for a bank that helps you save automatically. A round-up function that nudges purchases up to the next whole dollar amount and adds the extra money to your savings can be valuable.

Also helpful are dashboards that allow you to see your money (earnings, spending, and savings) and credit score at a glance, for no extra charge. This feature can help you budget better.

Overdraft Protection

As mentioned above, many people have those “oops” moments and overdraw their accounts. Some banks will give you free overdraft protection up to a certain sum. For instance, they might cover up to $50 of your overdraft without charging you the standard fees. This can be a valuable feature when you are deciding which financial partner is right for you.

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Account Maintenance Fees

As noted above, some banks will charge monthly account maintenance fees for holding a checking account at their institution. It can be one of the ways that banks make money. These fees can range from, say, $5 to $12 a month or more, which can take a bite out of your budget.

You may find that some banks, especially online ones, offer no-fee checking accounts. Or a financial institution may waive fees if you keep a certain amount on deposit across your accounts or if you meet other requirements.

Customer Service and Support

Another factor to consider is the kind and quality of customer service and support a financial institution offers. Some people may gravitate toward online banks which typically have 24/7 online support by phone or text chat. Others may prefer banking with a traditional bank where they can meet in-person with team members. Consider what’s important to you to make the best decision for your news.

The Takeaway

For many people, a checking account can be a reliable hub for their personal finance needs. You can store your earnings securely and still easily access your money to pay bills and fund daily purchases.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Are checking accounts free?

Some are. You can often find free checking accounts from traditional and online-only banks as well as credit unions. While these accounts may be billed as “free,” keep in mind that some fees may apply, say, if you overdraft your account.

What happens if my checking is overdrawn?

If your checking account is overdrawn, that means you have tried to withdraw more money than you have in your account. This can lead to payments not being processed (a check bouncing, for example) and charges piling up. By linking a checking and savings account, you may be able to have funds automatically transferred from savings into checking to cover the shortfall. Your bank may charge you a fee, whether they cover the shortfall through overdraft protection or not.

Can I have multiple checking accounts?

There is usually no limit on how many checking accounts you can have. It can be convenient to have one for, say, your salary and your living expenses and another for a side hustle and related expenses.

Are checking accounts FDIC insured?

Most but not all checking accounts are FDIC-insured. You can look for this feature before opening an account. With FDIC insurance, you are covered for up to $250,000 per depositor, per account ownership category, per insured institution in the very rare event of a bank failure. Some banks have programs that offer even higher amounts of insurance.

Do checking accounts offer fraud protection?

Most banks will refund you if your account is hacked or your debit card is used without permission, provided you report it in a timely fashion. Check with your financial institution about their policies, but note that if you willingly sent money to an individual or business that turned out to be a scam, refunds are less likely.

Photo credit: iStock/SDI Productions

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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

¹SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

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Jun

2025

What’s a Good Monthly Retirement Income for a Couple in 2022?

What’s a Good Monthly Retirement Income for a Couple in 2025

By Julia Califano | Budgeting & Goals, Family Finances, relay | Comments Off

Table of Contents

How Being a Couple Affects Your Income Needs
What to Consider When Calculating Your Monthly Income
Common Sources of Income in Retirement
How to Plan for Retirement as a Couple
Strategies for Generating Passive Income in Retirement
Maximizing Social Security Benefits
FAQ

Determining a good monthly retirement income isn’t one-size-fits-all. However, many financial experts suggest couples should aim for around 80% of their pre-retirement income to maintain a comfortable lifestyle. If you earn $100,000 in your final working years, for example, you’ll need around $80,000 annually or $6,667 monthly in retirement.

You might also consider the average retirement income for a couple. According to the U.S. Census Bureau, the median household income for retired couples aged 65 and over in 2023 was $84,670 per year, or about $7,056 per month.

The exact monthly income you and your spouse or partner need, however, will depend on several factors, including your expenses, age, health, and desired lifestyle. Below, we explore these key considerations to help you estimate your ideal monthly retirement income and explore where that money might come from.

Key Points

• Lifestyle preferences and current expenses determine retirement income needs.

• Social Security benefits and retirement savings are crucial income sources.

• Inflation reduces purchasing power, necessitating careful financial planning.

• Retirement spending doesn’t stay static but generally follows a U-shaped curve.

• A surviving spouse may face financial adjustments and income loss.

How Being a Couple Affects Your Income Needs

Being part of a couple can significantly impact retirement income needs, making it different from retirement planning as an individual.

While some expenses may double — such as food, travel, and health insurance — others can be shared, leading to cost savings. For example, housing, utilities, and transportation often remain similar whether supporting one person or two. That means a couple may not need twice the income of a single retiree to maintain a comfortable lifestyle.

That said, couples typically need to plan for a longer period of retirement, since one partner generally outlives the other. This requires careful long-term planning to ensure both partners are financially secure throughout retirement.

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What to Consider When Calculating Your Monthly Income

There are many misconceptions about retirement spending. Some couples assume that their expenses will drop significantly after retiring, but that’s not always the case. Here are some key factors to consider when calculating your monthly income needs.

Spending May Not Be as Low as You Think

Many couples anticipate that their living costs will go down after retirement, since they’ll spend less on commuting, professional clothing, and lunches out. Expenses like payroll taxes for Social Security and retirement account contributions also go away after retirement. However, these savings can potentially be offset by increased spending in other areas, like health care, travel, leisure activities, gifts for grandkids, or home renovations. Retirees may also find themselves spending more on hobbies and dining out as they have more free time.

It’s important to calculate your current monthly expenses and then consider which ones may go down or up when you stop working to get an accurate sense of your monthly income needs.

Spending Doesn’t Stay Steady the Whole Time

It’s a common retirement mistake to assume spending will be fixed once you enter the retirement phase of your life. In reality, spending patterns typically take on a U-shaped curve over the course of retirement. Expenses tend to be highest in the first several years, due to increased spending on travel, hobbies, and activities couples may have put off while working. Spending then generally declines as retirees get older and less active, only to rise again due to higher health care costs and (possibly) long-term care expenses. You’ll want to be sure your retirement income plan accounts for all of these different phases of retirement.

Expenses May Change When One of You Dies

When one spouse passes away, the surviving partner often experiences a significant shift in their financial needs. Some expenses like housing may stay the same, while others — such as food, travel, or entertainment — may decrease. In addition, the surviving spouse might lose one source of Social Security or pension income, potentially straining finances. As a result, it’s critical to plan for income flexibility.

Essential vs Discretionary Expenses

When calculating your monthly retirement income needs, it’s important to differentiate between essential and discretionary expenses.

• Essential expenses are the non-negotiable costs necessary to maintain your basic lifestyle and standard of living in retirement. Examples include housing, utilities, groceries, healthcare, and transportation.

• Discretionary expenses are optional expenses that enhance your quality of life but are not strictly necessary. These can be adjusted or reduced if your income fluctuates or unexpected costs arise. Examples include: travel/vacations, entertainment, dining out, hobbies and recreation, charitable donations and gifts, and subscriptions and memberships.

By separating needs from wants, you can develop a realistic budget, adjust discretionary spending if your income fluctuates or unexpected costs arise, and increase your chances of a financially secure and enjoyable retirement.

Planning for Inflation and Health Care Costs

Inflation significantly impacts financial needs in retirement by eroding the purchasing power of your income and savings over time. As prices rise, the same amount of money buys fewer goods and services, potentially forcing you to withdraw more from your savings each year to cover expenses. It’s crucial to factor in a realistic inflation rate when calculating retirement needs.

Health care costs also tend to increase over time, both due to inflation and the fact that medical needs generally increase as you get older. Without proper planning, you may find that premiums, out-of-pocket expenses, and services not covered by Medicare can deplete your retirement savings.

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Common Sources of Income in Retirement

Building multiple reliable income streams can help ensure a stable and sustainable retirement. Here are the most common income sources for retirees:

Social Security

For many American couples, Social Security is a key retirement income stream. In May 2025, the average Social Security monthly check for retired workers was $2,002.39, according to the Social Security Administration’s (SSA) Monthly Statistical Snapshot. For a couple, this could amount to approximately $4,005 per month. However, benefits vary based on your earnings history and the age at which you start claiming.

Retirement Savings

Retirement savings accounts, such as 401(k)s and IRAs, provide additional income for couples after they leave the workforce. Financial planners often recommend using the 4% rule as a guideline for drawing down your retirement savings. This guideline is based on a 30-year retirement and designed to help ensure you don’t outlive your savings.

To follow the 4% rule, you add up all of your combined retirement savings, then aim to withdraw 4% of that total during your first year of retirement. For example, if you have $1 million in savings, you would withdraw $40,000 per year or around $3,333 monthly. The following year, you would adjust that 4% to account for inflation. So if inflation was 2%, you would give yourself a 2% raise.

While the 4% rule can be a helpful guideline, you may need to adjust your spending rate based on your situation, age, and the performance of your investments.

In addition, as you save for retirement, a retirement calculator can give you a sense of how much you should be regularly putting toward retirement savings to meet your goals for those later years.

Annuities

An annuity is a financial product sold by insurance companies that can offer an income stream in retirement and/or increase retirement savings. With an income annuity, you make a lump sum investment then receive a payout for life or a set period of time. With a tax-deferred annuity, you accumulate tax-deferred savings, while also having the option to receive income in the future. This makes annuities attractive for couples looking for stability after retirement.

Other Savings

The other savings category includes money you have in savings accounts, certificates of deposit (CDs), and nonretirement brokerage accounts. These funds can serve as backup or supplemental income. While they don’t offer the tax advantages that come with retirement accounts, they provide liquidity and flexibility, which can be helpful for managing unexpected expenses.

Pensions

A pension is an employer-based plan that pays out a specified amount of income on a regular basis (typically monthly) to an employee after they retire. It’s generally funded by the employer during the employee’s working years, and those funds are usually invested so they can grow over time. If a worker stays with that employer for a certain period of time, they are eligible to receive payouts from their pension plan when they retire.

Pensions are not as commonly offered as they used to be, however, having largely been replaced by 401(k)s and other defined contributions plans. If neither you nor your spouse have ever worked for a company that offered a pension, you won’t be able to rely on this as a source of income after retirement.

Reverse Mortgages

A reverse mortgage enables eligible homeowners to tap their home equity to earn income in retirement. The most common type of reverse mortgage is called a Home Equity Conversion Mortgage (HECM). HECMs allow homeowners aged 62 and older to borrow against the equity in their home without making monthly payments. The loan is typically repaid when the borrower sells the home, moves out permanently, or dies.

While reverse mortgages can boost monthly retirement income, they have some significant downsides, including fees and interest, which are added to the loan balance each month. And either you or your heirs will eventually have to pay the loan back, usually by selling the home. It’s important to consider the pros and cons carefully before taking out a reverse mortgage.

How to Plan for Retirement as a Couple

Planning for retirement as a couple is an ongoing process that ideally begins decades before you actually retire. Some of the most important steps in the planning process are:

• Figuring out your target retirement savings number

• Investing in tax-advantaged retirement accounts

• Paying down debt

• Deciding when you’ll retire

• Deciding when to take Social Security benefits

• Developing an estate plan

• Planning for long-term care

Working with a financial advisor can help you to create a plan that’s tailored to your needs and goals.

Strategies for Generating Passive Income in Retirement

Passive income helps reduce reliance on withdrawals from retirement accounts, allowing your savings to last longer. Here are two effective strategies for couples:

Rental Properties and Real Estate Investment

Investing in real estate, such as single family rentals or duplexes, can generate steady income in retirement. While property management may require effort, many retirees hire managers or invest in Real Estate Investment Trusts (REITs) to avoid day-to-day responsibilities, making this a type of passive investment.

In addition to cash flow, investing in real estate can add diversification to your portfolio and may come with tax benefits. As with any other investment, however, there are potential risks with passive real estate investing. For example, there’s a chance that property values can decline or an investment doesn’t earn the expected profits.

Dividend Stocks and Interest-Bearing Accounts

Dividends and interest can provide a modest — but steady and reliable — cash flow in retirement.

• Dividend stocks are shares in companies that distribute a portion of their profits to shareholders, typically on a quarterly, semiannual, or annual basis. Many retirees invest in established “blue chip” companies known for consistent payments. These investments can offer both income and potential portfolio growth. However, they also carry market risk, as stock values fluctuate with economic conditions.

• Interest-bearing accounts, such as high-yield savings accounts, CDs, and money market accounts, provide a low-risk way to generate income. These accounts pay interest on deposited funds and are typically backed by FDIC insurance, offering a high level of safety. However, returns are often lower than what you could earn by investing in the stock market over the long term.

Technically, anyone who is employed for at least 10 years is eligible to begin taking Social Security benefits at age 62. But doing so reduces the benefits you’ll receive. To get the highest possible payment, you and your spouse would need to delay benefits until age 70. At that point, you’d each be eligible to receive an amount that’s equal to 132% of your regular benefit. Whether this is feasible or not can depend on how much retirement income you’re able to draw from other sources.

If one of you has earned significantly less than the other, you may be able to maximize Social Security benefits by taking advantage of spousal benefits. This benefit allows the lower-earning spouse to receive up to 50% of the higher-earning spouse’s Social Security benefits once they reach full retirement age (67 for those born in 1960 or later). However, the higher earning spouse must already be receiving benefits.

The Takeaway

A good monthly retirement income for a couple in 2025 will depend on a variety of factors, but you might aim to earn around 80% of your current monthly income. This amount can likely cover essential and discretionary spending while accounting for inflation, taxes, and unexpected health care costs.

To make sure you’ll have sufficient income in retirement, it’s important for couples to take a holistic view of their finances — combining Social Security, retirement savings, pensions, other savings, and passive income sources — to build a sustainable plan.

With smart planning, clear communication, and diversified income strategies, you and your life partner can enjoy a secure and fulfilling retirement together.

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FAQ

What is the average retired couple income?

The median household income for retired couples aged 65 and over is $84,670 per year, or about $7,056 per month, according to 2023 data from the U.S. Census Bureau. This includes income sources like Social Security, pensions, savings, and investments. However, actual income can vary widely depending on lifestyle, geographic location, and retirement planning.

What is a good retirement income for a married couple?

A good retirement income for a married couple is typically around 80% of their pre-retirement income to maintain a comfortable lifestyle. For example, if a couple earned $100,000 annually before retiring, a target retirement income would be about $80,000 per year.

This rule of thumb assumes that some expenses (such as payroll taxes for Social Security, retirement account contributions, and work-related expenses) go away after retirement. However, some couples may find that their expenses don’t significantly decline if they travel extensively or take up expensive hobbies or leisure activities.

How much does the average retired person live on per month?

According to the U.S. Bureau of Labor Statistics 2023 Consumer Expenditure Survey, the typical household age 65 and older has monthly expenditures of $60,087. That breaks down to monthly spending of about $5,007 per month. However, many factors can impact a particular household’s spending and the amount of money they need to feel secure.

How can couples manage retirement income tax efficiently?

Couples can manage retirement income tax efficiently by diversifying their sources of income in retirement and planning withdrawals strategically.

When you’re saving for retirement, you might use a mix of tax-deferred retirement accounts, like traditional Individual Retirement Accounts (IRAs) and 401(k)s, and accounts that allow tax-free withdrawals in retirement, like Roth IRAs. This allows for greater control over taxable income.

Once you retire, consider withdrawing funds strategically. For example, if your taxable income is low in a given year, you might withdraw from tax-deferred accounts. If your income is high, you may be better off pulling from tax-free sources like a Roth IRA.

What are some common mistakes couples make when planning for retirement?

Common mistakes couples make include underestimating healthcare costs, failing to plan for longevity, and relying too much on one income source (like Social Security). Many couples also overlook inflation’s impact on fixed incomes and/or retire too early without sufficient savings.

Proper planning, ongoing financial reviews, and professional guidance can help avoid these pitfalls and ensure a secure retirement.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Photo credit: iStock/yongyuan

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

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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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SOIN-Q225-093

Jun

2025

Paying for College: A Parent’s Guide

By Jody McMaster | Budgeting & Goals, Family Finances, Student Loans, student_loan | No Comments

Many parents want to do whatever they can to help pay for their child’s higher education, which can be quite expensive. In-state education can add up to $108,584 for four years, and a private education can total $234,512 on average, according to figures from the Education Data Initiative.

Starting to plan and save early and consistently can be vital. But knowing how much to save and where to stash those funds, plus pay for any balance due, is equally important.

Need guidance? Here, what parents need to know about paying for their child’s college education.

Key Points

• Many parents help their children pay for college and use methods such as automating savings and redirecting funds from no longer needed expenses to boost college savings.

• Parents can open 529 plans for tax-free growth and withdrawals for qualified education expenses.

• Coverdell ESAs have a $2,000 annual limit, grow tax-free, and are suitable for lower-income families.

• UTMA/UGMA custodial accounts can be used for any expense benefiting a minor, with no contribution limits, though there are potential tax implications.

• Federal and private student loans are options to help cover remaining costs, along with scholarships and grants.

How Much Will I Need to Save?

The answer to this question is subjective. Do you plan to try to cover 100% of your child’s college costs, or will you use student loans, if needed? Will your child likely qualify for need-based or merit-based aid? Might your high achiever be eligible for a college that meets some or all of their demonstrated need?

Also, think about your own financial picture. Have you carved out your retirement savings plan, created an emergency fund, and focused on paying down your own debt? It’s smart financial planning to get your house in order first, so you can save for your offspring’s college.

The cost of attendance, or “sticker price,” on every college website that estimates the total cost of a year of school can cause, well, sticker shock. But most students do not pay sticker price. They pay the net price, which is the sticker price minus scholarships, grants, and financial aid.

The College Board reports that the average published tuition and fees for full-time students for 2024-25 were:

• Public four-year college, in-state student: $11,610

• Public four-year college, out-of-state student: $30,780

• Private nonprofit four-year college, any student: $43,350

Remember that the above numbers cite tuition and fees, not the total cost of attendance, which also includes the estimated annual cost of room and board, books, supplies, transportation, loan fees, miscellaneous expenses (including for a personal computer), and eligible study-abroad programs.

The upshot: Anticipating the cost of attendance of various colleges, your family’s eligibility for a merit scholarship, need-based aid, and borrowing tolerance can help you prepare.

If you put a number on a savings target, another key question is: How can I start saving for college?

What Are Some Strategies for Saving?

Here are a few options to consider:

Automating savings. You could set up automatic transfers to a designated college savings account, so you won’t even have to think about it. You can transfer from your checking account or, if it’s an option, opt to direct deposit a portion of your paycheck directly to your savings account.

Putting windfalls to work. Another way to boost savings comes from the planned and unplanned windfalls in life. Getting a tax refund or receiving an inheritance? Keeping an eye out for unexpected money can help you achieve your savings goals.

Pruning expenses. If you haven’t already trimmed your expenses, you can use the natural course of time to turn expenses into savings. For example, once your child no longer needs diapers, you can put that cost toward college savings. When they no longer need daycare, you could funnel what you were paying into your account. If piano lessons end, it’s yet another chance to increase how much you can save.

Finding scholarship matches. Once children get closer to high school graduation, you can help them find scholarships. FastWeb and Scholarships.com are two popular sites among many that will help you search for opportunities. Many allow you to set up a profile for your child that may include interests, intended majors, and even preferred schools — data points that will be used to help match your child with scholarships.

It’s usually more cost-effective to save than borrow, of course. Every dollar you borrow can cost you more than that dollar once you add interest.

Many parents use a mix of sources to fund their children’s education. For example, you could save a third of your target, pay a third during your child’s time in college, and borrow the last third with federal student loans and private student loans.

Which Savings Plan Is Right for Me?

If you have your target goal and a plan to make regular contributions, you’re ready to weigh which investment vehicles will fit your needs. Here are some common savings tools.

529 Plans

The 529 college savings plan is a tax-advantaged account to save for higher education costs, and it has become popular with parents saving for college. Anyone, even non-family members, can set one up and make contributions on behalf of a beneficiary. Some details:

• Contributions to 529s are made with after-tax dollars, but they grow tax-free, and capital gains are tax-free as long as withdrawals are used to pay for qualified education expenses.

• Any withdrawals that are not used for higher education expenses may be subject to penalties and taxes.

• If your child doesn’t go to college, the funds still need to be spent on education to avoid taxes and penalties. But you have the ability to change the beneficiary of a 529 account to another family member.

This means that if your oldest child does not use the funds for college, you can change the beneficiary on the 529 to a sibling or even a family member in the next generation.

• If your child receives a scholarship for college, you can withdraw the amount of the scholarship from the 529 plan penalty-free. If you decide to withdraw it for another purpose, you’ll pay a 10% penalty, plus regular income taxes.

• Annual contributions to a 529 plan are not limited, but any amount you give the beneficiary will be part of your annual $19,000 gift tax exclusion for 2025. The IRS will let you (and your spouse, if you elect to split gifts) make five years of contributions at once without paying gift taxes.

• Many states offer these plans, so you’ll want to start by finding out if your state offers any tax incentives to participate in your own state’s sponsored plan. If you discover that your state does not offer additional tax benefits for contributions, you can shop around for the lowest fees.

Then there are 529 prepaid tuition plans, offered by a dwindling number of states, that allow parents, grandparents, and others to prepay tuition and mandatory fees at today’s rates at eligible colleges and universities.

• Currently, eight states offer them: Florida, Massachusetts, Michigan, Mississippi, Nevada, Pennsylvania, Texas, and Washington.

• Most state prepaid tuition plans require you or your child to be a resident of the state offering the plan when you apply. Most allow the funding to be transferred to a sibling.

• Qualified distributions from prepaid 529 plans are exempt from federal income taxes and might also be exempt from state and local taxes.

• The Private College 529, not run by a state, offers guaranteed prepaid tuition at many participating colleges and universities, with no residency requirements.

Coverdell Education Savings Account

A Coverdell education savings account can also be used to pay for qualified education expenses.

The annual contribution limit is $2,000. Contributions are made with after-tax dollars, but they grow tax-free, and withdrawals for qualified expenses are tax-free.

The account is limited to certain incomes. The current limit is a modified adjusted gross income (MAGI) over $110,000 per person or $220,000 if filing jointly.

UTMA and UGMA Accounts

A Uniform Transfers to Minors Act (UTMA) or Uniform Gift to Minors Act (UGMA) custodial account can be set up to pay any expense that benefits a minor. Here’s more intel on how these work:

• When your child reaches the age of majority, 18 or 21, depending on the state, they will be able to use the money for whatever they want, so many parents are wary of using these to plan for college. (However, the funds could become an investment plan for your child if they didn’t go to college.)

• The flip side is your child won’t be limited to just paying for education expenses and can use the money for living arrangements, a car, or other necessary purchases.

• There are no contribution limits for UTMA and UGMA accounts, and they can be funded with any combination of cash and investments. Annual gift tax exclusions apply.

• Because contributions are made with after-tax dollars, there are no taxes on withdrawals, but there may be taxes on capital gains.

What About Student Loans?

Students can have access to scholarships and grants, which can help make college more affordable. In addition, your student may have to take out federal student loans to make it to graduation day. You can also shoulder some of the load.

Parent PLUS loans can be one way to help your child afford college. They are student loans offered by the U.S. Department of Education, and parents become the borrower. Currently, you can borrow up to the amount of education expenses not covered by other financial aid. For loans disbursed on or after July 1, 2026, you can borrow up to $20K per year, or $65K total per student. You may be able to qualify even if you don’t have a good credit history.

Parent PLUS loans have a fixed interest rate, currently 9.08%, with a typical term of 10 years that may be extended to 25 years with another repayment plan or up to 30 years if you consolidate. For loans disbursed on or after July 1, 2026, repayment terms will range from 10 to 25 years, depending on the loan balance. However, unlike federal student loans, Parent PLUS Loans come with a fairly high origination fee — it’s currently 4.228%.

Even with savings, federal student loans, grants, and scholarships, your child may still have unmet needs. Private student loans, offered by private lenders, are often used to fill those gaps.

• Depending on your situation, student loan refinancing can also lower your monthly payment, especially if you qualify for a lower interest rate. Many online lenders consider a variety of factors when determining your eligibility and loan terms, including your educational background, earning potential, credit score, and other factors. However, if you’re lowering your monthly payment by extending your loan term, you may pay more interest over the life of the loan.

• With private parent student loans, you take responsibility for the loan. Another option can be undergrad private student loans that allow a cosigner. If you cosign, you and the student are both responsible for the loan.

• It’s important to know that federal student loans come with benefits, including income-driven repayment options and student loan forgiveness, that private lenders do not offer.

Recommended: Student Loans Guide

The Takeaway

Paying for a child’s college education involves two key things: saving early and consistently. Even so, most students will still end up borrowing student loans in order to pay for the many expenses of higher education.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Is it a parent’s responsibility to pay for college?

Generally speaking, a parent does not have to pay for college — parents are not legally obligated to cover tuition, fees, and other college costs. (One exception: Some divorce and custody agreements may include college payment requirements that parents must abide by).
However, the Free Application for Federal Student Aid (FAFSA) calculates financial aid eligibility based on parental income. If parents are not paying for college, a student needs to meet stringent criteria to be considered an independent student to qualify for need-based financial aid. Students whose parents are not chipping in can also turn to scholarships, grants, work-study programs or student loans to help pay for school.

What is the best way to pay for college as a parent?

One of the best ways to help pay for college as a parent is to open a 529 savings plan, which is a tax-advantaged account. Contributions to the account are made with after-tax dollars and grow tax-free in the account. Capital gains are also tax-free as long as withdrawals are used for qualified education expenses.

What parent income disqualifies you for FAFSA?

There are no income limits to qualify for federal financial aid through the FAFSA. Anyone, no matter how much their parents make, can — and should — submit the FAFSA. The amount of money you are eligible to receive will vary based on your income, but you may still qualify for grants and loans.

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SOSLR-Q225-048

Jun

2025

What Is Budget Billing?

By Timothy Moore | Budgeting & Goals, Family Finances, money | Comments Off

Table of Contents

Budget Billing Defined
How Does Budget Billing Work?
Does Budget Billing Save You Money?
Advantages of Budget Billing
Drawbacks of Budget Billing
What Happens If You Are Billed Incorrectly?
Can You Make Your Own Budget Billing System?
Alternatives to Budget Billing
FAQ

When your home energy usage peaks in the summer and winter, you could be surprised by a higher energy bill — and might have to scramble to cover the cost. Signing up for budget billing with your utility providers can eliminate these unexpected cost surges and make it easier for you to plan your monthly expenses.

However, budget billing may not be right for everyone. Below, we’ll explore what budget billing is, how it works, its benefits and drawbacks, and how to set up budget billing on your own — without any help from your provider.

Key Points

• Budget billing offers fixed monthly payments for utilities, avoiding cost spikes.

• These programs can simplify budgeting and reduce financial stress.

• Drawbacks include potential fees and underpayment risks.

• Year-end adjustments may be necessary.

• Energy efficiency programs and seasonal savings strategies are alternatives.

Budget Billing Defined

Budget billing is an alternative, optional payment program for utilities like gas and electricity. By opting into budget billing, you will pay the same predictable amount each billing cycle, regardless of how much or how little energy you actually used.

With budget billing, you can avoid the roller coaster-like highs and lows of utility billing — where costs can skyrocket during sweltering summers and frigid winters. For many, this makes building a monthly budget much easier.

To opt into budget billing, call your utility provider or check out the website for information about what programs are available.

How Does Budget Billing Work?

Energy prices and usage fluctuate throughout the year. This can make it difficult to anticipate what your gas, electric, water, and other utility bills will be each month. Depending on where you live and how harsh the seasons are, you might be in for a surprise on a few bills each year.

Budget billing eliminates those bill fluctuations. Instead, your utility provider analyzes past energy usage for your residence (usually over the prior 12 or 24 months) to estimate an annual total. The company then divides that total into 12 identical payments for the upcoming year.

Of course, it’s unlikely that your energy consumption will be exactly the same as it was the previous year. And with inflation rates and unpredictable weather events, the price of electricity, natural gas, and oil could increase over time. To account for this, your utility provider will track your actual energy usage throughout the year and calculate what you would owe (sometimes called a “true-up amount”).

If you overpaid for the year, the provider may reimburse you for the amount you paid above your actual energy use or they might issue you a credit on an upcoming bill. If you underpaid for the year, you’ll typically have to pay the outstanding balance or the extra will be folded into your upcoming bills.

Either way, the utility provider will use the past year’s worth of data to calculate a new monthly equal billing amount for the year ahead. Some providers may update bill amounts quarterly, rather than annually. Be sure to ask your provider exactly how their budget billing works.

Does Budget Billing Save You Money?

Budget billing does not save money on utility bills. It just makes your monthly payments more predictable. Some months, you will likely pay less than what you actually owe. In others, you could be paying more than what you would owe.

Having a predictable line-item in your budget may make it easier for you to handle other monthly expenses or keep you from needing to dip into your emergency fund to cover an especially high energy bill.

Factors That Impact Savings

So is budget billing worth it for eclectic and other utility bills? It can be. While the payment program itself doesn’t lower your energy costs, equal billing programs can still have a positive impact on your finances. Some factors to consider:

• Energy efficiency: If you become more energy-conscious after enrolling and reduce your consumption, you could end up with a credit at year-end.

• Rate fluctuations: If utility rates rise during your plan term, your fixed payments might be temporarily lower than actual usage costs.

• Personal budgeting habits: Budget billing can help you avoid missed payments or overdraft fees, potentially saving you money indirectly.

Advantages of Budget Billing

Budget billing can offer several benefits to households looking for financial stability and easier budgeting. Here’s how it may help you out:

Easier Budget Management

Paying a fixed amount to your utility providers each month makes it easier to build — and stick to – a monthly budget. With predictable bills, you’ll know how much money to set aside each month for utilities. You’ll also know how much is left for other expenses, as well as for savings and retirement contributions, debt repayments, and investments.

Less Financial Stress

If seeing an unusually high total on an email statement or paper bill can send you into a panic, you may appreciate the stability afforded by budget billing. Budget billing won’t save you money, but when you know what to expect each month, you might rest a little easier.

Reducing Late Payment Penalties

If you receive a high energy bill that you can’t afford to pay, you may have to dip into emergency savings, or just pay the bill late. The latter could result in late payment penalties.

With budget billing, you won’t have to worry about a spike in your monthly energy bills and may feel comfortable putting the bill on autopay, which further ensures you never miss a payment.

Predictable Monthly Expenses

This predictability of budget billing supports overall financial planning. It can be particularly helpful for individuals on fixed incomes, such as retirees or those relying on government assistance.

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Drawbacks of Budget Billing

As helpful as budget billing can be for some families, there are also some cons to consider:

Potential Fees

Some utility providers charge a fee to enroll in budget billing. On top of the startup fee, the provider may charge ongoing fees for the service. If that’s the case, budget billing will actually cost you more money than a traditional billing program. It’s a good idea to ask about fees before signing up for any new program.

Chance You Could Underpay

With budget billing, you can end up underpaying throughout the year and, in turn, owing money to your utility provider. This can occur if your actual energy consumption ends up being more than your budget plan accounts for, or if rates rise sharply during the year.

But if you didn’t pay enough each month, you’ll owe whatever remains. If it’s a sizable amount, you may have to rely on a credit card to cover other expenses or take money out of savings to pay off the bill. Many people enroll in budget billing to avoid such surprises to begin with, so this can be counter-productive.

Complacency

When you’re on a budget billing plan, you might get used to a relatively low electric bill in the summer and be tempted to blast the AC. Similarly in the winter, it could be tempting to get all toasty by cranking up the heat, since you won’t feel the financial repercussions of those decisions until much later.

If you don’t think you can be responsible with energy consumption without the threat of a high bill looming over you each month, budget billing may not be the right fit for you.

Possible End-of-Year Adjustment

At the end of the program — usually a year after it kicks off — the utility company will calculate what you actually owed for the year, based on your energy consumption. If you overpaid, you’ll get a credit on a future bill (nice!).

Recommended: Money Management Guide

What Happens If You Are Billed Incorrectly?

Mistakes can happen with budget billing just like with standard billing. It’s important to know how to handle billing errors to protect your finances.

Steps to Resolve Billing Disputes

While every utility company’s dispute process varies slightly, here are the general steps to take if you have an energy billing concern or dispute:

• Review your bill: Carefully examine the charges, usage history, and any billing adjustments.

• Gather supporting documentation: If you think you’ve been billed incorrectly, you’ll want to collect previous bills, meter readings, and anything else you feel supports your claim.

• Contact customer service: Reach out to your utility provider’s customer service department and clearly explain your issue or concern. Ask for clarification and, if necessary, request a correction or adjustment.

• File a complaint: If your issue doesn’t get resolved, you may need to involve an external agency, such as an energy ombudsman or a regulatory body like the Public Utility Commission.

Can You Make Your Own Budget Billing System?

If your utility provider doesn’t offer budget billing — or if you prefer more control — you can create your own system.

DIY Budgeting Strategies for Utility Bills

By handling budget billing yourself, you can avoid any potential fees the utility provider might have charged you. You can also create a budget billing system for all of your utilities combined. Here’s how:

• Track historical usage: Sign into your accounts and look at historical data to determine your average monthly cost for each utility. Combine those numbers to get your average total monthly utility costs. Use this amount when building your monthly budget.

• Set up a separate utility fund: Open a savings account (ideally a high-yield savings account) and deposit a fixed amount each month based on your average utility usage. If your first bill comes in and is less than your monthly budgeted amount, pay the bill and keep the extra funds in the account — you’ll need them later.

• Automate savings: Set up automatic transfers to your utility fund for consistent budgeting.

• Monitor your monthly usage: It’s a good idea to assess your usage every few months and adjust your contributions if it changes significantly.

This approach gives you the benefits of budget billing without relying on your utility provider.

Alternatives to Budget Billing

In addition to, or instead of, budget billing, there are other strategies to manage high utility costs and smooth out your expenses.

Energy Efficiency Programs

Many utility providers offer free home energy audits, rebates on energy-efficient appliances, and deals on HVAC systems and other home improvements. Reducing your overall energy usage can permanently lower your monthly bills.

Seasonal Savings Strategies

You can save on utility bills by lowering energy consumption during high-use seasons. Simple actions like sealing drafts around windows and doors, adjusting your thermostat, and turning off unused lights and electronics can lead to significant savings. For more sustained reductions, consider upgrading to LED lighting, installing a programmable thermostat, and adding insulation to key areas like the attic, walls, and crawl spaces.

The Takeaway

Budget billing is a helpful tool for households that want more predictable utility payments. While it doesn’t reduce your energy costs directly, it offers peace of mind, eases budgeting, and helps prevent missed payments. However, there are some downsides to consider. These include potential fees, underpayment risks, and the need for year-end reconciliations.

Before enrolling in a budget billing program, it’s a good idea to review the pros and cons and understand how it can affect your finances each year.

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FAQ

Do all utility companies offer budget billing?

Not all utility companies offer budget billing, but many do — especially larger electric, gas, and water providers. Availability often depends on your location, the specific utility company, and your account history. Budget billing is typically offered to customers with a good payment record and at least 12 months of usage history. To find out if your provider offers this option, check their website or contact customer service directly for eligibility requirements and enrollment details.

Am I better off budget billing or not?

Budget billing can be helpful if you like a predictable utility bill each month. Knowing what you’ll spend may make it easier to budget for other expenses. However, budget billing does have its drawbacks, especially if the utility provider charges a fee for the service.

Can I budget bill for other areas of my budget besides utilities?

Yes, while budget billing is most common for utilities, you can apply similar strategies to other budget categories. For example, you can set aside a fixed monthly amount for irregular expenses like car maintenance, subscriptions, or annual insurance premiums. This method — often referred to as a “sinking fund” approach — helps smooth out large or seasonal costs over time, preventing expense spikes. Budgeting apps and spreadsheets can help you track and manage these monthly allocations effectively.

What happens if my actual energy usage is much higher than estimated?

If your actual energy usage exceeds the estimate used for budget billing, you’ll typically have to pay the difference during a reconciliation period — usually at the end of the billing year. Your utility provider may also adjust your monthly payment going forward to reflect your higher usage. While budget billing can help avoid seasonal spikes, it doesn’t eliminate your responsibility for actual costs, so it’s wise to monitor your usage and be prepared for possible adjustments.

Can I cancel budget billing if it doesn’t work for me?

Yes, most utility companies allow you to cancel budget billing at any time, though the process may vary. When you cancel, you’ll usually be billed for the difference between what you’ve paid and what you’ve actually used. This could result in a credit or a balance due. Be sure to ask your utility provider about any specific terms or timing considerations. If budget billing no longer aligns with your financial needs, switching back to regular billing is usually simple.

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Jun

2025

Unexpected Wedding Expenses to Watch Out For

By Pam O’Brien | Budgeting & Goals, Family Finances, Life & Career, personal_loan | Comments Off

It’s easy to get lost in the excitement of your wedding and focus on the fun parts, like trying on dresses. But before you get too far into planning, it’s a good idea to take a breath and crunch a few numbers.

In addition to being a joyous occasion, a wedding can also be a significant expense. While the price tag can vary widely depending on the level of luxury you go for and where you live, the median cost of a wedding is $10,000, according to SoFi’s most recent survey.

Besides the basic expenses like the dress, venue, catering, and rings, there are also lots of unexpected wedding costs, both small and large that can really add up. Being aware of these costs can help you plan ahead and save appropriately.

Key Points

• Weddings have hidden costs beyond the main expenses; these can add hundreds or thousands of dollars to your total expenditure.

• Budget for beauty treatments, gifts, and pre-wedding parties.

• Consider insurance for venues.

• Factor in postage for invitations and cards.

• Plan for lodging and transportation costs.

1. Bachelor and Bachelorette Parties

Since these events happen in advance of the wedding, it’s easy to forget to include them in your initial budget when saving for your dream wedding. But planning for these festivities is crucial, since they can come with a hefty price tag.

Guests spend an average of $1,300-$1,500 on these parties, according to the wedding site Joy.com. When travel is involved, the cost can go up even more.

Sometimes the host and guests will opt to cover the cost of accommodations and activities for the bride and groom, but that’s far from guaranteed.

And even if your costs are partially covered, you may still need to chip in for your airfare, meals, and incidentals.

2. Marriage License

In the whirlwind of wedding planning, it can be easy to forget about some of the more technical steps of getting married.

You’ll need to apply for a marriage license, of course, typically with the relevant county clerk’s office. Some states have a fixed fee, while others vary by county or city. The fees can range from about $20 to $110.

3. Insurance

You know that you’ll need to pay for a wedding venue, but you may not be aware that many of them require you to also purchase insurance. These policies typically cover damage to the venue or injuries to guests or vendors.

Some wedding insurance policies also reimburse you if something goes wrong, such as a venue becoming unavailable or a vendor not showing up. Wedding insurance costs range from about $75 to $550 for basic coverage, but the price can be higher for more expensive events.

4. Postage

If you’re mailing correspondence to your guests, don’t forget that you’ll need stamps, too. These can add up when you consider that you may need them for save the date cards, invitations, RSVP envelopes, and thank you cards.

As of June 2025, a postcard stamp costs $0.56, and a First-Class Forever Stamp for an envelope costs $0.73. Say your save the date is a postcard and your invitations, RSVPs, and thank-you notes use envelopes. Mailing these items to 150 guests in the U.S. could cost hundreds of dollars.

5. Alterations

The perfect wedding-day outfit requires not only paying for a dress and a tuxedo or suit, but also likely shelling out for alterations.

Some stores and custom tailors include the cost of alterations in the price of the garment, but others don’t. For a wedding dress, changes such as hemming the gown, adding lace or beading, or taking it in can cost anywhere from $150 to $800 or more.

6. Beauty Treatments

You’ll want to look your best on your big day, and that likely requires spending some cash. Hair and makeup for brides costs $290 on average in mid-2025, and some stylists charge extra for a trial. If you’re paying for your bridesmaids to get hair and makeup done as well, the cost could also be around $230 per person for both services on average, according to The Knot’s latest data.

Brides may also choose other beauty treatments, such as facials, manicures and pedicures, application of false eyelashes, and body art, like mehndi for Indian brides. Costs can run from $25 to hundreds of dollars.

The groom may also choose to pay for services like a haircut (an average cost of $30 to $70) and professional shave.

7. Gifts

You are probably expecting to receive gifts from your guests, but don’t forget that you may want to give some out, too.

It’s customary to give thoughtful thank you gifts to your wedding party, with especially nice presents going to the maid of honor and best man. Expect to spend $75 to $150 for each bridesmaid or groomsman.

You may also want to give tokens of appreciation to your parents and grandparents, particularly if they helped pay for the wedding. If you have friends who helped out, perhaps by doing a reading at the ceremony or serving as an officiant, you may want to thank them with a gift as well. And you’ll also want to give a gift to any children participating in your day, such as a flower girl or ring bearer.

Last but not least, it can be meaningful to exchange gifts with your new husband or wife. By including these significant items in your budget, or by exploring the option of a wedding loan (a kind of personal loan) to help cover them, you can make sure you can afford them when the time comes.

8. Wedding Weekend Events

Your initial wedding budget may not have included other gatherings you’re hosting, such as the rehearsal dinner, welcome drinks, or a brunch.

Depending on the number of guests, all of these events can cost a pretty penny. The average cost of a rehearsal dinner is around $2,700 as of 2025.

9. Lodging and Transportation

You’ll probably be paying for a hotel for one or more nights if your wedding isn’t in your hometown, or if you just want to stay somewhere special.

You also likely won’t want to drive yourselves around on the big day. If that’s the case, factor in the cost of a limo or fancy bus to get you to and from the wedding locations. The average cost of a wedding limo is $75 to $150 an hour.

If you’re providing transportation for guests as well, expect the amount you spend on transportation to go up significantly.

10. Rentals

More likely than not, your wedding venue and caterer won’t provide everything you need. You’ll typically need to pay extra to rent linens, flatware, and glassware. You may also want to rent other items, such as heating lamps, a cake stand, string lights, candles, or a photobooth. These items can add hundreds of extra dollars to your costs.

Recommended: Guide to Unsecured Personal Loans

Financing Your Wedding

So how do you afford all the wedding expenses — both the ones you plan for and the hidden ones that crop up? Here are some ideas for financing your dream wedding.

Budgeting and Saving

The first step is to make a budget, but you’ll want to be sure to avoid some common budgeting mistakes. Add up all the anticipated wedding expenses, including the lesser-known charges above. Then, you and your partner-to-be can track your monthly expenses and income and see how much you have left over to save each month.

If that isn’t enough to get to your goal, see if you can find ways to reduce living expenses or earn extra cash. Your financial institution may offer a financial tracker to help you avoid going over budget — and help you save for the big day.

Trimming Expenses

If your wedding budget is more than you can afford, you may be able to find ways to lower some of the costs. For example, perhaps a friend can officiate instead of paying a professional.

Family and friends may be able to help you create DIY paper goods, bouquets, and centerpieces. Or you could send digital Save the Dates and invitations, rather than paying for printing and postage. Some couples even self-cater their weddings. There are a number of creative ways to save money.

Personal Loans

Along with saving and cutting costs, a wedding loan, which is a type of personal loan, could help finance your wedding. Borrowers may qualify for loans with interest rates that are generally lower than the interest rates charged by credit cards.

Personal loans are flexible and may be used for almost any purpose, so they can help you cover wedding expenses that come up. It can take just a few minutes to apply for a personal loan online, and these loans usually have fast funding and flexible repayment options.

The Takeaway

Most people planning a wedding know about the major expenses: the dress, the rings, the venue, food, and music. But the often forgotten extras, like hair and makeup, rehearsal dinner, and bridal party gifts can add hundreds to thousands of dollars to your budget. You’ll want to include these items in your budget so you can save appropriately or consider the right amount to borrow, say via a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Is $5,000 enough for a wedding?

While recent research suggests that $10,000 is the median cost of an American wedding, you can plan a wonderful wedding for $5,000. Ways to economize include having the wedding at your or a loved one’s home or in a park, having a pot luck meal, and asking friends and family to help out (say, but helping arrange flowers as centerpieces or play music).

What are some unexpected wedding expenses?

Some commonly overlooked wedding expenses include postage for Save the Date cards and invitations, hair and makeup for the wedding couple and bridal party, the cost of a rehearsal dinner, gifts for the bridal party, and the cost of a bachelor/bachelorette party if friends don’t pick up the tab.

How do people afford weddings?

People typically afford weddings by a combination of saving, receiving help from family, and borrowing via credit cards or loans.

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