How Much Money Should I Save a Month?

We’ve all got dreams. Maybe yours is drinking from a coconut on a beach in Bora Bora during your honeymoon, raising a family in a warm and comfortable home, or biking through the countryside of France as a retiree, blissful and excited for the next phase of your journey.

Maybe you’d just like the ability to afford healthcare. Or you’re stashing away funds that will help your (future) kid access higher education. Perhaps it would be enough to be able to go out to eat with friends without worrying about the bill at the end of the meal.

No matter where you are in your financial journey, you probably have dreams for your future. And more than likely, at least some of those dreams cost money.

But without a plan of action, dreams are just that—dreams. Which begs the follow-up question, “How much money do I need to make my dream a reality?” And even more specifically, “How much money should I save each month?”

With savings goals of all sizes and forms, it can help to consider these goals in terms of what you can accomplish within manageable time frames, like a month.

Here are some ways to calculate how much money you should be saving each month, along with tips and tricks for working towards your savings goals.

Define Your “Why?”

It’s difficult to know how much money you need to save if you don’t know what you’re saving for. For many people, the first step in answering the question, “how much money should I save each month?” is to define and outline each of your savings goals. Ask yourself “why” you want to save money and for what purpose.

There are some savings goals that are more universal than others. For example, most people will want to have some sort of emergency fund. An emergency fund is exactly as it sounds—a place to hold cash in the event of an emergency such as a job layoff. Additionally, most people will need to save money for retirement.

After emergency savings and retirement, goals may start to look different from person to person. One person may want to save up for a down payment, another may want to save up to start a business, and yet another may be interested in college savings. Write these down and spend some time thinking about them in order of importance.

Calculating the Basics

A rule of thumb that is often used in personal financial planning is the spending and savings breakdown of 50/30/20. Using this guideline, a person would attempt to spend 50% of their income on necessities, 30% on fun spending, and 20% on savings goals.

Exactly how you divvy up the 20% depends on your financial priorities. If you can’t start with a 20% savings rate right away, start with what you can.

To use the 50/30/20 method to determine how much you should save, start by calculating 20% of your monthly after-tax pay. For example, if you earn $3,000 each month after taxes, $600 would go towards savings or other short term financial goals.

A more precise way to calculate savings goals is by dividing the total cost of each savings goal by the number of months available to save for that goal. For example, a person that wants to save $10,000 for a down payment in five years would need to save $166 per month. A person that wants to save $400 for holiday presents and festivities each year would want to stash $33 per month into their holiday fund.

Distilling big savings goals down into a monthly figure can be an eye-opening experience. Still, it’s an important exercise in knowing what is possible within your personal financial framework, and will likely aid you in prioritizing savings goals. It may even provide you with some extra motivation to work on your spending.

What to Work on First?

Even though each human is unique and therefore so are everyone’s individual financial goals, there is a financial order of operations that makes sense for many people. For example, many folks may want to prioritize paying off high-interest debt, like credit cards and student loans with interest rates of 7% or more.

Also, it is generally considered to be good financial practice to have a well-stocked emergency fund and to prioritize retirement savings because it could be the largest expense in a person’s lifetime. At the very least, savers will likely want to take advantage of company matches if it is offered in their workplace retirement plan.

With high-interest debt paid, an emergency fund, and a solid start to retirement savings, you’ll have a foundation from which you can build other savings goals. This is when the process starts to get a bit more personal, and you choose your own (financial) adventure. For some folks, this may be where saving gets more fun.

Build Your Savings Infrastructure

At this point, you are ready to set up savings accounts to reflect your savings goals. Exactly what accounts you’ll need will depend on your personal goals. If you are saving up for retirement, you’ll likely want to use a designated retirement account, like a 401(k) or IRA.

Retirement accounts have tax advantages, and that’s why many people prefer to save for the long-term within a retirement account as opposed to a savings account.

For an emergency fund or for other savings goals, you may still want to consider opening a separate account to store your savings. With a cash management account like SoFi Money® you’ll pay no account fees (subject to change).

This way, your money is also working towards your savings goals. A great way to make sure you stick to a money-saving plan is to automate the process. After giving your paycheck enough time to settle in an account, you might set up an automatic transfer to the savings account(s) you’ve established.

For those using a workplace retirement account like a 401(k), lucky you—money is automatically moved from your paycheck and into the account. You’ll simply need to select a percentage of your salary to “defer” to your retirement account.

If keeping all of your accounts and savings goals straight gives you a headache, consider using an app like SoFi Relay®. SoFi Relay pulls information from all of your accounts to give you one cohesive picture of your finances. Think of it as a budgeting tool and net-worth tracker all in one.

SoFi Relay works with all of your banks. When used in conjunction with SoFi Relay, SoFi Money can help savers step up their game.

Users will have access to comprehensive budgeting tools through the SoFi Money dashboard. Because your savings goals are worth having the best tools at your disposal.

Ready to make your money dreams a reality? Open a SoFi Money cash management account today.

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.
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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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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What is a Financial Coach?

A financial coach works with clients to help them manage their money. These clients typically have challenges that have kept them from effectively managing their finances in the past, so the coach will usually work with them to help them create a financial plan that fits their needs and goals, and also help them to develop healthy, long-lasting, finance-related habits.

(In contrast, there are also financial advisors. They, instead, typically recommend investments for their clients and help them to manage their investment portfolios.)

The coaching process typically includes taking a deep dive into a client’s income, debts, and savings, and then creating a budget that will work for this person’s specific situation.

Accountability is typically built into the process—so, rather than the coach managing the person’s finances, the client himself or herself is being taught how to make responsible financial decisions.

So, if someone has money-related challenges that are preventing him or her from effectively moving towards financial goals, then that person may decide to work with a financial coach, perhaps to pay off debt, create an emergency savings fund, stabilize their finances, and to create and follow a budget and overall financial plan.

Pros and Cons of Hiring a Financial Coach

If you’ve struggled to create a financial plan that works well for you, then using an experienced coach who helps clients to get measurable results could be a real plus for you. If you sit down with a coach, one-on-one, this means you have the opportunity to create a plan that’s customized to your specific situation, including your challenges and opportunities.

When a coach focuses on accountability, it could give you the opportunity to consistently move towards your goals within a structure that’s tailored for you. When you have an experienced pro at your side, you can benefit from that experience, and work towards making lasting, positive changes in your financial strategies and overall situation.

When any new challenges arise, you can problem-solve together, confident in knowing that you have a knowledgeable professional brainstorming with you. Your coach may very well be able to take what seems like a complex problem and simplify it, keeping you on track for your goals.

And, perhaps best of all, working with a financial coach can provide you with the education, tools, and resources you need to make smart financial decisions now and in the future, empowering you in your ability to move ahead, financially.

One con is that you’ll need to pay for the services of a professional finance coach, which may seem counterintuitive if you’re already struggling in one or more aspects of your finances. If you don’t feel ready yet to commit to the process, then it may not make sense to start with a financial coach just yet.

It’s also important to find the right financial coach. Your coach’s personality, methods, and coaching style should resonate with you for best success.

Finding the Right Coach

If you decide that hiring a financial coach is the right move for you, be clear about what you need from a financial mentor. Be honest about your own financial strengths and weaknesses, and chart out your goals.

Are you, for example, struggling to save enough money for a down payment on a house? Or do your credit card balances keep going up? No two situations are the same so, before you go about choosing a financial coach, be clear about what help you need.

Before you begin considering candidates, also keep in mind that your coach should help you work towards your goals, not have a different agenda in mind.

Then, you can begin to create a list of potential candidates. When going outside your personal circle, it can help to ask friends and family for referrals, because personal references are often more reliable than simply picking someone out of a directory or through a Google search.

Once you have a list of names, it can help to reach out to each candidate of interest to see which ones seem like a good fit.

Some questions to consider asking potential mentors include:

•   How long have you been a coach?
•   What’s your business specialty?
•   What’s your greatest financial success/failure?
•   Have you ever been in my situation? What did you do about it?
•   What is your availability?
•   What’s your plan to help me reach my goals?

Use these answers to make the right choice for your needs. It can also help to check to see what online reviews say about the candidates you’re seriously considering.

If you see a negative comment, see how it resonates with you. If, for example, someone says the coach doesn’t have a good sense of humor, that may or may not matter to you.

Once you begin working together, listen carefully, ask questions if you don’t understand something, take good notes, and then follow the suggestions. If, after you’ve started with a coach, they don’t seem like the best match for you, then you have the option to back off.

Levering Technology to Track Finances

Here’s another option. If you discover that you really don’t have the budget to hire a professional coach and you don’t have access to a mentor in your personal network, then you could consider using technology to track your finances.

Whenever possible, you could set up auto payments, which means that you don’t have to worry about making late payments. This can allow you to put paying your monthly expenses on autopilot.

You can also set up auto payments to a savings account, perhaps intended for a down payment on your house or for your child’s education, or to put money towards your retirement savings.

Another thing to consider in your effort to simplify your finances—when you can, go paperless. When you do this with bills, bank statements, investment accounts, your taxes, and so forth, this information is just a couple of clicks away.

This can help to eliminate the stress of misplacing important paperwork. Apps that help with transaction receipts include Expensify , Smart Receipts , and Zoho Expense . To file paperless statements, consider FileThis .

You can also use SoFi Relay® to track your finances at no cost and, with this application, it’s easy to see what you own, what you owe, and what you spend—all in one convenient place.

SoFi makes it easy for you to know where you stand and how to hit your financial goals, allowing you to conveniently see the big picture. How?

You can connect all of your accounts on one convenient mobile dashboard, giving you a bird’s-eye view of your balances. You can keep track of your cash flow, monitor your spending habits, and find ways to save money, all in real-time.

With SoFi Relay, you can also talk one-on-one with a financial planner. Together, you can set ambitious goals—meaning, multiple goals—for your money (and your life!).

SoFi Money

When organizing your finances, you could also think about SoFi Money®. This cash management account allows you to spend, save, and earn all in one place.

SoFi doesn’t charge any account fees. This means we don’t charge the ones you’d expect, and definitely not the ones you wouldn’t. Plus, with SoFi Money, withdrawing cash is fee-free at 55,000+ ATMs worldwide.

We work hard to give you interest and charge zero account fees. With that in mind, our interest rate and fee structure is subject to change at any time.

Signing up for SoFi Money is easy, and you can open an account in just 60 seconds. Plus, this account is FDIC insured up to $1.5 million, with additional fraud protection provided. Using your smartphone, you can make mobile transfers and photo check deposits, and access customer service.

Using P2P transfers, you can send money to anyone, right from your app. When you send funds to SoFi Money holders, they’ll receive it instantly.

Does SoFi Money sound interesting? Get started today!

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.
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 Relay is offered through SoFi Wealth LLC, an SEC-registered investment advisor. For more information, please see our Form ADV Part 2A, a copy of which is available upon request and at . For additional information on SoFi Wealth LLC, SoFi Relay, and products and services of affiliates, see
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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7 Tips for Improving Your Financial Health

Poor financial health can linger like a stubborn cold that just won’t go away. Plenty of fluids and rest might get someone back in fighting shape, but there’s no single cure that’ll bring someone’s finances back to good standing. However, that doesn’t mean throwing in the towel.

Staying in good financial standing means a stronger credit score, peace of mind, and often better terms when applying for loans in the future.

Improving financial health takes time, effort, and often multiple strategies. Take a cue from these seven tips below to help kick that financial cold once and for all.

Making a Budget

For most, the idea of budgeting brings a sense of dread. Budgets conjure the image of fewer meals out, clipping coupons, and generally saying “no.” But in reality, a budget is a tool for efficiency.

It could help determine how much to spend and save in a month, and might actually create a sense of freedom. It might help eliminate that stomach ache that arrives each month when the credit card bill comes in the mail. One way to start budgeting is to collect the previous month’s spending in a single place. Think of it like the Marie Kondo method.

Pull everything out all at once into one big pile to get an idea of each month’s spending patterns and income—taking note of multiple bills for rarely used streaming services might “spark” a budgeter to unsubscribe and save a few bucks a month.

This spending information could be found in bank statements or credit card bills or might need to be logged manually depending on how much cash a person uses. Budgeting might include the following financial information, but this is in no way an exhaustive list:

•   Credit card statements and debt
•   Education loans
•   Car loans and additional expenses, including fuel, insurance, etc.
•   Health care insurance premiums
•   Rent/mortgage, including home or renter’s insurance
•   Utilities
•   Monthly food expenses
•   Child care, child support, or related family obligations
•   Additional transportation (excluding a car)
•   Savings/investments, such as a 401(k), an IRA, or automatic savings deductions
•   Average monthly income from pay stubs or bank account statements

With this information, a budgeter can get a general sense of net expenses month over month. Do months generally net out positive or negative? Is there money left over or is it a close call?

This might be the toughest part of the budgeting process, and once it’s in the rearview, creating a simple budget moving forward could make all the difference. Every budget will look different for every person, but one guideline to keep in mind is the popular 50/30/20 budget.

This budget dictates that:

•   50% of post-tax income goes to essential spending. This includes finances that are required, such as rent/mortgage, groceries, health insurance, and utilities.
•   30% of post-tax income goes to discretionary spending. This is spending that a person could cut if they were in a pinch. It includes things like dining out, Netflix memberships, and fitness classes.
•   20% of post-tax income is dedicated to savings. This money is put toward future spending, whether that be retirement contributions, emergency savings, or larger loan payments.

Sticking close to the 50/30/20 budget at the outset could help illuminate blind spots in spending. It might reveal that a budgeter is spending too much on dining out, going far beyond the 30% discretionary spending.

Or it may show that essential spending, like astronomical monthly rent, doesn’t leave much wiggle room for the 20% savings. Expenses and spending habits might wax and wane with the seasons, but that’s no excuse to keep a person from establishing a budget.

It’s a good idea to start with a budget that’s simple to maintain and easy to stick with but still helps manage money and improve financial health.

Paying Off Debt

The amount of debt a person carries can have a pretty big impact on their overall financial health. Thirty percent of a person’s credit score consists of how much they owe in relation to their credit limits.

To stay in good financial health, it’s a good rule of thumb to use no more than 30% of the credit available.
If a borrower is trending above that 30% limit, they might make paying down debt a top priority to improve financial standing.

There’s no one right way to pay down money owed, but these are some popular strategies that could help eliminate debt faster:

Snowball Method

The snowball method starts small and grows as it picks up momentum. Debtors pay the minimum on all loans, regardless of interest rate and amount. From there, they’ll put any surplus cash in their budget toward paying off their smallest debt.

Once the smallest debt it paid, they’ll roll the amount of that monthly payment into the next smallest balance. This method continues, growing monthly payments toward larger loans as the smallest are eliminated. This method makes for wins early on, knocking out the little guys first, and growing toward those large or intimidating balances.

Avalanche Method

The avalanche method is nearly the reverse of snowball, focusing on interest rates of loans instead of balances. Budgeters ignore the total amount of each loan and prioritize repayment of the highest interest rate loan first.
Like the snowball method, they’ll pay the minimum on each loan every month, but they’ll put the surplus of their budget towards the high-interest bill.

Once the highest interest rate loan is paid down, budgeters will focus on the next highest interest rate, and so on. This method tackles the intimidating high-interest rates, then downshifts to the smaller loans. Like an avalanche, the method starts big, then peters off as it becomes easier to pay off low-interest loans.

Fireball Method

When someone can’t choose between the snowball and avalanche method, the debt fireball method may be the answer.
It’s a hybrid between the two strategies above, asking budgeters to sort between good and bad debt and focus on repaying bad debt first. Bad debt, like credit card debt, is debt that generally has a high-interest rate (above 7%).

Good debt, on the other hand, are things like a mortgage or student loans, they generally have lower interest rates and are good investments to make.

The general idea: Rank the bad debts from small to large based on balance. Make the minimum monthly payments on each debt, but use extra cash to pay off the smallest “bad” debts first.

Once the smallest is knocked out, pay attention to the next smallest, and so on until all bad debt is burned up. Then, budgeters need only to pay off “good” debts normally.

Without a plan to properly tackle it, debt can be crushing. However, once a person decides to torch, roll, or overwhelm their loans with a payment method, they’re in control.

Curbing Spending Habits

When spending money is as simple as swiping a card or tapping a phone, it’s no wonder impulse spending is out of control. While a couple of lattes or convenience store trips don’t feel expensive at the point of sale, they add up over time.

Prime orders make it easy to drop $20 here and $40 there, without leaving the comfort of home.
One way to curb these frivolous spending habits is instituting a “hold” period on all purchases.

Instead of hitting “buy now,” shoppers could consider waiting 24 hours, or even 72, before completing the purchase. Creating a waiting period eliminates that instant gratification dopamine rush and allows for logic and reasoning to take hold.

After the allotted waiting period, shoppers can return to the online cart or boutique to reconsider the purchase. They might just realize they don’t need it.

Automating Savings Transfers

Tackling financial health can be exhausting, and it wouldn’t be surprising if some habits fell through the cracks in the process. There’s a lot to keep track of, and that’s where financial automation can lend a hand.

Setting up an automatic transfer each month from checking to savings account means even the busiest budgeter won’t have to remember to do it manually.

Transferring an amount, even if it’s small, into saving each month might mean there’s less of a temptation to spend. Remember, saving a little is better than saving nothing at all. Making it automatic is one less thing for a busy person to remember.

Paying Bills on Time

Thirty-five percent of a credit score is based on payment history—it’s weighted more than any other factor. When it comes to improving financial health, paying bills on time can have a pretty significant impact.

One way budgeters can ensure timely payment is automating bill payment through a checking account or adding bill due dates to personal calendars. Even if a person can’t afford to pay a bill in full, they should pay the minimum amount due to avoid a penalty.

Starting an Emergency Fund

Only 40% of Americans say they’d be able to cover an unexpected expense totaling $1,000 or more. Without an emergency fund, people are forced to dip into their retirement savings or rack up credit card debt when unexpected finances arise.

A savings account could be set up using an automated savings transfer with a goal of saving $1,000 to start. This probably won’t happen overnight, and that’s okay. Even the smallest savings can build up over time.

Once a budgeter has $1,000 socked away in a savings account, they could start thinking big. With an eye on monthly expenses, they could aim to accrue three to six months’ worth of expenses in a savings account. It’s important these savings stay liquid for easy access in the event of an emergency.

Building up a robust emergency nest egg can create a sense of well-being when it comes to financial health. Budgeters can rest easy knowing they have savings set aside for whatever life throws their way.

Staying up to Date on Credit Reports

Checking a credit score is equivalent to an annual check-up at the doctor’s office. While negative factors such as late payments and collections can stick around on a credit report for up to seven years , they’ll impact a score less and less as time passes.

Pros recommended checking on credit scores at least once a year or more to stay on top of financial health. Federal law allows for one free credit report every 12 months, but budgeters looking to go above and beyond can also try major credit bureaus Experian , Equifax , and TransUnion for free annual credit reports, but not scores. You could also use a credit score monitoring tool like SoFi Relay.

Checking in on credit score regularly will give budgeters not only a sense of how their efforts to improve financial well-being are going, but they’ll also make it easier to find and dispute errors if they arise.
Think of regular check-ins on credit like progress reports on a person’s financial health.

Tracking Financial Wellness with SoFi Money®

Tackling all the steps to improve your financial well-being can be overwhelming, but with a SoFi Money® cash management account, you can track all your spending and saving with a single dashboard. You could set up automatic transfers to savings accounts for different goals, all while earning competitive interest.

With SoFi Money®, it’s easy to save, spend, and earn all in one place. Get started today.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.
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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Tips for Creating a Financial Plan

It’s time to talk about the big picture for a minute, so close your eyes and imagine your future. What does it look like? Are you sitting poolside, sipping margaritas while someone else takes care of your property?

Maybe you’re in an apartment at the heart of New York City, within walking distance to all the greatest shows and restaurants. Or maybe you simply want to have enough money to fully retire—no part-time gig needed.

How to Create a Financial Plan

A financial plan is not just another word for budget or debt-reduction plan. It’s the long-term roadmap that could help make your vision a reality. The smaller pieces, like budgets and debt-payoff strategies, are tools to help you get there.

And whether you sit down with a financial planner or do it yourself, putting pen to paper and writing down not only what you want, but how you plan to get it, could help take it out of your head and make it real. (If you’re the creative type, you might even consider a vision board.)

Setting Your Goals

While everyone’s financial goals will be different based on their individual situation, these three tend to rise to the top of the list:

•   Having an emergency fund. Many recommend a goal of three to six months worth of living expenses. It might help cover those unexpected expenses that show up, or float you through a loss of income, without wrecking your plan.
•   Growing your 401(k) or other retirement accounts. Contributing at least as much to your 401(k) that your employer is willing to match at 100% is akin to doubling your money. Combine that with the magic of compound interest, and you could see your balance grow at a nice pace.
•   Getting rid of high-interest debt. It’s no secret that eliminating your credit card debt could not only save you thousands of dollars in the long run, it could also help improve your credit score.

While those are certainly important, they’re not the entire list. Some other financial goals that might make sense to you could include:

•   Getting (and keeping) good credit. If your dreams include large purchases, or even starting a small business, a bad credit score can be a deal-breaker. The minimum number needed to buy a home, for example, currently sits at around 620 for a conventional loan. (If you’re struggling with bad credit, there are ways to help increase your score.)
•   Paying off your student loans. If this is one of your financial goals, you likely share it with more than 44 million of your closest friends. And while a student loan is generally considered “good” debt, it still accrues interest. It’s also a potentially large chunk of money that could go toward other areas of your plan.
•   Living within your means. Conventional wisdom suggests you shouldn’t borrow more than you can afford. If you think you may need to borrow money, you could begin with a reality check to decide if you can afford to pay off the debt. If not, you may want to consider saving money until you can.
•   Saving for your kids’ education. No one can predict what the higher-ed landscape will look like when your kids are ready to start filling out applications. But we do know that the average costs for tuition and fees for a public college are hovering at just over $10,000 and are currently increasing at a rate of 3.1% over inflation .
•   Growing your investment portfolio. This might include items like your 401(k) and IRA, but it can also mean a foray into the world of stocks and mutual funds. Becoming a smart investor can not only be a goal by itself, but a way to achieve many of your other goals.

The goals that you choose as part of your financial plan may be on vastly different timelines, and you may need to accomplish one before you can move on to another.

One way to stay focused is to remember that you’re in it for the long haul, and huge changes probably aren’t to happen overnight (unless you win the Powerball, of course.)

Understand Your Resources

Knowing exactly what you have to work with might be one of the most important keys to building a plan that works. To put the entire puzzle together, though, you’ll need to find all the pieces.

One way to get started is to gather up all your paper and electronic bank statements, billing accounts, and portfolio documents. (You might also consider storing all your passwords in one place while you’re at it.

Because, let’s be real, remembering all your logins might be the hardest part of this whole process.) So, what are you looking for? The details on where your money is, how it’s moving, and whether it’s working for or against you. This might include:

•   Income: Salary, investment income, alimony, monetary gifts
•   Expenses: Bank debits, monthly billing statements, and other sources of everyday spending
•   Assets: Savings accounts, home equity, or physical items you own (your house, car, collectibles, etc.)
•   Liabilities: Credit card debt, student loans, mortgage(s), and any other sources of debt

The next step—categorizing spending—might be one of the most challenging due to the ever-changing nature of monthly expenses. (But you’ll likely thank yourself for putting in the work later.) An app like SoFi Relay® can give you a birds-eye view of your finances and let you track expenses all from one place.

However you choose to organize your finances, you might want to consider a method that feels natural rather than trying to force yourself into a pre-set structure. You might be more prone to let all your hard work go idle if you just don’t like the system.

Analyzing Outcomes & Exploring Alternatives

If the organization is the outline of your financial puzzle, then creating and analyzing your working plan is like filling in the center. If a piece doesn’t work one way, you can turn it around and try something different.

For example, if your 401(k) continues to grow at its current rate, and you continue to contribute the same amount each month, how much will you have at age 65? What if you push your retirement until age 67, or increase your risk-tolerance on your retirement accounts?

Or, if your debt will take too long to pay off using the snowball method, might another strategy work better? You could keep an eye out for areas in your plan that fall especially short and consider giving them some extra TLC.

With a lot of diligence and “if this, then that” tinkering, you may soon find yourself looking at a realistic, workable financial plan.

Looking for Help If You Need It

But if the picture just isn’t coming together, don’t forget that DIY doesn’t mean do it alone. If you look around, you’re likely to find quality, no- or low-cost expert advice that could help ensure you’re on the right track.

Your employer may offer access to planning tools, for example, as part of their employee benefits package. A number of low- or no-cost services may also be available to you, such as the Association for Financial Counseling and Planning Association .

And, if you become a SoFi member, you’ll have complimentary access to financial planners.

Implementing the Plan

Did you think you’d get through an entire article on how to make a financial plan without one mention of the “b” word? Here it is—the part where you create a budget that helps you implement your plan.

If saving is your ultimate goal, one helpful way to create a solid budget is to track every cent to the penny. Understanding your spending habits could be an effective way to control them.

You might also want to stick to some of the basic tenets of personal finance, like paying your bills on time, keeping one eye on your credit report, and choosing your financial institutions wisely.

You could get your money growing quickly, for example, by setting up a SoFi Money® cash management account.

Monitoring and Reviewing

It’s been a few months since you implemented your financial plan, and so far, so good. But things may have changed a bit.

You paid off one credit card, so you need to reallocate that payment to the next debt. Or, a goal that used to be at the top of your list isn’t so important any more.

Reviewing your plan can mean not only making adjustments, but simplifying. This can include automating any new payments, consolidating new debts, or opting out of paper statements to reduce clutter.

Plus, having the right accounts can go a long way toward helping a person achieve their financial goals. Learn more about how SoFi Money can help.

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