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Investing vs. Saving: Finding a Balance

People sometimes use the terms “saving” and “investing” as if they mean the same thing. And, because both have the same general goal—to create financial stability for you and your family—there are similarities.

But there are also important differences. Saving is when you incrementally add money into a bank account. Goals can include creating a fund for emergencies, saving for a down payment on a house, buying a car, going on a dream vacation, and so forth. This strategy is often intended to reach shorter-term financial goals.

Investing is when you take a portion of your money and buy assets with the funds. You might buy stocks and bonds, invest in mutual funds and so forth, with the goal being to grow your wealth. This strategy is typically used to reach long-term goals.

In this post, we’ll explore more distinctions of saving vs. investing, and share strategies to consider. No one strategy works for everyone, because financial situations differ, as do financial goals and comfort with risk levels. The real question isn’t whether you should save or invest—often good financial strategies include a combination of both.

More About Savings

When saving, money is commonly stored in a savings account. This means the money is readily available when you need it (although your bank may put limits on daily withdrawals).

With a savings account, there is limited risk because the Federal Deposit Insurance Corporation (FDIC) insures each person’s money to at least $250,000; or if you have a savings account at a credit union, the National Credit Union Share Insurance Fund (NCUSIF) insures to at least the same amount.

The major downside to traditional savings accounts is the interest rates may be lower than the rate of inflation. The current inflation rate is about 1.9%, and the most common interest rate for savings accounts is 0.01%. Ultimately, accruing less interest than the rate inflation may actually mean you’re losing money.

More About Investing

Unlike savings, when you invest, you typically have longer-term goals in mind (say, at least five years away)—it could be paying for your children’s college expenses or planning your retirement.

When you invest, there is potential for greater rewards through a higher return on investment. But when you invest, there is not a guaranteed return on your investment, and you can lose part or all of the funds.

Overall, your goal should be to position yourself well financially through debt reduction and savings, and then move into investments, leveraging the potential for greater rewards as a vehicle for growing wealth.

How Much Money Should You Save Before Investing?

If you owe money on high-interest credit cards or loans, it typically makes sense to first focus on paying that down—or, ideally, paying it off. You may consider consolidating this debt into a low-interest personal loan, which will allow you to pay off the balance more quickly, freeing up more cash for savings and investing.

Next, it’s typically recommended that you save three to six months’ worth of living expenses before you begin to invest. This will create a safety net in case of emergencies. As the next step, it usually makes sense to invest in your 401(k) and/or IRA to the maximum allowable amounts. (And, yes! You can invest in both a company-sponsored 401(k) and an IRA.)

How You Can Make Money Through Investing

SoFi has created an investment guide to help you understand the various ways you can invest your money, along with three ways that investments may create earnings for investors:

•  Income: This is when your investments earn interest and/or pay dividends.

•  Capital appreciation: This can occur when you invest in stocks, real estate, or gold, as three examples; if they go up in value, this is capital appreciation.

•  Pass through profits: If you invest in private businesses or real estate, you may earn what’s called pass through profits when their operations are profitable.

Invest in the future–not fees.




Distributor, Foreside Fund Services, LLC

Investing in Stocks

Broadly speaking, companies are privately or publicly owned, and public companies trade shares of their companies through the stock exchanges. So, when you buy one single stock, you’ve bought one single ownership share in a publicly-traded company, and therefore own a tiny piece of that company.

Investing in Bonds

Sometimes companies need an influx of cash. Sometimes, the government does. So, to get that cash, they might issue bonds. A bond is essentially a loan—and you’re the one lending the money. You loan money to the government or a company, and they pay you back in full—with interest. Four commonly-available types of bonds include:

•  Treasury bonds by the U.S. government

•  Corporate bonds by a corporation

•  Municipal bonds by a state or local government or agency

•  Mortgage-backed or asset-backed bonds

Investing in Mutual Funds

Investing in mutual funds is a way to invest in stocks, bonds, and more and can be ideal when you’re first investing. Mutual funds contain a variety of different types of assets.

When you invest in mutual funds, you benefit from instant portfolio diversification, which is good in case, as just one example, the value of an individual stock within the fund plunges. There are more than 20,000 mutual funds available to choose from, and this strategy can be simple and inexpensive as you begin investing.

Alternative Investments

Once your portfolio grows, you might want to diversify into alternative investments, such as real estate trusts, directly investing in businesses, entering into limited partnerships, investing in gold and other precious metals and more.

SoFi Invest® for Your Investment Strategies

We believe that everyone should have access to quality investment management. That’s why we’ve created SoFi Invest where you only need $1 to start investing.

At SoFi, you benefit from a combination of today’s technology, through the use of automated investing, and professional human advisors. And our planners don’t get paid on commission, which means their focus stays on you to create a personalized plan that is tailored to your unique financial goals.

You have the ability to adjust risk tolerance (something not all companies using automated advisors allow). And our human advisors work to help keep your investment strategies on target.

There are no application fees and no brokerage commission fees. Make an appointment online to learn more about SoFi Invest.


Choose how you want to invest.

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do-it-yourself?

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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.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member
FINRA / SIPC .
SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Neither SoFi nor its affiliates is a bank.
SoFi MoneyTM is offered through SoFi Securities, LLC, member FINRA SIPC . Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
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How to Prepare Financially for a Divorce

When you’re picking wedding invites and planning an exotic honeymoon with your lover, it’s hard to imagine getting divorced. But divorce happens—although, it is happening at a declining rate.

Divorce rates hit their peak in the 1980s and have been slowing down ever since—one researcher notes an 18% decline in divorce in the millennial generation between the years of 2006 and 2016.

Going through a divorce can be an overwhelming experience. There’s already the emotional pain of divorce, and then partners must also divide up money and assets and break down the financial structure that they’ve built together.

Piled on top of the logistics of divorce, some people may find themselves managing money on their own for the first time in their lives. These added financial stressors can make a difficult situation even harder.

Thankfully, with some thoughtful planning and help, divorce financial planning doesn’t have to be a disaster. And who knows, maybe you’ll end up more knowledgeable on the other side.

For anyone that is wondering how to prepare for a divorce financially, here’s a roadmap to follow. Below, we’ll cover some things you should consider while divorce financial planning.

How Expensive is Getting a Divorce?

Let’s rip the bad news off like a band-aid: Getting a divorce is expensive. According to Nolo, the average divorce costs $15,500 with most of that moola going towards legal fees.

That said, every divorce is going to be different. How much it will cost and how long it will take will depend on a number of factors, such as whether the relationship is combative or civil, how many issues need to be resolved, and how these issues will ultimately be resolved. According to Nolo’s findings, it also depends on where you live and who you hire to assist with the divorce process.

Divorces can range from being hard-fought battles in court to peaceful mediation that happen outside of the courtroom. Either way, when it comes to divorce and finances, the money eventually needs to be split up. Here’s how to make the process of dividing up assets go as seamlessly as possible.

How I Used a Personal Loan to Help Pay for My Divorce

How to Prepare for a Divorce Financially

Take Inventory

The first step is to do a wholesale inventory of everything you and your spouse own—and owe. Writing everything down can help you feel more organized and give you a better idea of the whole picture. Be sure to consider retirement accounts, real estate, cars, and sources of debt, like loans and credit cards.

Write down all current sources of income, including salaries, pensions, Social Security, investment or business income, rental income, and family or other gift money.

If the relationship remains amicable, you may want to do this together. If not, ask your spouse for a print-out or login information to any accounts that you currently don’t have access to.

Gather Documentation

Gather documentation for all of the above-mentioned assets, liabilities, and sources of income.

This includes statements for all bank accounts, property deeds, pension and Social Security statements, and statements for credit cards, mortgages, and any other sources of debt.

Also, make copies of all legal documents, such as a will and/or trust formation documents.

It may be helpful to have one designated place that you keep all of your documents, such as a binder.

Take some time to look at whose name is on what. For example, are you both listed on the mortgage? Are you named as each other’s beneficiaries on life insurance policies and retirement accounts?

The documents that you’ve gathered will become important again later when you need to split assets, refinance loans, remove co-signers, and adjust beneficiary information.

Track Your Finances

If you haven’t already, take some time to look over how much you’ve been spending each month—and on what. There are apps you can use to do this, but you might want to consider something more comprehensive, such as putting all of your spending information into an excel spreadsheet.

By looking into you spending with a magnifying glass, you’ll learn how much money is dedicated to joint monthly expenses, how much money you are spending on yourself, and how much goes to the kids.

With this information, you are able to make projections about what you’ll be spending on your own. This exercise may also guide you in your decision to keep, divide, or request certain assets.

Once you’ve been tracking your spending for a few months, you’ll notice patterns starting to emerge. Then, you can begin to build out your own monthly budget.

Be Frugal

It can be tough to hear, but divorce can be really expensive. Oftentimes, it’s an expense that couples can’t afford to pay for in cash—especially if they were struggling financially before.

If you and your spouse are aware that a divorce is coming down the pipeline, it’s a smart idea to shift into frugal mode. Now might not be the time to make large purchases, either individually or as a unit.

Divorce can be a good time to eliminate or pare back where possible. For example, cancel unused subscriptions and memberships, attempt to dine out less, and use the clothes that you own. There are tons of creative ways to be frugal—do so in a way that aligns with your values.

Think Long-Term

Throughout the haze of divorce, it can be hard to think about anything except for what needs to get done today. While it is a perfectly reasonable strategy to take the process day by day, do remember to take a step back and think about which assets will best serve you now and into the future.

For example, think about the long-term costs of keeping the family home. Will this be possible with just one income, or does it make more sense to sell the home and find something smaller or more affordable? Thinking realistically about the costs associated with being single could save heartache down the road.

Hire Help

You don’t have to do all of this alone. In fact, don’t be surprised if going through a divorce takes an entire team. Many people will find it helpful to seek out financial advice during divorce.

While it is certainly possible to do this on your own, a financial planner can assist with tasks such as making sure that all assets are divided, transferred successfully into new accounts, and reinvested, if necessary.

A fee-only financial planner specializing in divorce could be your best bet. “Fee-only” simply means that the financial planner will only charge a one-time fee or hourly rate to meet with you, as opposed to taking a cut of your overall wealth. This generally makes the most sense if you don’t require ongoing services.

No matter what type of financial planner you use, ask whether that person will be acting as your “fiduciary.” This means that they will always act in your financial best interest.

Open New Accounts

As you split up bank accounts, it is a good time to re-assess whether you like the banks you currently work with. A divorce can be a good time to move or consolidate money into new bank accounts.

At a minimum, people should generally have a checking account, a savings account, and a retirement account. You can keep them where they are or move them to a new bank or institution. As you are rearranging bank accounts, it is worth considering using an online-only account for your savings.

Additionally, you could consider a cash management account like SoFi Money®. With SoFi Money, withdrawing cash is fee-free at 55,000+ ATMs worldwide (subject to change).

Feeling ready to start fresh? Check out SoFi Money, which is perfect for an on-the-go professional.


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. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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Top Budgeting Tips for Single Parents

Whether through birth, divorce, or death, becoming a single parent can mean tremendous pressure to figure things out—fast. And while life may have changed dramatically for the adults involved, the kids still need new practice gear, daycare tuition is still due, and those credit cards aren’t going to go away. It’s undoubtedly a stressful time for everyone involved, but it doesn’t mean that a financially healthy life is no longer an option.

We won’t say it will be easy, because it won’t be. But if you’re strict with yourself, diligent, and willing to make some sacrifices, getting your family back to a good financial spot on a single-mom budget (or single-dad budget) is absolutely possible. We’ve created a step-by-step guide to get you started not only paying off debt, but even generating positive cash flow.

Step 1: Budget For Your New Reality

The first step is to create a workable, yet conservative budget based on your new income, which may be less than before, and your new expenses, which will likely be more if you formerly split bills with a partner. This process is essential and often eye opening, especially if you’re dealing with extra costs like lawyers or adoptions. Don’t be surprised by a negative cash flow, but do get in the the mindset that it’s only temporary.

To keep from getting overwhelmed and giving up, focus first on the immediate needs like bills, debts, and groceries. While you shouldn’t completely ignore savings or retirement accounts, those can come into play once you have a clear understanding of your day-to-day finances.

One of the keys to successful budgeting is to make sure you keep track of all of your bills, including occasional expenses like oil changes or dance recital costumes. Take an inventory of every month for a year, noting which events happen in what months and how much they might cost.

A good way to set aside money for those needs is to estimate your variable utility bills based on their most expensive months. If you have a month where the bill is lower, put the difference toward those other needs without putting a dent in your budget.

Step 2: Start Looking for Money

If you do find yourself in the red, it’s time to start looking for ways to save money and cut back on expenses. This step might be a little painful, especially if you’ve been used to a comfortable, dual income lifestyle, but living within your means is essential to getting ahead.

Start with your most expensive bills and look for ways to lower them. Consider turning up your air-conditioner a few degrees to save on energy bills. You may not even notice the temperature difference, but it could save you quite a bit of money during hotter months.

Next, take a look at your cell phone bill. Analyze your data usage and see if you can manage with a smaller plan. And, as painful as this advice might be, resist the urge to upgrade to the latest and greatest phone every time one comes out. Stick to the old adage “If it ain’t broke, don’t fix it,” especially if the latest changes are only cosmetic. Instead, treat yourself to a new case.

Another great option for cutting way back on a monthly bill is to join the 5 million Americans who are cutting their cable cord in 2018 and utilizing much cheaper streaming services. If watching TV is extremely important to your family, consider putting some of the money you save toward upgrading your home internet speed so you can stream without buffering.

Outside of monthly bills, look for expenses you can cut back on or eliminate completely—like that morning coffee shop habit. Is there a less expensive way to buy your groceries, clothes, and other necessities? Consider shopping at a consignment boutique for your clothing, and make coupons and circulars your friend. Cut back on eating out, and—if going to restaurants is a special treat for your family—check out sites like Groupon and Gilt City for deals.

There are a thousand other ways to cut back, and where you choose to make changes is entirely personal. The key to making the sacrifice worth it is to take your newfound money and put it straight into paying off debt and creating (or recreating) a nest egg. Once you’re back in the black, that money goes straight into your pocket.

Step 3: Open an Interest-Bearing Account

Even for single parents, setting money aside for unexpected expenses, retirement, or a rainy-day fund is possible. The key is to make your money work for you. SoFi Money®, our cash management account, where you can earn, save, and spend all in one. Combine that with no account fees (subject to change) and a free debit card.

Step 4: Take Advantage of Tax Credits

How you file your taxes as a single parent can unlock several ways to help reduce your taxable income, and a refund is valuable found money that can make a big dent in high-interest debts, grow savings, or give you a little fun money.

However, the recent tax reform has brought about some significant changes in credits , deductions, and tax brackets that could impact how you file. Consider using up-to-date tax software, a tax service, or a tax accountant or attorney to help you navigate the changes—especially if you’re a new single parent this year.

Step 5: Stay on Top of Your Bills

This step is essential to maintaining a healthy budget, because late fees, especially on high-interest credit card payments and overdraft protections, can quickly find you with more debt instead of less. In addition, electric or utility reconnection fees not only add to your expenses, but also affect your credit score.

The easiest way to never miss a bill payment is to sign up for autopay and have it automatically deducted from your checking account. But if you need to shuffle money around each month to make ends meet, automatic drafts can be a detriment and lead to overdraft fees.

To help keep track of what’s due when, take advantage of smartphone notifications and set monthly repeating reminders for four days before a bill is due (to account for weekends and holidays). When that notification pops up, pay it immediately. If it’s an auto-draft reminder, take a quick peek at your account to make sure it has enough funds.

Step 6: Pay Off Your Credit Cards

Eliminating even one high-interest debt can make a significant change in your monthly cash flow. When you’re creating your budget, leave room for payments that are higher than the minimum, and check your card’s options to see if you can split the payment between minimum and extra principal. Then, avoid using your credit cards for new payments as much as possible.

If you’re dealing with multiple, high-interest credit cards, consider consolidating them into one monthly payment with a personal loan. You might get a much lower interest rate than your credit cards offer, and you’ll only have to set one bill payment reminder. In addition, if you take out a personal loan with SoFi, you’ll get access to the member community, where you can connect with other single parents with similar financial challenges and goals.

There’s also the option to transfer all of your existing balances onto one, 0% credit card. However, that has drawbacks, namely balance transfer fees, the return to a high interest rate once the promotional period is over, and the temptation to keep spending. If you choose this option, read the fine print carefully and note details like annual fees, the final month of 0% interest, and what the interest will be after the promotional period is over.

For a number of reasons, being a single parent is difficult—and the impact is more than financial, especially if it’s not what you’re used to, and is related to some kind of loss. But with your finances on more solid ground, it allows you to spend that time and energy you’d be worried about finances more meaningfully with your children—which, at the end of the day, is the most important use of your time.

Learn more about how SoFi Money can help you manage your finances on-the-go. Sign up 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. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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2 Members Share Their Tips For Paying off Student Loans

Paying off your student loans can feel like a grueling journey, especially if you have a lot of it. And there’s a lot of student loan debt out there—$1.5 trillion to be exact .

It’s becoming clear just how much student debt can have a negative impact on the psyche of the student debt holder. In a survey conducted by SoFi, 83% of respondents felt like they couldn’t relax due to their student loans, and 50% felt that student loan debt has made them feel depressed.

More than a third have reported losing sleep due to student loan debt, and plenty of others say that it’s caused them to miss out on opportunities to travel, practice self-care, and make major life decisions.

If you’re in the throes of student loan debt repayment, you should know that there’s hope: Catie Gould and Veronica Scafe, two SoFi members, show us that it can be done. Not only did they each pay off their nearly $100,000 in respective students loans, but did so in about four years—significantly faster than their original loan terms.

It is important to note that these results may not be typical of every person paying down student loans. Below, these two members share their student debt journeys as well as their tips to help pay off student loans.

Meet Catie Gould and Veronica Scafe, SoFi Members

If you’ve got student loans and are looking for inspiration to get rid of them once and for all, Catie Gould and Veronica Scafe are your people. Both paid down nearly $100,000 in student loan debt.

Catie Gould paid off her student loans in just over four years—an impressive feat considering she graduated with around $91,000 in student debt from her dual degrees in material science and mechanical engineering.

Veronica Scafe found herself in a similar situation after graduating with $99,800 in student loans from obtaining her Doctor of Pharmacy degree. Even though Scafe had only expected to leave graduate school with $80,000 in loans, she was able to pay off the balance in an incredible three years and eleven months.

Their Personal Strategies For Paying Off Student Loans

Right out of school, Gould and Scafe deployed similar strategies for paying off their student loans fast; they both worked hard at keeping their expenses low, even with their new, higher salaries.

When Gould graduated from school, she avoided “lifestyle inflation” even though she was making more money than she ever had before. “Not very much changed for me after graduating. I am a saver by nature. I kept driving my old car, living with roommates, shopping at thrift stores, taking local vacations.”

And Gould didn’t stop there. “I bought a bicycle to get around town, tried gardening, and cooked my own food most of the time. I said no to plenty of things, but most never felt like a sacrifice.”

It helped Gould that she didn’t have expensive tastes to begin with: “Festivals were a big thing I never knew about. I was shocked that people pay $300+ to go to weekend music festivals.”

Scafe recounts an experience similar to Gould’s. She and her husband “never expanded our lifestyle to fit our salary so we never had to make cuts.” Scafe added, “We live pretty frugally. We have a modest home. We cooked most of our meals at home and took leftovers for lunch the next day.”

Just as keeping expenses low was an important tactic for both women, so was making additional payments towards their student loans. Neither wanted the emotional burden of paying back loans for longer than they had to, nor did they like seeing so much of their loan payments go towards interest payments and not the principal.

Simply having a long, hard look at how much you’re spending in interest payments every day, week, or month, may be the motivation you need to pay your loans off faster than the standard ten-year repayment schedule.

“I sometimes calculated how much interest I owed every morning just for waking up,” says Gould. From this exercise, she noticed that the daily interest charges on her student loans cost her “more than eating out every day, which I considered pretty indulgent,” and this motivated her to take action, and fast.

Gould and Scafe also refinanced their student loans, which provided them both the extra boost they needed to pay their loans back on such short timelines. By refinancing and qualifying for lower rates, more of each payment could be applied to the loan’s principal and not just interest.

What pushed them to pull the trigger on refinancing?

When Gould started her first corporate engineering job, the company was in the midst of layoffs. Luckily, she kept her job, but she says that “the layoff had a huge impact on me.” This experience at work pushed her to explore even more options for lowering her student loan bill.

The concern of how she’d make payments if something were to happen to her job, along with interest rates that she felt were far too high—some of them at 8.75%—inspired her to tackle her debt through extra payments and refinancing.

Gould refinanced around $36,000 of her debt through SoFi. She said, “Getting out of a higher interest rate was really helpful to pay down my remaining student loan balance. I feel a lot more in control of my future and how I chose to spend my time. It’s steered my life in a direction I never anticipated.”

Scafe also knew the feeling of wanting her loans long gone, and fast. “I obsessed over them and I think that’s what motivated me to get rid of them ASAP.” Having multiple loan payments scattered throughout her month was a nuisance.

“I refinanced to lower my interest rate,” she says, but also desperately wanted to have only one monthly payment. Paying down multiple loans faster than their scheduled repayment terms was a logistical hassle, and required significant manual maneuvering. “It got really frustrating.”

Both women refinanced their loans with SoFi, lowering their interest rates and saving them money on interest while consolidating their multiple loans—both federal and private—into one loan with one easy payment.

Tips to Help Pay Off Student Loans Early

“Tracking your spending is a must,” says Gould. She used Mint to track her spending, though there are many methods of doing so. The important thing, says Gould, is to do it. “The difference between months I looked at my budget frequently and months I didn’t was about $300 to $500 of savings, just from being more aware.” And putting those savings towards a student loan payment seriously expedited her loan payoff journey.

When it comes to spending money, try to cut whatever doesn’t bring you true joy. “There is always something forgettable that you are spending money on every month that you can cut.” For Gould, one of these things was dining out. For you, it could be something different, but the lesson here is to identify what really doesn’t produce joy for you, and ruthlessly eliminate it. Spend on only what you love.

“There is no way you can cut out all your expenses, and you need to let yourself have a little leeway to feel like you are living a great life. Some treats I got myself were evening classes in things I found interesting.

I took calligraphy, pottery, Arabic, essay writing. I also have some nice camping gear. I always equated these extra things to lunches—a $10 expense that I wouldn’t miss.”

Scafe, on the other hand, extols the virtues of paying yourself first. Whether you’re paying off loans on an expedited schedule or saving up an emergency fund, it’s wise to spend what is left over after saving and not vice versa.

While you should always keep a buffer in your checking account, too much cash lying around could be just asking to be spent. You can move it towards your loans or a savings account as soon as payday hits instead.

For both women, seeing the light at the end of the tunnel was crucial to their perseverance. They stuck with it, even when it felt like student debt freedom would never become a reality.

For Scafe, having her debt eliminated has been a big stress relief. Gould says that she feels in control of her future and how she chooses to spend her time, and that nothing compares to the feeling of paying off her student debt. And while neither claim that the process was easy, or entirely possible for many on their relatively short timelines, both believe that it was totally worth it.

If you have student loans like Scafe and Gould, keep pushing to reach your goal of being debt free. You can use our student loan payoff calculator to get an idea of when your loan payoff date could be, and it’s never too late to start putting strategies in place to help accelerate your loan payoff—even if it’s just a little at a time.

Also, you can consider refinancing your student loans with SoFi to potentially lower your interest rate and get a shorter term, and therefore help to expedite your own loan payoff journey.

Refinance today! It only takes two minutes to check your rate.


Disclaimer: The savings and experiences of members herein may not be representative of the experiences of all members. Savings and experiences are not guaranteed and will vary based on your unique situation and other factors.
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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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10 Personal Finance Basics

Most of us were never really taught to manage our money. Personal finance tips are rarely covered in
school
. If you’re lucky, your parents passed on a few lessons, but typically, that’s not enough to provide a solid knowledge base for taking charge of your finances as an adult.

As a result, many well-educated, gainfully employed adults are pretty clueless when it comes to their own pocketbooks. Nearly 70% of adults aged 35 or younger say they find investing confusing, and an estimated one-third of homeowners don’t know their mortgage interest rate. A study that measured knowledge across eight areas of personal finance found that half of U.S. adults couldn’t answer half of the questions correctly.

You don’t need to become a financial expert—there are advisors for that—but, it’s important to have a grasp of foundational personal finance concepts. Not understanding those basics can set you up to be taken advantage of, or can eventually lead to financial disaster. It can also delay you from taking the steps you need to build a solid financial future for you and your family.

The topic of personal finance may sound intimidating, but it doesn’t have to be complicated. Here are 10 basic things to know about personal finance.

1. Budgeting Is Your Friend

Budgeting often has a negative connotation. In reality, it’s a way to take control of where your money goes and help make sure you’re on a path to the goals that matter. You can get started by tracking your spending for at least 30 days.

Use that as a guide to make a list of your monthly expenses, including basic needs (e.g., rent, utilities, groceries) and discretionary spending (e.g., shopping, travel, Netflix). Next, add up your monthly income: what you actually take home after taxes and deductions. You should always be spending less than you earn.

If you aren’t living within your means, or if you’d like to free up more cash for saving, the choice is usually pretty binary: either trim expenses or grow your income. Go through your budget, and look for ways to save: Can you move in with a roommate? Buy used clothing? Cook more instead of going out?

And consider your options for earning a better living: Can you ask for a raise? Look for a new job? Start a side hustle? Once you have a reasonable budget worked out, stick to it! Plenty of apps (like SoFi Relay) are available and can help you stay on track.

2. Building an Emergency Fund

You can’t predict when your car will break down or when you’ll have an unexpected medical crisis. If you don’t have money saved up for what life throws at you, you may risk racking up high interest credit card debt or defaulting on your bills.

To avoid this, you can save money every month to build up an emergency fund. Conventional wisdom typically suggests having three to six months of basic living expenses saved.

This fund should be accessible anytime so you can use them in a pinch, so you’re probably not going to want to invest this money or lock it up in a CD. Instead, you can keep it in a high interest checking or savings account so it has a chance to grow and can be withdrawn when you need it.

3. Avoiding a Credit Card Balance

When you have a credit card at your disposal, it can be tempting to charge more than you can afford. But trying your best to avoid carrying a balance can save you some serious dough. See if you can pay off your card in full each month, not just make the minimum payment. The reason is that credit cards have some of the highest interest rates out there, with the average currently at 17.56% .

That means a small charge carried over from month to month can quickly balloon into a much larger sum. The same is true for other high-interest debt, such as some private or payday loans. If you already have high-interest debt, don’t fret; There are ways to pay off that debt.

The avalanche method, for example, requires paying the minimums to all your creditors, and putting any extra money toward the debt with the highest interest rate first. Once that’s paid off, the borrower puts their extra cash toward the debt with the next highest rate, and so on.

Another option is to look at balance transfer credit card offers, which can allow you to move your balance to a new credit card with 0% interest for a period of time. As long as you pay the balance off completely before that period expires, you should avoid being hit with higher rates.

4. Paying Your Bills on Time

This sounds like a no-brainer, but a quarter of American adults have trouble paying their bills when they’re due. Of course, there are many reasons people struggle, but, if you’re budgeting and have an emergency fund, you’re probably in a good place to make your payments on time.

If you tend to forget, you can set up calendar reminders or pay your bills automatically through your bank or service provider. Delaying payment can result in late fees or, after prolonged periods, your balance going into delinquency or sent to collections. Late payments can also hurt your credit score, which could affect whether you’re able to qualify for loans, credit cards, or renting an apartment.

5. Starting Saving for Retirement Early

When you’re young, retirement can feel far away. But starting to put away money as early as possible means you’ll have more years to save, spreading the savings across your life rather than racing to catch up. But the main reason is the power of compound interest.

Because you earn interest not only on your contributions but also on accumulated interest, your savings can grow over time. If you have an employer-sponsored plan, such as a 401(k), you may want to consider contributing, especially if your employer offers to match contributions. If you’d prefer, you can open a traditional IRA, Roth IRA, or SEP IRA, depending on your situation. All of these individual retirement accounts are available on SoFi and allow you to invest your retirement savings through a broad range of investment options.

6. Investing

Saving for retirement may not be enough for you to have what you want for retirement. Retirement accounts offer a range of investment options, including stocks, mutual funds, and bonds. You can look into a diversified portfolio that aligns with your risk tolerance and the number of years you have until retirement.

If you’re maxing out your retirement funds, you can invest in other ways: If you have children, a 529 plan can help you invest for their college educations while potentially qualifying for tax benefits. You can also invest through a brokerage account, robo-advisor, or an online financial services provider, such as SoFi Invest®.

7. Getting Insured

When it comes to insurance, sometimes it’s smart to prepare for the worst. That means looking into health insurance and car insurance, and making sure you’re covered. In fact, everyone who drives a car is required to purchase car insurance by law . You also may want to consider renters or homeowners insurance to protect your home and belongings.

People with dependents (so, parents) may also want to consider long-term disability insurance and term life insurance . Many people can purchase health and disability insurance through their employers. If you don’t have that option, it’s possible to go through an insurance agent, broker, or the insurance company directly.

8. Taking Advantage of Credit Card Points

If you have a decent credit score, you can look into credit card reward offers that may give you travel miles or cash back on your purchases. Among the best travel rewards are those that are flexible, meaning they can be applied to many different airlines and hotels.

A few warnings: Most offers require you to spend a minimum amount in the first few months to get the bonus. Be warned that opening and closing too many cards in succession can get your credit score dinged .

9. Checking Your Credit Reports Annually

You can request a credit report every year for free from the three main credit reporting agencies—Equifax, Experian, and TransUnion—at AnnualCreditReport.com. If you see any errors or signs of identity theft, it’s wise to contact the credit reporting agency or the account provider, and file a formal dispute if needed.

Separately, you can check your credit score for free through a major credit bureau, in many cases, a credit card provider’s website. Credit score typically matters a lot when you apply for loans, but if it’s on the lower side, there are almost always steps you can take to improve it, which might include reducing your debt balances or paying bills on time consistently, or increasing credit lines.

10. Choosing Your Bank Wisely

There are lots of financial institutions out there, and it can be hard to choose. It’s important to shop around to make sure you’re finding a product that really suits your financial needs.

For example, if you sign up for a cash management account with SoFi Money®, there are no account fees (subject to change).

Take the next step in smart personal finance. Learn more about SoFi Money.



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