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How Much Stock Market Fluctuation is Normal?

If you are turn on any of the up-to-the-minute financial news programming, you’d hear the anchors yelping about what stocks are up, which stocks are down, and all of the reasons why.

Every day, someone compares the stock market to a rollercoaster ride, with its ups, downs, and sideways action; sometimes enough to make you want to lose your lunch.
The stock market has become something of an affair in entertainment. If the stock market is down, it’s entertainment. If the stock market is up, it’s entertainment. But, it’s also people’s lives and livelihoods.

There are millions of people who have their retirement savings tied up in the stock market. For these people, fluctuations aren’t fun or interesting, they can be painful. A great way to overcome the pains associated with stock market fluctuation? Understand why it’s happening. We all know that some amount of stock fluctuation is normal. But just how much?

Below, we will first answer the question, “Why does the stock market fluctuate?” in order to understand how much market fluctuation is normal. Having a good grasp on volatility in the stock market is critical to as an investor in the stock market over your lifetime.

Why Does the Stock Market Fluctuate?

To understand market fluctuation, it helps to first understand stocks and the stock market.

A stock, which is a small percentage of ownership in a company, can be bought and sold by investors like us. That’s right, everyday folks can own a share of companies like Tesla, Starbucks, and Snapchat. That’s why investors of stocks are also called shareholders.

A stock might be bought and sold in what we call the stock market. And the stock market is like any other open marketplace; it just so happens that what’s for sale are these pieces of ownership in a company, called shares. And just as in any open marketplace, there are two important forces that determine the value (and therefore the price) of these goods for sale: supply and demand.

Remember our old friends, supply and demand? Let’s do a refresher, because they’ll be important later. Supply is how much of a good is available for sale. Demand is how much consumers want to buy the good. Between the pressures of supply and demand, the economy determines the value of that good.

Here’s an alternate way to describe supply and demand: buying and selling. How much investors are buying or selling a certain stock on any given day, month, or year, quite literally give a stock its value.

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Crazy, right? So while the television commentators may have you believe that it’s some single, external event (such as a tsunami or newly released economic numbers) that causes the price of stocks to increase or decrease, that’s not totally true.

The real truth is that investors were selling out of their stocks in a way that outpaced how many investors were buying into those same stocks; supply and demand at work. Why does the overall stock market fluctuate? Because investors are buying and selling stocks in such a way, and in such volume, that stock prices make a large move in one direction or another. That’s it.

Volatility Means the Stock Market Is Working

As tough as a nasty price drop in your investments can be to stomach, stock market volatility is a normal part of stock market investing. In fact, volatility is natural and even healthy, and shows that the stock market is working as it should. If you want to be a good stock market investor, you have to accept this.

Here’s why: The more investors weigh in—by actively buying and selling stocks—the more accurate the prices of stocks will ultimately be. Think of it this way: If you needed an opinion about something that didn’t have a precise answer (in this case, what the value of any one stock should be), would you ask just one person? Two people?

Or would you take a poll from as many people as possible, weighing out all of their many respective perspectives and responses? That’s essentially what is happening in the stock market—it’s a weighing of information about the “correct” price of a stock from investors across the globe.

It’s also helpful to remember that volatility doesn’t just relate to rising stock prices—it also relates to plummeting stock prices Yet for whatever reason, some only really think about “volatility” and “stock market fluctuation” as happening when there’s a downturn in the market. But when the stock market makes a surge upward, that is also considered stock market fluctuation too.

If you want the possibility of returns, you have to be willing to see your investments dip sometimes. Risk and reward are two sides to the same coin. You cannot have one without the other. If you hear someone promising outsized returns with no risk, it is absolutely a scam; run far, far away.

The stock market has returned about 10% annualized over the long term according to some estimates . But almost never does this come in the form of perfectly 10% years. Usually stock market returns are higher or lower than this, and they sometimes even go into the negative.

So, What is Normal?

This is a notoriously hard question to answer because really, almost any amount of market fluctuation is possible.

Of course, this would be hard to believe if all of your stock investments were down 50% or more. But such drops have happened in the past, and could happen again.

Our best guide for understanding what is normal (and what is abnormal) is to look at what has happened in the past. While past performance is never a guarantee of future financial success, it’s helpful to look at the data.

The most commonly cited pool of data is the S&P 500, which is an index that measures the returns of the United States’ 500 “leading” U.S. companies. The S&P 500 can give us a good historical gauge of stock market movement.

Since World War II—the “modern” stock market era, the S&P 500 has seen 11 drops in the stock market of over 20% . A more than negative 20% market is what is classified as a “bear market,” or a bad market.

Peak (Start)

Return

  May 29, 1946     -30%
  August 2, 1956     -22%
  December 12, 1961     -28%
  February 9, 1966     -22%
  November 29, 1968     -36%
  January 11, 1973     -48%
  November 28, 1980     -27%
  January 11, 1973     -48%
  November 28, 1980     -27%
  August 25, 1987     -34%
  July 16, 1990     -20%
  March 27, 2000     -49%
  October 9, 2007     -57%

You’ll notice that a big drop in the stock market happens about once every five to ten years—so somewhat frequently. And smaller fluctuations of 5% or 10% to the downside happen much more frequently than that. In fact, it’s common to see a drop like this in most years.

As far as we’ve seen, there has never been a market dip that hasn’t eventually recovered. And really, it seems like the most upward movements happen after the worst of times. While there’s no denying that seeing a big drop in the value of your investments is painful, it’s possible to learn from the bad times. It is important to understand that dips are normal, and that shouldn’t necessarily scare you from investing in the market.

Also, know thyself. Investing in good times is easy. Investing in bad times is hard. If you’re skittish or uncomfortable with market gyrations, you may want to consider having a financial advisor on hand who can help talk you through any confusion.

SoFi Invest® not only helps you invest according to your goals and risk tolerance, but provides you with real, live financial advisors to answer any questions. Because keeping investors on track is so important, this is a service that SoFi provides its members for free.

Want help investing during the good times and the bad? Open an investment account with SoFi, an easy, automated way to invest, but with the assistance of real, live wealth advisors.


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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
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How to Refinance Your Student Loans

Did you know that upon graduating, the average student loan borrower has approximately $37,000 in student loan debt? Meanwhile, the average graduate student holds significantly more—sometimes up to hundreds of thousands of dollars.

No matter which way you slice it, that much student debt amounts to a lot of interest payments, made by both the collective holders of over $1.44 trillion of student loan debt, and by each individual borrower.

If you’re one of those borrowers that’s tired of paying hundreds or even thousands of dollars toward student loan interest, there’s some good news: Student loan borrowers have many options for repayment.

One of the more compelling options for borrowers to have a look at is student loan refinancing. Through refinancing with a private lender, some student loan borrowers have the opportunity to lower the interest rates on their loans.

Lowering an interest rate isn’t the only reason that borrowers are refinancing. Below, we’ll dive into the details of who refinances student loans and how to refinance student loans. And by the end of the next few paragraphs, you’ll hopefully be able to answer the question, “Should I refinance my student loans?”

How Student Loan Refinancing Works

What is student loan refinancing? Refinancing is the process of paying off your existing loan, or multiple loans, with a new loan. Ideally, the new loan would have a better rate of interest or terms that work better for the borrower than the current terms. For example, the borrower may want to switch from a fixed to a variable rate or extend their term so their monthly payments are lower.

To understand why a borrower might refinance, it helps to first understand the major parts of a student loan. Every student loan is comprised of the following variables:

  1. The value of the loan (the “principal”)

  2. The interest rate on the loan

  3. The repayment period (also known as the loan’s term)

When a borrower refinances their student loan(s), they are typically looking to change either the second or third list item, or both. Keep in mind that refinancing means forfeiting federal loan benefits like income-based repayment plans, deferment, and forbearance. Here are some of the most common potential outcomes from student loan refinancing:

Lower Interest Rate

By lowering the interest rate on a loan, the borrower may pay less in interest over time. Those who qualify for a lower interest rate typically have a solid credit score and income.

Switch to a Fixed/Variable Rate

It is also possible to refinance a loan from a fixed rate to a variable rate, or vice versa. A fixed rate doesn’t change over the life of a loan. Federal student loan interest rates are determined by federal law and depend on loan type; since 2006, new loans adjust their interest rates every year on July 1. A variable interest rate typically uses an underlying interest rate benchmark and fluctuates accordingly.

Oftentimes, variable interest rates start lower than fixed rates, but you’re taking a risk given that they could rise at some point in the future. Refinancing can give you the flexibility to choose between fixed or variable rates.

Lower Monthly Payment

By changing the student loan repayment period, a borrower may be able to lower their monthly payment. By extending the loan repayment period, monthly payments get lower, because the borrower is now taking longer to pay off the loan. Borrowers who go with this strategy should be aware that although their monthly payments are lower, they will likely owe more in total interest over time.

Shorter Loan Term

It is also possible to refinance a loan to a shorter repayment period. This strategy generally results in a higher monthly payment, but can save the borrower money in interest over time. And it can help you get out of debt faster.

Loan Consolidation

Some graduates may want to consider refinancing simply for the benefit of consolidating multiple student loans into one new loan, and thus one easy monthly payment.

It should be noted that multiple student loans can be effectively consolidated through the process of refinancing, but this is different than Federal Loan Consolidation. Federal Loan Consolidation is a program offered by the federal government that allows borrowers to wrap each of their federal loans into one loan with a weighted average of their original loan interest rates rounded up to the nearest 1/8 of 1% (0.00125%).

Should I Refinance My Student Loans?

To know who refinances student loans and whether you should too, the first step is to identify your types of student loans. Student loans come in two main varieties: federal and private.

Federal student loans are backed by the U.S. government’s Department of Education. These are the loans that borrowers apply for using the Free Application for Federal Student Aid (FAFSA®) form. Private loans, on the other hand, are obtained through a bank, credit union, or other lender, and these loans are not backed by the U.S. government.

Some banks are only able to refinance federal loans, and some are able to refinance both federal and private loans. Always be sure to ask whether a student loan refinancing company can refinance the types of loans that you currently have. Next, use that information to ask yourself the following questions:

1. Am I planning on using a student loan forgiveness program?
Because refinancing is the process of paying off your existing loans with a new, private loan, you will lose any access to the programs offered by federal loan programs, such as student loan forgiveness or income-driven repayment.
If you are currently using an income-driven repayment plan and working towards student loan forgiveness, you’ll probably want to think twice before refinancing your federal student loans. And only the federal government offers forgiveness programs to graduates who are working in certain areas of public service.

2. Am I currently using an income-driven repayment plan?

Flexible repayment plans such as one of the income-driven repayment plans are another offering by the federal government on federal student loans. Private loans don’t generally offer any such programs. If you need to keep your monthly payments low and have exclusively federal student loans, refinancing might not be right for you. Refinancing with a private lender forfeits your access to the government’s income-based repayment plans.

However, if you want to shorten your loan term and can afford to pay more, refinancing might help because it may allow you to pay off your loans at a lower interest rate.

3. Am I planning on using a forbearance or deferment program?

Both forbearance and deferment allow the borrower to suspend their payments for a certain period of time and for a variety of reasons, such as economic hardship or military service.

A key difference between the two is that the government pays interest costs during periods of deferment on Perkins and subsidized loans. During periods of forbearance, you are responsible for paying the interest that accrues on any federal loans you have.

Some private lenders offer programs that are similar to forbearance. One such program is SoFi’s unemployment protection program, which allows qualified borrowers to suspend their loans while they look for a new job. SoFi also has a deferment program for qualified borrowers to pause payments if they go back to graduate school.

If it is likely that you would ever need one of the federal government’s forbearance or deferment programs, then this might be a reason to put off refinancing student loans, because you give up your access to these federal programs if you refinance with a private lender. Again, make sure to do your research before making a decision.

4. Do I have a good or great financial history?

There’s a bit of a misperception that federal loans will always offer a better interest rate than private loans. Due to the low interest rate environment and because of student loan refinancing companies looking to shake up the industry by providing competitive rates and top-notch customer service, many borrowers may be able to achieve a better private loan rate.

This could be especially true for borrowers that have good credit and a solid financial foundation. Even if you think that this isn’t you, it costs nothing to check and see if you qualify for a better rate.

Steps To Refinance Student Loans

Prepare Your Personal Financial Information

If you decide that refinancing is right for you, or you just want to give it a shot and see if you qualify for a better rate, it’s a good idea to shop around at different lenders to check their rates. But before you do that, you’ll want to have your basic personal financial information ready. In general, potential lenders need some combination of the following information about you to give you a quote:

  -Name

  -Address

  -University

  -Degree

  -Total Student Loan Debt

  -Income

  -Total Housing Costs

  -Credit Score Estimate

The information a borrower needs to provide varies from lender to lender, but this is the basic idea.

Check Rates and Terms with Multiple Lenders

Because student loan refinancing companies set their own rates and terms, it is important to do some shopping around. Not only will you want to get rate quotes, but you may also want to ask questions like the following:

  -Are there other fees, such as origination fees?

  -Is there a prepayment penalty if I want to pay my loan off early?

  -Can the lender refinance both federal and private loans?

  -Is there a forbearance program if I am laid off from my job?

  -How do I access customer service?

  -What is the loan application timeline?

If a company interests you, you can submit the information that you gathered from Step 1. With this information, the lender will likely run a soft credit check. This should not affect your credit score, but make sure the lender guarantees it won’t.

If you meet a lender’s eligibility requirements, they’ll generally provide you with multiple offers, including offers with different term lengths and interest rates (both fixed and variable rates).

Choose a Lender and a Loan

After you’ve had the chance to review both the loan offers and the lenders themselves, it’s time to decide.
While many borrowers gravitate toward the loan with the lowest rate of interest, it is worth remembering that the lowest rate might not amount to the lowest amount of total interest paid on a loan.

The longer the loan’s term, the more interest a borrower will pay. For example, if you have a loan term of 10 years, you’ll have to pay off the entire loan balance plus the interest that was accrued over the 10 years. But, if you extend your loan term to, say, 20 years, that means 10 more years of interest accruing on your loan.

Also, a loan that charges an origination fee could end up costing more than a loan with a higher rate of interest that does not charge an origination fee. Often, an origination fee is added to the balance of the loan, with the interest rate calculated on top of this new figure.

Again, weigh all of the information you discover.

Gather Your Documents

Once you’ve chosen a lender and a loan, you’ll probably submit documentation that supports the information you provided during the initial rate check, as well as identifying information.

Although it will vary by lender, you’ll likely need some combination of the following:

  -Proof of citizenship

  -Valid ID number

  -Paystubs, tax returns, or other income verification

  -Statements for all of the loans you are planning to refinance

If you are applying for a refinance with a co-signer, they will need to provide this information as well.

Upon turning this information into the lender, they typically run a hard credit check and send the application through a final approval process. How long this process takes will depend on the lender, but it could be as short as 24 hours and as long as a couple of weeks. Check with each lender to be sure.

A lender should inform you if any of your documentation is missing, but you may want to check back in after a few days if you haven’t heard from a customer service representative.

Wait for Your New Loan to Be Approved

Continue making all payments on your existing loans while you wait. Soon, you should hear from your new lender about the status of the refinance application, including information on where new payments are to be directed.

Once your loan is approved, consider signing up for auto-pay (if they offer it and you haven’t already). Many lenders offer a discounted rate for borrowers who allow payments to be automatically deducted from their accounts.

And there, you’ve done it! You’ve learned how to refinance student loans. If you ultimately decide that refinancing is right for you and venture down this path, good luck and enjoy your new, shiny student loan.

Check out SoFi student loan refinancing for competitive rates and award-winning customer service.


To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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FOMO Spending and How to Avoid It

The fear of missing out can play a major role in influencing how people spend their money, at the same time often motivating them to buy things they can’t actually afford. This modern form of debt, known as FOMO spending, is hard to avoid if you feel peer pressure to live outside your means.

When it comes to what are millennials spending money on—there’s no single answer. But Millennials are more likely to spend money on comforts and conveniences than other generations. Things like Ubers, coffees, and fancy dinners with friends, which can add up quickly if you’re not paying attention or are splurging to keep you with your friends’ lifestyles.

Avoiding FOMO spending doesn’t have to mean giving up every nice dinner or outing, but you should work within your budget and try to become comfortable saying no to overspending.

Wait, Back Up—What Is FOMO?

FOMO, or Fear Of Missing Out, is a feeling of anxiety someone might experience about not being part of an event that is happening, usually triggered these days by seeing social media posts from friends enjoying an activity, and wishing you were part of the fun. While it’s certainly true that businesses employ FOMO tactics to get you to buy things, it’s not just a sales strategy.

Nick Hobson Ph.D, says “While the fear of missing out has always been there, the explosion of social media has launched our young people headfirst into the FOMO experience.” For many people now, social media is their main community lifeline, and having the impression that you are not part of the “in” group is enough to trigger a stress response like FOMO.

FOMO Spending to Keep Up with Peers

A 2018 study from Qualtrics and Credit Karma found that almost 40% of about 1,000 Americans ages 18 to 34 who were surveyed said they have gone into debt just to keep up with their friends’ lifestyles. This is FOMO taken the the financial extreme.

People are fighting FOMO by spending more than they have on things like travel, clothes, food, and going out. Whether it’s bigger “once-in-a-lifetime” experiences you can’t miss out on like trips, music festivals, or weddings, or even smaller events like dinner and drinks, FOMO spending can really add up over time.

According to the study, 27% of millennials feel uncomfortable saying no when a friend suggests an activity that they can’t afford. Nearly 75% of those who said they have gone into debt due to FOMO also said they’ve kept it a secret.

Money is one of the most difficult subjects to broach with friends, but also one of the most important to discuss. FOMO spending often stems from peer pressure to buy something you can’t afford so that you can still participate in a group.

If you are scared of being left out, and you become stressed, that fear of missing out on quality time with friends or family can add up to extra spending and debt.

How Can You Avoid FOMO Spending?

Reining in FOMO spending can be hard, especially if your friends are truly living at a different income level than you. But odds are, some of your friend group might be in the same situation, and are overspending in an effort to impress. Avoid FOMO spending by finding which of these tips works best for you:

1. Suggest Free Alternatives

The first way to conquer FOMO spending is to simply stop spending! While it’s of course not that easy, why not come up with a free alternative when a friend suggests plans?

Meeting for up for a $5 latte at a cafe could just as easily turn into sitting on your couch with a homemade cup of joe. Friends want to go out to the movies or the mall? Suggest visiting a museum on a day they offer free admission instead.

2. Limit Your Card Usage and Carry Cash

Limiting your spending on credit or even debit cards and making the majority of your purchases with cash will drastically impact how often you impulse spend on something when the feeling of FOMO creeps in.

If you only withdraw a certain amount before heading out to dinner or the bar, you’ll already have a pre-set budget that you know you feel comfortable spending.

3. Create a Budget and Stick to It

Along those same lines, creating a monthly or even weekly budget will may also help you cut down on FOMO spending. Your budget can, and should, include money for savings or big-ticket items like travel you know you have coming up.

Not sure where to put the money you are saving? Save, spend, and earn all in one product with a SoFi Money® cash management account.

By putting some money away, and then calculating how much “fun” money you have left over after bills, you’ll know exactly when you’ve reached your limit. While a budget might not help you eliminate FOMO spending altogether, you’ll at least give yourself more constraints if you limit yourself to a specific spending amount.

4. Lower Your Social Media Exposure

The endless scrolling on platforms like Facebook, Twitter, and Instagram offer some instant gratification, but social media is one of the main contributing factors of FOMO.

Targeted ads, influencers touting products, and even your own friends’ posts can all add up to spending money so that you don’t feel like you’re missing out. Trade in your laptop or phone time before bed for a good old-fashioned book or movie.

If You Must Spend, Still Plan Ahead

You won’t be able to avoid FOMO spending all of the time, so it’s also important to have a strategy in place for how you want to make the best use of your time and money if the feeling kicks in.

Delayed Gratification

If you have a sudden urge to buy something because of FOMO, try instead to write the item down, whether in a Notes app on your phone or even just a physical piece of paper, and come back to it 24 hours later.

This will help you avoid impulse purchases just because something is on sale, for instance, and evaluate in a day if it’s something you still really need.

Buying in Person

Nothing crushes the FOMO spending feeling more than forcing yourself to trek to an actual physical store to make a purchase.

Too many times, FOMO spending happens when you are online shopping and the ease of delivery right to your door doesn’t make you think twice about your purchase.

Introducing SoFi Money®

The study mentioned above also reported that two-thirds of millennials regret spending more on social situations than they planned, and one-third do not think they will be able to sustain their lifestyle for a year without going into debt.

This is where SoFi Money comes in. You’ll be able to see the big picture on your spending and keep tabs on your cash flow. SoFi Money is a cash management account that makes it easy to know where you stand and what you spend.

Put a stop to FOMO spending with SoFi Money!


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.
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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. 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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How to Invest While Paying Off Student Loans

If you’re struggling with the dilemma of whether to pay off your student loans or invest, you’re not alone. There are millions of Americans struggling with student loan debt; between rent, groceries, utilities, and a variety of other expenses, your monthly income can dwindle rapidly, leaving little for investing.

While common financial advice is to pay off debts as soon as possible, you may want to reconsider that when it comes to student loans. If you have a low-interest federal student loan, you could be better off investing or saving for retirement than sending all of your “extra” cash to your student loan holder.

In a perfect world you wouldn’t have to debate whether you should pay off student loan debt or save for retirement, however, there are ways for you to prioritize both.

Start with an Emergency Fund

One of the best ways to start saving is by building an emergency fund. This is a safety net of cash you can use for any unexpected expenses, like a sudden layoff, emergency medical care, unanticipated veterinary needs, or home and car repairs.

While your financial circumstances will dictate how much money you should save in an emergency fund, the general rule of thumb is that you should have between three to six months of living expenses saved up for financial emergencies.

If that seems like an intimidating amount of money, start with a smaller sum—say, $500—and build your emergency fund up from there. It could be good to have a dedicated account for your emergency fund. One great option is a cash management account SoFi Money™. Where you can earn 0.20% APY on all your cash and take out the money whenever you want at no charge!

Having a financial safety net is critical should any unforeseen, urgent costs arise. If you are prepared with your emergency fund, your loan repayment and retirement savings can stay on track.

Prioritize Minimum Payments

While paying off student loan debt, it is important to make the minimum monthly payments on all of your loans. If you fail to make the minimum payments each month, your loans could become delinquent or end up in default, and that is a situation you want to avoid.

The consequences of defaulting on a student loan are severe and include losing the benefits of deferment and forbearance, having to pay the unpaid balance of your loan in full, and possibly, being taken to court.

To avoid these repercussions, remember to always make your minimum payments, and make them on time. To make it easier, sign up for automatic payments with your loan holder.

The money will be taken directly out of your account every month so you’ll never have to worry about missing a payment. And with certain lenders, you could qualify for a reduced interest rate when you sign up for AutoPay.

If you have a little wiggle room in your budget, you could also consider paying a bit more than the monthly minimum on your student loans. Since most student loans have no prepayment penalties, it could be one of the fastest ways to accelerate your student loan repayment.

Refinance Your Student Loans

If you are buried under a number of student loans, it could be time to consider refinancing. Before you do, make sure you’ve done your research on the specific types of loans you hold. Refinancing a federal student loan will eliminate benefits like deferment, forbearance, and income-based repayment plans.

However, if your student loan debt is incredibly high, or you are already carrying both private and federal student loans, refinancing could be an smart option for you. When you refinance your student loans, you take out a new loan—usually through a new lender—with a new interest rate and new loan terms.

If you have a good credit history and solid earning potential, you could lower your interest rate or monthly payments, ultimately reducing the amount of money you pay over the life of the loan. To see what refinancing could do for you, take a look at the SoFi student loan refinance calculator.

Take Advantage of Employer-Sponsored Retirement Plans

If you are employed and are able to enroll in a 401(k), take advantage of the opportunity. A 401(k) is an employer-sponsored retirement plan to which both you and your employer can contribute. Often, employers who offer 401(k) plans will match your contributions up to a certain dollar amount or percentage.

If you’re struggling to pay off debt or save for retirement it might make sense to take advantage of the free money your employer is offering by taking advantage of the match program. Another great benefit of a 401(k) is that you can set up your contributions through payroll, so they are automatically deducted from your paycheck.

Use Windfalls Wisely

Another great way to make a dent in paying off debt while saving for retirement is to use financial windfalls wisely. Instead of using your tax return to splurge on a new outfit, a swanky vacation, or other indulgences, use that money to pay off debt or save for retirement.

You could even split it up and use a portion to repay student loans and use the rest to add to a 401(k) or another retirement account, like a traditional or Roth IRA. Paying down debt and investing now will be impactful in the future as you get closer to retirement.

About SoFi Invest®

If you’re already making headway toward repaying your student loans and are making active efforts to save in a 401(k) or IRA, consider investing as part of your financial strategy. Investing is a great way to put your money to work, instead of having it sit idle in a low-interest savings account. One way to boost your investments is to open an investment account with SoFi Invest.

At SoFi, you can begin investing with as little as $100. You’ll have access to a credentialed financial advisor who will work with you to set up your financial goals—a step toward making your goal of repaying your debt and investing at the same time a reality.

SoFi will work with you to establish your threshold for risk and will diversify your investments to match. With portfolio selection and auto-rebalancing, SoFi is a great option to begin investing.

When you’re ready to start investing (even while paying off your student loans), consider opening a SoFi Invest account.


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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. A registered investment advisor. Neither SoFi nor its affiliates is a bank. SoFi Money is offered through SoFi Securities, LLC, member FINRA / SIPC .

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5 Reasons You Should Track Your Spending

If the thought of sitting down to make a budget is overwhelming to you, you’re not alone. One poll found that only 32% of Americans maintain a household budget.

It makes sense. We’re all crazy-busy, and already spend more than enough time in front of our computer and telephone screens. Very few people get excited to come home and budget after a long, exhausting day at work.

Some folks may avoid building a budget because they don’t know where to start. Others may be struggling with finding the motivation to sit down and do it.

For those that don’t know where to start, here’s your first step: Track your spending. It is impossible to build a meaningful budget if you don’t know where the money is going in the first place. (Building a budget requires you assign dollar figures to spending categories, which you’ll need some sense of first.)

If you’re struggling with motivation, we’ll also cover the five reasons you should track your spending, along with some tips on how to track spending and ultimately, build out a budget plan.

Identify Areas That You’re Overspending

In every person’s spending hides some sort of gremlin, busting up budgets while lurking around completely unnoticed. And there’s no way to uncover the problem without spending some real time looking at the numbers. The truth is, spending is so easy and frictionless these days, that it’s nearly impossible to do mental accounting on how much we’re spending in each category and overall.

It’s not uncommon to hear stories about people who are tracking their spending for the first time who realize they are spending hundreds more in certain categories than they had anticipated.

For example, lots of people find they are spending more than they expected on dining out, Starbucks, groceries they don’t use, or shopping. Sometimes, the act of daily or weekly tracking alone inspires people to spend less.

What’s Measured Gets Improved

When it comes to spending less and saving more, the old adage holds true: what’s measured is what gets improved. There’s hardly a way to make meaningful change if you have no benchmark for which you can build from. Say, for example, that you want to spend less on dining out. That’s great, but how can you spend less, if you don’t know how much you spend now?

Only after tracking your spending for a time can you begin to build a meaningful budget. Think about building a budget without knowing how much you spend in each category! There would literally be no point.

For example, say that you guess that you spend $100 on gas each month. But if you had actually tracked your spending, you would know that you get gas once/week, and it costs $40 each fill. Really, you need to budget $160 for gas each month (or slightly less, if you are trying to reduce gas spending).

Feel Inspired to Make Eliminations

The shock of seeing how much you’re spending (and on what) may be the inspiration you need to make real changes. And perhaps these changes extend beyond simply nixing the daily Starbucks habit.

Use that motivation to eliminate unused subscriptions, to work on lowering your gas or phone bill, to cut out entire spending categories, to take public transportation more, or to consider more drastic measures—like getting a roommate or moving into a more affordable place.

Change is never easy to make, but it’s best to use the spark of motivation you first have when you realize that there are plenty of ways to cut back.

Give Yourself the Freedom to Spend on What You Love

Sure, budgeting can feel restricting at first. But eventually, you may come to find that budgeting gives you both peace of mind and the freedom to spend on exactly what you love.

Without a budget, it is possible to feel anxious every time you swipe your card, not sure if you can really afford this thing. With a budget, you can make a purchase knowing that you planned for it and that the money will be there.

Here’s what a lot of people get wrong: the tracking of spending doesn’t have to result in the diminishment of your pleasure. Instead, it’s about looking at how you spend, and assigning priority to those different expenses.

Ask yourself this question: In retrospect, was that purchase worth it? And what purchases weren’t? Again, eliminate the categories that don’t bring you utility or joy, keep the ones that do, and never hesitate to spend on those items again. Tracking and budgeting allow you this freedom.

Build Saving Into Your Plan

If you want to build savings into your monthly financial plan, but can’t imagine how, you have to begin by tracking your spending. Identify areas that you can cut back in so that you are then able to re-allocate those funds to your future.

Once you have found some spending categories where you can give yourself some leeway, practice moving that spare cash into a savings account at the end of the month.

After a month or two of this, you’re ready to truly build savings into your budget, through automation. To do this, set up an automatic transfer of funds from your account, scheduled a few days after your paycheck hits.

Now, you can do as Warren Buffet says: “Do not save what is left after spending, but spend what is left after saving.” Building automatic saving into your monthly financial plan is always best, but monitor to make sure you don’t overdraft your account.

Tips and Tricks On How To Track Spending

Start By Gathering Account and Income Information

If you want to make a personal budget and keep track of spending, your first step is to know exactly where money is moving both to and from. Gather up information on checking accounts, credit cards, online mobile transfer accounts (like PayPal), and so on. Organize your information and make sure that you can log into all of your accounts.

While you’re at it, make sure that you have all sources of income accounted for. Know what these figures are both before and after income and other taxes. It will be up to you whether you budget with after-tax income or pre-tax-income (and consider taxes a line item in your budget), but start with both figures.

Track Last Month’s Income

Instead of starting in the middle of the month, begin by looking at the most recent full month’s worth of spending. Practice putting money into categories like groceries, entertainment, dining out, bills, etc.

You may want to practice doing this in a few different ways. A good way to start is by downloading all of a month’s spending into a spreadsheet. (This should be an option provided by your bank, usually under the “statements” tab or something similar.)

This method requires more upfront work, but forcing yourself to sit with the numbers and manually identify transactions is an important skill to learn. You can also switch to using an app like SoFi Relay.

Determine Your Categories

After looking through last month’s spending and putting transactions into categories, determine how much you’d like to spend in each category. These categories can be as broad or as narrow as works for you and your budgeting style. Don’t forget to account for expenses that don’t happen monthly (like semi-annual car insurance payments) and incidentals.

Increasingly, folks do their shopping at stores like Target or on Amazon, where spending doesn’t fit nicely into one category. During one trip, you could easily buy groceries, toiletries, clothes, and furniture. This makes it hard to budget by category. In that case, consider giving yourself a budget by store.

Get Into A Groove

Maybe you’ll continue to update your spreadsheet with downloaded information from your account, and this is the tracking method that you’ll stick with forever.

Perhaps you’ll find something that you like better, such as app or program. To figure it out, you’re going to have to try it all out. This will be hard in the first few months—give yourself the space to feel frustration—but know that it does get easier over time. The good news is that money-tracking technology is getting better and more helpful and there are many solutions you can check out.

SoFi Money

SoFi Money® is one option to check out. It is a cash management account that comes with a dashboard that provides weekly expense tracking.

After a few months of tracking, you’ll have a better idea of how to put purchases into categories that work as part of a bigger budgetary system. For most people, this will be the hardest part, but it will be worth it. You’ll get into a groove, feel in control of your spending, and finally be able to say, “I am confident in my ability to keep track of my spending.”

Get started with SoFi Money to keep track of your expenses.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi 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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