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.
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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.


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What is a Direct Stock Purchase Plan (DSPP)?

When you buy vegetables from a grocery store, you know farmers grow the vegetables, then a distributor might buy from the farmer and sell the vegetables to grocery stores, and stores then sell those vegetables to you, the consumer. This is comparable to investors using a broker to buy shares of stock, because there is a middle person involved.

But you can sometimes purchase food directly from growers, perhaps at farmers markets. This direct form of purchasing can be comparable to participating in a direct stock purchase plan (DSPP).

Direct Stock Purchase Plan Explained

At a high level, DSPP is a term that pretty much means what it says. When a company offers a DSPP, individual investors can directly purchase shares of that company’s stock without the need for broker involvement. If someone has a 401(k) retirement account at work and has stock from the employer’s company included in a portfolio, then this process has some similarities.

Briefly returning to our vegetable analogy, buyers can sometimes get a better price from a farmers market, because the distributors and grocery stores may mark up their prices to cover their own costs.

With a DSPP, investors directly purchase shares of stock, sometimes at a small discount, which adds value to the purchase. Discounts can range from 1% to 10% to encourage investors to buy more of the company’s stock.

More specifically, if someone wants to buy stocks in this way, they typically open an account and make deposits into it. Usually, these deposits are automatically made monthly through an ACH funds transfer from the investor’s bank account.

Then, that dollar amount is applied toward the DSPP, meaning toward purchasing shares in that company’s stock, which can include fractions of those shares. For example, let’s say that one share of a company’s stock currently costs $20. If an investor sets up an ACH withdrawal of $50 monthly, then, each month they have purchased 2.5 shares of that company’s stock. (The price of a share of stock can fluctuate, but this is how the process works, overall.)

One of the benefits of investing through a direct stock purchase plan is the ability to incrementally invest in an inexpensive way. This might make it a good choice for some first-time investors with smaller amounts of money to invest, with initial deposits ranging from $100 to $500, usually with very low fees to purchase shares or, sometimes, no fees.

This investment strategy can also work for people who want to focus on a select number of quality stocks, long term. It might be a good strategy for people who simply want to have a direct method of ownership, without an intermediary—and some investors appreciate the DSPP programs that allow dividends to be automatically reinvested into additional shares of stock (something that not all companies that offer DSPP programs do).

Conversely, this may not be the preferred method of choice for investors who value diversification, because buying DSPPs tends to create a portfolio based on a small group of stocks. Plus, not all companies offer this investment option, so focusing solely on DSPPs can limit choices.

Note that there may be restrictions placed upon when shares can be purchased. Companies often put maximum limits on how much an individual investor can purchase, too. One well-known home improvement store, as just one example, puts an annual cap of $250,000 on their DSPP program. And, when selling DSPP stocks, multiple types of fees can be charged that can significantly impact gains made.

Finding DSPP Opportunities

Armed with information about how to buy directly from companies, at least in general, investors may want to explore what specific opportunities exist. Perhaps they follow the stock market and already have a publicly traded company in mind.

In that case, they can go to that company’s investor relations website to see if that company offers this type of investment opportunity. They can also search on Google to see if DSPP information is available.

If investors decide to buy through a direct stock purchase plan, they can use a service like ComputerShare.com . It provides a listing of companies that sell stocks through a DSPP—these searches can be filtered in several ways to find the opportunities that fit investor parameters.

What to Consider Before Buying DSPPs

When internet investing was new, people typically needed to pay significant fees to brokers to buy stock—so, in that era, DSPPs could be real money-savers for investors. Over time, though, fees for online investing have lessened, making this less distinctive of a benefit.

Plus, many DSPPs charge initial setup fees, and may have other fees, including ones for each purchase transaction or sale. Although they may be small, in and of themselves, these fees can build up over time. And it may be challenging to re-sell shares without the use of a broker, which makes this investment strategy more of a long-term one, rather than one where investors regularly buy and sell.

Not everybody has the same type of investment personality—what’s important is for each investor to be clear about what type they are and act in tandem with that.

What Kind of Investor?

When people are relatively new to investing, they may not know the answer to that question yet—and that’s okay. As part of the process, though, investors will want to determine, at a minimum, their risk tolerance—in other words, the amount of risk a person is willing to take with investment dollars.

People who are risk takers might be what’s called a growth investor. This type of person might be willing to invest in high-priced stocks that have plenty of potential, even if they’d never heard of them before. More conservative investors can be called “income investors,” people who like to invest in stable, “blue chip” companies that are well established.

It isn’t unusual for younger investors to be more willing to go for growth, with older people going the more conservative route. This isn’t universally true, though, and it’s okay to experiment with investment strategies.

Buying That First Share of Stock

People with a retirement plan are probably already investing in mutual funds. When thinking about buying stock outside of retirement account investing, then it can make sense to complete a couple other financial items first, including:

•   Getting rid of high-interest debt
•   Building an emergency savings of three to six months’ worth of salary to cover unexpected expenses

Now, here’s what it means when someone buys a share of stock. Investors are really buying a piece of a company, becoming a partial owner of that company.

Then, when that company does well, investors can be rewarded by having shares of stock increase in value and/or receiving dividends. If the company doesn’t do well, then that can be reflected in a lesser stock value.

There are two main types of shares: common stock and preferred stock. Generally, when people talk about buying and selling shares of stock, they’re referring to common stock that comes with voting rights. Ideally, investors would like for the stock owned to increase in value, which would give them the option to sell their shares at a profit.

And, if the company is doing well, they may issue dividends, perhaps on a quarterly basis. Investors could use that as an income stream or reinvest those dollars into more shares of that company’s stock.

If a company goes bankrupt, common stockholders are placed behind creditors and another type of stockholders in line—preferred stockholders—in getting payment (which means common stock investors very well might lose all of what they’d invested in that company).

Owners of preferred stock, meanwhile, would get preferential treatment if a company was liquidated, being next in line behind creditors. Owners of this type of stock may or may not have voting rights but could benefit more fully when the company is profitable.

Nowadays, nearly all stock trading is handled online, which has made the process less expensive and more hands-on for the typical investor—at least compared to the days when people needed to walk into a stockbroker’s office to place an order.

Today, they simply need to open up an account with an online brokerage firm and then they can typically handle transactions from their computers or mobile devices. This, of course, raises the question about where a brokerage account should be opened. New investors can compare fees, as one step, while noting that it might be worth it to pay a bit more if the service is good.

When it’s time to actually buy that first share of stock, the decision may be made to invest in a company that is already familiar to the investor—and then invest a small amount as a trial.

Any time a share of stock is purchased, at any company, some degree of risk comes along with it—how much depends upon what is happening with that specific company and the overall levels of turbulence in the market.
Here’s something else to consider: When owning stock in just one company, or only a couple of them, portfolios aren’t diversified.

Portfolio diversification is desirable because it helps to spread out the degree of risk—that’s because, if one stock’s value decreases, others may rise to balance out that portfolio. Some investors, for example, have a portfolio with 40 to 50 different stocks to provide diversification.

Researching Investment Opportunities

Before investing in a company, it makes sense to research how well they’ve been performing. How profitable have they been? How do they compare against their competitors?

Most companies must provide information about their financial performance and major corporate changes; this information can be found on a company’s website in the Investor Relations section or at the Securities and Exchange Commission site.

Before investing, it can make sense to look at a company’s quarterly and annual balance sheets, as well as their income statements and cash flow statements. Another strategy is to review their retained earnings statement and shareholders’ equity information.

When reviewing a company’s financial information, check its after-take income—or what’s often called their “bottom line.” This is the number that’s most watched by a typical investor because it’s often directly related to the price of that company’s stock.

This information can be found in quarterly and annual financial statements and, besides looking at how good current earnings are, it can make sense to check the statements to see how consistent earnings have been.

Another idea is to review return on sales, also called operating margins. This will show investors how much a company makes in profit after paying associated costs, not including interest or taxes. To calculate this metric, find the company’s operating profit and then divide it by its net sales. A good (higher) number is a positive sign while a lower number may indicate more risk for investors.

As another strategy, check the cash flow statements—cash flow has been described as the life’s blood of a company’s financial position. Then there’s a calculation known as asset utilization, and it helps people to know how well a particular company is doing when compared to other ones.

If someone is considering investing in Company A, for example, and that company has revenues of $200,000 and assets of $100,000, its asset utilization rate is 2:1. In other words, for every dollar they have in assets, they have $2 being generated in revenue. How does that compare to Company B? Company C?

Investors sometimes also review a company’s debt-to-equity ratio (also called debt-to-capital ratio) to determine how a particular company funds its business operations and pays for its assets. Ideally, a company will have enough short-term liquidity to pay for business operations as well as its growth. This figure does not take into account any long-term debt held by the company.

Are its earnings going up, overall? Are there noticeable patterns—perhaps lower earnings in the winter for outdoor entertainment corporations? When lower earnings exist, does it fit the seasonal pattern observed—or is something else potentially going on?

Besides doing investigative work, investors might want to read financial news, with reputable sources including The Wall Street Journal, Bloomberg, MarketWatch, and CNBC, among others.

Investors can browse through them to see how the market is doing, overall, as well as how individual sectors are performing. If interested in specific companies, they can read about their performances.

Considering Exchange-Traded Funds and Mutual Funds

If someone is new to investing, choosing exchange-traded funds (ETFs) and mutual funds may be a good introduction to the investing world. These types of investment vehicles can offer more diversity, which can help to mitigate risk. One way to think of ETFs is as a basket of securities that gives investors access to a broad variety of markets.

Mutual funds, meanwhile, also provide opportunities for people who want to get started investing with small amounts of money. Because mutual funds are like suitcases filled with different security types, they provide instant diversification.

SoFi Invest

When it’s time to start investing online, that’s also the time when people need to choose their broker.
With SoFi Invest®️, people can invest with ease, no matter what level of investment experience exists.

One option is the active investing route, choosing stocks, ETFs, and cryptocurrency, getting started with as little as $1 and avoiding the high costs associated with some other methods of investing. And, at SoFi, stocks and ETFs can be traded for free.

Because diversity is so important, SoFi makes it easy for investors to spread their money out over different investment vehicles, including Stock Bits, which allows people to invest in their favorite companies without needing to commit to a whole share.

Or, if investing sounds like a good idea but the heavy lifting involved doesn’t, there is the automated investing option.

Recommendations are made through sophisticated computer algorithms and help with goal-setting, rebalancing of portfolios, and diversification. Best of all, when choosing automated investing at SoFi, investors can still have access to human financial advisors.

SoFi Invest allows you to invest your way, all in one place.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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.


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What is a Quiet Period?

For investors living in the era of “fake news,” it probably isn’t hard to imagine the chaos which might ensue if there weren’t any rules regarding the marketing of IPOs.

The SEC regulates the sale of securities to ensure that it is done fairly and investors receive accurate information. One of the ways it does this is by restricting the type of communication a company is allowed to do during the time leading up to and following an IPO.

When a company decides to issue an Initial Public Offering (IPO) there are numerous legal and financial steps they go through in preparation.

These include preparing a prospectus and filing an IPO registration statement with the Securities and Exchange Commission. The prospectus is a publicly available document which includes:

•   A description of the company’s business and assets
•   Information about the company’s management team
•   A description of the security being offered in the IPO
•   Independently certified financial statements

The quiet period is a time when company executives, board members, management, and employees cannot publicly promote the company or its stock. Investment bankers and underwriters also cannot put out buy or sell recommendations.

It starts when the company files the registration statement, including a recommended offering price for the security, and lasts for 30 days.

During this time, the SEC looks over all the documentation and approves the registration. The quiet period allows the SEC to complete the review process without bias or interruption and ensures that the company doesn’t attempt to hype, manipulate, or pre-sell their stock.

Companies are allowed to discuss information already in the prospectus during the quiet period, and oftentimes they will go on a “road show” to present this information and get a sense for the potential market. Activities generally avoided during the quiet period are advertising campaigns, conferences, and press interviews.

Some companies are now choosing to confidentially file for IPOs and only release information a few weeks before the sale. The confidential filing had only been allowed for companies with revenue under $1 billion since the 2012 JOBS Act and was extended to all companies in 2017.

This option allows businesses to avoid negative media attention, and if there are any changes in the stock market between the time they file and their planned IPO date, they can adjust their plans accordingly—and without scrutiny.

A study conducted at The Wharton School of The University of Pennsylvania showed that media coverage during a quiet period can result in negative outcomes for investors, so the confidential filing process could potentially help improve those outcomes.

Another quiet period takes place each quarter, during the month before a company files its quarterly earnings report. Similar to the pre-IPO quiet period, executives and management must be careful not to publicly say anything which could be perceived as insider information.

History of the Quiet Period

The quiet period was enacted in 1933 as part of the Securities Act. Prior to the 1929 stock market crash, the Federal Government didn’t regulate the sales or marketing of securities.

This was handled by each individual state. The goal of the Securities Act was to prevent fraudulent activity and marketing hype, as well as to ensure that potential investors across the nation were all presented with the same materials prior to an IPO.

The Securities and Exchange Commission (SEC) became the central regulating party. Companies were now required to register with the SEC and put together a prospectus document outlining the company’s team, assets, finances, and the security being offered in the IPO.

Since the SEC must act as a neutral party when vetting a company’s registration materials, the quiet period allows them to perform this task unbiased. It also gives investors the chance to assess the prospectus and IPO pricing in order to make informed purchasing decisions.

A few amendments have been made to the Securities Act regarding the quiet period since the 1930s. These include the recognition that companies may have made public statements prior to filing their registration, and clarifications about the type of marketing and communications a company is still allowed to do.

In the early 2000s the SEC modernized the rules of the quiet period to include clarifications about digital and online communications.

Other recent changes have made the rules more lax, such as permitting the solicitation of accredited investors. Perhaps one day the quiet period may no longer be enforced, but for now it is still an important part of the IPO process.

Violation of the Quiet Period

Violation of the quiet period is called “gun-jumping.” If the SEC deems a statement made by a company is in violation of the quiet period, consequences can include:

•   A delayed IPO
•   Liability for violating the Securities Act
•   Requirement to disclose the violation in the company’s prospectus

What to do During a Quiet Period

Quiet periods can be a good time to assess whether you’re interested in investing in a company’s IPO. Seasoned investors look to profit at the end of the quiet period, called the quiet period expiration.

At this time the stock price and trading volume can see drastic movement up or down, since a flood of information gets released from analysts.

Unbiased prospectus information about recent filings can be viewed on the SEC website. It’s a good idea to read the prospectus so you can judge for yourself whether a company’s mission, team, and financials look like a sound investment.

One of the keys to building a successful long term portfolio is diversification. By mixing investments from higher and low risk, new and established companies, you can likely reduce the risk of a single investment having an outsized effect on your performance.

IPOs have the potential to be lucrative investments, but can also turn out to be extremely volatile and could lose value. A good way for new investors to add recent IPO stocks to their portfolios is through an IPO ETF.

ETFs include multiple stocks and are generally rebalanced over time, so investors can hope to gain access to growing companies while diversifying their risk.

Don’t Keep a Lid on Your Investments

If you have questions or want to discuss your investment strategies and portfolio, the SoFi Invest team is here to help. Investing in IPOs can be risky and takes time.

If you’re looking for an efficient way to add some of the newest IPO stocks to your portfolio, let SoFi do the heavy lifting using the Automated Investing platform.

Or, if you love doing your own IPO homework, the SoFi Active Investing platform can give you access to stocks of newly public companies.

Learn more about SoFi Invest®.

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 Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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What is The Average Rate of Return on a 401K?

If your employer offers a 401(k) plan, you’ve probably wondered if it’s really the right place to put a portion of your hard-earned money every month.

You’ve likely been told that the earlier you start saving for retirement, the better off you’ll be. But how can you know that the average rate of return on your 401(k) investments will be the same or more than other available options?

After all, if you’re going to make sacrifices now to put money toward the future, you want it to be the best retirement possible.

A Few 401(k) Basics

To understand what a 401(k) has to offer, it can help to know what it is. The IRS defines a 401(k) as “a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts.”

In other words, employees can choose to delegate a portion of their pay to an investment account that is set up through their employer.

And because participants put the money from their paycheck into their 401(k) on a pre-tax basis, those contributions reduce their annual taxable income.

Taxes are deferred on contributions and growth in a 401(k) account until the money is withdrawn (unless it’s an after-tax Roth 401(k)).

A 401(k) is a “defined-contribution” plan, which means the participant’s balance is determined by contributions made to the plan and the performance of the investments the participant chooses.

That makes it different from a “defined-benefit” plan, or pension, which puts the investment risk on the plan provider and guarantees the employee a monthly income in retirement.

Employers aren’t required to make contributions to employee 401(k) plans, though many do—typically by offering to match a certain percentage of an employee’s contributions.

Besides the tax advantages and the convenience of automatic 401(k) payroll deductions—which can help make saving simpler for everyone, but especially for those who might otherwise lack the discipline—it’s the employer match that can be a big draw for plan participants. It’s tough to turn down free money.

Employer-sponsored 401(k)s have made investing accessible to more Americans, and the plans encourage saving for the long-term. Compound growth over time can be one of an investor’s most valuable tools.

And the less money there is coming out of a paycheck because of taxes, the more there is available for compounding. But there are other factors to consider when looking at a 401(k).

One of the less-talked about benefits of 401(k) plans is that they’re protected by federal law. The Employee Retirement Security Act of 1974 (ERISA) sets minimum standards for employers that choose to set up retirement plans and for the administrators who manage them.

Those protections include a claims and appeals process to make sure employees get the benefits they have coming—that there is a right to sue for benefits and breaches of fiduciary duty if the plan is mismanaged, that certain benefits are paid if the participant becomes unemployed, and that plan features and funding are properly disclosed. Another plus: ERISA-qualified accounts are protected from creditors.

401k Fees, Vesting and Penalties

But there are some downsides for some 401(k) investors. The typical 401(k) plan charges a fee of 1% of assets under management. That means an investor who has $100,000 in a 401(k) could pay $1,000 or more. And as that participant’s savings grow over the years, the fees could add up to thousands of dollars.

Fees eat into your returns and make saving harder—and there are companies, including SoFi Invest®, that don’t charge management fees on their investment accounts. (If you’re unsure about what you’re paying, you should be able to find out from your plan provider, HR, or you can do your own research on various 401(k) plans.)

Although any contributions a participant makes belong to that individual 100% from the get-go, a vesting schedule may dictate the degree of ownership the employee has when it comes to employer contributions.

And don’t forget, some of the money in that tax-deferred retirement account also belongs to Uncle Sam. And he wants 401(k) investors to keep growing their savings for retirement.

So besides any other taxes due when there’s a withdrawal, if a participant decides to take money from a 401(k) before reaching age 59½, there’s usually a 10% penalty. (Although there are some exceptions.) And at age 70½, retirees are required to take minimum distributions from their tax-deferred retirement accounts.

Another thing to consider when looking at signing up for a 401(k) is what kind of investing you’d like to do. A lot of 401(k) plans have a slim selection of investments to choose from.

Employers are required to offer at least three basic options: a stock investment option, a bond option, and cash or stable value option.

Many offer more than the minimum, but they stick mostly to mutual funds. That’s meant to streamline the decision-making for investors who might be overwhelmed by too many choices and suffer from analysis paralysis. But for those looking to diversify outside the basic asset classes, it can be limiting.

How Do 401(k) Returns Hold Up?

It would be nice if we could know the average rate of return to expect from a 401(k). But the answer is, it depends. It depends on the investments a particular plan has to choose from and the portfolio a particular participant creates. And it depends on what the market decides to do from day to day and year to year.

Based on past numbers, the classic 60/40 portfolio—the moderate asset allocation common among investors participating in 401(k) plans—generally provides an annual return that ranges from 5% to 8% .

But that doesn’t mean a 60/40 investor will always be in that range. Sometimes that mix will have double-digit returns. Sometimes, it will drop down to negative numbers.

And no one can know how the strategy will fare as the market expands and evolves. (A financial professional may be able to help you analyze how your particular portfolio choices would have done during down markets, like those we experienced in 2000 and 2008.)

A basic 60/40 mix, which allocates 60% to equities and 40% to bonds/cash investments, is meant to maintain balance in a portfolio as the market fluctuates, minimizing risk while generating a consistent rate of return over time—even when the market is experiencing periods of volatility.

Stocks have the greatest potential for growth over time. Since 1926 , large stocks have returned an average of 10% per year, while long-term government bonds, which are considered more stable, have returned between 5% and 6%.

The 60/40 mix was popularized by Jack Bogle, the late founder of The Vanguard Group who is credited with creating the first index fund. And it’s easy to accomplish with the mutual funds available through 401(k) plans. But not every investor has to—or should—go with that exact ratio.

Asset allocation is usually based on an investor’s risk tolerance and time horizon—the amount of time until an individual will be ready to tap his or her retirement funds.

Retirement plan participants can figure out their best mix on their own, with the help of a financial advisor, or by opting for a target-date fund—a mutual fund that bases asset allocations on when the participant expects to retire.

A 2050 target-date fund will likely be more aggressive—it might have more stocks than bonds and will typically have a higher rate of return. A 2025 fund will lean more toward safety, protecting an investor who is nearer to retirement, and might be invested mostly in bonds. (Again, the actual returns an investor will see may be affected by the whims of the market.

But this is how these funds are targeted.) Most 401(k) plans offer target-date funds, and they make investing easy for hands-off investors. But if that’s not what you’re looking for, and your 401(k) plan makes an advisor available to work with you, you may be able to get more specific advice. Or, if you want more help, you could hire a financial professional to work with you on your overall plan as it relates to your long- and short-term goals.

Another possibility might be to go with the basic choices in your workplace 401(k), but also open a separate investing account with which you could take a more hands-on approach—maybe a traditional IRA if you’re still looking for tax advantages, a Roth IRA if you want to limit your tax burden in retirement, or an account that lets you invest in what you love, one stock at a time.

Making the Most of Investment Options

Whether it’s your only retirement account or not, it’s up to you to manage your employer-sponsored 401(k) in a way that makes the most of the options it offers.

One way to start is by familiarizing yourself with the rules on how to maximize the company match. Is it a dollar-for-dollar match up to a certain percentage of your salary, a 50% match, or some other calculation? It also helps to know the policy regarding vesting and what happens to those matching contributions if you leave before you’re fully vested.

With or without help, taking a little time to assess the investments in your plan could boost your bottom line, and you may be able to tailor your portfolio to better accomplish your financial goals. Checking past returns can provide some information when choosing investments and strategies, but looking to the future also can be useful.

If you have a career plan (will you stay with this employer for years or be out the door in two?) and a personal plan (do you want to buy a house, have kids, start your own business?), it may help you decide how much to invest and where to invest it.

Have you lost track of the 401(k)s you left behind at past employers? It may make sense to roll them into your current employer’s plan, or to roll them into a separate IRA outside of your workplace. You might need to update your portfolio mix, and you might be able to eliminate some fees.

Keep in mind that there are different contribution limits for 401(k)s and IRAs . For those under age 50, the 2020 contribution limit is $19,500 for 401(k)s and $6,000 for IRAs. For those 50 or older, the 2020 contribution limit is $26,000 for 401(k)s and $6,500 for IRAs. Other rules and restrictions may also apply.

The good news here is that investors have options as they save for the future. They can be as aggressive or as conservative as they want by choosing the investment mix that best suits their timeline and financial goals.

They can stick with one type of retirement account or fund, or they can diversify their investments and strategies with multiple accounts. And they can be hands-off or hands-on. The only thing they can’t afford to do is nothing.

If you have questions about how 401(k)s and other investment plans can benefit you as you work toward your goals, it can help to get some professional guidance.

With a SoFi Invest account, you’ll have complimentary access to financial advisors who can talk to you about diversifying your portfolio and maximizing the money you have to invest now and in the future.

You won’t pay transaction or SoFi management fees. And you can trade stocks online and ETFs yourself with active investing, or let SoFi put together an automated portfolio based on your input.

When you’re ready to invest, check out SoFi Invest, and get help building a plan for the future.

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.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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 Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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How Much Does it Cost to Remodel a House?

In the world of HGTV renovation shows, remodeling a home might look like a breeze. Interior design pros tackle a home in 30 minutes (including commercial breaks) and finish on time—miraculously under budget.

But, real life is rarely like reality TV. Home remodels can sometimes be complicated, and costly. Coming up with a budget beforehand could help avoid the headaches and hard choices that can crop up down the line.

Ready to start calculating a potential dream home remodel? Turn off the home renovation show, grab a calculator, and read on.

There’s no one “magic number” a person can bank on when it comes to the cost of a home renovation.
However, there are several factors that a homeowner can take into account when budgeting for a home remodel: high-end vs low-end, type of home, and rooms renovated.

Factors of a Home Remodel Cost

High-end Versus Low-end Renovation

A renovation of a 2,500 square foot home could cost anywhere between $25,000 and $150,000 on average . The variation in price stems mostly from the scale of the projects. According to HomeAdvisor , a homeowner can expect to generally complete the following within each budget range:

•   Low-end ($15,000-$45,000). A renovation of this size would include small changes, such as new paint and fresh landscaping. It might also include inexpensive finishes, such as new counters and flooring.
•   Middle-end ($46,000-$70,000). In addition to the low-end projects, a middle-end home renovation includes full room remodels, like a bathroom and kitchen, as well as a higher quality flooring than the low-end renovation.
•   High-end ($71,000-$200,000). A high-end budget would include the low- and middle-end projects, as well as high-quality finishes including custom cabinetry and new appliances. It might also include improvements to the foundation, HVAC, plumbing, and electrical.

As a homeowner begins to identify what rooms they want to upgrade and to what extent, they will begin to customize their renovation budget. Just one in five homeowners finish renovations under budget, so it’s recommended to pad estimates in the event of unexpected costs.

Type and Age of Home

Older homes will typically need more TLC during the renovation process. Once walls and floors are opened up, a homeowner might realize the wiring and plumbing is outdated and should be brought up to code.

While a person’s home won’t be unsellable if everything isn’t up to code, there could be issues with financing because generally lenders will not close on a home where health and safety issues are identified.

People may decide that adhering to building standards ensures the work is up to code and that it’s a safe renovation. That can involve time, money, and work. That is why sometimes older homes can involve more work than the average renovation.

If a person’s home is old enough to be considered “historic” in their town or community, they’ll want to be careful about the changes they make. Depending on where a person lives, they’ll likely need to adhere to their city’s guidelines to make sure their home still falls into the “historic“ categorization, even after a remodel.

Designated historic properties in states like Connecticut could boost a home’s value between 4% and 19% , on average.

Depending upon the condition of the home and any past upgrades, a home’s age can have an impact on the cost of renovation, but so too can the type of home, regardless of age.

HomeAdvisor estimates that Victorian homes generally cost the most to renovate per square foot, up to $200 and that farmhouses and townhouses tend to have the lowest cost per square foot, between $10-$35 .

Use SoFi’s Home Improvement Cost Calculator
to estimate the price of your next remodel.

Typical Renovation Costs by Room

For many homeowners, a dream renovation would cover every inch of the home, but for the budget-conscious, that might not be possible.

When it comes to renovation expenses, generally, not every room is created equally. Rooms with cabinets and appliances tend to be the priciest—think bathrooms and kitchens.

Kitchen Remodel

The typical range for the cost of remodeling a kitchen comes in between $13,052-$37,026 , but kitchens can have the most variation when it comes to cost, depending on finishes, appliances, and projects.

Here’s what a homeowner could expect to overhaul in a kitchen based on the budget range :

•   Low-end ($5,000-$30,000). New lighting, faucet, coat of paint, refreshed trim, and a new but budget-friendly sink backsplash. This also might include knocking down walls or a counter extension project.
•   Middle-end ($30,000-$60,000). This budget could include new appliances, floors, and tiled backsplash to the sink. It might also include new cabinets and mid-range priced countertops.
•   High-end ($65,000+). When the budget expands for a kitchen, the projects start to take on custom finishes. A high-end budget would likely include custom cabinets, high-end countertops like stone or granite, and expensive appliances. Other projects might include new lighting, hardwood flooring, and new faucet fixtures.

Because a kitchen can be so customizable and include so many levels of finishes, the budget could fluctuate greatly.

Bathroom Remodel

Bathrooms take on a similar budgeting structure. The typical range for the cost of a bathroom remodel is between $5,989-$14,964 , but that includes a range of projects and features.

For example, new cabinets in a bathroom can account for up to 30% of the budget . Other big-ticket items come in a range of prices based on low-end versus high-end finishes.

On the low-end, a new bathtub might cost just $400 , but if a homeowner is looking for a high-end tub, they could pay upwards of $8,000 . The final cost will likely hinge on the homeowner’s decision on budget range.

Bedroom and Living Room Remodel

Budgeting a bedroom remodel can be a little more cut and dry since it generally doesn’t include as many costly fixtures as a person might find in the bathroom or kitchen. A homeowner can expect to tackle a bedroom for about $7,880, on average .

This typically includes new carpet, windows, door, and refreshed molding. It might also include new heating, insulation, and updated wiring and lighting. But this budget doesn’t account for new furnishings in the bedroom, like a bed or wardrobe.

Remodeling a master suite could cost a bit more since it typically includes a bathroom and bedroom renovation. If a homeowner wants to add or expand a closet in the master suite, they can estimate adding around $1,500 to $2,000 to the room’s budget, on top of the bathroom and bedroom.

A living room remodel can cost between $1,500-$5,500, on average . Like the bedroom, living rooms tend to lack the “wet” features, plumbing and appliances, that can drive up the cost of the bathroom and kitchen.

If a living room has a fireplace feature, homeowners can expect to spend a bit more. Looking to add a fireplace? That could add at least $2,000 to the room .

Exterior Remodel

Updating roofing and refreshing the exterior of a home is commonly part of a renovation. A new roof could cost $20,000 , on average, but will vary depending on materials.

Adding new siding to a home will typically cost around $14,000 , but will once again fluctuate based on the material used. Painting the exterior of a home will cost between $1,710 and $4,000 .

Of course, depending on the degree to which each room is remodeled, the estimates could vary. DIY-ing projects in various rooms could also help bring down the budget.

Other Remodel Considerations

A remodel isn’t just financial spreadsheets. There are other considerations a homeowner may want to consider before taking a sledgehammer to a room.


A renovation could take anywhere from a few days to a few months, so a homeowner may want to plan their timeline accordingly. It might be tempting to duck out of town when big projects are underway, but staying around means the homeowner could monitor projects and provide answers if any unexpected issues arise.

Additionally, renovations can be stressful and might be best scheduled around other big life events. For example, homeowners might think twice about a full home remodel that coincides with nuptials, or a baby on the way. Of course, unexpected events could arise, but there may be no need to pile on projects when so much is going on.

Who Is the Renovation for?

Before diving deep into plans, homeowners may want to consider who the renovation is for. Is it for the homeowner to enjoy decades from now, or is it to make the house more marketable for a future sale? The renovation could take a different shape depending on a homeowner’s answer.

If the remodel is just for the homeowner, then they might choose fixtures based on personal taste, or might decide to splurge on high-end bathroom features that they’ll enjoy for years.

On the other hand, if the homeowner plans to sell within a few years, they may consider tackling projects that have the greatest return on investment (ROI). That could mean prioritizing projects like a kitchen update or bathroom remodel.

Not sure about a project’s resale value? SoFi’s home project value estimator can be a useful tool to help determine the approximate resale value of a home improvement project.

Delays and Unforeseen Expenses

Homeowners might expect the unexpected when undergoing a remodel. Unexpected delays could extend the timeline, or emergency expenses could drive a project over budget.

As a general rule of thumb, it is recommended for homeowners to pad their budget by at least 10% for emergencies or unexpected costs.

Financing a Remodel

Coming up with the capital to finance a remodel can be daunting enough to make some homeowners abandon the whole process. However, there are multiple avenues homeowners can explore to start the remodel of their dreams.

Out of Pocket

Homeowners who take on small renovations and have liquid savings might decide to pay for everything out of pocket. This means no debt or interest rates to contend with.

However, paying cash for a large project can be challenging for some, and might lead to cutting corners on important elements in an effort to keep costs down. Plus, unexpected emergency costs could drive the homeowner into unexpected debt.

Out of pocket is possible for some homeowners, but it’s not the only way to pay for a remodel.

From Friends or Family

Another alternative is to borrow money from family members or friends. While this saves homeowners from having to deal with loan applications and approvals, and potentially provides more flexible terms, it can come with its own share of issues, such as risking the relationship if the borrower is unable to pay back the lender (in this case, family or friends).

Homeowners may want to carefully consider the effect borrowing money for a remodel might have on a relationship, and make sure there are plans in place in case the money can’t be repaid.

Additionally, loans from family members may be considered gifts by the IRS (and may be taxable), so it’s best to discuss with a tax professional before proceeding.


A HELOC, or Home Equity Line of Credit, allows homeowners to pull a certain amount of equity out of their home to finance things like renovations.

Qualifying for a HELOC depends on several factors, including the outstanding mortgage amount on the home, the market value of the home, and the owner’s financial profile.

HELOCs typically come with an initial low-interest rate, and a homeowner generally has the option to only pay interest on the amount they’ve actually withdrawn.

However, they could also have high upfront costs, and can come with a variable interest rate with annual and lifetime rate caps.

Personal Loan

If a homeowner doesn’t have the cash on hand or enough equity in their home for a HELOC, then a personal loan might be a consideration.

An unsecured personal loan is generally an unsecured installment loan that isn’t attached to a person’s home equity, and typically can be funded faster than secured loans and with fewer or no upfront fees.

Personal loans might be a good option for people who recently bought their homes, need capital quickly for unexpected personal reasons, or need a loan for their home improvement project.

SoFi’s personal loans are generally funded in as little as three days, with competitive rates, and no fees. Qualified borrowers may be eligible to borrow $5,000 to $100,000 for a home improvement or other personal needs, and can apply online in a few clicks.

Home remodels are stressful enough, but with a home improvement loan from SoFi, finding a way to pay for them doesn’t have to be.

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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.


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