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How to Create a Budget in 6 Steps

Budgets sometimes have a bit of a bad reputation; they’re seen as being a killjoy. But in truth, a budget doesn’t have to hold you back, restrict you from fun, or sour your lifestyle. In fact, it can eventually set you free from the financial burdens that are keeping you from reaching your ultimate life goals.

A budget can help put your financial house in order and make you more efficient. In the end, your budget could be your strongest and most faithful economic ally. It allows you to see how your spending and saving tracks against the income you bring in each month. Once you have this equation nailed down — and the math is not as scary as it sounds — you can reconfigure and adjust.

You’ll likely find that a budget allows you to control your finances rather than have your finances controlling you. So read on to learn the six steps needed to create a budget and see an example of how a budget can stack up.

6 Steps to Creating a Budget

Here, you’ll learn the six steps that will help you create a budget. You will need to take a look at what you earn and what you spend, as well as do a little basic math. The results will be a guideline that shows you what you are spending, how much you should be spending, and how much you can allocate to your important financial goals, whether that means going to Japan to see cherry blossoms next spring or knowing that you’ll have the down payment for a house saved up within a couple of years.

1. Aligning Your Goals

Before starting a budget, it can be helpful to have a clear idea of your short-term financial goals and longer-term ones and to keep them in mind throughout the entire process. Goals could be anything that’s ultimately important to you:

•   buying a home

•   starting a family

•   travel plans

•   getting out of credit card debt

•   planning for retirement

•   starting and maintaining an emergency fund.

Of course, these are just suggestions, but they can guide your budget and help you prioritize how you allocate your money.

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2. Gathering Your Financial Docs

To make a solid, workable budget, you need to know exactly how much money is coming in and how much money is typically going out. You are going to want to know both how much money is coming in and how much is going out.

First, pull together how much you have coming from all sources of income. Then, it’s time to dig into your expenses. You may think of organizing your bills as grunt work, but it’s actually a great way to get a crystal clear picture of what you are spending each month. These will become the basic building blocks of your budget.

Take a look at how much you typically spend per month in the following categories:

•   Credit cards and credit card debt

•   School loans

•   Car loans and expenses

•   Insurance premiums (health, life, car, home)

•   Rent/mortgage

•   Utilities

•   Monthly food expenses

•   Child care, child support, or related family obligations

•   Transportation (other than car)

•   Savings/investments (401(k), IRA, automatic savings deductions)

As you gather this information, you may want to look at a couple of months’ worth of records. For example, your credit card bill may vary considerably, so averaging a few months will give you a more realistic picture than checking a single month.

3. Calculate Your Income

Now that you have the forms you need in front of you, add up how much you have to work with each month. In all cases, what you want to work with is your after-tax, not pre-tax, income.

Perhaps this step just involves looking at your paystub, or perhaps you also have a side hustle or rental property that brings in money. Or maybe you are the lucky holder of an investment account that generates dividends. Perhaps you regularly receive bonuses or tips at work. Add it all up.

4. Review Your Spending Categories

Next, take all that expenses-related info from step #2 and group your spending into categories. Many people look at their spending as “needs” versus “wants.” A need is something required for basic existence, while a want is discretionary spending. Needs also include debt payment, so if you have a student loan or similar monthly expenses, include that in the need category.

Be a bit strict with yourself about what you truly require to exist and what is a luxury. So your weekly grocery bill is a need, but that twice-a-week takeout sushi habit is a want. A new pair of shoes because your old ones wore out may be a need, but a cool pair of boots that are on sale goes into the want category.

Recommended: How Much Should I Spend on Rent?

5. Building Your Budget

First, get a big-picture view of your finances, which is a critical step in building your budget: Subtract your monthly expenses from your monthly income. How are you doing? Is there money leftover? If so, that can be applied to meet your financial goals.

Are you breaking even or veering into negative territory? That means you need to either cut your expenses a bit or earn more money (or try a combination of both).

Then, you want to get more detailed, and establish your budget, which will give your guidelines and guardrails for your spending. What’s most important is to find an organizing principle that works for your personal and financial style. Here are a few ideas; you might try one for a couple of months and see if it’s a good fit.

•   The 50/30/20 Budget Rule. The 50/30/20 budget breaks up your budget like this:

◦   50% on essential expenses. This category could include housing costs, bills and utilities, auto payments, insurance and repairs, education costs, food, essential services (like childcare) and medical costs.

◦   30% on discretionary expenses. You probably still want to live and enjoy life, but live it with a strategy and end goal in mind. Your discretionary expenses could include shopping, entertainment, personal care (like haircuts and gym), travel, and other expenses that may not necessarily be considered essential.

◦   20% towards your goals. This amount of money can go into savings and investments as you work towards things like an emergency fund, a new car, or your child’s college education.

•   The 70/20/10 Budget Rule. This is similar to the 50/30/20 rule, but allocates more money towards needs. This can be a good variation for those who are just starting their careers or anyone who lives in an area with a high cost of living.

•   Zero-based Budget. In this system, every single dollar is given a purpose until you get to zero (or every bit of your income accounted for). When you know how your money is allocated, it can help you keep on track and not mindlessly spend. For instance, your budget may allocate $100 a month to dining out. If you know it’s the 20th of a given month and you’ve already spent that amount, you’re better able to realize that going out for brunch will throw your budget out of whack.

•   The Envelope Budget System. In this method, you write the name and cash amount you have for a category for a month. So you might put, “Housing, $2,000” on one envelope, “Food, $600” on another, and so forth. As you spend in each category during the month, subtract your expenses from the amount on the envelope. When you hit zero in a category, stop spending for the rest of the month.

There are many other budget methods available via apps and online. Check if your bank offers budgeting tools; many do. And if you like to manage your budget with an Excel spreadsheet, with a pad and pencil, or other means, that’s fine. Whatever can help you keep track of your money and manage your spending and saving will be good.

Recommended: Are You Bad With Money? Here’s How to Get Better

6. Making Adjustments

A budget is a dynamic, not static, thing. Some months may be more expensive than others (say, around the holidays, when you are buying gifts). Other times, you may notice a pattern that you are struggling to make ends meet and building up credit card debt. In those cases, you’ll need to find ways to minimize your expenses so you can recalibrate. Don’t beat yourself up; just use this learning to move forward in a positive direction.

In terms of cutting your spending, you might take a closer look at any expenses that you can honestly call non-essential, and be brutally honest with yourself. Even if you start slow and be kind, you can take off a few bucks here and there, and then maybe work your way up to the bigger expenses.

For instance, you could start with eliminating, or at least reducing, your mani/pedi appointments, or your daily espressos. Little steps. The money you save on non-essential spending can be placed instead toward lowering your credit card debt or boosting retirement savings plan.

There’s also the other possibility: Your income might rise. You might get a raise and need to think strategically about how best to allocate those dollars to avoid “lifestyle creep,” when your spending rises along with your earning power but you don’t wind up building wealth.

Recommended: Compulsive or Impulsive Shopping: Ways to Combat It

Example of a Monthly Budget

Here’s a look at what a monthly budget might look like. Remember, this example is based on after-tax, not pre-tax, income.

Monthly Income

Salary $4,000
Side hustle (average) $150
Total: $4,650
Monthly Expenses
Rent ($1,500)
Groceries ($375)
Student loan ($337.50)
Car payment ($300)
Credit card payment ($300)
Discretionary spending (eating out, etc.) ($232.50)
Power, cable, internet ($330)
Auto & renters insurance ($150)
Career enrichment class ($60)
Savings ($400)
Total: ($3,985)
Budget Totals
Income $4,650
Expenses ($3,985)
Budget surplus or deficit $665

As you see in this example, the budget has $665 excess cash at the end of the month, which could be used to pay down debt more quickly or put towards savings goals, whether short- or long-term.

Recommended: 5 Ways to Achieve Financial Security

The Takeaway

Creating a budget doesn’t have to be hard, and it can be a great way to guide your spending and saving so you can realize your financial goals. While there are many approaches and techniques to try, what matters most is finding one that is a good fit for you personally and helps you feel in control of your cash.

One way to help stay on top of your budget is by tracking your spending. With an online bank account with SoFi, you’ll have great tools to help you track your weekly spending and notice patterns. What’s more, when you open our Checking and Savings account with direct deposit, you’ll earn a super competitive APY and pay no fees, both of which can help your money grow faster.

Want a better way to track your spending, spend and save? Open a SoFi Checking and Savings account today.

3 Great Benefits of Direct Deposit

1. It’s Faster
As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.

2. It’s Like Clockwork
Whether your check comes the first Wednesday of the month or every other Friday, if you sign up for direct deposit, you know when the money will hit your account. This is especially helpful for scheduling the payment of regular bills. No more guessing when you’ll have sufficient funds.

3. It’s Secure
While checks can get lost in the mail – or even stolen, there is no chance of that happening with a direct deposit. Also, if it’s your paycheck, you won’t have to worry about your or your employer’s info ending up in the wrong hands.


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® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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How Much Money Should Be in Your Emergency Fund?

Having an emergency fund is a good safety net if you get hit with an unexpected car repair bill or get laid off. You know you’ll have cash available. But how much should you actually have in the bank? Most experts recommend that you have at least three to six months’ worth of living expenses, but that can vary on factors like your age, your health, how many dependents you have, and your cost of living.

An emergency fund is one of the best ways to make sure you’re not relying on credit cards to make ends meet if a worst-case situation were to crop up. Just knowing it’s there might even help you sleep better at night. To help you determine how much you need in the bank, read on. You’ll learn about how to tuck away the right amount, and answer such questions as:

•   What is an emergency fund?

•   What is the issue with not having an emergency fund?

•   How can I start saving for an emergency fund?

•   How much should an emergency fund be?

•   What are the factors that influence how much I should have in an emergency fund?

•   How can I build my emergency fund?

What Is an Emergency Fund?

An emergency fund is money set aside in case an urgent and unexpected expense comes your way. This could be a medical or dental bill, a car repair, or travel to visit a family member who is ill or injured. The money can also be used in situations where a person is laid off or their hours are reduced and they don’t have enough cash to make ends meet.

Financial experts typically recommend that people prioritize saving an emergency fund and have at least three to six months’ worth of basic living expenses covered. In some cases, you may want to stash away more.

Also worth noting: An emergency fund needs to be liquid and accessible. When an emergency strikes, you want to be able to access your money quickly, without penalties for making a withdrawal. This is why a high-yield savings account can be a good choice. Your money will earn some interest and be available when you need it, unlike, say, a certificate of deposit (CD), which ties up your money for a period of time.

Also, an emergency fund should be in an account that is insured by either the Federal Deposit Insurance Corporation (FDIC) or NCUA, the National Credit Union Administration. Due to its volatility, the market is not a good place for an emergency fund.

How Much Should You Have in an Emergency Fund?

As briefly mentioned above, most experts recommend that you have at least three to six months’ worth of basic living expenses in the bank. This means that if you were, say, injured and unable to work or is you lost your job, you could keep going for a few or several months.

So let’s say you typically spend $4,000 a month on housing, food, utilities, and debt payments. In that case, the answer to “Is $20,000 enough for an emergency fund?” would be yes. That sum would see you through five months if you needed it.

However, if your monthly living expenses are $10,000, then $20,000 would only last two months. Instead, $30,000 would be enough for an emergency fund in your situation. Some experts would say even more, up to $60,000, would be a better figure.

This amount can seem daunting, but remember, you aren’t expected to have it set aside in one lump sum. You will save up to reach this goal. And you are not alone in needed time to build an emergency fund. Barely half of Americans surveyed could pay an unexpected bill of $1,000 (you’ll learn more on that in a moment).

Also know that if, due to other expenses or life circumstances, you can’t accumulate that amount in savings, something (anything) is better than nothing. Don’t feel defeated and not save at all. If you can put away $1,000 over the course of a year, do it.

How to Calculate Your Emergency Fund Amount

If you’re convinced of the value of an emergency fund, it’s time to drill down on just how much to save. Figuring out how much money should be in your emergency fund is a fundamental step in building your financial plan for the future. Here are some ways to calculate your goal and achieve it:

•   Conventional wisdom says you should have between three months and six months’ worth of living expenses set aside for an emergency. To calculate your expenses, you might create a line-item budget. It will also give you a clearer view of how much money you have coming in and going out. Once you’ve determined what your take-home pay is, calculate all your monthly necessary expenses including rent or a mortgage, insurance, healthcare, utilities, phone, car, etc. And of course, factor in student loan or credit card debt.

   After you tally all your expenses, deduct that amount from your take-home pay and then see what is left. This is where you’ll need to figure out how much you can realistically set aside each week or pay period for your emergency fund. Aim to accrue your goal amount in a year, if possible.

   Let’s say you’re a recent grad whose minimum monthlies total $2,000. In this case, $10K is a good emergency fund. It could float you if it took you, say, five months to find a job.

•   Another method for saving is to look at your insurance deductibles for your medical, dental, household, and car policies. Although it’s no fun, imagine having some kind of accident that triggered your needing to pay a few or even all of those deductibles at once. This is especially daunting if you have a high deductible health plan (HDHP); if you need to cover that amount all of a sudden, you could wind up with debt. Make sure you have enough in the bank to cover that amount.

•   You might also see what unemployment would pay you per month if you were to lose your job. See how that compares to your living expenses, calculate the shortfall monthly, and work towards saving, say, six times that amount.

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Factors That Determine How Much to Save for an Emergency Fund

When considering how much an emergency fund should be, three to six months’ worth of living expenses is a good baseline. That said, there are certain situations that may require a bit more saving, as in at least six months’ worth and possibly a year’s worth. Also, when you are thinking “How much emergency savings should I have?” know that the figure will likely vary, person by person. Even if you have an identical twin, your goals will probably differ. Here are some factors to consider.

Health

If you or a member of your immediate family has a medical condition, you probably will want to save a bit more in your emergency fund. You might have additional doctors’ or lab expenses. The price of prescription drugs could increase. Or you could be dealing with a situation where your insurance doesn’t pay or takes a long time to do so. An emergency fund can be your lifeline.

Also, if you have a medical condition that could have you out of work for a period of time, your emergency fund could help you pay the bills.

Amount of Debt

If you have more than minimal debt in your life, it can be a good thing to have an extra cushion of money in your emergency fund. Let’s say you have student loan debt, car payments, a mortgage, and credit card debt, as many Americans do. An unexpected expense or loss of work could mean that all of those payments can’t be met. That can trigger considerably late charges, possibly non-sufficient funds or overdraft charges as well, and can also lower your credit score. Having money in the bank can keep you afloat in an emergency situation.

Cost of Living

It’s no secret that inflation has been extremely high lately. Many people’s raises at work don’t come close to offsetting the uptick they have seen in the price of groceries, gas, heating, and more. An emergency fund can help make ends meet if a big bill hits amidst this situation.

Also, if you live in an area with a high cost of living, you may be more vulnerable and need emergency funds. For instance, in major metropolitan areas, rents have recently seen a sizable uptick. A significant rent increase could mean it’s a challenge to afford your monthly bills until you recalibrate. An emergency fund could help if a huge rent hike comes your way.

Recommended: What Is Cost of Living?

Job Security

While there are no guarantees in life or in work, some jobs are more secure than others. If you have a very specialized skill set that would make it hard to quickly find another job should you need one, save a bit more. Also, if you are a freelance or seasonal worker, your income may be less predictable than those with salary jobs. You may want to make sure you have the higher end of the range for emergency funds.

Children or Dependents

If you have children or dependents, you know how important it is to keep all the plates spinning and pay for their needs. This level of responsibility means it would likely be wise to save extra. You are also more vulnerable to having emergency expenses if you have dependents as well: A child could have more medical or dental bills than you expected, or an elder could be sick and you might have to take unpaid leave to care for them.

Having Financial Support

Some of us have a support network that could lend us money or otherwise help out in case of an emergency. For others, there is no one in their immediate family or friends group that could provide a loan or gift if an urgent expense were to crop up. If you are more of the “all by myself” type in this regard, that’s another reason to add a bit more to an emergency fund.

Your Age

Typically, your saving goals vary by age, and so should the amount in your emergency fund. If you are retired or nearing retirement age, you probably should set aside more for an emergency fund. As you age, medical expenses tend to rise, and you might also be on a fixed income. These variables make having more money available a wise move.

The Issues With Not Having an Emergency Fund

When it comes to having an emergency fund, Americans struggle with what would appear to be a simple, commonsensical idea.

The average person does not put enough in an emergency fund. In fact, 56% of Americans said they could not cover an unexpected $1,000 emergency expense, according to a recent survey. That means they would likely have to either put the amount on their credit cards (which is a form of high-interest debt which can be hard to pay off), borrow, or sell something to cover the cost.

But you could be faced with a much more serious financial hardship than $1,000. Or you might endure a long-term stretch of unemployment or a medical misfortune that could have a nasty impact on your finances.

In circumstances like these, an inability to pay your bills could potentially damage your credit score and keep you in debt for years to come.

Tips for Building an Emergency Fund

If you’ve figured out how much emergency savings you should have (or at least a ballpark figure), it’s time to start saving! Here are some pointers to help you bulk up your account and know where to keep it.

•   Set up automatic deductions. Let’s say you have figured out how much per paycheck you can put into your emergency fund. Whether it’s $25 or $250 or more, know that any amount will get you on a path to meeting your goal and having peace of mind. If you have a linked savings account, set up payday automatic transfers so the cash is whisked into your rainy day fund. You don’t want it sitting in your checking account, tempting you to spend it.

•   If you don’t have a savings account you can use for your emergency fund, it’s likely a good idea to open one. A high-yield one can help you earn a bit of interest. Whether you choose an online vs. traditional bank is up to you, though online ones tend to offer higher interest rates. (Incidentally, some people keep their emergency fund as a mix of checking and savings accounts; the choice is yours, as long as that money is sitting in case it’s needed.)

•   Consider growing your savings by depositing windfall money in your emergency fund. Perhaps you’ll receive a tax refund, a bonus, a rebate, or other unexpected source of funds. It can go into your account.

•   If you are having a hard time finding room in your budget to enrich your emergency fund, see if you can challenge yourself to make temporary, rotating budget cuts (going to the movies one month, buying clothes the next). Then put the saved money into your account. Or take up a side hustle, and put your earnings into the emergency fund.

Recommended: How to Manage Your Money Better

The Takeaway

Having an emergency fund is an important element of your financial fitness. It’s a cushion of money socked away, to be used if you have unexpected, urgent bills or face a loss of income. The amount you should save will vary depending on a variety of personal factors, such as whether or not you have dependents and how easily you could find a new job if laid off. Whatever the amount you want to have in your emergency fund may be, it’s important to start saving, little by little, so you can enjoy the peace of mind that this account can bring.

Wondering where to start and grow your emergency fund? SoFi has a simple, accessible, and top-notch solution. If you open a bank account online for your emergency fund with us, with direct deposit you’ll earn a competitive APY and pay no account fees. That can help your money increase faster.

If you’re ready to start saving for your emergency fund, see how SoFi Checking and Savings can help.

FAQ

Can you have too much in an emergency fund?

It’s wise to have at least three to six months’ worth of basic living expenses in an emergency fund. Depending on your specific situation, you might even want twice that. However, since emergency funds are usually held in savings accounts, which don’t earn all that much interest, you might look elsewhere if you have more than that sum to invest and grow.

Do you need an emergency fund if you are rich?

Everyone needs an emergency fund. People who are rich may have bigger expenses and bills than those who have less money, so they definitely want funds accessible if an emergency were to strike. What’s more, a wealthy person may have their money in investments like real estate, meaning it’s not liquid nor easily tapped, which is all the more reason to have some cash in the bank.

Can you have financial freedom without an emergency fund?

For most people, having an emergency fund is part of financial freedom. When you know you have enough cash to manage a worst-case scenario, it takes away a layer of worry. Many financial experts recommend having at least three to six months’ worth of living expenses in the bank and available.


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® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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How to Stop or Reverse ACH Payments: All You Need to Know

How to Stop or Reverse ACH Payments: All You Need to Know

Sometimes, no matter how careful you are with your bank account, you may want to cancel an ACH payment, and fortunately, it is very often possible to do so. Even if you previously sent out a recurring automatic payment, you can hit the brakes on that transaction.

Many of us have learned to rely on ACH payments, which can be used for a business’s payroll, tax payments, bill payments, account transfers, and more. You may well pay many of your monthly bills this way, from your utilities to your streaming service subscription. Because of this popularity, consumers and businesses alike can benefit from understanding how ACH works. Beyond that, knowing how to halt a payment — one that could potentially derail your financial health — is vital, too.

With that in mind, here is what you need to know about:

•   What ACH payments are

•   How to stop ACH payments or cancel an ACH payment

•   How to reverse an ACH payment

•   How to spot common ACH frauds

Recommended: What is Liquid Net Worth

What Are ACH Payments?

ACH payments are a method of money transfer between banks made through the ACH or Automated Clearing House network. NACHA (National Automated Clearing House Association) governs these transactions, which can be an alternative to other payment options, like credit cards.

With ACH, the source of the funds come directly from a bank account. So they are quite seamless and convenient; no paper checks or postage stamps required. They are also open to both consumers and businesses alike as long as they have a U.S. bank account.

One downside of ACH transfers, though, is that they can take longer than options like a wire transfer. When you compare a wire transfer vs. an ACH payment, wired funds can transfer within a day. In terms of how long an ACH payment takes, it may be several days. However, ACH has the upper hand in terms of cost: They are generally less expensive than other payment processing methods and often free.

ACH payments can break down into two categories: ACH credit and ACH debit.

An ACH credit is like a virtual check. The payer tells the ACH network to transfer their account funds to the payee’s account. In contrast, ACH debit (the more popular version of ACH transfer) involves a recipient pulling funds from the payer’s account. (For instance, this kind of payment occurs when you authorize your car loan to be automatically debited on a certain day of each month.) Merchants often prefer this kind of automatic debiting as it reduces the possibility of late or failed payments.

Can ACH Payments Be Canceled or Returned?

So, let’s say you just moved and forgot to cancel your gym membership at your old location. You realize that a payment is about to be sent out. Or maybe you set up a one-time payment to a vendor but notice (oops!) that you typo’d the amount? Now what? Can you stop an ACH payment from a checking account or other bank account?

Breathe a sigh of relief. Yes, you can cancel or return an ACH payment. This is partially possible due to the time frame of ACH transfers. ACH transfers can take multiple days to settle, and, as a result, you have more time to stop or reverse your transaction.

However, rules can vary depending on your bank or financial institution. For example, some may be able to cancel an ACH transfer online or over the phone. Meanwhile, other institutions may require a written form requesting cancellation.

Recommended: Average Savings by Age

How to Reverse ACH Payments

Let’s look at reversing an ACH payment in a little more detail. At some point, an ACH transfer may involve a mistake. It’s easy to type in the wrong dollar amount or otherwise err when it comes to making payments without cash in hand. Regardless of the circumstances, you have to wait for the payment to go through first. Then, you can reverse the ACH payment.

Banks have different ways of conducting this process (we’ll go into more detail on this in a moment), so check with yours on the exact protocol. Once the payment is interrupted, the bank should reach out to the account holder after the payment reverses to confirm the details.

ACH Reversal Requirements

Let’s learn a little bit more about this process. NACHA, the organization that oversees ACH payments, has specific qualifications that determine if an entry is erroneous. If these details are satisfied, you are then allowed to reverse your payment without an issue. To qualify, an entry must meet one of the following conditions:

•   Be a duplicate of a previously initiated entry

•   Transferred on the wrong date

•   Include a mistake in the sender or recipient’s account number

•   Transferred the incorrect amount

These scenarios cover many of the situations that would lead you to cancel or reverse a payment.

Ready for a Better Banking Experience?

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How to Stop an ACH Payment

So you want to cancel a payment because perhaps it was sent incorrectly or you no longer want to complete the transaction? Let’s learn how to cancel an ACH payment.

In this situation, it’s actually to your benefit that ACH payments take several days to settle. This means you have some time to halt an ACH transaction if you need to. However, every bank operates differently and may have its own rules on how to stop an ACH payment. For example, you may find that your bank can cancel an ACH payment online or over the phone. But other institutions may need you to submit a physical form canceling the transaction. Check with the institution that holds your account to find out how to proceed.

You can also cancel your recurring ACH debit payments. But you have to do that within three business days before the funds are due. You will probably need to contact the entity expecting your payment. The exact method might depend on your situation. Some companies may accept a phone call, while others might need a written authorization.

After that, you’ll need to address the financial institution associated with the transfer and let them know about the change. In some cases, this may require a stop payment order which instructs the bank to hold off on any automated transaction. This gives you time to formally cancel your payment arrangement. This can come with a fee, but it varies bank by bank. Check with yours for details.

How to Update Direct Deposit Details

A quick look at the other side of the coin: Let’s say you are receiving funds by direct deposit (perhaps your paycheck or government payments), and realize you need to update your details. If you have changed bank accounts — maybe you found a high-interest account you can’t resist — you’ll need to let the entity that is sending you funds know your new info. You may be able to do this online for benefits like Social Security payments; otherwise, calling the issuer of the deposit may be another option. If it’s your paycheck you’re concerned about, contact your HR department to see the best way to share your new account specifics.

You’ll probably want to do this a few days before a deposit usually hits, since ACH payments take a few days to process.

Common ACH Frauds

While the ACH network makes sending money to businesses or services fast and simple, it is not perfect. As a result, people can use the system to their advantage. It is possible for a company or consumer to face fraud when making an ACH transfer.

There are various tools at criminals’ disposal these days. But they may only need two details to commit ACH fraud: your bank routing number and your business checking account number. With this information, the criminal may be able to use your finances to pay for anything from services to goods. And they can have the additional option to make these payments either online or by phone.

Typically, fraudsters collect this information via malware and phishing emails. Web transactions are also an easy way to obtain your personal data. For example, scammers might offer you overseas money, discounted products, or other appealing lies. They hope that you will be fooled and enter your account details so they can then commit fraud.

You can protect yourself against fraud by being wary of text messages and emails asking for account verification (they may be phishing and/or have malware embedded) and taking the time to double-check, by phone or other means, requests to update your information. Your bank may also be able to place an ACH block or filter on your account to prevent unauthorized transactions. Contact your bank’s fraud prevention team to learn your options.

The Takeaway

The ACH network is a valuable payment processor that consumers and businesses in the U.S. rely on. However, situations can arise that may trigger you to want to stop or reverse a payment, such as if you had entered details incorrectly. Fortunately, it’s possible to stop ACH payments from your checking account or reverse the ACH payment. Then you can notify the others impacted and get your banking transactions back on the right track again.

Here’s another way to bank better: Check out SoFi. When you open our Checking and Savings accounts with direct deposit, you’ll earn a competitive APY. What’s more, you won’t pay any account fees; no monthly or minimum balance charges. So you keep more of your hard-earned dough.

Better banking is here with up to 3.25% APY on SoFi Checking and Savings.

FAQ

How long will it take to reverse an ACH payment?

A rejection or return of an ACH payment can usually be settled within two business days. However, some cases can take as long as two months (or 60 days) if the transaction is disputed.

Can you amend an ACH transfer?

Yes. ACH users can revoke their ACH payment authorization and stop the transfer. However, they must notify their biller as well as the bank or credit union that holds the account from which the funds would be deducted.

How do I stop ACH payments on my checking account?

If you want to stop an ACH payment, you’ll need to contact your bank at least three days before the ACH transfer’s date. This may involve an ACH payment stop request submitted in writing within a 14-day time frame. A small fee may be involved in halting the payment.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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.

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Can an Immigrant Open a Bank Account?

Can an Immigrant Who Is Undocumented Open a Bank Account?

If you’re a fresh arrival to the United States, you’ll be glad to know that even if you’re undocumented, opening a bank account is possible. Which is very good news; after all, taking care of bills and everyday purchases is a lot easier — not to mention safer — when your cash is safely stashed in a checking account.

However, you will have to follow certain steps and perhaps a workaround or two. Probably the most important is that you’ll just need to provide an alternative for the Social Security number you don’t have. You may well find that a Tax Identification Number, or ITIN, along with the other required identification, can get the job done.

Read on for more about how an undocumented immigrant can open a bank account and the benefits of doing so.

What Do Immigrants Need to Open a Bank Account?


Like anyone else who opens a bank account, immigrants will need to provide and verify basic identifying information, such as their name and date of birth, using government-issued identification. This requirement may be met by a driver’s license, passport, birth certificate, or consular ID — and you’ll likely need to provide two different types of identification.

In addition, you’ll need to prove your residence. This can probably be done by presenting a utility bill, lease contract, or other official statement that includes your current address.

Finally, you’ll need either a Social Security number (SSN) or Tax Identification Number (ITIN). As an immigrant, the latter may be easier to obtain.

So, to recap, to open a bank account, you’ll want to check the eligibility requirements of the financial institution to which you’re applying, but you’ll probably need:

•  Official identification documentation

•  Proof of address

•  An SSN or ITIN

•  Anything else the bank might require (such as a minimum opening deposit)

💡 Additional help: What Are All the Requirements to Open a Bank Account?

What Is an ITIN?

As just mentioned, an ITIN may be an option to an SSN at many financial institutions. You may wonder what exactly that is. Here’s the scoop: ITIN is short for Individual Taxpayer Identification Number. It’s an official form of identification that the IRS (Internal Revenue Service) issues to immigrants in order to make it possible to file taxes.

But your ITIN has other perks, too — such as allowing you to open a bank account with financial institutions that accept this form of identification instead of an SSN. These days, there are plenty of banks that fit that category, but you should always contact the bank you’re considering to verify that they’ll process an account application without an SSN.

Keep in mind, too, that you aren’t automatically issued an ITIN once you arrive in the U.S. In order to obtain one, you’ll need to apply for one with the IRS directly. You can do this by mail or in person.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning up to 3.25% APY on your cash!


How to Open a Bank Account With an ITIN Instead of a SSN

Here’s the good news: Once you have an ITIN, using it in place of an SSN to open an account should be a fairly straightforward process. At many banks, you’ll simply supply that number instead of your SSN on that part of the application. If you apply online for a bank account, the application process may take only a few minutes.

The rest of the application will involve the bank gathering documentation, accepting your opening deposit, and issuing your bank account number and debit card. The process of establishing the account may take a couple of days. In addition, you may need to wait a week or more to receive your debit card in the mail.

And then, voila: You’re the proud owner of a U.S. bank account!

Benefits of Opening a Bank Account for Undocumented Immigrants

If you’ve been doing most of your financial transactions in cash for a while, you may wonder if going through the steps it takes to open a bank account is even worth it.

For many immigrants, it definitely is. A bank account makes it safer and easier to store and use your money. What’s more, it can also help you establish history and move toward legitimizing yourself as an American resident.

Personal Safety

Carrying cash is always risky. If you accidentally drop some (which can easily happen while you’re lugging bags in one hand and a coffee in the other), it’s gone forever. That’s not to mention the risk of others eyeing your cash. Paper money is liable to theft, and carrying large amounts of cash could even put you at risk of physical violence.

Having a checking account makes it possible to store larger amounts of money with a lower risk level. You’ll still be able to access cash when you need it using an ATM or your debit card. For these reasons, opening a bank account could increase your level of physical safety as an immigrant.

Establishing History

Opening a bank account shows people that you’re here on at least a semi-permanent basis, and may even help you establish state residency. While the process of naturalization is, of course, long and complex, having a bank account can be one small step toward legitimizing your status as a U.S. resident.

Ability to Save Money

Most banks offer both checking and savings accounts—the latter of which is an excellent vehicle for building up a rainy day fund. Having a separate savings account makes it a lot easier to put some money “out of sight, out of mind” so you’re prepared for an emergency. And, of course, it’s a lot more secure than stuffing cash into a coffee can or under the mattress.

Earning Interest

In addition to being physically safer, bank accounts also give you an edge against inflation. Here’s why: Many of them make it possible to earn interest on your balances—even on a checking account. The interest you earn might be pretty low, but it’s still better than no growth at all. Plus, it’s a low-risk investment given that money in a legitimate bank account is FDIC-insured up to $250,000.

The Takeaway

While it may take a few extra steps, it’s totally possible for an undocumented immigrant to open a bank account. You may just have to apply for an ITIN to use in place of your SSN, and find a bank that accepts ITINs. But once you get that taken care of, you’ll have access to a safe, potentially interest-earning place to stash your cash.

Better banking is here with up to 3.25% APY on SoFi Checking and Savings.

FAQ

How do undocumented immigrants open a bank account?

An undocumented immigrant will need an alternative to the Social Security number, or SSN, in order to open a bank account. This number is called an Individual Taxpayer Identification Number, or ITIN, and you can apply for one through the RIS. Many financial institutions will accept an ITIN in place of a SSN.

Can I open a bank account without an SSN or ITIN?

Unfortunately, you’ll likely need one or the other of these official, identifying numbers in order to open a bank account.

Can a U.S. citizen open a bank account abroad?

Yes, but it can be tricky. Many U.S. citizens have offshore bank accounts, though the process of applying for one may vary depending on which country you’re hoping to open an account in. It can involve a lot of paperwork, and starting this kind of account may have tax ramifications in both the U.S. and the foreign country in question.


Photo credit: iStock/Bilgehan Tuzcu

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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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15 Ways to Avoid Paying Full Price for Anything

Secrets to Not Paying Full Price

Want to know how to never pay full price for anything? There are plenty of tips and tricks that can help you get a better deal on everything from a car to a big carton of cereal.

Saving money does more than put money back in your pocket. It can truly help you feel in control of your finances, which can, in turn, help motivate you to continue building good financial habits.

If you’re interested in becoming more conscious with how you’re spending money, be sure to take a look at these 15 tips. Even the savviest shoppers are always learning new ways to save money for optimizing spending and saving habits.

Common Retail Markups

Before delving into strategies for saving money off of retail, consider how much most items are marked up for sale. While there is no set or ideal number, many businesses charge 50% more than the actual cost of the item. So if it cost a company $50 to make a sweater, they would sell it for 50% more than that, or $75.

This means that, while not optimal for their financial goals, they could sell the garment for less than $75 and still be recouping their costs, plus a profit.

Some categories of products are known for having even higher markups. Consider these:

•   Mattresses, up 900%

•   Designer jeans, up to 500%

•   Furniture, up to 400%

•   Coffee to go, up to 300%

•   Diamonds, up to 100%

Places Where the Price Is Non-Negotiable

While there isn’t a rule about where you can and can’t negotiate, you are more likely to be able to get a better price at some locations than others. For instance, bargaining is more appropriate at:

•   Flea markets

•   Car dealerships

•   Small shops

It’s less likely to be effective at:

•   Luxury retailers

•   Chain stores

•   Malls

That said, some top-notch negotiators say they have scored discounts almost anywhere. Read on for tips to help you do the same.

15 Tips to Avoid Paying Full Price for Anything

Smart shoppers often get the latest and greatest – without having to pay full price for it. These genuinely helpful tips can help you save money on anything and everything so you know how to never pay full price for anything ever again.

1. Install Browser Extensions on Your Computer or Apps on Your Phone

There are a whole host of browser extensions and apps that can save you money with minimal effort on your part. You can see cash back options, rebates, price drops, and places where you can find an item for a lower price on another website. Some examples of boosting your money saving skills this way include:

•   The Honey Extension will automatically look for and apply digital coupons and promo codes when you’re shopping online.

•   Rakuten is a rebate extension that offers cash back, coupons, and deals at more than 3,500 stores.

•   CamelCamelCamel is an Amazon price tracker that alerts you when the price drops on an item you’ve been looking to buy.

•   Booklovers alert: The Library Extension works when you’re searching for a book to buy, such as on Amazon. It’ll allow you to check the online catalog of your local library so you can save some money by borrowing a book from the library instead of buying it online.

2. Find Rebates

You’ll find rebates from many manufacturers and retailers. Order new contact lens or an electric toothbrush, and you may get $25 or $50 back. Don’t let that piece of paper (which you may have to mail back in to get your reward) wind up in the trash.

Another popular source: Your power company likely offers some type of rebate for energy-efficient appliances, air conditioners, water heaters, smart thermostats, light fixtures, and more. For example, you may be able to find a $50 rebate for an energy efficient refrigerator. Pair that with a $50 credit for recycling your old one, and you have $100 off a new fridge. Just be sure to check with your power company to make sure your appliance meets the requirements and you send in the rebate on time.

3. Buy Used or Refurbished Products

Buying used consumer items can net you substantial savings — upwards of 90% off — and sometimes you can find these things for free. Essentials for babies and kids, clothing, and home decor can be found for a fraction of their original retail price. They’re often in great shape and there’s such an abundance of used items for sale that you can be picky with what used items you buy.

Where to look? Try the following:

•   Freecycle sites

•   Local thrift shops and flea markets

•   Nextdoor and Facebook Marketplace

Buying discounted goods this way can be part of your financial freedom plan and help you find more money in your monthly budget.

4. Buy Items in the Offseason

You’ll score major discounts if you can buy things you need in the offseason. When a store is trying to make room for new inventory, you’ll see several price drops. Buying snow boots in March or swimsuits in September could save you 50% or more.

5. Redeem Credit Card Rewards for Travel, Gift Cards, and Merchandise

A great way to never pay full price on travel is to redeem credit card points for airfare, hotel stays, transportation, and other travel expenses. Some credit cards have partners (such as airlines and hotel chains) where you can transfer points and book directly with the travel provider. Other credit cards offer a simpler redemption based on the cash back rewards based on the value of what you book.

The benefit for redeeming points depends on which credit card you have, but many offer a tremendous value for the frugal traveler who never pays full price.

You may also be able to redeem cash back for gift cards. You may be surprised to see a 20% bonus for cash back you redeem for a gift card. To do a bit of the math, that means $40 in cash back becomes a $50 gift card for your favorite retailer.

Many credit cards also offer consumers the ability to use cash back or points to pay for purchases. You may have a card that offers you the ability to erase charges with the cash back you’ve earned after you receive your statement. You may see an option to pay for a purchase at checkout with your cash back or points (usually if you’re using a third-party site like PayPal). These can be a good way to avoid paying retail.

Recommended: 25 Ways to Cut Costs on a Road Trip

6. Use Coupons and Promo Codes

Not every shopper needs to be an extreme couponer to help them never pay full price. If you find something you want to buy online, for example, getting a discount may be as easy as searching online for a promo code.

Promo codes are essentially just digital coupons for the site you want to buy something from. They can help you avoid overspending money by reducing the cost of buying the product or service you need.

7. Learn the Pantry Principle

The pantry principle is when a shopper stockpiles goods bought at the lowest price. If a can of corn normally costs $1 and goes on sale for 50 cents, you buy in bulk to take advantage of that reduced price.You’ve cut your cost for corn in half for as long as you have the cans in your pantry.

The same idea can work with other non-perishable essentials. If you can buy, say, your favorite yoga pants or cleaning products on sale and in bulk, you’ll reduce your spending.

8. Shop at Warehouse Clubs and Outlet Stores

Warehouse clubs and outlet stores offer different ways to save money. Costco and Sam’s Club, for instance, focus on selling products in bulk, which can result in a decent amount of savings. Keep in mind, however, that not all products sold at a warehouse are cheaper than what you can find at other retailers, so just be sure to check your price, especially pre unit, whether that’s by the ounce or the liter. Also take advantage of discounts your membership may offer on health services, entertainment, tires and more.

Likewise, outlets can offer savings by selling overstock items from other retailers. You might find a pair of boots you’ve been coveting or a new armchair at a deep discount.

Recommended: 23 Tips on Saving Money Daily

9. Take Advantage of Birthday Deals at Certain Places

Want a free dessert? $10 off your meal? A surprise gift? Take advantage of special perks on your big day. Birthday deals abound, particularly at restaurants and certain retailers, like Sephora, Macy’s, and Petco, among others. To take advantage of a great birthday deal, you may need to sign up online in advance.

10. Look for Price Matching and Price Drop Refunds

If you’re about to make a significant purchase, do your research online first. You might find, for example, that one retailer is offering no delivery fees on refrigerators, but that they charge $75 more for the model you want than a competitor. You could see if they will match the price of the competitor in order to snag the best deal possible

Also, some retailers offer a price drop refund on items you previously purchased. This works by taking your receipt back to the retailer if the item you just bought went on sale shortly after your purchase (usually within two weeks, but the time can vary by each retailer’s policy).

Recommended: Compulsive or Impulsive Shopping: How to Combat It

11. Haggle With Sellers and Ask for Discounts

Sometimes, scoring a deal is as easy as asking for it. You can politely ask, “Is there any discount you can offer me for this?” or “Would it be possible to ask for a discount on this?” The best places to ask for a discount are the ones where there is some discretion at giving discounts, such as a seller on Facebook Marketplace, a retail manager, or even a hotel clerk.

Nevertheless, even a big-box salesperson can help you identify any current or upcoming discounts if you take a moment to inquire.

12. Wait for Sales

Eventually, most of the items you’re shopping for will go on sale, so it’s best to never pay full price for retailers that have frequent sales. Retailers will use any excuse to hold a sale. (Ever see an ad for a furniture store selling mattresses on Presidents Day?) The Gap, for instance, is known for having monthly sales with great discounts. After all, retailers know you’re more likely to spend money if you feel like you got a good deal.

13. Abandon Your Online Cart

This one is a little sneaky. Abandoning an online cart occurs when you add something to your online shopping cart but don’t actually complete your purchase. Nearly 70% of carts are abandoned by consumers. To help increase sales of abandoned shopping carts, retailers have some smart ways to get consumers to come back and finalize the purchase. Sometimes, the retailer will email you a coupon or entice you with another offer to get you to finish your purchase.

14. Sort From Low to High When Shopping

It’s common for websites to show their newest (and most expensive) products first, but if you sort your search to have the lowest-priced items shown first, you’ll likely find the things you need for less.

15. Subscribe to Email Lists or Newsletters

Many retailers offer a discount when you subscribe to their email list or newsletter for the first time. Retailers know that nearly 60% of their sales come from offering coupons or discounts. This means the discount they offer has to be good enough for a consumer to subscribe, so offering up your email could save you a bit of money.

These offers might be for 10% or more off, free shipping, or other deal sweeteners. And you can opt out of future emails whenever you like. Additionally, some retailers will offer these deals or increased savings if you allow them to text you with their latest news and sales.

The Takeaway

Paying less for items can mean you’re a smart shopper; it just plain feels good to know you’re saving money off of retail prices. If you have a few tricks up your sleeve, you’ll know how to never pay full price for anything ever again. Whether it means using a browser extension when shopping online, taking advantage of cash back offers, or tapping your negotiation skills, there are many ways to make sure you get the best possible price tag whenever you buy.

3 Money Tips

  1. When you overdraft your checking account, you’ll likely pay a non-sufficient fund fee of, say, $35. Look into linking a savings account to your checking account as a backup to avoid that, or shop around for a no fee bank account that doesn’t charge you for overdrafting.
  2. When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
  3. Signing up for your paycheck to be directly deposited in your bank account is a great way to help you pay your bills on time. After all, if your check is being deposited like clockwork, you can schedule bill payments ahead of time.
Better banking is here with up to 3.25% APY on SoFi Checking and Savings.

FAQ

Is paying retail bad?

If you feel the price is fair, there’s nothing wrong with paying full retail price. In fact, studies have shown the more focused a person is on scoring a deal, the more likely they are to spend more money. If you’re also more conscious of what you buy, that’s more important than saving a few bucks on something that won’t last or doesn’t hold value.

Why are wholesale and outlet stores cheaper?

While not every item is going to be cheaper at wholesale and outlet stores, in general, you will find better prices shopping at stores that offer an alternative to full retail price. Wholesale stores can offer better prices by focusing on fewer products and selling inventory in bulk. Outlet stores often have better prices because they sell overstock items.

Should I pay retail if an item is limited?

The adage, “spend according to your values” can help you decide when to pay retail price. If you’re purposeful with spending your money, paying retail price on a limited item is a decision that may make sense for you.


Photo credit: iStock/Mongkol Akarasirithada

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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SoFi members with direct deposit can earn up to 3.25% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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