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Though money is a very important aspect of life, the topic of personal finance (or financial literacy) isn’t part of most people’s education, neither in school nor at home.

Not knowing financial basics can leave you to wing it when it comes to your money management, meaning you might wind up living paycheck to paycheck, having too much debt, or not saving enough for retirement.

To help you avoid those situations, read up on personal finance basics — the smart and simple steps to budgeting wisely, saving well, and spending sensibly.

Personal Finance Definition

Personal finance is a term that involves managing your money and planning for your future. It encompasses spending, saving, investing, insurance, mortgages, banking, taxes, and retirement planning.

Personal finance is also about reaching personal financial goals, whether that’s having enough for short-term wants like going on a vacation or buying a car, or for the longer term, like saving enough for your child’s college education and retirement.

Top 10 Basics of Personal Finance

Here, learn about 10 of the most important foundations of mastering personal finance.

1. Budgeting Is Your Friend

Budgeting and learning how to balance your bank account can be key to making sure what’s going out of your account each month isn’t exceeding what’s coming in. Winging it — and simply hoping it all works out at the end of the month — can lead to bank fees and credit card debt, and keep you from achieving your savings goals.

You can get a quick handle on your finances by going through your statements for the past several months and making a list of your average monthly income (after taxes), as well as your average monthly spending.

It can be helpful to break spending down into categories that include basic needs (e.g., rent, utilities, groceries) and discretionary spending (e.g., shopping, travel, Netflix). To get a real handle on where your money is going every day, you may want to track your spending for a month or so, either with a diary or an app on your phone.

Once you know everything that typically comes in and goes each month, you can see if you’re going backward, staying even, or ideally, getting ahead by putting money into savings each month.

If you aren’t living within your means, or you’d like to free up more cash for saving, a good first step is to go through your budget and look for ways to cut back discretionary spending. Can you cook more instead of going out? Buy less clothing? Cut out cable? Quit the gym and work out at home?

You can also consider ways to bring in more income, such as asking for a raise or starting a side hustle from home.

Recommended: 50/30/20 Monthly Budget Calculator

2. Building an Emergency Fund

You can’t predict when your car will break down or when you’ll have to make an emergency trip to the dentist. If you don’t have money saved up for what life throws at you, you can risk racking up high-interest credit card debt or defaulting on your bills.

To avoid this, you may want to start putting some money aside every month to build an emergency fund. A common rule of thumb is to keep three to six months of basic living expenses set aside in a separate savings account.

It can be a good idea to choose an account where the money can earn interest, but you can easily access it if you need it. Good options include: a high-yield savings account, online savings account, or a no-fee bank account. Using an online emergency fund calculator can help you do the math on reaching your goals.

3. Avoiding a Credit Card Balance

When you have a credit card at your disposal, it can be tempting to charge more than you can afford. But carrying a balance from month to month makes those purchases considerably more expensive than they started.

The reason is that credit cards have some of the highest interest rates out there, often over 20%. That means a small charge carried over several months can quickly balloon into a much larger sum. The same is true for other high interest debt, such as some private or payday loans.

If you already have high-interest debt, however, you don’t need to panic. There are ways to pay off that debt.

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

4. Paying Your Bills on Time

If you miss bill payments or make late payments, your creditors might impose late payment penalties. If you delay payment for a prolonged period, your account could go into delinquency or be sent to collections.

Late payments can also affect your credit score — the number lenders use to help judge whether to give you loans and credit.

Your payment history accounts for 35% of your credit score, so a history of late and missed bill payments can be a major strike against your score. A poor credit score can make it difficult for you to get loans, and the loans you do get are likely to have higher interest rates.

To make sure you never miss a due date, it can be helpful to make a list of your bills and their due dates, set up auto payments when possible, and sign up for reminders.

5. Starting Early to Save for Retirement

When you’re young, retirement can feel far away. But putting money away as early as possible means you’ll have more years to save, spreading the savings across your life rather than racing to catch up.

Perhaps the biggest reason to start as early as you can, however, is the power of compound interest.

Because you earn interest not only on your contributions but also on accumulated interest, small amounts can grow over time. If you have an employer-sponsored plan, such as a 401(k), you may want to consider contributing, especially if your employer offers to match your contributions.

Depending on your situation, you may be able to open a traditional IRA, Roth IRA, or SEP IRA, as well.

6. Investing

Saving for retirement may not be enough for you to have what you need to live comfortably after you stop working. Plus, there may be things you want to be able to afford later in life but before you reach retirement age.

If you have children, for example, you may want to start a 529 plan to help you invest for their college educations.

For other long-term savings goals, you may want to invest additional money, keeping in mind that all investments have some level of risk and the market is volatile, meaning it moves up and down over time.

To get started with investing, you can choose a financial firm you want to work with and then open a standard brokerage account. From there, you can put your money in a mutual fund or an exchange-traded fund or ETF (which bundle different types of investments together), or, if you’re prepared to do a fair amount of research, pick and choose your own stocks and bonds.

7. Getting Insured

When it comes to insurance, sometimes it’s best to prepare for the worst. That means making sure you have health insurance and car insurance (which is typically required by law). You also may want to consider renters or homeowners insurance to protect your home and belongings.

If you have children or other people who are dependent on you financially, it can be a good idea to get long-term disability insurance and term life insurance. Many people can purchase health and disability insurance through their employers. If you don’t have that option, it’s possible to go through an insurance agent, broker, or the insurance company directly.

8. Taking Advantage of Credit Card Rewards

If you have a decent credit score, you can look into getting a credit card with rewards that may give you travel miles or cash back on your purchases. If travel is your priority, you may want to look for a flexible travel rewards credit card, meaning their rewards can be applied to many different airlines and hotels.

You may want to look for a card that not only offers rewards but also offers a nice signup bonus for spending a certain amount within the first few months. One with no annual fee would be ideal, too.

Whichever card you pick, it’s a good idea to familiarize yourself with its rewards program: the value of its rewards units (points, miles or cash back), how to redeem them, whether your rewards expire, and any minimum redemption amounts.

You may also want to keep in mind that credit card interest rates are typically a lot higher than credit card rewards rates. So, to avoid seeing your earnings swallowed up by finance charges, it can be wise to make sure to pay your full statement balance by the due date every month.

9. Checking Your Credit Reports Regularly

You can request a credit report for free from the three main credit reporting agencies — Equifax®, Experian®, and TransUnion® — at AnnualCreditReport.com.

It can be a good idea to periodically order a copy of your report and then scan it for any errors or signs of fraudulent activity. If you see anything that isn’t right, it’s wise to contact the credit reporting agency or the account provider as soon as possible and file a formal dispute if needed.

Checking your report can help you spot — and quickly address — identify theft. It can also help you make sure there aren’t any errors on the report that could negatively affect your credit score. If you ever want to obtain a lease, mortgage, or any other type of financing, then you’ll likely need a solid credit report.

10. Choosing Your Bank Wisely

There are lots of financial institutions out there, so it can be a good idea to shop around and make sure you find a place that really suits your financial needs. Choices include:

•  A traditional bank. These typically have physical locations throughout the country and offer a wide range of financial products and services. If you want to know you can have an in-person chat about your money, this option might work well for you.

•  Credit union. These are nonprofit organizations owned by the members of the union. They’re similar to a traditional bank, but membership is required to join, and they’re often smaller in scale and have fewer in-person locations. However, they may have lower fees and higher interest rates than a traditional bank.

•  Online bank. These institutions don’t usually have any in-person locations — everything happens online. Because of this, they often have very competitive fees and interest rates on checking and savings accounts. If you don’t necessarily need in-person money talk and would prefer to handle your money at home (or on the go), an online bank could be a great option.

When making a bank choice, it can be a good idea to make sure the bank you choose has a user-friendly website and app, as well as conveniently located ATMs that won’t charge you a fee for accessing your money.

3 Personal Finance Rules to Know

Once you’ve established some fundamental procedures, you can start thinking about some overarching rules that can help you make better money decisions. Three rules you may want to keep in mind include:

•   Keep your goals in mind. Without a clear set of goals, it can be difficult to do the hard work of budgeting and saving. Defining a few specific goals — whether it’s buying a home in five years or being able to retire at 50 — gives you a picture of what personal financial success looks like to you, and can keep you motivated.

•   Learn to distinguish wants from needs. Merging these two concepts can wreak havoc on your personal finances. Needs generally include food, clothing, shelter, healthcare, reliable transportation, and minimum debt payments. Everything else is likely a want. This doesn’t mean you can’t have wants, but it can be important not to trade financial security in pursuit of these things.

•   Always pay yourself first. This means taking some money out of each paycheck right off the bat and putting it towards your future goals. Setting aside money in a savings account, IRA, or 401K plan via automatic payroll deductions helps reduce the temptation to spend first and save later.

The Takeaway

Being good with your money requires a set of basic skills that many of were never actually taught in school. Learning personal finance basics like how to choose a bank, set up a budget, save for retirement, monitor your credit, manage high-interest debt, and invest your money can be key to reaching your goals and building wealth over time.

One simple way to become more organized with your money can be to open the right bank account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.

FAQ

What are the basics of personal finance for beginners?

Personal finance basics typically include budgeting, saving, investing, managing debt, and understanding credit. These principles can help you manage your money well and reach your financial and personal goals, whether short- or long-term.

What are the five basics of personal finance?

To manage your money well, it’s typically important to have a comprehensive understanding of the five key areas of personal finance: income, spending, saving, investing, and protection.

What is the 50-30-20 budget rule?

The popular 50/30/20 budget technique says to divide up your take-home pay into three categories: 50% toward needs, 30% toward wants, and 20% toward savings or additional debt payments.

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SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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Budgets can help you take control of your money and make it work harder for you. A monthly budget template can help you stay organized as you track your income, expenses, savings, and debt repayment. There are different ways to make a budget template, but if you don’t have time to do it yourself, it’s easy to find one online.

If you’re specifically looking for an Excel budget template then you’re in the right place. You’ll find a free budget Excel template you can download to help you better manage your money.

Options trading online by SoFi Invest.

Monthly Budget Template

There are different types of budgeting methods to choose from, such as the envelope system or the 50/30/20 budget rule. This free budget template can likely work well with many of them. The template allows you to enter your income, expenses, savings, and debt payments to create a comprehensive snapshot of your finances from month to month.

Here’s what you can expect when using this monthly budget template.

Key Components of the Template

When making a financial plan, it’s important to include the most important components of a budget. This simple budget template is divided into five sections:

•   Income

•   Essential expenses (the “needs” in life)

•   Discretionary expenses (the “wants” in life)

•   Savings and debt repayment

•   Monthly totals

You’ll be able to enter projected and actual amounts for each section. You can add or remove lines as needed or edit the descriptions for expenses, savings, and debt payments. Totals are calculated for you automatically.

How to Download and Access the Template

Here are steps for downloading the free monthly budget template:

•   You can download the Excel budget template here.

•   Once you download the file, you’ll open it and then click “Enable editing.”

•   You can then save the file to your preferred location on your device, and start using it to make a budget.

If you don’t have Excel, you can open the file in Google Sheets. You’ll need to:

•   Download the Excel file

•   Open Google Sheets

•   Click “File,” then “Import”

•   Click “Upload” and “Browse,” then find the Excel file

•   Select the file and click “Open”

•   In Google Sheets, select “Create new spreadsheet” from the dropdown menu (or this may automatically populate on a pop-up screen), and click “Import data”

•   Click the blue “Open now” link to start using the spreadsheet

If you’re opening the file in Google Sheets, you may need to make adjustments to the font or spacing if you have a default font that you use.

Recommended: 50/30/20 Budget Calculator

Using the Monthly Budget Template Effectively

Every monthly budget template is different, and you may need to do some customizing to make it your own. Here are some tips for living on a budget and tracking all of the numbers.

•   Review each section one by one to determine whether you’ll need to add or remove lines or make changes to descriptions.

•   Start by reviewing your monthly income and adding the projected amount for each income stream that you have.

•   Enter “Essential expenses” next, using the projected amount for each budget category. Again, you may need to add or remove expenses or adjust the descriptions to match your needs.

•   Enter “Discretionary expenses,” using the projected amount for each budget category. There’s plenty of room in the budget template to add additional expense categories if you have them.

•   Enter projected amounts for each of your monthly savings goals and debt repayment goals.

•   As you pay your essential expenses, add the actual amount spent for each one to your budget template.

•   Use the “Expense tracker” tab included in the budget template to record expenses for things like groceries and gas throughout the month. You can then add up the amounts for each category and enter them in the relevant box on the “Monthly budget” tab.

•   Enter savings contributions and debt payments in the “Actual” column as you make them.

Once you’ve added your income, expenses, savings, and debt payments and calculated the projected and actual amounts for each category, you can enter those numbers into the “Monthly totals” section. You can then subtract your actual expenses, savings, and debt payments from your actual income to calculate the difference. Managing your budget in this way adds an extra level of insight onto and control of what’s going on in your bank account.

Personalizing Your Budget

The monthly budget template is customizable so you can add or remove items as needed.

For example in the “Income section,” you’ll see room to enter amounts for two paychecks, two side hustles, and an ‘Other’ category. If you only get paid monthly, you can delete one of the paycheck lines. Or if you get paid biweekly and have a three-paycheck month coming up, you can add a line to account for that.

You can do the same with all of the other sections so that your budget template reflects your monthly expenses and savings goals. For example, say that you use sinking funds — money set aside for specific goals — to save money for one-time expenses. You could add individual lines for each one in the “Savings” and “Debt” section.

So your savings goals might include:

•   Emergency fund

•   Holiday fund

•   Vacation fund

•   New car fund

Likewise, you might have multiple student loans you’re repaying that you’d like to list separately. Having a projected column and an actual column can be a huge asset. This can help you see how well you’re doing with your spending, savings, and debt repayment goals month to month. That, in turn, can help you manage your money better.

Tracking and Analyzing Your Spending

Failing to track variable or discretionary expenses is one of the most common budgeting mistakes. It’s easy to go over budget if you don’t know what you’re spending.

This budget template includes an “Expense Tracker” sheet that you can use to record spending, outside of what you pay toward the bills. Tracking expenses monthly is a great way to see how your expenses are trending, where your money goes, and what you might want or need to cut back on.

Some of the most helpful expenses to track may include:

•   Groceries

•   Gas

•   Anything that’s in your “Discretionary expenses” category on the template, such as entertainment and dining out

These are the areas of your budget where spending may not be the same month to month. You can look at each expense category and ask yourself what you could do to reduce spending or even eliminate it altogether if you’re trying to free up funds to save or pay down debt.

It’s also helpful to look back each month to see how your essential expenses have changed. Some costs, like your mortgage or rent payments, may always be the same but you might spend more on utilities during certain times of the year than others. Getting to know these patterns can help you adjust your budget accordingly so you’re not surprised by a higher-than-usual electric bill.

Budget Template vs App

Using a budget template is a hands-on way to track your income and spending because you have to enter amounts in the sheet manually. If you don’t have time to do that or you’re worried about getting the numbers wrong, you might use a free budget app instead.

These can let you link your bank account, including checking and savings accounts, in one place so you can see what you’re spending. You can also add investment accounts, retirement accounts, credit cards, student loans, and other loans to track your net worth. Many financial institutions offer these tools, so it can be worthwhile to check with yours, or many third-party apps are available as well, some for free and others with associated costs.

You might also find that a budgeting app can help you move towards your short- and longer-term money goals, as you see where your cash goes and how you can lower debt and build savings over time.

In addition, credit score monitoring may be included so you can see how paying down debt or taking out a new loan affects your credit rating.

Recommended: Ways to Earn Money From Home

The Takeaway

If you’re ready to make budgeting part of your money routine or looking to fine-tune how you track your finances, a monthly budget template can help you do it. This Excel budget template is designed to be user-friendly.

As you work on tracking your money, it’s wise to have a banking partner that helps you manage and grow your wealth.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.

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Photo credit: iStock/cagkansayin

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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Setting financial goals is one of the most important steps you can take toward building a secure and stress-free future. Without clear goals, it’s easy to spend impulsively, fall into debt, or miss out on opportunities to build wealth. Whether you’re saving for a vacation, trying to get ahead of debt, or preparing for retirement, a well-structured financial plan can help you stay focused and motivated.

What follows is an essential guide to financial goals — from understanding their importance to setting achievable milestones and adjusting your plan when life changes.

What Are Financial Goals and Why Are They Important?

Financial goals are specific money-related targets you set to guide your financial decisions. They give you direction and help you align your daily spending habits with long-term priorities. Instead of letting money just come and go from month to month, you create a roadmap that leads you toward stability, independence, and growth.

Goals are also important because they provide:

•   Clarity: They help you understand what you’re working toward.

•   Motivation: Defined goals encourage you to save instead of overspend.

•   Control: They prevent financial stress by giving you a sense of purpose.

•   A way to track progress: Goals let you measure how far you’ve come.

Without goals, money has a tendency to slip through the cracks. With them, you can make strategic decisions that improve your financial health step by step.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

Types of Financial Goals: Short-, Mid-, and Long-Term

Financial goals depend on timeframes and priorities. Generally, they fall into three categories — short-, mid- and long-term goals.

Examples of Short-Term Financial Goals (1-3 Years)

Short-term goals are immediate priorities. They include the things you want to buy or do within the next few months or years, and help build momentum for bigger challenges. Examples include:

•   Building an emergency fund

•   Paying off a credit card balance

•   Saving for a vacation or holiday gifts

•   Creating a monthly budget and sticking to it

•   Setting aside money for a new laptop or phone

Examples of Mid-Term Financial Goals (3-10 Years)

Mid-term goals take more time and planning and act as a bridge between short-term wins and long-term security.

They often involve saving or investing for significant life milestones and might include:

•   Paying off significant debt (such as student loans)

•   Saving for a wedding or dream vacation

•   Saving for a down payment on a house

•   Funding a large-scale renovation

•   Growing an investment portfolio

Examples of Long-Term Financial Goals (10+ Years)

Long-term goals shape your financial future and often require consistent commitment. These goals can seem intimidating, but breaking them into smaller steps makes them achievable. Common long-term goals include:

•   Saving for retirement through 401(k)s, IRAs, or pensions

•   Paying off a mortgage completely

•   Funding your children’s college education

•   Achieving financial independence or early retirement

•   Building generational wealth through investments

Recommended: Savings Goals by Age

How to Set Financial Goals in 5 Steps

Now that you understand the different types of goals, here’s how to set them effectively:

Step 1: Understand Your Current Financial Health

Before setting goals, it’s important to have a clear picture of where you currently stand. You can do this by gathering the last several months of financial statements and then using them to determine:

•   Your average monthly income

•   Your average monthly spending

•   Current debt balances

•   Status of your emergency savings and retirement accounts

This assessment forms the foundation for realistic goal setting.

Step 2: Define What You Want to Achieve

Once you have a snapshot of your overall financial situation, it’s worth spending some time reflecting on your money goals: what is really important to you.

While there are many things people commonly save for, like a down payment on a house or retirement fund, your financial goals might not be the same as your sibling’s or your coworker’s.

Think about what you would like to accomplish in the next few years, in five or so years, as well as decades from now, and simply jot them down. Keep in mind that these goals aren’t set in stone — they can and likely will change over time.

Step 3: Make Your Goals S.M.A.R.T.

A vague goal like “save money” is hard to stick to. Instead, consider using the S.M.A.R.T. framework:

•   S for Specific: Be clear  about what you want to achieve, such as exactly what you want to save or how much you’ll need to pay off a debt.

•   M for Measurable: Assign real numbers to your goals. Measurable goals allow you to track your progress and monitor your success.

•   A for Achievable: Setting unrealistic expectations can lead to frustration and disappointment. Ensure your goals are realistic for your income and expenses.

•   R for Relevant: Make sure your goals align with your overall financial plan and your life priorities.

•   T for Time-based: Set a deadline (e.g., within 10 months) for each goal.

SMART goals help keep you accountable and focused.

Step 4: Create a Budget That Includes Your Goals

Your budget is the tool that makes your goals achievable. And thanks to Step 1, you already know your average monthly income and expenses. The next step is to decide if your current spending aligns with your goals, or if you need to rejigger your spending to free up more funds for saving.

There are many different types of budgets, but one popular framework is the 50/30/20 rule. This divides your take-home income into three categories:

•   50% for needs (housing, food, utilities)

•   30% for wants (entertainment, travel)

•   20% for savings and debt repayment

“Thinking about where to put your 20% savings each month can help you reach your goals,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “High-yield savings accounts, money market accounts, certificates of deposit, and cash management accounts are all vehicles that may pay more interest than a traditional savings account, helping your savings grow.”

Step 5: Track Your Progress and Stay Flexible

Once you’ve set some goals and established a budget, it’s a good idea to track your spending for a few months to make sure you are sticking to the plan.

You can track your spending with plain old pen and paper or a computer spreadsheet, but a simpler option is to put a budgeting app on your phone. Your bank may even offer a free tool that automatically tracks and categorizes your spending in real time.

If you find that your budget isn’t realistic, or your financial situation changes at some point, you may need to make some adjustments to your budget. That’s why it’s important to check in with your money regularly.

Common Financial Goal Examples

Here are some six popular financial goals you might include on your list:

1. Build an Emergency Fund

Whether you’re easily covering your monthly expenses or grabbing change from the bottom of your bag to buy a coffee, many people are living paycheck to paycheck. But what if that paycheck disappeared or if you had a large, unexpected expense? Enter the emergency fund.

Having an emergency fund can help you comfortably manage an unexpected medical bill, major car or home repair, or a sudden loss of income with having to run up high-interest debt.

A general rule of thumb is to have three to six months’ worth of living expenses set aside for emergencies. While that can be a sizable sum, keep in mind that you don’t have to build your back-up fund overnight. You might first set a short-term goal of saving a small cushion of $1,000, then build from there.

Recommended: Emergency Fund Calculator

2. Pay Down High-Interest Debt

High-interest credit card debt can feel like a treadmill: Despite constant effort, you never seem to get any closer to the finish line. By prioritizing repayment, however, you can make real progress. This will free up cash flow you can then redirect towards savings and investments.

Two popular payoff approaches are the debt avalanche (paying off the highest-interset debt first) and the debt snowball (paying off the smallest balance first to build momentum). Whichever you choose, the key is to consistently make extra payments and avoid new debt along the way.

3. Start Saving for Retirement

Most of us know we should be saving for retirement, but making it happen can be challenging when there are so many competing places to put our money. The good news is that even small contributions to a retirement account can grow to significant savings over time. This is largely due to the magic of compounding returns — when the returns you earn start earning returns on their own.

One rule of thumb is to save at least 15% of your pre-tax income each year, including any employer match. If that’s not feasible right now, try to contribute at least up to any employer match (otherwise you’re leaving free money on the table).

4. Save for a Down Payment on a House

For many people, owning a home is a major milestone and a symbol of financial stability. But buying a home often requires a significant down payment, typically ranging from 3% to 20% of the purchase price. Saving for this can feel overwhelming, but breaking it into smaller milestones makes the goal achievable.

Consider opening a dedicated high-yield savings account for your down payment fund so it remains separate from everyday spending. Or, if your bank offers savings vaults, you might create a sub-savings account within your main one earmarked for your down payment. Then automate contributions to this account or vault so it grows over time.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

5. Invest for the First Time

Investing allows your money to work for you, building wealth beyond what traditional savings accounts can provide. While investing might seem intimidating at first, starting small is often the best approach. Low-cost options like index funds, exchange-traded funds (EFTs), or robo-advisors make it easier than ever to get started without needing extensive financial knowledge. As your income grows, you can increase contributions and diversify your portfolio.

6. Pay Off Student Loans

Student loans are a reality for millions of people, and paying them off can take years. Carrying this debt affects your ability to save, invest, and even qualify for other financial opportunities like a mortgage. That’s why making a structured repayment plan is so important.

Start by reviewing your repayment options — federal loans may offer an income-driven repayment plan or refinancing opportunities. Making extra payments towards the principal when possible can reduce the overall interest you pay and shorten the repayment timeline.

Financial Goal Examples for Students

Students often juggle limited income with rising expenses, making financial goals essential. Here are some practical ones to consider:

•  Creating and sticking to a monthly budget

•  Building a small emergency fund (even $500 helps)

•  Paying off credit card balances in full each month

•  Saving for textbooks or tuition payments

•  Beginning to invest through a low-cost brokerage app

•  Applying for scholarships or part-time jobs to reduce student loan reliance

Setting goals early can help students avoid financial pitfalls and build healthy habits for adulthood.

How to Adjust Your Financial Goals if Your Circumstances Change

Life rarely goes exactly as planned. You might face job loss, medical expenses, or unexpected windfalls like a bonus or inheritance. When your circumstances shift, it’s important to:

•  Reevaluate your priorities: Decide which goals still matter most.

•  Adjust timelines: You may be able to shorten a deadline or you might need to extend one or more of your timelines.

•  Reallocate resources: If money is tight or your priorities change, you may want to shift money from one goal to another.

•  Stay flexible: Remember, goals are not fixed — they evolve with your life.

The Takeaway

Setting financial goals isn’t about perfection — it’s about progress. By understanding your current financial health, defining clear objectives, and using the SMART framework, you can create a roadmap toward stability and success.

Whether you’re saving for your first emergency fund, tackling debt, or planning for retirement, goals can give you the motivation and direction you need to take control of your financial future. The key is consistency. Start small, stay flexible, and remember that every step forward brings you closer to your near- and long-term aspirations.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.

FAQ

Is it wise to invest your emergency fund?

Generally, it’s not wise to invest your emergency fund in risky assets like stocks or mutual funds. An emergency fund should remain easily accessible and safe, since its purpose is to cover unexpected expenses or a sudden loss of income. Keeping it in a high-yield savings account or money market account balances safety with some interest growth. Once your emergency fund is secure, you can focus on investing other money for long-term goals.

What is the most important financial goal?

For many people, the most important financial goal is to build a strong foundation of financial security. This typically means creating a healthy emergency fund and paying down high-interest debt. Without stability, it’s difficult to make progress toward other goals like saving for retirement, buying a home, or investing.

Once your essential safety net is in place, you can prioritize goals that align with your lifestyle and values, such as long-term wealth building, financial independence, or providing for your family’s future.

How many financial goals should you have at once?

It’s often best to focus on a manageable number of goals (such as two or three) at one time. Trying to juggle too many can spread your money and attention too thin, making it harder to make meaningful progress. A practical approach is to prioritize one short-term goal (like building an emergency fund), one medium-term goal (such as saving for a car or vacation), and one long-term goal (like retirement savings). This balance helps you stay focused while still moving forward in multiple areas.

What is a good financial goal for a beginner?

A great financial goal for beginners is starting an emergency fund. Even saving a small amount, such as $500, can provide a cushion against unexpected expenses and reduce the need to rely on credit cards or loans. Once that’s established, beginners can aim to save three to six months of living expenses. Other beginner-friendly goals include paying off small debts, creating a realistic budget, or setting up automatic savings. These goals build confidence and establish strong money habits for future success.

How can I set financial goals with a partner or family?

Setting financial goals with a partner or family starts with open communication about values, priorities, and long-term dreams. Begin by discussing shared goals, such as buying a home, paying off debt, or saving for children’s education. Next, agree on a budget and assign responsibilities for managing finances to ensure accountability. Regular check-ins help you stay on track, celebrate progress, and adjust goals as life circumstances change.

What tools can help me track my financial goals?

Several tools can make tracking financial goals easier and more organized. Budgeting apps like YNAB, GoodBudget, or PocketGuard allow you to set savings targets and monitor spending. Spreadsheets are another customizable option for tracking progress. Many banks also offer built-in goal-tracking features through their mobile apps.

For long-term goals, investment platforms often provide dashboards showing growth toward retirement or wealth-building objectives. The key is choosing a tool you’ll use consistently, helping you stay motivated and accountable.

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College life is about getting a great education, exploring interests and activities, and forging your own adult identity. It’s also a perfect time to establish some good money habits that will set the scene for financial success today and tomorrow.

From developing a budget to opening bank accounts, there are ways you can make your money work harder for you over time so you can achieve your goals.

Read on to learn the 10 best strategies for good money management for college students.

Why Learning to Manage Your Money in College Is a Superpower

As a student, you’re at a key point in your life where you’re taking charge of your finances, perhaps for the first time ever. Learning the skills and knowledge you need to make informed decisions about your money — something known as financial literacy — is important now and in the future. It can help you save more, spend wisely, and avoid too much debt. Being financially savvy can also help manage your student loans and choose the bank accounts and credit cards that make the most sense for you.

The financial moves you make as a college student can set you up to build wealth and reach your financial goals in your twenties, thirties, and beyond. This includes buying a car, renting an apartment, putting a down payment on a house someday, and saving for retirement.

10 Essential Money Management Tips for College

Here are 10 financial tips for college students that can help you spend less and save more during and after school.

1. Create a Simple College Budget That Actually Works

Budgeting may sound complicated, but making a budget is simply a matter of figuring how much is coming into your bank account each month and how much is going out, and then making sure the latter doesn’t exceed the former.

To get started, list all of your sources of income, such as from a part-time job or family contributions.

If you are living off a fixed amount of money for each semester, say from summer earnings, you may want to divide this lump sum by the number of months you need to make the money last.

Once you know how much you have to live on monthly, make a list of regular expenses that you will be responsible for paying, such as your cell phone or a car payment, or maybe rent if you live off campus.

Next, you’ll want to subtract your fixed expenses from your monthly income. This will give you the amount you have left over to cover variable and discretionary expenses, such as eating out, buying clothes, and entertainment. You can then come up with target spending amounts for each category.

Doing your best to stay within these spending limits can help ensure that your money lasts until the end of the semester, and help you avoid running up costly credit card debt.

2. Open a Student-Friendly Bank Account (like SoFi)

You might feel like you don’t have enough income to start saving money yet, but even just putting a small amount in the bank regularly can add up over time.

You can open a checking account as a place to start saving. If you’re able to set aside $50 a month, you could soon have a decent sum. And if you have a part-time job, your paycheck can be directly deposited into your account. That way you won’t be tempted to spend it.

Being diligent about saving money each month can help cultivate a habit that will serve you later when you can afford to save more for your future goals, including retirement.

As you’re choosing a bank, you may want to look for one with an ATM near you for convenience and to avoid out-of-network fees. For example, with a SoFi checking account, you’ll have fee-free access to more than 55,000 ATMs worldwide.

3. Build Your Credit Score Responsibly With a Credit Card

When you open a bank account, you’ll likely also apply for a debit card to make managing your financial transactions easier. But don’t forget about a credit card for convenience, as a backup for emergencies and to start building a credit history.

But don’t overdo it. To manage finances in college, use your credit card only when you need it. Pay off your debt in full each month, otherwise you could end up paying a high-interest rate on the balance, which can make it even harder to pay off.

Using your credit card responsibly by making small purchases and paying off the balance in full can help you build your credit.

4. Start a Small Emergency Fund for Unexpected Costs

Life can be unpredictable and having a financial safety net can help protect you from costs that pop up — if your car breaks down or you’re facing a sudden (and costly) medical procedure, for example. That’s why it’s important to start an emergency fund or back-up savings fund as a critical part of your long-term financial health.

Having an emergency fund can help keep you from having to rely on credit cards to get through a financial challenge.

How much you should put aside for emergencies each month is up to you and your financial situation. Many financial professionals recommend saving at least three to six months’ worth of expenses. But it’s better to have a small fund than not to have a fund at all. The key is to start saving something each month, no matter how small the amount may seem.

When building your emergency fund, it’s a good idea to fund the account regularly if you can. Consider setting up an automatic transfer to your savings so you don’t have to think about it.

Ideally, your emergency fund should be in a separate savings account so you won’t be tempted to spend the money on something else.

5. Understand How Your Student Loans Work

A crucial part of money management for college students is understanding how your student loans work and what’s required to repay them. Familiarize yourself with the types of loans you have (federal and/or private), and then take a look at how the interest on each loan is handled. For example, if you have federal Direct Subsidized Loans, the interest is covered for you while you’re in school. With federal Direct Unsubsidized Loans, however, you are responsible for all the interest that accrues — even while you’re in school — and it accrues daily, meaning it can build up significantly over time. For this reason, you may want to make interest-only payments on your loans while you’re in school, if possible.

You can find information about your loans by logging into your account at StudentAid.gov. There, you’ll see the different loans you have, how much you owe, the interest rate of each, and who your loan servicer is.

While you’re at it, start exploring the different options for repayment, so you can get started without a hitch when the time comes. Many changes are coming to student loans as part of the big domestic policy bill that was signed into law in July 2025, so it’s a good idea to study up on the options now.

6. Find Ways to Earn Extra Income On Campus or Online

There are a number of side hustles for college students that can help you earn some extra cash. For instance, you could become a tutor and help other college students learn a subject in which you excel. Or you could pet-sit on evenings and weekends or do lunchtime dog walking (as long as you don’t have class). Other potentially lucrative side hustles include becoming a ride share driver or delivering food and groceries for a company like DoorDash or Instacart.

A side hustle can be flexible so you can fit it around your class schedule. You can also set your own hours for the most part, unlike a more traditional job. You can use some of the money you earn to cover your daily expenses and then put the rest into the bank to build your savings.

7. Master the Art of Saving on Everyday Expenses

Financial tips for college students include saving money on the daily expenses that can add up over time. Take eating out. You may get tired of cafeteria fare. At the same time, you don’t want to blow your budget on eating in restaurants every weekend. If you have access to a kitchen, consider purchasing ingredients from your local supermarket and putting together some simple, tasty meals, instead of eating out. This can be a good way to save money on food.

Another idea to stretch your money is to find freebies. Facebook has groups where people can post items they no longer want. You might be able to score free clothes, furniture, or room decor. Freecycle and NextDoor also have listings for things that people are giving away.

Finally, rethink some of your major expenses, like textbooks. Buying them new can be costly. Fortunately, there are a number of ways to save on college costs like this. One option is to buy up-to-date versions of used textbooks whenever you can. Getting the digital version of a book can also yield savings. You could also rent what you need from a third-party bookseller, such as Amazon or Chegg.

Sell any books that you’ve purchased (new or used) that you won’t need again in the future to recoup some of the expense.

8. Use Your Student ID for All It’s Worth

You may think of your ID card only as a form of identification and a way to get into college sporting events. But there are actually additional benefits that come with a student ID, and many can help you save money.

Some businesses, especially those near universities, offer students discounts when they show a student ID card.

Next time you go to the movies, shop for school supplies, go out to eat, or get a haircut, it’s a good idea to ask if they offer any discounts for local college students.

In addition, many national and online retailers, including major clothing, sneaker, and computer brands, offer discounts to college students.

You may also be able to use your student ID to get a better deal on your cell phone plan and streaming services. Make sure to maximize this valuable resource.

9. Protect Yourself From Financial Scams Targeting Students

College students who are on their own for the first time and learning how to manage their money can be prime targets for scammers. In fact, young adults ages 18 to 24 report the second median highest dollar loss to scams after adults 65+), according to the Better Business Bureau’s 2024 BBB Scam Tracker Risk Report.

Some common scams that target college students include:

•   Fake employment offers — students are asked to pay a fee or provide personal and financial information to fill out an “application”.

•   Student loan debt-relief scams — students are contacted by representatives who claim to be from debt relief companies and offer to reduce or eliminate their college debt for a fee.

•   Fake scholarships or grant offers — students receive notice that they’ve been awarded a grant or scholarship they never applied for and are asked to supply their Social Security number or other personal information in order to receive it.

To avoid becoming a victim of a scam, never give out personal information to anyone you don’t know. If you are contacted unsolicited by a person asking for information or a fee or a supposed service they can provide for you, hang up or don’t respond to their text or email. And beware offers that seem too good to be true. Always err on the side of caution.

10. Dip Your Toes Into Investing (Even With Small Amounts)

Investing when you’re young can potentially be one of the best ways to help your money grow over time.

That’s thanks to compound returns, which is when any returns you earn are reinvested to earn additional returns. The earlier you start investing, the more benefit you may gain from compounding.

It’s important to keep in mind, however, that all investments involve some level of risk because the market fluctuates over time.

If you’re interested in investing, you could start small by opening a traditional or Roth IRA and putting a little money from a part-time job into it, or you could opt for an online brokerage account. Either way, even if you invest just $50 a month, you’ll be saving for your future.

A Deeper Dive: How to Build Your Credit in College

Building your credit now as a college student can help you once you graduate. Without a credit history, it can be challenging to take out a loan or get a credit card, among other things. If you’ve already established credit, you’ll likely be able to get your post-college life started more easily.

To help build your credit, get a credit card while you’re in college. Use it judiciously for small purchases and then consistently pay your bill on time and in full each month. This kind of responsible credit card use can help you build your credit history. You’ll need a strong credit history if you want to get the best terms on a car loan, a mortgage, or a student loan for grad school. Your credit can even affect your job prospects and your ability to rent an apartment.

It’s also a good idea to monitor your credit report regularly to make sure it’s accurate. You can get a free credit report annually from the three major credit bureaus. If you spot any errors, be sure to report them right away.

And finally, once it’s time to start making your student loan payments, be sure to make each monthly payment on time and in full. This can help you establish a positive payment history, which can also strengthen your credit.

A Deeper Dive: Making Sense of Your Student Loans

As noted earlier, understanding your student loans and how they work is extremely important. A student loan is a legal obligation and you are responsible for paying what you borrow, plus interest. Staying on top of your loans now, while you’re still in college, can make it easier to manage them.

First, make sure you know what kind of student loans you have. There are federal and private student loans, and they each work differently. Find out the interest rate for each loan and how the interest is handled.

Keep track of how much you’re borrowing with student loans and try not to borrow more than you need. Read the terms and conditions of your loans and make sure you understand them. Keep all your loan documents so you can refer to them when you have questions. Know who your loan servicer is and contact them if you have questions.

And log into your account on StudentAid.gov to make sure all the information on your federal loans is correct and up to date.

Finally, make your monthly student loan payments in full and on time. If you are struggling to repay your loans, contact your loan servicer to see what your options are. For instance, with federal student loans, you may be able to switch to a repayment plan that bases your monthly payments on your discretionary income and family size.

The Takeaway

College can provide a great opportunity to develop the money skills you’ll need after you graduate. By learning basic money management techniques now, you can gain confidence in your ability to handle your finances well after graduation.

In 10 years, you’ll likely thank yourself for putting in the effort to learn how to set and stick to a monthly budget, use credit cards wisely, save and invest money, manage your student loans, and build your credit score.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.

FAQ

How much money should a college student have in savings?

College students should have an emergency savings fund to help cover any unexpected expenses. While financial professionals often recommend having three to six months’ worth of living expenses in an emergency fund, that amount might be difficult for a college student with a limited income. Instead, some financial pros suggest aiming to have $500 or $1,000 in the bank as a college student. To help get there, save regularly. Even if you deposit just $20 in your emergency fund each week, it will continue to grow steadily.

How can I start a budget in college?

One method for starting a budget in college is to use the 50/30/20 rule. Here’s how it works: You allocate 50% of your income to needs (such as bills, rent, and other fixed monthly expenses), 30% to wants (such as eating out or going to the movies), and 20% to saving for your financial goals (such as a down payment on a car or a house, or for retirement). Because the formula is simple, it can be an easy way to manage your money as a college student and after graduation.

Is it a good idea to get a job during my freshman year?

Whether or not it’s a good idea to get a job during your freshman year depends on your unique circumstances and financial situation. A job can help you cover some of the costs of college, but you’ll want to make sure that it doesn’t interfere with your classwork or studies. If you need the income, you may want to consider a flexible part-time job that you can do after classes or on weekends as your schedule allows, such as pet-sitting or tutoring.

What are the most common financial mistakes students make?

Some of the most common financial mistakes students make include overspending, charging too much on credit cards, failing to put money into savings, and mismanaging student loans, including borrowing more than needed. To avoid these mistakes, make a budget so that you don’t spend too much. Also, use credit cards only for small purchases and pay your bill in full each month to avoid accumulating credit card debt. Put money into a savings account regularly. And finally, make sure you know exactly how much you need to pay for college, and don’t borrow more than that in student loans.

What percent of college students drop out because of money?

According to the most recent statistics from the Education Data Initiative, approximately 23% of college students leave school every year, and 41% of college dropouts say they left for financial reasons.

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SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.

¹SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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.

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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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Even the most money-savvy person may have some false beliefs about money. Maybe you were raised with misconceptions about finances, such as investing is only for the very rich, or were given off-target advice from well-intentioned friends (telling you to always aim to buy a house vs. renting), for instance.

Incorrect beliefs about money can have a negative impact on how you manage your finances, potentially hindering your path to achieving your goals.

Why Debunking Money Myths Is Key to Financial Success

Being realistic about money can help you set reasonable financial goals and reach them in the short- and long-term. Whether you are feeling financially secure or are looking to better manage your finances, practicing healthy financial habits will serve you well in the long run.

That’s why debunking money myths is important. If you believe, for instance, that carrying lots of credit card debt is “normal,” you may not eliminate that monthly balance that’s dragging down your budget.

Here are some common misconceptions about money to avoid if you want to be financially fit.

10 Common Misconceptions About Money

Here, learn about popular money misconceptions and why it may be time to bust some financial myths.

1. You Need a Lot of Money to Start Investing

You do not need to be rich in order to invest: You can start investing with just a few dollars. The average stock market return is about 10% a year, as measured by the S&P 500 index. The S&P 500 Index return does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns. Investing has risks, and you’ll want to be comfortable with that notion and find investments that suit your risk tolerance.

Whatever you decide to do, investigate fees before you begin investing so you are prepared for any costs you will need to cover.

2. Budgeting Is Too Restrictive and Complicated

Regardless of how little or how much money you have, a budget is helpful for organizing your finances. If you feel budgeting is too restrictive and/or complicated, you probably just haven’t found the right budgeting method yet.

Making a budget could help you achieve financial stability. You need to budget so you can keep track of your spending, your debt, and your savings for future goals.

There are various techniques and tools (spreadsheets, journals, apps) for budgeting. One strategy is the 50/30/20 budget rule, in which 50% of your post-tax money goes towards necessary expenses (housing, food, utilities, and the like), 30% goes towards wants, and 20% is used for saving.

3. All Debt Is Bad Debt

According to Debt.org, 90% of American households have some kind of consumer debt. But keep in mind, not all debt is created equal. Some debt is considered good debt. Think about a mortgage: Once you’ve saved for a down payment, this financial product is typically a fairly low-interest loan that may help build your credit history (if managed responsibly) and also allows you to accrue equity in the home.

Bad debt, on the other hand, is high-interest debt, such as credit card debt, where interest rates are high and you aren’t building equity. Just because a lot of people may have this kind of debt doesn’t mean you should. It can snowball and keep you spending a chunk of money monthly that could otherwise be saved or invested.

4. A High Salary Automatically Makes You Wealthy

A common money misconception is that earning a high salary makes you wealthy. That is not necessarily true. People who earn a lot of money can spend a lot of it too. The key to building wealth is saving and investing your money so it can potentially grow over time. Even if you simply stash money in a high-yield savings account, compounding interest can help grow your wealth.

To look at it from another angle, say one person earns $50,000 a year, lives within their means, and saves and invests wisely. Then there’s a person who earns $500,000 but they own multiple houses, spend freely on luxuries, and haven’t yet gotten their act together in terms of saving and investing. The person who has the lower salary might actually be the wealthier of the two.

5. Buying a Home Is Always Better Than Renting

Buying a home is the quintessential American dream, but it’s not necessarily the right move for everyone. Whether to rent or buy ultimately depends on your personal situation and your aspirations.

You may have heard that renting is a waste of money, but it can provide flexibility for those who are not ready to buy a home or not interested in doing so. For instance, perhaps your work requires you to relocate often, or you only want to buy a house when your baby is older and you can pick the right school district. Maybe you’d rather pay off debt vs. save for a down payment. Or you just might not want the major expense of a mortgage, taxes, and home maintenance in your life. Whatever your situation may be, it’s important not to feel pressured into buying unless it’s the right move for you.

6. You Should Avoid Credit Cards to Stay Out of Debt

Using credit cards as a form of payment doesn’t mean you’ll go into debt. Spending more than you can afford to pay off what you owe, however, may put you on that path. If you use a credit card wisely and typically pay off the debt every month, this can be a factor that helps you build credit. It also keeps you from paying high credit card interest, which averages 24.35% as of July 2025.

However, if you are a person who tends to spend impulsively and not pay your credit card bill on time, this could negatively affect your credit score. This is why it’s important to manage your purchases and pay your credit card bills on time.

7. Saving for Retirement Can Wait Until You’re Older

This can be a dangerous myth to believe. If you are young and are investing for your retirement, you have time on your side. Your invested money can grow over time thanks to compounding returns. Here’s an example: If a 25-year-old invests $200 a month and earns a 6% return, they’ll have $393,700 by age 65. But if that same person starts saving at age 35, that same money at the same rate nets them $201,100, or about half of what they’d have if they started sooner.

It may feel as if retirement is a long way away, but the sooner you begin funding it, the more you are likely to have. If your employer offers a 401(k) plan, take advantage of contributing to it. If this isn’t offered at your place of work, you can open an individual retirement account (IRA) or a Roth IRA.

8. Talking About Money Is Taboo

Talking about money issues may seem like taboo, but it shouldn’t be. It can be healthy to talk about money troubles to close family and friends, because they may have ideas about how to approach a solution. Perhaps they experienced a similar issue in the past and can offer advice on how they handled it.

If you find it uncomfortable to talk to family or friends about your money concerns, you might want to consider speaking to a professional. For instance, there are non-profit credit counseling organizations, like the National Foundation for Credit Counseling that could help you if you are burdened with debt and feel overwhelmed.

9. More Money Will Solve All Your Problems

Yes, money can help take care of bills, but the old adage, “More money, more problems” may well be true, too. The secret to being financially secure is not about how much money you make, it’s about how well you manage it.

For instance, say you take a new job that pays twice your current salary. If you turn around and buy a pricier home and car and book some luxury vacations, you might be in more debt and experience more stress than before. The way to prevent this is by not living beyond your means.

Healthy budgeting and saving habits (such as automating your savings) are what can help solve problems.

10. Financial Planning Is Only for the Rich

Financial planning isn’t only for those who have hefty savings accounts, net worth, or investment portfolios. Although it may not be taught in school, financial literacy is important for all, and setting money goals can help you achieve your dreams. Too many people just open a checking account and then ignore their money.

You might be more comfortable working with a financial professional, but you don’t need one to manage your money. It’s totally your choice. You might also see what tools and services your bank offers, and investigate third-party options.

Budgeting and Saving Myths Debunked

There are several myths about budgeting and saving that are worth debunking. For instance, many people believe living on a budget is hard, complicated, time-consuming, and all about deprivation.

Not true! The right budget can help you stay on track financially and achieve your goals. What’s important is to experiment with different budgets to find one that suits your needs. You might use technology, such as a savings calculator to help you along.

Also, it’s a financial myth that you need a lot of money to save effectively. Regardless of your income and expenses, budgeting well can allow you to start saving regularly. Small amounts of money can really add up over time.

Recommended: Savings Goal Calculator

Investing and Retirement Myths Debunked

Here’s what is a common misconception about finances: that you need a lot of money to invest. Anyone can invest well, even starting with a small amount, and robo-advisors can help automate the process for you. On the topic of investing, it’s also a misconception that you don’t have to think about retirement until later. You’re actually likely to save more effectively when you start early (again, even with small amounts) than if you put more money in for a shorter period of time.

Another myth is that you don’t need to save for retirement because you can live off Social Security payments. However, many people find that those payments are not enough when they reach retirement age, especially with rising healthcare costs.

Debt and Credit Card Myths Debunked

A debt myth is that all debt is bad. Some kinds of debt, such as mortgages, charge relatively low interest and allow you to build wealth. However, when it comes to credit cards, there are some myths to conquer. For example, some people may believe that they should only pay the minimum amount on their monthly bill. This amount is the bare minimum, and paying just that can wind up locking you into a debt trap, without building up funds in your bank account because you’re struggling to pay off your debt.

Mindset and Lifestyle Myths Debunked

A mindset and lifestyle myth about money to debunk is that making more money means you’re wealthy. It might be true, but if you allow your spending to rise with every raise at work or money windfall, you could wind up less wealthy than you were before.

This is considered lifestyle creep. An example is when you get a new job and earn more, you go out and, say, lease a luxury car rather than putting the extra money into savings or investing. You live more lavishly, but you could be shortchanging your future.

How to Develop a Health Money Mindset

To develop a healthy money mindset, it’s helpful to devote some time and energy to learning how to manage your money well. That could mean reading up on finances, listening to podcasts, or taking an online course.

Goal setting is important, too. By establishing your short-, medium, and long-term goals, you can begin working toward achieving them. Budgeting well and talking with trusted friends and relatives for advice can help you get on the right track. Automating your savings so money seamlessly gets transferred into a savings account can be a smart move, too. You might also work with a financial planner or a financial therapist to help you in your money journey.

The Takeaway

Myths about money can stand in the way of your making the most of your finances. By avoiding these misconceptions, you’ll be better able to take control of your cash, budget, save, and invest wisely. These moves can not only help you achieve your goals, they can enhance your peace of mind, too.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.

FAQ

What is the biggest misconception people have about money?

There are many negative beliefs about money. Some include believing only rich people should invest their funds and that a person doesn’t need to think about retirement saving when they are young. These misconceptions can keep people from reaching their financial goals.

Is it true that you need money to make money?

While having money can help you make money, it’s not a requirement. By budgeting well and saving regularly (even small amounts), you can work toward generating wealth. A person who makes $50,000 could be wealthier than one who makes a multiple of that if they manage their money more wisely.

Why is it so hard to talk about personal finances?

It can be hard to talk about personal finances because many people are raised with the belief that one should never discuss money. It’s a myth about money that it’s a taboo topic. Unfortunately, this secrecy leads people not to share information that could help one another manage money better. Also, typically financial management skills aren’t taught in school, so many people clam up about the topic since they feel ignorant about it.

What’s a simple first step to fix my money mindset?

Often, the simple first step to fix your money mindset is to think about and recognize your attitudes. Do online research about money management and talk to friends whose money management you respect. Look at the interest rates on your credit card and student loans, try budgeting apps, and take other small steps that begin to put you in the driver’s seat financially rather than believing prevailing wisdom.

Maybe you think that there’s no point saving for retirement until you’re older or that investing is only for the rich. By being honest about your beliefs and then working to educate yourself and take steps toward financial management, you can fix your money mindset.

Is carrying a small credit card balance good for my score?

If you’ve wondered about what are some common money misconceptions, this is one! Carrying a balance doesn’t build your credit score. Among the habits that help maintain and build your credit score are always paying your card on time and keeping your credit utilization ratio (your balance vs. your credit limit) as low as possible. Under 30%, if not under 10%, is considered a good level.

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Photo credit: iStock/baona

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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