23 Tips on Saving Money Daily

23 Tips on Saving Money Daily

There’s no doubt about it, prices seem to be heading ever higher. That means your money doesn’t go as far and it’s harder to save…but you probably knew that already.

A whopping 82% of American consumers reported that their budgets were impacted after weathering an historic pandemic followed by inflation, according to a 2022 HomeServe survey.

Rather than sit by and watch your dollars do less, fight back. How to save money every day? With a clear eye, cool confidence, and some clever hacks, you’ve got this. The belt-tightening likely won’t make life miserable, just more manageable.

These little tweaks shouldn’t sting too much, whether you try the practical (such as adjusting your meal planning) or the philosophical (delaying gratification). Read on to learn easy ways to save money every day and details on:

•   How to achieve financial fitness

•   Building a realistic budget

•   Improving your money mindset

•   The best ways to cut back on spending

The Benefits of Saving Money Daily

Finding ways to spend less daily can be a money-wise move that helps you all your life. Leaner spending could help you now and in the long term.

Some of the benefits of saving money every day include:

•   Fewer money crises: You’ll likely have a cash cushion in your checking account.

•   More money to save: Spending less means more money you can sock away, whether in an emergency fund or an investment portfolio.

•   A more intentional lifestyle: You’ll be more conscious of the money you have coming in and going out and can therefore make more careful, mindful money decisions.

•   Smaller environmental footprint: Saving money can mean buying less and also learning how to use fewer natural resources.

•   Paid-down debts: When you don’t spend as much and free up extra cash, you can use that to minimize or eliminate your debt.

•   Fewer bank and credit-card fees: By saving money, you are less likely to accrue late fees, overdraft or NSF fees (that’s non-sufficient funds), and other pricey charges.

•   Heightened awareness of needs vs. wants: By analyzing your spending, you’ll be better able to recognize necessities vs. things that perhaps you don’t really need.

•   A life lived within your means: You’ll be able to design a life that doesn’t involve feeling as if you are always struggling to keep up with expenses. That’s a form of financial self-care.

•   Confidence and empowerment: Practicing smart cash management is a valuable skill and one that you should be proud of!

23 Tips to Save Money Daily

Now that you know all the amazing benefits that are possible, why not dive in? Here are 23 easy tips to save money every day.

1. Understand Your Spending Habits

Stop for a minute, and consider your money style. Some people are planners and thoughtful spenders; others are more impulsive with money, or have a yo-yo style of spending.

For instance, on payday, do you splurge on cocktails and clothing and then eat boxed mac and cheese until your next paycheck? Do you look at a windfall like a tax refund and think how to start paying down debt with it, or would you instead go shopping?

Think about how you manage your cash and the money culture you grew up in. Did your family squirrel away cash or overspend? What we learn as kids can affect how we spend as adults. But that doesn’t mean you are locked into a certain financial style. By understanding how you behave, you can start making changes.

2. Build a Realistic Budget Tailored to You

Creating a budget that is tailored to your needs and really works for you is a great step towards saving money daily. Making a budget typically requires looking at your after-tax income and seeing how to allocate your funds. Essentially, it is a blueprint for living within your means.

You can use a variety of methods to budget, like the 50/30/20 budget rule (50% towards musts, 30% towards wants, 20% towards savings). You may want to track your budget with pencil and paper, in an online spreadsheet, or via an app or digital tools that your bank offers. What’s most important is to find a system that works for you, so it can help keep your spending and saving in a good place.

Recommended: Building a Line Item Budget

3. Track Your Spending and Expenses Daily

Part of budgeting and saving money involves knowing where your cash goes. Keep a log for up to a month. Track every dime: tips in the bakery jar, sales tax, parking meter fees, Ubers, tolls. Include bank fees.

This tally will provide important data. By knowing where your money goes, you can then see where to scale back. You may realize your once-a-week takeout dinner has become a three-times-a-week habit that’s throwing your finances off-track.

4. Avoid Buying Items According to Trends

You can make your money go further by being a discriminating shopper and not spending on fads. For instance, your wardrobe can see you through years if you buy quality classics. If, say, a certain hue is a fall fashion trend, embrace it via a small purchase, such as eyeshadow or tights.

Also be cautious about buying brand new electronic gadgets or the latest home entertainment system. Prices have been known to come down considerably if you can be a little patient.

5. Eat Out Less Frequently

A latte and a muffin are not everyday office essentials. Get up 15 to 30 minutes earlier, and eat at home. Bring lunch. Don’t eat out with kids so often. Children’s menus (pasta, chicken fingers) are often overpriced. Cook spaghetti, and have Alexa play Italian music.

When you do eat out, don’t feel obligated to go for splurge-y places just because a friend wants to try a new hotspot. Or see if the new place in town has a prix fixe menu if you eat on the early side. Having financial discipline means making smart choices about where to allocate your money.

6. Pay for Expenses With Cash

A plastic card can feel like play money until the bills come. Credit cards, with their high APRs (annual percent rates) and late fees, are not your friend. The average American is walking around with over $5,000 in credit card debt according to an Experian study in late 2021. That amount can take quite a while to pay off and can interfere with your reaching financial goals.

Instead of charging purchases, use cash or a debit card. This will help you save money daily.

7. Improve Your Money Mindset

Another way to keep more of your cash is to change your money mindset. Rather than see your income as something to be spent, come up with meaningful goals worth saving for (the down payment for a house, perhaps). Consider gamifying saving with rounding-up apps and other tools. Set up automatic transfers (even just $20 is fine) on payday to whisk money from checking into savings before you can spend it. Also be conscious of lifestyle creep (when we automatically spend more as we earn more) and outsmart it.

8. Reduce Your Entertainment Costs

Cancel extra subscriptions. Do you really need Hulu, HBO, Disney+, and Netflix? Many of us signed up for all kinds of streaming services during the pandemic, but now can be a good time to drop one, two, or a few and save money daily. (The Trim website can help you track them.)

Recommended: How to Save Money on Streaming Video Services

9. Pay Down Debts ASAP

It can be tough to figure out how to start paying down debt, but do your best to live on real, not borrowed, money. If you’re behind on personal loan or credit card payments, set up a monthly plan to pay it off. The money weight (and, possibly, emotional baggage) will likely start to lift with the first payment. Need more help? Look into nonprofit debt counseling services for advice.

10. Delay Gratification

Avoid impulse purchases. Put off buying more possessions, whether clothes or gadgets. Understand your shopping triggers (boredom, for instance), and learn how to distract yourself. Or put cash aside in increments to save for something special.

11. Lower Your Car Costs

Cars are major purchases to start with, and they lose value quickly once you buy them. Consider buying a pre-owned car versus new, and also look for ways to whittle related costs. The Gasbuddy.com search engine finds the cheapest gas available nearby (you could save up to 50 cents per gallon.) Wash your own car. The investment is small if you already have a hose and a hand-held vac.

12. Avoid ‘Keeping up With the Joneses’

Bills can soar when you try to keep up with free-spending friends and neighbors. Just because your bff has a Tesla and loves it doesn’t mean you need one too. And just because your coworkers fly to Florida every winter for vacation doesn’t mean that’s a smart money move for you. You can save big by shaking off the FOMO and living within your means. To save even more every day, go a step further and experiment with living below your means.

13. Switch up Meal Plans

The old promise about “a chicken in every pot” (enough food for the family) gets harder with inflation. Cut back where possible. Buy chicken thighs (or roast a whole chicken) vs. skinless, boneless, pre-sliced chicken breasts; you can definitely lower your food costs. Try more meatless meals (beans, rice, cheese, veggies) to save versus the price of beef. Plan and freeze meals ahead. There are thousands of inspiring recipes online and completely free that can suit any palate.

14. Buy In Bulk

Warehouse clubs can save you a bundle if you stick to a list. The annual membership fee is generally worth it if you buy basics, from pasta sauce to paper products, pet food, and frozen dinners. If you think places like Costco aren’t for you due to small household size or lack of storage space, consider partnering with a friend or two and divvying up the purchases.

15. Buy Secondhand

A great way to save every day is to shop Facebook Marketplace, Nextdoor, thrift shops, and yard sales for gently used items, from air conditioners to designer shoes. It helps your wallet and the environment to reduce, reuse, and recycle. Plus the thrill of the hunt can be hard to beat!

16. Rent vs Buy

Crunch the numbers and see if renting can help improve your budget. You may be able to save big in an apartment vs. a house or by leasing vs. buying a car. Renting is usually an obvious money-wise choice in other situations as well, such as formal wear when attending a wedding and kayaks or mountain bikes if you’re test-driving a new hobby.

17. Find a High-Interest Savings Account

Instead of cutting back on expenses, how about putting your money to work for you? Shop for a bank that pays you more to keep your money there. Interest rates are currently rising, with online banks often paying considerably more than traditional ones. Banks want your business, so hunt for a competitive high-yield savings account that doesn’t charge you fees.

18. Work Out at Home, Not a Gym

Put your money into sneakers on sale, and run or walk regularly at a park or track. Or get weights and an exercise ball. It can save you a nice pile of cash over pricey Pilates classes (which can also be found online for free, incidentally).

19. Find Cash Back on Purchases

Some debit and credit cards offer cash back, meaning a percentage of the money you spend comes back to you in the form of discounts, gift cards, or, as the name implies, cash. Also look for manufacturer rebates; one tire company offered a $50 gift card with purchase of a new set of four; some contact-lens companies will send you a $25 or $50 rebate with each supply.

20. Save Electricity

Turn off lights and TVs when you leave a room. Keep your house a little cooler than usual (say, a couple of degrees) in winter and a little warmer in summer. Smart thermostats can be a wise investment to help you scale down your utility bills.

21. Seek Out Free Activities

Explore ways to fill your free time without spending much or any money. Some museums have free days or nights. County parks, hiking trails, and nature preserves are open. Check public library and town recreation schedules for concerts and cultural events.

22. Make Small Sacrifices

If you usually buy java to-go every day, make your own a few days a week; you might save $50 a month or more. Hold yourself accountable to taking public transportation rather than rideshares on a regular basis. Put off beauty salon treatments by a week, or do your own mani. Inquire at salons about junior stylists in training, when services cost less.

23. Plan Events Ahead

A great way to save money is to plan ahead. For example, if you’re hosting a dinner party or bridal shower and wait till the last minute to get going, you’ll likely wind up having to buy prepared (pricier) foods, not to mention racing around frantically. And if you are buying gifts for the holidays, you may miss out on good deals on toys if you wait till right before the big day. Make a list, and schedule ahead to keep on budget.

The Takeaway

Almost anyone can learn how to save money every day. It’s not a hardship if you make small changes that add up. You can start with small ways to spend a bit less. Once you realize you can still live comfortably and confidently while trimming expenses, focus on changing your shopping patterns, finding DIY options, and knowing how not to get caught in debt traps. Not only will your savings grow, but so too will your financial literacy.

SoFi can help you with these money goals. When you have our Checking and Savings account, you can spend and save in one simple place and access a suite of tools that can help you budget better. Plus, when you open a bank account online with direct deposit, you’ll earn a competitive APY and avoid those typical bank charges.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Is the envelope challenge good for saving money daily?

The envelope challenge is helpful for saving money daily. Put cash in separate envelopes marked, for example, gasoline, coffee, lunch, and groceries. The cash allotted reflects how much you can spend in a month. Once the money is gone, that’s it. Handling cash this way can help train you not to overspend.

How can I save money every day if I do not make a lot of income?

Even if your income is lower, you can save every day by shopping with intention (use a list, plan your meals, delay gratification), buying second-hand or renting items, and embracing DIY skills. Spending wisely works equally well for those with large or small incomes.

How can I teach myself to start saving money?

You can teach yourself to be more frugal by first reviewing the money mindset you grew up with. See if you can break out of some bad habits. Set your goals, then embrace tips, like automatically transferring some money to savings on payday, that will help you save money.


Photo credit: iStock/kate_sept2004

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. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

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What Does Cost of Living Mean?

What Is Cost of Living?

When planning a move to a new city or state, the cost of living is an important consideration. Here’s why: Cost of living tells you how much money it takes to maintain a basic standard of living in a given place. If you were offered your dream job in a city 1,000 miles away, you’d want to know whether the salary would allow you to live well…or whether you’d have to be on a super tight budget.

Location typically plays a major role in determining the level of income needed to finance your lifestyle. For instance, a dollar doesn’t buy as much in New York as it would in Des Moines. If the cost of living is higher because you live in a major city, you’ll likely have to allocate more of your budget toward everyday expenses, such as housing, food, and transportation.

It’s important to understand the factors that affect cost of living calculations and what a higher or lower cost of living means for your finances. Otherwise, you could wind up with an uncomfortable level of “sticker shock” if you relocate.

Here, you’ll learn:

•   What does the cost of living mean?

•   Which factors determine cost of living?

•   What is the cost of living index?

•   Where is the cost of living typically highest?

•   How can you control the cost of living?

Cost of Living Definition

What does cost of living mean? In simple terms, the cost of living is the cost to maintain a certain standard of living. It refers to how far your income will go, based on where you live and your expenses.

The cost of living can vary from state to state and city to city. As you might guess, renting a 1,500-square-foot home is likely to be much more affordable in a small town in the middle of the country than doing so in a hip neighborhood in San Francisco.

That said, you can also have different costs of living within the same metro area. For example, someone who owns a home in the suburbs of a major city may have higher or lower expenses compared to someone who lives downtown.

In terms of what the cost of living is used for, it’s a gauge for determining affordability. Before moving to a new location, you might look at the cost of living in that area to help you decide if it’s realistic for your budget.

How Does the Cost of Living Work?

Cost of living calculations work by measuring how much it costs to live in a specific location, using basic living expenses as a guide. The cost of living is not static; it can go up or down over time. Looking at cost of living trends for a certain city, region, or state can give you an idea which way consumer prices are trending.

There are a number of entities that perform cost of living calculations. The Council for Community and Economic Research, for example, maintains a cost of living index for participating cities across the U.S. Other organizations calculate cost of living for locations around the world.

On a personal level, the most important question to ask is, “What does the cost of living mean for me?” The simple answer is that cost of living can determine how far your income is able to go toward funding your lifestyle.

Factors That Determine Cost of Living

When discussing cost of living and expenses, you’re talking about necessities. In other words, the things people in a given area need to spend money on to live each month. According to the Economic Policy Institute, that includes:

•   Housing

•   Food

•   Childcare

•   Transportation

•   Healthcare

•   Taxes

•   Other necessities, such as clothing, household supplies, and personal care items

Cost of living calculators use prices for those types of expenditures in a particular area to determine how much it costs to live there on average. Consumer prices for goods and services are largely a product of supply and demand, and what’s happening with inflation. Inflation is a general upward trend in prices over time.

When inflation is higher, prices tend to rise across the board, which brings a higher cost of living. Even when inflation is lower, prices may still be higher in some areas than others if there’s higher demand for goods and services.

Calculating Cost of Living

Cost of living indexes collect information about various costs for different cities and locations, then use average prices to determine how much it costs to live there. If you’re comparing two cities, you can use a cost of living index to see which one is less expensive.

If you’d like to calculate your personal cost of living, you’d use your spending history to determine your average monthly expenses for these categories:

•   Housing

•   Food

•   Transportation

•   Utilities

•   Childcare, if applicable

•   Healthcare

•   Taxes

•   Other necessary expenses

Using those numbers can tell you how much it costs to maintain your basic standard of living each month. You can also add in your average monthly spending for debt repayment or non-essentials or discretionary expenses, like dining out, travel, or recreation, to get a sense of what your actual cost of living adds up to.

What Is the Cost of Living Index?

Generally speaking, a cost of living index is a measurement of average prices. Similar to a stock market index, a cost living index is meant to provide a benchmark for comparison. The Consumer Price Index (CPI) is often referred to as a cost of living index, though that description isn’t entirely accurate.

The CPI measures the average change in prices over time for a market basket of consumer goods and services. That’s how the U.S. Bureau of Labor Statistics (BLS) defines the Consumer Price Index. The CPI isn’t a true cost of living index but an inflation index. Changes to the CPI can be an indicator of how inflation is changing; whether it is rising, falling, or remaining flat.

Get up to $300 when you bank with SoFi.

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Does Cost of Living Vary State by State?

The cost of living by state is not uniform and what you might pay to live in one state could be very different from what you’d pay to live in another. That’s important to keep in mind if you’re considering moving across state lines to a new location. The more expensive a state is, the less purchasing power your money holds.

For example, the California cost of living index is much higher than the Texas cost of living index. So why do some states have a higher cost of living? Again, it depends largely on things like supply and demand, though taxes and average incomes can also play a part.

When the average income in a state is higher and job opportunities abound, that can lead to an increase in people moving to the state. That means more demand for housing, which can send home and rental prices soaring. More people can also mean more demand for everyday goods and services, such as food or utilities. As demand rises, prices can follow suit.

So, in our example above, if you were living in Texas in a two-bedroom rental apartment and were offered a job at the same salary in California, you’d face a higher cost of living. If you moved there, you might have to rent a smaller home. Your groceries would likely be more expensive as well as your other monthly necessities. You might find you couldn’t eat out or go to concerts as often since prices are higher.

Recommended: What Percentage of Income Should Go to Rent and Utilities?

Which State Has the Lowest Cost of Living?

As of 2022, Mississippi had the lowest cost of living in the U.S., with a cost of living index of 83.1. For perspective, cost of living indexes are generally based on 100 as an average. So an index of 83.1 means that the cost of living in Missouri is 16.9% less than the national average.

Housing, which is typically the biggest expense most people have, is nearly 37% cheaper in Mississippi compared to the U.S. average. The median sale price for a home there was $263,400 as of August 2022, while the national median was $427,055. Transportation, food, and utility costs are also well below the national average.

Which State Has the Highest Cost of Living?

Hawaii is the most expensive place to live in the U.S., with a cost of living index of 192.1. Housing is more expensive there than in any other state in the country, with a median list price of $848,000. A home buyer would have to shell out considerably more to live in Hawaii’s natural paradise than elsewhere in America.

But housing demand isn’t the only factor. Higher taxes and higher costs for transporting goods and materials to the state are some of the other factors that drive up the cost of living in Hawaii. Other states that rank among the most expensive include New York, California, and Alaska.

How Much Should Your Cost of Living Be?

Your cost of living should be a figure that, given your income, you can reasonably afford to pay for the area that you live in. When your expenses exceed your income, that can cause shortfalls in your budget each month. You may need to use credit cards or loans to fill the gap, which can leave you with a pile of bills, wondering how to pay off high-interest debt.

When calculating your ideal cost of living, start with your income. Then work your way backwards to determine how much you should be spending on things like housing, food, transportation, utilities, and other necessities. If your income comfortably covers those things, you can then decide how much to allocate to savings, debt repayment, or “wants” like travel and entertainment.

Also, consider your household size. The cost of living for a single person can be very different from the cost of living for a family of four. So you may need to allocate more of your budget for necessities if you have a spouse, partner, or children in your household.

Tips to Improve Cost of Living

If you’ve run the numbers and your cost of living is higher than you’d like it to be, say, when contemplating a move, you aren’t necessarily out of luck. There are some things you can do to try and bring it down. Here are some ideas for ways to reduce your cost of living:

•   Eliminate unnecessary spending from your budget.

•   Move your money to a different financial institution to avoid bank fees and/or pays higher interest.

•   Plan meals at home, and cut down on restaurant meals.

•   Consider refinancing student loans or your mortgage to lower your interest rate.

•   Consolidate credit card debt using a 0% balance transfer offer.

•   Shop around for better rates on auto, homeowners, or renters insurance.

•   Aggressively pay off debt.

•   Consider moving to a cheaper area.

•   Take on a roommate to share expenses.

•   Downsize into a smaller home.

•   Sell a vehicle if you own more than one.

Some of these money-saving ideas are relatively easy to implement; others may seem a bit more extreme. But the more you can cut your expenses, the easier it may be to improve your cost of living.

You can also research different ways to make more money. That might mean taking a different job, getting a part-time gig, or starting a side hustle. If you’re contemplating a move for a higher-paying role, remember to factor in the cost of living in a new location to see how far a higher salary might go. A higher cost of living could eat up the salary boost you’ll receive, and so you’d want to be prepared for that.

Managing Finances With SoFi

Achieving a manageable cost of living starts with keeping a close eye on your budget and spending. Even making small changes, such as cutting out high banking fees, can free up more cash that you can use to save and fund your financial goals.

If you’re looking for a new way to bank, SoFi can help. When you open a new bank account with SoFi, you can get checking and savings in one convenient place. There are no fees, so you can hold on to more of your hard-earned money. And you can earn a competitive APY on deposits.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What is a cost of living adjustment?

The Social Security Administration (SSA) applies a cost of living adjustment to Social Security benefits, based on changes to the Consumer Price Index. That means benefits can rise as the cost of living does. In other words, these adjustments are designed to ensure that recipients’ benefit payments are able to keep pace with inflation.

How can I compare the cost of living between two cities?

The easiest way to compare the cost of living between two cities is to use a cost of living index. You can subtract the cost of living index for the city that’s lower from the one that’s higher to figure out how much cheaper it is.

Which country has the highest cost of living?

Bermuda is the world’s most expensive place to live, according to Numbeo. The island country has a cost of living index of 141.74.


Photo credit: iStock/artisteer

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. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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Financial Planning Tips for Freelancers

Managing Your Money as a Freelancer

In this era of the Gig Economy, side hustles, and entrepreneurship, many people are freelancers. Working this way can offer flexibility and unlimited earning potential, for sure, but it can also bring a learning curve when it comes to managing your money. Financial planning for freelancers means knowing how to handle things like tracking income and expenses, planning for taxes, and investing for retirement.

Mastering freelance money management can take some time and focus, but it’s a worthwhile pursuit if it helps you to achieve your financial goals. The better you understand how to manage finances as a freelancer, the easier it can be to get ahead.

To help get on the right path, read on to learn, among other topics:

•   Why financial planning is important for freelancers

•   How to create a budget as a freelancer

•   How to track cash flow

•   How to separate business and personal expenses

What Is a Freelancer?

A freelancer is someone who gets paid to complete work on a per-job basis. Freelancers are independent contractors, not employees. A freelancer can work with multiple clients on a contract basis, performing a variety of tasks.

Why does understanding this definition matter for freelance money management? It’s important because freelancers are not entitled to the same financial perks as hourly or salaried employees.

As a freelancer, you’re responsible for handling things like retirement planning, health insurance, and taxes yourself. You also won’t have paid vacations and holidays the way employees do, which may factor into your cash flow and money management planning.

Why Financial Planning Is Important

What is financial planning? Financial planning is the process of creating a plan for managing your money. A financial plan can include both short-term and long-term goals and the steps you’ll need to take to achieve them. For example, your financial plan might include a strategy for paying off student loans or saving money toward a down payment on a home.

Financial planning for freelancers is important because you’re in charge of deciding what happens with your money. Learning how to manage finances as a freelancer can help you to:

•   Create a workable budget, even if you have irregular income

•   Formulate a plan for saving for retirement

•   Stay on top of your tax obligations

•   Streamline expenses so you can avoid debt

•   Plan for emergencies or unexpected costs

Planning can be a pathway to good financial health. And it’s an opportunity to develop positive habits and improve your money mindset, both of which can benefit you throughout your freelance career.

11 Tips for Financially Planning as a Freelancer

If you’re new to freelance money management, you may not know where to start or what you even need to be doing. Having a blueprint to follow can make it easier to develop a workable plan for managing money. Here are some essential steps to include in your financial plan if you have a freelance mindset.

1. Having and Maintaining a Budget

A budget is a plan for spending the money you make each month. If you want to be better with money as a freelancer, then creating and sticking to a budget is non-negotiable. It will help you both understand and optimize your finances.

When making a freelancer budget, start with income first. If your income is irregular, it can help to create an average as your baseline. So you’d add up all the money you made from freelancing over the past 12 months, for instance, then divide by 12 to arrive at a monthly average income.

You can then plan out your expenses (more on that in a minute), using that average as your baseline. You’ll tally how much money flows out for necessities every month, and see how much profit you are making.

When you have higher-income months, you can stash extra money in savings to help cover expenses in months when income is lower. You’ll also want to put money towards savings for an emergency fund and retirement (more details below).

2. Giving Yourself a Consistent Paycheck

When you freelance, there’s no such thing as a weekly or biweekly paycheck. Instead, you might get paid on different dates each month, depending on how your clients handle payments.

That can lead to uncertainty about when to pay bills. You can avoid that issue by giving yourself a consistent paycheck on a regular schedule. So you might pay yourself a set amount on the 1st and 15th of each month, for example.

To do that, you might need to set aside enough money to cover one month’s worth of bills in your checking account first. That way, you can pay yourself according to the schedule you set without having to worry about overdrawing your bank account.

3. Keeping Track of Your Expenses

Tracking expenses is central to managing money better as a freelancer, especially if you’re worried about going over budget. It’s important to keep tabs on both your personal expenses and your business expenses so you know how much you’re spending each month. When adding up your business expenses, be thorough: Do you rent an office? If so, don’t forget about the electrical bill and any cleaning services as expenses.

Also track the costs of legal fees, insurance, website hosting and any online advertising you may do. Some of these charges can be billed annually, and you may lose sight of them since they don’t recur.

Keeping up with business spending also matters from a tax perspective. There are a number of tax deductible expenses for freelancers that can help to reduce your tax bill.

For example, you might be able to write off marketing expenses if you maintain a website for your business or claim an office at home tax deduction. Having a paper trail to back up those deductions is a good thing if the IRS targets you for an audit.

4. Timing Your Freelance Projects

Staying booked and busy is every freelancer’s dream since no work means no income. Timing your freelance projects can help to keep your income and cash flow consistent, so that you’re not struggling to stay on top of the bills. For example, if you’re a freelance writer, you might set deadlines to allow yourself enough time to invoice for your work (and get paid) before certain bills come due.

There’s another dimension to timing to consider as well. It’s important to think about how much time it will take to complete a project when setting rates. Underestimating the amount of time involved could cause you to shortchange yourself when quoting rates to clients. A good rule of thumb is to assume that any project will take 20% to 50% longer than you think it will. Then base your rates on that higher number.

Recommended: Ways to Make Money on Social Media

5. Paying Down Your Debt

Debt can be a stumbling block to getting ahead financially as a freelancer. If you have student loans, a credit card balance, or other debt, it’s to your advantage to create a plan for paying them off as quickly as possible.

If your income is irregular, your budget should be designed to ensure that your most important living expenses are paid first. You can then decide how much room you have left in your budget to commit to debt repayment.

Also, consider ways to make your debt less expensive. Refinancing student loans, for example, can help you to get a lower rate and monthly payment, which can ease budget strain. You can also consolidate credit card debt with a better APR (annual percentage rate) or even a rate of 0% with a balance-transfer offer. This can help you save on interest and pay off your debt.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


6. Separating Business and Personal Expenses

Keeping business and personal spending separate is a good idea for a few reasons. It makes it easier to create budgets for personal expenses and business expenses, so you know what you’re spending on each one. And you may encounter fewer headaches at tax time when trying to claim freelance tax deductions if business expenses are separate.

Opening a business bank account is a simple way to separate your spending each month. You can link it to your personal checking account in order to pay yourself your regular paycheck. You may also consider opening a separate business credit card to cover freelancing expenses if you can afford to pay the bill in full each month and avoid interest charges.

7. Investing in Insurance

As a freelancer, you don’t have access to employer-sponsored health insurance. So if you want to get covered, you’ll need to purchase a policy yourself. Self-employed individuals, including freelancers, can buy health insurance through the Health Insurance Marketplace.

When comparing health insurance plans, pay attention to:

•   Premiums

•   Deductibles

•   Copays and coinsurance

•   Coverage limits

You may also consider applying for health insurance through Medicaid if you have little to no income or financial resources. Eligibility for Medicaid is based on your income, household size, and assets. You can apply through your local department of social services.

In addition to health insurance, you may also want to look into insurance for your business. Liability insurance, for example, can protect you against claims arising from copyright infringement, libel, or defamation. That type of insurance can come in handy if you’re sued.

8. Having an Emergency Fund

An emergency fund is money that you set aside for unexpected expenses; say, a major car repair or medical bill. As a freelancer, an emergency fund can be invaluable if your work assignments dry up or you get sick and are unable to work temporarily.

In terms of how much to save for emergencies, three to six months’ worth of expenses is a commonly-used rule of thumb. But you might want to double or even triple that amount if your freelance income is irregular or you’re worried about a sustained client drought.

Recommended: Ready to build your emergency fund? Use our emergency fund calculator to determine the right amount.

Keeping your emergency fund in an online savings account can be a great option if you want to earn a solid rate on your money. The interest (or annual percent yield, or APY) tends to be higher than what bricks-and-mortar banks offer. Online savings accounts can also charge fewer fees than traditional savings accounts.

9. Accounting for Taxes

Freelancing means you don’t have an employer taking out taxes from your paychecks. So you’ll have to handle taxes yourself.

Generally speaking, the IRS requires you to file an annual tax return and pay estimated quarterly taxes if you expect to owe $1,000 or more for the year. Quarterly taxes are essentially an advance payment against the amount of tax you’ll likely owe for the year.

Estimated taxes are due four times a year, typically:

•   April 15 (1st payment)

•   June 15 (2nd payment)

•   September 15 (3rd payment)

•   January 15 of the following year (4th payment)

Failing to make those payments on time can trigger penalties. If your state collects income tax, you’ll also need to make estimated payments to your state revenue agency.

You can use an online tax calculator to gauge how much you’ll need to pay for estimated taxes each quarter. It may be helpful to set up a separate business checking account or savings account to hold the money for those payments. As your clients pay invoices, you can allocate part of each payment to your tax account.

If filing taxes as a freelancer seems overwhelming, consider talking to an accountant or another tax pro. A tax expert can help you figure out how much to set aside for taxes and how to maximize deductions in order to lower your tax bill. You may be surprised to learn about some business tax credits you didn’t know about.

10. Investing Your Money

Investing is key to building wealth since it allows you to take advantage of the power of compounding interest. If you already have an emergency fund in place, the next step in freelance money managing is creating an investment portfolio.

You can start with a retirement account if you don’t already have one. Freelancers can use traditional IRAs, Roth IRAs, SEP IRAs, and solo 401(k) plans to save for retirement. Each of these plans can offer a tax-advantaged way to save for the future. You can supplement your retirement savings with investments in a taxable brokerage account.

When investing as a freelancer, consider your risk tolerance and how much you have to invest, based on your budget. You may need to start with a small monthly amount, but you can build on that over time. And the most important thing is to start saving and then be consistent with your investment strategy.

11. Taking Advantage of Resources

Financial planning as a freelancer can be easier when you have the right tools and resources. For instance, some of the things you might consider incorporating into your plan include:

•   Budgeting apps

•   Tax management apps

•   Online bank accounts for freelancers

•   Investment apps

You can also search online for resources to help with things like insurance and tax planning.

Managing Finances With SoFi

Between managing deadlines, tracking invoices, and keeping up with client needs, freelancing can be demanding. Finding ways to simplify money management as a freelancer can save you valuable time and money.

Opening a SoFi bank account can make keeping up with personal spending and saving less stressful. Our Checking and Savings keeps your money in one convenient place, without the high fees that other banks charge. And you can earn a competitive APY on deposits to help you grow your money faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How is freelancing paid?

Freelancers can get paid in a number of ways, depending on their clients’ preferences. For example, clients can send payments through PayPal, Stripe, direct deposit, or paper checks. When negotiating a freelance contract with a new client, it’s important to understand how and when you’ll be paid for the work you perform. In some professions, it can be typical for clients to take 30 days or longer to pay invoices.

Do you need insurance if you are a part-time freelancer?

If you freelance part-time while working a full-time job, you may be covered by a policy from your main employer. But if you have no insurance coverage at all, it could make sense to buy a policy for yourself through the healthcare marketplace. You may also want to look into buying separate liability insurance for your business.

What are some good freelancer jobs?

There are lots of ways to make money as a freelancer. Some of the highest-paying freelance gigs can include copywriting, graphic design, and editing. There are also a variety of freelance jobs that may be desirable because you can set your own hours, such as driving an Uber.


Photo credit: iStock/StefaNikolic

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


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 members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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

Third-Party Brand Mentions: No brands, 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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Is a $20,000 Salary Good?

Is a $20,000 Salary Good?

While there’s no official guideline on what makes a salary “good,” a $20,000 salary is not typically enough for a household to live comfortably in most parts of the United States. Certainly, each person’s situation is unique in terms of their assets and expenses, but an individual making $20K a year may have a hard time making ends meet. They might need to rely on assistance from family, friends, and/or the government to afford basic necessities.

A $20,000 salary puts a single person above the poverty threshold for 2022. An individual supporting themselves plus two or more people on $20K a year, however, will live below the poverty threshold. With the record-high inflation we’ve seen in 2022, affording basic needs on a $20,000 salary is becoming even more challenging.

So is $20K a year good? While a $20,000 salary averages out to more than the federal minimum wage of $7.25/hour for full-time work, it is likely not an adequate income for anyone living independently and especially those with a family. In this piece, we’ll cover:

•   The current American median income.

•   Is $20K a year good?

•   A breakdown of a $20,000 salary.

•   The best and worst places to live on $20,000.

•   Tips for living on $20K a year.

Factors to Determine if a $20,000 Salary Is Good

A $20,000 salary will be challenging for anyone to live on, but a few factors may determine if it can be done — or if it’s impossible:

•   Taxes: If you are filing singly, a $20,000 salary will put you at the 12% federal income tax bracket. You may owe additional taxes for your state, city, and/or school district. For the sake of example, assume a flat 15%. That means, although you make $20,000, you only bring home $17,000 after taxes.

•   Family size: Single individuals without children can make $20,000 stretch more easily. Two or more people living off a $20,000 salary will face more challenges.

•   Location: Money goes further in some places more than others. If you live in an area with a low cost of living, a $20,000 salary may be more manageable. But if you live in a popular city, $20,000 a year may not even cover rent.

•   Debt: If you have debt, it can be more challenging to allocate your limited money to basic necessities and important financial goals, like an emergency savings fund. If you are dealing with high-interest debt (say, trying to lower your credit card debt), you probably know how quickly this debt can grow when you are only paying the minimum amount due.

How Does a $20,000 Salary Compare to the American Median Income?

After the 2020 Census, the U.S. Census Bureau reported that the median household income was just over $67,500. More recent data from the Bureau of Labor Statistics suggests that the number has gone down; the median weekly income for a full-time worker is $1,037, which comes out to about $54K a year.

Either way, $20,000 is far below either estimate for a median income. If you earn $20,000 and have a domestic partner or spouse who earns additional income, your salaries together might get you closer to the median income level.

$20,000 Salary Breakdown

Again, no judgment here: It’s not a matter of if a $20,000 salary is good or bad. It’s a number, albeit at the lower end of the earning spectrum. To someone just out of high school, $20K a year might look like a good entry-level salary. But anyone who has handled monthly bills like rent and utilities will likely recognize that a $20,000 salary may be insufficient. This year’s rising inflation makes living on $20,000 even more of a challenge.

Here’s how a $20,000 annual salary breaks down:

•   Monthly income: $1,666.66

•   Biweekly paycheck: $769.23

•   Weekly income: $384.62

•   Daily income: $76.92 based on working 260 days a year

•   Hourly income: $9.62 based on working 2,080 hours a year

These estimates do not account for taxes. In the example above, a $20,000 salary may shrink to $17,000 after Uncle Sam has taken his cut.

Recommended: Is Making $100K a Year Good?

Can You Live Individually on a $20,000 Income?

It is possible to live individually on a $20,000 income, but you will likely only be able to afford the items on your basic living expenses list if you aren’t able to supplement your income. Living comfortably — with easy access to good health care (including mental health), balanced nutrition, safe housing, and efficient transportation — may be far more challenging on $20,000 a year.

If you make $20,000 a year, you might be able to minimize monthly expenses by looking for government assistance, getting a roommate or moving in with family, cooking at home, and using an online bank account with a high interest rate and automatic savings features.

Recommended: Typical Monthly Expenses for a Single Person

How Much Rent Can You Afford Living on a $20,000 Income?

Wondering how much you can afford to spend on rent? Researchers have long argued that you should spend no more than 30% of your income on housing. With rising inflation and increasing rent prices, however, that’s not always possible.

If you were to stick to the 30% rule (and forget about income taxes for the sake of the example), that means you can spend $6,000 a year on rent, or $500 a month. But earlier this year, the median cost of rent in the U.S. surpassed $2,000 a month for the first time, marking a 15% year-over-year increase. That’s four times what you could afford on $20K a year.

To afford rent on a $20,000 salary, it’s a good idea to live in a place with a very low cost of living and to have one or more roommates who can help share living expenses of rent and utilities with you. Moving in with family is also a solution if you cannot afford rent on your salary.

Best Places to Live on a $20,000 Salary

If you are making $20,000 a year (or $9.62 an hour), it might be a good idea to explore cities and states cost of living and look for those that are cheapest.

These are the five least expensive cities to live in 2022, per U.S. News:

•   Hickory, North Carolina

•   Green Bay, Wisconsin

•   Huntsville, Alabama

•   Quad Cities (Davenport-Bettendorf, Iowa and Moline-Rock Island, Illinois)

•   Fort Wayne, Indiana

Living outside a city altogether is usually more affordable. Consider a rural location in one of these five cheapest states to live in:

•   Mississippi

•   Kansas

•   Oklahoma

•   Alabama

•   Arkansas

Worst Places to Live on a $20,000 Salary

On the flip side, there are some major cities that are exorbitantly expensive to live in. If possible, it’s a good idea to avoid living in the following locations when you are living on $20,000 a year:

•   Los Angeles, California

•   Miami, Florida

•   San Diego, California

•   Salinas, California

•   Santa Barbara, California

California cities clearly carry a high cost of living, but other states are also expensive. If you have a $20,000 annual salary, it’s a good idea to steer clear of any of the five most expensive states to live in:

•   Hawaii

•   New York

•   California

•   Massachusetts

•   Oregon

Is a $20,000 Salary Considered Poverty?

A $20,000 salary is above the poverty line for an individual or a couple, but if you are a family of three or more people living on a $20,000 salary, the government considers you to be below the poverty line.

These numbers do not consider factors like variable cost of living. A localized poverty line could be more telling, especially if you live in a place with a high cost of living. If you are, say, living in a pricey city and earning $20,000 a year, you might be feeling the financial pinch more.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Tips for Living on a $20,000 Budget

While advocating for a higher salary can infuse your line item budget with more funds, it’s not a good idea to wait for your employer to dole out raises. Taking other steps now may make it easier to live on your $20,000 salary.

Finding Out What Assistance You Qualify For

If you are making $20,000 or less, you may qualify for government assistance. Here are a few actions to consider taking:

•   Work with the U.S. Department of Housing and Urban Development for assistance with rent, including the Section 8 program.

•   Determine if you are eligible for assistance with grocery bills through the Supplemental Nutrition Assistance Program (SNAP).

•   Research the Low Income Home Energy Assistance Program (LIHEAP) to help with utilities.

•   Lower your phone bill through the Lifeline Modernization Order .

•   See if you are eligible for free or low-cost health coverage through Medicaid and the Children’s Health Insurance Program (CHIP).

Coming Up With a Housing Plan

If you do not qualify for rental assistance from the government, you may need to come up with another plan to avoid high rent costs. Roommates can be a good way to keep rent low.

Alternatively, family and friends may be willing to offer free lodging while you save money. While it can be hard to lean on others in this way, it can be a form of financial self-care to do so until you are able to be out on your own. If you do move in with a loved one, just remember to be helpful around the house and chip in with utilities and groceries if you’re able.

Cutting Costs

After reducing your largest cost (rent), it may be possible to remove even more items from your budget. For example, a car payment, gas, and car insurance can be costly monthly expenses. If you live in an area with great public transportation or are comfortable walking and riding a bike, you may be able to get around without owning your own vehicle.

Other costs you might be able to cut include streaming services, gym memberships, and bills from dining out.

Getting on a Budget

After finding low-cost housing and cutting out unnecessary expenses, it’s a good idea to make a monthly budget that accounts for your post-tax income and your monthly expenses.

Not sure how to budget on a $20K salary? Taking care of all necessary bills (housing, utilities, groceries) is the perfect first step. Once you’ve accounted for those monthly expenses, see how much you can allocate to paying down debt or building your savings.

Recommended: How to Save Money From Your Salary

Avoiding the Wrong Kinds of Debt

Taking on debt is often necessary — when buying a house, purchasing a car, or even going to college. But when you make a low salary and struggle to pay the bills, it can be tempting to take out a payday loan or overuse a high-interest credit card.

When possible, it’s a good idea to avoid high-interest loans. In fact, instead of taking on more credit card debt, you may be able to take control of your bad debt by applying for a debt consolidation loan. These are typically personal loans that charge an interest rate that is significantly lower than your credit cards’ rates (which are hovering between 15% and 19% these days). You use the loan to pay off the cards and then you work to eliminate the personal loan.

You might also meet with a counselor from a nonprofit debt counseling organization like the National Foundation for Credit Counseling, or NFCC .

Recommended: Debt Repayment Strategies

Supplementing Your Basic Income

You might also consider ways to bring in more income to pump up your spending power. This could include seeing if additional hours are available at your primary workplace as well as taking on a seasonal part-time job or starting a side hustle. These are all ways to use some of your leisure time to bump up your income.

The Takeaway

A $20,000 is usually not enough for a family to live on, and it may be difficult for individuals to get by on this salary too. It may be wise to research government assistance, look for roommates to lower housing costs, and build (and stick to) a monthly budget that prioritizes paying down debt and building an emergency savings. These steps can help you live on a $20,000 annual income.

When you’re earning a lower income, it can be wise to keep your money where it can grow faster. When you open an online banking account with SoFi, we can be your partner in reaching that goal. Our Checking and Savings account has no monthly fees and, even better, earns a competitive APY when you sign up with direct deposit. Members also have a suite of budgeting and saving tools at their disposal. Plus, eligible accounts can benefit from no-fee overdraft coverage and paycheck access up to two days early.

Put your money to work for you with a SoFi bank account.

FAQ

Can you live comfortably on $20,000 a year?

It can be difficult for an individual to live comfortably on $20,000 a year. With the right assistance from friends, family, and the government, however, it may be possible to meet basic needs. Families will face more challenges living off $20,000 a year.

What can I afford making $20K a year?

A $20,000 salary leaves room in your budget for the most basic expenses: rent, utilities, transportation, and groceries. Even then, getting government assistance and a roommate might be necessary for managing monthly expenses on $20K a year.

Is $20,000 a year middle class?

Pew Research considers middle class to be $56,000 to $156,000 for families of three. Thus, a family of three on $20,000 is not middle-class; it’s actually below the poverty level. While an individual on $20,000 a year is not below the poverty line, they are still not considered middle-class.


Photo credit: iStock/svetikd

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. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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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Correspondent Bank: What They Are & How They Work

A correspondent bank helps to connect domestic and foreign banks that need to do business together. Correspondent banks can facilitate different types of transactions, including wire transfers, cash and treasury management, and foreign exchange settlement.

Correspondent banking plays an important part in the international financial system and the flow of cross-border payments. Correspondent banks are often a subject of scrutiny as they can also be used to perform illegal operations, such as money laundering.

If you’re wondering how they work and if you need to use one, read on to learn:

•   What is a correspondent bank?

•   How does correspondent banking work?

•   How much does it cost to use a correspondent bank?

•   What are nostro vs. vostro accounts?

•   What is the difference between correspondent and intermediary banking?

What Is Correspondent Banking?

Correspondent banking is a formal system through which banks in different countries are able to provide payment services to one another. Correspondent banking makes it easier for funds to move between domestic and foreign banks, regardless of whether they have an established relationship. This plays an important role in smoothing international transactions.

What is a correspondent bank? Simply, it’s the financial institution or bank that connects other banks within a correspondent banking system. Foreign banks may rely on correspondent banking if establishing one or more branches in another country isn’t feasible. While correspondent banking is often used to facilitate business transactions on a larger scale, individual consumers may also use correspondent banking to complete a money transfer from one bank to another.

For example, if you’re Canadian but living in the U.S. temporarily for work, you may use cross-border banking services to transfer funds between your U.S. and Canadian bank accounts. A correspondent bank would handle those transactions for you so that you never lose access to your money. (You’ll learn more details about how correspondent banking works below.)

Recommended: Separate vs. Joint Bank Account in Marriage

How Correspondent Banking Works

Correspondent banking works by allowing payments to move between banks located in different countries that may not have a formal relationship with one another. In a typical correspondent arrangement, you have two respondent banks and one correspondent bank.

The correspondent bank is effectively a liaison or halfway point between the two respondent banks. The main role of the correspondent bank is to provide necessary financial services to the two respondent banks. The types of services correspondent banks can provide include:

•   Wire transfers

•   Check clearing and payment

•   Trade finance

•   Cash and treasury management

•   Securities, derivatives or foreign exchange settlement.

In exchange for these services, correspondent banks can charge respondent banks fees.

Correspondent banks operate through the Society for Worldwide Interbank Financial Telecommunication (SWIFT network). SWIFT allows for the secure transfer of financial messages to correspondent banks and other financial institutions around the world. Millions of messages move through the SWIFT network on a daily basis, transmitting financial information.

Correspondent Banking Example

Curious about how exactly correspondent banking works? Money moves from respondent bank to respondent bank in a sequential way, with the correspondent bank in the middle. Here’s an example:

•   Say you run an auto repair business, and you need to order parts from a supplier in Canada. The supplier only accepts wire transfers as payment so you go to your local bank to schedule one.

•   Since your bank and the supplier’s Canadian bank do not have an established banking relationship, there needs to be an intermediary. In order to send the wire transfer, your bank will need to connect to a correspondent bank in the SWIFT network that has a relationship with the supplier’s bank.

•   Once your bank is connected to the correspondent bank, it can facilitate the wire transfer from your account. The money will move from your account to the correspondent bank, along with an added fee.

•   The correspondent bank will then send the money along to the supplier’s bank in Canada, less the amount of the fee.

You might also use correspondent banking if you’re working in one country and want to send part of your pay to your bank account in your home country. You could send a wire transfer through the local bank you have an account with, which would forward it to the correspondent bank. The correspondent bank would then send the money to your account at your home bank.

Recommended: Should I Open More Than One Bank Account?

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Additional Considerations

Correspondent banks may operate largely behind the scenes for most consumers, but they play an important role in international financial transactions. Without correspondent banking, it might be much more difficult to complete international wire transfers as many banks do not have formal relationships with banks in other countries.

While correspondent banking is used to facilitate legitimate financial transactions, it can also be a vehicle for criminal activity. Two of the biggest concerns center around the use of correspondent banks to launder money and fund terrorist organizations. In the U.S., regulatory requirements exist that aim to bar the use of correspondent banking for these types of transactions, though they’re not always foolproof.

Recommended: Why Your Bank Account Is Frozen

Vostro vs. Nostro Accounts: How Banks Settle Cross-Border Transactions

Correspondent banks handle large amounts of money every day, which can easily get confusing. They keep track of the movement of funds between respondent banks using nostro and vostro accounts. These accounts allow one bank to hold another bank’s money on deposit during the completion of international financial transactions. Here’s the difference:

•   Vostro means “yours” in Latin, while nostro means “ours.” Vostro and nostro can be used to describe the same account for recordkeeping purposes. The label that’s used describes which bank holds the funds.

•   For example, say a Canadian bank has an account with a U.S. bank and funds are held in U.S. currency. The Canadian bank would apply the nostro label to that account signifying that the money in it is “ours.”

•   Meanwhile, the U.S. bank would refer to it as a vostro account, acknowledging to the Canadian bank that the money is “yours”.

Correspondent banks use nostro and vostro accounts to settle transactions and identify accounts as money flows between them. For every vostro account, there’s a corresponding nostro account and vice versa.

Correspondent vs. Intermediary Banking

Intermediary banking is similar to correspondent banking in that it involves the transfer of funds between banks that do not have an established relationship with one another. Similar to a correspondent bank, an intermediary bank acts as a middleman for the other banks involved in the transaction.

But consider these distinctions:

•   Intermediary banks primarily assist in completing wire transfers between different banks, either domestically or internationally. For example, the U.S. Department of the Treasury acts as an intermediary bank in wire transfers between other banks.

•   In intermediary banking, there are three parties: the sender bank, the beneficiary bank, and the intermediary bank. It’s the intermediary bank’s role to ensure that money from the sender bank gets to the beneficiary bank.

Typical Correspondent Bank Fees

As mentioned, correspondent banks can charge fees for the services they provide. The fees charged can depend on the bank itself and the service that’s being provided. Fees are typically charged in the currency of the payment.

A general range for wire transfer fees for this kind of transaction can be anywhere from $0 to $50, depending on the bank. The easiest way to get a sense of what you might pay for correspondent banking is to check your bank’s fee schedule for wire transfers. Banks can charge fees for:

•   Incoming domestic wire transfers

•   Outgoing domestic wire transfers

•   Incoming international wire transfers

•   Outgoing international wire transfers

International wire transfers are typically more expensive than domestic transfers. Some banks may charge no fee at all to receive incoming domestic or international wire transfers. But you may still be charged a fee by the correspondent or intermediary bank. It can be wise to investigate before you conduct the transaction so you can be prepared.

Recommended: How to Set Up Direct Deposit

Difference Between Correspondent and Intermediary Banks

Correspondent and intermediary banking share some similarities, but it’s important to understand what sets them apart. Here are some of the key differences between correspondent and intermediary banks:

•   Correspondent banks can handle transactions in multiple currencies.

•   Intermediary bank transactions typically involve a single currency.

•   Correspondent banks can be used to facilitate a number of different transaction types.

•   Intermediary banks are most often used in situations involving wire transfers between two unconnected banks.

•   Correspondent banks are the middle ground between two respondent banks, which may or may not be located in the same country.

•   Intermediary banks act on behalf of sender and beneficiary banks.

The Takeaway

Correspondent banks make it easier for money to move across borders and around the world. If you simply need to move money between banks in the same country, there are alternative banking options you can turn to.

For example, you can open a checking and savings account with SoFi and connect them to accounts at traditional banks. SoFi’s high-yield bank accounts may help you grow your money faster, too, thanks to our competitive APY when you sign up with direct deposit and our no-fee policy. What’s more, eligible accounts can access their paychecks up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Why is a correspondent bank needed?

Correspondent banks are necessary because they help to facilitate cross-border payments between banks that have no formal banking relationship. Without correspondent banking, it would be more difficult to complete international financial transactions.

What is the difference between correspondent bank and beneficiary bank?

A correspondent bank is a go-between for two different respondent banks in an international financial transaction. A beneficiary bank is the bank that receives money from a sender bank through a third-party intermediary bank.

What is correspondent and respondent bank?

A correspondent bank is a financial institution that helps respondent banks to complete financial transactions. A respondent bank is a bank that needs help connecting to another respondent bank through a third-party, i.e., the correspondent bank.


Photo credit: iStock/Auris

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. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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