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Should I save or pay off debt? It’s a tough financial choice. Prioritizing debt repayment can help you pay off what you owe faster, eventually freeing up more money that you can save. It could also cut down on what you pay in interest charges. On the other hand, delaying savings could mean missing out on the power of compounding interest.

Whether it makes sense to pay off debt or save depends largely on the specifics of your financial situation, your needs, and your goals. The right decision might actually be to try to do both.

Here, you’ll learn how to make the smart decision, including:

•   The pros of paying down debt first

•   How to start paying down debt

•   The advantages of saving money

•   How to start saving money

•   How to pay down debt and save money at the same time

What Are the Benefits of Paying Down My Debt?

Debt can wear you down mentally, emotionally, and financially. Collectively, Americans owed $15.84 trillion in household debt as of the first quarter of 2022, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data. Whether you owe a credit card balance, student loans, personal loans, or a mortgage, here are some of the main advantages of choosing to pay off debt first:

•   Paying off debt could save you money on interest charges, finance charges, and fees.

•   As you reduce your credit utilization ratio (how much of your total credit limit you are tapping into), your credit scores might improve.

•   Reducing debt can also reduce your mental or emotional burden if your financial obligations are a source of stress.

•   Once your debt is gone, you can redirect those funds in your budget to saving or other financial goals.

Eliminating debt also means that you can lower your baseline cost of living. So instead of needing $5,000 a month to cover your expenses, you might be able to trim that to $4,000 instead, provided you can pay off a $1,000 monthly debt payment. Reducing monthly expenses can make it easier to get through a financial crisis or emergency should one come along.

When Might I Make Paying Down Debt a Priority?

If you’re debating whether to pay off debt or save, it’s helpful to think about your bigger financial picture and goals. For example, you might put debt repayment ahead of saving if you:

•   Have been paying debts for a while and are tired of feeling like you’re not making any progress.

•   Are able to qualify for a low APR personal loan or credit-card balance transfer that would allow you to pay off the debt faster.

•   Mainly owe unsecured “bad” debts, such as credit cards or payday loans that are costing you significant money in interest.

•   Are committed to sticking to your debt repayment strategy in order to clear your balances as quickly as possible.

That last point might be the most important. If you’re not all-in with your debt payoff plan, then you might not get much in return for your efforts.

How Can I Start Paying Down My Debt?

If you’re ready to pay down debt, the first step is knowing what you owe and to whom. You can start by making a list of your debts, including the creditor’s name, account balance, APR or interest rate, and monthly minimum payment, and how long it’s projected to take to pay down the debt.

Once you know what you owe, you can formulate a plan for paying it off. There are different strategies to become debt free that you can put to work.

Some of the most popular options include:

•   Debt snowball. The debt snowball method involves ranking debts from lowest balance to highest and paying them off in that order. You pay as much as you can toward the smallest debt, while making minimum payments to everything else. Once that debt is paid off, you roll its payment over to the next debt on the list, continuing the process until all debts are gone. Recommended: How the Debt Snowball Payoff Method Works

•   Debt avalanche. The debt avalanche (or highest interest rate) method ranks debts from highest APR to lowest. You’d then pay as much as you can toward your most expensive debt (the one with the highest interest rate), while making minimum payments to everything else. Once the first debt is paid off, you’d roll its payment over to the next debt on the list, continuing this process until all debts are gone. Recommended: How the Debt Avalanche Payoff Method Works

•   Credit card balance transfer. Transferring balances to a credit card with a low or 0% APR can help you to save money on interest charges. Typically, these offers involve a window of no- or low-interest, after which point, you pay a typical variable APR. The goal is to catch up financially during that time period, or to whittle your debt down significantly since no interest is accruing. The most important thing to keep in mind is how long you have to pay off the balance transfer at the promotional rate before the higher APR kicks in.

•   Debt consolidation. Debt consolidation means taking out a personal loan, home equity loan, or home equity line of credit (HELOC) to pay off other debts. You’d then make one payment toward the loan going forward. Whether this option saves you money can depend on the loan’s APR vs. the average APR you were paying across your other debts. If you can save a significant amount of money with a new rate versus your current rate, it may be worth the effort.

If you’re struggling to find the right debt repayment option, you might consider meeting with a nonprofit credit counselor or financial advisor. Guidance on financial planning for debt reduction can be very helpful, and organizations like the National Foundation for Credit Counseling (NFCC ) can connect you with advisors.

What Are the Benefits of Saving Money?

It pays to look at the other side of the issue when you are wondering, Is it better to save or pay off debt? Understanding the benefits of saving can help you to decide. Here are some of the main advantages of prioritizing saving:

•   The sooner you begin saving, the longer you have to grow your money through the power of compounding interest.

•   Having money in emergency savings can give you peace of mind if an unexpected expense comes along.

•   Saving and investing in a tax-advantaged retirement plan can help you to build wealth for the long-term.

•   You can save money for different goals at a pace that works for your budget.

Saving is crucial if you’d like to avoid racking up debt in an emergency. If your car breaks down or your dog needs surgery, for instance, you can use your emergency fund to pay those expenses rather than having to rely on a high-interest credit card.

When to Consider Saving Money Over Paying Down Debt

The decision to save vs. payoff debt also depends largely on your goals and what your financial situation looks like. You might prefer to save first and pay off debt second if you:

•   Mainly owe “good” debts with low interest rates and don’t feel unduly burdened by them.

•   Would like to build up an emergency fund before tackling your debt payoff plan.

•   Could earn a higher interest rate on savings compared to the rate you’re paying on your debts.

•   Are able to get “free” money by investing in an employer-sponsored retirement plan.

It’s important to note that there’s a difference between savings vs. investing. When you save money, you’re earmarking it for some future expense which might be planned (say, a down payment on a house) or unplanned (in the case of an emergency fund). You might put your money in a savings account, money market account, or certificate of deposit (CD) account where it can safely earn interest.

When you invest money, you’re putting it into the market. So you might buy stocks, mutual funds, or other investments. Investing money has the potential to deliver higher returns than saving it. But there’s a greater risk of losing money.

Potential Strategies to Start Saving Money

Making saving a regular habit can take time and effort. You may have to bypass little splurges (takeout food, for instance) as well as larger ones (joining pals on a vacation to Paris). But finding easy ways to save money can help you get into a routine of setting aside money. Here are a few ways you can do just that:

•   Schedule automatic transfers. One of the simplest ways to save money is to transfer funds from checking to savings every payday. You can pick a set dollar amount to transfer. Then when you get paid, you’ll know that money is automatically going to savings. It won’t be sitting in your checking account, tempting you to spend it.

•   Save at work. If you have a 401(k) or similar plan at work, that’s a built-in opportunity to save. You can defer part of your paychecks into the plan automatically, and your employer may chip in matching contributions, which is free money for you. If you get a raise each year, you can adjust your contribution rate by that same amount to funnel more money into retirement savings.

•   Save “found” money. Found money is money that you weren’t planning on receiving. So that can include things like tax refunds, rebates, cash gifts you receive for birthdays or holidays, and other windfalls. Found money can give your savings a boost with minimal effort. Even if you don’t set aside the whole amount you receive, do try to stash part of it in savings.

•   Use apps to save. Apps can make saving money easy. There are round-it-up apps that push purchases up to the nearest whole dollars and put the difference into savings. Or there are apps that pay you a percentage cash back on things like gas, groceries, and shopping. That’s money you can add to your savings pile.

If you’re struggling to find motivation to save money, try setting one or two small financial goals. For example, give yourself a goal of saving $1,000 to start your emergency fund in the next 60 days. Challenging yourself this way can help you get fired up about saving. If you’re able to knock out some smaller goals fairly quickly, it can get you solidly on the path to save more.

Can I Pay Down Debt and Save Money at the Same Time?

Whether you can pay down debt and save money at the same time will depend largely on your budget and how much you can dedicate to either goal. If you don’t have a firm budget in place, making one can help you see at a glance how much money you have to pay down debt or save.

So, say you make your monthly budget, and you have $1,000 left over after all your regular expenses are paid. Your current debt payments total $500 per month.

In that case, you might decide to keep paying $500 each month toward the debt and put $500 in savings. That way, you’re working toward both goals equally. If you’d like to prioritize paying off debt vs. saving, then you might pay $750 per month to debt and cut the amount you save down to $250.

Saving and paying off debt at the same time might be ideal if you can find the right balance between them. Again, it all comes down to whether paying off debt or saving takes first priority on your list of financial goals.

Does Starting an Emergency Fund Make Sense?

An emergency fund is designed to help you pay for unplanned expenses or unanticipated events. For example, getting laid off from your job could be a financial emergency if you don’t have any other income to fall back on. Other examples of financial emergencies include unexpected appliance repairs, vehicle repairs, vet bills, or medical bills.

Sixty-four percent of U.S. adults say they’d be able to handle a $400 emergency in cash, according to the Federal Reserve. But that means roughly a third of Americans would have to turn to debt to manage an unexpected expense. That’s a lot of people without a financial back-up plan. It may be wise to prepare and put some funds away in case a rainy day strikes.

Starting an emergency fund makes sense if you don’t want to be left scrambling to pay for unanticipated expenses. Even a small emergency fund of $1,000 could be enough to help you weather most minor emergencies. Once you save that amount, you could then work on building a larger emergency fund.

Of course, you may not need an emergency fund if you have substantial savings, investments, or other assets to draw on in a crisis. For most people, however, this is not the norm, so an emergency fund can still be an important part of their financial plan.

Banking With SoFi

Saving money and paying off debt can both be central to improving your financial situation. Whether you prioritize one over the other or tackle them both at the same time, it’s important to understand how saving and becoming debt-free can help you to get ahead and build wealth.

If you’re ready to start saving, then it pays to keep your money in the right place. With SoFi, you can get a Checking and Savings account in one place for added convenience. With direct deposit you’ll also earn a competitive APY, which can help you grow your money faster. Plus, you won’t pay any fees.

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 much money should I save before paying down debt?

At a minimum, it can be a good idea to save $500 to $1,000 before paying down debt. That amount of money may be enough to get you through any small financial emergencies that might come your way as you focus on debt repayment.

Is it better to pay down debt or save money?

It may be better to pay down debt if you’re carrying debts with high interest rates or are simply tired of not seeing your balances go down. On the other hand, it may be better to save money first if your debts have low interest rates or you don’t owe that much overall.

What bills should I pay down first?

When paying debts or other bills, it’s always important to pay any past due accounts first. Late payments can hurt your credit score, so it’s helpful to get past due accounts current. From there, you can focus on paying down the highest-interest debts first if you’d like to save money on interest charges. Or you can pay down debts from lowest balance to highest, which could help you knock out some smaller debts fairly quickly.

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Photo credit: iStock/malerapaso

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 deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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

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Ever have a glitch when it comes to budgeting and wind up in overdraft or close to it?

Whether it’s from an unexpected transaction, forgetting about an automated bill pay, or just overspending, there are times when checking accounts may dip dangerously low.

In these situations, a cash cushion can add a layer of protection. It’s a bit of extra money kept in your account to help protect against bounced checks and overdraft charges.

Read on to learn more about cash cushions, including:

•   What is a cash cushion and how does a cash cushion work?

•   Why are cash cushions useful?

•   How can you save up a cash cushion?

•   What are the differences between a cash cushion vs. an emergency fund?

•   What are alternatives to cash cushions and emergency funds?

What Is a Cash Cushion?

A cash cushion is extra money in a person’s checking account that serves as a buffer. It can keep them from hitting zero or overdrawing if they deviate from their budget or a minor emergency occurs.

As you may know, if you overdraw your checking account, you can owe overdraft or NSF (non-sufficient fund) fees and possibly be liable for other late charges as well. With a cash cushion in place, you may avoid the risk of overdrawing and these consequences.

How Do Cash Cushions Work?

Even if you’re the most meticulous budgeter, you can benefit from keeping a cash cushion in your checking account. Here’s how it can help: Say it’s the first of the month when rent and other bills auto-withdraw from a checking account. Maybe you made an error in your math or you swiped your debit card a few too many times, and there isn’t enough in your account to cover those bills. This would usually mean that your account would be overdrawn, leading to fees and canceled transactions.

But, if you keep a cash cushion of even a couple of hundred bucks in the checking account, it can prevent the account from becoming overdrawn. It can also take the stress off of having a perfectly balanced budget all the time. Having some extra cash sitting there, just in case, can really pay off.

Worth noting: A cash cushion is different from a slush fund, another odd financial term. What is a slush fund? It’s typically someone’s “fun money” in a budget, or cash set aside for discretionary spending.

Reasons Why a Cash Cushion Is Useful

A cash cushion is useful for several reasons:

•   It creates breathing room. Instead of keeping the exact amount of money needed monthly in a checking account, the cash cushion creates padding in the event of a budget mistake or emergency expense.

•   It benefits “hands-off budgeters.” Some account holders may set their budget at the beginning of the month and then not check in again that often. A cash cushion can provide peace of mind in this scenario.

•   It can help avoid account fees. A cash cushion helps avoid overdrawing a checking account. The average overdraft fee is $35, which can add up over time.

Tips for Saving Up a Cash Cushion

While a cash cushion can sound intimidating, it likely only amounts to a few extra hundred dollars, $1,000 at most, in a checking account. In terms of financial priorities, it’s lower on the list than necessities, or building up an emergency budget.

Here are a couple tricks for starting a cash cushion:

•   Reserve just a few dollars each paycheck until reaching the goal.

•   Set aside a windfall, like a quarterly bonus or tax refund.

•   Cut out an unnecessary expense, such as a streaming service, for a few months.

•   Reward good behavior. Pay a bill on time? Add a dollar to the cash cushion budget. Visit the gym? Add a dollar to the cushion.

•   Adopt “no spend” days and put the cash that would’ve been spent into the cushion budget.

Recommended: What Is a Sinking Fund?

Is This the Same as an Emergency Fund?

An emergency fund is used to cover large, unanticipated expenses. This could be anything from a medical emergency to living expenses in the event of losing a job. While it’s impossible to anticipate when things will go wrong, an emergency budget can help people avoid going into debt when a financial emergency happens.

Emergency budgets can be a sizable chunk of change. It’s recommended to reserve between three to six months’ worth of living expenses in a separate savings account.

How Do Emergency Funds Work?

If everything goes well, an emergency fund isn’t deployed. But, if a large, urgent bill hits, this fund can help cover the costs. Without an emergency fund, it might be challenging or impossible to pay this expense without taking on credit card debt or asking for assistance.

Emergency funds should be easy to access. While the fund probably shouldn’t sit in an everyday checking account, where it earns little or no interest, it also shouldn’t be in the market or a retirement fund, where it would be challenging to withdraw. Many choose to start an emergency fund in its own standard or high yield savings account, where it can accrue interest.

Recommended: Why Emergency Funds are so Important

Reasons Why an Emergency Fund Is Useful

When things are going well, it might be hard to imagine why an emergency fund is useful. No one ever really expects accidents to happen, for instance, but they do. So consider these benefits that underscore the importance of having an emergency fund:

•   It helps avoid debt. Without an emergency fund, the path to paying bills may involve resorting to credit card debt, unsecured loans, or pulling from retirement to pay expenses.

•   It can provide a cushion during unemployment. Unemployment benefits might not be enough to cover day-to-day living expenses in the event of job loss.

•   It could relieve stress. An emergency may happen, but money set aside could provide a sense of financial security.

Tips for Building an Emergency Fund

Accruing three to six months’ worth of living expenses may sound challenging, but the cash doesn’t have to be saved all at once. Consider these strategies when building a beginner emergency fund:

•   Automate transfers, even a few bucks a week, from checking to your emergency fund account.

•   Look for excess spending, such as a pricey gym membership or multiple streaming services. Cancel those, and put the savings towards your fund.

•   Take on a side hustle to earn extra money, at least temporarily, until reaching the goal.

•   Challenge yourself. Skip eating out for a month, and send the savings to an emergency fund.

•   Sell any gently used items you own (clothing or electronics, say), and put the proceeds towards your fund.

Cash Cushion vs Emergency Fund

At a high level, cash cushions and emergency funds seem very similar. They are both techniques that provide a financial safety net. However, an emergency fund is usually larger than a cash cushion because it’s designed to cover the possibility of a greater expense. Also, an emergency fund is typically held in a savings account, while a cash cushion stays in your checking account.

Here’s more detail on how each works and how they compare:

	Cash Cushion	Emergency Fund
Location	Checking account	A separate savings account
Amount	$300-$500, perhaps $1,000	Three to six months’ worth of living expenses
How used	A buffer to avoid overdraft or NSF fees	Cash to cover large, unexpected expenses

How Emergency Funds and Cash Cushions Can Improve Your Banking Experience

Both cash cushions and emergency funds can make banking simpler and better.

Cash cushions can help keep unwanted fees, like overdraft or NSF fees, at bay. This saves the account holder money and stress.

An emergency fund can bring in interest since it’s usually held in a savings account. In this way, it builds a bit of additional money.

Alternatives to Cash Cushions and Emergency Funds

There are a couple of alternatives to cash cushions and emergency funds.

In the case of a cash cushion, you might instead opt for overdraft coverage by linking a backup savings account to your checking account. If your checking account is about to be overdrawn, money is whisked in from your savings to cover the shortfall.

If an emergency strikes and you don’t have a fund waiting, there are a couple of other sources of cash:

•   If you have a Roth IRA (individual retirement account), you might be able to withdraw funds without penalty. However, once you’ve tapped retirement savings, it can be hard to rebuild them.

•   You might be able to use an HSA (health savings account), if you have one, to pay for unexpected health-related costs.

•   A HELOC (home equity line of credit) might be an option if you are a home-owner. This line of credit can be a source of cash, but you will need to pay it back plus interest.

•   Credit cards are an option if you are hit with unanticipated expenses, but they carry high interest rates. Most financial experts recommend using these sparingly as debt can snowball.

Banking With SoFi

A cash cushion can help account holders avoid overdrawing their checking and paying fees. This “breathing room” (usually a few hundred dollars sitting in their account) can allow them to worry less about their balance on a daily basis, knowing they have some wiggle room.

Looking to build a cash cushion? Consider opening an online bank account with SoFi. If you sign up for Checking and Savings with direct deposit, you’ll earn a competitive APY, plus you’ll pay no account fees. That means your cash cushion could grow that much 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

Is a cash cushion different from an emergency fund?

Yes. A cash cushion is padding (typically a few or several hundred dollars) that someone keeps in their checking account to fill in small gaps in overspending. An emergency fund, however, is usually a larger sum of money, held in a savings account, and reserved for unexpected expenses that come up, such as a medical emergency or paying expenses when out of work.

Should a cash cushion be the same amount as an emergency fund?

No. A cash cushion can be a couple hundred dollars, or up to $1,000, while an emergency budget should cover between three and six months’ worth of expenses.

Should I keep my emergency fund and cash cushion in separate accounts?

Yes. Emergency funds should be in their own savings account, while a cash cushion should be in a regularly used checking account.

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Photo credit: iStock/Mykola Sosiukin

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 deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Many people consider it a priority to protect the planet these days as reports of climate change are frequently in the news.

While living sustainably can take planning (Where to start? What are the right moves to make?), it doesn’t have to be pricey. Learning how to be eco-friendly on a budget can be surprisingly simple with some motivation and practice.

Sustainable living isn’t a one-size-fits-all prescription. One person may be all about composting while another would never try it. But the non-composter might bike rather than drive as often as possible or keep their thermostat in eco-mode year-round.

Ultimately, it’s up to the individual to figure out their preferred way to live a greener lifestyle. Remember, any adjustment can help the environment (and the wallet), so don’t feel intimidated.

Ready to learn more? Here, you can read up on:

•   What is sustainable living?

•   What are the practical benefits of living sustainably?

•   What are the financial benefits of living sustainably?

•   What are specific ways to live sustainably and save money?

What Is Sustainable Living?

Living sustainably means considering the environment when making daily decisions. It involves prioritizing actions that reduce your carbon footprint (the total amount of greenhouse-gas emissions your actions trigger). These moves, in turn, can benefit the environment.

Sustainable living is an all-encompassing umbrella term covering everything from how people shop and prepare food to how they allocate their money (say, with socially responsible investing).

What’s more, sustainable living can also help you reduce your expenses. Learn its basic principles, and it can help you to financially downsize.

What Are the Practical Benefits of Living Sustainably?

At first, a sustainable lifestyle sounds as if it may benefit the environment more than it does the individual. Certainly, it is focused on helping preserve our planet. However, practical benefits come with going green, including:

•   Saving money. Sustainable living encourages people to “reduce, reuse, and recycle.” Consuming less and reusing can also cut back on living expenses, which is a good money-management strategy.

•   Improving health. Depending less on a car can be an easy way to go green. Walking or biking to destinations can incorporate healthy living into everyday activities.

•   Gaining knowledge. People may learn to reuse or repair things they already have, picking up practical skills. That could mean learning to mend clothes instead of buying something new or becoming a home gardener who grows fresh veggies.

•   Creating community. As sustainable living gains steam, community groups may prove to be a way to meet like-minded people and make new friends.

What Are the Financial Benefits of Going Green?

Besides practical benefits, there are several direct financial benefits to eco-living:

•   Tax benefits. Purchasing everything from eco-friendly appliances to electric cars can come with tax credits or federal rebates.

•   Less consumerism. Since green living encourages reusing, people may be less likely to purchase new items.

•   Lower bills. Simple things like turning up the thermostat a few degrees in the summer can lead to direct savings on utility bills.

•   Reduced transportation costs. Biking, walking, or using public transportation can be considerably cheaper than driving a car or requesting a ride-share.

19 Ways to Save Money While Living Sustainably

You don’t need to go out and buy an expensive electric car to live sustainably. Learning how to be eco-friendly on a budget can be easier than it sounds. Read on for 19 affordable go-green tips. These creative ideas may help you save money while giving back to our planet.

1. Riding a Bike to Commute

Riding a bike to the office a few days a week is a win-win-win. With no emissions, riding a bike helps reduce harmful pollutants in the air. It’s also free (after the bike purchase), and as a bonus, it’s a form of exercise that can benefit your health.

2. Turning off Water When Washing Dishes and Brushing Teeth

Turning off the water when brushing teeth can save up more than 100 gallons of water a month. Conserving water during daily tasks could also lead to savings on the water bill.

3. Buying Items Second-Hand

Want to shop more ethically? Second-hand items are typically sold at a fraction of what their original price was when new. Perusing thrift shops could mean finding gently used, high-quality items for less. You might come across anything from brand-name kitchenware to clothing for much more affordable prices than buying at a department store or online. As a bonus, shopping for second-hand items gives them a longer life and saves them from the landfill.

4. Joining a Buy Nothing Club

Learning how to live sustainably on a budget can be easy when you snag a lot of things for free. Buy Nothing communities have sprung up across the country in the past few years. Members offer items they’re getting rid of for free, including everything from clothes to home decor. It’s a practical way to both give and receive items for free.

There are other similar organizations that have different names, and some people find that Facebook Marketplace or local groups, as well as Nextdoor have similar benefits.

5. Using Energy-Efficient Appliances

Swapping an old appliance for an energy-efficient one may cost more upfront but can save users in the long run. It could seriously lower energy bills and give you a tax credit to boot.

6. Eating Food Before Buying More (Reducing Waste)

The average American household wastes over a third of the food they buy, essentially throwing money down the drain. It also represents a waste of the energy and expense that went into the food’s production as well.

Making a conscious effort to eat everything in the fridge before another grocery run can be a good way to save money on food and help you cut down on waste.

7. Replacing Disposable Items With Reusable Items

Sure, disposable items are convenient, whether it’s a single-use plastic bottle of water or paper plates. Understanding the math behind cost per use is an important lesson in learning how to be eco-friendly on a budget.

For example, buying an insulated water bottle may be more expensive than a plastic bottle of water, but remember, once a reusable item is purchased, it’s used repeatedly. Its cost per use declines every time you reach for it, making it a better deal.

Opting for single-use items will likely be more expensive in the long run and worse for the environment. Consider swapping reusable items, like:

•   Water bottles

•   Straws

•   Sandwich bags

•   Shopping bags

8. Taking Shorter Showers

The average shower can use about 20 gallons of water or more. Cutting down shower time will save water and the monthly water bill.

Or, instead of shortening shower time, try a “Navy Shower,” which is when a person gets wet, turns off the water, lathers, then turns the water back on to rinse off. A Navy Shower can cut water usage dramatically.

9. Using Smart Power Strips

One of the cheap ways to go green is hunting down the “phantom energy” or “vampire loads” in a home. These terms refer to appliances that continue to suck up energy, even when they’re not in use. It’s been estimated that this kind of load represents 7% of all energy use in the U.S.

Power strips that have “all off/all on” switches can keep devices like smart TVs or printers from sucking energy and raising your electricity bill in their sleep mode.

10. Buying Used Over New

When it comes time to make major purchases, you may want to think used instead of brand new. The quest to buy used but still super functional items can be a good way to control spending money and be kind to the environment.

Buying, say, a used car or laptop, can definitely save money, as the item is likely to cost a fraction of its original price. It also encourages reuse. That car or laptop won’t wind up being junked if you swoop in and snag it.

11. Waiting to Run Laundry Until You Have a Full Load

When it comes to how much electricity home appliances use annually, washers and dryers are at or near the top of the charts. Cutting down on laundry loads saves on electricity and can help lower your bill. Aim to wash clothes only when there’s a full load, and consider running the washer on cold to save more electricity.

12. Upcycling

Upcycling is finding a second life for an item that typically goes in the trash. Let’s say you have an empty salsa jar. Rather than trashing it, you can use it to store leftovers in your fridge. And if you have an old door in the basement of your house, why not transform it into a desk or table that you might need?

Upcycling keeps items from being dumped into landfill and can save you money since you can buy less.

13. Going Meat-Free a Few Times a Week

Buying less meat at the store cuts down on the grocery bill, and going meat-free on a regular basis can reduce greenhouse gases — the gases in the earth’s atmosphere that trap heat. Cows and sheep emit methane, a greenhouse gas, as they digest grasses and plants, and ever larger amounts of land are needed for beef production, which is also a factor. Going plant-based for just one day a week can cut someone’s greenhouse gas footprint about 5% annually.

14. Composting

Composting is a process that takes what we typically consider waste (food scraps that usually go into the garbage, leaves that have fallen from trees) and turns it into fertilizer that can benefit the land. Creating a home compost or enrolling in a city collection program can divert food waste from landfills and have it perform a positive action for the environment. It also, of course, can save on garden maintenance expenses.

15. Avoiding Having Your Car Idle

When driving is necessary, avoid idling when you pick someone up or are waiting in a lot. Idling can produce harmful pollution. What’s more, it unnecessarily burns off fuel, costing you more at the gas pump.

16. Hanging Laundry to Dry

As previously mentioned, dryers are the most energy-consuming appliance in the home. Hanging laundry to dry saves electricity bills, and gentle drying outdoors could prolong the life of your garments.

17. Using Rechargeable Batteries

Disposing of single-use batteries in a landfill can lead to chemicals leaching into the soil. While rechargeable AAA or AA batteries are more expensive than single-use, they can be repeatedly recharged. As mentioned above, the cost per use gets lower and lower over time.

18. Opting for Slower Shipping

Global shipping accounts for 3% of the world’s greenhouse gas emissions. The rise of free and fast shipping can contribute to rising overall emissions. The rush to get the product to the consumer could waste more natural resources as well.

When possible, opt for slower shipping and choose bundling items so they arrive together in a single package versus multiple ones. That slow shipping might also deter impulse purchasing.

19. Utilizing Local Libraries

Visiting the local library helps cut spending and encourages lending instead of buying new. Local branches may offer everything from books to tool rental, cutting down on buying new or purchasing something for a single use.

The Takeaway

Going green (meaning being eco-friendly) and saving green (as in your hard-earned cash) don’t have to be mutually exclusive. Sustainable living encourages spending less overall. With a little practice and planning, learning how to live sustainably and benefiting your budget could become second nature.

Another way to save money while living sustainably? Open a bank account online with SoFi. When you open Checking and Savings with direct deposit, you won’t pay any account fees, and you’ll earn a competitive APY so your money could grow faster. Go ahead and opt for digital statements to help save the trees, too.

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

Can living sustainably cost more money?

Some sustainable choices may cost more upfront, but ultimately, the goal is to cut down on costs as well as minimize purchases that harm the environment.

How can I live sustainably if I do not make much money?

There are cheap ways to go green that don’t involve spending more. Shopping for second-hand items vs. buying new, for example, can save you a considerable amount, as can riding a bike or using public transportation rather than owning a car.

Am I living with financial integrity if I don’t live sustainably?

It depends on an individual’s outlook. For those who prioritize protecting the environment, financial integrity and a sustainable lifestyle probably go hand-in-hand to some extent. Spending sustainably would likely be very important. Others, however, might feel that finances and sustainability are two completely separate concerns.

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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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Even the most money-savvy person is likely to have some false beliefs about money. Maybe you were raised with misconceptions about finances, were given off-target advice from well-intentioned friends or advisors, or picked up some not-too-true intel online. These are all ways you can wind up adopting some incorrect beliefs about money. These in turn can have a negative impact on how you manage your money, hindering your path to achieving your financial and lifestyle goals.

To help make sure that’s not the case, read on to learn 18 common money misconceptions and why they simply aren’t true. Knowledge is power, and dropping false ideas can help you manage your money even better.

Why It Is Important to Have a Realistic View of Money?

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

That’s why bashing money myths is important. If you believe, for instance, that carrying lots of credit card debt is “normal,” you may not eliminate that monthly balance that’s dragging down your budget, not to mention lowering your credit score. If you want to be financially fit, it’s wise to avoid the following common misconceptions about money.

1. “The More Money I Have, the Happier That I Will Be”

Yes, there is a link between money and happiness, but it’s not necessarily all that strong. People who make more money tend to be happier overall, but research reveals that millionaires are not extremely happy. Having more money doesn’t insulate you from illness, relationship issues, worries about politics and the environment, and other challenges. Also, having a lot of cash in the bank can lead to all kinds of “shoulds”: You should have multiple homes, you should spend a lot of travel, plus other expenses that can deplete your wealth.

No matter how much a person earns, it’s likely their life will have ups and downs. Understanding how to allocate the funds you have to cover needs, wants, and future aspirations is likely to help you feel in control of your finances. That, in turn, can give you peace of mind and a measure of happiness.

2. “I Don’t Need to Save for Retirement Now”

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

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

3. “Credit Cards Bring Debt, so I Don’t Need to Get One”

Using credit cards as a form of payment doesn’t mean you’ll go into debt. Spending more than you can afford to pay off, however, may put you on that path. If you use a credit card wisely and typically pay off the debt every month, this can be a factor that increases your credit score. However, if you are a person who tends to spend impulsively and not pay your credit card bill on time, this can put a dent in your credit score. This is why it’s important to manage your purchases and pay your credit card bills on time.

4. “If I Have Enough Money, I Don’t Need to Budget and Save”

Regardless of how little or how much money you have or make, a budget is needed to organize your finances. Budgeting for beginners can be a pillar of financial stability. You need to budget so you can keep track of your spending, your debt, and your savings for future goals. Even if you have zero debt, a budget can still help you manage your money and allocate for short- and long-term goals.

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

5. “All My Problems Will Be Solved With More Money”

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

For instance, let’s say you take a new job that pays twice your current salary. If you turn around and buy a pricier home and car and book some luxury vacations, you might be in more debt and experience more stress than before. The way to prevent this is by not living beyond your means. Healthy budgeting and saving habits are what can help solve problems.

6. “I Need at Least Three Months of Income in My Emergency Savings”

It’s typically recommended to keep three to six months’ worth of living expenses in an emergency savings account. This can provide a cushion if, say, you were to experience a job loss or receive an unexpected medical bill. Some experts recommend that people have still more money stashed aside, but there are plenty who can’t even muster one month’s worth of expenses in savings. A recent survey found that 49% of Americans said they couldn’t afford a surprise bill of $400.

If you’re part of that group who feels an emergency fund is out of reach, overcome your financial anxiety. Start saving a small amount (perhaps $25 a week or a month) and build towards having $1,000 in a rainy day fund. By allocating a little bit of cash consistently, you can build up savings and be prepared for unexpected expenses.

7. “Money Can Buy Me Friends and Love”

Some people believe that having more money would make their personal lives fall into place, like something out of a movie. But think about it, true friends and partners are not with you for your money. They value who you are as a person.

If you tend to think that money could solve your relationship problems, challenge that belief. Look for other ways to improve that area of your life, like building your personal networks and working to enhance communication.

8. “The Rich Live In Big Houses, Drive Nice Cars, and Wear the Most Expensive Clothes”

If you watch reality TV or follow luxury influencers on social media, you might believe that the signs of having “made it” and being rich is all about living large. But the reality is that many rich people do not live in mansions, nor do they have a fleet of Bentleys. Media imagery might make you believe that rich people spend extravagantly, but many millionaires respect their money and live a modest lifestyle. They know that the more you spend, the more difficult it will be to accumulate wealth.

9. “If I Have More Money, I Will Have More Security”

One of the biggest money myths is that with more cash comes more security. Having financial security is less a measure of how much you have than it is of how well you save and invest. If you win the lottery and spend it all on, say, traveling around the world on a private plane, you may well have less security than the person who earns a modest income but consistently contributes to their employer’s 401(k) plan and snags the company match.

Again, this points to the value of setting up a financial plan and saving wisely. Being mindful with money in these ways is an important aspect of financial security.

10. “Money Increases My Odds Of Meeting People”

Having more money may provide opportunities to travel or go out often, but you can also do that in a more frugal way. You don’t have to join a private club or go out to Broadway shows every week to meet new people. You can expand your social network for free, and that includes volunteering opportunities. Donating your time and energy to, say, a local museum or other nonprofit can connect you with like-minded people with no money required.

11. “I Need to Be Rich In Order to Travel”

This is another popular money misconception. You do not need to be rich to travel. People at any income level can go on vacation; you simply need to have a budget. Starting a vacation fund (a savings or other kind of account earmarked for travel) can be a good starting point to begin saving.

Also, take advantage of the many ways to afford a great trip for less. Airbnb, VRBO, and other businesses offer rentals that may be cheaper than hotel rooms. Plenty of credit cards award travel perks when you use them, whether frequent flyer miles or discounts on lodging.

12. “It’s Normal to Have a Lot of Debt”

It’s true that 77% of American households have some kind consumer debt. But keep in mind, not all debt is created equal. Some debt is considered good debt. Think about a mortgage: It’s typically a fairly low-interest loan that builds your credit report (if managed responsibly) and allows you to build equity in the home and therefore wealth.

Bad debt, on the other hand, is high-interest debt, such as credit card debt, where interest rates are high (currently around 20%) and you aren’t building equity. Just because a lot of people may have this kind of debt doesn’t mean you should. It can snowball and keep you spending a chunk of money monthly that could otherwise be saved or invested. Most financial experts urge people to work hard to avoid this kind of bad debt.

13. “I Should Avoid Talking About My Money Problems With Others”

Talking about money issues may seem like taboo but it shouldn’t be. It is healthy to talk about money troubles to close family and friends, because they may have ideas about how to approach a solution. Perhaps they experienced a similar issue in the past and can offer advice on how they handled it. But if you find it uncomfortable to talk to family or friends about your money concerns, you can speak to a professional. For instance, there are non-profit credit counseling organizations, like the National Foundation for Credit Counseling (NFCC ), that can help you if you are burdened with debt and feel overwhelmed.

14. “It’s Better to Buy a House Rather than Rent”

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

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

15. “I Need to Be Rich In Order to Invest”

You do not need to be rich in order to invest: Let’s bust that myth right away. You can start investing with as little as $10, and you might even invest if you have debt. Investing is often a path to wealth. Yes, it has its risks, but over time, it is likely to give you a very healthy return. For instance, at the start of 2022, the annualized 10-year return for the Standard and Poor’s (S&P) 500 was 15.43%.

You don’t need to be a market expert before you dive in. With today’s robo advisors and investing apps, investing has become easily accessible and convenient. Of course, you might prefer to work with a human advisor. Whatever you are comfortable with, investigate fees before you begin investing so you are prepared for any costs you will need to cover.

16. “High Salary = Wealthy”

A common money misconception is that earning a high salary makes you wealthy. That is not necessarily true. People who earn a lot of money can spend a lot of it too. The key to building wealth is saving and investing your money so it can grow over time. Wealthy people have a money-preserving and money-growing mindset.

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

17. “I Can’t Improve My Finances Unless I Work With a Professional”

You might be more comfortable working with a financial professional, but you don’t need one to manage your finances well. It’s totally your choice. If you are looking to improve your finances, you can do so by reading up on cash management tactics or by listening to a podcast. There are plenty of apps that can help you budget and track your spending to better your financial situation. (Many banks offer these as well.) In addition, there are a variety of online calculators that can help you assess money moves like refinancing your student loan or mortgage.

18. “I Need to Work Until 65 In Order to Retire”

Another money misconception to correct: There is not a one-size-fits-all age for retirement. Deciding the age at which you can retire depends on many factors. While the typical retirement age is 65, you may retire earlier or later depending on whether you have enough funds to manage your future expenses. These days, many people continue to work in some capacity after the age of 65, since Social Security benefits are greater if you delay tapping them until age 70.

The Takeaway

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

If you’re ready to put your money on a growth path, why not open an online bank account with SoFi? When you do so with direct deposit, you’ll earn a competitive APY, and pay zero account fees. What’s more, we also give you access to a network of 55,000+ fee-free ATMs.

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 are some negative beliefs about money?

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

How might a misconception about money affect you?

A money misconception can prevent you from taking control of your finances. If you believe, for instance, that debt is normal, you might carry a balance on your credit cards and wind up being saddled with debt for a long time. In truth, high-interest credit card debt is not something to be treated as a fact of life; it should likely be paid off ASAP.

How do I change my beliefs about money?

To change your beliefs about money, it can help to broaden your perspective. Do online research about money management, listen to podcasts, and talk to friends whose money management you respect. Begin to look at the interest rates on your credit card and student loans, try budgeting apps, and take other small steps that begin to put you in the driver’s seat financially rather than believing prevailing wisdom.

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Photo credit: iStock/baona

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 deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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As nice as a spa day, vacation, or hot yoga class is, sometimes the best form of self-care doesn’t cost anything at all. In fact, you can practice financial self-care and grow your wealth.

Financial self-care involves taking the steps to avoid financial stress and meet financial goals. Given that 73% of Americans say money is their number-one stressor in life, practicing financial self-care and minimizing money worries can be a very good thing. It might even feel better than a massage.

But what exactly does financial self-care mean and how do you do it? Read on to find out the answer, as well as learn nine money moves to make now.

What Is Financial Self-Care?

Financial self-care is a form of self-care that focuses on financial wellness. Essentially, instead of more traditional self-care activities (like getting massages or enjoying dinners out), you find the best way to manage your finances and improve your financial situation. This may not sound fun, but worrying about debt, paying the bills, and falling short of savings goals can all lead to a lot of stress that can be draining both physically and mentally. Self-care and money can go hand in hand.

Here’s another perk: Once you get your financial life under control, you’ll have more money to put towards the more exciting areas of self-care. Whether that means finally splurging on that cleaning service or a new puppy is up to you.

Recommended: Are you financially healthy? Take this 2 minute quiz.💊

Tips for Practicing Financial Self-Care

Self-care and money can combine in the pursuit of financial self-care. Here are some strategies that make it easy to incorporate this form of self-care into daily life.

Creating Realistic Financial Goals

To make strides in the area of financial self-care, it’s important to set reasonable goals. That way, you can make progress and feel a positive boost when you finally do reach a goal. Here’s an example: Paying off your student debt in a single year would be hard even on a high salary. Instead, having a goal of paying off your highest-interest debt (perhaps a credit card balance) in a year is likely more obtainable. Look at your income versus your monthly necessary expenses (the “musts” in your life), and see if you can begin funneling some of the funds left over after bill-paying towards your debt.

Tracking Your Expenses Daily

Impulse spending can feel good in the moment, but it can do a lot of harm. You can be more mindful about your spending by reviewing your personal finances daily, focusing on where your cash was spent. You may not realize just how much money flows away from you on a typical day. Expense tracking will reveal that. On days that you don’t spend much or anything at all, give yourself a big pat on the back. You’ve just taken care of yourself financially by adding to your wealth.

Checking Your Banking Accounts Frequently

Good cash management is an important part of hitting your financial goals. Alongside tracking your daily spending, it can be helpful to check bank account balances daily or at least a couple of times a week. You’ll see where you stand financially and won’t be caught unaware by a low balance. This process will also give you a deeper look at how any automatic bill payments are impacting your cash flow.

After all, most of us don’t see the money we earn or spend in cold hard cash, so it can feel less tangible. When you know exactly where you stand financially, it can empower you and help better inform your purchasing decisions.

Making Any Needed Changes to Budgets

After keeping an eye on spending habits and account balances, it’s a good idea to review your monthly budget goals and see how you’re doing. Perhaps you put a reminder in your calendar to do a quick check-in on the last day of every month and see how things look. Maybe eating lunch out on weekdays has made it hard to stick to your food budget for the month. Perhaps having too many subscription services left no wiggle room in the entertainment section of the budget.

The end of the month is the perfect time to reevaluate spending habits, to see where you can cut back on spending, and to figure out how to increase savings.

Recommended: Post-Pandemic Money Lessons

Focusing On Getting Rid of Debt

Debt is likely part of your life, but it can also cause a lot of worry. Thanks to interest charges, debt can mount and be hard to pay off. It’s not a fun cycle. So when you have some extra money, sure, you might spend it on a new outfit or a weekend getaway and lift your spirits that way. Or you could pay down your debt instead.

By prioritizing debt, you’d be a step closer to eliminating some money stress from your life. Getting rid of debt can be a key aspect of financial self-care and can boost your peace of mind.

Improving Your Mindset on Money

Self-care has just as much to do with our mental health as our physical health. Feeling negative about money can really drag a person down. That’s why it can be helpful to focus on what you have instead of what you don’t have.

If you are feeling as if you can’t compete with other people’s lifestyles, it may be that your comparison framework is skewed. It may be beneficial to delete social media (or unfollow certain luxury accounts), stop watching reality T.V., or to skip hanging out with that friend who earns and spends big.

Recognizing what your money can do for you rather than feeling deprived is an important step. It can be a very empowering mindset to adopt.

Recommended: Tips for Managing Finances When Facing Depression

Improving Financial Literacy

Money can be intimidating in part because most of us lack a basic financial education. While you may not have learned about money management in school, you can teach yourselves the financial basics and beyond. Knowledge is power, after all.

From learning about how credit scores work to the investing basics, take some time to read up on the financial topics that seem confusing. Also look into apps that help you with budgeting, saving, and tracking your spending. These tools can be part of financial self-care, helping to boost your financial literacy and wealth.

Visualizing Retirement and Investing in It

Financial self-care means taking care of today’s and tomorrow’s needs. Retirement can seem like a distant concept, so try picturing your future self at retirement age and how you’d want to live then. That way, you may feel more motivated to save even though retirement is far away. Look at your budget again to see if there is room to improve your retirement savings. Even saving an extra 1% a month can make a major impact.

Respecting Money

Money is a tool and a very valuable one at that. Embracing financial self-care means recognizing that money isn’t just about buying things. That may be the easy and fun part, but saving and investing it is what really makes the most of your cash. Educating yourself on investing or seeking professional advice can help you harness the full power of the money you make. It’s a force to be reckoned with; respecting its importance can help you achieve your financial and lifestyle goals.

Why Financial Self-Care Is Important

Financial self-care is equally important, if not more so, than more traditional forms of self-care like heading to the spa or taking a personal day off of work. When you prioritize financial self-care, you can reduce money stress and move closer to your short- and long-term goals.

Banking With SoFi

Financial self-care can help you reduce money stress and make the most of what you earn. Being smart about your cash and helping it grow can unlock the good things in life today and in the future. Try practicing some financial self-care ideas, and see if you don’t feel more in control of your money and less stressed about it.

The right bank can also help boost your finances. For instance, you can bank smarter with SoFi. When you open an online bank account with direct deposit, you’ll earn a competitive APY and pay no account fees, plus have access to more than 55,000 fee-free Allpoint Network ATMs. Higher interest and no fees mean your money could grow that much 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

Why is financial self-care important?

Financial self-care can help eliminate financial stress from your life. Specifically, prioritizing financial self-care can make it easier to reach financial goals like paying down debt or saving for retirement.

How do you take care of yourself and your money?

Budgeting, focusing on debt repayment, and setting clear savings goals are all great ways to take care of yourself and your money. Not having to worry about debt or overdue bills are other benefits of financial self-care.

How do I respect my money?

Respecting money involves not wasting it and instead looking for ways to make the most of it. Being mindful about purchases, sticking to savings goals, and not taking on high-interest debt are all ways someone can respect their money.

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Photo credit: iStock/hatman12

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 deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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