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The Pros and Cons of Owning Rental Property

Owning rental property might conjure visions of a seemingly effortless monthly income that rescues you from the monotony of a day job. It’s definitely possible to see this kind of success, but it requires some luck and hard work.

Between mortgage payments, maintenance, and tenants, being a landlord is far from magical. Some might argue that venturing into real-estate investing is not for the faint of heart.

Excelling as a landlord requires a solid understanding of not only property investment pros and cons, but also of the local real estate market, taxes, and even people management. Read on to learn more about the pros and cons of rental property and tips for turning your rental property into a profit-driving real estate investment.

The Pros of Investing in a Rental Property

One pro of owning rental property, is the potential to build equity in the property . This can be especially true if for instance, market conditions are in your favor and/or you are able to rent the property to cover the cost of the mortgage and maintenance. As an added bonus, any upgrades you make on the property could constitute a higher rent assessment when the current lease expires.

Another pro to owning rental property is the potential for recurring revenue and passive income. It’s not exactly a “set it and forget it” investment, but on-time, in-full rent checks can go a long way toward a meaningful side hustle or even a full living wage.

The tax benefits that come with owning rental property are also a big draw. You can claim business-related expenses, some upkeep costs as well as depreciation on the property each year, but it can get pretty complicated. If you are at all unsure about the possible tax benefits or how to file your taxes as a rental property owner, we recommend getting help from a tax professional.

The Cons of Investing in a Rental Property

Remember earlier how we mentioned that it takes a little bit of luck to be successful at real-estate investing? Bad turns and “what ifs” make up quite a bit of potential cons. What if your tenants trash the place, or don’t pay rent, or both? What if you need to replace the roof or the A/C? What if the neighborhood goes downhill? The best-laid plans can be foiled by the unexpected. When you’re dealing with people and the local community, it’s a real possibility.

But assuming good fortune is on your side, there are still some potential disadvantages to investing in rental property. Today we will focus on three things—liquidity, taxes and fees, and tenants.

From an investment perspective, owning rental property isn’t liquid, meaning your assets cannot be sold quickly for cash. If repairs or other maintenance work is needed, a rental property can quickly swallow up every extra penny as well. And if you need fast cash, going through a real estate sale isn’t the best way to get it.

As much as you’re tied to the property, you’re also tied to its community. If the neighborhood thrives, you thrive. If it doesn’t, neither do you. Here’s where diligent research on the front end can help you pick a property that will likely be a stable long-term investment.

Fees and taxes take many forms, some of them necessary evils and others just plain unpleasant. Take, for example, property management fees. If you don’t live close enough to your property to maintain it or collect the rents yourself—or live next door but don’t want to deal—you can hire a property management company to handle the day to day. It eases some of the stress, but they charge a fee for their services, typically a percentage of the monthly rent . In addition, you may be required to keep a separate account of a few hundred dollars that they can access for minor repairs. Property management firms can also pre qualify potential renters for you and offer other services.

You’ll still need to pay property taxes, homeowners insurance, any HOA fees along with the mortgage, even if you don’t currently have tenants living in the rental property. If your state has a homestead exemption, you’ll lose that benefit for any properties that aren’t your primary residence. In addition, insurance rates can often be higher for rental properties due to the risks. But these policies can also help you in time of need. For instance, you can add Loss of Rents coverage to your rental policy. This coverage helps with the loss of rental income if the property becomes uninhabitable by a covered event such as a fire. Coverage is generally for a specified period of time.

One of the biggest tax ramifications of owning a rental property can be the state and federal capital gains taxes you’ll likely have to pay if you decide to sell. Capital gains are determined by subtracting your adjusted tax basis (original cost minus accumulated depreciation) from your net sales price. Translated, it means that if you claimed depreciation as a tax benefit while you were renting the property, you may be required to pay at least part of it back when you sell. Consult your tax advisor.

Another con can be the human element. If you get lucky and find tenants who pay rent on time, in full, and take care of your property, it’s probably a smart idea to do whatever you can to keep them.

If you need to go through the eviction process and start over, you may lose several months’ rent depending upon the laws in which the property is located and may have a big cleanup bill (that you may or may not be able to cover with any security deposit collected from the tenant upfront. One key to moving your tenants to the pro list is to screen, screen, screen and be picky about whom you choose.

How to Find the Perfect Rental Property

It may appear at first blush that the cons outweigh the pros, but many negative situations can be avoided by doing your research and making wise decisions based on what you learn.

First and foremost, set your financial goals. Are you looking for a vacation rental or a long-term lease? Is this a side hustle or a way out of the 9 to 5? Consider speaking with a financial advisor who can guide you through your options and help you make informed decisions. They can also give you advice on ways to diversify your portfolio, even if you’re short on cash.

Once you have goals in mind, take careful stock of not only the property, but the location, nearby amenities, tax rates, and HOA fees and any other special assessments. Next, get a thorough inspection and early estimates on any repairs. If you plan to manage the property on your own, choose a location that you can access easily.

What about setting the rent? Applicable rent controls aside, Some experts say that setting it too high is better than too low, since it’s more acceptable to lower a price than raise it. In the best scenario, Your rent assessment would cover the cost of the mortgage payment, taxes, insurance, and any fees and hopefully have a little left over to set aside for any issues that arise.

In addition, allow pets in your property could entice potential renters. Around 68% of American households own pets , and eliminating them from your potential tenant pool could leave you with an unoccupied property for longer than you’d like. Instead of saying no to Mr. Fluffy, add a pet deposit or additional monthly fee instead.

When you have a price, ask yourself if it’s realistic for the property condition and location. Would you pay that much to live there? If the answer is yes, you may well be on your way to being a rental property “pro.”

Learn more about how a SoFi financial advisor can help you set your financial goals, including your real-estate investments.

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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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Concentrated vs. Diversified Investment Portfolios

You may have heard the phrase “in order to make an omelet, you have to break some eggs.” We’re pretty sure that means that in order to achieve a beautiful thing, you have to take some risks. We’re on board with that.

However, there is another egg analogy that we swear by: “Don’t put all of your eggs in one basket.” Because we obsess as we do on smart financial planning, we believe this to mean not to sink all of your money into just one investment (concentrated investing).

Here, we’re going to break some eggs and explain the difference between concentrated and diversified investment portfolios. Read on and learn how you could place your eggs into a variety of baskets in order to ultimately create that beautiful omelet. Or at least an amazing nestegg.

Concentrated Stock Position Investments

In this world, there is one thing to be sure of: There is nothing to be sure of. Placing all of your money into one or two investments may seem like a sound plan, but you never know what the future may bring.

Say, for every Apple and IBM, there is a clunker investment that didn’t live up to its original promise. Even the most seasoned investors may not see what the future brings. Sometimes it’s great; other times, it could be a money suck. It’s a numbers game.

The more investments you have, the less concentrated risk you may face. To break it down, one sound investment can potentially make up for the poor performance of another.

Whether you are a concentrated investor or a diversified investor, risk is always going to be a thing. Let’s drill down to what each option may mean for you:

Advantages of Concentrated Stock Position Investments

One of the more notable champions of a concentrated portfolio is Warren Buffett, an investor who is very difficult to doubt.

Of investing in a concentrated portfolio, he said , “An investor should act as though he had a lifetime decision card with 20 punches on it. With every investment decision his card is punched, and he has one fewer available for the rest of his life.”

In other words, he’s saying do your homework, and when you make an investment choice, be very sure of it. And stick with it. Sounds like a solid plan, but, of course, not all of us are Warren Buffett.

Developing a diversified portfolio—as opposed to a concentrated one—takes work. If you are going to invest in a number of stocks, you’re going to need to research and understand them.

This takes time. On the other hand, focusing on just a few investments you believe in and know well could mean less fuss and less maintenance. And speaking of that, fewer investments may mean fewer maintenance and transaction costs over time. The money you save could continue to compound in your concentrated investment.

It may be prudent to hold on to a few investments for a long time and avoid all the short-term bumps and fender-benders that come along with other types of investing. The thought is to keep your eyes on the prize—all the highs and lows could eventually all come out in the wash and, in the end, you may accumulate the wealth you need.

When taking the concentrated investment route, the idea is to invest for the long term and let the funds compound. You wouldn’t need to take wide swings with investments that feel unfamiliar or uncertain. Basically, those investors just set it and forget it and have faith that the few investments they have chosen will do what they need to do over the long term.

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Disadvantages of Concentrated Stock Position Investments

Concentrated investing often takes a good deal of know-how, skill, and experience. Holding on to investments that don’t seem to move the needle can lose your money in the long run.

When you concentrate your investments, you might want to be darn sure that you are making the right decision to park your money in one spot for a long time. Staying with one investment may prevent you from taking a chance with a newer, more promising investment that could get you to your financial goals faster.

Ways to Diversify Your Investments

This is the easier part, and yet it’s not as easy as it sounds. Diversifying is merely spreading out your investment among a number of opportunities. However, you might need a strategy in mind. Here are a few ways you could do that:

Investing in more than one company. Instead of sinking all of your money into just one stock, you could spread out your money among a number of different ones.

Investing in more than one industry. For instance, media, real estate, steel, and financial services. If one industry is suffering, another industry may be booming. They might take turns winning and losing, but you’ll be there for both; and the winning might make up for the losses, but you’ll need to be in the right place at the right time.

Investing in both global and domestic stocks. This technique revolves around spreading your money around the world with the intent of protecting yourself from instability in the area of the globe that is currently experiencing challenges. Not every economy does well or poorly at the same time.

Investing in companies with different levels of market capitalization. Sounds complicated, but market capitalization is merely the market value of a company’s shares. Here’s how to do the math: Multiply the number of the company’s outstanding shares by the current market price of one share.

The answer is called the “market cap.” Example: If the company that interests you has 10 million shares selling at $50 per share, the market cap is $500 million (10 million shares x $50). This answer also shows you how big or small a company is compared to other companies. Your diversified portfolio could include small to large-cap stocks .

Investing in different asset classes. There are three main asset classes : stocks (also called equities), bonds (also called fixed-income), and money markets (also called cash equivalents). You could also consider alternative asset classes, such as real estate and buying and selling cryptocurrency like Bitcoin, Ethereum, Cardano, Litecoin, Solana, and more. The idea is to hold a variety of investments with different levels of risk and returns, a strategy which can help protect you against risk.

Investing in growth stocks. This is when you invest in companies that are considered golden by many. The anticipation for a growth company’s success is high, and growth investors want to get on board without too many questions asked. You might not receive dividends right away for a growth company stock—instead, the earnings are usually reinvested back into the company in order to grow even larger. The money is usually earned through capital gains , when the stock is eventually sold.

Value investing. Here, investors look for a hidden gem: companies that may be presently undervalued but are on the verge of becoming superstars (or even just stars). If and when the company’s valuation increases, the value investors wins, earning a profit on the stock price increase. Value investors are often brave people, putting themselves in the line of danger when everybody else runs the other way.

Concentrated vs. Diversified? What to Ask Yourself Before Choosing an Investment Strategy

Before hooking up the dartboard and putting on your blindfold, it might be a good idea to have a clear idea of your endgame. Ask yourself about your investment goals and how afraid you are (or aren’t) of risk. Each stock, ultimately, is a gamble, and no one strategy is always better than another. Each investment comes with advantages and disadvantages.

Advantages of a Diversified Portfolio

Spreading your money out can help reduce your vulnerability to ups and downs. Another word for this is volatility . That’s when you can measure your portfolio risk by exact numbers, using a specific formula. From there, you could decide how comfortable you are with that risk factor.

If all of your money is concentrated into one industry, market sector, or asset class, you might suffer when that category does not do well. As a result, you could lose money and fall behind in achieving your goals.

On the other hand, diversification could open you up to more opportunities when a certain category of investment starts to improve or even blow up.

Think of those investors who believed in Apple back in the day—they may have invested in other stocks as well, but they wouldn’t have been able to miss the big gains that Apple started to earn on a consistent basis. If you’re still in your 20s, you might have the chance to find the next Apple and get an amazing head start.

Disadvantages of a Diversified Portfolio

You might hear so much about the awesome benefits of a diversified portfolio, but remember that no sure thing is a sure thing. Here are a few red flags you could look out for when it comes to diversification:

Over-diversifying. Diversifying may be good, but over-diversifying is not. If more of your stocks are doing fair-to-poor than the few that are doing well, you won’t be getting ahead. A situation like that calls for some reconfiguring.

Maintenance and transaction costs. If you invest in funds that charge fees, your diversification might nickel-and-dime you and get in the way of your good time.

Lack of knowledge. If you haven’t done your research and due diligence and if you are just going on hunches, instinct, and hearsay, you could be in for a world of trouble. Don’t diversify for the sake of diversification. Instead, you might want to take educated guesses by schooling yourself.

Whether it be concentrated or diversified investment, consider this first:

Where to put your money? Forbes has a few rules of thumb:

Take advantage of your knowledge of technology. Younger generations as a whole generally have technology in their DNA . That comes in handy as the tech sector seems to be changing on a daily basis, constantly evolving and turning the heads of investors. It’s a growth story when it comes to many tech stocks. You could do your due diligence and take a look at some up-and-coming tech companies, or you might want to invest in the technology you think will become a big part of our tomorrow.

Invest in your passions. What do you like? What arouses your interest? It could be anything from video games and phone apps to ecological-friendly causes or cool, innovative pet toys. They say, “do what you like and the money comes,” (although we cannot verify who “they” are)—the same may be said for investing. If you invest in something you love, it may be easier for you to follow and understand its growth. You might also enjoy checking in on your investment every day.

Invest in what you know. If you can’t find an investment you’re immediately passionate about, a good first step might be to find an investment that makes sense to you. Because investing can be confusing at times, it might help to be invested in something you understand. Eliminating as much befuddlement as possible could help you figure out a long-term strategy for your investments.

Stay steady. Especially if you’re a newbie, you might test the waters by wading in the shallow part of the pool first. You could try to find an investment that shows a rather steady history, so you can watch your investment grow and learn as you go. Some investments might double as roller-coaster rides, and they’re not for the faint of heart. Instead, starting out on the baby rides might help you get your bearings.

Find a good advisor. Sometimes it’s good to seek a second opinion. Before you take the plunge, you could consider talking to a financial advisor, who may be able to tell you the stuff you never would have known on your own.

Diversifying With SoFi

Portfolio diversification might give you peace of mind, but it shouldn’t stop there. Doing your research to know what you are getting into could help. The more of a mix you have, the more diversified you’ll be.

Investing with SoFi Invest is an easy and convenient way to get started. Most important, SoFi could help you map out a plan and a plant a goal post to help you work on achieving the very things you want out of life, be it retirement or emergency savings, a downpayment on a new home, or preparing for a family.

Get started with SoFi Invest today!

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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5 Ways to Rebuild Your Retirement Savings

Life happens. A natural disaster, an emergency surgery, a roof leak—all sorts of sudden, unexpected situations could leave you scrambling for funds and needing to dig into your retirement fund. If you’ve lost your life savings or discovered you aren’t on track to have the money you’ll need for the retirement you desire, then we’ve created this post for you!

Here, you’ll find five ideas that could help you rebuild lost retirement savings, including:

•  Reviewing your budget

•  Contributing to your 401(k) or IRA

•  Asking for a raise

•  Delaying retirement

•  Reviewing your portfolio

As a bonus tip, it might help to visualize what you want your retirement years to be like. Do you imagine traveling the world? Relocating to a place where it’s sunny and warm—or where you’ll be near friends and family? No matter what appeals to you, keeping your unique vision front of mind could serve as a guiding light as you develop the strategy to rebuild your retirement savings.

5 Ideas to Help Rebuild Retirement Savings

1. Reviewing Your Budget

In the busyness of life, it can be easy to get into the set-it-and-forget-it mode of thinking. You might not have started saving for retirement yet, or you may have created a budget that has worked okay for you in the past and haven’t made any changes. If that sounds familiar, then you may be pleasantly surprised by the possibilities.

Could you, for example, consolidate your credit card balances into a personal loan ? If so, how much would you save? If you took that amount and put it into your retirement account, more money could be going toward investing in your own future.

Are you paying off student loans or helping your child to do so? Again, refinancing might free up cash flow that could go into retirement savings.

What apps, subscriptions, and the like could you live without—ones you might not even use, anymore? In total, how much more could you invest in your own retirement each month or year? What might be the cumulative effect of all of your budget-cutting strategies?

As a related strategy, are you close to paying off a large purchase? This could include a boat, an RV, or even your home. If so, you could consider earmarking whatever you’ve been paying monthly for that large purchase to go into your retirement account. If it doesn’t seem possible to commit the entire amount each month to your retirement savings, what percentage might seem doable?

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2. Contributing to Your 401(k) or IRA

If you have a 401(k) or other employer-sponsored retirement plan, you are allowed to invest up to $19,000 of your pre-tax salary annually, a cap that the IRS says may be increased in the future because of cost of living increases. Then, when you reach the age of 50, your annual contribution limit is boosted to $25,000. Increasing your retirement contributions also reduces the amount of your income that’s taxable .

If you’re contributing to an IRA , you can contribute $6,000 annually, or $7,000 if you’re 50 or older. This is true for both traditional and Roth IRAs. Note that, if you have an employer-sponsored 401(k), you can also invest in an IRA .

And, if you reach the limits of your retirement plans with tax advantages in a particular year, you could still continue to build up your reserves with other forms of investments , whether stocks, bonds, mutual funds, or something else.

In other words, you wouldn’t have to let the limits set by the IRS stop you from investing if you have funds available for that purpose. You might just need to invest another way until the next year’s retirement-investment opportunity returns.

3. Asking for a Raise

Ideally, yes, your hard work would automatically be recognized and your boss would give you a raise without you needing to ask. But, it doesn’t always work that way—and SoFi has created the ultimate guide on how to get a raise.

Highlights of the guide include:

•  Being clear about what you deserve in compensation. It might help define your value by researching what other professionals with your skills, experience, and education are receiving.

•  Gathering facts. This could include the financial information we’ve mentioned, plus your accomplishments, what others value about your work, and what you plan to contribute to the company going forward.

•  Building up your confidence. It might help to practice your pitch for a raise with trusted friends and colleagues.

•  Making an appointment. You might want to set a time to give your data-based, professionally expressed, well-timed request for a raise.

Then, you could invest any raise (or bonuses) into your retirement savings.

4. Delaying Retirement

If you were born in 1960 or beyond, then your full retirement age for Social Security benefits, according to the IRS, is 67. There are also delayed retirement credits that you can take advantage of. In this scenario, you could earn 124% of your monthly benefit if you delay retirement until the age of 70—a delay of 36 months.

You may decide that, yes, you’re going to keep working in your current career until the age of 70. Or, you could switch to an encore career, one that brings about a change of pace for you and allows you to focus on a specific passion, one that might offer more freedom and aligns with values you hold dear.

It could involve consulting or freelancing, or otherwise using skills, contacts, and experiences in a new way, possibly even telecommuting or working a more non-traditional schedule.

This might help increase Social Security benefits while working in an exciting new career. You could also use some of your earnings to invest in retirement savings.

Want to brainstorm encore career possibilities? SoFi offers complimentary career coaching.

5. Reviewing Your Portfolio

It might help to review your retirement portfolio to determine if you’re investing in the best way, with “best” defined differently for each person. Each person has their own risk tolerance, and each person’s financial situation is unique.Your portfolio review might take those factors into account.

Perhaps you also have a wealth account, an investment vehicle where you contribute after-tax funds. If so, it might make sense to review that portfolio, as well, to determine if you may be able to accelerate growth.

As you look at your portfolio, would it become even more meaningful if you focused on socially responsible investing? For some people, this might help them to become even more hyper-focused on investing, knowing that, by doing so, they could be providing support to causes that matter to them, whether that’s climate change or other environmental issues, human rights issues, sustainability, equal employment opportunities, or something else entirely.

Ready to start rebuilding your retirement savings? SoFi Invest can help you achieve your investment goals with online IRAs. We offer both active and automated investing platforms that could help you as an investor without paying fees.

Get started today with SoFi Invest!

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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Law Enforcement Student Loan Forgiveness Programs

Considering a career in law enforcement? Besides the satisfaction of serving the public good, one benefit of doing so may be the opportunity to take advantage of the student loan forgiveness program for police officers.

Public Service Loan Forgiveness may offer loan forgiveness of Direct Loans for police officers and other government employees. Also known as “PSLF,” the program started in 2007 and may offer federal student loan forgiveness for police officers who have made 120 qualifying on-time payments and who are working full-time. (You can see all of the qualifications here .)

This means that if you’re a police officer who works for the government and successfully makes ten years of qualifying payments, you may be eligible to have the remainder of your debt wiped out entirely after your 120th payment.

Of course, this option is not available to everyone. To qualify for Public Service Loan Forgiveness, you must work for a qualifying employer. Generally, government organizations may be considered qualifying employers for the purpose of PSLF, which means that if you work for tribal, city, county, state, or federal law enforcement, you may qualify for public service loan forgiveness.

And because Public Service Loan Forgiveness is not just limited to police officers, other staff at these agencies may qualify for PSLF, too—even if you’re not on the frontlines. One important thing to note about PSLF eligibility is that detention officers who work at for-profit prisons are not eligible because they work for a private company and not the government or non-profit.

To be sure that your job is considered public service under the PSLF program, you can submit a PSLF employment certification form . The PSLR certification form is used by the government to confirm that your current job qualifies for PSLR benefits.

Public Service Loan Forgiveness Requirements

In addition to restrictions on the type of employment that is eligible for PSLF, there are other criteria you must meet in order to take advantage of this student loan forgiveness for police officers.

First, your student loans must be Direct Loans, borrowed from the federal government. Private student loans are not eligible for loan forgiveness under PSLF.

Additionally, you may be required to consolidate your federal student loans before you qualify for PSLF. Consolidation is a process by which you combine all of your federal student loans like Direct Subsidized Loans, Direct Unsubsidized Loans, or PLUS Loans, into one new loan.

Further, you must work full-time in order to qualify for PSLF. That means that in addition to working for a qualified employer, you also need to be employed full-time, which is generally 30 hours or more per week.

There is one exception to this requirement, however: If you work part-time for two different qualifying employers and you work more than thirty hours per week between the two jobs, you may still qualify for PSLF.

Finally, in order to take advantage of the PSLF for law enforcement, you must make 120 qualifying student loan payments. That means that even if you’re working full-time for a qualified employer and plan to take advantage of PSLF, you are still responsible for paying back your student loans for ten years.

PSLF only forgives the amount of your student loan remaining after the ten years of qualifying payments. And if you miss a month or are more than 15 days late in making your payment, that month won’t count towards your 120 total payments, which means that you could end up making more than 120 payments before the government clears your loans for loan forgiveness.

The one bright side here is that the 120 monthly payments you are responsible before you can qualify for PSLF can be on any valid federal loan repayment plan. This means that you may be able to choose a plan that keeps your monthly payments relatively low until your 120 payments are complete.

Perkins Loan Forgiveness for Police Officers

Perkins Loans, which were offered until September 2017, may also eligible for forgiveness if you consolidate them into a Direct Consolidation Loan. Perkins Loans were administered and distributed by your college, which often means that borrowers end up paying one student loan payment to the federal government and one to their alma mater. Under the Perkins Loan program , certain employment such as law enforcement officers and teachers may qualify for a full or partial Perkins Loan cancellation.

To qualify for forgiveness of your Perkins Loans, you must be employed full-time as a law-enforcement officer or in another qualifying position. If you qualify for Perkins Loan forgiveness, a certain percentage of your loans will be forgiven each year of full-time qualifying employment as follows:

Year 1: Forgiveness of 15% of your loan.

Year 2: Forgiveness of 15% of your loan.

Year 3: Forgiveness of 20% of your loan.

Year 4: Forgiveness of 20% of your loan.

Year 5: Forgiveness of 30% of your loan.

That’s right, after five years of qualifying employment, you could be eligible to get up to 100% of your Perkins Loan forgiven if you’re a law enforcement officer. On top of that, you may not have to pay your Perkins Loans while you hold a qualifying job, which can mean you might end up never paying back a penny of your Perkins loan.

Because colleges independently disbursed Perkins Loans, each school also runs its own forgiveness program. To see if you qualify, reach out to your school’s billing department.

Loan Refinancing for Law Enforcement Officials

For law enforcement officials who don’t qualify for PSLF, student loan refinancing may be able to help you lower the cost of your student loan repayment. Loan refinancing is one of the few ways to potentially decrease the amount of interest you’re paying on your student loan. If you qualify, lowering your interest rate can add up to some serious savings over the life of your loan—depending on your loan term, naturally.

Refinancing student loans involves taking out a new, private loan to pay off your existing federal and private loans.

Although it may seem counterintuitive to save money by taking on new debt, loan refinancing is premised on the idea that you may be able to secure a better interest rate than the current rate on your student loans.

If you’re instead burdened by high loan payments and are looking to free up some cash every month, refinancing may also help you to consolidate multiple student debts into one new loan with one, hopefully lower, monthly payment (although this typically comes with a lengthening of your term and more interest paid over the life of your new loan).

Additionally, student loan refinancing allows you to focus on paying off your loan over a fixed time period, meaning that you won’t be stuck paying interest on your loans for the rest of your life.

Of course, not all law enforcement officials will benefit from refinancing, particularly those planning on taking advantage of Public Service Loan Forgiveness. Make sure to do your due diligence when picking out a loan repayment plan that is right for you, but in general, there are many loan repayment and loan forgiveness options available to law enforcement, which means you can focus on your job instead of your loans.

Ready to explore the refinancing of your student loans? Find out what your new rate with SoFi could be in just a few minutes.

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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.


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How Much Should I Spend on a Car?

You’ve been putting off getting a new car for a while. After all, you and your car have made a lot of good memories together. But after years of road trips, carpools, and it reliably getting you to and from work every day, it’s time to say goodbye.

Before you head to the dealership and start test driving the latest models, you’ll need to figure out exactly how much car you can afford.

Determining How Much to Spend on a Car

There are a few guidelines to consider when you’re trying to figure out how much money you should spend on a car. Before you dig into the details, perhaps start by taking a minute to balance your budget so you have an accurate idea of how much money you’re able to spend on a car.

Tally up your monthly income and all of your monthly expenses so you have a keen understanding of where you are spending your money.

(If you need help, the Federal Trade Commission has a helpful guide detailing the expenses to include in your budget.) Once you have a solid grasp on your monthly expenses, you may be better able to determine how much to spend on a car.

Here are some common recommendations for determining how much to spend on a car. Think of these more as guidelines than hard and fast rules. They may give you an idea of how much you should spend on a car, but of course it all depends on your specific circumstances.

The 10% Rule

The 10% rule is pretty straightforward. The general idea is to not spend more than 10% of your gross annual income on a car. But the low limit can make it difficult to stick to this rule. If you just need a car that will get you from point A to point B, you may be able to find a vehicle that will fall under 10% of your income. But if you need a car with more features or more space you may want to consider one of the following rules.

The 36% Rule

This rule takes into consideration your total debt-to-income ratio. This guideline suggests you keep all of your debt, including your car payments, to less than 36% of your income. If you, like many Americans, have debt from credit cards, student loans, or a mortgage, you may want to calculate how a car payment would factor in.

Another related guideline is the 15% rule , which can be useful if the only debt you have is a mortgage. If that’s the case, the guideline suggests that you don’t spend more than 15% of your net monthly take-home pay on car expenses.

The 20/4/10 Rule

This is a multi-part rule . First, it suggests that when you buy a car, you make a down payment of 20%.

Secondly, it recommends that when you take out a loan to finance the car, you plan to pay it off in no more than four years .

Finally, the total monthly vehicle expenses shouldn’t be more than 10% of your monthly income. Having your dream car is great, but it may not be worth it if you can’t afford to save for retirement or focus on other goals because your disposable income is primarily going toward your car payments.

The 50/30/20 Rule

If you find the above rules unrealistic, you could also consider using the general 50/30/20 rule-of-thumb for budgeting . This rule says that you should spend 50% of your income on needs, 30% of your income on wants, and 20% of your income should go toward saving.

Your auto loan would fall into the needs category, but if you opt for a more expensive vehicle, you could consider a portion of the payment as part of your wants. This way, you can get the car you need with the features you want, while still keeping your budget balanced by allocating some of your discretionary spending money to your car payment.

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Finding a Car You Can Afford

Buying a car can be an intimidating process. Thankfully, there are plenty of options, so you can find a car that works for your lifestyle and budget. Here are some things to consider as you embark on your search for a car that fits into your budget.

What Are You Going to Use the Car for?

Will you use the car mostly for quick trips to and from work? Do you have a large family that you’ll be driving to and from baseball games, soccer practices, and play dates? How you plan to use the car may influence the type of car you choose to get .

It’s also worth considering the weather. Do you live in an area with harsh winters where a larger vehicle with all wheel drive may be helpful? There are a wide variety of vehicles on the market that fill different needs so take the time to determine which features are most important to you.

Doing Your Research

Once you decide on the type of car you want to buy, you’ll want to dig in to the research phase of the process, so you are familiar with the models available, the features, and their average price.

When you’ve decided on a few models, there are a variety of resources that can help you track down details on each car. Sites like Edmunds, Kelley Blue Book, and Consumer Reports have reliable information to help consumers. And hopefully being an informed shopper will take some of the intimidation out of buying a car.

Will You Buy Used or New?

You’ll also need to decide if you plan to buy the car new or used. If you are on a tight budget, a used car may be a more affordable option . Something to remember is that a car is a depreciating asset —it typically loses around 20% of its value within the first year .

Test Driving a Few Options

Before you consider buying, consider test driving a few options. Buying a car is a big purchase, so take your time if you’re able to. It can be worth trying the car out on a few different types of roads so you can see how it drives in different settings.

It can be easy to feel pressure to make a purchase after a test-drive, but it is a standard part of the car buying process . The salesperson will likely be interested in making the sale , but there’s no reason you need to decide on the car immediately after the test-drive. One option is to tell the salesperson at the beginning of the drive know that you’re still researching options and don’t plan to buy during this visit.

Being Prepared to Walk Away

When buying a car, you may have to negotiate. Haggling can be an acquired skill, but if you’ve done the research and know exactly how much the car is worth, you can dust off your negotiating skills and try using them to work out a deal you’d be happy to accept. If negotiations aren’t going well, being prepared to walk away may help.

Saving For Your New Car

As you are saving for the purchase, consider opening an online banking account that works hard for you. SoFi Checking and Savings® has no account fees, members can earn up to 4.00% APY, and withdrawing cash is fee-free at 55,000+ ATMs worldwide (subject to change).

Learn more about how SoFi Checking and Savings can help you save so you can buy your new wheels.

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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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