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So, you’re a newlywed! Congrats.

You’ve probably been busy planning your wedding ceremony, enjoying your honeymoon, perhaps moving to a new place, and otherwise settling in as a married couple. So, if you haven’t had time to create and agree upon an investment style and strategy, that’s understandable.

Investing as a couple doesn’t mean you need to adopt one another’s investment philosophies and risk tolerance, but it can be extremely helpful to be clear about how one another feels as you create investment goals for your portfolio. (Also consider discussing how you feel about socially responsible investing, as increasing numbers of people feel passionate about aligning investments with their personal ethics.)

As an overview of our tips for newlyweds, we’ll discuss:

•  agreeing upon finances in a marriage

•  sharing financial information with one another and merge investing, as desired

•  creating or build upon an emergency fund

•  investing together (or separately) as a married couple

•  different generations may need different investing strategies

We’ll share seven tips relevant to today’s market, plus how SoFi can help with your investments and financial plan.

Love and Money Tips for Newlyweds

Having a common vision about how to spend, save, and invest money will likely go far beyond simply creating a budget and financial strategy. Agreeing upon money can also be important to protect your marriage. According to PsychCentral.com , money arguments are “by far the top predictor of divorce.”

Citing a study with data collected from more than 4,500 couples, they noted the following:

•  how much money you make and how much you are worth aren’t factors, with money arguments happening at all levels

•  couples take longer to recover from money arguments than any other type

•  couples typically use harsher language during financial-based arguments

•  continuing financial arguments tend to lower the “relationship satisfaction” of a couple

Additionally, Dr. Sonya Britt (professor at Kansas State University) suggests that couples educate themselves about finances, and then create a financial plan for today and for your future. She even suggest financial planning as part of premarital counseling, including a look at one another’s credits reports.

Money.USNews.com suggests, as an important step, that each of you organizes your finances, and then analyze where you are, right now. This might include each person sharing his or her tax returns from last year, recent pay stubs, credit card bills, student loan balances, and more. You could then each create a net worth statement where you list your assets and liabilities.

Because this can be an intimidating process and because your spouse may feel vulnerable when sharing, it’s important to “be respectful, not judgmental” during this discussion. Then, what happens when you combine net worth statements?

What does this comprehensive financial statement look like? How much money is currently in savings? Investment funds? Retirement accounts? (And, during this process, check to make sure you’ve changed beneficiaries wherever it’s needed.)

Agreeing Upon Savings

After you’ve taken a good look at your assets and liabilities, and created a budget, you can gain visibility into how much money you can save and invest. And, here are more money tips for newlyweds. If you aren’t satisfied with how much money you’ve put away into an emergency fund, then it makes sense to focus on that first.

Looking for a place for you and your partner to save money together? With SoFi Checking and Savings® account, you and your +1 can easily merge your finances and continue to get 0.20% APY, no account fees, unlimited ATM reimbursements, and more.

Create specific goals and then set up automatic deposits to make that happen. As you see financial successes as a team, this will likely inspire you to save and invest even more.

In general, an emergency fund should contain enough money for three to twelve times what you spend monthly, with many people suggesting six months’ worth as your target.

Talking About Investment Strategies

As step one, consider why you want to invest. The “why” will help to direct the “what,” because selecting the right investment strategy differs by financial goals.

Saving for retirement is a pretty universal goal, so ask yourself these questions:

•  At what age would you like to retire? If you were born after 1960, the retirement age for full Social Security is 67.

•  How much money (in today’s dollars) would you need to live on each year?

•  How long do you expect to live? That can be a tough question to answer but, statistically, people born in the 1980s have an average life expectancy of 70 for men, 77.4 for women. When planning for retirement, though, it can make sense to plan on 90 for men and 95 for women.

You can use our retirement calculator to help determine, hypothetically, how much you should be investing for retirement.

It may help to think of emergency savings and retirement savings as being the two bookends, and then you can determine what other savings and investment goals you have in between. These can include:

•  buying a home

•  starting a family

•  opening a business

•  traveling

After you’ve determined your goals (be specific!), then you can calculate how much money you’ll need to achieve each one, and on what timetable. Now, reverse engineer to calculate how much you’ll need to save or invest each month to reach your goals.

Compromising on Style

No post on investing tips for newlyweds could be complete without discussing what to do if you have different investing styles, which could include differing levels of risk tolerance.

Maybe she has an aggressive investing style, wanting the biggest return on investment possible, willing to take chances to get that pot of gold—while he may want to increase financial wellness but is less comfortable with high volatility.

What’s most important is to openly communicate and seek solutions. These could include:

•  have separate investment accounts, one more aggressive and one more conservative

•  on joint brokerage accounts, the investment strategy could be more moderate

•  keep a more robust emergency fund to help reassure the more conservative member of the couple

Here’s something else to consider. You may be a newlywed couple in your twenties—or in your sixties. Wise investment strategies can vary by generation, and SoFi has an article about investment strategies by generation. And, no matter what generation you are, we invite you to download The SoFi Wealth Investing Guide. This guide provides step-by-step information about investing, including:

•  goal setting

•  understanding tradeoffs between risk and reward

•  learning about different types of investments

•  choosing an investment portfolio

As one more resource, we’ve also created a list of seven investment tips for today’s market. As an overview, they include:

•  Start now, start small: The sooner you start to invest as a couple, the longer you can keep this money invested—which naturally gives it more time to grow.

•  Focus on investing, not on picking stocks: If you’re not comfortable picking individual stocks, that’s okay. You can work with a wealth advisor.

•  Diversify: When you invest in more than one type of investment, you can feel less anxious when the market fluctuates.
Have long-term goals: We covered this earlier in this post, but it bears repeating.

•  Understand your risk tolerance: It’s your money. You’re in control. A quality advisor will work with your risk tolerance, no matter where it falls on the spectrum of conservative to bold.

•  Consult with an advisor: This can help you choose a portfolio of investments that will facilitate your ability to meet your investing goals.

•  Opt for the lowest fees: Investment fees and advisors fees can take a chunk out of earning, so consider choices with limited fees (or even zero management fees).

Investing with SoFi

With SoFi Invest®, you pay zero in SoFi management fees. Absolutely zero. And, you can start online investing with as little as $1. You can also access the SoFi financial advisor team who can help you to create a personalized financial plan.

The curated portfolio will be based on several factors, including your age, assets, and income. We can track your portfolio and adjust it, as needed.

At SoFi, we put your money to work, with benefits including the following:

•  We will work with you to help you achieve goals; that’s because we map out a plan together—and then help you to stick with that plan.

•  We believe in diversification, so we aim to reduce some of your portfolio’s risk by investing in ETFs.

•  When it comes to portfolio selection, we actively manage passive assets to give you the best of both worlds.

•  Plus, we automatically rebalance your investments, as needed.

At SoFi, you can count on real advice from real advisors. Better yet, it’s on the house! You get access to financial planning services with human advisors at no extra charge.

Ready to get started? You can invest with SoFi. Simply make an appointment or call to meet with an advisor.

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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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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.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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Financial decisions. They’re already hard enough as an individual, and even harder to do with another person who has their own independent ideas.

Our relationships with money are a very personal thing. We each grow up with preconceived notions about money and through our own individual experiences develop feelings about money, including how it should be spent and whether it should be saved.

Considering how personal and therefore complicated it already is to make financial decisions on our own, it probably comes as no surprise that doing so with a partner can pose even more of a challenge.

As with any difficult conversation with a partner, deep-seeded personal feelings are involved and that makes navigating money conversations feel tricky. The first step is understanding that financial decision making as a couple may not come naturally, and that’s completely fine! These conversations take practice.

And ultimately, the work is worth it. Arguments about money are the leading indicator for divorce —not disagreements about the children or even a rogue in-law or two. If you and your partner can devise a method for having productive conversations about financial decisions, it could preserve the relationship.

Here are a few strategies to try and ideas to keep in mind when making financial decisions with your partner.

Start Early

This doesn’t mean that you come into a first date armed with twenty questions about a person’s financial life. That would be weird. But it may not be smart to wait until you’re married to talk about money, either.

As your relationship with a person develops, it could be a good idea to make it a practice to talk about money as you would talk about other important factors in your relationship, such as whether you want to have kids.

At the beginning stages, start with easier topics, like who pays for dinner and whether or not you enjoy your jobs. With comfort and practice, you can begin to discuss weightier topics like debt and future financial goals.

The very fact that marriages are dissolving because of arguments over money makes the case for why it is so important to have these conversations early (and often). Not only are you able to practice without the stress of needing to take immediate action, but you can get a feel for how your partner navigates money decisions.

And if you have found that you are with someone who holds wildly different values about money, you may need to consider this before making any further commitments to this person.

Make a Date to Talk

Sometimes it feels easiest to dive headfirst into a big money talk in order to get it the heck out of the way. But this may not be your best strategy. Instead of bringing up the topic of money out of the blue, give your partner some notice.

No one is their best self when they feel caught off guard. A conversation about a tough financial decision will be more productive with two calm, prepared people at the table.

Set a time to talk about the financial decision at hand. Maybe, you’ll even want to make it into a “real” date and treat yourself to a coffee at the local shop or a favorite take-out dinner and wine.

No matter how you do it, the most important thing is that you have a designated time for the talk. This strategy can be applied to discussing one particular financial decision, or you can utilize it on a regular basis.

Write It Out

Sometimes, it’s just plain hard to communicate how you feel. This is especially true for topics that affect us deeply and in confusing ways, like money. If you and your partner are people that like to put their feelings down in written word, consider writing each other a letter prior to your financial “date.”

While this exercise may feel unrelated to financial decision making, it really isn’t. There is important work to be done in laying the groundwork for future conversations. No matter how pragmatic a financial decision may seem, feelings may (understandably) become involved.

In your letter, include some background on how you were raised to think about money, your money stressors, and your financial goals. Focus the letter on yourself and from where your financial beliefs stem.

Not only will this help your partner understand where you are coming from, but it will provide you with some very useful introspection about money and your system of values.

Be Prepared to Listen

When financial decision making, your first priority should not be to explain your point of view. To have a truly productive conversation, you must be committed to listening.

This is good practice in all conversations with your partner and loved ones, but especially when talking about financial decisions.

Here’s the thing about making financial decisions; it’s not usually black and white; there is generally no right and no wrong. Being open to listening often translates into being open to learning.

Not only is your partner’s perspective important, but you might even be able to learn something from them. We’re all learning as we go anyway, and by listening, you have a chance to learn and evolve as a couple.

Be Communicative

One key to a productive and healthy conversation regarding a financial decision with your partner is to communicate your feelings, thoughts, and fears. Something that seems obvious to you may not be obvious to them, so give your partner the grace of explaining yourself in a calm and thorough way.

When you communicate, stick with talking about how you feel regarding a matter and avoid making declarations about what your partner has done in the past or what you’re hoping that they will do in the future.

Making comments about how a person is spending can quickly turn accusatory, making a person defensive. Even when having tough conversations, do your best to remove judgment from the equation.

Also, accept that just because you have explained something to your partner once, that they understand what you mean and where you are coming from. Don’t lose your cool if you have to remind your partner what’s important or a priority to you, especially if that’s not the way they seem wired to operate.

Crunch the Numbers

If you are making a big (or small) financial decision, you and your partner are going to want to sit down and work out a plan. You might find it helpful to have a Google doc or some pen and paper handy so you can write it all down.

Because while it’s one thing to have money goals and plans, it’s another thing to map them out. Take the time to figure out exactly how each financial decision would play out over the short and long term. Break big costs down into monthly numbers. Enact plans for these reaching goals, such as setting up automatic transfers from checking accounts and into savings accounts.

Sometimes, the numbers help guide financial decision making within a relationship. You and your partner can see, on paper, what is possible (and what isn’t). The exercise may provide a new perspective altogether or at the very least, get you on the same page regarding the different options with your money.

If you feel at a loss for what you should be focusing on or how to accomplish your goals, you may want to hire a financial expert, such as a credentialed financial planner. Some financial guidance from a person skilled in financial planning could be just what a couple needs to step up their money game.

Compromise

If you’re in a partnership, you already know that compromise is the name of the game. The good news with money is, compromising is not only possible but often ideal. For example, you do not have to pick just one savings goal to work on at a time. Financial decisions don’t have to be “one or the other.”

Also, know that there is no perfect formula for how a couple makes financial decisions. Just because your best friend and her boo may divide up their finances in a certain way or prioritize working on a particular goal with their partner, it doesn’t mean that you have to do it this way. Part of compromise with your partner is abandoning the idea that your partnership should work like anyone else’s.

Compromise is certainly more difficult when partners disagree about big picture money issues, such as whether saving is a priority or paying off debt is important.

Put Plans Into Action

Once you’ve hashed out your money goals and fears with your honey, it’s time to take legitimate steps towards making your dreams a reality. Use the fact that you have a built-in accountability buddy and set weekly goals for accomplishing tasks.

One such goal should be to start a savings account that exists separate from your checking accounts. It may help you avoid the temptation of spending money that lingers in your account for too long.

You could try a bank account online like SoFi Checking and Savings®. You can use any ATM that accepts Mastercard and we’ll reimburse all of your ATM fees. Best of all? SoFi Checking and Savings has no account fees (fee structure subject to change), which means you can try it out without fear of being overcharged.

You (and your partner) are free to use it in a way that makes the most sense in accomplishing the financial goals you’ve laid out before you.

It’s the perfect option for setting up a new checking and savings account whether you’re doing it solo or jointly with a significant other. A SoFi Checking and Savings account can be used for a specific savings goal, or it can be used as your all-purpose money needs.

No matter your financial goals, take steps towards accomplishing them. You give your relationship the greatest gift of all by turning your financial dreams into reality.

Setting new savings goals with your partner? Merging your finances? Learn more about spending, saving, and earning, all in one product with SoFi Checking and Savings.

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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.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC . SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
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Graduation is an incredible, busy time. In addition to taking their last set of tests, wrapping up final projects, and spending time with friends, college students will probably be applying to jobs and generally preparing for the next phase of life.

Students might even be moving cities and furnishing new apartments. (Or, like many graduates, they’ll just use camping chairs for another two years until they can afford to buy a real couch.) Another item that’ll show up on a student’s end-of-school year checklist is student loan exit counseling . Students with most federal student loan types must find some time to complete exit counseling.

When a student graduates from college, the government wants to arm them with the basics of managing their student loans. That’s because student loans can be tricky to understand; student loan repayment and general financial knowledge are not necessarily intuitive. In fact, the government requires, by law, that students go through student loan exit counseling when they leave college for any reason, including transferring schools or dropping below half-time enrollment.

Here’s what a student borrower should know about federal student loan exit counseling, why it’s important, and where to get student loan exit counseling. Additionally, we’ll discuss what’s not covered in federal student loan exit counseling but could be important for student loan borrowers nevertheless.

What to Expect with Student Loan Exit Counseling

Depending on your school, students typically complete their exit counseling online or through an in-person meeting with a counselor at the school’s financial aid office. Schools may also offer online counseling
programs to review all of the important information regarding paying back student loans. Each student should check in with their school’s website to find out their options.

Generally, student loan exit counseling takes about 30 minutes if completed online. If the student meets with a counselor or has specific questions, it might take longer. Although no one usually loves sitting through a presentation about financial planning, it’s a great idea to take advantage of the learning and soak up as much knowledge as possible.

Before student loan counseling, the student must prepare some information. First, they should know the outstanding balances on their current federal student loans. You can find that here at the Federal Student Aid website .

Also, the student should gather the names, addresses, email addresses, and phone numbers for a close relative, two references that live in the United States, and their employer, if they have one. The Department of Education requires this information in the event that a borrower defaults on their loans and cannot be contacted.

During the online student loan exit counseling the student will also spend some time mapping out their potential salary and living expenses such as rent and utilities, so that they can create an expected budget.

Major Topics Covered in Student Loan Exit Counseling

Here are some of the topics you’ll encounter in student loan exit counseling:

Understanding Your Loans

During this portion of student loan exit counseling, the student receives a summary of their student loans, including total balance, terms and conditions, and the date that the first payment is due.

Next, they’ll cover the interest rates on student loans. Each loan has a set interest rate that depends on the loan type (subsidized, unsubsidized, PLUS, etc.) and the year they’re dispersed; students may want to write these interest rates down so that they can calculate their monthly payments in a later section.

Plans to Repay

This is a very important section. Here, student borrowers will learn all about the rules of student loan repayment. Borrowers typically have control over the repayment plan that they choose, so it is wise to understand the pros and cons of all options. For example, income-driven repayment plans may lower the borrower’s monthly bill (in accordance with their income) but could cost a borrower more over time in interest. Keep an eye out for the major trade-offs between plans.

In this section of student loan exit counseling, borrowers are provided with a number of helpful student loan repayment calculations . Most students going through student loan exit counseling will see calculations that show how expensive it can be to utilize a grace period, because as the interest accrues on a student loan, it is capitalized, which means it is added to the balance of the loan. Yet another calculator shows the borrower how much can be saved by making additional payments.

Here, student borrowers are also provided with logistical repayment information, like who to contact and in what scenarios you should contact your loan service provider.

Avoiding Default

Not paying loans on time and allowing student loans to fall into delinquency could have consequences in many areas of a borrower’s life. Therefore, during student loan exit counseling, there is a large focus on borrowers avoiding default on their student loans. This section will discuss the consequences for both a borrower’s federal loans (such as loss of deferment options) and for career and future income (such as wage garnishment and impact to credit scores).

It will also cover options in the event that a borrower cannot make payments, such as deferment and forbearance, and the pros and cons of each of these options.

This section will also explain federal loan consolidation, student loan forgiveness programs, loan discharge for the permanently disabled, and how to settle student loan disputes.

Prioritizing Financial Planning

The next section is dedicated to financial planning. Here, a borrower’s counselor or online program should discuss budgeting, credit management, identity theft, and other basics of money management. Borrowers are encouraged to consider their short-term and long-term financial goals.

Though very important, the advice and education in this section are typically somewhat light. It might be a good idea for students to make note of the concepts they don’t understand and do some additional work outside of student loan exit counseling.

Repayment Information

Last, a borrower would choose a repayment plan, enter in their new contact information, employer or future employer’s information, and provide the names and contact information of references. The borrower’s loan servicer then reviews the information and provides the borrower with a repayment plan.

According to Federal Student Aid , the borrower is told to list their preferred repayment options, at which point their loan service will make a final decision and assign the borrower a repayment plan.

What Your Exit Counselor Doesn’t Tell You

Student loan exit counseling is necessary and important. It is required of all students with federal student loans. But overall, the program to be pretty light and quick.

Think about it: Some borrowers could have tens of thousands or even hundreds of thousands of dollars to pay back and get just 20 minutes of guidance as they click through some online slides. This information very easily could be part of a full multi-credit course at a university.

Also, there is some important information that a borrower just won’t receive in exit counseling, and that’s information on how to handle their private student loans. While there are some similarities, private student loans will have many of their own nuances that are imperative to understand.

For example, private loans determine their own repayment plans and generally don’t offer deferment or forbearance options, and they may or may not allow for advance prepayment on a loan.

Federal student loan exit counselors and programs generally do not cover student loan refinancing. Refinancing is the process of paying off student loans—both federal and private—with a new loan, ideally at a lower rate of interest.

Refinancing could help potentially lower borrowers’ interest rates and consolidate multiple loan payments into one. Compare this to federal loan consolidation, a program offered through the government that simply takes a weighted average of the existing loans’ interest rates.

With refinancing, the borrower pays off your government loans with a private loan, so refinanced loans are not eligible for federal repayment programs such as income-driven repayment, deferment, and public service loan forgiveness.

For borrowers who have no plans to use these programs, it may be worth considering refinancing. You may qualify for a better interest rate through refinancing if your credit score or financial situation has improved since you initially took out your loans as a student.

Regardless, it is a great idea to go into student loans exit counseling with a clear head, ready to lap up as much information as possible. Paying back your loans is no small feat, so it will be so worth it to do some hard work up-front to make the rest of the process as smooth as possible.

See what rates you qualify for with SoFi student loan refinancing. It costs nothing to check and takes as little as two minutes.

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Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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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Perhaps you’ve found your dream home, or maybe you’re still in the exciting stages of looking for the house you want. In either case, you’re likely thinking about getting a mortgage loan—and you may be wondering if the amount of debt you currently have will become a stumbling block to qualifying for a mortgage.

To qualify for a mortgage, a lender needs to be confident that you can responsibly manage the amount of debt that you’re currently carrying along with a mortgage payment. The formula used to determine that is called a debt-to-income (DTI) ratio.

More specifically, a DTI ratio is the percentage of your qualifying monthly income, before taxes, that is needed to cover ongoing debts. This could include student loan payments, a car payment, credit card payments, and so forth. If the DTI ratio is too high, then a lender may see you as a higher risk.

This post will describe DTI in more detail, including how to calculate yours, what lenders typically like to see, and what might be too much debt to buy a house. We’ll also share strategies to manage your debt and lower your DTI ratio to help you qualify for the house of your dreams.

Understanding How Your DTI Ratio Can Affect Your Mortgage Options

The DTI formula is pretty simple. First, make a list of all your debts with recurring payments. Then, if you’re a W2 earner, take your pre-tax monthly income and divide your monthly expenses by this amount. That percentage is your DTI ratio .

Note that, with a mortgage, to calculate your DTI ratio, you’ll need to have a reasonable estimate of monthly property taxes on the home, insurance (homeowners, for sure, and PMI and flood insurance, if applicable), and HOA dues, if applicable. Even if you wouldn’t necessarily pay those bills on a monthly basis, you’ll need the bill broken down into a monthly amount for DTI calculation purposes. (And remember these are just examples. Your actual DTI, as calculated by a lending professional, may differ.)

If your debt-to-income ratio is too high, it can impact the type of mortgage you’ll qualify for. Each mortgage lender will have their own preferred DTI ratio, of course, and lenders can and do make exceptions based on your unique financial situation. Here’s an explainer on desirable debt-to-income ratios from the Consumer Financial Protection Bureau.

Preparing for When You Need a Mortgage

If you know you’ll want to buy a house within, say, the next year or two, it can be beneficial for you to understand how much home you can afford. This will give you time to manage your finances to make getting a mortgage approval easier. Perhaps you can’t pay off all your debt in that time frame, but there are strategic moves to make to position yourself better when mortgage time is upon you. In addition, consider reviewing our home buyers guide to get a better understanding of everything you need to prepare for your mortgage.

First, be careful. There are plenty of debt-related myths, but let’s address two debt-related realities:

1. Having a lot of debt in relation to your income and assets can work against you when applying for a mortgage.
2. If you are consistently late on debt payments, lenders may question your ability to pay your mortgage on time.

Here are a few tips that can help with some of the most common debt challenges:

Student Loan Debt

If you’re looking to take control of your student loan debt, consider refinancing your student loans into one new student loan with a potentially lower interest rate.

This can make paying back your loans easier, because there is just one monthly payment to make. Plus, with a (hopefully) lower interest rate, you can pay back less interest, overall. And, if you’re concerned about your monthly DTI ratio being too high when you go to apply for a mortgage, you may be able to refinance your student loan to a longer term for lower monthly payments, to reduce your current monthly DTI ratio. (Keep in mind, though, that extending your loan term may mean paying more interest over the life of your loan.)

When you refinance at SoFi, you can combine federal loans with private ones, something not many lenders permit. Request a quote online to see what you can save. Note that SoFi does not have any application fees or prepayment penalties.

Credit Card Debt

When you have a significant amount of credit card debt, the monthly payments can negatively impact your DTI ratio.

If you’re concerned about managing credit card debt payments while paying a mortgage, you could even consider focusing your efforts on getting out of credit card debt before you start the homebuying process.

To manage your credit card debt, and ultimately eliminate it, here are a few debt payoff methods to consider

•  The snowball method. List your credit cards from the one with the lowest balance to the one with the highest. Then, focus on paying off the one with the smallest balance first, while still making minimum payments on the rest. When that first card is paid off, focus on the next one on your list and so forth.

•  Tackling high-interest debt first. Using this method, you list your credit cards from the one with the most interest to the one with the least. Then, focus on paying off the credit card with the highest interest while making minimum payments on the rest. Then tackle the next one, and then the next one.

•  Consolidating credit card debt using a personal loan before you apply for a mortgage loan. When you do this, you’ll have just one loan, and personal loans typically have lower interest rates than credit cards (if you qualify). Ideally, keep credit cards open while only using them to the degree that you can pay off in full each billing cycle. And as with all debt payments, make all personal loan payments on time.

By reducing and managing your credit card debt, you can better position yourself for a mortgage loan on the house of your dreams.

Consolidating Your Credit Card Debt with a Personal Loan

Ready to consolidate credit card debt into a personal loan? SoFi makes it fast and easy, and it only takes minutes to apply. Plus, our personal loans have the following perks:

•  Low rates

•  No fees

•  Access to live customer support seven days a week

•  Community benefits; ask about how, if you lose your job, we can temporarily pause your personal loan payments and help you to find a new job

We look forward to helping you achieve your financial goals and dreams. Learn how a personal loan from SoFi can help.

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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 Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the
FTC’s website on credit.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or 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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Hard as this may be to imagine, 75 years ago, we didn’t have anything like today’s modern credit cards. Nowadays, studies are conducted annually to monitor the rising average credit card debt in our country, and this figure is seen as an indicator of the economy and of people’s individual spending habits.

It wasn’t as easy to buy what you needed in the pre-credit card era, and this form of payment has important benefits, including giving users a short window of time to make purchases on credit without paying interest on the balance.

But, the ease of credit card use also makes it ultra-easy to build up a mountain of debt, and the credit card debt spiral can be especially challenging to break. We’ll share more about why that’s so, later on in this post, along with tried-and-true methods to get out of this unwanted spiral of debt.

First, though, we’ll answer two commonly asked questions:

•  What is the average credit card debt this year?

•  How can I get out of credit card debt?

What is the Average Credit Card Debt This Year?

BusinessInsider.com reported on a 2018 study that shared how more than 40% of households in the United States have credit card debt, with the average household having a balance of $5,700. This average varies by where exactly you live in the country.

On the one hand, the percentage of Americans who have credit card debts has been decreasing for the past 10 years. On the other hand, when looking at people who do have this kind of debt, the average amount has been increasing.

Related: What is the Average Debt by Age?

From an economic standpoint, this is useful information to have. This data can also be helpful in allowing you to place your own financial situation into context. And if you’re unhappy with the amount of debt you’re carrying, the real question is how to get out of credit card debt. Fortunately, we’ve got plenty of insights and solutions to share.

First, let’s take a closer look at that average amount of credit card debt: $5,700. This takes into account every household, about 40% of which are in debt. However, if you just count the households in debt that don’t pay off their balances every month, that average debt increases to $9,333.

If you don’t have the means to pay the debt balance off all at once, then as you’re making payments interest keeps accruing, often compounding daily. So, it can be challenging to pay down that debt, especially if you’re making minimum payments or an amount that’s not significantly more than the minimum.

Here are a few more credit card facts to consider:

•  About one in every five adults in the United States has a credit card balance that’s higher than the amount of funds in their emergency savings accounts.

•  Men have, on average, higher credit card balances than women do, about 22% more.

•  About 68% of Americans have credit card debt when they die, on average $4,531. Compare that to the number of people who have mortgage loans when they pass away (37%) and those who have car loans (25%), and you can see how prevalent credit card really is.

Rising credit card debt can be exacerbated when there isn’t an emergency savings account to fall back on, and our cultural climate of consumerism, one where more is always better, doesn’t help.

If you no longer want to be average in the amount of your credit card debt, meaning you want to get out from underneath your debt, there are solutions.

Tips to Get Out of Credit Card Debt

To break the cycle of debt, it’s important to reverse engineer how it works and understand what makes it so challenging to get out of. Credit card companies typically compound interest, which means that interest accrues on the debt, and then you also pay interest on the interest.

Related: What is the Average Credit Card Debt for a 30-Year Old?

To make the situation even more challenging, interest is sometimes compounded daily, and so it’s easy to see how interest can quickly add up. This is true especially when you make minimum payments. It’s even true if you pay more than what’s owed as a minimum payment, but still have a remaining balance. If you’re late on a payment, you’re often charged a late fee, which is added to your balance—and then you’ll owe interest on that new total amount, as well.

So, What Can You Do?

Here are four methods to consider to ultimately pay off your high-interest credit card debt. You can choose the strategy that fits your financial philosophy and needs best, continue paying on all your debts, and then focus on not adding to your credit card debt as you pay down what you currently owe.

Choices include:

•  Debt snowball method: Using this method, you’d rank your credit card debts by outstanding balances. Then, focus on paying off your smallest debt first, and use the sense of accomplishment you’ll feel to fuel your motivation going forward. Then, pay off the smallest of your remaining debts, continuing until you’ve paid off your credit card debt entirely. A Harvard Business Review study showed that people using this method tend to pay off their credit card debts the quickest.

•  Debt avalanche method: In this method, you’d rank your credit cards by the interest rate charged. Then, focus on paying off the card with the highest interest rate first, and then the next highest and so forth. This is also known as the debt-stacking or ladder method.

•  Debt snowflake method: As a different strategy, you can use any extra money collected—from gathering change to a side gig—to pay down your credit card balances.

•  Debt consolidation method: Using this method, you would consolidate your credit cards into one debt, with low-rate personal loans/a>. You can potentially reduce your interest rate by using a personal loan and streamline the number of bills you need to pay monthly.

Here’s another idea to consider. What has been billed to your credit cards that you don’t really need? It’s pretty common to subscribe to a service you think you’ll need but don’t use, or one that you’ll need for a short period of time only.

Yet, until you cancel that service/subscription, the monthly charge will keep getting added to your credit card balance. So, review those monthly charges and consider tools that help identify places you can cut back on expenses.

Personal Loans with SoFi

If, as part of your financial plan, you’ve decided to apply for a low-rate personal loan to consolidate your credit card debt, there are numerous reasons why SoFi could be a great choice. This includes:

•  We don’t charge an origination fee.

•  We don’t charge any prepayment penalties.

•  We make it fast, easy, and convenient to apply for your personal loan online.

•  Live customer service support is available every day of the week.

•  If you lose your job, we can temporarily pause your payments—and even help you find a new job.

•  You can find your rate in just two minutes’ time!

Ready to get started? Apply for your personal loan at SoFi today!

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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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the
FTC’s website on credit.
No brands or products 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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