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You did it. All those countless hours devoted to classes, late-night study sessions, and college entrance exams have paid off. That’s right, you’re going to college!

Chances are you’ve been working toward this goal for most of your life, so you deserve a major pat on the back. Bask in this moment, because once that post-acceptance glow wears off, you may be faced with some big decisions that you aren’t all that eager to make. Namely, how to be a great student loan borrower.

No matter how much you plan or how many pennies you and your family pinch, these days it’s pretty difficult to save enough to pay for school without the assistance of loans. If it provides any comfort, know you aren’t alone when it comes to facing large amounts of student loan debt once you graduate.

The average student borrower has about $37,000 in loans and as of August 2018, there were 44 million student loan borrowers in the United States. Luckily, there are ways you can prepare to manage your future student loan debt and receive some help along the way.

Understand the Cost of Your Education

When choosing where to study, you’ll have to make a lot of important decisions. Do you want to attend a liberal arts school or one that focuses on S.T.E.M. subjects? Would going to a university in a big city help you find that dream internship or would you better thrive by staying closer to home?

In an ideal world, you would make your education decisions based off many factors, but cost wouldn’t be one of them. Unfortunately, most soon-to-be college students need to consider the cost of their degree and living expenses before choosing which school to attend.

It’s not a factor to consider lightly. Before you make a final decision, you need to sit down and map out what each of your education options (including living arrangements) could cost you.

That calculation should include interest as well as costs like textbooks, meal plans, parking, sundries, and more. Most universities will map out estimates of school supplies, dorm fees, and other expenses students should anticipate while enrolled. If you’re planning on traveling for a semester abroad or pledging a fraternity or sorority, you’ll need to account for those expenses as well.

There are also ways you can plan to shorten your time at a costly university in order to keep your loan total lower. One less expensive option to consider is starting at a community college for your lower division coursework. If a community college isn’t the right fit full-time, you can always pick up elective credits at one during the summer for a fraction of the cost a typical private university would charge.

Know Your Student Loan Options

Fortunately, this step isn’t too difficult, as there are really only two overarching types of student loans: federal and private. All federal loans are backed by the federal government. Loans that are considered private are often backed by banks, credit unions, or other private lenders.

You can typically expect private student loans to have higher interest rates than federal loans. Federal student loans have fixed interest rates, meaning the interest rates don’t fluctuate post-graduation, whereas private loan interest rates can sometimes be variable, which means the interest rate can increase (or decrease) in accordance with the market if you choose a variable rate loan.

Federal loans require you to be enrolled in school at least half-time in order to be eligible and don’t require you to pay the loan until after you leave school. In fact, a post-graduation grace period of six months is usually provided to allow time for you to find work and get settled.

Private loans are an avenue that can be utilized if federal loan options have been exhausted. If you do find you don’t receive enough in federal loans in order to cover your tuition and other expenses during school, private loans could be a viable option.

Apply for Aid

Once you’ve decided on a school, your next step will likely be applying for financial aid and scholarships. Begin your financial aid and scholarship search by rounding up all the programs you might be eligible for, and keep track of each application deadline in a spreadsheet, your calendar, or both, so you don’t miss any.

You can also contact the financial aid department of the school you are enrolling in, since their office will likely know the best student loan resources available to you. They’ll most likely be happy to help you in any way that they can through the application processes.

The Department of Education has a great online resource to begin your financial aid search, starting with completing their Free Application for Federal Student Aid (FAFSA®) form, which is required for federal student aid like grants, work-study programs, and federal student loans.

Understand Your Post-Grad Repayment Options

Right now, repaying your student loans is a ways off. But before you sign on to borrow student loans, it helps to know how you’ll pay them back after you graduate.

If you have federal loans, you’ll likely be put on the standard 10-year repayment plan after graduating. If you’d prefer a lower monthly payment, federal loans also offer income-based repayment plans that private student loans don’t. And don’t forget, federal loans also typically come with a six-month grace period.

If you’re in a good financial place after graduation (or after you’ve worked for a few years post-college), student loan refinancing could also be a smart way to repay your loans. Whether you have federal or private loans, refinancing can help consolidate your loans at a potentially lower interest rate.

This new interest rate will be based off of your financial picture when you apply. The lower your interest rate is, the less you’ll spend on your loans. SoFi can refinance both federal and private loans, as well as offer fixed and variable interest rates.

Student loans can get complicated—SoFi is here to help. From helping you finance your education to helping you get out of your college debt, we’ve got you covered.

Check out what kind of rates and terms you can get in just a few minutes.

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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 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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If the thought of sitting down to make a budget is overwhelming to you, you’re not alone. One poll found that only 32% of Americans maintain a household budget.

It makes sense. We’re all crazy-busy, and already spend more than enough time in front of our computer and telephone screens. Very few people get excited to come home and budget after a long, exhausting day at work.

Some folks may avoid building a budget because they don’t know where to start. Others may be struggling with finding the motivation to sit down and do it.

For those that don’t know where to start, here’s your first step: Track your spending. It is impossible to build a meaningful budget if you don’t know where the money is going in the first place. (Building a budget requires you assign dollar figures to spending categories, which you’ll need some sense of first.)

If you’re struggling with motivation, we’ll also cover the five reasons you should track your spending, along with some tips on how to track spending and ultimately, build out a budget plan.

Identify Areas That You’re Overspending

In every person’s spending hides some sort of gremlin, busting up budgets while lurking around completely unnoticed. And there’s no way to uncover the problem without spending some real time looking at the numbers. The truth is, spending is so easy and frictionless these days, that it’s nearly impossible to do mental accounting on how much we’re spending in each category and overall.

It’s not uncommon to hear stories about people who are tracking their spending for the first time who realize they are spending hundreds more in certain categories than they had anticipated.

For example, lots of people find they are spending more than they expected on dining out, Starbucks, groceries they don’t use, or shopping. Sometimes, the act of daily or weekly tracking alone inspires people to spend less.

What’s Measured Gets Improved

When it comes to spending less and saving more, the old adage holds true: what’s measured is what gets improved. There’s hardly a way to make meaningful change if you have no benchmark for which you can build from. Say, for example, that you want to spend less on dining out. That’s great, but how can you spend less, if you don’t know how much you spend now?

Only after tracking your spending for a time can you begin to build a meaningful budget. Think about building a budget without knowing how much you spend in each category! There would literally be no point.

For example, say that you guess that you spend $100 on gas each month. But if you had actually tracked your spending, you would know that you get gas once/week, and it costs $40 each fill. Really, you need to budget $160 for gas each month (or slightly less, if you are trying to reduce gas spending).

Feel Inspired to Make Eliminations

The shock of seeing how much you’re spending (and on what) may be the inspiration you need to make real changes. And perhaps these changes extend beyond simply nixing the daily Starbucks habit.

Use that motivation to eliminate unused subscriptions, to work on lowering your gas or phone bill, to cut out entire spending categories, to take public transportation more, or to consider more drastic measures—like getting a roommate or moving into a more affordable place.

Change is never easy to make, but it’s best to use the spark of motivation you first have when you realize that there are plenty of ways to cut back.

Give Yourself the Freedom to Spend on What You Love

Sure, budgeting can feel restricting at first. But eventually, you may come to find that budgeting gives you both peace of mind and the freedom to spend on exactly what you love.

Without a budget, it is possible to feel anxious every time you swipe your card, not sure if you can really afford this thing. With a budget, you can make a purchase knowing that you planned for it and that the money will be there.

Here’s what a lot of people get wrong: the tracking of spending doesn’t have to result in the diminishment of your pleasure. Instead, it’s about looking at how you spend, and assigning priority to those different expenses.

Ask yourself this question: In retrospect, was that purchase worth it? And what purchases weren’t? Again, eliminate the categories that don’t bring you utility or joy, keep the ones that do, and never hesitate to spend on those items again. Tracking and budgeting allow you this freedom.

Build Saving Into Your Plan

If you want to build savings into your monthly financial plan, but can’t imagine how, you have to begin by tracking your spending. Identify areas that you can cut back in so that you are then able to re-allocate those funds to your future.

Once you have found some spending categories where you can give yourself some leeway, practice moving that spare cash into a savings account at the end of the month.

After a month or two of this, you’re ready to truly build savings into your budget, through automation. To do this, set up an automatic transfer of funds from your account, scheduled a few days after your paycheck hits.

Now, you can do as Warren Buffet says: “Do not save what is left after spending, but spend what is left after saving.” Building automatic saving into your monthly financial plan is always best, but monitor to make sure you don’t overdraft your account.

Tips and Tricks On How To Track Spending

Start By Gathering Account and Income Information

If you want to make a personal budget and keep track of spending, your first step is to know exactly where money is moving both to and from. Gather up information on checking accounts, credit cards, online mobile transfer accounts (like PayPal), and so on. Organize your information and make sure that you can log into all of your accounts.

While you’re at it, make sure that you have all sources of income accounted for. Know what these figures are both before and after income and other taxes. It will be up to you whether you budget with after-tax income or pre-tax-income (and consider taxes a line item in your budget), but start with both figures.

Track Last Month’s Income

Instead of starting in the middle of the month, begin by looking at the most recent full month’s worth of spending. Practice putting money into categories like groceries, entertainment, dining out, bills, etc.

You may want to practice doing this in a few different ways. A good way to start is by downloading all of a month’s spending into a spreadsheet. (This should be an option provided by your bank, usually under the “statements” tab or something similar.)

This method requires more upfront work, but forcing yourself to sit with the numbers and manually identify transactions is an important skill to learn. You can also switch to using an app like SoFi Relay.

Determine Your Categories

After looking through last month’s spending and putting transactions into categories, determine how much you’d like to spend in each category. These categories can be as broad or as narrow as works for you and your budgeting style. Don’t forget to account for expenses that don’t happen monthly (like semi-annual car insurance payments) and incidentals.

Increasingly, folks do their shopping at stores like Target or on Amazon, where spending doesn’t fit nicely into one category. During one trip, you could easily buy groceries, toiletries, clothes, and furniture. This makes it hard to budget by category. In that case, consider giving yourself a budget by store.

Get Into A Groove

Maybe you’ll continue to update your spreadsheet with downloaded information from your account, and this is the tracking method that you’ll stick with forever.

Perhaps you’ll find something that you like better, such as app or program. To figure it out, you’re going to have to try it all out. This will be hard in the first few months—give yourself the space to feel frustration—but know that it does get easier over time. The good news is that money-tracking technology is getting better and more helpful and there are many solutions you can check out.

SoFi Checking and Savings

SoFi Checking and Savings^® is one option to check out. It is a bank account online that comes with a dashboard that provides weekly expense tracking and members can earn up to 4.60% APY.

After a few months of tracking, you’ll have a better idea of how to put purchases into categories that work as part of a bigger budgetary system. For most people, this will be the hardest part, but it will be worth it. You’ll get into a groove, feel in control of your spending, and finally be able to say, “I am confident in my ability to keep track of my spending.”

Get started with SoFi Checking and Savings to keep track of your expenses.

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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 members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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

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

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

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

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

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.

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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.

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.
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.
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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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