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Living on your own can be expensive, especially these days, thanks to inflation and a scarcity of housing. Add to that the fact that when you’re younger, you tend to have a lower income, and it can be a major financial challenge to afford living on your own.

That said, it is certainly possible to afford moving out of your parents’ place. The key is to start planning and saving well in advance of your intended move. As a general rule, you want to have enough put aside to cover your upfront moving costs and three months’ worth of rent and living expenses saved up before setting off on your own. That may sound like a tall order, but these tips and strategies can help you get there.

How to Financially Prepare to Live on Your Own

One of the most important first steps in getting ready to move out is determining how much it’s going to cost. Once you come up with a ballpark figure, you can determine a realistic timeline, then start setting aside a portion of every paycheck into a savings account that pays a competitive rate (such as a high-yield savings account) earmarked for your move.

Upfront Costs and Regular Bills

Let’s say a friend clues you in on a great deal on an apartment rental and says to hurry and get an application in. Just a minute, please! Before you can move out, you need to make sure you can truly afford to do so.

Start your research by tallying up all upfront costs and regular bills you’ll need to pay, such as rent, auto and renters insurance, utilities, cell phone service, health insurance, transportation, and groceries. After calculating all necessary expenses, see how much room is left in your budget for extras, such as dining out or traveling.

Also consider the one-time hits your finances will take when you head out on your own: There may be broker’s fees, moving expenses (more on that in a minute), and other charges, as well as the price of buying furniture and other items for your home.

By looking at your budget this way, you can get an idea of whether you can comfortably afford to move out or if you need to wait a little bit longer to make a move work financially. You want there to be some breathing room in your budget so you don’t wind up putting necessities on your credit card and racking up debt.

12 Steps to Afford Moving Out

Now that you have an overview of costs and expenses, it’s time to take the next step and drill down on understanding what you can afford, when you’re ready to move out, and how to navigate a move more smoothly.

These steps can help you get your own place without going broke.

1. Assess How Much Rent You Can Afford

As you plan this big step in adulting, you are likely focused on how much rent you can pay. You’ll want to come up with a range of how much rent you can take on while still managing your other necessary bills, such as student loans, health insurance, and car payments.

It’s a good idea to tally up all your expenses and subtract that from your monthly after-tax income to see how much room is left in your budget and if the amount you can afford to pay is doable in your area. If you’re feeling as if you can’t quite come up with the necessary rent, you may want to consider how to move to another state or a nearby city that’s more affordable.

2. Consider Getting a Roommate

If it’s too hard to afford rent all on your own, you can think about having a roommate to help share the expenses. Having a roommate can also make moving out for the first time feel less lonely.

3. Research Homes and Locations

Speaking of rent: Whether you plan to rent or buy when you move out, you’ll want to do some research on different housing opportunities in different areas. That way, you can see where you can get more bang for your buck while still meeting your personal goals.

For instance, if you really value having a short commute, you might search for a studio instead of a one-bedroom apartment in the neighborhood you are targeting if one-bedroom units are pricey. Or if you’re hoping to rent a house, see what kind of prices you find in a neighborhood that’s adjacent to the one you are targeting or choose to go farther afield. You might find better deals due to more housing supply.

Recommended: Tax Breaks for Young People

4. Research the Cost of Movers

If you have a fair amount of things to move, it’s important to budget for the cost of movers. Yes, a friend with a van may be able to help with some smaller items, but things such as a queen-size bed typically require movers.

Depending on how much you have to move and how far the move is (25 miles? 250?), your costs could be a few hundred or thousands. Ideally, you’ll want to get a couple of estimates from companies that come and actually eyeball how much you have.

Also, be sure to find out whether moving materials are included as you create your moving checklist. You may well be charged for boxes, wardrobes, tape, and moving blankets. In addition, it’s a good idea to inquire about “drive time” to and from your locations, which you may be billed for.

5. Don’t Make Any Excuses

It’s common to think, “I can’t afford to move out” or “Rentals are hopelessly expensive,” and give up (or at least procrastinate for a good long time). But if there’s a will, there’s usually a way. Finding your motivation and patience can be crucial to taking this step and getting your own place.

It’s common to get complacent when moving forward feels hard. If you do have to remain living with your parents or another family member while you save up to move out, keep your eye on the prize. Set up alerts for new home listings, put the word out that you are hunting for a home of your own, and keep saving and making career progress so you can attain your goal of moving out.

You might chat with friends or friends of friends to get their advice on making your independent living dreams come true. They may have valuable hacks for you, too.

6. Have an Emergency Fund Saved Up

One way to ease the financial stress of moving out is to have an emergency fund ready and waiting. That way, when you do move out on your own and hit an unexpected (and major) expense, you will have a financial cushion available to help you out.

How much should you have in an emergency fund? Many financial planners advise having three to six months’ worth of basic living expenses stashed away (a high-yield savings account can work well). Figure out what that amount would be with the housing costs you expect to pay, and begin saving. Even $25 or $100 a month is a good start to get that layer of protection going.

7. Track Your Spending

When you are considering moving out for the first time, it’s wise to track your spending for a month or two. This will give you an idea of how much you tend to pay out each month, which can help you get a better idea of how much rent you can afford. For instance, how much do you typically spend on gas? On your wifi provider? On eating out? As you look at these costs, you may be better prepared to know your budget once you are also paying housing costs.

Looking at your outflow of cash can also help you cut back on nonessential spending. For instance, you might realize you are spending over $100 a month on those iced coffees to go.

8. Budget for Home Needs

Figuring out how to move out with low income can be tricky. One hidden expense that is often forgotten about when budgeting for a move is home needs. Cleaning supplies, furniture, and appliances are expenses mom or dad may have taken care of in the past. Soon, they will be your responsibility. Consider how much that will cost and budget for it.

Also, if you are planning to buy a home instead of rent, budget for property taxes, home maintenance, and repairs.

9. Look for Cheaper Options on Furniture

When you are first starting out, you don’t need to splurge on expensive furniture. Thrift stores, garage sales, and inexpensive retailers can all get the job done. Freecycle and other similar sites (or Facebook and Nextdoor groups) can yield no- or low-cost furnishings, too.

Over time, you’ll likely be able to swap those inexpensive finds out for higher-quality pieces of furniture.

10. Manage Your Finances

To make moving out possible financially, it’s a good idea to keep a close eye on the money coming in and out each month. You’ll want to take some time to get all finances in order and to create a budget for this new chapter. Learning to manage money is a big step toward independence. It will have you that much more prepared for on-your-own living.

Your bank may well have an app that can help you track your incoming funds and your spending, which can help with this endeavor.

11. Set a Moving Timeline

Once it’s clear that a move is affordable, create a final timeline for finding a place to rent or buy and then moving in. Block out weekends for home hunting, and note how long before your move you want to get quotes from moving companies.

If you still need to save a bit more money, you can extend this timeline to include saving for a few months.

12. Be Realistic

It can take time to build the life you dream of, so don’t sweat it if your first home isn’t all that glamorous. Part of the fun of life is figuring things out and evolving over time. Many people have had first apartments that they still fondly look back on, despite how tiny, dark, or inconveniently located they may have been.

The best things in life often take time to fall into place, so be patient as you pursue your financial and lifestyle goals.

Prioritizing Financial Independence Over Savings

Many young people feel stuck at their parents’ place because the finances of this situation make it possible to save on rent. They worry about moving out and not being able to save as much as they used to.

While there’s some truth to that point of view, understand that, yes, money is likely to be tight at first, but that is part of this rite of passage. Granted, you may not be able to save as you did before, but you can likely sock away a bit of money in savings (through your employer and/or into an emergency fund, perhaps) and begin to build your credit history, too.

It’s a big leap, but remember that your income will probably rise over time and help you save. Plus, living away from your parents can help you build your budgeting skills and financial savvy.

The Takeaway

Moving out on your own is a big step, but careful planning can make it more manageable. By knowing what you can afford, building savings, and making thoughtful choices along the way, you can create a solid financial foundation for this next chapter. If you’re saving up for a major expense like a move, SoFi can help.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How much money should you have saved before moving out?

How much money you’ll need to move out varies from person to person. One rule of thumb is to save up at least three months’ worth of rent and living expenses, plus upfront costs, before moving out of a parent’s or family member’s home.

How do you move out when you can’t afford it?

It’s important for your financial health to not move out until you can afford to do so. To get to that point as quickly as possible, consider saving some of every paycheck and putting it in a savings account earmarked for your move. You might also want to look into sharing expenses with a roommate or perhaps taking on a temporary side hustle to earn extra income.

How do I know if I’m ready to move out?

You can get an idea of whether or not you’re ready to leave your parents’ place by calculating how much it will cost to live on your own. Sometimes, it’s just a matter of having a sufficient amount of income and savings. If you can afford to pay for rent and other necessities, plus have some fun (such as the occasional movie or dinner out), and you’ve built up some emergency savings, then you may be ready.

Photo credit: iStock/Hache

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Wholesale clubs or warehouse clubs offer shoppers the opportunity to buy items in wholesale quantities at discounted prices, typically in exchange for an annual membership fee.

Shopping wholesale is a tactic favored by the frugal and thrifty since, in theory, bulk buying usually results in a lower unit price. But are wholesale clubs worth it? Can you truly save enough to make it worth the annual fee, not to mention the massive packages of soap and cereal in your closets?

Understanding how warehouse club shopping works can help you decide if it makes sense for you. Read on to learn the pros and cons of wholesale clubs.

How Does a Wholesale Club Work?

A wholesale club works by offering consumer goods in large quantities at wholesale prices. So, rather than buying a 6-pack of toilet paper for $8.99, you might have the opportunity to purchase 30 rolls in a single package for $29.99.

You don’t have to do too much math to see that you typically save money by buying in bulk. But you might be wondering how wholesale and warehouse clubs make money if they’re charging low prices for their items.

One of the main ways these clubs make a profit is through annual fees. The wholesale club gets your membership fee, and in exchange, you get to buy items at a discount. Some wholesale clubs even offer additional incentives, such as discounts on home and auto insurance.

Wholesale Clubs vs Grocery Stores

Wholesale clubs and grocery stores differ in a few ways:

•   Selection: While both can offer food, household items, and pet care items, the range of products available at a wholesale club may be different than what you’re used to at a grocery store. For example, you may be able to find frozen vegetables in bulk at a wholesale club, but you’ll need to hit the grocery store for fresh veggies.

•   Sizing: Instead of buying one can of crushed tomatoes for pasta sauce at a grocery store, you might be buying a case of eight at the wholesale club. Or the 48-ounce orange juice you buy at the grocery store may only be available in a 96-ounce size at the warehouse club.

•   Membership: Grocery stores don’t charge membership fees. Anyone can walk into a grocery store and shop. Without a membership pass, however, you generally won’t be able to shop at a wholesale club. Not having to pay a fee might appeal to you if you’re used to grocery shopping on a budget.

Factors That Determine if a Wholesale Club Is Worth It

While many people enjoy shopping at warehouse clubs, these retailers aren’t necessarily right for everyone. If you’re debating whether joining a wholesale club makes sense, here are some factors that can determine if it’s worth it to you:

•   Membership fee: The first thing to consider is the fee you’ll pay to shop. If you can’t make the fee back in savings, then a wholesale club might be a waste of money.

•   Discounts: To gauge how much savings you might net, you’ll need to look closely at the size of the discounts. This can involve a little homework, as you’ll need to compare unit prices for the items you typically buy at the grocery store to unit prices for the same items sold at wholesale clubs.

•   Time savings: In addition to the financial aspect, consider whether shopping at a wholesale club would save you time. Will you be able to get in and out quickly and make fewer trips by buying in bulk? Or will you eat up an entire day wandering the aisles of a giant warehouse full of stuff?

•   Returns: If you change your mind about a bulk purchase, it’s important to know whether you’ll be able to return it and get your money back. What if you buy a 12-pack of laundry detergent and discover it’s not the unscented kind you like? Would you be stuck with it? Different wholesale clubs have different policies regarding what they will and won’t take back.

•   Usefulness: Buying 20 apples or 4 pounds of quinoa at rock-bottom prices might seem like a deal, but it’s important to consider how much use you’ll get out of those items. If you don’t frequently eat or use the things you’re buying in bulk at a wholesale club, then you’re essentially throwing money away.

•   Extra savings: Aside from potentially saving money on food and other items, consider whether you can get a break on anything else you typically buy. For example, some warehouse clubs sell gas at prices that are typically several cents lower than regular gas stations. You might also be able to pick up complimentary samples of items or, as mentioned above, get discounts on home and auto insurance.

If you only plan to hit the warehouse club every few months, then you might not get the full range of benefits from your membership. On the other hand, if you’re a more regular shopper with a large family, a wholesale club membership could pay itself back (and beyond) in savings.

Advantages of a Wholesale Club

If you’re wondering what are wholesale clubs good for, consider some of the benefits that come with membership.

Lower Prices and Bargains on Certain Products

One of the chief selling points of wholesale clubs is their prices. Wholesale clubs can limit markups on products by selling them in bulk (and charging membership fees). So while a grocery or regular big-box store might mark up items 25%-50%, a wholesale club might cap its markup at 15%.

Wholesale clubs may also offer special deals on certain items that can’t be matched anywhere else. For example, you might be able to take advantage of online-only exclusive coupons or savings.

Brands Can Be Higher Quality

You might assume that just because you’re buying items in bulk or at discounted prices at a wholesale club, they’re cheap and perhaps not top-notch. That’s not necessarily the case. Warehouse clubs can and do sell quality name-brand items. This is not limited to grocery or household items. You can also find brand-name tires, electronics, and appliances for sale at wholesale clubs.

Having Access to Services

If you’ve never joined a wholesale club, you might not be aware that they can offer services beyond just shopping. For instance, you might be able to order checks through your wholesale club, get pet insurance, sign up for identity-theft protection, get a garage-door opener installed, or get business cards printed at discounted rates through your membership.

Depending on the club, you might also be able to get access to car-buying programs, vision and hearing-aid services, banking services, or home renovation and repair services or receive special discounts on travel. All of these things can help to increase the value that you’re getting in exchange for your membership fee.

Disadvantages of a Wholesale Club

Shopping at a wholesale club can take some getting used to if you’re primarily used to shopping at grocery stores or big-box retailers. And there are a few potential drawbacks to know before signing up.

Membership Fees

As mentioned, one thing that sets wholesale clubs apart from other retailers is the membership fee. The amount you pay and the perks the fee unlocks will depend on which club you join.

Here’s how the fees compare at three of the top wholesale clubs in the U.S. for basic and premium plans:

•   BJ’s: $60/year for Club Card Membership and $120/year for Club+ Card Membership

•   Costco: $65/year for Gold Star Membership and $130/year for Executive Membership

•   Sam’s Club: $60/year for Club Membership and $120/year for Plus Membership

Keep in mind that you’re not limited to joining just one club. But you’ll need to pay each one’s membership fee. And you generally need the higher-tier membership to take advantage of the full range of features and benefits a wholesale club offers.

Having to Buy Many Items in Bulk

While not every item is sold in bulk at a wholesale club (you wouldn’t buy five air conditioners, for example), many of them do come in multiunit packages. So before you shop, you need to be reasonably sure that you’re going to use all of what you buy. If you’re not into stockpiling or you don’t know someone you can split your purchases with, they could just end up cluttering up your home and costing you money.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

Higher Potential for Impulse Buying

Part of the lure of the wholesale club is the opportunity to get a great deal. But that could lead to impulse buys if you spot something on sale at a price that seems too good to be true. While you might save if you can find true bargains, you’re not really saving if the money you spend isn’t in your budget. If you’re struggling with how to stop impulsive spending, then a wholesale club membership might be a stumbling block to your efforts.

Tips for Shopping at a Wholesale Club

If you’re heading out to your local wholesale club to shop for the first time, it helps to know some insider tips to enhance your shopping experience. Here are a few pointers for getting better value when buying from a warehouse club:

•   Preshop at home. Checking out your wholesale club’s website can give you an idea of what’s in stock at your local store and what kind of deals you’ll find once you get there. You can also look for exclusive online-only offers that might be worth scooping up.

•   Compare unit prices. Unit price is everything when you’re buying in bulk to save money. So as you shop, note the unit price (if posted) or calculate it yourself on your phone. You can then compare that to the price you’d pay for the same item at your local grocery store.

•   Watch out for sizing. What’s known as shrinkflation is a real threat to your wallet when prices are on the rise. This practice occurs when companies downsize items but charge the same price for them. Again, you’ll want to look at the unit price to see how much value you’re getting for your money when shopping wholesale clubs.

•   Take advantage of freebies. Wholesale clubs commonly offer freebies and complimentary samples to shoppers. So be on the lookout for those as you’re cruising the aisles.

•   Shop with a list. Shopping with a list can be an effective way to curb impulse spending. The key is committing to buying only what’s on your list and not being swayed by any surprise deals you come across.

•   Consider splitting the trip. If you have a friend or family member who doesn’t have a wholesale club membership, you could still take them along with you to shop. You can pick out items together, purchase them using your membership, then split the cost. That way, you’re only getting what you need, and they get a deal at the same time.

Also, you might consider upgrading to a premium membership if doing so could help you to earn rewards on purchases. If you can get 2% of what you spend back, for example, it might be worth it to pay a higher annual fee for that added savings.

Recommended: How to Save Money: 33 Easy Ways

Are Wholesale Clubs Worth It?

Whether a wholesale club is worth it to you or not really depends on your lifestyle and shopping habits. For example, if you often rely on takeout because there’s no food in the house, buying staple items, such as frozen chicken breasts, frozen veggies, rice, and oil, in bulk could allow you to make more meals from scratch. It’s generally cheaper to buy groceries than eat out.

The Takeaway

Buying groceries in bulk can lead to significant savings since warehouse clubs typically offer generous discounts per unit when you purchase items in large quantities. However, these stores generally require memberships. Annual fees can run from $60-$130 per year, depending on the club you join and whether you choose a basic or premium tier. If you’re able to save more than you spend on annual dues, joining a wholesale club may be financially worth it. If, on the other hand, you could potentially come out behind or find that combing the aisles of these stores often leads to impulse purchases, it’s probably not a good deal.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How do wholesale clubs make money?

Wholesale clubs primarily make money by charging membership fees. Since they don’t charge the same high markups on items as other retailers, they use membership fees to make up the difference in their profits.

What services do wholesale clubs provide?

Wholesale clubs can provide a variety of services, including pet insurance, home and auto insurance, life insurance, home improvement services, travel services, and vision services. The range of services offered will depend on which warehouse club you join, and whether wholesale clubs are worth it will depend on the annual fee and how well the perks line up with your spending habits and lifestyle.

What are some common wholesale clubs?

BJ’s, Costco, and Sam’s Club are among the more well-known wholesale clubs in the United States. Boxed.com is an online store that sells wholesale items with no membership fees. Alibaba is another online wholesaler that ships a wide variety of items to buyers around the world.

Photo credit: iStock/nycshooter

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Making a budget is often the first step in building a solid financial foundation. It helps you get better acquainted with how much money you earn, spend, and save. What’s more, it provides guidance and guardrails to help you hit the financial goals you’re focused on, whether that means saving for a vacation in Tuscany or the down payment for your dream house.

But budgets are not “set it and forget it” tools. The process can involve plenty of trial and error, and you may benefit from refining your plans along the way. In fact, it’s a good idea to check in on your budget every month, quarter, and/or year to make sure it’s still serving you well.

That’s where budgeting questions come in. Whether you’re just starting to budget or have been doing it for years, the following list of budget-specific questions can help you fine-tune your financial plan and stay on track. When asked regularly, these questions can yield surprising insights and adjustments to enhance how you manage your money.

How Questions Can Help You Budget Better

Asking questions about budgeting can be a wise move because everyone’s financial situation is different. The way that your parents or best friends budget may be entirely different from the way you approach managing your money. By checking in and assessing where you stand, you can help improve your financial outlook.

The right budget questions can give you insight into things such as:

•   Why you may want to budget in the first place

•   What you hope to achieve from keeping a budget

•   Where your biggest budget pitfalls are

•   How you can improve your budget

To put it another way, asking budgeting questions can help you better understand where you are financially, where you’d like to be, and how a budget can help you to get there.

In terms of how often you might be asking questions about budgeting, there’s no set rule of thumb. You might check in monthly if you’re just getting started, then ease back to every few months. At the very least, it’s a good idea to do an annual budget review to see how your spending has evolved over the year. It’s also a good time to see what adjustments you might need to make as you set new financial goals for the year ahead.

14 Budgeting Questions That Can Help You

Not sure which budget questions to ask? The following checklist covers some of the more important things to consider as you make your monthly spending plan and keep tabs on it.

1. Am I Prepared for Unexpected Expenses?

Saving for financial emergencies is an important part of budgeting. When you don’t have money to cover an unexpected expense, you run the risk of having to use a high-interest credit card or loan to cover, say, a car repair or a major dental bill.

One of the first budget questions to consider is how much you have saved toward emergencies. If the answer is “0” in liquid funds you could quickly tap, you may want to think about how much you need to save for emergencies and how to fit that savings goal into your budget each month.

2. What Is a Good Amount for an Emergency Fund?

A general rule of thumb is to keep three to six months’ worth of expenses in a separate savings account earmarked for emergencies. However, a good amount for an emergency fund for you can depend on your income and expenses and how much money you need to have in the bank to feel comfortable.

If you’re single and have side-hustle income on top of your regular paychecks from a job, for instance, you might be okay with one to two months’ worth of expenses saved. On the other hand, if you’re married with two kids and are the primary breadwinner, it’s a much different situation. You might be more at ease with 9-12 months’ worth of expenses saved instead.

When you’re starting from zero, aiming for $500 or $1,000 can be a good way to ease into a savings habit. You can then review your budget monthly to see where you might be able to find additional money. Every little bit counts ($20 here, $35 there) until your emergency savings hits a level that allows you to breathe a sigh of relief.

Recommended: Savings Account Calculator

3. How Much Debt Should I Pay Down Each Month?

Debt can make it difficult to reach your financial goals, especially if a big chunk of your income is going to credit cards, student loans, or other debts. With high-interest debt (such as credit cards), it’s generally a good idea to pay as much as you can in excess of the minimum payment each month. This will help speed up repayment and save you a significant amount of money on interest. With other types of debt, however, you may want to strike a balance between debt repayment and saving. With the 50/30/20 rule of budgeting, 50% of your after-tax income goes to needs, 30% goes to wants, and 20% goes to debt payments beyond the minimum and savings.

4. Did I Overspend? If So, Where?

This is another great budgeting question to ask when reviewing your budget monthly if you’re trying to stop overspending. Going through each budget category and analyzing how much you spent can help you pinpoint the money leaks in your financial plan.

Once you find the leaks, you can take steps to plug them. For example, if you noticed that you’re spending more money on dining out, then planning meals at home and committing to that plan is a relatively simple fix. Or you might decide to audit your subscription services and cut out anything you’re paying for but not using. Those are simple ways to cut back on spending.

5. Do I Need to Adjust Spending Limits?

Reviewing your spending each month can help you figure out where you might be overdoing it. But it’s also an opportunity to see how inflation and rising prices might be affecting your expenses. If you notice that you’re spending more on groceries or gas, for instance, then you may need to adjust your budget and trim other areas of spending to compensate for those higher costs. You might also decide to adjust spending limits down if you want to dedicate more of your budget to saving or debt repayment. So again, instead of eating out, you might stick to having meals at home, which can be more cost-effective. If that saves you $100 a month, you could add that sum to your emergency fund or make an extra payment to your student loans.

Recommended: Budgeting for Beginners: A Guide

6. What Are My Money Priorities?

Knowing your money priorities is important, as they can influence the financial decisions you make. You could ask this budgeting question monthly. But if that feels like too much, aim to consider it at least once a year to see how life changes might affect your answers.

For example, your money priorities might include spending on travel or recreation in your 20s. But once you hit your 30s, your focus may shift to saving, paying down debt, and taking other steps to work toward financial stability and security.

7. Am I Tracking Toward My Financial Goals?

Tracking your financial goals can give you motivation to stick with your money plan. It’s also a good way to see how you’re progressing toward them.

Whether your goals include paying down debt, building an emergency fund, or saving for a vacation, you can ask this budget question monthly to gauge how you’re doing.

If you see that you’ve made little progress over the past few months, for instance, you can then ask yourself what you can do to change that and get closer to your goals.

8. Am I Happy About the Purchases I’ve Made?

Some things you have to spend money on, but others you buy because you want to. That’s the difference between needs vs. wants, and understanding that is an important part of budgeting.

If you find yourself spending money more often than you’d like on things that aren’t necessities, ask yourself what you’re getting from those purchases. Dropping $5,000 on a once-in-a-lifetime vacation might be justified if you get a chance to create lasting memories. Spending that same $5K on new clothes, on the other hand, might give you a temporary boost, but you may end up regretting that purchase later.

Considering what you’re getting from spending money can give you clarity on your financial priorities. It can also help you to identify bad money habits that might be hurting your financial situation.

9. What Would My Budget Look Like Without Debt?

Living without debt might seem like a dream, but it’s possible to make it a reality with the right plan. If you have debt that you’re paying down monthly, ask yourself what your budget might look like if you didn’t have to make those payments. That could give you a push to dedicate more money toward debt repayment so you can eliminate those obligations faster.

There are lots of debt reduction strategies you can use, including the debt snowball and debt avalanche techniques. If you’re tracking your debt repayment progress and aren’t getting ahead as fast as you’d like, you might review your budget to see if another method might be more effective.

When it comes to credit card debt, you might investigate balance transfer credit card offers, which give you, say, 18 months during which you pay no interest. This can help some people pay down the amount they own. You might also seek advice from a nonprofit credit counselor.

10. Is There a Way to Increase My Income?

Making more money can give your budget a boost. When income goes up, paying bills becomes less stressful. It may also help you knock out debt or grow your savings.

How often you ask yourself this budget question can depend on your situation, but it’s worth pondering it at least once a year. Some of the ways you might be able to increase income include getting a part-time job, taking on more hours at your current job, negotiating a raise, or starting a low-cost side hustle.

11. How Much Should I Budget for Investments?

Investing money and saving it are two different things. When you invest money, you’re putting it into the market where it has more opportunity to grow. There’s greater risk involved than with saving, but the rewards can be greater as well.

The amount you choose to budget monthly for investing can depend on how much you have left after covering basic expenses, how much you’re saving for emergencies or other short-term goals, and how much you’re paying toward debts. (You also want to spend a little on those “wants” mentioned above. Otherwise, you’ll end up feeling deprived.)

Depending on the details of your situation, aiming to invest 10% might be a good place to start, and you can build on that amount year over year as you pay down debt or increase your income.

12. How Much Should I Save Each Month for Retirement?

Paying yourself first is a fundamental rule of personal finance, and it’s a good way to build the wealth you need to retire. When reevaluating your budget each year, it’s a good idea to look at how much you’re saving for retirement.

The exact amount you’ll need to save monthly will depend on your retirement goals and age. Financial planners often recommend saving at least 10%-15% of your annual take-home income for retirement (including any company match). However, you might need to double or even triple that if you’d like to retire early or you’re getting a late start.

Look at what you’re putting into your 401(k) at work if you have one. If you’re not contributing enough to get the full company match, then consider bumping up your contribution rate to max out this benefit (which is essentially extra money).

13. What Are My Goals This Month?

Financial goal setting often involves looking well into the future. For instance, you might want to save $50,000 for a down payment on a home or $1 million for retirement. But you can also set goals that you hope to achieve month to month.

For example, you might set a goal of getting three car insurance quotes from different companies if you’re hoping to get a better rate. Or you might have a goal of not spending money for 15 days out of the month. These kinds of short-term goals can help you move ahead financially without losing sight of your bigger money picture.

What’s more, succeeding at small financial goals can build your confidence to tackle larger ones.

14. How Can I Stay Consistent in Keeping My Budget?

Making a budget is important, but sticking to it matters even more. Examining your income and expenses monthly is helpful, but asking the key question, “How can I stay consistent with my budget?” can also be vital. Doing so can help you figure out what might be tripping you up and what you can do to be more consistent with your spending plan.

You might decide to do weekly or biweekly budget check-ins versus reviewing your budget once a month. Or you might start using a budgeting app that tracks your daily and weekly spending. These tools often link to your checking account and credit cards and will automatically download transactions. This can help you catch — and correct — small cash flow problems before they become bigger and completely derail your budget.

The Takeaway

The great thing about making a budget is that there’s always room to tweak and improve things. Asking the right budget questions is a good way to figure out what’s working (and what’s not) so you can make your money go further each month.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How many budget categories should I have?

There’s no single right answer to how many budget categories someone needs to have. It’s possible to have 100 budget categories or more, depending on how much detail you go into when dividing up your income and expenses. At a minimum, you may want to have budget categories for fixed expenses, discretionary expenses, variable expenses, savings, and debt.

What does a realistic budget look like?

A realistic budget takes into account all of your income and divides it up to pay for your needs (including debt repayment) and some wants, as well as allowing room for saving. It may allow you to manage your money without feeling stressed or anxious.

How do you plan a budget?

Planning a budget starts with understanding your income and then diving into your expenses. As you make your budget, you can assign income to each expense you have, starting with the more important ones first, which usually means housing, utilities, food, transportation, and insurance. Paying down debt is also often a priority, and from there, you can continue dividing up income to cover discretionary spending and savings.

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SOBNK-Q326-057

The term “unbanked” applies to an individual or household that doesn’t use a bank or credit union for financial services. An unbanked adult has no checking or savings account, relying instead on alternative financial services to pay for life’s expenses.

While storing cash under a mattress might be tempting, being unbanked is often both expensive and impractical. The benefits of traditional banking generally outweigh the alternatives, though many people face barriers when attempting to access a bank or credit union. Below we explore why people become unbanked, the associated pros and cons, and how to open a bank account — even if you’ve had difficulties with banking in the past.

What Does Unbanked Mean?

First, it’s important to understand the definition of “unbanked.” If a person is unbanked, that means they are not served by a bank or similar financial institution. If you are over the age of 18 and have no checking or savings account, you are considered to be an unbanked adult.

You may wonder, how do unbanked adults conduct financial transactions? How do they go about cashing checks and paying bills without a bank account?

Many unbanked individuals deal primarily in cash, whether by personal preference or due to their circumstances. To manage everyday financial tasks, they often rely on a combination of cash, check-cashing services, prepaid debit cards, and money orders.

These days, digital alternatives are also expanding how people manage and move money without a traditional bank account. For instance, cryptocurrency and newer blockchain-based international remittance options allow anyone with a smartphone or internet connection to store assets or send funds directly to a recipient’s mobile digital wallet quickly and at a relatively low cost.

Why Do People Become Unbanked?

People become unbanked for various reasons. These can include:

•   Lack of money to meet minimum opening balance requirements at financial institutions

•   Lack of the credentials needed to open bank accounts (such as a Social Security number)

•   An underlying distrust of financial institutions

•   A desire to avoid any fees involved in opening a checking or savings account, or the penalties for incurring a negative bank account balance

•   Inability to open an account due to having a previous account closed by a bank or credit union

•   Living too far away from a brick-and-mortar banking location or being unable to drive or take transportation to a financial institution

•   Lacking a computer, a wifi connection, and/or the technology skills to open an account online.

How Many People are Unbanked in the U.S.?

The United States has a considerable number of unbanked adults. According to the Federal Reserve, 6% adults were “unbanked” in 2024 (their most recent statistic). While that’s a significant number, it’s worth noting that other nations have much larger percentages of unbanked people. Countries with some of the highest rates of unbanked people include Bangladesh, Egypt, and Pakistan, all with unbanked populations of around 50%.

What Are the Types of People Who Are Unbanked?

According to the most recently available data from the Federal Reserve and the FDIC, the unbanked population tends to fall into the following demographics:

Low-income: Families making below $25,000/year are disproportionately unbanked. The Federal Reserve notes that nearly all adults with an income of at least $100,000 have an account, while lower-income brackets face the highest barrier to entry.

Less-educated: A higher percentage of unbanked individuals never graduated from high school. Financial exclusion drops significantly as education levels increase.

Racial disparities: Black, Hispanic, and Indigenous adults are disproportionately unbanked relative to their population size.

Households with disabilities: Federal data indicates that adults with a disability experience significantly higher unbanked rates.

Young people: Younger adults (ages 18–29) tend to be unbanked more often than older adults. This is primarily due to lacking the funds for minimum balance requirements, though lower financial know-how and a growing preference for mobile payment apps and digital wallets over traditional banks also play key roles.

What Is the Difference Between Unbanked and Underbanked?

You may also have heard the term underbanked as well as unbanked. An underbanked person typically does have a checking and savings account with an FDIC-insured institution, but regularly relies on alternative financial services. Despite having traditional accounts, they may still utilize check-cashing services, money orders, and short-term payday loans.

According to the most recent FDIC data (2023), 14.2% of U.S. households are underbanked. While the completely unbanked population faces barriers like a lack of access, ID issues, or previous account closures, the underbanked typically rely on alternative services due to credit limitations, a desire to avoid steep overdraft fees, branch proximity issues, or the need for immediate cash access that traditional banks fail to provide.

Initiatives to Help the Unbanked

Being unbanked can make it a challenge for a person to manage their money and build wealth. Fortunately, government programs and some financial entities are working to solve this issue. They are developing new ways to provide incentives and encourage unbanked individuals to choose traditional banking options. These include:

•   Eliminating banking fees. Getting rid of minimum balance requirements, monthly account fees, and other financial deterrents can encourage low-income individuals to open an account.

•   Developing user-friendly apps and online platforms. Online banking via a computer or phone app can help make it easier for people who don’t have a convenient banking branch or have physical challenges.

•   Second chance accounts. Some banks may offer a second chance checking account. When opening this type of account, the bank is often willing to overlook previous banking problems, such as unpaid overdraft fees or past forced account closures. The account will likely have some limitations, but it can be an on-ramp to a standard checking account.

•   Bringing back postal banking. Decades ago, an individual could perform basic banking transactions at their local post office — cashing checks, bill payment processing, sending money to other branches, and issuing modest loans. Today, a growing movement advocates for the return of these services.

•   Educational outreach. Many banks and nonprofit organizations offer financial literacy programs, including workshops and videos, to educate unbanked and underbanked individuals about basic financial concepts, such as how to balance your bank account, budgeting, saving, and credit.

Why Is Being Unbanked a Problem?

Being unbanked can be a problem for a few reasons. For example:

•   It can be complicated and time-consuming to conduct financial transactions without having standard bank accounts.

•   Being unbanked can be expensive as well. You may have to pay high fees for check cashing and other services from predatory businesses. Plus, you won’t early any interest on your money.

•   It can be risky to carry and store cash versus safely keeping it with a bank or credit union.

Pros of Being Unbanked

Being unbanked could be seen as a positive for some people. Potential upsides include:

•   Not having to deal with the bureaucracy or paperwork of opening and maintaining accounts at banks

•   No checking or savings account fees

•   No overdraft or minimum balance fees

•   No risk of having your money frozen, restricted, or subjected to sudden account-closing decisions by a bank policy

•   Can be seen as more convenient to use cash vs. using debit cards, ATMs, and bank branches.

Cons of Being Unbanked

As mentioned, being unbanked can be problematic. Those who don’t have checking and savings account may find that:

•   Using prepaid debit cards, money orders, and similar products to pay bills can be costly (fees) and time-consuming.

•   Carrying and/or keeping cash at home can be risky; what happens if you are robbed?

•   No convenient direct deposit for paychecks. The unbanked may have to utilize a check-cashing or payday loan service, which can charge very high fees or interest rates.

•   No opportunity to build up a banking history for future opportunities

•   No access to other products and services that banks may offer when you are a customer, such as cashback programs or better mortgage rates.

Opening a Bank Account

While many people hesitate to open a bank account, being unbanked often limits security, increases transaction costs, and prevents potential interest earnings.

Opening an account is typically a straightforward process. Requirements vary by institution, but you generally need:

•   A valid government-issued photo ID

•   A Social Security number or taxpayer ID number

•   Proof of address

After selecting a financial institution, you can often complete the sign-up process quickly, either in person or online. Many banks now offer accounts with no minimum balance requirements or initial deposit.

Overcoming Barriers to Banking

If you have faced banking challenges in the past, such as forced account closures, you may still have options.

•   Second chance accounts: Some banks offer “second chance” checking accounts, which provide a path to standard banking. While these accounts may have limitations, such as restricted overdraft protection, they are a practical step toward building a healthy banking history.

•   Starting fresh: If you previously had an account that was closed, it is typically not possible to reopen it. In such cases, the best approach is to open a new account, either with your previous financial institution or a new one.

The Takeaway

By choice or circumstance, millions of Americans are unbanked. Typically, this means they don’t have a checking or savings account and don’t participate in personal banking. There can definitely be a downside to being unbanked, including factors like spending more time and money to conduct banking transactions and not earning any interest on one’s funds. For many people, becoming a client of a bank or credit union can be a positive step towards improving their money management and building wealth.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What does it mean when a person is unbanked?

An unbanked person does not have a checking or savings account at a mainstream bank or credit union. Instead of traditional banking, they rely completely on cash, money orders, payday lenders, check-cashing services, or prepaid cards to manage their finances. This often happens because of high account fees, lack of required identification, minimum balance requirements, or a basic distrust of financial institutions.

What are the needs of the unbanked?

The unbanked require safe, accessible, and affordable financial services to manage daily life and build long-term security. Their primary need is secure storage to protect money from theft. They also require low-cost payment options to pay bills, transfer money, and send remittances without heavy fees. In addition, access to fair credit is important for handling unexpected emergencies or growing a small business without relying on predatory lenders. Finally, flexible savings tools can help them accumulate wealth. Meeting these core needs can allow individuals to move away from risky, cash-only constraints and fully participate in the formal modern economy.

How do unbanked people get paid?

Unbanked workers receive payments through several alternative methods. Many accept traditional paper checks, which they cash at retail stores or specialized check-cashing outlets for a fee. Others use payroll cards, which are reloadable prepaid cards funded directly by employers for use at ATMs and cash registers. Digital options like some mobile wallets and peer-to-peer payment apps allow workers to receive and spend funds electronically without a traditional bank account. Some individuals rely on direct cash payments for informal or freelance gigs. Finally, a growing number utilize cryptocurrency transfers sent directly to private digital wallets.

Photo credit: iStock/Deagreez

SOBNK-Q326-082

There are times when urgent, vital expenses pop up that lead you to dip into your emergency fund. Maybe you were laid off and rent is due, or perhaps you injure yourself in an accident and wind up with a pile of medical bills.

But other times, it can be hard to know what exactly qualifies as a rainy day and gives you license to dip into your emergency savings. What about a great deal on a used car, which you could really use? Or the opportunity to replace your old fridge at a steep discount? Do those qualify as reasons to dip into your savings? Learn more here.

What Are Things to Avoid Spending My Emergency Savings On?

If you’ve done a good job stashing cash in an emergency fund, you likely want to know what types of expenses are valid uses of the money sitting in your savings account. Here are examples of when not to withdraw funds:

•   Fun purchases: If you want but don’t need something and it isn’t in your budget, don’t pull from your emergency fund. Entertainment, dining out, tech gadgets, and designer clothes (even if on final sale) are all examples of wants, not needs. Set aside some funds for such buys if you like, but don’t deplete your emergency fund savings. It’s always best to ask questions before making an impulse buy. Spend time thinking about a purchase carefully before making it. You may find that the new bike you thought you desperately needed doesn’t seem so vital a day or two later.

•   Vacations: It’s very tempting to get away for a little R&R when things get tough, but a vacation isn’t a worthwhile emergency fund expense. If you want to have that week at the beach, go ahead and create a savings plan and a separate savings account to make it a reality. But it’s not a wise spending strategy to pull the money out of your rainy day funds.

•   Debt: Paying down debt is a great goal. It’s also a smart use of any extra money you may have, though not at the expense of draining an emergency fund completely. If you’re chipping away at debt, keep at it, but continue to keep some emergency funds. If you lose your job or an unexpected expense hits and you don’t have emergency savings, you might end up turning to more expensive forms of credit as a result. This underscores the importance of having an emergency fund.

6 Questions to Ask Yourself Before Spending Your Emergency Fund

Now, it’s time to consider when to go ahead and use that money you saved for a rainy day. If you’re on the fence about whether an expense counts as an emergency, ask yourself the following six questions to determine if you should tap your emergency funds.

1. Is This Absolutely Necessary?

There’s a difference between things you want and things you need. If you start a new job and have to buy a uniform for it, that’s a necessity. If, however, you begin a new job and simply want some new outfits, that isn’t. Similarly, pining for a new stove with a commercial-style cooktop is a want, while replacing a stove that conked out is a necessity.

2. Is This the Only Way That I Can Pay for This?

Before pulling money from your emergency fund account, consider whether it’s the only source of money that can cover a certain expense. Would it be possible to wait a week until payday and use your income instead? Gift cards, coupons, and sale discount codes can make it easier to pay for purchases without draining your emergency fund.

Your goal here is to determine the lowest possible price for a purchase and then see if there’s another (nonemergency fund) way to pay for it.

3. Is This an Unexpected Event?

Emergency funds can be a great way to cover unexpected and necessary purchases, but they aren’t supposed to replace poor planning. If you know a major expense is coming your way (say, your water heater is coming to the end of its lifespan), it’s better to save for it instead of dipping into your rainy day fund.

4. Is This Urgent, or Can It Wait?

Even if an expense feels like something that must be dealt with at that very moment, there’s a good chance it can be put off. Ask yourself if it can wait until you have saved enough money to pay for it without accessing emergency funds.

5. How Much of My Emergency Fund Will I Be Using?

An emergency fund exists as a safety valve when you unexpectedly need funds. However, before pulling money from it, it can be helpful to consider just how much of the emergency fund the purchase will require. If it’s going to drain the fund and the purchase can wait, it’s likely best to wait. Or maybe you can buy a less pricey version of the item in question.

6. How Long Will It Take to Rebuild My Savings?

If the purchase will take up a big chunk of the emergency savings fund, it can be a good idea to map out how long it will take to rebuild those savings. If it will take more than six months, then it may be best to hold off making that purchase until the emergency fund is more substantial. It may be better to cut back on spending to cover this expense now without having to touch emergency savings.

Of course, sometimes an emergency is really an emergency, and you can’t hold off. If you are hit with, say, a major medical bill, you may have to use up that emergency fund and work hard to rebuild it later. But it will have done its job and seen you through a tough time.

Recommended: Emergency Fund Calculator

The Takeaway

Before pulling savings from an emergency fund, it’s important to determine if the purchase is truly urgent or simply something you really want. Sometimes, real emergencies do crop up, and you’ll be glad you have money saved. Other times, you may realize that the expense isn’t really so vital. Emergency savings can be a real lifesaver, so you want to protect those funds and make sure you use them properly.

One way to build up an emergency fund faster is to put your money in a savings account that earns a competitive interest rate.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What should you ask yourself before using your emergency fund?

Before you pull money from an emergency fund, ask yourself questions such as, Is this expense absolutely necessary? Is this the only way I can pay for it? Is it urgent or can it wait? How much of my emergency savings will I be using up? The answers can help guide you on whether or not it’s worth tapping into your emergency fund.

What should you spend your emergency fund on?

What constitutes an emergency purchase for one person may look quite different for another. That being said, it’s usually best to only spend emergency fund savings on necessities, not wants. Financial emergencies are usually unexpected and may include home repairs, medical bills, and car repairs or day-to-day expenses after, say, a job loss.

What should you not put in your emergency fund?

While it’s a good idea to put extra money toward an emergency fund instead of spending it frivolously, there are some types of savings it’s best to leave out of an emergency fund. For example, it’s not a good idea to use 401(k) contributions or other retirement savings to build an emergency fund. Saving for retirement is crucial, and employers may match 401(k) contributions, which is basically like getting extra money. In this scenario, it may be wise to focus on maxing out retirement contributions before building an emergency fund.

Photo credit: iStock/szefei

SOBNK-Q326-051