A health maintenance organization, or HMO, is a type of health insurance plan that typically offers lower premiums and out-of-pocket costs in exchange for members using the plan’s network of providers.
That network is usually confined to a certain city or geographic area.
An HMO can be a good choice for healthy people who don’t anticipate needing a lot of specialized care in the coming year.
However, these plans tend to offer less flexibility in where you can go for care than other types of health plans, such as preferred provider organizations (PPOs).
Read on to learn if an HMO could be the right plan for you and your family.
Key Points
• HMO plans offer lower costs and less paperwork.
• HMOs restrict healthcare providers and have geographic limitations.
• HMOs require a primary care physician for care coordination.
• PPO plans provide more flexibility but with higher premiums.
• HMOs limit out-of-network care, while PPOs allow it at a higher cost.
How Do HMOs Work?
HMOs contract with a group of doctors, hospitals, and other healthcare providers within a certain area for a negotiated fee.
In return for accepting lower payments, HMOs offer providers a steady stream of patients. Insurers can then pass the savings onto patients in the form of lower premiums and out-of-pocket costs.
To take advantage of these lower costs, HMO members must, for the most part, receive care only from network providers.
This starts with your primary care physician (PCP). HMO members typically should choose a PCP from the plan’s network. Your PCP takes care of annual check-ups and other medical needs that require an office visit.
In an HMO, your PCP is typically also the gatekeeper for your other health needs. To see a specialist, such as a podiatrist or a dermatologist, you would likely need to first visit your PCP to get a referral to a specialist within the network.
There are often some exceptions to network-only care, however. Emergency care received out-of-network is usually covered. And, with some preventive care services, such as mammograms and gynecological visits, you may be able to see a network doctor without first getting a referral.
In cases where you may have a serious health condition requiring a specialist not included in the network, the HMO may cover that treatment as long as you request pre-approval.
In addition to low premiums, there are often low or no deductibles with an HMO. Instead, the plan will typically charge a copayment, or copay, for each clinical visit, test, or prescription.
How Do HMOs Compare With Other Types of Health Insurance?
Another commonly available health plan offered by employers and health insurance companies is a preferred provider organization, or PPO. These plans have many features in common with HMOs, but also a few key differences.
As with an HMO, members of a PPO plan have access to a network of providers. When they use providers within that network, they will typically pay less out-of-pocket costs, such as copays.
Unlike an HMO, however, care outside of the network is usually also covered, but at an additional cost.
How much the PPO will pay for an out-of-network doctor may be capped at what the PPO deems the “customary and usual” payments for providers in your area. Depending on where you live, that could mean a small or potentially large additional out-of-pocket cost.
Depending on where you live, that could mean a small or potentially large additional out-of-pocket cost.
Another key difference between these two types of plans: With a PPO, you typically do not need a referral to see a specialist, either within or outside of the network.
In addition, PPO plans usually have deductibles, while some HMOs do not. PPO plans also typically have more expensive premiums than HMOs.
However, not having to see your PCP (and pay a copay) to get a referral to a specialist can be a cost saver for members of PPOs.
It can be a good idea to weigh the advantages and disadvantages of HMOs before you choose a plan, just as you would with any other type of insurance coverage.
Here are some of the most common pros and cons.
Advantages of HMOs
• Lower costs. Premiums, deductibles, and copays are usually lower with an HMO compared to other types of health care plans. Some plans even have no deductible. Your out-of-pocket costs will also likely be lower for your prescriptions.
• Less paperwork. Because your care is managed through your PCP and you are receiving care through the HMO network, billing tends to be less complicated for those with an HMO.
• Care is often high quality. Because preventive services are generally fully covered and because your PCP can act as your advocate for early intervention medical care, many people find HMOs provide good quality of health care.
Disadvantages of HMOs
• Provider restrictions. With an HMO, you must choose a primary care physician from the plan’s network. This doctor will manage your care and refer you to specialists within the network. If your current doctor is not in the HMO network, you would likely need to switch.
• Restricted emergency care. Emergency care is usually covered even if it is received from out-of-network providers. But HMOs often have strict rules on what constitutes an emergency and which emergency providers will be covered.
• Geographic restrictions. Because HMO networks are usually located within one geographic area, your network of providers will only be available within that location. That means if you’re traveling and you need medical care, those bills may not be covered, unless it is an emergency. Also, dependent college children who attend school out of state are usually not covered.
HMO plans can be an efficient, low-cost way to manage your health care needs. These plans can foster a close relationship with your primary care physician, who can help you navigate both preventive and specialty care.
Some consumers feel the restrictions on receiving care from out-of-network providers and the hassles of getting a referral can be an obstacle to optimal care.
HMOs are often compared to PPOs, which generally allow members more freedom to see out-of-network providers (though going out of network may cost more). PPOs typically don’t require referrals to see specialists.
To determine which type of health plan is best for you, you’ll likely want to weigh the costs and plan offerings against your budget and health needs. Before choosing a plan, it might also be helpful to track your spending for a few months to see how much you are currently spending on medical care.
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FAQ
What are some downsides of having an HMO?
One drawback of having an HMO is that you’ll likely need to get a referral before seeking specialized care. Also, you generally can only see doctors within your plan’s network.
What does an HMO not cover
Coverage varies by insurer and plan, but in general, HMOs do not cover care from out-of-network providers, except in emergency situations.
Are HMO plans cheaper than PPO plans?
Generally speaking, yes. HMO plans tend to have lower monthly premiums and lower out-of-pocket costs than PPO plans.
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A bank deposit is defined as funds that are put into a checking or savings account, among other types of financial products. This money is kept safely at a financial institution like a bank or credit union, and it may earn interest in return for keeping your cash there.
You can make bank deposits via cash, checks, online transfers, or direct deposit, among other methods. The type of deposit you make will determine when you can withdraw funds.
Understanding how bank deposits work and the pros and cons of each type of deposit can help you better manage your money. Here’s what you need to know.
Key Points
• Bank deposits store funds securely, potentially earning interest.
• Checking accounts provide easy access for daily transactions.
• Savings accounts offer higher interest rates for saving goals.
• CDs guarantee fixed interest over a set term.
• Mobile deposits enhance convenience, allowing check deposits via smartphone.
What Are Bank Deposits?
A bank deposit involves putting money into a bank account. Your bank deposits can go into various accounts such as a savings or checking account, a money market account, or a certificate of deposit (CDs).
Depositing your money into a bank account can help you accomplish two things:
• It can keep your money safe.
• It can help your money grow.
Here’s a little more detail: Bank deposits are typically insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor, per account ownership category, per financial institution, and in some cases even more. That means your money is a whole lot safer in a bank account than under your mattress.
The other thing you can accomplish by depositing your money is helping it grow. Because many financial institutions offer interest-bearing bank accounts, you can capitalize on compounding interest by not withdrawing funds and also consistently adding to your balance over time.
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How Do Bank Deposits Work?
The type of deposit you make will dictate the process of your cash getting into an account.
For example, when you deposit a check, the bank sends a digital image of the check to the payer’s financial institution. While large banks usually communicate directly to clear checks, other banks work through a clearinghouse or a third-party intermediary to verify checks. The clearinghouse organizes all the deposits coming in and out of a specific bank and ensures all deposits are put in and taken out of the correct accounts.
If the payer’s account doesn’t have enough funds to process the check, it will bounce and be returned unpaid. If you have already taken out the funds from the check, you will have to pay the total balance back, usually plus a fee.
Direct deposits, on the other hand, work a little differently. Since direct deposits are scheduled payments, the payer’s or employer’s bank will credit the account before sending the direct deposit. This way, the payer’s bank can ensure the account has enough money to cover the transaction.
Once the funds are deposited in your bank account, you can access the sum the next business day.
How Long Do Bank Deposits Take to Process?
Process times vary by the financial institution and how the deposit is made. However, federal law limits the time it takes for a bank deposit to process.
• For example, if you deposit checks totaling $275 or less, the bank must let you access the funds the next business day. So, if you deposited checks on a Monday, you should be able to access your money on Tuesday. However, if there’s a bank holiday transactions may be delayed.
• If you deposit a check(s) totaling more than $275 you will have access to the first $275 the next business day. Then, you will have access to the remaining deposit the following business day.
• When you deposit a check from another account from that financial institution, a government check, or a certified check in person at a bank branch, you should have access to the money the next business day.
Keep in mind some banks and credit unions apply cut-off times, which dictate the end of the day. So, if you deposit after the cut-off time, you may have to wait an extra business day before accessing the deposit.
Also, other types of deposits have different processing time. For example, wire transfers and ACH deposits can usually take a couple of days to process but may take longer in some situations.
Here are a few reasons why it can take longer for your deposit to process:
• You’re depositing money into a new account
• You made an ATM deposit to an ATM outside the financial institution’s network
• If you have a deposited check that was returned unpaid
There are two primary types of bank deposits: demand deposits and time deposits. Here’s a breakdown of each.
Demand Deposits
Demand deposits consist of money you put into a bank account that you can take out when you need cash. Demand deposit accounts usually have minimal interest rates (or no interest), but they give you more freedom to withdraw money when needed. These types of deposits can be made to three types of accounts, including:
• Checking accounts. This type of account is meant for everyday transactions. You can deposit and withdraw money as often as you want. Usually, checking accounts have checks and debit cards linked to them so you can access your money when you’re on the go.
• Savings accounts. This type of account is designed to help you sock your money away for short-term or long-term goals. Since the different types of savings accounts are meant for savings, some banks apply withdrawal limits, limiting the number of monthly withdrawal transactions that can occur in an account.
Savings accounts may also have interest rates higher than checking accounts. This is especially true if you deposit funds at an online vs. traditional bank.
• Money market accounts. This type of account combines the features of a savings account with those of a checking account. Money market accounts let you earn interest, just as a savings account does. They can also provide a debit card and checks so you can withdraw funds more easily.
Time Deposits
A time deposit is when you put money into a deposit account with a fixed rate and term, like certificates of deposit (CDs). You can only take money out of a time deposit account once the term expires. (You may have to pay a penalty if you take money out of the account beforehand. But whether you get a penalty or not depends on the type of account and the financial institution.)
For example, let’s say you deposit $5,000 in a CD that earns 5% interest for one year. Then, after one year, you can withdraw $5,250.00, which includes your deposit and interest earned.
You can think of banks as using time deposit accounts to borrow money from depositors. In exchange for borrowing money for a certain amount of time, the bank usually gives the depositor a fixed interest rate, typically higher than traditional savings accounts. At the end of the term, the depositor can take out the money in the account or renew the time deposit for another term.
Mobile banking, as you likely know, gives you access to banking services no matter where you are or what time it is. You can make mobile check deposits from your phone as part of this service. So, instead of driving to an ATM or local bank branch, you can deposit it on your mobile device.
• Choose the account you want to deposit the check into.
• Endorse the back of the check.
• Enter the amount of the check.
• Snap a photo of the front and back of the check.
• Review the deposit information, and then hit deposit.
Remember, though, there can be limits on the amount and type of checks you can deposit on your mobile app. For example, some banks prohibit depositing third-party checks, money orders, traveler’s checks, and foreign checks. So, verify the rules with your bank or credit union.
Also, if you deposit a check using the mobile app, keep the paper check until the check clears. This way, you’ll have a backup if it doesn’t go through or there is an error.
The Takeaway
A bank deposit is money that is given to a financial institution where it is safely held and may earn interest. Examples of deposit accounts are checking and savings accounts, money market accounts, and CDs. When considering where to keep your money, it’s wise to shop around and consider such factors as interest paid and fees charged.
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FAQ
What are the 2 types of bank deposits?
Demand deposits and time deposits are the two types of bank deposits. A demand deposit references deposits made into an account such as a checking or saving account where you can withdraw the funds at will. A time deposit, on the other hand, refers to a deposit made to an account with a fixed interest rate and set terms (whether several months or years), like certificates of deposits.
What happens if you deposit more than $10,000 in the bank?
When you deposit $10,000 or more into a financial institution, federal law requires them to report the deposit to the federal government. The federal government requires this alert to help prevent money laundering and fraud.
Does deposit mean payment?
Yes, deposits can mean an initial payment towards a product or service. It can also mean putting something of value away for safekeeping, like when you make a bank deposit to a bank, or hand over cash for safekeeping.
About the author
Ashley Kilroy
Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.
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SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet
Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.
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A preferred provider organization (PPO) is a type of health care plan that offers lower out-of-pocket costs to members who use doctors and other providers who are part of the plan’s network.
These preferred providers have signed onto the network at a lower negotiated rate than they might charge outside of the network.
PPOs also offer members the flexibility to see providers outside of the plan’s network, although they will most likely pay more in out-of-pocket costs to do so.
To learn more about PPOs, and how this type of plan compares to other health insurance options, read on.
Key Points
• PPO plans offer flexibility to see any healthcare provider, with lower costs for in-network services.
• PPOs provide access to a large, geographically diverse network of providers.
• No referrals are needed to see specialists, enhancing convenience.
• Monthly premiums for PPOs are typically higher than for HMOs and HDHPs.
• Out-of-network care incurs significantly higher out-of-pocket expenses.
How Does PPO Insurance Work?
When you join a PPO health plan, you’re joining a managed care network that includes primary care doctors, specialists, hospitals, labs, and other healthcare professionals. PPO networks tend to be large and geographically diverse.
If you see a preferred provider, you will likely pay a copay, or you might be responsible for a coinsurance payment (after you meet the health care plan’s deductible).
While you are free to see any health care provider whether or not they are in the PPO network, if you see a provider outside of the network, you may pay significantly more in out-of-pocket costs. In return for flexibility, large networks, and low in-network cost sharing, PPO plans typically charge higher premiums than many other types of plans.
PPOs are a common, and often a popular, choice for employer-sponsored health insurance.
What Are the Costs of Going Out of the PPO’s Network?
If you see a provider who is not part of the plan’s network, you will likely be expected to bear more of the cost. PPOs typically use what’s called a “usual, customary, and reasonable” (UCR) fee schedule for out-of-network services.
Insurers calculate UCR fees based on what doctors in the area are charging for the same service you were provided.
If your doctor charges more than what your insurance company determines to be usual, customary, and reasonable, you most likely will be charged for the difference between the amount charged for the service and the amount covered by your insurer.
Depending on where you live and the service you received, this difference could be significant. It may also come as a surprise to policyholders who assume their medical costs will be covered and don’t fully understand the distinction between in-network and out-of-network providers.
A good way to avoid surprise charges with a PPO (or any health plan) is to talk to your provider and your insurer before you receive treatment about the total cost and what will be covered.
How PPOs Compare to Other Types of Health Care Plans
HMOs typically offer lower premiums and out-of-pocket costs than PPOs in exchange for less flexibility.
Unlike a PPO, HMO members typically must choose a primary care physician from the plan’s network of providers. Care from providers out of the HMO network is generally not covered, except in the case of an emergency.
Also unlike a PPO, an HMO’s network of providers is usually confined to a specific local geographic area.
Another key difference between these two types of plans: HMO members typically must first see their primary care doctor to get a referral to a specialist. With PPOs, referrals are not usually required.
PPOs are also often compared to point of service (POS) plans.
POS plans are generally a cross between an HMO and a PPO. As with a PPO, POS members typically pay less for care from network providers, but may also go out of network if they desire (and potentially pay more).
Like an HMO, POS plans require a referral from your primary care doctor to see a specialist.
PPOs (as well as HMOs and POS plans) are very different from high deductible health plans, or HDHPs.
HDHPs charge a high deductible (what you would have to pay for health care costs before insurance coverage kicks in).
This means that you would need to pay for all of your doctor visits and other medical services out of pocket until you meet this high deductible. In return for higher deductibles, these plans usually charge lower premiums than other insurance plans.
You can combine a HDHP with a tax-advantaged health savings account (HSA). Money saved in an HSA can be used to pay for qualified medical expenses.
HDHPs are generally best for relatively healthy people who don’t see doctors frequently or anticipate high medical costs for the coming year.
As with all health insurance options, PPOs have both advantages and disadvantages. Here are a few to consider.
Advantages of PPOs
• Flexibility. PPO members typically do not have to see a primary care physician for referrals to other health care providers, and they may see any doctor they choose (though they may pay more for out-of-network providers).
• Lower costs for in-network care. Out-of-pocket costs, such as copays and coinsurance, for care from in-network providers can be lower than some other types of plans.
• Large provider networks. PPOs usually include a large number of doctors, specialists, hospitals, labs, and other providers in their networks, spanning across cities and states. As a result, network coverage while traveling or for college student dependents can be easier to access than with more restricted plans.
Disadvantages of PPOs
• High premiums. In return for flexibility, PPO members can expect to pay higher monthly premiums than they may find with other types of plans.
• High out-of-pocket costs for out-of-network care. Depending on where you live, the treatment you receive, and how your insurer calculates “usual, customary, and reasonable” fees, you may find you are responsible for a large portion of the bill when you receive care outside of the PPOs network.
• Might be more insurance than you need. If you rarely see doctors and wouldn’t mind potentially switching doctors, you may be able to save money by going with an HMO or a HDHP.
The Takeaway
PPOs are a popular type of health plan because of the flexibility, ease of use, and wide range of provider choices they offer. PPO networks tend to be large and varied enough to include a patient’s existing doctors. If not, members still have the option of going out-of-network and receiving at least some coverage from a PPO. PPO members pay for this flexibility, however.
PPOs typically come with higher premiums, along with extra costs associated with out-of-network care. That can be prohibitive for many consumers.
Your employer’s benefits department or an experienced insurance agent or broker can help you compare PPOs to other types of health care plans and determine which choice is right for your health care needs and your budget.
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FAQ
What is a disadvantage of having an HMO?
One drawback of PPO plans is that they’re often more expensive than HMO plans. Monthly premiums are usually higher, and you’ll likely have to pay more out of pocket if you see doctors who are out of the plan’s network.
What does PPO mean?
PPO stands for preferred provider organization. It’s a type of health care plan that offers lower out-of-pocket costs to members who see health care providers who are part of the PPO plan’s network.
Is having a PPO worth it?
It depends. PPOs tend to have large networks, which can make them a good choice for someone who travels frequently within the U.S. or lives in two different states.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Money and your psyche can be deeply intertwined, and that’s where financial therapy can play a role. Financial therapy merges the emotional support of a psychotherapist with the money insights of a financial planner.
Working with a financial therapist can help clients begin to process their underlying feelings about money while optimizing behaviors related to their cash. This can minimize stress and anxiety, while honing plans for earning, spending, and saving more effectively. Financial therapists can also assist couples in overcoming differences in their money habits and their approaches to cash management. .
Read on to learn if this kind of professional counseling could help you, and, if that’s the case, what to expect from financial therapy and where to find a qualified professional.
Key Points
• Financial therapy combines emotional support with financial insights to enhance money management.
• It aids individuals and couples in managing money-related stress and unhealthy financial habits.
• Financial therapy offers a safe space to address and resolve financial infidelity.
• Unlike traditional financial advising, it focuses on the psychological aspects of money and well as spending and saving behaviors.
• It provides practical financial advice alongside emotional and psychological support.
What Is Financial Therapy?
A basic financial therapy definition is that it’s a practice that combines behavioral therapy with financial coaching. The goal is to help improve an individual’s feelings and behavior around money.
A certified financial therapist (or financial psychologist) can assist with issues such as money stress, overspending, or concerns about debt. But this differs from, say, a financial advisor who is helping you maximize your gain on investments or plan for your child’s future college expenses.
It also differs from financial coaching, which helps establish good money habits. Financial therapy can go deeper psychologically speaking. It can help a person work through childhood trauma related to money as well as money-related disorders.
How Financial Therapy Works
According to the Financial Therapy Association (FTA), financial therapy is a process informed by both therapeutic and financial expertise that helps people think, feel, and behave differently with money to improve overall well-being.
The profession sprang out of increasing evidence that money can be intrinsically tied to our hopes, frustrations, and fears, and also have a significant impact on our mental health.
What’s more, money can also have a major impact on our relationships. Indeed, research has shown that fighting about money is one of the top causes of conflict among couples.
And, while it might seem like bad habits that deplete your bank account and money arguments are things you can simply resolve on your own, the reality is that it’s often not that simple. That’s where financial therapy can help.
• Many financial roadblocks, such as chronic overspending or constantly worrying about money, often aren’t exclusively financial. In many cases, psychological, relational, and behavioral issues are also at play.
• Financial therapy can help patients recognize problematic behaviors, such as impulse buying. It also aims to help people understand how various relationships and experiences may have led them to develop those behaviors as coping mechanisms or to form unrealistic or unhealthy beliefs.
• Along with offering practical financial advice, a financial therapist can reduce the feelings of shame, anxiety, and fear related to money. It can help people who are struggling to recommit to money goals.
The reasons why financial therapy can help are the same as why traditional psychological therapy can help: It can lead people to understand that they can do something to improve their situation. That, in turn, can instigate changes and healthier behaviors.
Like conventional therapy, the number of sessions needed will vary, depending on the situation. A financial therapy relationship can last from a few months to longer.
Generally, a financial therapist’s work is “done” when you feel your finances are orderly and you have the skills to keep them that way in the future.
Financial advisors are professionals who help manage your money.
They are typically well-informed about their clients’ specific situations and can help with any number of money-related tasks, such as managing investments, brokering the purchase of stocks and funds, or creating a retirement plan.
However, psychological therapy is not why financial advisors are hired, nor is it their area of expertise.
If a person requires real emotional support or needs help breaking bad money habits, a licensed mental health professional, such as a financial therapist, should likely be involved.
A certified financial therapist (someone trained by the FTA) can work with you specifically on the emotional aspects of your relationship with money and provide support that gets to the root of deeper issues.
Due to the interdisciplinary nature of financial therapy, professionals who enroll in FTA education and certification include psychologists, marriage and family therapists, social workers, financial planners, accountants, counselors, and coaches. Some experts recommend being sure that the professional you work with is first and foremost a licensed therapist with a deep understanding of psychology.
Financial Therapists
Financial Advisors
Address psychology relating to money
Advise on managing and investing money
Can be certified by the FTA
Can be certified as CPA, CFP®, CFA, and ChFC, among other designations
Focus on behaviors and attitudes
Focus on budgeting and growth
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Financial Therapy vs. Other Therapy
If you are having issues related to money (say, losing sleep due to anxiety or arguing with your partner about spending), you might think almost any mental health professional could help.
A financial therapist, however, can be your best bet in this situation. These professionals have special training and expertise related to how money can impact a person’s emotional wellness.
They also are also trained in techniques to help clients overcome issues related to money. In other words, they are laser-focused on the kind of emotional responses and problematic habits that crop up around money.
Do You Need a Financial Therapist?
If you’re considering whether a financial therapist could help you, you may want to think about your general relationship to money.
If you feel you have anxiety about money, or unhealthy behaviors and feelings when it comes to spending, budgeting, saving, or investing, you might benefit from exploring financial therapy. These behaviors can be a symptom of other negative habits related to mental health (feelings of low self-worth, for instance).
Keep in mind that it’s possible to have an unhealthy relationship with money even if your finances are good on paper and there’s plenty of cash in your savings account.
Top 4 Reasons People Seek Financial Therapists
Here’s a more specific look at why a person might benefit from financial therapy.
1. Avoiding Money Management
Some people hide from their finances. They don’t budget, don’t know exactly how much they earn, pay bills late (or not at all). Working with a financial therapist could expose the root of this behavior and improve financial management.
Many people have anxiety around their money. This could involve worrying about how they will pay off their debt to worrying about going bankrupt, even though they are earning a good salary. Others may feel guilty about spending money or carry a lot of trauma about money from their childhood. A financial therapist can work to explore and resolve these emotions.
3. Fighting About Finances
If you often argue with your partner, friends, or other loved ones about money, you might find that a financial therapist can help you defuse this source of tension. It can help couples deal with what’s known as financial infidelity.
4. Poor Money Habits
Do you tend to “shop til you drop” when bored? Have you spent or gambled away your emergency fund? Do you overwork yourself in an effort to accumulate wealth? Do you tend to hop from one “get rich quick” scheme to another? A financial therapist could help you break these habits and develop new, beneficial ones.
These are some of the scenarios that a financial therapist could help you with.
Finding a Financial Therapist
Like choosing any therapist, you often need to shop around a bit to find the right fit — someone you feel you can relate to, trust, and you also feel understands you.
For those who may not have access to a financial therapy professional in their backyard, many offer services via video calls.
You can start your search with the Find A Financial Therapist tool on the FTA website, which features members and lists their credentials and specialties.
Your accountant or financial counselor might also be a good source of referrals.
As with choosing any other financial expert or mental health professional, it’s a good idea to speak with a few potential candidates. In your initial conversations with candidates, you may want to discuss the therapist’s training and specific area of expertise, as well as your needs and situation. This can help you assess how good a match they are.
It can also be a good idea to ask how long they have been providing financial therapy services, what their fees are, as well as if some or all of the fee may be covered by your medical insurance.
The Takeaway
Financial therapy merges financial with emotional support to help people deal with and improve stress, decision-making, and habit-forming related to money. If you frequently feel stressed and/or overwhelmed when you think about money (or you simply avoid thinking about money as much as possible), you might be able to benefit from at least a few sessions of financial therapy.
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.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.
FAQ
What does a financial therapist do?
A financial therapist combines expertise in psychology and finances to help people improve their attitudes toward money and their habits relating to money. They can help individuals manage such issues as money anxiety, overspending, and financial infidelity.
Is financial therapy the same as financial planning?
Financial therapy and financial planning are not the same thing. Financial therapy can help a person improve their attitude toward money and their behaviors related to money. Financial planning is focused on budgeting, debt management, and growth of wealth.
Can therapy help with finances?
Therapy can help with finances. You might have stress related to money due to childhood trauma centered on finances. Or you might be compulsively overspending or ignoring your money due to emotions about such matters. Financial therapy could help you work through these and other issues.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet
Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.
See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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It’s a common dream to become financially independent. While the phrase “financial independence” can mean different things depending on a person’s situation and outlook, it usually refers to living comfortably off one’s savings and investments. That often means you have no or low debt. In addition, it means that if you work, it’s probably because you want, not because you have to do so to pay bills.
If this sounds appealing, you’ll probably be happy to know that achieving financial freedom could be simpler than you think. The process often boils down to a relatively basic concept: Spending less and saving more.
Key Points
• Financial independence means living off savings and investments vs. relying on a paycheck.
• Budgeting is essential; track income and expenses, then save or invest the surplus.
• An emergency fund of 3-6 months’ expenses helps to ensure financial security.
• Prioritize paying off high-interest debt to improve financial health.
• Smart investing, including tax-advantaged accounts, can accelerate financial independence.
What Does It Mean to Be Financially Independent?
While there is no set definition for financial independence, the term often means getting to a point where you don’t have to work to pay your living expenses. Usually, financial independence is achieved by relying on savings, investments, and other forms of passive income to pay the bills. People who are financially independent likely don’t have to look at their checking account balance to know whether or not they have enough to cover, say, their utility bills.
Though financial independence doesn’t have to mean leaving behind a job or career path, it can. In fact, for many people, knowing the answer to “When can I retire?” helps them judge whether they are on track to financial independence or not.
The term “financial independence” is often used as a synonym for early retirement. What’s more, the two phrases are commonly strung together in the popular acronym FIRE, which stands for “financially independent, retire early.”
• One of the biggest perks is the ability to have choices. You can choose to keep working if you enjoy it, or you can kick back and relax. You can save money to pass on to future generations, or you can splurge on a trip around the world.
• Achieving financial freedom can also enable you to enjoy work more. If you’re no longer doing it for the money, you can structure your job responsibilities so you’re only doing the things you want to do.
• Financial independence can also benefit your physical health. Having the ability to work less allows you to exercise more and get more sleep. You may have more time and energy to eat better too.
• Financial independence may also have emotional benefits. It can allow you to spend more time with a partner, kids, family, and friends. Having stronger relationships can lead to increased happiness in life.
How to Become Financially Independent in 6 Steps
Here are some key steps that can help you reach financial independence.
1. Setting Realistic Goals
Being financially independent can look different for everyone, so a good place to start can be to define what being financially independent means to you. What do you visualize? Maybe you want to be debt-free by 40, or you’d like to retire at 50. Or perhaps you’d love to relocate to some place warm and sunny in 10 years.
As you develop your goals, you may want to give them a reality test by consulting with a financial advisor or chatting with a trusted financial mentor. You may find that you need to retool your vision based on your financial situation and how much time you have to achieve your dream.
Once you’ve honed in on some specific, achievable long-term goals, you can begin to figure out what you’ll need to do to make them a reality — whether that’s cutting your spending, boosting your income, and/or saving and investing more than you currently are each month. Even if you are just starting out or not earning that much, it can be wise to forge ahead. There are even ways to save on a low income.
2. Understanding That Income Isn’t Everything
Another step in how to be independent financially: Learning that your salary may not be the only thing that matters. Many people have a tendency to fixate on how much money they are making. And while income is an important part of your financial big picture, other factors also count. Yes, it’s easier to amass assets if you have more monthly income, but one key to increasing your net worth is to spend less than you make.
For example, if you are making a comfortable salary but haven’t gotten into the habit of saving and investing, then you may not be leveraging your income to its full potential. Becoming financially independent often requires an understanding that the amount of money you make is just one piece of the puzzle.
The path to financial independence may become a little less daunting once you realize that a high income alone is not necessarily going to lead to sustainable wealth. There are several other factors that play a role in how much you are able to grow your finances, such as how much interest your investments are making and the rate at which you are able to save.
More than a high salary, financial independence typically requires foresight, long-term thinking, and a holistic understanding of how your income overlaps with your expenses, lifestyle, and future goals.
3. Building a Budget
No matter what your income level, one of the keys to becoming financially free is to spend less — and potentially a lot less — than you are earning. Doing that typically involves finding a budget method that works for you.
Budgeting is the process of measuring income, subtracting expenses, and deciding how to divert the difference toward reaching your goals. It’s often considered the essential first task in achieving financial independence.
You can set up a monthly budget by first assessing what you are currently earning (after taxes) each month. Next, you can tally up your actual spending by looking at the last three to 12 months of bank and credit card statements and recording your expenses on a spreadsheet.
Seeing it all laid out in black and white can help you identify unnecessary expenses you might be able to cut out. You can then put the difference toward your long-term goals instead. One rule of thumb is to try to put 20 percent of your monthly take-home income into savings or investments. Working couples might try to bank a substantial part of one salary if possible.
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4. Establishing A Safety Net
Achieving financial independence also means thinking about financial security. Having a dedicated emergency fund that can help you weather a health emergency or another large, unforeseen expense means. Having money set aside can mean you may not have to run up credit card debt or dip into your investment or other savings account in order to cover these costs.
Experts often recommend having at least three to six months’ worth of living expenses set aside in an account. Ideally, that account earns interest but can be easily and quickly accessed when you need it. You can use an online emergency fund calculator to help you determine the right amount to save.
The more effective you are at dealing with financial emergencies, generally the faster your savings and investments can grow. In terms of growing your emergency fund as quickly as possible, consider adding any windfalls (like a bonus) to your fund, and keep your money in a high-yield savings account, typically offered by online banks.
5. Putting a Debt Pay-Off Plan Into Action
Taking care of your debt is another important step to achieving financial independence. Today, debt can take many forms — whether it’s student loan debt, a home mortgage, a car loan, or credit card debt.
If you currently have debt, consider incorporating a debt reduction plan into the budget you create and calculate how you would need to tweak your current spending habits in order to prioritize becoming debt-free.
It can be wise to start with the debt that has the highest interest first, since borrowing from those creditors is costing you the most money.
If you have multiple credit card balances, you may want to target them one at a time. You can do this by paying more than the minimum each month on one balance (paying just the minimum on the others) until that balance is wiped out, then move on to the next.
6. Being a Smart and Savvy Investor
Becoming a smart investor is another key step you can take on your journey to financial independence. The world of investment can be confusing and carries risk, but it also has the potential to be lucrative.
You may want to first focus on tax-advantaged accounts. If you have an employer-sponsored option, such as a 401(k) plan, it can be a good idea to contribute some of each paycheck, especially if your employer offers to match your contributions. Depending on your situation, you may be able to open a traditional IRA, Roth IRA, or SEP IRA as well. (There may be contribution limits to adhere to, however.)
If you have children, you may also want to consider the benefits of a 529 plan to help you invest for their college educations.
If you’re able to invest additional funds, you can choose a financial firm you want to work with and then open a standard brokerage account. From there, you can put your money in a mutual fund or an exchange-traded fund (ETF) (which bundle different types of investments together). Another option: If you’re prepared to do a fair amount of research, pick and choose your own stocks and bonds.
If you’re new to investing, you may want to consider opening an investment account through a robo-advisor, an investment management service that uses computer algorithms to build and look after your investment portfolio and typically charges relatively low fees.
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How Much Money Do You Need to Become Financially Independent?
How much you need to become financially independent will depend on a variety of variables, such as the cost of living you expect to have and the amount you plan to spend (will you be a no-car household? Two cars perhaps? How often would you like to travel?).
One way to look at this is to consider a formula used for retirement, which says you want to have 25 times the amount you plan to spend in a year, and that money needs to be invested in a 60/40 stocks and bonds portfolio to generate income.
Then, you would apply the 4% rule, which means that you would safely take 4% of your investments out each year (adjusting for inflation) in order to have those funds without outliving your money. Now, if you are a significantly younger person than the usual retirement age, you would have to adjust the numbers to cover more years.
Here, a couple of examples:
• Say you plan to spend $50,000 a year on your living expenses. If you multiply that by 25, you get $1.25 million. That would need to be the amount of your available assets to be financially independent.
• Now, say you plan to spend $125,000 a year on your living expenses. In this example, when you multiply $125K by 25, you would need $3,125,000 to be financially independent.
When looking at these numbers, don’t forget to consider other forms of income you might have coming in. Perhaps you earn passive income in some way or will eventually start to receive a pension. Maybe you will have money coming in from a side hustle you love or from Social Security. Consider all ways money could flow in your direction to understand your path to financial independence.
Habits That Can Get in the Way of Financial Freedom
As you pursue becoming financially independent, there can be habits than can hold you back. Here, a few to be aware of:
• Lack of planning: If you don’t take the time to dig into your finances and find a budget that works, you aren’t in control of your money or your goals. Thinking you can wing it typically doesn’t help you hit your marks or become financial freedom. Living with high-interest debt rather than figuring out how to pay it off is another example of how lack of planning can hinder you.
• Lack of financial literacy: This is another aspect of “winging it”: not educating yourself about how finances, net worth, and other facets of money management work can hinder you from reaching financial freedom. Seeing what resources your bank offers, listening to well-regarded podcasts, or reading well-researched books or websites can get you on the right track.
• Procrastination: Not getting started can hold you back financially. The sooner you begin saving, the closer you get to financial independence.
• Lifestyle creep and/or FOMO: If, as you earn more money, you spend more money, that’s lifestyle creep), and it can inhibit your ability to save. And if you shell out lavishly to keep up with friends, that’s FOMO spending, and it can prevent you from achieving financial independence.
If you avoid these habits and manage your money well and save steadily, you can be on the path to financial freedom.
The Takeaway
Becoming financially independent usually means that you don’t need to work for a living; you can rely on savings, investments, and passive income to pay your bills. Reaching this goal takes careful planning and management of your spending. One path to financial independence is to save regularly. Opening a savings account with a healthy return can be one step toward doing that.
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.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.
FAQ
How do I start to become financially independent?
Becoming financially independent can involve budgeting well and avoiding overspending. It also typically involves managing your money to save steadily and invest your cash so it works for you.
How much money do you need to be financially independent?
One rule of thumb is to have 25 times the amount you plan to spend in a year in the bank in order to be financially independent. So if you plan on spending, say, $100K a year, you would need assets of $2.5 million.
How can I get financially free with no money?
With no money, it will be hard to be financially free unless you live off the grid. For most people, even those with low income, financial freedom is a matter of spending less than your make, paying off debt, saving aggressively, and investing.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet
Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.
See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
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