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Everyone feels the effects of inflation: Groceries cost more, and child care seems to be a luxury service. But that’s subjective. To nail down the real-world impact of inflation, economists like to compare rising prices to salaries, which are more static. This is where the wage inflation calculator comes in. The tool illustrates how much buying power your earnings currently have compared to past years.

We’ll take a closer look at how wage inflation calculators work and what they can tell you about making a living in the U.S. in 2026. It also examines what inflation is and how much wages have increased compared to home prices, gold, and other metrics.

What Goes Behind an Hourly Wage Inflation Calculator

A wage inflation calculator may go by other names, such as an inflation wage calculator, an hourly wage inflation calculator, a minimum wage inflation calculator, or a wage- adjusted-for-inflation calculator. But they all refer to the same thing. You can see an example at https://www.bls.gov/data/inflation_calculator.htm.

The calculator is one way to see the effects of inflation, which is the change in the price of goods and services. It tells you how much buying power a dollar amount has on a certain date compared to another date — typically today’s date or a year-over-year equivalent. For example, someone may enter what their hourly wage was on Jan. 1, 2010, and then compare how much that same wage bought them on Jan. 1, 2026.

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Historical Inflation Rates, Compared

The table below shows the annual rate of inflation from 1920 to the present. See the next section for more information on how to read the table.

How to Read Our Historical Inflation Rate Table

To understand the table above, you first need to know what CPI means. The CPI comes from the U.S. Bureau of Labor Statistics (BLS), which began collecting family expenditure data in 1917. The annual average CPI-U in the second column represents urban CPI data. The annual percent change between each year’s CPI represents the rate of inflation.

How to Calculate Hourly Wage Adjusted for Inflation

Using a wage inflation calculator is a simple way to see how your income’s buying power changes with inflation. Just enter the starting year of your choice, your hourly wage, and then the current year.

Let’s say someone was making $25 per hour in March 2018 and wants to know what the equivalent hourly rate is in March 2026. In this case, it’s equivalent to making $33.08 in March 2026. Assuming that this person makes the same money today, this shows that the buying power of their hourly wage has decreased over the years.

If you’re negotiating a raise, you could argue that $33.08 is the minimum you should be making to keep up with the cost of living.

What Is Inflation, and How Does It Work?

Inflation represents changes in the prices of services and goods throughout the economy. The way the government measures inflation is by comparing the current cost of goods and services to prices in previous years.

Inflation weakens the purchasing power of the dollar, as consumers have to pay more for things than they did in previous months and years. Inflation can also deflate the value of cash held in savings accounts.

What Is Actual Inflation?

Actual inflation is a term used to refer to what the current rate of inflation really is versus what consumers perceive the current rate to be, also referred to as their inflation expectations. Consumer expectations influence actual inflation.

Hyperinflation

Hyperinflation is a term used when rapid inflation occurs. This is when prices rise uncontrollably over a period of time. Hyperinflation of 50% a month or more is extreme and, fortunately, rare.

The U.S. has never experienced hyperinflation, and no one believes that it’s on the horizon. The most recent example of hyperinflation is Venezuela, where inflation reached 65,000% in 2018.

Deflation

Deflation is the opposite of inflation, and it’s when the prices of goods and services go down. The U.S. experienced an average deflation of 7% (or -7% inflation) per year during the Great Depression (1930-1933).

Recommended: What Is Stagflation?

How Is Inflation Calculated?

The formula for measuring inflation is:

Percent Inflation Rate = (Final CPI Index Value/Initial CPI Value) x 100

How Is Wage Adjusted for Inflation Calculated?

It’s complex. The simplest way to calculate a wage adjusted for inflation is to use an online wage inflation calculator.

How Inflation Impacts You

There’s some confusion around whether inflation is good or bad. Some inflation is normal and shows that the economy is growing. But for consumers, it feels like a bad thing. It can be especially worrisome for borrowers with variable-rate-interest debt, such as student loan debt.

Economists can measure the impact of inflation on consumers in a number of ways. You’ve probably seen articles discussing college tuition vs. inflation, which show how American incomes have not kept up with rising education costs. Other metrics tell similar stories.

Let’s look at a few different metrics that reveal how consumers may feel the impact of inflation.

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How Your Wage Is Doing Relative to the Housing Market

Inflation can sneak up on consumers when prices at grocery stores rise slightly. But they really feel it when making a large purchase, such as buying a home. People who have saved for many years to buy a house find that their income and savings are no longer enough to reach their home-buying goals.

That’s because median home prices have far outstripped median wages: Nationwide, the median sales price of a new house rose from $17,800 in 1963 to $403,000 in early 2026 — a roughly 2,165% increase — while median family income rose from $6,249 in 1963 to $105,800 in 2024 — about a 1,600% increase. This may have been great news for our parents and grandparents, who saw their real estate investments soar. But for today’s first-time homebuyers, it’s a disaster.

Also, mortgage interest rates can rise during periods of inflation.

Recommended: Should I Sell My House Now or Wait?

How Your Wage Is Doing Relative to Gold

Because gold tends to hold its value, it makes a good unit of measurement for economists. By converting wages to gold, we can get a better sense of how wages have held up, or not, over the years.

In 1965, the federal minimum wage of $1.25 per hour equaled about $2,600 per year for full-time work, which bought roughly 74 troy ounces of gold at the then-official U.S. price of $35 per ounce. At the current average gold price of about $4,720 per ounce (May 2026), 74 ounces would be worth almost $350,000. Compare that to the current federal minimum wage of $7.25 per hour, or $15,080 annually.

How Your Wage Is Doing Relative to CPI

Remember, CPI represents consumer prices. Inflation impacts prices of essential goods and services such as groceries, gas, and childcare. This means that salaries and savings don’t extend as far as they used to. This is why many people push for raising the minimum wage during periods of inflation.

If you’re looking to take control of your money during inflation, a money tracker app can help you gain valuable insight into your financial life.

The Takeaway

Inflation, and the rising prices that come with it, means your income doesn’t buy as much as it used to. Using a wage inflation calculator is one way for consumers to get a more realistic idea of how much buying power their hourly wage has during periods of inflation. Of course, inflation doesn’t affect all prices equally. That’s why economists use different metrics to measure inflation’s impact, such as the CPI, the housing market, and gold.

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FAQ

How do you calculate wages adjusted for inflation?

You divide the current Consumer Price Index (CPI) by the CPI from the past year, then multiply by the past wage. A wage inflation calculator does this math automatically using historical CPI data from the U.S. Bureau of Labor Statistics.

How much is $15 an hour in 2000?

According to the Consumer Price Index (CPI) Inflation Calculator from the U.S. Bureau of Labor Statistics, $15 an hour in March 2000 had the same buying power as $28.93 per hour in March 2026. It illustrates how inflation erodes purchasing power over time.

What is the inflation rate for 2026?

The 12-month inflation rate as of March 2026 is 3.3%, based on the Consumer Price Index (CPI). Because inflation is updated monthly, check the U.S. Bureau of Labor Statistics for the most current figure.

How do you calculate a real hourly wage from CPI?

Take the current Consumer Price Index (CPI), divide it by the CPI from your base year, and multiply by your nominal hourly wage. The result is your real wage, which shows what your pay is worth after accounting for inflation.

Why should you adjust your hourly wage for inflation?

Adjusting reveals your true purchasing power, not just the dollar amount on your paycheck. It lets you compare wages across years using the Consumer Price Index (CPI) to see whether salaries have kept up with rising prices.

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.

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SORL-Q226-007

Nearly 25% of U.S. households are living paycheck to paycheck, according to one 2025 report. That means their spending on necessities leaves virtually nothing for savings or discretionary spending.

With so many people barely able to pay their bills, you may wonder if it’s possible to live below your means — or spend less money than you make. The answer is yes. It involves some budgeting, a little determination, and a few smart strategies.

Read on to learn the details of living below your means, and discover how to gain financial freedom with the right mindset and goals.

What is the Exact ‘Living Below Your Means’ Meaning?

When you live below your means you spend less money than you earn every month. For example, if your monthly income is $5,000, and you spend $4,700 on rent, food, and other living expenses, you’re left with $300 each month to put in your bank account to create a cash cushion and to save for future goals.

What Does “Living on Less Than You Make” Mean Not Doing?

Living on less than you make means not having to borrow money from a relative to pay your rent or having to use your credit cards to cover basic living expenses that can leave you with high-interest debt to pay off.

In other words, living within your means involves avoiding overspending so that you don’t sacrifice your future financial security.

How Do You Calculate Living Under Your Means?

No specific amount of money qualifies as living under your means. No matter what your income is, living below your means is defined as spending less than you earn.

So if you earn $65,000 a year, and spend $62,000 annually, you are living $3,000 below your means. This extra money — which can be deposited into a savings account — makes it possible to save money and build wealth.

12 Powerful Benefits of Living Below Your Means

Living under your means is a wise financial move — one that can pay off in a variety of ways. Here are 12 good reasons to start living on less than you make so you can enjoy the benefits of financial independence.

1. Being Prepared for Emergencies

When you have wiggle room in your finances, you can start putting money into an emergency fund and build a safety cushion. Many financial professionals suggest having at least three to six months’ worth of living expenses in your emergency fund. This helps give you peace of mind when unexpected expenses arise, such as a broken washing machine or a major dental bill, or in the case of a job loss.

2. Saving for Larger Purchases

Planning a family beach vacation or girls’ weekend away? Will you need a new laptop soon? If you live below your means (for example, driving your trusty old car rather than financing a new model), you’ll have more breathing room in your budget to save for key expenses. Even ordering takeout for your family’s dinner every two weeks instead of weekly could add up to $100 or more in monthly savings, which could be better used elsewhere.

3. More Financial Freedom and Confidence

A major benefit of living below your means is gaining financial freedom. When you aren’t living paycheck to paycheck, you won’t feel so stressed about money, and you won’t have to watch your credit card debt climb upward. You may see your savings grow, which can make you more confident about the future.

Living beneath your means can help you be a responsible spender and saver. Achieving this financial discipline will give you a feeling of control and confidence, and it can also open the door to more possibilities.

4. Having a Healthier Lifestyle

Living below your means typically gives you the room to be more mindful about your spending and your lifestyle. When you’re watching your pennies, you’re more likely to make meals at home, which can be healthier and have more reasonable portion sizes than burgers and fries or a bucket of fried chicken delivered to your door.

In addition, to cut back on the high price of gas, you might walk or bike more, which is good for you and the planet.

5. Less Stress and Worry About Money

A recent survey found that 73% of Americans said their number-one cause of stress is money. Younger generations like Millennials and Gen Z are even more stressed out about their finances than older generations.

When you are living below your means, you may be able to eliminate some of this stress. Having room in your budget means you don’t have to break out your credit card to buy a cup of coffee or see your checking account balance head towards negative territory. And you don’t have to lie awake at night worrying about debt. Instead you can think happily about how you’re saving for the future.

6. Spending Less Money on Consumerism and Materialism

When you are focused on living under your means, you may begin to recognize that constant consumerism is bad for your pocketbook. More and more people are embracing the minimalist way of life, bypassing new jeans in favor of thrift-shop pairs, for example. The same goes for other purchases like furniture and books.

Too often, the urge to shop and the desire for new goods is short-lived, and the items end up in a landfill. Buying gently used items can help prevent this while padding out your savings.

7. Having Funds for a Rainy Day…or a Sunny One

Maybe your favorite armchair’s upholstery rips. Wouldn’t it be nice to have funds available to fix it without feeling money anxiety? Or perhaps the kids would love an overnight stay at a lodge with a water park. If you have been living below your means and setting aside some cash, this may be your moment to forge ahead.

That’s where a rainy day fund or splurge savings come in. While these situations are not good uses of an emergency fund, they can be worthwhile expenses to spend on using other cash reserves.

8. Having the Ability to Build Wealth

When you live below your means, you have a surplus of cash that you could save and invest to build wealth. One smart move: If your employer has a 401(k) program, sign on to participate. Money will be automatically deducted from your paycheck (before you even see it) into your account. This is an example of paying yourself first and it’s also one way to help build wealth for your retirement.

Another idea: If you get a raise, save or invest it rather than amping up your spending to account for the extra money. Also, if you are not living paycheck to paycheck, when you get a windfall (say, a tax refund or a birthday check), you can sock that away.

9. Avoiding the Trap of Lifestyle Creep

Living on less than you make means not falling victim to lifestyle creep. Also known as lifestyle inflation, lifestyle creep is spending more than you make. It can easily begin to happen when you get a raise or a bonus at work and you feel like you can afford to spend more since you’ve got some extra cash coming in. You might splurge on a fancy vacation or a new car, for instance, which could reduce your savings and increase your debt.

10. Developing a Stronger Money Mindset

Do you think about money with shame or anxiety because of debt burdens? Or with pride and contentment, knowing you have cleared the deck and are even putting money into savings by living below your means? The more you take control of your finances and improve your money mindset, the better your outlook on life is likely to be.

11. Having Financial Security

When you live below your means, you know you can handle bills without worry and dread over late notices, collection agency phone calls, fees, and service interruptions. Living on a leaner budget also means you can save extra cash for unexpected expenses that pop up. These might include, for example, a dress for your college roommate’s wedding or fees for a professional class you really want to take.

By living below your means, you are likely taking a giant step or two toward achieving financial security and not feeling like you’re on the brink of money trouble.

12. Being Able to Invest Your Money

For long-term savings goals, you may want to invest your money when you have some extra cash. You can participate in your employer’s 401(k), as noted above, and contribute enough to get the employer match, if you can. That’s basically free money that your employer kicks in when you contribute a certain amount to your account.

You might also put some funds into a high-yield savings account to save for short-term goals. There, your money can grow faster than it would in a traditional savings account.

Expert Tips to Help You Live Within Your Means

If you’re convinced of the value of living below your means, the next step is taking action to do so. Here are some strategies to help make that happen.

Tracking All of Your Spending

Recording where your money goes is vital to living below your means. For one month, track every dollar that leaves your wallet, from a tip at the coffee place to a gift for your sister. Not just rent and gas, but also pharmacy co-pays, the juice you got on your way to work, and parking meter charges. Look into a free budgeting app to help you stay on task; many financial institutions provide these for their clients, or there are plenty of third-party options available online.

Budgeting

Once you know what you spend in a given month (including debt payments), compare this to your take-home income. Re-evaluate what you truly need and what can be eliminated in your quest to live below your means. This is one of the key components of successful budgeting.

Some expenses are fixed, like a monthly mortgage or commuter fare. But others are more variable. Take a close look at grocery bills, streaming services, dining out, and shopping. Consider a town library card vs. buying books; making your own iced tea rather than spending $5 to have the barista pour one; and perhaps give up your gym membership in exchange for free online workouts or jogging in a local park.

There are different types of budgeting and you can choose the one that works best for you. The important thing is to create a budget and then stick to it to help live under your means.

Recommended: The 50/30/20 Budget Rule

Creating a Financial Plan

Take time to consider your lifestyle and goals. If you’re wondering how to set financial goals, this is something you could do solo or with a financial planner.

Things to consider are short-term financial goals like boosting an emergency savings fund or funding a wedding, medium-term goals like buying a house, and long-term aspirations, such as building a robust retirement nest egg.

When you trim expenses and live below your means, you can sock money away to help achieve your goals.

Downsizing

Could you consider moving to a smaller space or more affordable city, or trading in your gas guzzler for a greener car? These downsizing moves can reduce the cost of your monthly needs and deliver wiggle room in your budget.

You might also consider selling things you no longer want or need, whether that’s gently worn clothing, furniture sitting in your basement, or an iPad you haven’t touched in months. Depending on the item, you might be able to sell it on eBay, Facebook Marketplace, Poshmark, or ThredUP, among others.

Eliminating Unnecessary Expenses

Get serious about axing unnecessary expenses. In addition to ditching a cappuccino-a-day habit, scroll through your monthly credit card statement and cancel any excess services. You may have forgotten how many streaming services you signed up for way back when, or perhaps you are paying for a meal-kit plan that keeps raising its prices. Keep what you cannot part with, and trim the extras to bring your spending in line. It’s a key aspect of living within your means.

Having Multiple Streams of Income

While cutting costs is one way to help live beneath your means, another tactic is to increase your income. More money coming in, minus your current spending, should yield some spare cash. Start by thinking about some passive income ideas, like taking in a roommate for a while or renting out your bike.

You could also do something more hands-on like starting a part-time gig — whether it’s dog-walking or website design — in your free time. One of the benefits of a side hustle is bringing in extra funds.

Organizing Bills and Monthly Expenses

Above all, when learning to live below your means, stay organized at tracking money that comes in and money that goes out to pay for bills and other expenses. As noted above, you can use an online finance tool from your bank, or one from the app store. This can help you always know where you stand financially as unexpected expenses and bills pop up.

Improving Your Money Mindset

Take stock of, and pride in, what you do day by day to live below your means. Recognize your progress, no matter how minor. Every dollar you don’t spend is helping you live below your means.

Hopefully, you can bid farewell to money shame, which can lead to overspending and splurge-related regrets. You will be more aware of where your money goes and hopefully on a path to building wealth.

Automating Your Savings and Investments

Automating your savings and investments can help you live below your means by making financial transactions happen regularly, seamlessly, and on time. When you automate your finances, you avoid missed bill payments and late fees, and save a certain amount (determined by you) automatically. It can also allow you to organize your financial life and reduce stress.

With automation, you can preschedule and preapprove transfers of money from your bank account to pay your bills, move money from your checking account to your savings account, set up direct deposit with your employer so your paychecks go right into your bank account, and also set up automatic retirement deductions.

Automating your savings and investments can help you gain more control over your money, stick to your budget, and work toward your financial goals.

The Takeaway

Living below your means, or spending less than you earn, is possible with the right budgeting steps and a healthy money mindset. Following a budget on your existing income can help you put away funds for important milestones, such as the down payment for your first house and building a retirement nest egg. It can also help you get past living paycheck to paycheck and accumulating credit card debt.

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FAQ

How do I start to live within my means if I am currently in debt?

If you are in debt, you can start living below your means by creating and sticking to a budget that tracks your spending, including debt payments. Prioritize paying off high-interest debt like credit cards to save money on interest. You might use the debt avalanche method, which involves paying the minimum on all your debt and putting extra money toward your highest-interest debt to pay it off faster and save money. Cut back on discretionary spending like eating out, streaming subscriptions, and gym memberships. And consider taking on a side hustle to generate extra income.

Is living below your means the same as being frugal?

Living below your means is not exactly the same thing as being frugal, although they share similarities. Living under your means is about spending less than you earn, however you might choose to do that. You could reduce your spending or take on a side hustle to boost your income. Being frugal means following specific thrifty behaviors such as buying used items rather than new, cooking everything from scratch, and making home repairs yourself rather than calling in an expert.

What is the 50/30/20 rule and how does it help you live under your means?

The 50/30/20 rule is a popular budgeting rule that involves dividing your money into three basic categories: 50% of your take-home income goes to essentials like rent, 30% goes to things you want, and 20% to saving for your future. By breaking your budget into three simple categories, the 50/30/20 rule makes it easy to track your spending and identify expenses you can trim to live under your means. For example, in the things-you-want category you might limit the number of times you eat out or skip the vacation away for a staycation at home that costs a lot less, but is still plenty of fun.

How can I tell if I am living above my means?

Living above your means is defined as spending more money than you earn. Signs that you are living beyond your means might include running out of money and having to use credit cards to get through the month; not having an emergency fund for unexpected expenses; and not having money in savings.

Can I still enjoy life while living below my means?

Yes! You can absolutely enjoy life while living below your means. For example, you can save and budget for fun events like vacations and dining out; the important thing is to make these experiences intentional and not go into debt trying to afford them. You can also find plenty to do for free or at a low cost, from group hikes and bike rides to community fairs and festivals. And consider this: Living below your means reduces your financial stress so you can enjoy life more.

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SOBNK-Q226-048

While some stock analysis tools rely on company fundamentals (such as earnings reports), technical indicators focus solely on stock price movements. Traders use technical analysis to identify patterns in price and volume data to glean insights about how a stock might move in the future.

For that reason, although technical indicators can assist with trend identification, most traders combine different indicators when conducting stock analysis.

How Do Stock Technical Indicators Work?

Technical analysis uses various sets of data and indicators, such as price and volume, to identify patterns and trends in a security’s price movements. This type of analysis is different from fundamental analysis, which looks at company financials, industry trends, and macroeconomics.

Rather, technical analysis solely analyzes a stock’s performance. Stock technical indicators are often rendered as a pattern that can overlay a stock’s price chart to predict the market trend, and whether the stock would be considered “overbought” or “oversold.”

Two Main Types of Technical Indicators

Stock technical indicators generally come in two flavors: overlay indicators and oscillators.

Overlay Indicators

An overlay indicator typically overlays one trend onto another on a stock chart, often using different colors to distinguish between the lines.

Oscillator Indicators

An oscillator typically uses metrics such as a stock’s price or trading volume to determine momentum, or rate of change, over time. It uses this info to generate a signal, or trend line, whose fluctuations between two values in a range can indicate if a stock may be overbought or oversold.

If the trend line moves above the higher value of the range, it can indicate a stock is overbought, while dipping below the lower value can indicate it’s oversold. For example, a stochastic oscillator uses a range of 0 to 100. When levels are above 80, it may indicate an asset is overbought; when the indicator is below 20, it may be oversold

The movements of the trend line thus can help investors determine support and resistance in certain price trends when trading stocks, so they can decide whether to sell or buy (support being the price at which a downturn generally bounces back up, and resistance being the point at which rising prices generally start to fall).

Oscillator indicators can be leading or lagging:

•  A leading indicator tracks current market movements to anticipate where the trend is headed next.

•  A lagging indicator is based on recent history and seeks patterns that will indicate potential price movements.

The moving average is a common oscillator; it’s considered a lagging indicator as it measures specific intervals in the past.

Naturally, every stock indicator has its pros and cons. Various trading indicators can be used by investors to analyze supply and demand forces on stock price, to help shed light on market psychology, or to manage risk.

But while stock indicators and trading tools can help with buy and sell points, false signals can also occur.

Reasons to Use Stock Market Indicators

Knowing some of the most popular trading tools might benefit your investing strategy by providing you with easier-to-spot buy and sell signals. You don’t have to know every single technical indicator, and there are many ways to analyze stocks, but using multiple stock indicators may help you improve trading results.

You can also use these stock indicators to help you manage risk when you are actively trading, when investing online or through a traditional platform.

Price trend indicators are some of the most important technical trading tools since identifying a security price’s trend is often a first step to forming a trading strategy. Long positions are often initiated during uptrends, while short sale opportunities can occur when prices are in a downtrend.

Volume trend indicators are also helpful to gauge the power or conviction of an asset’s price move. Some believe that the higher the stock volume on a bullish breakout or bearish breakdown, the more confident the move is. Higher volume could signal a lengthier trend continuation.

7 Stock Indicators for Technical Analysis

It’s important to remember that these trading tools were developed based on the belief that mathematically derived patterns may be valuable as predictors of stock movements. Past performance, however, is not a guarantee of future results. So while it can be useful to employ stock technical indicators, they are best used in combination before deciding on a potential trade.

Also, many of these trading tools are lagging indicators, which can lead to an inaccurate reflection of current and future market conditions.

Following are seven of the most common technical stock indicators, along with their advantages and disadvantages.

•  Moving Averages (MA)

•  Moving Average Convergence Divergence (MACD)

•  Relative Strength Index (RSI)

•  Stochastic Oscillator

•  On-Balance Volume (OBV)

•  Accumulation / Distribution Line (ADL)

•  Standard Deviation

1. Moving Averages (MA)

A moving average (MA) is the average value of a security over a specific time. The MA can be:

•  Simple Moving Average (SMA)

•  Exponential Moving Average (EMA)

•  Weighted Moving Average (WMA).

A moving average smooths stock price volatility, and is taken as an indicator of the direction a price may be headed. If the price is above the moving average, it’s considered an uptrend versus when the price moves below the MA, which can signal a downtrend.

Moving averages are typically used in combination with each other, or other stock indicators, to identify trends.

Pros

•  Using moving averages can filter out the noise that comes from price fluctuations and focus on the overall trend.

•  Moving average crossovers are commonly used to pinpoint trend changes.

•  You can customize moving average periods: common time frames include 20-day, 30-day, 50-day, 100-day, 200-day.

Cons

•  A simple moving average may not help some traders as much as an exponential moving average (EMA), which puts more weight on recent price changes.

•  Market turbulence can make the MA less informative.

•  Moving averages can be simple, exponential, or weighted, which might be confusing to new traders.

2. Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence (MACD) helps investors gauge whether a security’s movement is bullish or bearish, and helps gauge the momentum of the trend. The MACD uses two different exponential moving averages (EMAs) to do so.

A 26-period EMA is subtracted from a short-term 12-period EMA to generate the MACD line. Then a signal line, based on a nine-day EMA, is plotted on top of the MACD to help reveal buy and sell entry points.

If the MACD line crosses above the signal line, that can signal a buy opportunity. If it crosses below the signal line, that could signal a price decline and an opportunity to sell or take a short position.

Pros

•  The MACD, used in combination with the relative strength index (below) can help identify overbought or oversold conditions.

•  It can be used to indicate a trend and also momentum.

•  Can help spot reversals.

Cons

•  The MACD might provide false reversal signals.

•  It responds mainly to the speed of price movements; less accurate in gauging the direction of a trend.

3. Relative Strength Index (RSI)

The relative strength index or RSI is an oscillator tool that looks at price fluctuations in a given period and calculates average price losses and gains. It ranges from 0 to 100. Generally, above 70 is considered overbought and under 30 is thought to be oversold.

Traders often use the RSI in conjunction with the MACD to confirm a price trend. The RSI can sometimes identify a divergence, when the indicator moves in opposition to the price; this can show the price trend is weakening.

Pros

•  An RSI can help investors spot buy or sell signals.

•  It may also help detect bull market or bear market trends.

•  It can be combined with moving average indicators to spot breakout trends or reversals.

Cons

•  The RSI can move without exhibiting a clear trend.

•  The RSI can remain at an overbought or oversold level for a long time, making this tool less useful.

•  It does not give clues as to volume trends.

Recommended: 5 Bullish Indicators for a Stock

4. Stochastic Oscillator

Traders will often use the stochastic oscillator, which is a momentum indicator, to determine whether a given security is overbought or oversold. The stochastic oscillator allows traders to compare a specific closing price of a security to a range of its prices over a certain time frame.

By using a stochastic chart, traders can gauge the momentum of a security’s price with the aim of anticipating trends and reversals. A stochastic oscillator uses a range of 0 to 100 to determine if an asset is overbought (when the measurements are above 80) or oversold (when the measurement is below 20).

Pros

•  Clearer entry/exit signals: The oscillator has a basic design and generates visual signals when it reaches the outer bounds of a price range. This can help a trader determine when it may be time to buy or to sell stocks.

•  Frequent signals: For more active traders who trade on intraday charts such as the 5-, 10-, or 15-minute time frames, the stochastic oscillator generates signals more often as price action oscillates in smaller ranges.

•  Easy to understand: The oscillator’s fluctuating lines are fairly clear for investors who know how to use them.

Cons

•  Possible false signals: Depending on the time settings chosen, traders may misperceive a sharp oscillation as a buy or sell signal, especially if it goes against the trend. This is more common during periods of market volatility.

•  Doesn’t measure the trend or direction: It calculates the strength or weakness of price action in a market, not the overall trend or direction.

5. On-Balance Volume (OBV)

OBV is a little different from the other indicators mentioned. It primarily uses volume flow to gauge future price action on a security or market. When there’s a new OBV peak, it generally indicates that buyers are strong, sellers are weak, and the price of the security may increase.

Similarly, a new OBV low is taken to mean that sellers are strong and buyers are weak, and the price is trending down.

The numerical value of the OBV isn’t important — it’s the direction that matters. In that respect it can be used as a trend confirmation tool. It can also signal divergences, when the price and the volume move in opposite directions.

Pros

•  Volume-based indicator gauges market sentiment to predict a bullish or bearish outcome.

•  OBV can be used to confirm price action and identify divergences.

Cons

•  It can be hard to find definitive buy and sell price levels.

•  False signals can happen when divergences and confirmations fail.

•  Volume surges can distort the indicator for short-term traders.

6. Accumulation / Distribution Line (ADL)

The accumulation/distribution line (ADL) looks at the trading range for a certain stock, and uses price and volume data to gauge whether shares are being accumulated or distributed. Like OBV it also looks for divergences, so that if a price trend isn’t supported by volume flow it could indicate the trend is about to reverse.

Although this sounds similar to OBV, they are calculated differently, and the ADL gives more attention to price and volume data within a specified range.

Pros

•  Traders can use the ADL to spot divergences in price compared with volume that can confirm price trends or signal reversals.

•  The ADL can be used as an indicator of the flow of cash in the market.

Cons

•  It doesn’t capture trading gaps or factor in their impact.

•  Smaller changes in volume are hard to detect.

7. Standard Deviation

Standard deviation measures the extent to which a data point deviates from an expected value, i.e. the mean return. When used as a technical indicator, standard deviation is a common stock volatility measure; it refers to how far a stock’s performance varies from its average.

Investors often measure an investment’s volatility by the standard deviation of returns compared with a broader market index or past returns.

Pros

•  Standard deviation mathematically captures the volatility of a stock’s movements, i.e. how far the price moves from the mean.

•  It provides technicians with an estimate for expected price movements.

•  It can be used to measure expected risk and return.

Cons

•  It does not provide precise buy and sell signals.

•  It must be used in conjunction with other indicators.

The Takeaway

Technical analysis tools use past price and volume data to help traders identify price trends and make buy and sell decisions. It’s important to know that technical analysis does not use fundamentals, like earnings reports, to assess the underlying companies, their industries, or any macroeconomic trends that might drive their success or failure. Rather, technical analysis solely analyzes the movement and volume inherent in a stock’s performance.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

What is the most popular technical indicator for stocks?

Traders typically combine technical indicators, so it’s difficult to point to one as being a top choice. That said, many traders use the moving average indicators in combination with others to gauge price trends.

What is the most accurate indicator of the stock market?

There is no single indicator that can anticipate overall stock market performance. In fact, it’s an important factor to keep in mind when using technical indicators: For every successful price prediction or winning trade, there are countless others that don’t pan out. There are no crystal balls.

Which indicator gives buy and sell signals?

Different traders favor different indicators when looking for signals about how to place a trade. That said, the stochastic oscillator is relatively clear-cut in that it can help traders identify buy and sell opportunities based on price closes and trends within a certain range.

Photo credit: iStock/staticnak1983

Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC. For a full listing of the fees associated with Sofi Invest, see our fee schedule.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOIN-Q126-043

When you’ve decided on a house to buy and entered into escrow, you can expect to receive a preliminary title report. The report will verify ownership and reveal any lurking issues that will not be covered under a subsequent title insurance policy.

This is an important step: When you’re buying a home, the preliminary title report gives you the chance to eliminate problems before you close on the property. This can help you avoid any legal headaches that arise from those issues.

Here’s a look at how to read these documents and what kind of information you can expect to find in them, including what is a preliminary title report, how to read a preliminary title report, and what is a title report vs. title insurance.

Title Insurance 101

First, you’ll need to understand what title insurance is. A title is the set of legal rights you have to a property once you buy it. A clear title is the goal, meaning you want the property to be free of liens and other ownership claims. You may have qualified for a mortgage, but you will generally need to resolve any title issues in order to get to the closing.

Title insurance protects both buyers and lenders against certain problems with a title when ownership of a property transfers from one person to another. During or after a sale, if there is a title dispute, the insurance company may be responsible for paying certain legal damages. If you don’t have title insurance, you could be responsible for costs related to title issues that crop up.

There may be two forms of title insurance involved in a sale. If you’re borrowing money to buy a home, you may purchase lender’s title insurance, which protects the lender. Owner’s title insurance, less common, is usually purchased by the seller to protect the buyer, but this can vary based on state, local custom, and negotiation.

Reading a Preliminary Title Report

When you receive the preliminary title report, look for the information below.

Owner of Record

The preliminary title report will start with the name of the owner of record. If you’re buying a home, this should be the seller’s name. If it isn’t, ask your escrow or title officer to explain it.

Statement of Vesting

Next, the report will lay out the extent of the current owner’s interest in the property. The fullest type of ownership is known as “fee simple” or “fee.” This means a person owns a piece of land and all the real estate on it.

There may be other types of ownership that will show up in this section. For example, you might see a leasehold estate, which gives a tenant exclusive rights to use a property owned by someone else for a set period of time.

Legal Description

The legal description details the property location, lot size, boundaries, and any easements or encroachments. For condominiums and planned unit developments, the legal description might include common areas, parking, storage, and easements. A plot map (or plat), which shows how land is divided into plots, may be included as well to show the general location of a property.

Exceptions

Exceptions will be listed numerically and are matters that your title insurance policy will not cover. They may include:

•   General tax issues: Are there unpaid taxes? Property taxes will show up as the primary “lien” and as due or paid in full. Property taxes must generally be paid for the property sale to go through. And tax classifications could affect the new owner. For instance, if land is classified as agricultural, there could be penalties for withdrawing from that classification.

•   Assessments: Are there delinquent bills owed to the city that need to be paid before closing?

•   Encumbrances: These might include liens from creditors or lenders, or liens for the payment of federal taxes or assessments. They might also include liens against a property because of back-due child support or spousal support. Are there loans against the property you weren’t aware of, such as additional mortgage loans?

•   Covenants, conditions, and restrictions, also known as CC&Rs: These are rules that homeowners must follow in a planned community or common interest development. They might determine whether you are allowed to park on the street, what kind of fence you can put up, or what color you can paint your house.

•   Easements: An easement is the right another party has to the property you’re interested in buying. For example, neighbors may have a right of way that allows them to access their property through yours. Or a utility company might have the right to install, access, or maintain equipment on the property, such as power lines or cable.

•   Other issues: Other matters may appear on the preliminary title report, such as a bankruptcy or notice of action, which are court proceedings that are underway and involve the property.

The transfer of property is subject to these exceptions unless they are dealt with by the seller before the sale. If any liens or encumbrances crop up on your preliminary title report, you have the chance to clear them before the sale goes through. Together with your real estate agent, you can work with the sellers and their agent to clear the title before you take it on.

If you have any questions about your preliminary report, you can contact your real estate agent, an attorney, or your escrow or title officer.

Standard Exceptions and Exclusions

In addition to the list of exceptions that are particular to the home you want to buy, there are standard exceptions and exclusions that a title insurance policy won’t cover.

Building codes and restrictions are often exempt from title insurance coverage, as are zoning restrictions or other regulations for how land can be used in certain areas.

Sometimes a building is subject to zoning restrictions. For example, it may be in a historical district that restricts how a buyer can develop the property.

Recommended: How to Make an Offer on a House

How to Get a Title Report for a Property

As part of the home-buying process, your lender will likely require a preliminary title report and title insurance.

In some cases, the seller will request the title report from a title company once an escrow account is opened. The seller may include this information as part of their disclosure package.

Recommended: Mortgage Prequalification vs. Preapproval: The Differences

Title Report vs Title Insurance

As mentioned above, once you open escrow, an order is placed with the title company to produce your preliminary title report. The company will assemble and review records having to do with the property you want to buy. The title report will give you insights into whether the property has, say, any liens on it or other issues.

Title insurance, on the other hand, is indemnity insurance. It protects both lenders and homebuyers from enduring financial loss if there are any defects in a property’s title. (Title insurance is different from homeowners insurance, and you’ll need both.)

Limitations of the Preliminary Title Report

Be aware that the preliminary title report only shows the matters that the title company will exclude from coverage when and if a title insurance policy is issued.

It is not a complete picture of the condition of the property. And it may not even list all of the liens and other encumbrances that may affect the title of the property.

The Takeaway

Think of a preliminary title report like a background check on a home, revealing tax, lien, or ownership poltergeists lurking. Knowing how to read a preliminary title report helps prevent spooky surprises. It’s an important step in getting to the closing table and moving into your new home.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Who should order the preliminary title report?

It’s often the seller’s responsibility to order the preliminary title report as part of their disclosures about the property. Work with your real estate agent to make sure the title report has been ordered to keep moving smoothly toward your closing date.

What could a preliminary title report reveal?

A title report will show who owns the property and could reveal liens, covenants, easements, and other restrictions on the property. This allows you and the seller to clear these up before the sale goes through.

What is the difference between a preliminary title report and title insurance?

A preliminary title report outlines recorded matters that may affect the property’s title and identifies exceptions that may not be covered. Title insurance, on the other hand, helps protect against certain title-related losses after the policy is issued.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q126-219

Many first-time house hunters lie awake at night worrying, Will I qualify for a mortgage? With the wide variety of loan programs, down payment requirements, and credit thresholds out there, qualifying for a mortgage can feel like a bad choose-your-own-adventure story: “Didn’t prequalify? Return to page 1.”

Let’s take some of the mystery out of how to qualify for a mortgage.

9 Mortgage Qualification Factors

What goes into qualifying for a home loan can be especially confusing. Here are some things that may come into play when qualifying for a home loan.

1. Down Payment

Down payment requirements vary based on the type of home mortgage loan you’re applying for.

Conventional Loan Down Payment

You may have heard that 20% down is the ideal. From mid-2024 to mid-2025, the median down payment across repeat homebuyers was at an all-time high of 23%, and for first-time homebuyers, it was 10%, according to research by the National Association of Realtors®. And some conventional loans require just 3% down for first-time homebuyers.

The 20% figure is cited as a goal because putting down 20% helps buyers avoid the added cost of private mortgage insurance (PMI), which is required if your down payment is less than 20%. But you can also avoid PMI by seeking a “piggyback” mortgage or lender-paid mortgage insurance.

If you’re getting help from loved ones for your down payment, you’ll need to document that with a gift letter.

FHA Loan Down Payments

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA). FHA loans are popular with first-time homebuyers. Over 80% of FHA mortgages are issued to first-time buyers each year.

If your credit score is at least 580, you may qualify for a down payment of 3.5% on an FHA loan. FHA 203(k) loans for fixer-uppers also ask for 3.5% down. With a score between 500 and 579, you’ll need at least a 10% down payment.

FHA loans generally require upfront and annual mortgage insurance for the entire term.

USDA Loan Down Payment

A loan insured by the U.S. Department of Agriculture (USDA) is aimed at moderate-income households that purchase or build in eligible rural areas. Incredibly, no down payment is required. The USDA also directly issues loans to low- and very-low-income buyers in eligible rural areas and provides payment assistance.

USDA loans require an upfront guarantee fee and an annual premium for the life of the loan, but these are lower than FHA loan mortgage insurance rates.

VA Loan Down Payment

The great perk of VA loans is that, typically, no down payment is required, but a sizable one-time funding fee is. (You may be exempt from the funding fee if you’re eligible for VA disability compensation for a service-connected disability or meet other conditions.)

Recommended: First-Time Homebuyer Programs

2. Credit Score

Credit scores attempt to distill an individual’s financial history down to a single number that indicates their worthiness to lenders.

The FICO® Score range of 300 to 850 is categorized as follows:

•  Exceptional: 800-850

•  Very Good: 740-799

•  Good: 670-739

•  Fair: 580-669

•  Poor: 300-579

Borrowers seeking a conventional loan will likely need a credit score of at least 620. For an FHA loan, applicants with a score as low as 500 may be considered. But 580 is the minimum credit score to qualify for the 3.5% down payment advantage.

A USDA loan usually requires a score of 640, while a VA loan requires a minimum of 580 to 620. In some cases, you don’t have to have a FICO Score to qualify for a home loan. Fannie Mae’s nontraditional credit program and government loan programs allow a credit profile to be built based on factors such as rent payments and utility bills.

3. Income

Technically, there’s no minimum income required to apply for a mortgage. But your income can limit the amount you’ll qualify for. Lenders also like to see evidence that your income is stable and will look at an applicant’s last two years of employment. This means you’ll need to provide pay stubs, W-2s or 1099s, and tax returns.

Many types of income count toward a mortgage application: overtime, commissions, bonuses, dividends, Social Security, alimony, and child support. Lenders may ask for documentation (e.g., a letter from your employer) that such income is expected to continue for the next several years.

Self-employed homebuyers should keep in mind that lenders look at your income after deductions. Taking too many deductions, however deserved, can lower the size of the loan you’ll qualify for.

For some types of loans, there can be upper-income limits. Conventional, FHA, and VA loans have no upper limits. But with USDA loans, your income must not exceed 115% of the median income in your area. You can evaluate your eligibility for a USDA loan on the agency’s website.

4. Debt-to-Income Ratio

Typically, your income doesn’t matter as much as your debt-to-income ratio. Your DTI is calculated by dividing your total monthly debt, including your proposed house payment, by your gross monthly income, and is expressed as a percentage.

For example, say you pay $1,500 a month for a mortgage, $100 a month for a car loan, and $400 a month on a student loan. Your total monthly debt comes to $2,000. If you make $6,000 a month before taxes and deductions, your debt-to-income ratio is 33% ($2,000 divided by $6,000, multiplied by 100).

“If you have multiple debts, you want to make your minimum payments so you don’t hurt your credit score,” suggests Kendall Meade, a Certified Financial Planner at SoFi. “If you have cash left over after that, you should develop a strategy for which debts to pay off first.”

Depending on your credit score, down payment, and cash reserves, your DTI ratio may weigh more heavily or lightly in the qualification process.

•  Conventional loan DTI: The maximum DTI for a conventional loan is 45%, but exceptions can be made for strong compensating factors.

•  FHA DTI: FHA guidelines allow for a DTI of 43%, but higher ratios are allowed with compensating factors.

•  USDA loan DTI: The USDA usually allows a maximum DTI of 41%, but may make exceptions for those with higher credit scores and stable employment.

•  VA loan DTI: VA guidelines call for a maximum DTI of 41%, but lenders set their own limits based on an applicant’s financial health.

Recommended: How Do I Afford a Down Payment on My First Home?

5. Assets

Lenders will want to know about any valuable assets you hold. The idea is that these assets can be converted to cash in the event you face financial hardship down the road. Assets can include cash accounts, retirement accounts, stocks and bonds, cars, boats, recreational vehicles, jewelry, artwork, and collectibles. You’ll be asked to provide proof of ownership and value, such as appraisal letters.

6. Documentation

Lack of proper documentation in the mortgage loan process can hold things up. As noted above, lenders usually ask for:

•  Tax returns from the past two years

•  Two years’ worth of W-2s or year-end pay stubs, and, if you’re self-employed, other evidence of income

•  Child support or divorce documents

•  Bank statements

•  Statements from additional assets

•  Gift letters

•  Photo ID

•  Rental history and contact information

7. Property Type and Purpose

So far, this article has discussed mortgage qualification factors based on the buyer’s financial history. But lenders also consider the purpose of the property you want to buy. A “primary residence,” meaning a home that a buyer purchases with the intention of living in it, will usually qualify for a lower interest rate and better terms than a vacation home or an investment property.

The type of home you purchase also makes a difference. Single-family houses secure the best rates. Other types of housing that may incur special fees include condos, co-ops, manufactured houses, log homes, mixed-use developments, and nontraditional architecture. Homes shaped like dinosaurs or flying saucers just make lenders a little nervous.

8. Mortgage Type

The type of mortgage you may want to seek will depend on your credit scores, income, the lender’s loan menu, and more. Government-backed mortgages (e.g., FHA, VA, and USDA loans) are acquired through approved lenders, while banks, credit unions, or other private lenders issue conventional home loans.

•  FHA loan: Mortgages backed by the FHA have lower credit requirements than conventional loans. For borrowers with good credit and a medium down payment, a conventional loan may actually be less costly.

•  VA loan: Loans insured by the VA are for active-duty service members, veterans, and some surviving spouses. The VA also has a Native American Direct Loan program, which allows Native Americans to buy, build, or improve a home on federal trust land.

•  USDA loan: Loans backed by the USDA are for moderate-income buyers who choose a home in a designated rural area. The USDA also offers direct loans for low-income households.

Most mortgages come with a fixed interest rate, but a variable rate can be an option for some conventional loans, as well as a variety of mortgage terms or lengths. The fixed-rate 30-year mortgage dominates the U.S. landscape.

One last wrinkle: There are conforming loans and nonconforming loans. By meeting loan limits, a conventional conforming loan is eligible for purchase by Fannie Mae and Freddie Mac. If it isn’t eligible, it’s a nonconforming mortgage, like the government loans or a jumbo loan.

9. Other Mortgage Qualification Considerations

When browsing for a home, you might consider loan prequalification or preapproval.

Prequalification is a simpler process. You’ll provide basic information, which can be done by phone or online, and a lender will estimate what size loan you might be approved for. No information is verified at this point.

For preapproval, you’re required to give a lender access to your financial history. After reviewing your credit, income, and assets, the lender will offer a loan up to a specific amount. It doesn’t guarantee that you’ll be approved when you formally apply, though.

Prequalification and preapproval can be great ways to dip your toe into the home-buying waters. Then you may apply with more than one lender. Comparing loan estimates can help you determine which option is best for you financially.

Do I Qualify For a Mortgage?

To help you determine how big a home loan you might qualify for, there are a variety of online mortgage calculators to help get you started:

•   Mortgage Calculator

•   Home Affordability Calculator

Dream Home Quiz

The Takeaway

Many factors can help or hurt your chances of getting approved for a mortgage loan. Your down payment, credit score, income, DTI ratio, assets, documentation, property type and purpose, mortgage type, and prequalification or preapproval status all play a role. Some of these factors can compensate for weaknesses in other areas. For instance, a lower income is less of a problem if you have plenty of valuable assets to draw on. Additionally, a high down payment can counter a middling credit score.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What are the four things you need to qualify for a mortgage loan?

To qualify for a mortgage loan, you’ll need a stable income, a strong credit score, a modest debt-to-income ratio, and documentation of your employment and assets. Believe it or not, some loan programs don’t require a down payment!

What is the lowest income needed to qualify for a mortgage?

There is no minimum income required to apply for a mortgage. However, your income will determine how large a loan you’ll qualify for. Sometimes, your assets can compensate for a lower income, and there are government-backed programs, especially for low-income borrowers.

At what age do you not qualify for a mortgage?

There is no maximum age limit to qualify for a mortgage loan. In fact, lenders legally cannot deny someone a loan term based on their age. For instance, a 70-year-old can still qualify for a 30-year mortgage term.

What do banks check before giving a mortgage?

Just about everything. Banks check your credit history and score, proof of employment and income (W-2s, 1099s, tax returns), your assets (bank statements), your debts (credit card bills), and anything else that will give them a picture of your overall financial health and prospects.

Do mortgage lenders look at your spending?

Yes, they do. Mortgage lenders may look at your bank and credit card statements for the last two years to see whether your spending habits are consistent and where your money goes.

Is everyone eligible for a mortgage?

Pretty much anyone who can afford to carry a mortgage can qualify for one. However, someone who earns money under the table or holds their assets in offshore accounts may not be able to document their financial qualifications to satisfy a lender.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q126-248