5 Steps to Help You Achieve Financial Security_780x440

5 Steps to Help You Achieve Financial Security

Maybe your ultimate financial goal is to pay off your mortgage and live debt-free. Or, perhaps your dream is to retire early and relocate to a remote tropical island.

Whether you’re dreaming big, small, or somewhere in between, achieving financial security can help make your vision of the future a reality.

But what exactly is financial security? Broadly speaking, financial security or wellness refers to a condition in which you are able to meet your current and ongoing financial obligations, have the capacity to absorb a financial shock, feel secure in your financial future, and are able to make choices that allow you to enjoy life.

While that may sound like a far-off concept, achieving financial stability often isn’t as far off as many people think. The key to getting there is to think about your short- and long-term financial goals, and then devise a savings plan that can help you reach them.

Here are five steps that could help you achieve financial security.

1. Setting Goals

Financial goal-setting can be like jumping ahead to the last chapter of a book.

Financial goal-setting can be like jumping ahead to the last chapter of a book. It starts with the endgame, such as paying for kids’ college, traveling, buying or renovating a home, or getting a new car.

From there, “reading” goes backward by breaking those goals into bite-size steps until the arrival at Chapter 1—an overview of the current situation and a plan to meet those long-term goals.

Short-term financial goals could include things like paying off credit card debt, student loans or car loans, saving for a downpayment on a home or a car, or growing an emergency fund (more on that below).

Once those are achieved, money you were setting aside each month for those goals could be shifted into longer-term planning, such as retirement, buying or upgrading a home, paying off a mortgage, or investing.

No matter how long it takes, checking something off a goals list can be a huge feeling of accomplishment, as well as motivation to start the next chapter.

2. Creating a Budget

One of the most important things you can do to achieve financial security is to live on less than you earn, since this enables you to siphon some of your income into saving towards your financial goals each month.

A great first step is to set up, or fine-tune, a monthly budget. To do this, you’ll want to grab the last few months of financial statements and pay stubs, then use them to determine what your average monthly take-home (after tax) income is, and what your average monthly spending looks like.

If you find that your spending is equal to, or exceeding, your income, you may then want to drill down into exactly where your money is going each month. You can start by making a list of essential expenses (rent/mortgage, utilities, insurance, car payments, groceries) and nonessential expenses (clothing, dining out, entertainment).

It’s often easiest to cut back spending in the nonessentials category. You might decide to cook more meals at home instead of eating out, for example. Or, you might cancel a streaming service or quit the gym and work out at home.

The money you free up can then be put into savings every month for your future goals.

3. Attacking Debt

If those monthly high-interest credit card payments didn’t exist, where would that money go instead? Paying off debt could free up a potentially big chunk of money to put toward those big dreams. Creating a debt-payoff strategy can be an essential part of a financial wellness plan.

One popular method for getting out of debt is the debt snowball. This calls for listing debts from smallest to largest amounts owed, then paying any extra money you have each month towards the smallest debt (while paying the minimum on the others). When that debt is paid off, you move on to the next smallest debt, and so on.

Another option is the debt avalanche method. This involves making a list of all your debts in order of interest rate (regardless of balance). You then put extra money towards the debt with the highest interest rate, while paying the minimum on the others.

When that debt is paid off, you start tackling the debt with the next-highest interest rate, and so on. As you continue paying off bills, you will be saving in interest payments and should have more and more money to put toward each debt as you go.

4. Building an Emergency Fund

An emergency fund is money tucked away that you can use in times of financial distress. Having this contingency fund can significantly improve financial security by creating a safety net that can be used to meet unanticipated expenses, such as an illness, job loss, or major home repair.

A good rule of thumb is to keep enough money in an emergency fund to cover three- to six-months worth of living expenses, but some people may need a larger emergency fund. You may want to keep this money in an account that earns more interest than a standard savings account, but is still easily accessible. Good options include a high-yield savings account, online savings account, or a checking and savings account.

Having this money available when you need it can reduce the need to tap high-interest debt options, such as credit cards or unsecured loans, or undermine your future security by dipping into retirement funds.

5. Saving for Retirement

Once you are free of high interest debt and have a solid emergency fund, you may want to focus on investing more of your income into a retirement fund.

The earlier you start saving for retirement, the easier it will be to meet your goal, thanks to the benefit of compounding interest (when the money you invest earns interest, that interest then gets reinvested and earns interest of its own).

One of the simplest ways to save for retirement is through a 401(k) program at work, since you can set up automatic pre-tax deductions from your paycheck (and may not even miss the money). If your employer is matching up to a certain percent of your contributions, you’re essentially getting free extra cash to save.

Another option is to open an Individual Retirement Account (IRA). Like a 401(k), an IRA allows you to put away money (before taxes are taken out) for your retirement. However, there are annual contribution limits you’ll need to keep in mind.

The Takeaway

Reaching a state of financial stability means you feel confident and don’t feel stressed about money. You are able to pay your bills each month, have money set aside for any unexpected bills or emergencies, you are saving money each month, and you are also debt-free.

One of the easiest and most important ways to achieve financial security is to spend less than you earn and to put money aside each month towards your goals.

If you’re looking for a good place to start–or build–your savings, you may want to consider opening a SoFi Checking and Savings®️ checking and savings account.

With SoFi’s special “vaults” features, you can separate your savings from your spending while earning competitive interest on all your money. You can also set up recurring deposits to help you reach your financial goals faster.

Get on the path to financial security with the help of SoFi Checking and Savings.



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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.

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Centralized vs. Decentralized Exchange: How to Choose

Centralized vs. Decentralized Exchanges: Six Differences to Consider

When it comes to crypto exchanges, there are advantages and disadvantages in both a decentralized vs centralized exchange. Ultimately, the choice an investor makes will likely depend on factors like their trading goals, comfort level with newer technology, and the importance they place on things like security and anonymity.

What Are Centralized and Decentralized Exchanges?

A centralized exchange involves one central entity (e.g. bank, trading platform, government institution, etc.) controlling the operations of the exchange and its wallets for different types of cryptocurrency. This can make things easier for users but can also present all the problems centralization can entail, like a single point of failure.

Decentralized exchanges (DEXs) have no one entity controlling them—instead transactions are made peer-to-peer—and are thought to be more secure because they have no single point of failure. But these exchanges are still very new and can be more difficult to use, especially for those just learning crypto basics.

Recommended: 2021 Crypto Investing Guide

6 Key Differences Between Centralized and Decentralized Exchanges

Centralized and decentralized cryptocurrency exchanges are different in many ways. These are some of the major differences investors should know about.

1. Usability

One goal of centralized exchange platforms is to make it as easy as possible for new users to get started trading cryptocurrency. By design, creating an account and placing trades can be accomplished in very little time and with little technical expertise.

Decentralized exchanges, on the other hand, can make crypto investing somewhat more complicated. That’s primarily because 100% of the responsibility lies with the user, rather than a third party. If you make a mistake, there may be no way to fix it, whereas centralized exchanges sometimes have safeguards in place for certain user errors.

2. Security

Centralized exchanges, in their quest to make things easier for users, create a single point of failure. If hackers attack this single point with success and obtain private keys that protect users’ accounts, they can compromise the entire exchange and all of its funds. There have been several instances of this happening over the years, with ssers sometimes facing a total loss.

For those reasons, decentralized exchanges are thought to be more secure than centralized ones. Nothing’s ever for certain, and it might still be possible for a DEX to have some kind of bug. But for the most part, user error is a more common threat to DEX users than the exchange being hacked.

3. Fees

Centralized exchanges charge customers fees for their use of the service. Every transaction typically involves a fee and withdrawing coins may also come with a fee. For active traders, these fees may add up to large amounts over time.

Decentralized exchanges often have far fewer fees because they don’t have the same overhead expenses. Some decentralized exchanges don’t even have fees at all.

4. Liquidity

One of the biggest differences between centralized vs. decentralized exchanges is in liquidity.

Centralized exchanges tend to have more liquidity because they have more users, and these users are creating more orders. In-demand assets trade in higher volumes almost without fail. There are also market makers who further increase liquidity.

By contrast, because they typically have fewer users and no central entity organizing their order books, decentralized exchanges have less liquidity. The lack of liquidity in decentralized exchanges could pose problems for investors. For example, an investor may want to buy a particular asset but finds that high demand has led to a sharp rise in price compared to other markets, because other investors have bought up all the sell orders.

Recommended: What are Liquid Assets?

Liquidity and Slippage

Another example of a lack of liquidity causing problems for investors is if they attempt to sell an in-demand asset on a DEX—and end up falling victim to a lot of “slippage.”

Slippage refers to the losses that occur when selling large amounts of an asset, particularly in times of low liquidity. If someone wants to sell 100 tokens, for example, each at a price of $1, there may not be enough buy orders to actually sell them all at a price of $1. There might only be a buy order for 10 tokens at $1, then an order for 10 more at $0.99, 15 at $0.98, and so on. By the time a trader has liquidated their position, they wind up with less money.

Greater liquidity (such as one might find on a centralized exchange) means faster trades and less slippage.

5. Anonymity

Creating an account on a centralized exchange typically involves handing over lots of personal information. These exchanges might require a name, email address, mailing address, or even a selfie of the registrant holding their government-issued ID next to their face. This is typically done to comply with cryptocurrency regulations like know-your-customer (KYC) and anti-money-laundering (AML) laws.

Decentralized exchanges, on the other hand, might not require users to even create an account to get started. Traders can convert their gains into a centralized cryptocurrency like a stablecoin (one of many altcoins) and move those funds off the exchange to another crypto wallet, without needing to link a bank account.

6. Speed

Perhaps one of the most noticeable differences between centralized vs decentralized exchanges from a user’s perspective is the speed at which trades occur. Decentralized exchanges perform much slower than their centralized counterparts.

According to some estimates, trades placed on centralized exchanges take about 10 milliseconds on average to execute orders. That’s as good as happening instantly from the point of view of the person placing the trade.

Decentralized exchanges, however, can take anywhere from 15 to 60 seconds to match and fill an order. For investors who create a lot of buy and sell orders, that can add up to a good deal of sitting around waiting for trades to settle.

What Are the Biggest Advantages of Using a Decentralized Exchange?

The two main benefits of using a decentralized exchange might be increased security and anonymity. Some users prefer to keep their trades private and not have their personal information and wallet balances in the hands of a single entity.

Furthermore, the reduced risk of hacking eases both privacy and security concerns. Not only are funds thought to be safer, but the threat of a user’s info leaking and being used for identity theft or targeting for phishing attacks might be nonexistent, since DEX users might not even have to make an account to get started.

What Are the Biggest Advantages of Using a Centralized Exchange?

Centralized exchanges are easier to use (which may be especially important to those just getting started with crypto), have greater liquidity, and execute trades faster.

The Takeaway

Both centralized and decentralized exchanges have something to offer crypto investors. For investors who value usability, liquidity, and speed, a centralized exchange may be the way to go. For those who prioritize anonymity and security, a decentralized exchange is more likely to appeal.

Decentralized exchanges are a new concept and are still a long way from being widely used. Still, their volume has been rising steadily and could one day outpace that of centralized exchanges, especially as their usability improves.

Photo credit: iStock/Vertigo3d


SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

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.

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What is digital currency?

The Difference Between Public and Private Cryptocurrency Keys & Why It Matters

For those just starting to invest in cryptocurrency, it’s essential to understand what cryptocurrency keys are and how public and private keys work. Every cryptocurrency wallet has a public and a private key. Not only are keys used during the process of sending and receiving cryptocurrencies, but they are also integral to keeping cryptocurrency holdings secure.

This article covers the differences between private and public keys, how they enable crypto trading and storage, and what investors need to do to keep their crypto secure.

What Is a Private Key?

A private key is a cryptographic string of numbers and letters which is mathematically related to a public key, but impossible to reverse engineer. This is due to its strongly encrypted code base.

A private key is what gives a wallet owner access to their funds and allows them to send funds to others. Think of a private key as a password, used to decrypt messages and transactions.

A public key, on the other hand, can be shared publicly to allow others to send cryptocurrencies to a wallet. Think of a public key as encrypting messages and transactions. In fact, a wallet address is basically a hashed version of a public key—shortened and compressed in order to send an address.

Each cryptocurrency uses its own algorithms for creating keys, so some are longer than others.

Why It’s Important to Secure Your Private Key

It’s very important to keep private keys secure and to keep a back-up in a safe, offline location. If anyone accesses your private key they can steal funds from your wallet, and if a private key gets lost there is no way to retrieve the funds in the wallet.

This can’t be stressed enough. If a private key gets lost or stolen, the funds secured by it are lost too.

It’s estimated that about 20% of all Bitcoin—$3.7 million—that has been mined is lost forever, and 1500 more Bitcoins get lost every day.

Recommended: How Many Bitcoins Are Still Left?

How Do Public and Private Cryptocurrency Keys Work?

Certain crypto exchanges and wallets store users’ private keys in an encrypted form. This can be more convenient for sending and withdrawing funds, but can make users vulnerable to security breaches. If using this type of wallet or exchange it’s imperative to make sure the company is reputable, and one might want to consider only keeping a fraction of their cryptocurrency holdings in this type of wallet at any given time.

Although the same private key is used for every transaction from a particular wallet, it never gets shared with the public network, making it possible to securely use it over and over again. Each transaction gets linked to a unique digital signature which confirms the validity of the wallet owner and ensures that the transaction can’t be changed later.

Bitcoin Private Keys

When someone creates a new bitcoin wallet, a 256-bit long private key beginning with the number 5 is chosen randomly. A public key connected to that private key will also be generated, which is the address used to receive Bitcoins. The public key begins with the number 1. It is next to impossible to reverse engineer to figure out the private key associated with a public key.

Here is an example of what Bitcoin keys look like:

Private Key

5Kb8kLf9zgWQnogidDA76MzPL6TsZZY36hWXMssSzNydYXYB9KF

Public Key

1EHNa6Q4Jz2uvNExL497mE43ikXhwF6kZm

Storing Crypto with Private Keys

Cryptocurrencies themselves are not stored locally on one’s phone or laptop. They are stored on the blockchain and accessed using public and private keys. Wallets keep track of how many coins are held by any particular user. This is similar to a traditional online bank account. When an account owner logs into their account online, it tells them how much money is in their account, but the money itself isn’t stored online. The difference is that cryptocurrencies are digital currency, whereas online funds relate to fiat currency backed by physical assets, at least in theory.

If a wallet owner loses track of their phone, laptop, or hardware wallet, they can still gain access to their cryptocurrencies if they have the private keys, or in some cases by using a backup code or recovery phrase provided when the wallet gets created. This is why it’s so important to make a backup of one’s private keys or backup codes.

Different Crypto Wallets Use Different Private Keys

There are a few different types of crypto wallets, each of which utilize private keys in a different way.

Hot Wallets

Some online wallets and exchanges store private keys on behalf of the user. These may be mobile apps or web apps, and are also known as hot wallets. Crypto holders can also send and receive funds on decentralized exchanges, which are peer-to-peer networks that don’t have a central authority.

Desktop Wallets

Desktop wallets get downloaded from the internet but then exist offline on one’s computer. The private key may be written down or stored in an offline file.

Hardware Wallets

Hardware wallets, such as the Trezor and Ledger devices, store private keys offline, and funds can’t be accessed without the device and a pin code. They generally have small screens and buttons used to verify transactions when the device is plugged into a computer. This makes them very secure. If the device breaks or gets lost, the funds can be retrieved using a backup code. These devices support many different cryptocurrencies, including Bitcoin, Litecoin, Ethereum, and more. Both hardware wallets and paper wallets are known as cold wallets.

Recommended: Hot Wallets vs. Cold Wallets: Choosing the Right Crypto Storage

Paper Wallets

A paper wallet is simply a piece of paper where one writes down their private keys or that gets printed out with the keys on it. This is perhaps the most secure way to store private keys, but it’s important to keep the paper dry and in a safe and memorable place. Paper wallets for Bitcoin can be generated at bitaddress.org , while the user is offline.

Trading Crypto With Private Keys

When a wallet owner wants to access or send funds, they will be asked for their private key, or to verify the transaction if the key is held by a wallet service. Crypto wallets generally come with QR codes that can be scanned for sending funds, making the process faster and easier. If even one letter or number in an address is entered incorrectly the transaction will go to the wrong wallet, so using a QR code can help prevent that from happening.

Bitcoin and many other crypto transactions are irreversible. For this reason, it’s very important to double- or even triple-check the address that funds are being sent to and ensure that it’s correct. One should never send funds to an unverified company or unknown individual, as there have been countless instances of crypto fraud.

Tracking Transactions Using Keys

While a private key will get you into your own account, there are other, more anonymous ways to track other crypto transactions. There is a publicly viewable ledger for almost every cryptocurrency showing transactions between wallet addresses. One can also view all incoming and outgoing transactions from any particular wallet address, without knowing who the address belongs to.

This can be useful during the transaction process, because sometimes it takes several minutes or even longer for a transaction to go through and funds to transfer into a wallet. However, one can often see that the funds were sent from the outgoing address, confirming that the transaction has been initiated.

The Takeaway

Understanding private and public keys is integral to investing in and using cryptocurrencies. While a public key is in fact public-facing, one’s private key should always be kept secure, because with it you—or anyone else—can execute crypto transactions, and without it you have no access to your cryptocurrency.



SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

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