SoFi

Whether trying to consolidate debt with a personal loan or thinking about a loan to pay for a major life event (like a wedding), taking on debt is a financial move that warrants some consideration.

It’s important to recognize the financial commitment that taking on a personal loan — or any other debt — entails. This includes understanding interest rates you might qualify for, how a loan term affects the total interest charged, fees that might be charged by different lenders, and, finally, comparing offers you might receive.

Shopping around and comparing loans can increase your confidence that you’re getting the best interest rate on a loan. Learn more here.

What’s a Good Interest Rate on a Loan?

You may see advertisements for loan interest rates, but when you get around to checking your personal loan interest rate, what you’re offered may be different than rates you’ve seen. Why is that? A lender may have interest rate ranges, but the lowest, most competitive rates may only be available to people who have excellent credit, as well as other factors.

When shopping around for a loan, you can generally check your rate without affecting your credit score. This loan prequalification rate is just an estimate of the interest rate you would likely be offered if you were to apply for a loan, but it can give you a good estimate of what sort of rate you might be offered. You can compare rates to begin to filter potential companies to use to apply for a loan.

Getting a Favorable Interest Rate on a Loan

The potential interest rate on a loan depends on a few factors. These may include:

•   The amount of money borrowed.

•   The length of the loan.

•   The type of interest on your loan. Some loans may have variable interest (interest rates can fluctuate throughout the life of the loan) or a fixed interest rate. Typically, starting interest rates may be lower on a variable-rate loan.

•   Your credit score, which consists of several components.

•   Being a current customer of the company.

For example, your credit history, reflected in your credit score, can give a lender an idea of how much a risk you may be. Late payments, a high balance, or recently opened lines of credit or existing loans may make it seem like you could be a risky potential borrower.

If your credit score is not where you’d like it to be, it may make sense to take some time to focus on building your credit score. Some ways to do this are:

•   Analyzing your credit report and correcting any errors. If you haven’t checked your credit report, doing so before you apply for a loan is a good first step to making sure your credit information is correct. Then you’ll have a chance to correct any errors that may be bringing down your credit score.

•   Work on building your credit score, if necessary. Making sure you pay bills on time and keeping your credit utilization ratio at a healthy level can help positively impact your credit score.

•   Minimize opening new accounts. Opening new accounts may temporarily decrease your credit score. If you’re planning to apply for a loan, it may be good to hold off on opening any new accounts for a few months leading up to your application.

•   Consider a cosigner or co-applicant for a loan. If you have someone close to you — a parent or a partner — with excellent credit, having a loan cosigner may strengthen your application. Keep in mind, though, that a cosigner will be responsible for the loan if the main borrower does not make payments.

Recommended: Personal Loan Calculator

Comparing Interest Rates on Personal Loans

When you compare personal loan options, it can be easy to focus exclusively on interest rates, choosing the company that may potentially offer you the lowest rate. But it can also be important to look at some other factors. Here are some to consider.

•   What are the fees? Some companies may charge fees such as origination fees or prepayment penalties. Before you commit to a loan, know what fees may be applicable so you won’t be surprised.

•   What sort of hardship terms do they have? Life happens, and it’s helpful to know if there are any alternative payment options if you were not able to make a payment during a month. It can be helpful to know in advance the steps one would take if they were experiencing financial hardship.

•   What is customer service like? If you have questions, how do you access the company?

•   Does your current bank offer “bundled” options? Current customers with active accounts may be offered lower personal loan interest rates than brand-new customers.

💡 Quick Tip: Fixed-interest-rate personal loans from SoFi make payments easy to track and give you a target payoff date to work toward.

Choosing a Personal Loan For Your Financial Situation

Interest rates and terms aside, before you apply for a personal loan, it’s a good idea to understand how the loan will fit into your life and how you’ll budget for loan payments in the future. The best personal loan is one that feels like it can comfortably mesh with your budget.

But it also may be a good idea to assess whether you need a personal loan or whether there may be another financial option that fits your goals. For example:

•   Using a buy now, pay later service to cover the cost of a purchase. These services may offer 0% interest for a set amount of time.

•   Transferring high-interest credit card debt to a 0% or low-interest credit and making a plan to pay the balance before the end of the promotional rate.

•   Taking on a side hustle or decreasing monthly expenses to be able to cover the cost of a major purchase or renovation.

•   Researching other loan options, such as a home equity loan, depending on your needs.

Recommended: Avoiding Loan Origination Fees

The Takeaway

A loan is likely to play a big part in your financial life for months or years, so it’s important to take your time and figure out which loan option is right for you. And it’s also important to remember that interest rate is just one aspect of the loan. Paying attention to details like potential fees, hardship clauses, and other factors you may find in the small print may save you money and stress over time.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

How to get a loan at a low interest rate?

Ways to get a loan at a low interest rate include positively impacting your credit score, applying with a cosigner who has a strong credit score, or choosing a shorter loan term (though that may increase your monthly payment).

How can I get a low rate on a personal loan?

To get a low rate on a personal loan, consider building your credit score, having a cosigner with a strong score, comparing lenders, looking for discounts, and seeing if the financial institution where you currently bank can offer you favorable terms.

Can you ask a lender for a lower interest rate than offered?

Yes, you can ask your lender if they can offer a lower rate. While there’s no guarantee that they will lower the rate, they might do so to get or retain your business. It can be wise to have other offers, so you can let them know if you were offered a better rate elsewhere.

Photo credit: iStock/Prostock-Studio

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.

SOPL-Q225-087

Living beyond your means can easily happen. Typically, it’s a case of your spending outstripping your earnings. This in turn means it’s hard to pay off debt and save for your financial goals.

Sound familiar? If you find yourself running out of money before the next payday, you could be leaving above your means.

Here, learn more about this issue and the warning signs. Then you can begin to take action and take control of your money.

What Does “Living Beyond Your Means” Mean?

Simply put, ”living above your means” means that you are spending more money than you are earning. People are able to do this by relying on credit cards, loans, and prior savings to cover their expenses. However, the process is not sustainable, and eventually overspending is likely to catch up to you.

Living beyond your means can also mean that you’re spending most or all of what comes into your checking account each month and, as a result, don’t have anything left over for saving or investing, such as building an emergency fund, saving for a short-term goal like buying a car or a home, or putting money away for retirement.

Here are ten red flags that you’re living a lifestyle you simply can’t afford — and tips for how to get back on track.

1. You Live Paycheck to Paycheck

One of the most obvious and common signs of living beyond your means is when there’s little to no money left after you pay your bills. If your paycheck disappears within days of receiving it, and you’re counting down the days until the next one, that’s a major warning sign.

Living paycheck to paycheck means you have no cushion for emergencies and would not be able to cover your living expenses if you were to lose your income. This puts you in a precarious situation, where any financial bump in the road could throw your entire financial life into disarray.

2. Your Credit Score Has Dropped

A declining credit score is often a silent but powerful indicator that you’re overspending. This drop can result from late payments, high credit utilization (the amount of credit you’re using compared to your total limit), or accumulating too much debt.

If you’re relying heavily on credit cards to cover basic living expenses — like groceries, gas, or other monthly bills — it likely means your spending has outpaced your income. Over time, this kind of borrowing not only hurts your score but also racks up interest charges that dig you deeper into the hole.

3. You’ve Stopped Your Retirement Contributions

If money is feeling a little tight, you may feel that now is not the time to worry about retirement. While this may seem like a short-term fix, it can significantly damage your long-term financial health.

Halting retirement contributions — even temporarily — means missing out on compound returns (when the returns you earn start earning returns of their own), employer matches, and overall portfolio growth. If you’re regularly suspending or avoiding savings altogether, it may indicate your current expenses are too high to support your financial goals.

4. A Big Portion of Your Income Goes to Housing

Housing is typically the largest monthly expense, but if your rent or monthly mortgage payment is above 30% of your monthly pre-tax income, you may be financially overextended.^[1] This can make it hard to have enough money leftover to cover other expenses, save, invest, and build wealth over time.

Staying below 30% can be difficult if you live in a region of the country where the cost of housing is high. Nevertheless, spending a lot more than a third of your income on housing can leave you “house poor,” and put your other financial obligations at risk.

5. Your Savings Account Isn’t Growing

If your savings balance has stayed flat — or worse declined — over the past few months, it’s a sign that your lifestyle is too costly. A lack of progress in savings makes it hard to handle unexpected events or set aside funds for the future.

Making regular deposits into a savings account, such as a high-yield savings account — in addition to your 401(k) or IRA — allows you to work towards your short- and medium-term financial goals, such as putting a downpayment on a home or a car or going on vacation.

6. You’ve Been Charged an Overdraft Fee More than Once This Year

An overdraft fee is charged when there’s not enough money in your account to cover a check or debit card payment. Overdrawing from your account often means the bank will lend you money to cover the overage. You’re then responsible for paying back that amount, as well as an overdraft fee, which can potentially be more than the overdrawn amount. (That said, there are some banks that offer no-fee overdraft protection.)

Mistakes happen, and a one-off overdraft isn’t necessarily an indicator of overspending. But repeat offenses can be a sign that you are living too close to the edge and don’t have a clear picture of how much money is going in and coming out of your account each month.

7. You’ve Never Set a Budget

A lack of budgeting can be a fundamental sign of living beyond your means. If you’ve never taken the time to outline your income, expenses, and saving goals, you may well be spending money in ways that aren’t sustainable.

Without a budget, it’s easy to underestimate your monthly expenses or overestimate what you can afford. You might think you’re managing fine but in reality you could be accruing debt, missing saving opportunities, or overspending in certain categories.

Many people think making and following a budget will be too complicated. But having a budget can actually simplify your spending decisions by letting you know exactly what you can and can’t afford. Having a budget also helps to ensure you have enough money to cover essentials, fun, and also sock some away in savings.

8. You’re Leasing a Car You Can’t Afford to Buy

Leasing a vehicle you would not be able to purchase outright or finance can be a major financial red flag. Leasing lets you rent a high-end lifestyle, but many people end up with leases they really can’t afford.

You might be covering your monthly auto payments, but if you can’t do that while meeting your other expenses and also putting money into savings, then your car is likely too expensive. Leasing also means you’re never building equity in a vehicle and may face additional costs for mileage or wear-and-tear penalties.

9. You’re Only Making Minimum Payments on Credit Cards

It’s fine to use your credit card to pay for everyday expenses and the occasional big purchase. But if you can’t pay off most of the balance each month, it’s a red flag that you’re living beyond your means.

While minimum payments keep your account in good standing and avoid late fees, most of the payment goes toward interest, which means they don’t address the underlying debt. Minimum payments are also designed to be small, so it takes much longer to pay off your balance, sometimes even years. This can trap you in a cycle of debt where you’re constantly paying off interest rather than reducing the principal, making it highly challenging to ever become debt-free.

10. You Don’t Have an Emergency Fund

Not having a stash of cash you can turn to in a pinch can be a sign that you’re living above your means. You may be gambling on the fact that nothing will go wrong. But life is unpredictable, and you could well get hit with an unexpected expense (like a major car repair or medical bill) at some point, or potentially lose your job.

Without savings to fall back on, you may be forced to rely on high-interest credit cards or loans, which can lead to debt that’s hard to repay. This financial strain can cause stress, damage your credit, and disrupt long-term goals like saving for retirement or buying a home. An emergency fund provides a buffer that protects your financial stability.

How to Live Below Your Means and Get Back on Track

Overspending can feel like a slippery slope — once you’re living above your means, it can be tough to stop the cycle. But financial recovery is entirely possible. The key is to learn how to live below your means and establish habits that promote long-term stability. Here’s how to get started:

1. Create a Realistic Budget

A solid budget is the foundation of any financial turnaround. Start by tracking all your income sources and listing every expense, from rent to streaming services. Categorize your spending into needs, wants, and goals/savings, then determine if you want to rejigger how much you are spending in each area.

One popular budgeting framework is the 50/30/20 rule. This divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment beyond the minimum. This set-up ensures that your essential expenses are covered while also allowing for some “fun” spending and future financial security.

Recommended: 50/30/20 Budget Calculator

2. Reduce Unnecessary Expenses

To find room in your budget for saving and paying more than the minimum on debts, you may need to cut back on nonessential spending. For example, you might free up funds by cooking more and eating out less, getting rid of streaming services you rarely watch, and/or quitting the gym and working out at home.

To cut back on impulse purchases, you might institute the 30-day rule: When you feel the urge to buy something you want but don’t need, commit to waiting 30 days before making the purchase. If after the waiting period, you decide you truly want the item and it aligns with your financial goals, go ahead and buy it. There’s a strong chance, however, that the urge to buy it will have passed.

3. Build an Emergency Fund

Living paycheck to paycheck leaves little room for error. An emergency fund is your financial safety net — it prevents one unexpected bill from becoming a crisis.

Financial advisors often recommend setting aside at least three to six months’ worth of living expenses for emergencies. But you don’t have to come up with that entire sum overnight. Begin with whatever amount you can afford, even if it’s just $10 a week. Consider setting up an automatic transfer to a separate savings account earmarked for emergencies so you’re not tempted to spend it. Or, if your bank offers it, you might dedicate a savings vault within your account for emergency savings.

This buffer provides peace of mind and helps you avoid falling into debt when life throws curveballs.

The Takeaway

Living above your means doesn’t always look like luxury vacations or designer clothes. Often, it’s more subtle: relying on credit cards, skipping savings, or struggling to cover basic expenses. The good news is that these warning signs are not life sentences — they’re signals that you can change course.

Learning how to live within your means involves awareness, building a budget, and making one smart money decision at a time. With consistent effort, you can shift from financial survival to financial security — and ultimately, financial freedom.

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

FAQ

What are the long-term impacts of living beyond your means?

Living beyond your means can lead to chronic debt, poor credit, and financial instability. Over time, high-interest credit card balances and loans can become unmanageable, making it difficult to build savings or qualify for major purchases like a home. This behavior often leads to stress, strained relationships, and limited future financial opportunities. Without change, it can also delay or prevent retirement, forcing individuals to work longer or rely on others for support later in life.

What are the first steps to take if I’m overspending?

The first step is to track your spending for a full month to understand where your money is going. Then, categorize your expenses and identify areas where you can cut back, such as dining out, subscriptions, or impulse purchases. Creating a realistic budget is crucial — allocate funds for needs, savings, and limited wants. Set financial goals and consider using a budgeting app or cash envelopes to stay disciplined. If overspending is tied to emotional triggers, you might benefit from speaking with a financial counselor.

How can I start saving if I have no extra money?

Start by reviewing your expenses and identifying small, nonessential costs to reduce or eliminate — like daily coffee runs or streaming services. Even setting aside just $5 to $10 a week adds up over time. You might also want to automate your savings (so money is transferred to a savings account before you can spend it) and boost your income through side gigs or selling unused items. The key is to start small and build momentum through consistency and gradual lifestyle adjustments.

What percentage of my income should go toward housing?

Financial experts generally recommend spending no more than 30% of your gross monthly income on housing. This includes rent or mortgage payments, property taxes, insurance, and utilities. Staying within this limit helps ensure you have enough left over for other essential expenses like food, transportation, savings, and debt payments. In high-cost areas, it may be harder to stay under 30%, but exceeding it by too much can strain your finances and reduce your ability to build long-term wealth.

What helpful resources exist if I’m struggling financially?

There are many free and low-cost resources available. Nonprofit credit counseling agencies, like the National Foundation for Credit Counseling (NFCC), offer budgeting help and debt management plans. Local community organizations often provide food assistance, utility aid, and housing support. Government programs like SNAP, Medicaid, and unemployment benefits can also offer relief during tough times. In addition, financial literacy websites, public libraries, and budgeting apps offer tools and guidance to help you regain control of your finances.

Photo credit: iStock/urbazon

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

SOBNK-Q225-108

No one intends to waste money, yet it’s all too easy to look back and wonder where your paycheck went — and why it disappeared so fast.

Spending is personal. Whether you treat yourself to nights out or a biweekly fitness class, it’s your money and your choice. As long as these purchases align with your budget and priorities, they’re not inherently “bad.”

Still, you might find yourself wanting to rein in your spending. And that’s often easier said than done. Budgeting doesn’t come naturally to everyone, and many of us could benefit from a little guidance in spotting where our money might be slipping away.

With that in mind, here are some common ways people waste money — often without even realizing it. A few small changes can make a big difference.

Recurring Subscriptions

Set it and forget it is great when it comes to automating your personal finances, but it’s less than ideal when it comes to subscription services. A full 81% of American homes have at least one streaming service subscription, and the average U.S. subscriber has signed up for around four services.

On top of streaming entertainment services, many American consumers subscribe to a regular delivery service, like Dollar Shave Club, Hello Fresh, or FabFitFun. Whether you are ready to ditch some monthly services or not, you can try tracking your monthly recurring spending on a spreadsheet, using your bank’s app, or enrolling in a free service, like Trim by OneMain or Hiatus, to catch those monthly bills.

From there, you can decide what stays and what goes. Consider what might be worth the cost based on frequency, or what is worth canceling because you didn’t even realize you were signed up. For instance, you might decide to save on streaming services and reduce the number of subscriptions you have on that front.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

Food Expenses

Buying groceries is an essential part of your monthly budget, but it’s still one to keep an eye on. Purchasing too many groceries can be a big wasted expense. The average American throws away 325 pounds of food a year, and the average U.S. family of four throws out $1,600 a year just in produce. Meal planning and buying only what’s needed can help you spend less on food and reduce waste, too.

But groceries aren’t the only area where people waste money on food. The average home in America spends nearly $4,000 on food away from home per year, which includes home delivery.

Dining out is great for special occasions and, yes, ordering in makes sense sometimes, too. But eating even a few more meals at home a week can lead to some serious long-term savings.

Recommended: Savings Calculator

Small Impulse Buys

When a purchase is one click or tap away, buying things on impulse — like a new gadget, treat, or toy for the kids — becomes all too easy. Many of us rationalize these purchases because each item is not all that expensive.

But $5 here and $20 there can add up faster than you realize. Recent research suggests that more than one in five Americans (22%) have made impulse purchases that have significantly impacted their finances in the past 12 months.

Impulse spending ranges dramatically from shopper to shopper, but curbing it can look the same across the board. Try waiting at least 24 hours before making a nonessential purchase. This pause helps you to assess whether the purchase is truly a need or just a passing desire.

When shopping for not-so-small items online, consider implementing the “30-day rule” That means letting something sit in a digital shopping cart for 30 days before determining if it’s worth purchasing.

Slowing down the buying cycle can help separate want from need and prevent purchases that are forgotten moments after the transaction.

Unreturned and Unused Items

Some of us leave a lot of cash sitting on the floor of our closets. Ordering clothing and other items online has become fast and seamless, but when something doesn’t meet our expectations, returning it becomes a chore. So we let it sit.

Obviously, summoning your energy to deal with unwanted items and returning them is one solution. But if you missed the return window and/or have a closet full of unworn (or barely worn) clothes, you may be able to recoup some of your costs by finding places to sell used stuff. These can range from local consignment shops to online marketplaces like Poshmark or Depop.

Transportation Costs

Transportation is a major expense for many people, and it’s easy to overspend without realizing it. One common way people waste money in this area is relying heavily on ride-hailing services like Uber or Lyft, even for short or routine trips. Owning a car you don’t truly need — especially a new or luxury model — can also be a financial drain due to monthly payments, insurance, maintenance, and gas.

To cut back on spending, you might evaluate how often you truly need a car. If you live in a city with decent public transit, using buses, trains, or biking can significantly reduce costs. Carpooling or using ride-sharing services for occasional needs may also be more cost-effective. If owning a car is necessary, consider choosing a fuel-efficient used vehicle with lower insurance rates and maintenance costs.

Other ways to save money on transportation include using public transportation, walking or biking whenever possible, planning trips in advance to avoid peak ride-share pricing, and consolidating errands to reduce gas usage. Tracking your monthly transportation spending can help you spot areas to cut back without sacrificing convenience or mobility. Small adjustments can lead to major savings over time.

Bank Fees

Many Americans might not even realize how much they’re being charged simply for accessing their money. The average bank overdraft fee is around $31 per occurrence. If you’re not paying attention, you could overdraw multiple times before realizing what you’ve done and end up with a negative bank balance.

Some banks will even charge customers just for holding an account with them. Costs vary, but the average monthly account maintenance fee is around $14 per month.

ATM fees can also deplete your account over time. If you use an ATM that is not part of your bank’s network, you may pay two fees — one charged by your bank, and one charged by the ATM operator. Combined, these two types of fees add up to an average of $4.55. While that’s not a large sum, it can multiply quickly if you frequently use ATMs.

The Takeaway

Being mindful of how you spend your money is crucial for achieving long-term financial stability and peace of mind. By recognizing common areas of wasteful spending — such as food, unused subscriptions, impulse buys, Uber rides, unreturned items, and unnecessary bank fees — you can make more intentional financial decisions.

Regularly tracking your expenses and reviewing your budget can help eliminate unnecessary costs and ensure you’re using your money in ways that align with your income, needs, values, and goals.

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

FAQ

How do you know if you are wasting money?

You might be wasting money if you frequently make impulse purchases, pay for unused subscriptions, or buy items you don’t need. Track your expenses to identify patterns and unnecessary spending. If you find yourself consistently overspending in nonessential categories or not meeting your financial goals, it’s a sign to reassess your budget and spending habits. Regularly reviewing your finances can help you make more mindful and intentional spending decisions.

What is the 70/20/10 rule money?

The 70/20/10 rule is a budgeting strategy that divides your income into three parts: 70% for living expenses (including necessary and discretionary spending), 20% for savings and investments, and 10% for extra debt payments or charitable donations. This approach helps you manage your finances responsibly, build wealth, and contribute to causes you care about.

What do Americans waste the most money on?

Americans often waste the most money on dining out, unused subscriptions, and impulse purchases. Other common areas include high-interest credit card debt, expensive coffee and snacks, and overpriced phone plans. Regularly reviewing your expenses can help identify wasteful habits and help become more mindful of how you spend your money.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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SOBNK-Q225-073

The U.S. debt ceiling — sometimes called the debt limit — is the legal limit on how much money the U.S. federal government can borrow to fund government operations.

U.S. government debt comes from bonds issued to individuals, businesses, and foreign governments, as well as intragovernmental loans. As of January 2025, the U.S. government owed some $36.1 trillion — meaning it had reached the current debt ceiling.

Because the government is now poised to exceed the debt limit, the cap on federal borrowing will need to be lifted in order to allow the government to meet its obligations. As of Q3 2025, lawmakers were anticipating a new debt ceiling later this year, to avoid the risk of default.

The U.S. has never defaulted on its debts, and doing so could roil markets here and abroad. If lawmakers don’t raise the debt ceiling, the U.S. could see a credit downgrade, a potential spike in interest rates, which could impact the value of the dollar and could destabilize markets.

What Is the Debt Ceiling?

All governments borrow money to fund various obligations. The United States has the largest debt obligation in the world, as of June 2025, with some $36.1 trillion in outstanding loans it has borrowed from individual investors, governments (like Japan, China, the U.K.), businesses, and even from itself, via intragovernmental loans.

The debt ceiling is set by the Department of the Treasury, and reflects the allowable amount the government can borrow to fund obligations such as interest payments on current debt, national programs like Social Security and Medicare, military salaries, and much more.

Recent Changes to the Debt Ceiling

Lawmakers suspended the debt ceiling from June of 2023 through January of 2025, when it was re-set to match the amount of the U.S. debt obligation at that time: some $36.1 trillion.

Because the debt ceiling only authorizes borrowing to cover existing obligations, and it does not allow for new spending, the government began 2025 in anticipation of another fight over whether to raise the debt ceiling yet again.

When federal spending bumps up against this limit, as it is right now, Congress must vote to raise the debt ceiling. And there is ongoing concern about whether it’s sustainable to continue to issue new debt.

The current debt ceiling of $36.1 trillion represents about 122% of the nation’s gross domestic product, or GDP, and grows by about $1 trillion every quarter.


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What Does the Debt Ceiling Mean for Investors?

In the last 65 years, Congress has either raised, extended, or changed the debt ceiling 78 times to allow for increased borrowing and reliable debt payments to Treasury bondholders. That’s largely because the U.S. government has always honored and repaid its debts, and thus owning U.S. government bonds has long been considered a safe haven for investors looking for stable securities.

The debt ceiling isn’t simply about bond payments, however. It’s a reflection of the financial stability of the U.S. If the government were forced to default on its obligations, this would not only be a historical event, the likely downgrade of U.S. creditworthiness could spark upheaval in markets worldwide.

The Debt Ceiling, the Economy and Securities

For example, a downturn in demand for government bonds would push up interest rates, which could spur inflation and lower the value of the dollar — with a decline in equity markets as well.

•   Higher interest rates would spell higher inflation.

•   Higher inflation impacts the value of the dollar.

•   Equity markets here and abroad could react negatively to a higher rate environment, fuelling volatility.

Although the current trade environment is in flux, if a default came to pass these combined factors have the potential to spark a financial crisis.

What Is the Status of the Debt Ceiling?

While precedent suggests that lawmakers will likely vote to increase the debt ceiling in 2025, it’s unclear how the current debt ceiling debate will pan out. Some potential outcomes:

•   Congress could vote to raise the debt limit, as it has done since the debt ceiling was first created in 1917 (see more on the history of the debt ceiling below).

•   Both political parties could negotiate a way forward, by agreeing to cut spending while also raising the debt ceiling.

•   The president could use his executive powers to bypass the debt ceiling.

Finally, although very unlikely, as noted above, the government could default on its debts. This has never occurred, and would be unprecedented — potentially leading to a global financial crisis.

Recommended: Who Owns the U.S. National Debt?

Where Did the Debt Ceiling Come From?

Congress first enacted the debt ceiling in 1917, at the beginning of World War I, through the Second Liberty Bond Act. That act set the debt ceiling at $11.5 billion. The creators of the debt ceiling believed it would make the process of borrowing easier and more flexible.

In 1939, as World War II loomed on the horizon, Congress established a debt limit of $45 billion that covered all government debt.

Before the creation of the debt ceiling, Congress had to approve loans individually or allow the Treasury to issue debt instruments for specific purposes. The debt ceiling granted the government greater freedom to borrow funds via issuing bonds, allowing it to spend as needed. And over time the ceiling was often raised, and rarely contested.

The debt ceiling has, however, become a partisan pain point in recent years.

Benefits and Drawbacks of the Debt Ceiling

The debt ceiling has several advantages. It allows Congress to fund government operations, and it simplifies the process of borrowing. It also, theoretically, serves as a way to keep government spending in check because the federal government should consider the debt ceiling as it passes spending bills.

However, there are also some drawbacks. Congress has consistently raised the debt ceiling when necessary, which some analysts claim dampens the legislative branch’s power as a check and balance. And if Congress does not increase the debt ceiling, there is a risk that the government will default on its loans, lowering the country’s credit rating and making it more expensive to borrow in the future.

Recent Overview of the Debt Ceiling and Congress

In the last 15 years, Congress has found itself embroiled in partisan battles over raising the debt ceiling. For example, during the Obama administration, there were two high-profile debt ceiling standoffs between the president and Congress.

In 2011, some members of Congress threatened to allow the U.S. government to hit the debt ceiling if their preferred spending cuts were not approved.

This standoff led Standard & Poor’s, a credit rating agency, to downgrade U.S. debt from a AAA to a AA+ rating.

Moreover, in 2013 there was a government shutdown when members of Congress would not approve a bill to fund the government and raise the debt ceiling unless the president made their preferred spending cuts. This standoff ended after 16 days when Congress finally approved a spending package and a debt ceiling increase partially due to the potential for a further downgrade of U.S. debt.

More recently, after a showdown in Congress in June 2023, lawmakers voted to suspend the debt ceiling altogether, until January 1, 2025.

Then, the debt ceiling was reinstated on January 2, 2025, reflecting the amount of outstanding debt from January 1, and setting the stage for another standoff. On May 16, Moody’s downgraded the U.S. credit rating one notch, from Aaa to Aa1.


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What Happens If Congress Fails to Raise the Debt Ceiling?

The current debate centers on finding a long-term solution for raising the debt ceiling. If the executive and legislative branches can not reach an agreement, there could be several consequences.

Potential Consequences for the Economy and Markets

•   The government will swiftly run out of cash if it cannot issue more bonds. At that point, the money the government has coming in would not cover the millions of debts that come due each day. The government may default, at least temporarily, on its obligations, such as pensions, Social Security payments, and veterans benefits.

•   A U.S. government default could also have a ripple effect throughout the global economy. Domestic and international markets depend on the stability of U.S. debt instruments like Treasuries, which are widely considered among the safest investments.

•   Interest rates for Treasury bills could rise, and interest rates across other sectors of the economy could follow suit, raising the borrowing cost for home mortgages and auto loans, for example.

•   A default could also create stock volatility in global equity markets, turmoil in bond markets, and push down the value of the U.S. dollar.

Recommended: What Is the U.S. Dollar Index?

What Are Extraordinary Measures?

When the government hits the debt limit, there are certain “extraordinary measures” it can take to continue paying its obligations. For example, the government can suspend new investments or cash in on old ones early. Or it can reduce the amount of outstanding Treasury securities, causing outstanding debt to fall temporarily.

These accounting techniques can extend the government’s ability to pay its obligations for a very short amount of time.

Once the government exhausts its cash and these extraordinary measures, it has no other way to pay its bills aside from incoming revenue, which doesn’t cover all of it. Revenue from income tax, payroll taxes, and other sources only cover about 80% of government outlays, according to the U.S. Treasury.

Can Congress Get Rid of the Debt Ceiling?

As noted above, the debt ceiling debate has become fertile ground for partisan fighting in Congress, but theoretically, it doesn’t have to be that way. For example, Congress could give responsibility for raising the debt ceiling to the president, subject to congressional review, or pass it off to the U.S. Treasury.

Congress could also repeal the debt ceiling entirely, which it came close to doing in mid-2023.

The Takeaway

A failure to raise the debt ceiling and a subsequent default on U.S. government debt obligations could have a significant impact on financial markets, from increased volatility to a decline in the value of the dollar to a lower national credit rating or even a recession. Given such consequences, it’s likely that Congress will continue to find ways to raise the debt ceiling, although political battles around the issue may continue.

Even if the debt ceiling continues to go up, the growing national debt could lead to economic instability, according to some economists. It’s hard to predict, since the debt ceiling has been raised about 100 times since World War I, when it was first established, and the U.S. has yet to face grave consequences as a result.

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FAQ

How much is the U.S. debt in 2025?

The U.S. government currently owes well over $36 trillion in debt to investors, businesses, other governments, and even itself via intragovernmental loans.

Who is the U.S. most in debt to?

The Federal Reserve is the largest domestic holder of U.S. debt, because it keeps Treasuries as part of monetary policy. Foreign countries also hold large amounts of U.S. debt, with Japan, China, and the U.K. in the top three.

Can the U.S. ever get out of debt?

While it might be possible, getting out of debt would require substantial changes to policies and programs and could take decades to accomplish.

Photo credit: iStock/William_Potter