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Being a mystery shopper or secret shopper can sound like a dream come true: A company pays you, as an independent contractor, to hit the stores and buy things. You earn money by posing as a patron at a place of business and help evaluate the quality of the products and services.

Shopping is often the culprit when a person busts their budget; too much retail therapy can throw your finances off kilter. But what if you could capitalize on your favorite pastime instead? As a mystery shopper, you’ll receive paychecks and even free products from companies wanting insight into their customers’ experiences.

So, what is mystery shopping (also known as secret shopping) all about?

This guide will share everything you need to know about mystery shopping and how to become a mystery shopper and get paid for it, including:

•   What is a mystery shopper?

•   How does mystery shopping work?

•   How to become a secret shopper and get paid.

What Is Mystery Shopping?

Mystery shopping means a company hires you to use its services covertly. For example, you might bring your car into a shop for an oil change, buy a new pair of jeans at the mall, or eat at a new restaurant. The crucial factor is that the company’s employees don’t know by whom you are employed or that you are evaluating them, so you’ll gain insight into what typical operations are like. The purpose is for the company to gather your feedback to improve their business.

What Happens During Mystery Shopping?

During mystery shopping, you’ll head to the assigned business location and act like an average customer. You might have the job of returning something or noting the tidiness of the workspace.

After you complete your task, you’ll likely submit a writeup or complete a survey describing your experience, including what went well or how the company could sharpen their services. Once the company receives your feedback, they will pay you.

How Much Do Mystery Shoppers Make?

According to Indeed, mystery shoppers across America earn $22.69 per hour on average, which would equal $35,473 if employed full time. Typically, you receive compensation per task instead of per hour. However, mystery shopping can be time-consuming, so it may not be an efficient way to earn money.

Additionally, some mystery shopping opportunities don’t offer compensation. If they do, payments might take one to three months after the job to hit your bank account.

While some jobs, such as selling insurance, help you build passive income streams, mystery shopping pays by the gig. Therefore, to make continuous money, you’ll have to repeatedly take on mystery shopping jobs.

Can Mystery Shopping Be a Full-Time Job?

Companies pay mystery shoppers for their help, usually in the form of a flat fee. At a minimum, they’ll repay some or part of the expenses you paid during your experience. In either case, mystery shopping isn’t typically profitable enough to be a full-time job, but it can be a fun, low-cost side hustle. Remember, the time that mystery shopping takes and the hidden expenses such as travel can reduce the value of your reimbursements.

Additionally, as independent contractors, mystery shoppers don’t receive benefits, such as health insurance and paid time off. Also, if you are self-employed, saving for retirement is on you.

As a result, you’ll need to deduct those costs from what you think you could earn as a full-time mystery shopper. With an average salary of $35,000 a year, it may be challenging to make ends meet.

Would Mystery Shopping Be Considered Variable or Fixed Income?

Fixed income is a set sum of money that you can expect on a regular basis. For example, when you earn a salary, you will usually get paid the same amount weekly or bi-weekly.

On the other hand, variable income fluctuates weekly or bi-weekly. Since the income earned from mystery shopping can vary by company and project, your mystery shopping income is usually variable.

Quick Money Tip:Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. An online bank account is more likely than brick-and-mortar to offer you the best rates.

Do Mystery Shoppers Pay Taxes?

The IRS requires you to pay taxes on mystery shopping income if you earn at least $400 annually from it. If you netted less than $400 from mystery shopping, the IRS stipulates that you include it on your tax return, but you will likely not owe taxes on the income. Remember to keep records of your expenses so you can maximize your deductions.

Becoming a Secret Shopper

If you strategically acquire legitimate mystery shopping jobs, you can make quick cash to pad your budget every month. Here’s steps to becoming a secret shopper:

•   Search online for mystery shopping opportunities from businesses.

•   Vet the advertisement and company to ensure the opportunity isn’t a scam.

•   Apply to a mystery shop for the company.

•   If necessary, submit a background check and sign any related disclosures or professional agreements.

•   After the company grants you access, check their website for jobs and select one you’d like to complete.

The Mystery Shopping Providers Association (MSPA) has an online database to help you find honest, authentic mystery shopping jobs. In addition, the organization offers two certifications that make you a more desirable mystery shopper for companies. You can earn the MSPA’s silver certificate online and participate in a day-long workshop for the gold certification.

Recommended: A Guide to Ethical Shopping

Benefits of Becoming a Mystery Shopper

By becoming a secret shopper, you’ll enjoy the following perks:

•   You earn money for shopping, trying a delicious meal, or spending the night at a hotel.

•   You can create your own schedule and practice a healthy work-life balance.

•   You may get to keep what you buy.

•   You can work during evenings and weekends if that is your only available time.

•   You decide for whom you want to work, meaning you can be selective when choosing jobs.

•   You are your own boss to a large extent, setting your schedule.

•   You can supplement income from your day job with mystery shopping or even try going full time. Plus, your earnings could help you achieve financial freedom.

•   You’ll have variety and excitement from new experiences every day.

•   You’ll help companies you like improve their products and services.

Drawbacks of Becoming a Mystery Shopper

If you’re considering becoming a mystery shopper, it’s a good idea to be mindful of potential downsides:

•   You likely won’t have steady earnings like a typical job, meaning some weeks will be more lucrative than others. In addition, each job will pay differently.

•   Frequent travel can put extra miles on your car and possibly cause damage. Even if you’re reimbursed for miles, you may still lose more money through oil and tire changes.

•   You’ll probably have to sift through countless scams while looking for jobs. If you fall prey to one, you’ll likely lose money or waste time.

•   Payment could take up to 90 days to receive.

•   Starting out, you usually won’t be able to access some of the better assignments available only to seasoned shoppers.

Recommended: How to Earn Residual Income

Tips Before Becoming a Mystery Shopper

If you’re planning on becoming a secret shopper, consider this advice on staying organized and achieving success.

Keeping Receipts

You’ll likely submit receipts for many mystery shopping jobs. Therefore, you may spend time mailing, faxing, or scanning receipts. It’s recommended to make copies for your own records to ensure you retain proof of completed jobs.

Signing Up for Multiple Sites and Companies

To make substantial income, you’ll probably work with numerous companies. As a result, you’ll typically have to become well-versed in the methods and preferences of a plethora of businesses. It can be a good idea to organize your work into files for each company to keep you from getting mixed up.

Watching Your Income and Taxes

Current tax law requires you to list your mystery shopping income on your tax return, no matter the amount. You’ll likely owe taxes on the income if you earn more than $400 as a mystery shopper. Therefore, it’s recommended to meticulously track your earnings to ensure your income level is accurate on your tax return.

Watching for Scams

Unfortunately, not all mystery shopping jobs are legitimate. Scammers devise websites and advertisements to look authentic. Here, some signs to watch out for:

•   A dead giveaway of a scam is typically the requirement that you must pay to access a job. Companies with legitimate mystery shopping opportunities won’t charge you or demand that you transfer money from your bank account. Additionally, since MSPA lists mystery shopping jobs at no charge, you should not have to pay to view opportunities.

•   Any mystery shopping job that promises you’ll make thousands of dollars during your first month is also likely to be fraudulent. While it is possible to generate significant income by mystery shopping, it takes time and certifications to access better-paying work. Even then, you would have to work at least 40 hours per week to earn enough to live on.

•   Beware scammers who use the MSPA name to con you into their fraud. MSPA is an excellent resource, but scammers posing as the organization try to lure mystery shoppers. The MSPA posts jobs but does not directly employ mystery shoppers. It can be wise to avoid advertisements for jobs with the MSPA, as they tend to be fake.

Knowing What You Signed Up For

It’s easy to get carried away when perusing mystery shopping opportunities. So before you click away, it’s a good idea to read the details about the opportunity first. For example, although you might see a job at your favorite store, the location might be an hour away instead of the one that’s a five-minute drive from home. Therefore, it’s wise to study jobs carefully before committing to something you may not enjoy or receive enough compensation for it to be worthwhile.

The Takeaway

Mystery shopping can be a thrilling way to earn extra money. Remember, you’re getting paid to shop, so it may not be the most profitable side hustle out there, and finding opportunities can be challenging. Still, the added perks of trying new products and enjoying a plethora of experiences can make mystery shopping an enjoyable, productive hobby.

Since mystery shoppers usually earn a small flat fee as independent contractors, turning mystery shopping into a full-time job can be challenging. As you gain experience, you’ll be able to tell what kind of income it can realistically earn you. Additionally, it’s vital to avoid scammers who require you to pay for jobs or job listings.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Is mystery shopping too good to be true?

Mystery shopping is a viable side gig that can increase your income by completing jobs for businesses that are looking to improve. However, scammers try to lure in would-be mystery shoppers by promising huge paychecks for quick jobs. Any mystery shopping job that sounds too good to be true probably is. That said, a wide array of mystery shopping jobs pay modest rewards that can pad your wallet.

Do mystery shoppers get to keep what they buy?

Mystery shoppers sometimes get to keep what they buy. It depends on the company’s policies for the specific job. The business might allow you to keep purchases in some cases and ask for you to return them in others.

Do mystery shoppers get paid upfront?

In most cases, mystery shoppers do not get paid upfront. It usually takes 30 to 90 days to receive payment for a mystery shopping job.

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Photo credit: iStock/PeopleImages

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.

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

SOBK0822004

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In an increasingly digital world, mobile banking is among the cool new tools that can enhance your quality of life. It can make managing your money on the go simple and convenient.

The range of mobile banking features you have access to can, however, depend on where you choose to bank. Some of the most common features of mobile banking include the ability to view transactions, transfer funds, and review statements, all in the palm of your hand.

Understanding how those features work matters if you’re new to mobile banking or you’re on the hunt for a new bank account with mobile access. Read on to learn:

•   What is mobile banking?

•   How does mobile banking work?

•   What are some of the top features of mobile banking?

•   What are the pros and cons of mobile banking?

What Is Mobile Banking?

Mobile banking refers to a range of banking products and services that are offered through a mobile device. To access mobile banking, you’ll generally need two things:

•   A compatible and connected mobile device, such as a cell phone or tablet

•   A mobile banking app

Mobile banking is different from online banking, in terms of how you access it. To use mobile banking, you need to log in to your bank’s mobile app. Online banking, on the other hand, is accessed through a laptop or desktop computer.

How Does Mobile Banking Work?

Mobile banking works by allowing banking customers to access their accounts from a compatible mobile device. Instead of logging on to your bank’s website from a laptop or desktop, visiting a branch, or calling your bank’s phone banking number, you can manage your accounts right from your mobile phone or tablet.

A mobile banking app is an app that’s designed to be used specifically for banking services. Numerous traditional and niche banks have introduced mobile banking apps to complement their online and in-person banking services. You can also find mobile banking apps offered through fintech companies, neobanks, and other institutions.

Generally speaking, these apps allow you to log in with a unique user ID and password. From there, you can perform different money management tasks, based on the mobile banking features the app offers.

But is mobile banking safe? Generally, the answer is yes, as banks take various measures to encrypt and protect mobile banking app user information.

12 Features of Mobile Banking

What are the features of mobile banking? The answer depends largely on where you decide to bank, as each bank can determine what features to include in its mobile app. That being said, there are some mobile banking app features that are typically common from bank to bank. Here are a dozen features to consider.

1. Account Details

The first thing you’ll see when you log in to a mobile banking app is an overview of your accounts. Specifically, you should be able to review the following at a glance:

•   Available account balances

•   Current account balances

•   Name of each account

•   Identifying details, such as the last four digits of the account number

If you want to see how much you have in checking, for instance, you can quickly log in to your mobile banking app to view your balance.

You may also be able to see other account details, including full account numbers and your bank’s routing number. That information can come in handy if you want to set up direct deposit or schedule an ACH transfer or payment online.

2. Transaction History

One of the most helpful mobile banking features is the ability to view your transaction history. Some of the things you might be able to do with your app include:

•   Reviewing posted and pending debits

•   Reviewing posted and pending credits

•   Cleared checks

•   Filtering transactions by date, amount, or transaction type

Seeing transaction history can be helpful when making a budget; it can help you know exactly where your money is going. You can also review your transaction history to look for anything suspicious. This could include such things as purchases you don’t remember making or micro deposits that could indicate someone is trying to link your account to an external account without your consent.

3. Bill Pay

Mobile banking app features can also include bill pay services. But what is bill pay? In short, it’s a feature that allows you to schedule one-time or recurring bill payments through your banking app. You can add info on those who typically bill you, select a payment account, enter the payment amount, and schedule the date the bill should be paid all from your mobile device.

That can save you time, since you can schedule bills to be paid automatically. It can also save you money if you’re not having to buy postage to mail in check payments. One more bonus: You’re avoiding late payment fees since bills are paid on time.

4. Mobile Check Deposit

Mobile check deposit can be a highly convenient mobile banking feature for people who regularly receive checks. Instead of taking your check to a branch to deposit it, you can snap a pic of it with your mobile device and deposit it from wherever you are.

That’s one of the main benefits of mobile deposit if you use an online bank or neobank that doesn’t have physical branches or offer ATM access. If someone gives you a check, you don’t have to worry about depositing it at a brick-and-mortar financial institution and then initiating a bank transfer from one bank to another. Instead, you can deposit the check in minutes from your phone.

5. Person to Person Payments

Mobile banking features increasingly include the option to send person to person payments to friends and family. You can log in, navigate to the payments section of your mobile banking app and schedule a payment to someone using their email address or phone number.

Depending on where you bank, those payments might be completed in real time, meaning the money transfers from your account to theirs in minutes. That’s much easier and more convenient than withdrawing cash or writing a check and you can avoid the fees that other payment apps like Venmo or Paypal might charge.

Recommended: Pros and Cons of Online Banking

6. Cardless Withdrawal

A cardless withdrawal allows you to get cash at an ATM without needing your debit card. Instead, you can withdraw money using a secure code that’s sent to your mobile device either via text or in your mobile banking app messaging feature. That’s a nice feature to have if your debit card is lost or stolen and you need to make a withdrawal.

7. Card Management

Credit cards often offer a card lock feature that allows you to freeze your card temporarily if it’s lost or stolen. The same feature is increasingly being offered with mobile banking. If you misplace your card, you can log in to the app, select the card, and freeze it with the tap of a button. You can unfreeze your card the same way if you find it. If you don’t, you can leave it locked until you’re able to contact customer service to report the loss.

8. Account Alerts

Setting up account alerts and notifications can be a great way to stay on top of your money and potentially head off fraud. Some of the alerts you might be able to set up with your mobile banking app include:

•   New credit and debit transaction alerts

•   Alerts notifying you of changes to your account information, such as your address or contact email

•   Failed login attempts

•   Updates to your user ID or password

•   Low account balances

You may be able to set up individual alerts for each account that you have or blanket alerts that cover all of your accounts. And you might be able to choose from email alerts, text alerts, or both, depending on your bank.

9. Statements and Documents

Opting in to electronic statements can help you avoid wasting paper. You might also avoid a fee if your bank charges you to get statements in the mail. In addition to viewing your statements through your mobile device, you might also be able to review other documents as well such as tax forms if you’re earning interest with a savings account. Or you could check investment account statements if you have a brokerage account at your bank as well.

10. New Account Opening

Need to open a new bank account? You might be able to skip the branch and set up a new checking, savings, money market, or CD account through your mobile banking app. You can save some time if you’re a customer and are already logged in, since the bank will have the relevant information needed to open the account. And you can easily arrange to transfer money from one of your existing accounts to the new account to cover your initial deposit.

11. Secure Messaging

Mobile banking apps can also include a message center where you can send and receive messages with your bank securely. If you’ve set up account alerts or notifications, for example, you can review those notifications through the message center as they come in. Your bank may also use the message center to send other secure notifications regarding your accounts.

12. Money Management Services

Your mobile app could save you time if you’re able to complete certain banking services from your device without having to visit or call a branch. For example, some of the things you might be able to do include:

•   Ordering checks

•   Putting a stop payment on a check you’ve written

•   Linking external accounts

•   Schedule bank to bank transfers

•   Managing overdraft protection

•   Reviewing fee schedules for your accounts

•   Ordering foreign currency

•   Requesting copies of checks

•   Finding bank locations near you

•   Connecting with customer support

These features might be listed under a section called “Service Center” or “Services” in your mobile banking app. While you may not need most of them on a regular basis, being able to access them at your fingertips is a nice incentive to use mobile banking.

Banking With SoFi

Weighing the pros and cons of online banking and mobile banking can give you perspective on what’s good (or bad) about either one. If you’re specifically interested in being able to bank on the go, then finding an account that offers a robust mobile banking app is a must.

When you open a new bank account with SoFi, you can get checking and savings in one convenient place. You can easily manage your accounts online or through the SoFi mobile app. When you open accounts with direct deposit, you’ll also earn a competitive APY and pay no fees, which can help you money grow faster. Plus, qualifying accounts can get paid up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What are the benefits of mobile banking?

One of the main benefits of mobile banking is convenience. You don’t need to go to a branch or log in to your laptop to manage your money. Instead, you can transfer funds between accounts, view balances, pay bills, and send money to friends and family from your mobile device.

Are there any disadvantages of mobile banking?

The main disadvantage of mobile banking is that you can’t deposit cash through an app. If you need to deposit cash, you’ll need to take it to a bank branch or ATM to do so. Otherwise, there are very few drawbacks to mobile banking apps.

What is the purpose of mobile banking?

The purpose of mobile banking is to allow you to manage your bank accounts from anywhere as long as you have a compatible device and an internet connection. Mobile banking can save you time since you don’t have to go to a bank branch to complete basic transactions with your accounts.

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Photo credit: iStock/Kawanilaz

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.

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOBK1022009

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Have you ever noticed that spending money right after your paycheck is deposited feels great, but doing so later in the week, as your resources dwindle, is a lot less satisfying?

You’re not being moody or imagining things. This is a very real financial phenomenon known as the bottom-dollar effect. It explains the human tendency to have more negative associations with a final purchase that depletes one’s allocated budget.

Read on to learn more about:

•   What the bottom dollar effect is

•   When and why it happens

•   Tips that can help you make better purchase decisions

What Is the Bottom-Dollar Effect?

So what does bottom-dollar mean? First, an example: If you allow yourself to spend $500 a year on new clothes, the bottom-dollar effect means that you are more likely to be dissatisfied with the last clothing item you are able to purchase that year with your $500 shopping budget.

Researchers first coined this “bottom-dollar” phrase in an article that appeared in the October 2014 issue of Journal of Consumer Research. Robin Soster, a marketing professor at the University of Arkansas, conducted the study with colleagues Andrew Gershoff (University of Texas at Austin) and William Bearden (University of South Carolina).

According to Soster and her colleagues, the bottom-dollar effect refers to the experience of feeling significantly less satisfied with a product or service purchased with the last of one’s budget, regardless of the quality or cost of that product or service.

People who live paycheck to paycheck may feel the bottom-dollar effect as they near the end of their pay period, when funds are running out. But even those who live more comfortably tend to feel the pain of spending the last of an allocated budget, like the amount they set aside in their monthly budget for dining out. Or perhaps the negative feelings kick in when the funds in a person’s savings account (one allotted for a specific vacation) are drained. This can happen even if the money is earmarked only mentally, not in a separate account.

Recommended: Why Is the U.S. Dollar the Global Currency?

What Causes the Bottom-Dollar Effect?

While scientists may have a few theories about why the bottom-dollar effect happens, they typically boil it all down to how people view their money. Individuals have a tendency to organize their money — whether physically in piggy banks and sock drawers, digitally in different savings accounts, or just mentally (e.g., “I’m limiting myself to $200 for souvenirs on this vacation”).

A researcher named Richard Thaler explained the latter tendency as mental accounting. It means you might mentally view your salaried income differently from bonus income. You may see earned money differently from gifted money in a birthday card, and you might classify money set aside for sports events and movie tickets differently from money set aside from clothes and shoes — even though it’s all the same.

So even though you might have plenty of money in your savings account, if you’ve mentally earmarked $2,000 for a vacation in a travel fund account and you’re down to your last $100 on the final night, you are more likely to find that last vacation expense more painful. (You’re using up the last of your funds, exactly what bottom-dollar means.)

Even if it’s spent on an amazing meal, a once-in-a-lifetime boat ride, or a behind-the-scenes tour of a famous landmark, you may struggle to see as much value in the experience because that $100 seemed more meaningful and important. And you may transfer the negative experience of running out of money with the actual experience (or product) itself. That’s the bottom-dollar effect in action.

Recommended: Tips to Stop Overspending

Where Does the Bottom-Dollar Effect Occur?

The bottom-dollar effect can happen with all types of purchases. If you have a monthly grocery or gas budget, you are probably going to feel frustrated when you buy your last bag of food or fill up your tank one last time at the end of the month. If you live paycheck to paycheck, you may be even more likely to have negative associations with the final purchases you make before your next payment. And if you limit yourself each week, month, or year on certain splurges, you may not enjoy that final splurge as much as you did the first one, even if it’s an objectively “better” purchase.

Recommended: Are You Bad With Money? Here’s How to Get Better

Why Be Aware of the Bottom-Dollar Effect?

Being aware of the bottom-dollar effect may allow you to be less affected by it. Simply reminding yourself that it can represent an irrational emotion could negate the effects.

Being aware of the bottom-dollar effect is also helpful when you first get your paycheck or a new month starts. People are more likely to splurge then. By remembering the bottom-dollar effect, you may help yourself change your spending habits so that you spend more evenly throughout a pay period, month, or year.

What Does the Bottom-Dollar Effect Say About Our Spending Habits?

The bottom-dollar effect can reflect fairly typical spending habits. When you first get your paycheck or when a new month starts in your budget, you are more likely to spend more money.

The bottom-dollar effect also demonstrates how easily humans can attach emotions to purchases, similar to the ideas of immediate gratification from an impulse buy or buyer’s remorse after a purchase.

In the case of the bottom-dollar effect, dissatisfaction has nothing to do with the actual product or service you purchased but instead related to when you spent the money and how much money you have left.

Do Companies and Organizations Take Advantage of the Bottom-Dollar Effect?

You may wonder if the bottom-dollar phenomenon is ever used by clever marketers or businesses. When Soster and her colleagues first announced the results of their study, they immediately pointed to the implications for marketing.

In a statement on the University of Arkansas’ news site, Foster said, “If a marketer’s goal is to attract new customers, initial promotions might be better timed at the beginning of a month or immediately after consumers receive tax refunds, to ensure that budgets are not approaching exhaustion at the time of purchase.”

So, being aware of the bottom-dollar effect can be a good thing. It can make you more aware of when you are likely to be receiving more promotions and discounts from marketers. This can help you assess when to shop and when to hold back.

Examples of the Bottom-Dollar Effect

Below are a few examples of the bottom-dollar effect:

•   Paycheck: Assume you live paycheck to paycheck and are paid every two weeks. When your bank account is almost empty near the end of that period, you might be more dissatisfied with purchases, whether they are necessary (like groceries or the electric bill) or splurges (like an ice cream or movie tickets).

•   Needs: Even if you live more comfortably, your budget may allot a certain amount to spend each month on necessities like food and gas. As you near the end of the month and see that your grocery budget is almost depleted, you may be less satisfied when you make your final grocery run. This can happen even though you know you have additional money to pull from if you run out or go over.

•   Wants: If you mentally set aside a fixed amount each month or year for things like video games, shoes, or travel, you may find yourself less happy with purchases made when that money is almost gone.

Recommended: Signs You’re Living Beyond Your Means

Can the Bottom-Dollar Effect Be Avoided?

Avoiding the pain associated with the bottom-dollar effect can be difficult because it is, by definition, an irrational emotion. However, there are a few ways you can minimize the impact, if not avoid it altogether:

•   Be aware of the effect. As you see your allocated budget dwindling, remind yourself of the bottom-dollar effect. Sometimes all it takes is reasoning with yourself. That can make you more comfortable with spending the last of funds that you have mentally set aside for the very purchase you’re making.

•   Add an “unexpected overages” budget line item. If you can afford to budget additional funds each month to cover accidental or unexpected overages, you might feel better as your monthly allowances dwindle. For example, if you have $100 a month allocated to overages, you can draw on that money for something like a family cookout, where you might need to completely exhaust your grocery budget. Knowing that there is an extra $100 just in case makes it easier to spend for the gathering without feeling guilt or frustration.

•   Build more flexibility into your budget. The more rigid your budget is, the more often you may feel the bottom-dollar effect. If you think of each budget item (groceries, gas, entertainment, etc.) as a flexible range instead of one fixed number, you might be able to spend more easily without feeling negative emotions.

Tips for Improving Purchasing Decisions

Mentally reminding yourself that the bottom-dollar effect isn’t rational is one way to improve your purchasing decisions (or at least your satisfaction with your decisions). But how else can you improve and feel better about your purchasing decisions? Here are some ideas:

•   Make a flexible budget. Making a budget is important, but building in more flexibility for life’s unexpected events — from emergency car repairs to a surprise opportunity to travel somewhere new — can keep you from feeling upset about how you spend your money.

•   Research products and services. Dissatisfaction with a purchase because of the bottom-dollar effect is one thing, but dissatisfaction because you actually don’t like the product or service is another. While you’ll never truly know until you buy, researching a purchasing decision before swiping your card can help set expectations — and steer you away from a bad purchase altogether.

•   Get a checking account that works for you. Spending money feels worse when you’re also paying fees just to be able to access that money. Find a checking account without any monthly fees and, better yet, one that offers features like no-fee overdraft coverage and even cash back.

Banking With SoFi

Looking for a checking account without any monthly fees? Take a look at our high interest bank accounts. Our Checking and Savings account lets you spend and save in one convenient place. When you open an account with direct deposit, you’ll earn a competitive APY and pay no monthly fees — which can help your money grow faster. Need another perk? Qualifying accounts can access their paycheck up to two days early (right as you’re starting to feel that bottom-dollar effect).

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Is the bottom-dollar effect negative?

The bottom-dollar effect can be considered negative, as it makes people feel dissatisfied with products and services that they purchased. Marketers can also use the bottom-dollar effect to their advantage, potentially manipulating consumers into spending money at the beginning of the month, year, or pay period — or at particular times, like tax season.

What are the pros and cons of the bottom-dollar effect?

A benefit of the bottom-dollar effect is that it can prompt people to be more selective with how they spend their money at the end of the month or a pay period. It can help avoid impulse buys when a person needs to save their dollars for bills. However, a downside of the bottom-dollar effect is that a person might overspend when they first get paid and feel as if they have a fresh infusion of money to freely spend.

Is it unethical for companies to use the bottom-dollar effect to their advantage?

Companies can and do use the bottom-dollar effect in marketing practices. Some people may feel that marketing that preys on one’s emotions is unethical, but this is just one of many marketing practices that uses people’s feelings to their advantage.

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Photo credit: iStock/Elena Frolova

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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Do you pay all of your bills and then feel as if the amount of money you have left over for your financial goals is a big zero? Unfortunately, many Americans live paycheck to paycheck (61% of us, according to a June 2022 PYMNTS study) , and economic trends such as inflation can strain even the most financially stable households.

It’s a frustrating feeling not to have cash to put towards longer-term goals like, say, buying a house or retirement. While every person’s financial circumstances differ, your budget should allow room for important goals, such as building an investment account or padding out an emergency fund.

So if you’re wondering, “How much extra money should I have after bills?” the answer is definitely not nothing. Saving money after paying for your expenses can be challenging, but it’s critical for financial wellness.

This guide will help you understand and answer the question how much extra money I should have after bills and how to save every month even if you’re strapped for cash.

What Is a Good Amount of Money to Have After Paying Bills?

How much money should you have after paying bills? There’s no one answer; it really depends.

Everyone’s financial circumstances are different, so it’s hard to pinpoint a good amount of leftover money after bills. For example, you might have a medical bill weighing down your otherwise healthy budget. Or you could have limited income as a student or retiree.

In most cases, it’s vital to prioritize spending on your needs and stay motivated when paying off debt. You can also begin stashing away cash for other goals.

With this perspective in mind, the 50/30/20 rule represents a good way to allocate money. The numbers act as a guide: 50 percent of your income pays for necessary expenses like food, housing, and debts (like a student loan). Unnecessary expenses, like entertainment or dining out, are considered wants, not needs, and they account for the next 30 percent. Finally, 20 percent of your income goes toward investments and savings.

As a result, it’s recommended to have at least 20 percent of your income left after paying bills, which will allow you to save for a comfortable retirement. If your employer offers matching 401(k) contributions, take advantage so you can maximize your investment dollars.

Otherwise, you can start your own individual retirement account (IRA) and make similar contributions to fund your lifestyle later in life.

Recommended: Check out the monthly 50/30/20 budget calculator to see the breakdown of your money.

Tips for Managing Your Bills

Sometimes, though, putting aside 20 percent (as noted above) can be a real challenge. Paying your bills in full, on time each month, can be challenging. Use the following techniques to ensure you can comfortably afford your monthly obligations:

Getting to the Root Cause

If you often scramble to make it to payday, there’s likely a problem lurking in how your income and expenses are aligning. Fortunately, dozens of apps and bank services are available to help you see where each dollar goes every month. Of course, you could also keep paper receipts and bill statements the old-fashioned way. In any case, these tools can show you if you’re spending too much at restaurants or if you should up your income through a new job or a low-cost side hustle.

Organizing Your Bills

Everyone has monthly obligations. One thing that can help you get on top of those living expenses: taking the time to organize your bills? Depending on when certain bills arrive and what they pay for, you may want to shift around when and how you pay them.

For example, it might help to set up automatic bill payment for utilities or student loan payments so you make sure those important expenses definitely get taken care of on time. Focus on paying for only the most necessary expenses. By cutting down on impulsive buys, you can help put more money in your pocket.

What Are the Bills That Are Necessary to Pay?

The following bills are essential for the average American household:

•   Rent or mortgage for housing

•   Food and toiletries

•   Utilities such as gas, water, and electricity, as well as WiFi

•   Transportation expenses, such as a car, vehicle upkeep, or bus pass

•   Minimum debt payments on student loans or credit cards

•   Premiums for health coverage, car insurance, and renters/homeowners insurance

Identifying these bills as top priority and knowing how much of your paycheck they account for can help you budget better. It can help you answer the question “How much extra money should I have after bills?” and hopefully tweak your spending to make sure you can save.

Quick Money Tip:Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. Online banks are more likely than brick-and-mortar banks to offer you the best rates.

Which Bills Are Expenses That Can Potentially Be Canceled?

Cutting back on luxuries and treats can be painful, but there’s no feeling quite as rewarding as ending the month with your bills paid and a substantial deposit to your retirement account with money to spare. If you need to make room in your budget, consider canceling the following expenses:

•   Cable television or streaming subscriptions (you may have more of them than you realize)

•   Smartphone upgrades and high data plans

•   Gym or workout memberships

•   Amazon Prime and other shopping-related memberships

•   Digital cloud services

•   Overly expensive gifts for holidays and birthdays

•   Dining out and takeout

•   Cigarettes, vapes, and alcohol

•   Items that you can buy used instead of new, such as clothing, books, and more

Budgeting All Expenses

While ​​it’s critical to create financial goals and commit to eliminating unnecessary expenses, your budget is how you’ll accomplish the feat. A budget will act as a spending and saving plan to help you stay on track.

Reviewing the expenses you automatically fulfill through bill pay can help you understand how to construct your budget and make sure you aren’t overlooking any expenditures. Looking at upcoming expenses (whether that means new tires or a long weekend away) can also help you prepare better and not get thrown off track.

Getting Another Job or Side Hustle

If you reduce your bills to a minimum but still experience financial challenges, a side hustle can help make ends meet. Whether you find a part-time job with an employer or work independently for a company like Uber or DoorDash, an extra 10 to 15 hours weekly can make a substantial difference in your budget. On the other hand, if your day job meets all your expenses, a second job can help you beef up your retirement account or pay for an expensive hobby.

Tracking Your Spending

Coffees and checkout impulse purchases at the grocery store can stealthily ding your budget. Luckily, there are more apps and tools than ever for tracking every expense. You can ditch pens, paper, and envelopes for a spending tracker on your phone or an Excel budget spreadsheet. Your bank might provide a free financial management app to help as well. Use these tools to help maximize how much money you should have leftover after bills.

Being Frugal for a Temporary Time

If you have lingering debts or want to save up a specific amount of money, being thrifty for several months can propel you into financial wellness. For example, you could make grocery shopping lists based on the coupons you clip each week. Or, if online shopping is your Achilles’ heel, you may want to unsubscribe from sales email lists for a while.

Some people enjoy monthly challenges. One month, you might say you are not going to spend any money on movies or music and put the savings towards your emergency fund. The next month, you might order takeout only twice and deposit the money you saved versus your usual habits into your travel fund.

Downsizing Your Possessions

Just as some monthly payments are unnecessary, you may have toys, gadgets, unused appliances, and more lying around that you don’t use regularly. You can pad your wallet by selling your stuff through Facebook Marketplace, eBay, or ThredUp. If selling online doesn’t appeal to you, a garage sale could be an option. These moves can help you have more money after bills.

Why Money Management Is Important

Life gets expensive, and making the most of your hard-earned dollars is crucial. Here are some principles to consider:

•   Failing to manage your money could cost you hundreds or thousands of dollars annually. Solid financial management can transform your spending habits, quality of life, and retirement income.

•   Also, money management will help you become more financially disciplined, which can be a key characteristic of successful people. The fortitude you build from sticking to a budget will increase your overall stability in life.

•   You’ll likely be better able to achieve your goals as well. For example, managing your money is vital for saving for your child’s education, affording a down payment for a house, or creating an emergency fund.

•   In addition, you’ll probably make more intelligent financial decisions when you actively manage your money. For example, you might have goals such as building an emergency fund and repaying debts. However, you might only have enough income for one of the two. You can analyze your finances to understand whether it’s wiser to save or pay off debt.

•   Lastly, you can reduce stress when your finances are under control. Constantly worrying about money can present mental and physical health challenges. Getting a grip on your money is an excellent way to improve your life circumstances and create a bright future for you and your family

The Takeaway

So, how much money should you have after paying bills?

Your financial situation will help determine the right amount of leftover money after bills. However, it’s an excellent idea to put a portion of your income into your retirement, savings, and investment accounts so your money can grow. In doing so, you can help build up an emergency fund and your future wealth.

If you’re struggling to find leftover money at the end of the month, managing your bills can help. By paying necessary expenses only and eliminating nonessential items from your budget, you can increase how much money you have after paying your bills. Picking up a side hustle is another option to help boost your income.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How do I avoid living paycheck to paycheck?

You can avoid living paycheck to paycheck by tracking your spending, following a budget, and stopping unnecessary expenses such as subscription services and eating out.

How do I get a second job when I do not have the time?

You might find a second job that fits into your off-hours, like walking dogs when you have free time on the weekend. You can also prevent a second job from being overly time-consuming by finding a gig that pays well enough to reduce how much you’ll have to work. Additionally, map out a schedule to help divide work from leisure and maintain a healthy work-life balance.

Is the 50/30/20 budget the only good rule of thumb?

The 50/30/20 budget rule is helpful, but other techniques can also organize your finances well. The 80/20 rule similarly helps you save 20 percent of your income. Others like the 70/20/10 budget. Additionally, your unique financial situation might require a custom budget to help you take control of your money.

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Photo credit: iStock/RichVintage

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.

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

But budgets are not “set it and forget it” tools. The process can involve plenty of trial and error, and you may benefit from refining your plans along the way.

That’s where budgeting questions come in. The more often you check in with how your budget is going, the easier it becomes to tweak and stick with this key money management habit.

Knowing some of the most common budgeting questions to ask can help you fine-tune your financial plan so you can take control of your cash. Check out the list of questions below. When asked regularly, they can yield surprising insights and adjustments to enhance how you manage your money.

How Questions Can Help You Budget Better

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

The right budget questions can give you insight into things like:

•   Why you should budget in the first place

•   What you hope to achieve from keeping a budget

•   Where your biggest budget pitfalls are

•   How you can improve your budget

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

In terms of how often you should be asking questions about budgeting, there’s no set rule of thumb. However, it’s a good idea to review your budget monthly to track any changes to your income or expenses.

An annual budget review can also help you see how your spending has evolved over the year. It’s also a good time to see what adjustments you might need to make as you set new financial goals for the year ahead.

14 Budgeting Questions That Can Help You

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

1. Am I Prepared for Unexpected Expenses?

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

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

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

An often-cited goal for emergency savings is three to six months’ worth of expenses. However, a good amount for an emergency fund for you can depend on your income, expenses, and how much money you need to have in the bank to feel comfortable.

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

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

Recommended: 6 Examples of When to Use Your Emergency Fund

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

Debt can make it difficult to reach your financial goals if a big chunk of your income is going to credit cards, student loans, or other debts. Generally, it’s recommended that no more than 36% of your monthly income should go to debt each month if you own a home, including your mortgage. If you rent, then your debts should be no more than 20% of your income each month, at least according to the Consumer Financial Protection Bureau.

The simplest answer to how much debt you should pay down each month is the maximum amount you’re able to pay, without cutting yourself short in other areas. The faster you can get rid of debt, the more money you can save in interest. And the more room you’ll have in your budget to fund other goals.

Quick Money Tip:Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. Opening an online bank account is more likely than brick-and-mortar banks to offer you the best rates.

4. Did I Overspend? If So, Where?

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

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

5. Do I Need to Adjust Spending Limits?

Reviewing your spending each month can help you figure out where you might be overdoing it. But it’s also an opportunity to see how inflation and rising prices might be affecting your expenses. If you notice that you’re spending more on groceries or gas, for instance, then you may need to trim other areas of spending to compensate for those higher costs.

You may also decide to adjust spending limits down if you want to dedicate more of your budget to saving or debt repayment. So again, instead of eating out you might stick to having meals at home which can be more cost-effective. If that saves you $100 a month, you could add that sum to your emergency fund or make an extra payment to your student loans.

6. What Are My Money Priorities?

Knowing your money priorities is important as they can influence the financial decisions you make. You could ask this budgeting question monthly. Too often? Aim to consider it at least once a year to see how life changes might affect your answers.

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

Recommended: 5 Ways to Achieve Financial Security

7. Am I Tracking Toward My Financial Goals?

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

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

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

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

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

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

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

9. What Would My Budget Look Like Without Debt?

Living debt-free might seem like a dream but it’s possible to make it a reality with the right plan. If you have debt that you’re paying down monthly, ask yourself what your budget might look like if you didn’t have to make those payments. That could give you a push to dedicate more money toward debt repayment so you can eliminate those obligations faster.

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

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

10. Is There a Way to Increase My Income?

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

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

11. How Much Should I Budget for Investments?

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

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

Depending on the details of your situation, aiming to invest 10% might be a good place to start and you can build on that amount year over year as you pay down debt or increase your income. (Typically, experts recommend that 20% of your monthly after-tax dollars go towards savings; how you allocate that 20% between investments and other forms of savings is up to you.)

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

Paying yourself first is a fundamental rule of personal finance and it’s a good way to build the wealth you need to retire. As you approach your budget monthly or yearly, consider how much you’re saving for retirement.

The exact amount you’ll need to save monthly will depend on your retirement goals and age. Financial experts often recommend saving 10% to 15% of income for retirement, for instance, though you might need to double or even triple that if you’d like to retire early or you’re getting a late start.

Look at what you’re putting into your 401(k) at work if you have one. If you’re not getting the full company match, then consider bumping up your contribution rate. And if your budget allows it, you might think about opening an Individual Retirement Account (IRA) to save even more for the future.

13. What Are My Goals This Month?

Financial goal-setting is something you can do for the long-term. For instance, you might want to save $50,000 for a down payment on a home or $1 million for retirement. But you can also set goals that you hope to achieve month to month.

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

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

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

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

You might decide to do weekly or biweekly budget check-ins versus reviewing your budget once a month. Or you may ask a friend to be your accountability partner and help you stay on track with spending. Those kinds of things can help you get more comfortable with budgeting so that it’s easier to stay focused with spending month to month.

The Takeaway

It’s common to have questions about budgeting, even if you’ve been in the habit of making a budget for a while. The great thing about making a budget is that there’s always room to tweak and improve things. Asking the right budget questions is a good way to figure out what’s working (and what’s not) so you can make the most of your money each month.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How many budget categories should I have?

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

What does a realistic budget look like?

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

How do you plan a budget?

Planning a budget starts with understanding your income and then diving into your expenses. As you make your budget, you can assign income to each expense you have starting with the most important ones first. That usually means housing, utilities, food, transportation, and insurance. Paying down debt is also often a priority. From there, you can continue dividing up income to cover discretionary spending 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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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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