Direct deposit can be a convenient way to receive funds and can take from mere moments to a few days to go through.
Direct deposit can be a convenient way to get paid or otherwise receive funds without the hassle of checks or setting up payment apps and then transferring funds to your bank.
Key Points
• Setting up direct deposit can be done in minutes, but it may take a few weeks or pay cycles for it to become active.
• The exact timeline for direct deposit to go through depends on the entity issuing the funds and your financial institution.
• Some direct deposits can be available on the same day they are transferred, while others may take one to three days.
• To determine when your direct deposit will be available, you can contact your bank or observe the timing of previous direct deposits.
• Direct deposit can offer the advantage of faster access to funds compared to waiting for a paper check to clear.
🛈 SoFi members interested in how long direct deposits take can review these details.
How Does Direct Deposit Work?
Direct deposit allows someone to electronically send money from their bank or financial institution directly into someone else’s bank account.
ACH transfers eliminate the need to send physical checks or cash. These transfers can also happen almost instantaneously because they’re digital and you don’t need to worry about things like proving that a check is legitimate. That means direct deposit can be faster and more convenient. In some cases (as with payroll), your financial institution may even offer early access to the funds, up to two days before the scheduled date.
Most employers now offer direct deposit as an option, and, in some states, even require it. Employers typically find direct deposit convenient because they can process payroll much faster without having to deal with issuing, signing, and mailing checks.
Direct deposit is a popular way to get your paycheck, but that isn’t the only use. It may also be the way you get a tax refund, Social Security benefits, unemployment benefits, investment-related dividends, as well as other payments.
Setting up direct deposit is likely to be very simple — and fast. If you’re wondering how long it takes to set up direct deposit, all you have to do is fill out a direct deposit authorization form. Typically, this just takes a few minutes, provided you have the right information on hand (such as bank account and routing numbers; more on that below).
This usually happens on your first day of work, but you can often choose direct deposit or change your information later on. Some companies handle this process entirely online and some use a third party to sign you up.
When setting up a direct deposit, especially at a new job, you’ll want to remember to have the following information available to make it as simple as possible:
Much of this information can all be found on a personal check, by checking your banking website or app, or by contacting your financial institution directly.
Splitting Your Direct Deposit
If you want to split your paycheck between multiple accounts, you can typically add each account to the direct deposit form and specify how much of your pay should go into each. Most forms ask what percentage of your pay goes into each, instead of just a dollar value. You may need to fill out a new form for each account.
For example, you might designate a set amount of money to move automatically into whatever kind of savings account you have, while leaving what you know you’ll need in checking for bills and smaller payments.
Increase your savings with a limited-time APY boost.*
*Earn up to 4.30% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.60% APY as of 11/12/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 1/31/26. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.
How Long Does It Take to Get Direct Deposit?
Signing up for direct deposit can be done in minutes. However, it may not take effect for a few weeks or even more because the payor has to confirm your bank account information.
With your employer, direct deposit may take one or two pay cycles to become active. During that time, you may receive a paper check as payment instead.
In some cases, an employer may hire an employee at the start of the pay cycle so that the direct deposit authorization process is done just in time for the new employee to receive their first payment via direct deposit.
Exactly when you will have access to your direct deposit income will depend on the entity issuing the funds and perhaps your financial institution that receives the funds.
For example, if your employer uses payroll software to process your paycheck and send the transfer, they’ll set a pay date, which might be a day or two before your regular payday.
That’s the date the funds will be transferred into your bank account, and you can typically access the funds by the end of that day.
That said, other direct deposits may process on a different timeline. The funds could take one to three days to become available. To learn how long direct deposits take to post to your account, you can contact your bank directly, or watch to see what time of day the first few direct deposits come into your account.
Advantages of Direct Deposit
Receiving your paycheck or other income via direct deposit can simplify your life.
You won’t have to worry about waiting for a check or making time to take the check to the bank for deposit. And, you typically have access to your money sooner, since you don’t have to wait for a check to clear.
Direct deposit also makes it easier to stay on top of your personal finances because you know exactly when money is coming into your account.
This accuracy can help you manage your money and work towards short-term financial goals, such as paying all your bills on time or saving for an upcoming expense.
If you know when you have access to your paycheck, for example, it’s possible to schedule your other bills or an automatic transfer to your savings account soon after the direct deposit is scheduled.
Other advantages of direct deposit include:
• Your bank might waive your account maintenance fee if you receive regular direct deposits.
• It reduces the risk of check fraud or identity theft from a lost or stolen check.
• You can’t lose or misplace the funds.
• Electronic records don’t clutter drawers or fill file cabinets.
• You can easily track your paychecks and make sure none have been missed, since there is an electronic record of each payment in one place.
The Takeaway
Direct deposits are a convenient, electronic way to receive funds, and this can be instantaneous or take a few days. This process is typically used when an employer, government agency, or other third party instructs its financial institution to digitally deposit funds into your spending or savings account on a specific date.
Direct deposit can make it easier to keep track of your finances, pay bills on time, and avoid negative balances and overdraft fees.
Looking for more ways to simplify your financial life?
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.
🛈 SoFi members interested in how long direct deposits take can review these details.
FAQ
How long does direct deposit take to hit a bank account?
Direct deposit can happen almost instantaneously, but it can also take one to three days to hit your bank account, depending on factors such as bank holidays and weekends.
Why has my direct deposit not hit yet?
If your direct deposit hasn’t hit in one to three days, check with your bank. It could be that there is a hold on your account or your account is new or overdrawn, or that the sum is large enough to warrant additional review.
Is direct deposit available immediately?
A direct deposit should be available within one business day if it’s made via an electronic transfer. In some cases, direct deposits can be available almost immediately; in others, it can take up to three days.
About the author
Julia Califano
Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. 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.
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.
*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.
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.
Trading ETFs is, in many ways, similar to trading stocks or other securities, and can be done on most stock-trading platforms or brokerages. And while conventional wisdom suggests investors are limited in what they can do with an exchange-traded fund (ETF), an investor can likely find a fund that fits their portfolio.
But investors have different goals and strategies, and that may include trading or otherwise buying and selling ETFs frequently. Trading ETFs is fairly simple, though, and investors would do well to know how to trade ETFs.
Key Points
• ETF trading is similar to stock trading, and is available on various platforms.
• Market orders execute at the best available current prices, while limit orders execute at specific prices or better.
• ETFs offer liquidity and a wide range of investment options.
• Trading strategies may be based on technical and fundamental analysis.
• Risks are comparable to stocks, but the liquidity of ETFs may help investors manage downside risks.
What Is an ETF (Exchange-Traded Fund)?
An exchange-traded fund, or ETF, is a popular investment vehicle that enables investors to buy a group of stocks in one bundle, thus promoting investment diversity and efficiency. They’re widely available, usually through major investment fund companies.
ETFs aren’t mutual funds, although they originate from the same fund investment family. One of the primary differences between the two is that mutual funds are usually more expensive than exchange traded funds, since mutual funds are typically actively managed while ETFs are usually passively managed.
Another benefit of ETFs is that whereas mutual funds can only be traded after the end of the market day, ETFs can be traded during open market sessions at any point in the day. ETFs have become wildly popular, too, over the years.
💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.
Different Types of ETFs
ETFs come in a variety of different types, including the following:
• Stock ETFs: This type of ETF is composed of various equity (stock) investments.
• Bond ETFs: Bond ETFs hold different types of bond vehicles, like U.S. Treasury bonds, utility bonds, and municipal bonds.
• Commodities: Commodity ETFs are popular with investors who want exposure to gold, silver, copper, oil, and other common global commodities.
• International ETFs: Global-based ETFs often include country-specific and location-specific funds, like an Asia ETF or a Europe ETF, which are made up of companies based in the country featured in the ETF.
• Emerging market ETFs: This type of ETF is composed of stocks from up-and-coming global economies like Indonesia and Argentina.
• Sector ETF: A sector ETF is focused on an economic sector, like manufacturing, health care, climate change/green companies, and semiconductors, among others.
Trading ETFs offers the same advantages (and risks) associated with trading common stocks. These features and benefits are at the top of the list.
1. ETFs Can Provide Liquidity
In a multi-trillion dollar market, there is likely no shortage of investors looking to buy and sell ETFs. By and large, the bigger the market, the more liquidity it provides, and the easier it is to move in and out of positions.
2. There are Different Investment Options
With ETFs widely available in categories like stocks, bonds, commodities, and more recently, green industries and others, ETF traders have plenty of investment options.
3. ETFs Offer Portfolio Diversity
Investment specialists often extol the virtue of a diverse portfolio, i.e., one made up of both conservative and more aggressive investments that can balance one another and help reduce risk. With so many classes of ETFs available, it’s relatively easy to build an ETF trading portfolio that has different asset classes included.
4. ETFs Are Relatively Inexpensive to Trade
Exchange-traded funds are typically inexpensive to buy, with some brokerage platforms may offer commission-free ETFs.
What Are the Risks of Trading ETFs?
The main risk associated with trading ETFs is the same as with trading stocks, as you could lose money. While shedding cash is always a threat when trading any security, the liquidity associated with exchange-traded funds makes it relatively easy to sell out of a position if needed. A candid conversation with a financial advisor may help investors deal with ETF investment trading risks.
How to Trade ETFs
Just as you can trade stocks, you can trade ETFs, too, by taking these steps.
▶️
Video:How to Invest in ETFs with SoFi
Learn the basics in under 2 minutes. Watch Now
Step 1. Choose a Trading Platform
Traditionally, investors trade stocks through a brokerage house or more recently via an online broker. As with most things in life, it’s generally a good idea to look around, kick some proverbial tires, and choose a broker with the best ETF trading services for you.
Investors can choose from different categories of ETF trading accounts, ranging from standard trading accounts with basic trading services to retirement accounts, specialty accounts, or managed portfolio accounts that offer portfolios managed by professional money managers.
Step 2. Select an ETF Trading Strategy
The path to successful ETF trading flows through good, sound portfolio construction and management.
That starts with leveraging two forms of investment strategy — technical or fundamental analysis.
• Technical analysis: This investment strategy leverages statistical trading data that can help predict market flows and make prudent ETF trading decisions. Technical analysis uses data in the form of asset prices, trading volume, and past performance to measure the potential effectiveness of a particular ETF.
• Fundamental analysis: This type of portfolio analysis takes a broader look at an ETF, based upon economic, market, and if necessary, sector conditions.
Fundamental analysis and technical analysis can be merged to build a trading consensus, typically with the help of an experienced money manager.
Any trading strategy used to build ETF assets will also depend on the investor’s unique investment needs and goals, and will likely focus on specific ETF portfolio diversification and management. For example, a retiree may trade more bond ETFs to help preserve capital, while a young millennial may engage in more stock-based ETF portfolio activity to help accumulate assets for the long haul.
Step 3. Make the Trade
Executing ETF trades is fairly straightforward for retail investors. It may be best to consider starting out with small positional trading, so that any rookie mistakes would be smaller ones, with fewer risks for one’s portfolio.
Here are two trading mechanisms that can get you up and running as an ETF trader:
• Market order. With market order trading, you buy or sell an ETF right now at the current share price, based on the bid and the ask — the price attached to a purchase or a sale of a security. A bid signifies the highest price another investor will pay for your ETF and the ask is the lowest price an ETF owner will sell fund shares. The difference between the two is known as the trading “spread.”
A word of caution on market trades. ETFs tend to have wider trading spreads than stocks, which could complicate you’re getting the ETF shares at the price you want. Share trading spreads of 10% are not uncommon when trading ETFs.
• Limit trade orders. An ETF limit order enables you to dictate terms on an ETF purchase or sale. With a limit order, you can set the top price you’ll pay for an ETF and the lowest price you’ll allow when selling an ETF.
For investors who have qualms about buying or selling an ETF at a fixed price, limit orders can be a viable option, as they allow the investor to set the terms for a trade and walk away from an ETF trade if those terms aren’t met.
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.
The Takeaway
Historically, exchange traded funds have been used primarily as passive, “buy and sell investments.” But as asset trading grows more exotic in the digital age, trading ETFs has become increasingly popular. It’s fairly simple to trade ETFs, too, as most investors simply need access to an online trading platform or brokerage.
As with any investment, though, there are risks to consider. While ETFs can be a great starting point for many investors, they’re not entirely safe investments, and investors should do their research before buying shares of any specific ETF, as they would with any other type of security.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.
FAQ
What are some different types of ETFs?
Different types of ETFs include stock ETFs, bond ETFs, international ETFs, emerging market ETFs, and sector ETFs, among others.
What are some advantages of investing in ETFs?
While there may be drawbacks to consider, some of the advantages of investing in ETFs are that they’re relatively liquid investments, there are numerous different types and options available, they can help diversify a portfolio, and are relatively inexpensive.
Is an ETF the same as a mutual fund?
ETFs aren’t mutual funds, although they may be similar. The primary differences between the two is that mutual funds are usually more expensive than exchange traded funds. Mutual funds tend to be actively managed, too.
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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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With inflation and interest rates rising, many people are looking for ways to generate additional income these days — and finding reliable sources of passive income, which require less effort than most jobs — has become particularly desirable.
Creating and managing passive income streams isn’t a truly passive activity, however. Generating passive income usually requires upfront work, or sometimes a substantial investment to get the ball rolling. And depending on what your passive income ideas are, whether you’re renting out property or selling a product via online platforms, you’ll likely have ongoing tasks to keep the money coming in. That said, passive income can in some cases deliver more income with less effort than a traditional job that requires a fixed number of hours per week.
Key Points
• Passive income is money earned without regular, active involvement.
• Investing in businesses, P2P lending, and rental properties are some ways to generate passive income.
• Benefits of passive income include extra money with less effort, freedom, and flexibility.
• Initial work and investments are often needed to set up a stream of passive income.
• The opposite of passive income is active income, which usually involves a job and is also known as earned income.
What Is Passive Income?
Passive income is money that you earn without active involvement. In other words, it is income that isn’t attached to an hourly wage or annual salary. Passive income ideas could include things like cash flow from rental properties, dividend stocks, sales of a product (that requires little or no effort), royalties, and more.
Essentially, these side hustles can help you earn money without contributing much, if any, active effort. If you are paid for a service you perform, that’s active income — you have to put in time and energy in order to get paid. If you can continue making money while staying mostly hands-off, that can be a form of passive income. That doesn’t mean you won’t have to put work in up front to get started — you probably will. But besides some maintenance, passive income shouldn’t require your active involvement.
There are obvious benefits to these low-effort side hustles over traditional active income. Earning more money without putting in more hours offers the opportunity to make extra cash without burning yourself out. If you’re successful enough, it might even give you the freedom and flexibility to quit your day job and do whatever you want instead, whether that’s going to school, traveling, writing, or making art.
39 Passive Income Ideas to Help You Make Money
There are a number of ways to earn passive income. Some options, like the following types of passive income, take relatively little active supervision.
A fairly simple way to earn passive income through your investment portfolio is to invest in bonds with high yields. That is, you’ll receive regular payments from the bond-issuer, generating income and return on your investment.
Similar to a CD, a bond is a way of locking up a certain amount of money for a fixed period of time. In short, bonds are purchased for a fixed period of time (the duration), investors receive interest payments over that time, and when the bond matures, the investor receives their initial investment back.
Generally, investors earn higher interest payments when bond issuers are riskier. An example may be a company that’s struggling to stay in business. But interest payments may be lower when the borrower is trustworthy, like the U.S. government.
2. Invest in a Business
Although this may take an up-front investment, buying into a business and becoming a silent partner can be another passive income source.
Even if the company you are thinking of investing in seems solid, it’s important to have an understanding of the challenges the organization may face. There are some red flags to look out for, such as a company whose revenue is earned from just a couple of clients — or just one client — as opposed to several.
It’s also important to lay out the exact terms of your investment and compensation.
3. Become a Peer-to-Peer (P2P) Lender
Peer-to-peer (P2P) lending platforms are another type of crowdfunding that allows people to borrow money from individual investors. Through these sites, you can be matched with an individual seeking a loan, and lend your money at a rate that could be higher than the usual bank rates.
That’s because investors taking part in peer-to-peer lending tend to bear the bulk of any risk. It is possible that borrowers will default on their loans, leading to a higher risk if an investor were to lend money with a lower credit rating, for example. Returns are never guaranteed and while investors will receive a return on the money they invest, they could also lose some or all of it in the long run.
4. Buy a Rental Property
Another popular passive income source is rental property. You might want to purchase a home to rent out to an ongoing tenant or list a property on a short-term rental site. Hiring a property management company lessens your day-to-day involvement, thereby making this venture a more passive income strategy than active.
Obviously, setting up this type of income requires a pretty big outlay, and it may be a while before your investment property generates a profit over and above the many expenses required to run it, if it ever does. In addition, there are always risks in the rental markets to keep in mind.
5. Invest in Crowdfunded Real Estate
If you don’t have thousands of dollars to spend on a piece of property, you can always check out your options on crowdfunded real estate sites. These may require a smaller initial investment, and likewise the costs are also shared.
Crowdfunded real estate investments can be complex, however, and you’ll want to balance the risks and rewards.
6. Invest in Dividend Stocks
When companies choose to share a portion of their profits with the investors who own shares of the firm, those payments are called dividends, and they work generally the same way from company to company.
Typically, dividends are paid in cash (though some might be paid in stock), on a regular schedule. Dividends are usually paid quarterly, though there are variations.
Investors might receive dividends from companies they’re invested in, or from mutual funds they’re invested in that hold shares of dividend-paying companies.
There is no guarantee that investing in dividend stocks will continue to earn you passive income. As Liz Young Thomas, Head of Investment Strategy at SoFi, points out, “A stock’s dividend yield will fluctuate because it’s based on the stock’s price and prices can be volatile. You should also consider other factors like a company’s track record of increasing the dividend, the dividend payout ratio, debt load, and cash on hand when determining the overall health of an investment.”
If you’re just getting started with investing, you may want to use automated investing tools to help you choose the appropriate allocation of assets for your goals.
Typically, an automated platform — also called a robo-advisor — is a digital investing service that provides you with a questionnaire so you can establish your financial goals, risk preferences, and time horizon.
On the backend, a sophisticated algorithm then recommends a pre-set, automated portfolio that aligns with your responses. These portfolios often have lower account minimums compared with traditional brokers, and the portfolios themselves are typically comprised of low-cost exchange-traded funds (ETFs) — which adds to the cost efficiency of some robo products.
You can use a robo investing as you would any account — for retirement, as a taxable investment account, or even for your emergency fund — and you typically invest using automatic deposits or contributions. The allocation in each portfolio is usually pre-determined, and investors cannot change the investments.
One way to earn income in a retirement account is by investing in mutual funds. You can choose the level of risk you want to take with your money by finding a mutual fund that is higher or lower risk.
When you join a company’s affiliate program, you earn a commission from every product that someone purchases from that company. In many cases, all you have to do is post the link on your blog, website, or social media pages.
10. Rent Out Your Car
Another one of the best passive income opportunities is renting out your car on a site like Turo. It’s basically the Airbnb of cars, and could generate thousands of dollars per year, in some cases.
11. Advertise on Your Car
If you have a clean driving record as well as a newer car, consider getting in touch with a car advertising agency. You simply drive around town with ads on your car and easily generate passive income.
12. Rent Your Parking Space
Do you have space in your driveway that you aren’t using? Then rent it out on platforms like Stow It, where you can find people who will pay to rent out the space.
13. Rent Storage Space
If you have extra space in your garage, shed, or storage unit, then you could start earning passive income by using a peer-to-peer storage site like Stashii to find people who need your space.
14. Invest in Real Estate Investment Trusts (REITs)
An alternative to becoming a property owner or landlord are real estate investment trusts, or REITs. REITs are publicly traded companies on the stock market that own income-producing real estate, such as apartment complexes, office buildings, retail centers, storage units, and more. They give you the chance to invest in real estate portfolios without having to manage the properties yourself. REITs sometimes come at a higher risk than other types of funds, so it’s important to research potential REITs or REIT funds, and consider how they may play a role in a diversified portfolio.
Perhaps you don’t have a car, but you do have a bike that’s just sitting around. Your bike could be a lucrative passive income source, especially if you live in a high-traffic area. List your bike on Spinlister to get started.
16. Rent Out a Room or Property
Even if you don’t own an investment property, with your landlord’s permission, you may be able to rent out a room in your apartment or list it on Airbnb.
17. Pet Sit in Your Home
If you love pets, you can earn passive income by welcoming pets into your home while their owners are on vacation. For instance, you could charge $30 to $80 per day just for running a doggy daycare. You can gain clients through word of mouth or use a site like Rover to find customers.
18. House Sit for Someone
When your friends go out of town, they may need someone to stay in their home and do simple things like water their plants and collect their mail. You can easily make money and have somewhere new to stay for a little bit. Along with making yourself available to friends, you can sign up to be a house sitter on HouseSitter.com.
19. Buy and Sell Domain Names
Some domain names are cheap, while others cost a lot of money because they are in high demand. One thing you could do to start another passive income stream is to purchase domain names you think will be popular. Purchase low for around $10 to $100 and then sell them for a much higher price later on.
20. Rent Your Tools
Have you ever done a home improvement project that required you to purchase tools? You may never need to use those tools again. Thankfully, now you can rent tools, and rent out your tools, on peer-to-peer platforms such as Sparetoolz to earn passive income.
21. Invest in Royalties
Let’s say you don’t have any songwriting ability, but you would like to make money on other artists’ work. You can invest in royalties through Royalty Exchange and earn passive income on the intellectual property.
22. Purchase a Billboard
You can make thousands of dollars per month if you own a billboard where companies can advertise their products and services. Do your research and make sure you get the right permits before committing to a billboard.
23. Purchase a Blog
If you don’t have the time or energy to create content for your own blog, then look into ones that are already successful and see if the owners are willing to sell. You could also hire someone to manage your blog so that you’re truly earning in a passive way.
24. Create an Online Course
If you have a special skill or knowledge about a certain topic, you may be able to create a video course where you teach people about that topic and charge them to take the course.
25. Sell Digital Products
You may want to research online platforms where you can sell everything from digital art to e-books. Whether you’re an artist, graphic designer, or writer, you can create digital products to sell online.
26. License Your Photos
Many companies, bloggers, and individuals use stock photos on a regular basis. You may be able to upload your best photos to stock media platforms and earn passive income on them.
27. Create a Mobile App
If you’ve been dreaming about an amazing phone app that you think a lot of other people would use, you may want to look into hiring a development team to create it.
28. Sell a Product
You may be able to earn passive income through sales of a product that you create. This could be a book that you write or a physical product that you design and make. You might also list items you already own on sites like eBay and earn extra income through those sales.
29. License Your Music
Do you love to write songs? Then you could license your music and start earning passive income. You’ll just have to team up with a music licensing company to get started.
30. Self-Publish a Book
Through platforms like Amazon’s KDP, you can self-publish a book and earn a royalty on it every time someone makes a purchase. You will be able to set the price of your book and be in full control of your book’s Amazon page, where you can list pictures of the book, reviews, and videos promoting it.
31. Sell Blank Books
You can start selling books online without having to write anything. How? By focusing on blank books, such as journals, sketchbooks, and planners. Simply find a design you believe will appeal to people and begin collecting royalties when people buy your books.
32. Create Greeting Cards
Another artistic endeavor that could be a good passive income stream is creating greeting cards that you sell to a wholesale or retail stationery company that accepts independent artist submissions.
33. Sign Up for Dropshipping
If you want to sell products and make money online but don’t want to store any of the goods, you could always look into dropshipping to create passive income. With dropshipping, you don’t have to have much money to start since you don’t need inventory to fulfill orders for customers.
34. Start a Blog
Blogging seems like a pretty cool space to operate in and gives you a lot of creative freedom. You can make your blog all about crafts, share tutorials, ideas, and more. It’s up to you how your space operates.
Blogging might seem like too much work to many people, but it doesn’t have to be a full-time job for everyone. For some people, blogging can be fun after a day at the office — and, with time and effort, it could turn into something more lucrative.
Here are a few ideas on how you can make passive income from blogging:
• Affiliate marketing
• Google AdSense: Cost Per Click and Cost Per Impression
• Sponsored posts
• Selling products
35. Start a YouTube Channel
If you enjoy creating videos more than writing, then consider starting your own YouTube channel. Once you get enough viewers, you can begin to generate passive income through YouTube advertising.
36. Publish an Ebook
Like an online course, an ebook is a way to share your expertise with the world. Anyone can self-publish a book online through services like Amazon’s Kindle Direct Publishing, iBooks Author, or Kobo Writing Life.
The percentage of royalties you earn varies depending on the publisher. Of course, the more marketing you do, the more copies you’re likely to sell — and there’s no shortage of online marketing strategies to investigate. But once you write and publish the e-book, it’s out there ready to generate passive income for you.
37. Create a Podcast
Podcasts are still popular, and they can generate some passive income for you. If you start a podcast that resonates with people, then you can grow your audience and monetize your show by sponsoring with ad partners. If you get enough listeners, you may be able to sign up for podcast advertising networks.
38. Start an ATM Business
When people are out at a bar or nightclub or they’re frequenting a cash-only business, they may need cash right away. If you own an ATM business and you place your ATM in high-traffic locations, you could start to generate passive income through surcharge fees. Typically, you could earn around $3 per withdrawal.
39. Start a Vending Machine Business
Similar to an ATM business, a vending machine business allows you to use your creativity and determine high-traffic areas where you could make a lot of money. If you buy in bulk, you’ll be able to save on the snacks and drinks you purchase for your machines.
Potential Benefits of Earning Passive Income
There are only 24 hours in a day. If you go to a job each day that pays you a set amount of money, that is the maximum amount that you’ll ever make in a 24-hour period. That is called earned income.
By investing some of that earned income into different passive income ideas, you may be able to increase your earnings. Diversifying your income stream may also improve your financial security. Some benefits of passive income are:
• More Free Time: By earning money through passive income sources, you might be able to free time in your schedule. You may choose to spend more time with your family, pursue a creative project or new business idea, or travel the world.
• Financial Security: Even if you still plan to keep your 9-to-5 job, having multiple sources of income could help increase your financial security. If you lose your job, become sick, or get injured, you may still have money coming in to cover expenses. This is especially important if you are supporting a family.
• Tax Benefits: You may want certain legal protections for your personal assets or to qualify for tax breaks. Consulting with an attorney and/or tax advisor to explore setting up a formal business structure like a sole proprietorship, a limited liability company (LLC), or a corporation, for example, might help you decide if this is a good route for your particular situation.
• Location Flexibility: If you don’t have to go into an office each day, you’ll be free to move around and, possibly, live anywhere in the world. Many streams of passive income can be managed from your phone or laptop.
• Achieve Financial Independence: The definition of financial independence is having enough income to cover your expenses without having to actively work in order to cover living expenses. This could allow you to retire early and have more freedom to live your life the way you choose. Whether you’re interested in retiring early or not, passive income can be one way to help you reach financial independence.
• Pay Off Debt: Passive income may help you to supplement your income so that you will have the opportunity to pay off any debts more quickly.
Potential Downsides of Earning Passive Income
Although it might sound like a dream come true to quit your job and travel the world, earning through passive income is not quite that simple.
• Earning Passive Income Is Not a Passive Activity: Whether you’re generating passive income through a rental income, running a blog, or in another way, you will still need to put in some time and effort. It takes upfront investment to get these income sources up and running, and they don’t always work out as planned.
If, for example, you run an Airbnb, you have to maintain the property, ensure a high-quality experience for guests, and address any issues or concerns guests may have to secure positive reviews.
• Passive Income Requires Diversity: In order to earn enough passive income to quit your job and cover all your expenses, you would most likely need more than one source of income. Although you may no longer need to clock into a 9-to-5 job, you will likely still need to spend time managing multiple income streams.
• It’s Lonely at the Top: It might sound great to never have to go to the office again and to have the freedom to travel, but earning money through passive income can become lonely.
Not having anyone to talk to during the day might make you feel lonely, and if you aren’t self-motivated, you may find it difficult to stay on task if you need to manage your passive income streams.
• Getting Started May Require Investment: Depending on how you plan to create passive income, it may require an initial financial investment. You may need money for a down payment on an investment property, the development of a product you plan to sell, or for investment into dividend stocks.
Managing Passive Income Streams
No matter which type of passive income you choose to pursue, it’s important to keep track of your personal finances and both your short-term and long-term financial goals.
Tracking multiple sources of income in a monthly budget can be a complex task. To be profitable, it’s important to pay attention to how much money you put into the maintenance of your passive income stream(s), such as property upkeep or monthly online services.
The Takeaway
Establishing passive income streams is one way to diversify your income and can help you build wealth and achieve financial freedom in the long term. There are a variety of ways to earn passive income, such as through investing, rental properties, and automated investing.
Some passive income sources require a financial commitment or upfront investment, such as purchasing a rental property, and others may require a time commitment. And passive income, of course, is rarely 100% passive. Often there is considerable time and effort that goes into setting up a passive income stream. And some sources of passive income (from investing, real estate, running a business or creative endeavor) require ongoing maintenance.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.
FAQ
Do you need to pay taxes on passive income?
In most cases, yes, you’ll need to pay income taxes (or any other applicable taxes) on the income generated by passive income streams.
What are some advantages of creating passive income streams?
Generating passive income may help you reach your financial goals sooner, pay off debt, or even achieve financial independence, though there may be some drawbacks and extra responsibilities that come along with it.
Why might it be a good idea to try and develop passive income streams?
Creating passive income streams may help diversify your income and can help you build wealth and achieve financial freedom in the long term. There are a variety of ways to earn passive income, such as through investing, rental properties, and automated investing.
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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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Paying student loans on time can have a positive effect on your credit score and help build a good credit history. On the flip side, when you have a late or missed student loan payment, that can be reflected on your credit report as well.
If you’re wondering how to remove student loans from a credit report, the answer is that it’s only an option if there’s inaccurate information on the report. Student loans are eventually removed from a credit report, however, after they’re paid off or seven years after they’ve been in default.
Here’s what to know about student loans on a credit report, what happens when you default on a loan, and how to remove student loans from a credit report if there’s inaccurate information.
Key Points
• Accurate student loan information is crucial for credit reports; incorrect details can be disputed to ensure accuracy.
• Defaulted student loans appear on credit reports for seven years from the original delinquency date.
• Student loans paid in full can remain on credit reports for up to 10 years, potentially boosting credit scores.
• Removing student loans from a credit report is only possible if the reported information is inaccurate.
• Regularly reviewing credit reports allows individuals to verify that student loans are reported correctly.
What Is a Credit Report?
Before considering the impact of student loans on your credit report, it’s helpful to review what a credit report is. A credit report is a statement that includes details about your current and prior credit activity, such as your history of loan payments or the status of your credit card accounts.
These statements are compiled by credit reporting companies who collect financial data about you from a range of sources, such as lenders or credit card companies. Lenders use credit reports to make decisions about whether to offer you a loan or what interest rate they will give you. Other companies use credit reports to make decisions about you as well – for example, when you rent an apartment, secure an insurance policy, or sign up for internet service.
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Take control of your student loans.
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Defaulting on Student Loans
It’s also worth reviewing what happens when a student loan goes into default. One in 10 people in the United States has defaulted on a student loan, and 6.24% of total student loan debt is in default at any given time, according to the Education Data Initiative.
The point when a loan is considered to be in default depends on the type of student loan you have. For a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program, you’re considered to be in default if you don’t make your scheduled student loan payments for a period of at least 270 days (about nine months).
For a loan made under the Federal Perkins Loan Program, the holder of the loan may declare the loan to be in default if you don’t make any scheduled payment by its due date. The consequences of defaulting on student loans can be severe, including:
• The entire unpaid balance of your student loans, including interest, could be due in full immediately.
• The government can garnish your wages by up to 15%, meaning your employer is required to withhold a portion of your pay and send it directly to your loan holder.
• Your tax return and federal benefits payments may be withheld and applied to cover the costs of your defaulted loan.
And you don’t have to default on your student loans to experience the consequences of nonpayment. Even if your payment is only a day late, your loan can be considered delinquent and you can be charged a penalty fee.
How Long Do Student Loans Remain on a Credit Report?
If you are delinquent on your student loans or go into default, that activity is reported to the credit bureaus. It will remain on your credit report for up to seven years from the original delinquency date.
The good news is that the more time that passes since your missed payment, the less impact it has on your credit score.
The exception to this is a Federal Perkins Loan, which is a low-interest federal student loan for undergraduate and graduate students who have exceptional financial need. This type of loan will remain on your credit report until you pay it off in full or consolidate it.
On the other hand, if you made timely payments on your loan and paid it off in full, it may appear on your credit report for up to 10 years as evidence of your positive payment history and can boost your credit score.
How Do I Dispute a Student Loan on My Credit Report?
It’s a good habit to periodically check your credit report. You can request a free report from each of the three major credit reporting agencies — Equifax®, Experian®, and TransUnion® — by visiting AnnualCreditReport.com. The bureaus are required by law to give you a free report every 12 months.
There are three reasons your student loan might have been wrongly placed in default and reported to the credit bureaus by mistake, including:
1. If You Are Still in School
If you believe your loan was wrongly placed in default and you are attending school, contact your school’s registrar and ask for a record of your school attendance. Then call your loan servicer to ask about your record regarding school attendance.
If they have the incorrect information on file, provide your loan servicer with your records and request that your student loans be accurately reported to the credit bureaus.
2. If You Were Approved for Deferment or Forbearance
If you believe your loan was wrongly placed in default, and you were approved for (and were supposed to be in) a deferment or forbearance, there is a chance your loan servicer’s files aren’t up to date. You can contact the loan servicer and ask them to confirm the start and end dates of any deferments or forbearances that were applied to your account.
If the loan servicer doesn’t have the correct dates, provide documentation with the correct information and ask that your student loans be accurately reported to the credit bureaus. Under the Fair Credit Reporting Act, a borrower may appeal the accuracy and validity of the information reported to the credit bureau and reflected on their credit report.
If your loan has been reported as delinquent or in default to the credit bureaus, but you believe your payments are current, you can request a statement from your loan servicer that shows all the payments made on your student loan account, which you can compare against your bank records.
If some of your payments are missing from the statement provided by your loan servicer, you can provide proof of payment and request that your account be accurately reported to the credit reporting agencies.
In all three cases, if you believe there is any type of error related to your student loan on your credit report, it’s best practice to also send a written copy of your dispute to the credit bureaus so they are aware that you have reported an error.
Why Your Student Loans Should Stay on Your Credit Report
You generally can’t have negative but accurate information removed from your credit report. However, you can dispute the student loans on your credit report if they are being reported incorrectly.
On the bright side, if you’re paying your student loans on time each month, that looks good on your credit report. It shows lenders that you are responsible and likely to pay loans back diligently.
💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.
When You’re Having Problems Paying Your Student Loans
If you’re having difficulty making regular payments on your federal or private student loans, there are things you can do before the consequences of defaulting kick in.
As mentioned above, you can apply for student loan deferment or forbearance. It’s also a good idea to contact your loan servicer to discuss adjusting your repayment plans. Other options include:
Income-Driven Repayment
If you’re having trouble paying your federal student loans on time, you may be able to make your loans more affordable through a federal income-driven repayment plan. These plans cap your payments at a small percentage of your discretionary income and extend the repayment term to 20-25 years. Once the repayment period is up, any remaining balance is forgiven (though you may be subject to income taxes on the canceled amount).
Due to Trump’s One Big Beautiful Bill, many income-driven repayment plans are closing. Currently, you may still enroll in the Income-Based Repayment (IBR). And a new plan — the Repayment Assistance Plan (RAP) — will become the main option for new borrowers in mid 2026. RAP payments will be based on a percentage of your adjusted gross income (AGI).
Student Loan Refinancing
Refinancing your student loans may also be an option — if you extend your term length, you may qualify for a lower monthly payment. Note that while these options provide short-term relief, they generally will result in paying more over the life of the loan.
When you start making your payments by the due date each month, you may see that your student loans can become a more positive part of your credit report. Again, while these options provide short-term relief, they generally will result in paying more over the life of the loan.
The Takeaway
While you generally can’t remove student loans from a credit report unless there are errors, it isn’t a bad thing if you make payments on time, as that can help build your credit profile. If a loan is delinquent, it will be removed from your credit report after seven years, though you will still be responsible for paying back the loan.
If you’re having trouble making loan payments, there are ways to make repayment easier. Borrowers with federal student loans can look into forgiveness, an income-driven repayment plan, or a change to the loan’s terms.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
Is it illegal to remove student loans from a credit report?
There’s no legal way to remove student loans from a credit report unless the information is incorrect. If you think there’s an error on your credit report, you can contact your loan servicer with documentation and ask them to provide accurate information to the credit reporting agencies. It’s also a good idea to send a copy of the dispute to the credit bureaus as well.
How do I get a student loan removed from my credit report?
If you paid your student loan off in full, it may still appear on your credit report for up to 10 years as evidence of your positive payment history. It takes seven years to have a defaulted student loan removed from a credit report. Keep in mind you are still responsible for paying off the defaulted loan, and you won’t be able to secure another type of federal loan until you do.
How can I get rid of student loans legally?
If you have federal student loans, options such as federal forgiveness programs or income-driven repayment plans can help decrease the amount of your student loan that you need to pay back. If you have private or federal student loans, refinancing can help lower monthly payments by securing a lower interest rate and/or extending your loan term. If you refinance a federal loan, however, you will no longer have access to federal protections and benefits. And you may pay more interest over the life of the loan if you refinance with an extended term.
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Setting financial goals is one of the most important steps you can take toward building a secure and stress-free future. Without clear goals, it’s easy to spend impulsively, fall into debt, or miss out on opportunities to build wealth. Whether you’re saving for a vacation, trying to get ahead of debt, or preparing for retirement, a well-structured financial plan can help you stay focused and motivated.
What follows is an essential guide to financial goals — from understanding their importance to setting achievable milestones and adjusting your plan when life changes.
Key Points
• Financial goals are categorized into short-, mid-, and long-term, each requiring different planning.
• The S.M.A.R.T. framework ensures goals are specific, measurable, achievable, relevant, and time-based.
• Following the 50/30/20 budget rule can help you balance spending and saving.
• Tracking progress and making adjustments as you go is key to success.
What Are Financial Goals and Why Are They Important?
Financial goals are specific money-related targets you set to guide your financial decisions. They give you direction and help you align your daily spending habits with long-term priorities. Instead of letting money just come and go from month to month, you create a roadmap that leads you toward stability, independence, and growth.
Goals are also important because they provide:
• Clarity: They help you understand what you’re working toward.
• Motivation: Defined goals encourage you to save instead of overspend.
• Control: They prevent financial stress by giving you a sense of purpose.
• A way to track progress: Goals let you measure how far you’ve come.
Without goals, money has a tendency to slip through the cracks. With them, you can make strategic decisions that improve your financial health step by step.
💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.
Types of Financial Goals: Short-, Mid-, and Long-Term
Financial goals depend on timeframes and priorities. Generally, they fall into three categories — short-, mid- and long-term goals.
Examples of Short-Term Financial Goals (1-3 Years)
Short-term goals are immediate priorities. They include the things you want to buy or do within the next few months or years, and help build momentum for bigger challenges. Examples include:
• Building an emergency fund
• Paying off a credit card balance
• Saving for a vacation or holiday gifts
• Creating a monthly budget and sticking to it
• Setting aside money for a new laptop or phone
Examples of Mid-Term Financial Goals (3-10 Years)
Mid-term goals take more time and planning and act as a bridge between short-term wins and long-term security.
They often involve saving or investing for significant life milestones and might include:
• Paying off significant debt (such as student loans)
• Saving for a wedding or dream vacation
• Saving for a down payment on a house
• Funding a large-scale renovation
• Growing an investment portfolio
Examples of Long-Term Financial Goals (10+ Years)
Long-term goals shape your financial future and often require consistent commitment. These goals can seem intimidating, but breaking them into smaller steps makes them achievable. Common long-term goals include:
• Saving for retirement through 401(k)s, IRAs, or pensions
• Paying off a mortgage completely
• Funding your children’s college education
• Achieving financial independence or early retirement
• Building generational wealth through investments
Now that you understand the different types of goals, here’s how to set them effectively:
Step 1: Understand Your Current Financial Health
Before setting goals, it’s important to have a clear picture of where you currently stand. You can do this by gathering the last several months of financial statements and then using them to determine:
• Your average monthly income
• Your average monthly spending
• Current debt balances
• Status of your emergency savings and retirement accounts
Once you have a snapshot of your overall financial situation, it’s worth spending some time reflecting on your money goals: what is really important to you.
While there are many things people commonly save for, like a down payment on a house or retirement fund, your financial goals might not be the same as your sibling’s or your coworker’s.
Think about what you would like to accomplish in the next few years, in five or so years, as well as decades from now, and simply jot them down. Keep in mind that these goals aren’t set in stone — they can and likely will change over time.
Step 3: Make Your Goals S.M.A.R.T.
A vague goal like “save money” is hard to stick to. Instead, consider using the S.M.A.R.T. framework:
• S for Specific: Be clear about what you want to achieve, such as exactly what you want to save or how much you’ll need to pay off a debt.
• M for Measurable: Assign real numbers to your goals. Measurable goals allow you to track your progress and monitor your success.
• A for Achievable: Setting unrealistic expectations can lead to frustration and disappointment. Ensure your goals are realistic for your income and expenses.
• R for Relevant: Make sure your goals align with your overall financial plan and your life priorities.
• T for Time-based: Set a deadline (e.g., within 10 months) for each goal.
SMART goals help keep you accountable and focused.
Step 4: Create a Budget That Includes Your Goals
Your budget is the tool that makes your goals achievable. And thanks to Step 1, you already know your average monthly income and expenses. The next step is to decide if your current spending aligns with your goals, or if you need to rejigger your spending to free up more funds for saving.
There are many different types of budgets, but one popular framework is the 50/30/20 rule. This divides your take-home income into three categories:
• 50% for needs (housing, food, utilities)
• 30% for wants (entertainment, travel)
• 20% for savings and debt repayment
“Thinking about where to put your 20% savings each month can help you reach your goals,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “High-yield savings accounts, money market accounts, certificates of deposit, and cash management accounts are all vehicles that may pay more interest than a traditional savings account, helping your savings grow.”
Step 5: Track Your Progress and Stay Flexible
Once you’ve set some goals and established a budget, it’s a good idea to track your spending for a few months to make sure you are sticking to the plan.
You can track your spending with plain old pen and paper or a computer spreadsheet, but a simpler option is to put a budgeting app on your phone. Your bank may even offer a free tool that automatically tracks and categorizes your spending in real time.
If you find that your budget isn’t realistic, or your financial situation changes at some point, you may need to make some adjustments to your budget. That’s why it’s important to check in with your money regularly.
Common Financial Goal Examples
Here are some six popular financial goals you might include on your list:
1. Build an Emergency Fund
Whether you’re easily covering your monthly expenses or grabbing change from the bottom of your bag to buy a coffee, many people are living paycheck to paycheck. But what if that paycheck disappeared or if you had a large, unexpected expense? Enter the emergency fund.
Having an emergency fund can help you comfortably manage an unexpected medical bill, major car or home repair, or a sudden loss of income with having to run up high-interest debt.
A general rule of thumb is to have three to six months’ worth of living expenses set aside for emergencies. While that can be a sizable sum, keep in mind that you don’t have to build your back-up fund overnight. You might first set a short-term goal of saving a small cushion of $1,000, then build from there.
High-interest credit card debt can feel like a treadmill: Despite constant effort, you never seem to get any closer to the finish line. By prioritizing repayment, however, you can make real progress. This will free up cash flow you can then redirect towards savings and investments.
Two popular payoff approaches are the debt avalanche (paying off the highest-interset debt first) and the debt snowball (paying off the smallest balance first to build momentum). Whichever you choose, the key is to consistently make extra payments and avoid new debt along the way.
3. Start Saving for Retirement
Most of us know we should be saving for retirement, but making it happen can be challenging when there are so many competing places to put our money. The good news is that even small contributions to a retirement account can grow to significant savings over time. This is largely due to the magic of compounding returns — when the returns you earn start earning returns on their own.
One rule of thumb is to save at least 15% of your pre-tax income each year, including any employer match. If that’s not feasible right now, try to contribute at least up to any employer match (otherwise you’re leaving free money on the table).
4. Save for a Down Payment on a House
For many people, owning a home is a major milestone and a symbol of financial stability. But buying a home often requires a significant down payment, typically ranging from 3% to 20% of the purchase price. Saving for this can feel overwhelming, but breaking it into smaller milestones makes the goal achievable.
Consider opening a dedicated high-yield savings account for your down payment fund so it remains separate from everyday spending. Or, if your bank offers savings vaults, you might create a sub-savings account within your main one earmarked for your down payment. Then automate contributions to this account or vault so it grows over time.
💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.
5. Invest for the First Time
Investing allows your money to work for you, building wealth beyond what traditional savings accounts can provide. While investing might seem intimidating at first, starting small is often the best approach. Low-cost options like index funds, exchange-traded funds (EFTs), or robo-advisors make it easier than ever to get started without needing extensive financial knowledge. As your income grows, you can increase contributions and diversify your portfolio.
6. Pay Off Student Loans
Student loans are a reality for millions of people, and paying them off can take years. Carrying this debt affects your ability to save, invest, and even qualify for other financial opportunities like a mortgage. That’s why making a structured repayment plan is so important.
Start by reviewing your repayment options — federal loans may offer an income-driven repayment plan or refinancing opportunities. Making extra payments towards the principal when possible can reduce the overall interest you pay and shorten the repayment timeline.
Financial Goal Examples for Students
Students often juggle limited income with rising expenses, making financial goals essential. Here are some practical ones to consider:
• Building a small emergency fund (even $500 helps)
• Paying off credit card balances in full each month
• Saving for textbooks or tuition payments
• Beginning to invest through a low-cost brokerage app
• Applying for scholarships or part-time jobs to reduce student loan reliance
Setting goals early can help students avoid financial pitfalls and build healthy habits for adulthood.
How to Adjust Your Financial Goals if Your Circumstances Change
Life rarely goes exactly as planned. You might face job loss, medical expenses, or unexpected windfalls like a bonus or inheritance. When your circumstances shift, it’s important to:
• Reevaluate your priorities: Decide which goals still matter most.
• Adjust timelines: You may be able to shorten a deadline or you might need to extend one or more of your timelines.
• Reallocate resources: If money is tight or your priorities change, you may want to shift money from one goal to another.
• Stay flexible: Remember, goals are not fixed — they evolve with your life.
The Takeaway
Setting financial goals isn’t about perfection — it’s about progress. By understanding your current financial health, defining clear objectives, and using the SMART framework, you can create a roadmap toward stability and success.
Whether you’re saving for your first emergency fund, tackling debt, or planning for retirement, goals can give you the motivation and direction you need to take control of your financial future. The key is consistency. Start small, stay flexible, and remember that every step forward brings you closer to your near- and long-term aspirations.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings.
FAQ
Is it wise to invest your emergency fund?
Generally, it’s not wise to invest your emergency fund in risky assets like stocks or mutual funds. An emergency fund should remain easily accessible and safe, since its purpose is to cover unexpected expenses or a sudden loss of income. Keeping it in a high-yield savings account or money market account balances safety with some interest growth. Once your emergency fund is secure, you can focus on investing other money for long-term goals.
What is the most important financial goal?
For many people, the most important financial goal is to build a strong foundation of financial security. This typically means creating a healthy emergency fund and paying down high-interest debt. Without stability, it’s difficult to make progress toward other goals like saving for retirement, buying a home, or investing.
Once your essential safety net is in place, you can prioritize goals that align with your lifestyle and values, such as long-term wealth building, financial independence, or providing for your family’s future.
How many financial goals should you have at once?
It’s often best to focus on a manageable number of goals (such as two or three) at one time. Trying to juggle too many can spread your money and attention too thin, making it harder to make meaningful progress. A practical approach is to prioritize one short-term goal (like building an emergency fund), one medium-term goal (such as saving for a car or vacation), and one long-term goal (like retirement savings). This balance helps you stay focused while still moving forward in multiple areas.
What is a good financial goal for a beginner?
A great financial goal for beginners is starting an emergency fund. Even saving a small amount, such as $500, can provide a cushion against unexpected expenses and reduce the need to rely on credit cards or loans. Once that’s established, beginners can aim to save three to six months of living expenses. Other beginner-friendly goals include paying off small debts, creating a realistic budget, or setting up automatic savings. These goals build confidence and establish strong money habits for future success.
How can I set financial goals with a partner or family?
Setting financial goals with a partner or family starts with open communication about values, priorities, and long-term dreams. Begin by discussing shared goals, such as buying a home, paying off debt, or saving for children’s education. Next, agree on a budget and assign responsibilities for managing finances to ensure accountability. Regular check-ins help you stay on track, celebrate progress, and adjust goals as life circumstances change.
What tools can help me track my financial goals?
Several tools can make tracking financial goals easier and more organized. Budgeting apps like YNAB, GoodBudget, or PocketGuard allow you to set savings targets and monitor spending. Spreadsheets are another customizable option for tracking progress. Many banks also offer built-in goal-tracking features through their mobile apps.
For long-term goals, investment platforms often provide dashboards showing growth toward retirement or wealth-building objectives. The key is choosing a tool you’ll use consistently, helping you stay motivated and accountable.
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