Dec
16
2024
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What Are the Common Types of Payroll Deductions?

By | Budgeting & Goals, Growing Wealth, money | Comments Off on What Are the Common Types of Payroll Deductions?

Payroll deductions are amounts of money that are taken out of your gross pay, leaving you with net (or take-home) pay. Common types of payroll deductions include taxes, retirement savings, and Social Security contributions, among others. However, it can be confusing (and sometimes a little discouraging) to see how much money comes out before you have cash in hand.

Here, take a closer look at the deductions that are required by law and are out of your control, as well as others that are part of your employee benefits package, which means that you may be able to adjust them. This paycheck breakdown can help you understand more about where your money goes so you can manage it better.

Key Points

•   Payroll deductions include mandatory and elective amounts taken from gross pay, affecting net pay.

•   Common deductions include taxes, Social Security, Medicare, retirement contributions, and employee benefits.

•   Federal taxes depend on W-4 form details.

•   Retirement contributions reduce taxable income but have limits.

•   Managing deductions involves checking pay stubs and updating W-4 forms.

What is Net Pay?

Whether you’re paid hourly or by salary, your rate of pay is the compensation that you and your employer agreed upon when you accepted the job. That said, it’s typically expressed as your annual salary for full-time employees.

This number appears in official contracts and is referred to as your gross pay. However, it does not represent the actual amount that you will be paid.

Net pay, also referred to as take-home pay, is the compensation that is paid out via check or direct deposit to an employee. It is your gross pay with all the deductions taken out, which can make you think, “Wait, where’d my money go?” when it hits your checking account.

What Are Payroll Deductions?

So, to answer that question: Here’s where your money goes before it lands in your checking account:

•   Mandatory deductions: By law, an employer must subtract various mandatory federal and state tax withholdings.

•   Elective deductions: Employers will also subtract costs for employer-sponsored offerings that the employee takes part in, such as healthcare, life insurance, and retirement.

Whether required or optional, these are pulled out of your gross pay and applied where needed. While you may feel disappointed to see these funds siphoned off, they have an upside. They are saving you from owing major taxes come April 15, and they are potentially helping provide important elements of financial fitness, like saving for your future. This knowledge can be reassuring, especially if you are filing taxes for the first time, and are feeling a bit shocked about the difference between your gross and net pay on an annual basis.

How Do Payroll Deductions Work?

As mentioned above, payroll deductions may be required, such as federal or any state taxes, or they may be optional (say, a 401(k) plan or health insurance). The mandatory and elective deductions are subtracted from your paycheck’s gross pay amount.

What remains after these payroll deductions is your net pay. This is the amount that is paid to you. You can typically see a breakdown of exactly what has been subtracted from your compensation by looking at your paystub. If you are paid via direct deposit, you will likely find this information online at your employer’s portal. If you receive a paper paycheck, the paystub is often attached.

Types of Payroll Deductions

As you look at your paystub and see all the deductions that are being taken out of your gross pay, you may want a bit of help understanding what’s what. Below are explanations of some of the most common paycheck deductions:

Federal Taxes

Federal taxes include all the taxes you are required by law to pay to the federal government. These taxes (which are often referred to as being withheld vs. paid) help fund the federal government, allowing them to invest in things such as infrastructure, education, and national defense, and provide services to the American people.

It’s common to wonder what tax withholding is and how much must you allocate towards it. When you were first hired, you likely filled out an Employee’s Withholding Certificate or W-4 form form and claimed the number of tax exemptions you have. This amount tells the federal government how much money to take out of each paycheck to cover your taxes. The more allowances you take, the less federal income tax the government will take out of your paycheck.

One way to ensure that you have the right amount of tax withheld for each pay period is to use the Internal Revenue Service’s IRS Tax Withholding Estimator or speak with someone in your company’s HR department. You can tell them if you’re single or married, how many dependents you have, and if you have any other sources of income, and they should be able to help you fill out your form accurately.

It’s also a good practice to revisit your IRS Form W-4 selections annually as significant life events may change your withholding and also because the W-4 form is periodically updated. It can be wise to think about your exemptions regularly

During tax season of each year, individuals who have overpaid in federal taxes receive a refund from the government. Those who’ve underpaid, however, are required to pay additional funds and possibly a penalty.

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State and Local Income Taxes

There are other types of taxes that will possibly be withheld from your gross pay. Many states require a state tax to help fund government projects and services. To learn more about your state’s taxation policy, you can look at this map for details.

Just as with federal taxes, your state income tax will get deducted from your paycheck to cover taxes you may owe at the end of the year.

Social Security and Medicare

Another common paycheck deduction you’ll see: Social Security and Medicare taxes that are part of the Federal Insurance Contributions Act (FICA) tax, a group of payroll taxes collected from both the employer and the employee. As the name implies, these taxes fund our nation’s Social Security and Medicare programs, helping with income and insurance needs once you reach retirement age.

The tax rate for social security is currently 6.2%, and Medicare receives an additional 1.45% (employers match these tax rates, bringing the total of FICA tax contributions to 15.3%).

Wage Garnishments

Another possible payroll deduction to know about: wage garnishments. These are legal procedures designed to repay delinquent, outstanding debts, such as unpaid child support, overdue credit card payments, or even unpaid taxes.

Most wage garnishments are initiated by court order. However, the IRS and other tax collection agencies also levy for unpaid taxes in the form of wage garnishment.

Garnishments are made on earnings leftover after all legally required deductions are made. The actual amount of any garnishment will depend on the amount of debt owed and income earned.

Employee Benefits

Depending on where you work, you may be able to opt into a variety of benefits. Typically, these costs are automatically deducted from your paycheck.

If you sign up for your employer-provided health insurance, at least some of the cost is likely to be a type of paycheck deduction.

Under the Affordable Care Act, employers with 50 employees or more must offer affordable health insurance. As part of an employee’s compensation package, many companies will pay half, or another percentage, of the insurance premiums. The employee’s portion of those premiums is represented on a pay stub as a deduction.

Other benefits, like flexible spending plans, commuter plans, and life insurance, may also be deducted from your pay, depending on whether or not you opt into them and if your employer picks up the bill fully or partially.

Health insurance and other benefits typically come out before your taxes, and you may be able to reduce your taxable income by signing up for them.

Retirement Contributions

Employee 401(k) savings plans are a common benefit offered in the workforce.

If you opt into this benefit, your employer will deduct funds from your wage earnings and deposit them into a retirement account. (How much of your paycheck should you save? Experts often recommend 20% should go towards saving for retirement and other short- and long-term goals.)

Employees are typically able to choose the amount they would like deducted from their earnings for retirement savings. In some cases, employers may contribute an additional percentage of your salary into your retirement account.

Contributions to your 401(k) can not only help you save for the future but also lower your taxable income, since they come out of your paycheck before taxes get assessed.

You’ll want to keep in mind, however, that there are yearly retirement plan contribution limits set by the federal government through the IRS.

Other Common Payroll Deductions

Depending on your workplace and career, other payroll deductions are possible. Among the ones you may find are:

•   Charitable giving plans

•   Payment for job-required items, such as tools or uniforms

•   Union dues

•   Professional certification or tuition fee deductions

Examples of Payroll Deductions

You’ve learned details about many types of payroll deductions above. In list form, examples of payroll deductions include:

•   Federal income tax

•   State and local income taxes

•   Social Security and Medicare taxes

•   Wage garnishments

•   Employee benefits

•   Retirement contributions

Steps to Calculate Payroll Deductions

Calculating payroll deductions is typically something done by employers, not employees. Here’s a quick overview of how the process typically works:

1.    Obtain a W-4 from employees indicating their withholding.

2.    Determine employees’ gross earnings, whether salary pay or hourly.

3.    Calculate any overtime for those employees who are not exempt and worked over 40 hours a week.

4.    Take any pre-tax deductions.

5.    Calculate and deduct federal income tax based on pay, withholding status, what tax bracket an employee is in, and other factors.

6.    Determine and deduct Social Security and Medicare payments.

7.    Calculate and deduct any state and local taxes.

8.    Take any other deductions, and move funds to the appropriate entity.

Tips to Manage Payroll Deductions

If you are an employee seeking to tweak your deductions, you will have a few options. You might update your W-4 to reflect more or fewer exemptions, depending on whether you want to reduce or increase the taxes withheld.

In addition, if you could use some breathing room in your budget during a financial crunch, you might decrease retirement contributions a notch to free up a little more money for bills.

If you are in a position to be managing payroll deductions, consider these tips for making the process run smoothly:

•   Develop organizational systems to manage forms, deadlines, and other aspects of the process. There are many digital and online tools you can use for this.

•   Keep up to date with federal, state, and local tax laws to make sure you are deducting the proper amounts; know the guidelines about, say, equal pay provisions; and more.

•   Automate the entire process with payroll software. This can save time and boost accuracy versus doing things by hand. Or consider outsourcing the responsibilities to an external agency.

•   Regularly update training for payroll and HR teams, if you employ them.

•   Don’t touch payroll taxes that are only paid quarterly. It may be tempting to dip into those funds before they are due and use them for other business expenses, but this is a very risky path to pursue. If you wind up being short when the taxes must be paid, you could face penalties.

Recommended: 50/30/20 Budget Calculator

The Takeaway

While you may be surprised to see all the deductions coming out of your paycheck, once you know what number to expect to see landing in your bank account each pay period, you’ll be able to plan your spending and budget accordingly. Deductions can include those you can’t change, such as taxes, and those that you may be able to alter, such as retirement contributions.

It’s a good idea to check your pay stubs periodically to ensure that the deductions being taken out are accurate and align with your financial goals.

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FAQ

What are some common incorrect payroll deductions?

Examples of incorrect employee payroll deductions are expenses that have to do with running the business, workers’ compensation premiums, and some personal protective gear costs. In addition, payroll deductions should not bring an employee’s income below minimum wage.

How do I report payroll deductions?

If you are an employee, your payroll deductions will be reflected in the end-of-year W-2 form that you receive. If you are an employer, you are likely filing IRS Form 941, Employer’s Quarterly Federal Tax Return, or Form 944, Employer’s Annual Federal Tax Return, which shows the wages you’ve paid and various taxes withheld.

What are the pros and cons of payroll deductions?

Payroll deductions are a fact of life. On the plus side, they whisk away taxes regularly so you don’t face a huge tax bill come April 15, and the money paid in taxes can help quality of life in America. Also, deductions like health insurance and retirement savings go towards achieving financial security. The main con, of course, is that you take home less pay than your gross earnings and may need to budget wisely to balance your spending and saving.

What are the categories of payroll deductions?

The main categories of payroll deductions are federal, state, and local taxes; Social Security and Medicare; employee benefits; and retirement contributions.

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26 Tax Deductions for College Students and Other Young Adults_780x440

21 Tax Deductions for College Students and Other Young Adults

By | Budgeting & Goals, Financial Independence, money | Comments Off on 21 Tax Deductions for College Students and Other Young Adults

If you’re a student or a recent grad, you are likely just starting your financial life and looking for ways to economize. One way to do that is to learn about the tax deductions and credits that can often help you lower your tax bill whether you’re still in school or just got your degree.

Here, you’ll learn about more than 20 possible ways you can save on your tax bill. But keep in mind: Taxes can get complicated. If you have any outstanding questions or concerns about your specific situation, consider consulting with a tax professional.

Smart Tax Deductions for Young Adults

1. American Opportunity Tax Credit

If someone is still in school, they might qualify for The American Opportunity Tax Credit (AOTC). The AOTC allows people to take a student tax credit of up to $2,500 for tuition, fees, and course materials they paid for during the taxable year for an undergraduate education.

In addition, 40% of the credit, or up to $1,000, is refundable, which means that someone can receive it even if they happen not to owe any taxes for the year. To qualify, the taxpayer or their dependent needs to be pursuing a degree and enrolled half-time at the very least. A taxpayer can only take advantage of this for four years, no matter how long it takes the student to finish the degree.

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2. Lifetime Learning Credit

Unlike the AOTC, the Lifetime Learning Credit (LLC) is available to vocational, graduate, and non-degree or vocational students, too. The maximum benefit? Up to $2,000 is allowed per tax return. To learn more about the differences between the LLC and AOTC and which one might be right for you, see this IRS chart.

3. Student Loan Interest

Students and parents of students paying for a child’s education through student loans can use the student loan interest tax benefit for education. With this deduction, they can deduct up to $2,500 in interest they paid for the year.

4. Moving Expenses

Perhaps instead of going to college, a young adult enrolled in the military instead. If they are a Member of Active Forces on active duty and had to move due to a military order, then they could take a deduction for themselves, their spouse, and their dependents. On Form 3903, active members of the military can claim expenses related to a military move like transportation and storage of household goods and personal effects and travel (including lodging) from the old home to the new home. They cannot include the cost of meals.

The IRS has an interactive tool to help taxpayers determine whether or not their moving expenses may qualify for a moving deduction.

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5. Self-Employment Tax

If a young adult chose to go into business for themselves after graduating, then they can deduct one-half of their self-employment tax, which is 12.4% for Social Security and 2.9% for Medicare. They can do this when figuring their adjusted gross income on Form 1040 or Form 1040-SR.

6. Home Office

Someone who works at home, whether they’re working at their job remotely or after hours, or they are self-employed, can take a deduction for their home office. Someone can deduct expenses that keep their home office running such as utilities, insurance, and general repairs, but they cannot deduct unrelated expenses like a gardening bill or the paint they used for a room that is not their office. There is a simplified method for this deduction as well as a regular one. With the simple one, taxpayers can deduct $5 per square foot of the home used for business, with a 300-square-foot maximum (see both methods on the IRS’ website ).

Recommended: Do You Qualify for Home Office Tax Deductions?

7. Standard Mileage Rate

If a young adult is using their car for business purposes, then they may be able to deduct their standard mileage rate, which is 67 cents per mile for tax year 2024. They need to keep in mind, however, that if they use the standard mileage rate, they cannot use the car expenses deduction as well. They cannot deduct lease payments, gasoline, car depreciation, vehicle registration fees, oil, or insurance.

8. Car Expenses

When a young adult does not use the standard mileage rate, then they can deduct car expenses that involve business purposes from their taxes. If they use the vehicle for personal and business expenses, then they need to split the deductions.

9. Meals While Traveling

When traveling for business, young adults who are entrepreneurs or self-employed can take a 50% deduction for their unreimbursed business meals. They can either take a standard meal allowance through the IRS or keep records of their actual costs for their meals and take those deductions.

10. Other Travel Expenses

The IRS also allows taxpayers to deduct some travel expenses. If young adults own their own business or are otherwise traveling for professional purposes, they could deduct things like travel by airplane, car, or train, fares for taxis to and from the airport to the hotel, the shipping of baggage, dry cleaning, and laundry, and business calls made on the trip.

11. Business Interest

If a young entrepreneur took out a business loan vs. a personal loan to get their startup running, then they can deduct the interest they paid. If they utilized the loan proceeds for more than one type of expense, then they need to allocate the interest based on how they used the loan’s proceeds.

12. 401(k) Contributions Deduction for Employed People

The government doesn’t tax money that an employee diverts directly from their paychecks into a traditional 401(k). For tax year 2024, the 401(k) contribution limit for individuals is $23,000; for tax year 2025, the limit is $23,500.

13. IRA Deduction for Self-Employed People

If someone does not have a job that provides a 401(k), they may be eligible to deduct their contributions to a traditional Individual Retirement Account (IRA). This can be a common tax deduction when you are self-employed.

You can learn more about the various kinds of IRAs and possible deductions from the IRS website.

14. Employee Pay

A young entrepreneur who has hired someone as an independent contractor may be able to deduct the income they pay that person on their tax return. You may want to check in with a tax professional if you hire contract workers or salaried individuals to make sure you stay on top of your taxes.

15. Educator Expenses

A young graduate who is working as a teacher is able to deduct up to $300 of the expenses they put towards things they used in the classroom, such as books, courses, and computer equipment. If they teach a course in physical education or health, then athletic supplies would count towards the deduction as well.

16. Health Savings Account

If a taxpayer chose to use a tax-deductible Health Savings Account (HSA) for their healthcare expenses in 2024, then they can contribute up to $4,150 for self-only coverage; in 2025, they can contribute up to $4,300. Note: An HSA is only available to people who have a high-deductible health insurance plan.

Recommended: HSA vs. FSA: What Are the Differences?

17. Home Mortgage Interest

If a young adult is fortunate enough to own their own home, they may qualify for the home mortgage interest deduction, which allows them to deduct home mortgage interest on the first $750,000 of their debt.

18. State and Local Tax Deduction

Under federal rules, taxpayers who itemize may be able to deduct up to $10,000 of certain state and local taxes from their taxable income.

19. Charitable Contributions

Young adults who itemize may be able to deduct charitable donations on their return. Just remember that federal law limits cash contributions to just 60% of their AGI for the year. It’s always best to keep receipts and records of charitable contributions in order to take the deduction.

20. Medical Expenses

Healthcare is very expensive, but the IRS allows taxpayers to deduct the amount of total medical expenses that exceed 7.5% of their adjusted gross income (AGI). Medical expenses include payments for diagnosing, preventing, and mitigating disease.

21. Residential Energy Credit

If a young adult is lucky enough to own their own home and invests in qualifying clean energy (think heat pumps, solar panels, geothermal energy), they may be able to claim up to 30% of the costs as a tax credit.

The Takeaway

Making smart use of tax deductions can help maximize a tax refund or minimize tax liability. Even if you are a student or a young person, you may be able to claim deductions and credits that make a difference on your tax return. You might even qualify for a tax refund that you could use to pay down debt or sock away in the bank to earn interest.

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Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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 4.00% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

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13
2024
What Is a Financial Checkup?

What Is a Financial Checkup?

By | Budgeting & Goals, Financial Independence, money | Comments Off on What Is a Financial Checkup?

A financial checkup is a process in which you thoroughly review your finances and how you are tracking against your goals. It’s similar to an annual visit with your doctor to help ensure that you’re maintaining good physical health.

A financial checkup can be an important step in achieving financial wellness, which means meeting your money obligations today and also funding your future goals. Regular financial checkups can help you see how well you’re doing. What’s more, they give you the opportunity to pinpoint where you might be able to improve your money management strategy.

If you’ve never done a personal financial checkup before, fear not. Getting started is easier than you might think.

Key Points

•   A financial checkup involves a thorough review of personal finances, assessing budget, expenses, assets, and debt to gauge financial health.

•   The process can include examining credit reports and retirement savings to ensure progress towards financial goals.

•   Evaluating emergency savings and insurance needs can be a key step to securing financial stability.

•   Regular financial checkups help eliminate bad spending habits and clarify budgeting.

•   These checkups instill financial discipline and encourage consistent saving, essential for financial wellness.

What Is a Financial Checkup?

A financial checkup is a thorough review of your personal finances. It’s similar to getting a health checkup from a doctor, only instead of checking your blood pressure and other vitals, you’re measuring your financial stats. For example, some of the things you might review as part of a financial check include your:

•   Monthly budget and expenses

•   Assets, ranging from money in a savings account to equity in a home

•   Debt situation and repayment strategy

•   Credit reports and scores

•   Retirement savings

•   Emergency savings

•   College planning, if you have kids

•   Insurance needs and coverage

Those are all things that can go along with setting up a financial plan. What is a financial plan? It’s a strategy for managing your money in order to reach your personal money goals. You can complete a financial checkup and financial plan yourself or do so with the help of a professional financial advisor.

Recommended: Emergency Fund Calculator

Why Are Financial Checkups Important?

A financial health checkup can help you establish where you are with your money, where you’d like to be financially, and what steps you need to take to get there. Completing regular personal financial checkups can guide you to improve your financial health as you work toward your goals.

For instance, money checkups could help you to:

•   Get clarity around budgeting and expenses

•   Eliminate bad spending habits so you don’t overdraft your checking account

•   Define your short- and long-term financial goals

•   Instill a sense of financial discipline as you work toward those goals

•   Develop a habit of saving consistently

•   Create an actionable plan for paying off debt

•   Form a workable strategy for retirement savings

•   Fine-tune your investment goals

Taking those kinds of actions can get you on the path to living your personal definition of financial freedom. That might mean retiring early, for instance, or finding ways to create passive income so you can live a lifestyle that isn’t job-dependent.

Skipping regular financial checkups can make it more difficult to do those kinds of things and put your financial security in danger. The simple reason: You’re oblivious to how you’re managing your money.

Key Steps to Take for a Financial Checkup

Money checkups can help you move ahead with achieving financial security, but what do you actually include in one? How often do you need to perform a financial checkup? And do you need to get help from a professional financial advisor? Here’s a closer look.

•   Frequency: In terms of frequency, it may be a good idea to consider a personal financial check at least once a year. For example, you might schedule it for the beginning of January. That way, you can review the previous year and set goals for the upcoming year. Quarterly checkups may be a better option if you’d like to get smaller snapshots of your finances throughout the year.

•   Hiring a financial advisor: Whether you hire an advisor for a financial checkup is entirely up to you. An advisor can offer an extra set of eyes to review your finances but it’s important to know what you’ll pay for that help. The average financial advisor cost is around 1% of the assets they manage annually. However, some financial institutions provide access to professional advisors for free. It’s worth doing a bit of research to see what might be available.

Ready to start your financial health checkup? Here’s a simple checklist you can follow.

Take Your Financial Vital Signs

Getting some numbers down on paper can be a good way to start your financial checkup. Looking at certain metrics for the last 12 months can give you some perspective on where you are financially. Here are some of the most important measurements to take:

•   Your monthly income and expenses

•   How much you have saved for emergencies

•   What you’re carrying in total debt

•   Debt-to-income ratio (i.e., how much of your income goes to debt repayment)

•   Your credit scores

•   How much you’ve invested for retirement

•   What percentage of your income you’re saving monthly

Along with looking at specific numbers, it can also be helpful to ask some basic questions to gauge your financial health. For example, you might ask yourself:

•   How many months did I stick to my budget vs. going over budget?

•   Have I bounced any checks or overdrafted my bank account this year?

•   Was I late paying any bills in the past 12 months?

•   Did I reach any savings goals or fall short of any goals?

•   Did my overall debt load increase or decrease?

•   How well did my investments perform?

The purpose of looking at numbers first and asking these kinds of questions is to establish your financial baseline. You can then move on to the next steps to take a deeper dive into your money situation.

Review Your Budget

Making a budget is usually at the top of the list of personal finance basics for beginners. A budget is a plan for spending the income that you have each month. The basic elements of a budget include:

•   Fixed expenses, such as housing

•   Variable expenses, which need to be paid monthly but their amounts may change (such as food costs)

•   Discretionary expenses or the “wants” in your budget

•   Income

•   Debt repayment

•   Savings

You might also include taxes as its own budget category if you’re self-employed. In this situation, you will need to set aside money regularly to pay estimated tax bills.

If you’re doing a financial checkup for the last 12 months, it can be helpful to look at what’s changed in your variable and discretionary expenses. For example, are you paying more for utilities than you were 12 months ago? Has your grocery bill increased? Is a bigger chunk of your budget going to “fun” things like hobbies, entertainment, or recreation?

Analyzing individual budget categories can help you pinpoint money leaks or areas where you might be able to cut back on spending. It’s also a good opportunity to review what you’re paying for cell phone service, internet, or car insurance to see if it’s worth switching to a cheaper provider.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Check Your Emergency Fund

An emergency fund is money that you save for unplanned or unexpected expenses. Emergency savings is meant to be separate from money you save for sinking funds or for various short- and long-term financial goals.

If you have an emergency fund, check the balance to see how much cash you have on hand for rainy days. How much should you have in an emergency fund? An often-cited rule of thumb dictates saving three to six months’ worth of expenses for emergencies. If your savings balance is below that amount, you might go back to your budget to see where you might be able to find extra money to set aside.

Also, consider where you’re keeping your emergency fund. Ideally, that money should be somewhere that’s easily accessible in case a true emergency comes along. But you might also be interested in earning a great interest rate in the meantime.

If you’re keeping your emergency fund in a traditional savings account at a regular bank, you might consider upgrading to a high-yield savings account instead in order to snag a higher rate. Online banks may be a good option for finding one with a competitive interest rate.

Recommended: Emergency Fund Calculator

Factor in Life Changes

Life changes can affect your financial plans in different ways. Losing a job, for instance, can shrink your income. Getting married might increase your household income if you’re both working. Having a child, changing jobs, moving, buying a home, and starting a business are other situations that can impact your financial outlook.

If you’ve been through any of these life changes in the past year, consider what that might mean for things like budgeting, saving, and expenses. It’s also important to review your tax situation.

Getting married, for instance, means a change to your tax filing status. Having a child can open the door for added tax breaks. And starting a new business can bring additional tax obligations, such as estimated quarterly tax payments. Those are all things that could increase your tax bill year to year. It’s therefore important to consider where they fit in during your financial checkup.

Recommended: Getting Back on Track After Going Over Budget

Review Your Investment and Retirement Goals

Investing can be key to building wealth over the long-term. You can invest inside of a tax-advantaged plan, such as a 401(k) or individual retirement account (IRA), or through a taxable brokerage account. As part of your financial health check, it’s helpful to know:

•   Where your money is invested (i.e., taxable vs. tax-advantaged accounts)

•   How your portfolio is diversified across different asset classes

•   How those assets have performed over the last year

•   What you’re paying in investment fees

•   How your risk tolerance or tax situation has changed over the past year

•   Whether you’re on track with retirement saving.

Reviewing those things can give you an idea of whether you’re on the right track with your investments. For example, if you’re 30 years old and want to retire at 50 with $1 million, but you only have $10,000 invested, that’s a clear sign that you’ve got a lot of work left to do.

Using online investment calculators and retirement calculators can help you to figure out how closely you’re keeping up with your goals. And if you don’t have an investment account yet, you may want to consider setting up an IRA online and a taxable brokerage account so you can start growing wealth.

The Takeaway

A financial checkup is a smart way to keep tabs on your money and your financial health. It will give you the opportunity to make course corrections and can aid you with overcoming personal financial challenges. If you’re struggling with credit card debt, for example, then a periodic financial checkup can help you to figure out a strategy for paying down your balances while streamlining your expenses so you’re less reliant on plastic. It can also help you highlight ways you are succeeding financially and inspire you to keep going and keep your money growing.

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 4.00% APY on SoFi Checking and Savings.

FAQ

How often should you do a financial checkup?

Completing a financial checkup at least once a year can be a good way to see whether you’re on track with your goals and where you might be able to improve. If you’d like to check in with your money more often, you might schedule quarterly financial checkups instead.

How do you do a financial health checkup?

A financial health checkup starts with gathering information about your income, expenses, debt, and savings. From there, you can review your financial progress and goals to determine what steps to take next with your money.

What does financial wellness include?

Financial wellness means being able to manage your current money obligations with ease while also being able to look ahead to the future. Someone who has achieved financial wellness generally has stable income, a firm grip on their expenses, a dedicated savings habit, and little to no “bad” debt. Another component is looking forward and tracking well for future financial goals, like retirement.

Photo credit: iStock/Bilgehan Tuzcu

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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 4.00% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SoFi Invest®

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

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

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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13
2024
What Is a Reseller?

Guide to Reselling

By | Budgeting & Goals, Financial Independence, money | Comments Off on Guide to Reselling

A reseller is a critical link in the commerce chain, purchasing items from manufacturers, dealers, and other businesses and individuals, and offering them for sale to consumers. Resellers may do business on major platforms like Amazon and eBay or via smaller outlets.

There are real profits to be had by setting up a resale ecommerce platform. However, it requires taking the right steps professionally, such as finding initial capital, establishing a supplier network, and marketing your services as a reseller. Read on to discover if this career could be right for you.

Key Points

•   Reselling involves purchasing goods from manufacturers or wholesalers and selling them to consumers, often online, with flexibility and scalability as key benefits.

•   Startup costs include sourcing inventory, storage, marketing, and shipping, with significant capital needed for high-end items.

•   Reselling differs from dropshipping as it requires owning inventory, offering potentially higher returns but also higher risks.

•   Success in reselling depends on building a reliable supplier network and managing costs effectively.

•   Reselling can be a side hustle or full-time job, with income potential varying based on market demand and business strategy.

What Is a Reseller?

Resellers buy merchandise, such as clothes, shoes, toys, electronics, jewelry, and appliances, and resell it on online marketplaces or physical discount stores for profit. Online resellers often buy merchandise in bulk and at a discount from wholesalers and manufacturers. They then resell items individually on digital platforms like eBay and Poshmark.

Because the reseller does not manufacture the goods they sell, they typically have no production costs. However, they can face steep marketing costs. Depending on how well a seller manages these costs, they could see a steady stream of profits flowing into their checking account.

Another factor to consider is that resellers in the luxury goods or collector markets, such as watches, jewelry, or high-end fashion items, often have decades of industry experience and are experts in their field. They use this expertise to ensure the products they trade are authentic and not fake.

Recommended: 36 Places to Sell Your Stuff

How Does Reselling Work?

Resellers first have to source their merchandise or inventory. Some may seek liquidation pallets of customer returns or overstocks from big retailers. E-commerce resellers then market their inventory on their platform.

Once customers purchase products, the reseller ships packages and manages returns. Other than buying inventory, shipping and managing returns may be the biggest expenses for resellers, so they build these costs into their markups on the items they sell.

For luxury goods, like collectibles, watches, jewelry, and high-end fashion, resellers must authenticate the products to show that they are not fakes. Some buyers may only buy these items from dealers they know are trustworthy.

Recommended: 50/30/20 Budget Calculator

Common Reselling Industries

Practically any item you need or want can be found on the secondary market, except for perishables like food. Here are some common examples.

•   Apparel

•   Shoes

•   Luxury goods (high-end fashion, handbags, jewelry, and vintage jewelry)

•   Collectibles (wine, art, watches, whiskey, vintage cars)

•   Household goods (exercise equipment, household appliances, furniture)

•   Technology goods(smartphones, tablets, and tech accessories)

•   Electronics (stereo components, home entertainment systems)

•   Video games, DVDs, and Blu-ray discs

•   Vehicles

•   Baby products (toys, strollers, accessories)

•   Musical instruments

•   Power tools and garden equipment

Depending on what product you select to resell and how much time, energy, and investment you put into your business, reselling could be a job that pays daily or one that provides only occasional income.

Types of Resellers

Resellers assume various positions in the supply chain. To better understand what “reseller” means and what one does, here’s a look at the different types: wholesalers, retailers, and distributors.

•   Wholesalers: This involves buying products in bulk and at a discount from manufacturers or distributors. Wholesalers sell the products to retailers or resellers at a markup and in smaller quantities. They typically don’t sell directly to consumers.

•   Retailers: These professionals are further down the supply chain. Retailers buy from the wholesaler or distributor and sell directly to the consumer. They usually have a range of products and sell in small quantities.

•   Distributors: This involves buying products from manufacturers and selling them to others in the supply chain, usually wholesalers. Distributors tend to have close relationships with manufacturers who feature buying and marketing contracts with free samples and discounts.

Common Startup Costs for Resellers

Startup costs for resellers mainly involve sourcing inventory, storage, marketing, and shipping.

•   Inventory: The costs for inventory will depend on what you are selling. You will need significant capital if you plan to resell high-end items like designer handbags or jewelry. Clothing resellers will need capital to buy oversupply or liquidation pallets from big retailers like Nordstrom Rack or Costco or other wholesale clubs.

•   Storage costs: Resellers need to store their inventory, particularly if they buy in bulk from wholesalers.

•   Marketing: Marketing costs run high for resellers and focus on email outreach and ads, often on social media platforms like Facebook, Instagram, and TikTok.

•   Shipping: Shipping and returns may be the highest cost for resellers. Vendors need enough capital to ship items and cover returns costs.

Recommended: 15 Low-Cost Side Hustles

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Reselling vs Dropshipping: What’s the Difference?

Reselling is different from dropshipping because the former requires owning and storing inventory, while the latter is more of a middleman. Here are the key differences between dropshipping and reselling.

•   A reseller buys stock from wholesalers or distributors to sell at a profit.

•   Dropshippers don’t ever take physical ownership of products. They accept orders from customers and then buy the products from suppliers who package and ship the products to the customers.

•   Dropshippers require less capital than resellers because they do not buy or stock significant inventory.

•   The potential returns for resellers are higher than for dropshippers. Because resellers buy in bulk, they pay less per unit to their supplier and add more mark-up. Dropshippers often may buy single items, which can be more expensive.

•   Reselling is riskier because merchants may be left with inventory that they cannot sell but that they have paid for and still need to store. In this situation, it could put a strain on money in your traditional or online bank account.

Pros of Reselling

The beauty of reselling is flexibility in the products offered and the ability to run one’s own business. However, the success of a reseller largely depends on the relationship between the reseller and the suppliers. If you can succeed at that, you may well be taking a step towards making quick cash.

•   Resellers can make money without having to manufacture a product.

•   Once a reseller has established suppliers, they can scale and acquire new customers and find new products to sell.

•   Reselling is flexible. Merchants can change the products they offer according to market demand and depending on how much inventory they carry.

•   Resellers can scale quickly if they have reliable suppliers and market demand.

•   Reselling can be a way to make money from home.

Cons of Reselling

The disadvantages of reselling are that merchants must work hard to build a network of reliable suppliers, and a steady income is not guaranteed.

•   Finding inventory at the right price could be difficult until a reliable supply chain is established. This could drain funds in your savings account if you haven’t planned adequately.

•   Resellers must work hard to negotiate deals with suppliers and build relationships.

•   Quality control may be difficult because sending products back to manufacturers will mean delays for customers.

•   Shipping and storage costs can be considerable.

•   Your earnings may fluctuate, especially if you sell seasonal products, requiring you to create an irregular income budget.

•   Resellers are self-employed and have no health or retirement benefits from an employer.

Do Resellers Work from Home?

Whether you can work from home depends upon your particular situation and the kind of items you are hoping to resell. If working from home is an important consideration, it might make sense to focus on small goods, such as fashion accessories, that don’t require much storage space.
Whether you can work from home depends upon your particular situation and the kind of items you are hoping to resell.What are ways I can make money from home.

Reselling Alternatives

Becoming an entrepreneur and achieving financial freedom by reselling can often involve starting with eBay. While eBay is a popular and successful platform, it’s not the only game in town. Some alternatives to consider include:

•   Craigslist

•   Etsy

•   Facebook Marketplace

•   Poshmark

•   Rakuten

•   DePop (clothing)

•   The RealReal (fashion)

•   Mercari (home goods)

•   Ruby Lane (vintage items)

The Takeaway

Reselling involves purchasing goods from a manufacturer, wholesaler, dealer, or other source and then selling it to consumers. Typically, the selling happens online. This is a broad industry and a competitive one, but the flexibility of the work and ability to scale quickly can be major benefits. The disadvantages are similar to any entrepreneurial venture. New resellers must find capital to set up their business, buy inventory, and market that inventory.

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 4.00% APY on SoFi Checking and Savings.

FAQ

Is reselling best as a side hustle or full-time job?

Reselling can be a replacement for a full-time job, but it will take time to establish sourcing and learn how to make reselling profitable. It’s best to resell on the side until you are confident that your income is sufficient and you can afford to leave your full-time or part-time job. Remember, you will not receive employer benefits and contributions as an entrepreneur.

Is reselling considered “scalping”?

Scalping is a type of reselling where the seller takes advantage of an inelastic market (meaning one where there’s always demand, even if the price is high) to make a profit. For example, scalpers often resell tickets for a popular sporting event at a major markup. Because the tickets are scarce, people are willing to pay a lot to attend. While some resellers are scalpers, many charge a reasonable markup on goods.

Do you need to have a college education to resell?

You don’t need any qualifications to resell. Succeeding as a reseller takes hard work, an ability to negotiate and find suppliers, and good business sense. That said, a business degree would be an advantage and provide knowledge that would help you with accounting, budgeting, inventory management, and marketing.

Photo credit: iStock/Iryna Mylinska

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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 4.00% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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13
2024
15 Low-Cost Valentine’s Day Gifts Your Sweetie Will Love

15 Low-Cost Valentine’s Day Gifts Your Sweetie Will Love

By | Budgeting & Goals, money | Comments Off on 15 Low-Cost Valentine’s Day Gifts Your Sweetie Will Love

Here comes Valentine’s Day, when your heart may be full of love but your bank account could be low on cash. How can you mark the day with a great gift that won’t further deplete your funds? You’re in the right place to find out.

Typically, February 14 triggers a spending frenzy. In 2024, spending on all things red, heart-shaped, or otherwise lovey-dovey was projected to hit $25.8 billion, according to the National Retail Federation. But to stick to a budget, consider this list of 15 sweet but affordable Valentine’s gift ideas.

Key Points

•   To express their love, many people splurge on Valentine’s Day gifts and celebrations, but lower-cost or free festivities can be just as meaningful.

•   Create a small bag of your partner’s favorite candy bars with a handmade card.

•   Gift a low-maintenance potted succulent as an alternative to expensive roses.

•   Cook a special meal at home to enjoy a personal dining experience.

•   Craft a personalized Valentine’s Day card with heartfelt sentiments.

Valentine’s Day Gifts on a Budget

Valentine’s Day has been celebrated for hundreds of years now, with the first messages declaiming love appearing in the 1500s. Commercially produced valentines swept across the U.S. in the mid-1800s and have been going strong ever since. The image of Cupid, the Roman god of love, with his bow and arrow, has been a long-time favorite representation, and birds (who often mate in February) also became a symbol of love.

These days, there’s no need to stick with those icons. Expressing your devotion can be done in an array of ways, often for very little cash that won’t blow your budget, as you’ll see in this list.

1. Sweet Treats

You could easily spend a bundle on top-tier chocolate truffles, but candy bars from the impulse rack at the checkout line can be equally satisfying. Put together a small bag of your honey’s favorite treats. Add a handmade card noting, “I’m sweet on you!” for a thoughtful and cute Valentine’s Day gift without going overboard or depleting your checking account.

2. Plant Power

While roses are a classic V-Day gift, price gouging can kick in around the holiday, making this a very expensive way to say “I love you.” Instead, why not avoid credit card debt and buy an adorable (and low-maintenance) potted succulent instead? It can show your affection and brighten your honey’s home. Look for them on Amazon or at The Home Depot or Lowe’s; they can cost just $7 each. Add tissue paper and some ribbon, and you’re good to go.

3. A Favorite Home-Made Meal

Skip the $100 dinner, and opt for a delicious meal at home. (Stash the money saved in an emergency fund or start a travel account with it.) Maybe that’s a chef’s recipe for three-cheese mac and cheese and a nice bottle of red wine or a good steak and salad with French vinaigrette. Choose something you don’t normally make that feels first-class but stays within a sensible budget.

4. S’mores

Here’s another affordable luxury that won’t bust your line-item budget on Valentine’s Day: While chocolates and fancy candy are delicious, sometimes a good old-fashioned treat from your childhood can feel more fun and meaningful. Grab a bag of marshmallows, graham crackers, and bar chocolate to roast over a fire.

Don’t have access to an open flame? No problem. Heat an oven to 350 degrees and layer a small baking dish with graham cracker squares, chocolate, and marshmallow halves. Repeat with another layer, topping it off with remaining marshmallow halves. Bake for nine to 11 minutes until marshmallows are puffed and golden brown on top.

5. An Over-the-Top Valentine’s Day Card

What’s an extravagant Valentine’s Day card? You know the splurge-y ones: Maybe they are three-dimensional, cut-paper pop-ups or encrusted with dried flowers. Some play music when you open them. Others are embossed with metallic designs. Whatever the details, even at their most expensive, they are likely to give you change on a $10 or $20 bill and put a smile on your sweetheart’s face.

6. A Handmade Valentine’s Day Card

On the other hand, what could be more wonderful than a handmade card? You might make a collage with magazine images or doodle a little drawing. When a heartfelt sentiment is added, that can be quite the Valentine’s Day keeper. And the money you saved vs. buying a major gift can go into your savings account for that vacation you two are planning.

7. Cupid Coupons

Show your appreciation for your significant other through cupid coupons to be cashed in for loving gestures. These money-saving coupons don’t skimp on thoughtfulness. You can make them for a 10-minute massage, cooking dinner one night, doing their laundry, or watching their favorite reality show (which you really don’t like) together.

Come up with different coupon ideas and place them in a decorative jar or envelope. Your partner can then redeem these gifts throughout the year.

Recommended: 5 Ways to Achieve Financial Security

8. Low-Cost Local Activities

There are plenty of fun, free activities that you can take advantage of locally. Head back to your favorite spot in the park for a stroll, or drive up to a local scenic overlook. Search your city for free museums (many museums have times or days when you can visit at no cost) or points of interest that you haven’t been to together.

9. A V-Day Party

Why not do a group Valentine’s Day happy hour at home? Ask friends to BYOB, and celebrate together with simple snacks. Whether you make it a surprise for your beloved or not, you’ll have fun as a group, and you won’t have to worry about spending a ton of money.

Recommended: 23 Ways to Make Quick Cash

10. Selfcare Supplies

Who can resist a little pampering? Head to a shop like Ulta or Sephora or look online at Amazon and other e-tailers for not-too-pricey moisturizers, masks, or shower gels. These often come in cleverly packaged sets for the Valentine’s Day holiday. These low-cost gifts are not only a treat for the recipient; their affordability can also make them a form of financial self-care for the gift giver.

11. A Love Letter

The written word goes a long way. If it’s been a while since you’ve confessed your love or you have yet to do so, express your feelings in a handwritten letter. Reflect on the past year with your bae, and tell them why they are so special.

If you’re short on words, write the top reasons why your partner makes you smile. Put each reason on a Post-it note, and leave them throughout their house or in their car.

12. DIY Roses

They may not smell as sweet as what Mother Nature makes, but LEGO Roses ($13) can be a fun gift. You can pre-assemble, or let your love go crazy building the 100-plus-piece blooms.

13. Scavenger Hunt

If you’re really crafty, come up with a scavenger hunt. You can make it themed according to your loved one’s favorite book, TV show, or movie. There’s nothing better than solving a Harry Potter-themed riddle that leads your partner to the Gryffindor House Cup or Tom Riddle’s diary.

Try coming up with four to five clues that lead to a small gift. A gift card to a local coffee shop feels more significant when you put together a scavenger hunt with your honey’s favorite things in mind.

14. Movie Night for Months

Research and write up a list of movies you’d love to watch together. Maybe they’ve never seen your favorite Hitchcock flicks or the “Lord of the Rings” saga. Leave a bunch of blank lines on your list for your love to fill in the movies they would like to stream with you, and have fun sharing together time while checking off each entry.

Trying to save money on streaming services? Check out services like Hoopla and Kanopy that can allow library-card holders to watch films for free.

15. Class Gift

Embark on an adventure together. Check your local library, community center, or arts organization for free or low-cost one-time classes, and sign both of you up. For instance, you might take a memoir-writing workshop, calligraphy tutorial, or strength-training class to spark a new hobby.

Valentine’s Day Explained

Curious about this holiday that’s all about love and how it got its name? Here’s a bit of history: Valentine’s Day may have been so named in honor of a priest who was martyred around the year 270. He was said to have signed a letter to his jailer’s daughter “from your Valentine” as that was his name. Legend has it that he befriended the young woman and healed her from blindness. His example may have helped to inspire today’s tradition.

Other versions of the day’s history also exist; no one is 100% certain of the origin.

Valentine’s Day by the Numbers

Here are a few interesting statistics related to the Valentine’s Day holiday and gift shopping:

•   Men spend $235, or almost twice as much as women do at $119, on average for Valentine’s Day.

•   In a recent year, Americans spent $6.4 billion on jewelry, $2.6 billion on flowers, and $4.9 billion on an evening out for Valentine’s Day, according to the National Retail Federation.

•   Online dating activity tends to be busiest on the first Sunday of the New Year (messaging on Tinder has seen a 22% surge in years past) and can stay strong until Valentine’s Day, perhaps signaling that many people don’t want to be alone on that holiday.

If you do decide you want to splurge this holiday, you might think of how to finance it. Cash back rewards could help, or perhaps you can get a bonus when opening a new checking or savings account at an online bank or elsewhere.

The Takeaway

You are now armed with great Valentine’s Day ideas that maximize the moment without blowing your budget. You might try writing an old-fashioned love letter, hosting a scavenger hunt, or even giving your sweetie some everlasting toy roses. With these tactics, being financially savvy doesn’t have to take a holiday while you celebrate.

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 4.00% APY on SoFi Checking and Savings.

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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 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 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“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, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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 4.00% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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