Budgeting & Goals Archives | Page 32 of 186

Sep

2024

What Is Loud Budgeting?

By Julia Califano | Budgeting & Goals | Comments Off

Loud budgeting is a money-saving trend that is encouraging people to be honest with others about their finances and feel okay about saying “No” to expensive invitations.

The concept was first introduced by TikTok content creator and comedian Lukas Battle in late 2023 as an alternative to “quiet luxury” and involves talking openly — or loudly — about your financial goals and spending limits to those around you. Since Battle first coined the term, TikTok has been deluged with videos extolling the benefits of loud budgeting and how to do it.

Is it time to get on the loud budgeting bandwagon? Maybe. While you can’t trust all the financial advice you get on social media, many finance experts say that loud budgeting is rooted in a time-honored financial principle — that people should make spending decisions based on their budgets and savings goals, rather than peer pressure or FOMO.

Here’s a closer look at what loud budgeting is and how to incorporate this approach into your own life.

Key Points

• Loud budgeting, a concept introduced by TikTok creator and comedian Lukas Battle in late 2023, encourages transparency about financial goals and spending limits.

• Benefits of loud budgeting may include: reduced financial stress, avoiding overspending due to peer pressure, building an enhanced support system, and reaching financial goals.

• It can be implemented by determining priorities, building a basic budget, and being honest with those around you about your budget.

• Budgeting tools, such as those provided by your bank or apps that track or permit you to share your spending and savings goals, can assist with loud budgeting.

• Loud budgeting doesn’t have to entail disclosing financial or personal details — it can be as simple as sharing your financial goal and/or limits.

The Psychology of Loud Budgeting

When it comes to maintaining close ties to friends and family, it can be hard to decline an invitation to a catch-up dinner, reunion weekend, or destination wedding — even if you’re not comfortable with the cost. So, you might grudgingly say “Yes,” and figure you’ll deal with the financial fallout later. Or, you might say “No,” but make up a fake reason why you can’t be there. Neither option is ideal.

Loud budgeting offers an alternative solution — bowing out while being honest about your money concerns. It’s based on the premise that staying close and connected with people you care about doesn’t have to cost a lot. Often, it just takes one member of the group to say “No,” and suggest a way to bring down the cost of a social outing or gathering.

Recommended: 7 Tips for Living on a Budget

Benefits of Practicing Loud Budgeting

While loud budgeting isn’t for everyone, it has a number of benefits. Here are some to consider.

Reduced Financial Stress

Money worries can be a significant source of stress. Loud budgeting can immediately take some of the pressure off by making it acceptable to opt out of social plans that will cause you to spend more than you can afford. Over time, loud budgeting can help you grow the balance in your bank account, pay down debt, and achieve your goals — all of which can improve your financial well-being.

Improved Financial Transparency

While talking about money has long been considered taboo and can even trigger shame, loud budgeting aims to reduce the stigma around having financial limitations. Instead, it advocates being transparent about your budget and why you’re choosing not to spend your hard-earned cash on something. By starting the conversation, loud budgeters may also encourage others in their circle to be more authentic and honest about their finances.

Enhanced Support System

Not everyone will necessarily be receptive and understanding when you get loud with your budget. But there is also a good chance that you will get support from others who (unbeknownst to you) are in the same financial boat. This can help you build a community of people working towards similar financial goals. Your community can help hold you accountable to your plan. You can also share tips and experiences and cheer each other on when you achieve success, such as reaching a savings goal.

How To Implement Loud Budgeting in Your Life

If you’re interested in trying out this Gen Z budgeting trend, here are some tips for how to incorporate loud budgeting into your life.

Determine Your Priorities

Budgeting (loudly or quietly) is about making sure your spending aligns with your priorities. So a great first step is to sit down and lay out some specific and achievable financial goals, along with a timeframe for when you want to reach them. For example, maybe you want to pay off your credit cards in the next six months or put a down payment on a home in one year. Knowing what you want to accomplish gives you the “why” behind your loud budget and helps you stick to your plan.

Build a Basic Budget

Before you can get loud about your budget, you actually need to make a budget. To do so, you might start by looking at what’s coming in each month (on average) and what’s going out each month (on average). If your total monthly spending is higher than your total monthly income — or it’s about the same (meaning you’re not saving anything) — you’ll need to adjust accordingly.

There are all kinds of budgets, but one simple framework to consider is the 50/30/20 rule. This entails allocating 50% of your monthly take-home income to needs, 30% to wants, and 20% to saving and paying more than the minimum on your debts.

Once you come up with a basic budget, it’s a good idea to track your spending (there are budgeting apps that make this easy) to see how well you’re sticking with the plan and, if necessary, make some tweaks to your budget.

Be Honest With Others

Once you have a clear sense of your budget, priorities, and savings goals, don’t be afraid to share this information with friends and family. While you don’t have to delve into the intricate details of your finances every time you decline a social invitation, you can say that you’re trying to spend less and be better about managing your money. You might also talk about some specific goals you’re trying to achieve. Being honest in this way can help make it easier to decline costly invites and keep you accountable to your plans.

Suggest Alternatives

When someone in your circle suggests an outing that doesn’t work with your budget, consider suggesting alternative options. For example, if you can’t swing an expensive brunch, you might suggest a picnic in the park. Or if your friend group wants to spend the afternoon shopping, see if you can entice them to go hiking instead. The idea is to find some simple, wallet-friendly ways to have fun and stay connected without sacrificing your financial health.

Find Allies

Sticking to a budget can be a lot easier when you have a supportive community — or even just one or two allies — who are on the same financial page. If you can’t find any good budgeting buddies in your circle, you might search the #loudbudgeting hashtag on your social media channels to find others who are blazing the same path. This can help you build a community of people who can hold you accountable and cheer you on as you hit your goals.

Recommended: 7 Different Types of Budgeting Methods

The Takeaway

Loud budgeting promotes being more honest about your financial circumstances and goals, rather than accepting expensive invites out of fear of being a wet blanket and then dealing with the aftermath. While it can be challenging to speak your truth, being vocal about your budget can strengthen your connections and help you stay committed to your financial health — not just while it’s the latest trend on social media, but throughout your adult life.

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FAQ

How can I start loud budgeting without oversharing?

While loud budgeting involves being open about your financial situation, you don’t have to share sensitive details about your finances with everyone you know. Rather than lay out the specifics of your income and monthly bills, you can simply say that you are working toward a particular goal (like paying off your student loans or saving for a home) and trying to be more responsible about spending, saving, and managing your money. That can help explain why you are declining invitations to, say, pricey meals out or weekends away.

Does loud budgeting work for all income levels?

Yes, loud budgeting can be effective for all income levels, as it primarily involves being open about your financial goals and priorities with those close to you. While higher earners may be focused on wealth building and investment strategies, lower-income loud budgeters might share how they are working towards being free of credit card debt, building an emergency fund, or saving for a down payment on a home.

What apps or tools can help with loud budgeting?

Any budgeting app that helps you make better spending decisions can assist you with loud budgeting. Even better if the app allows you to track and share your progress with others. You might consider the tools your bank offers for budgeting. Other options include YNAB (You Need a Budget), which can help you create a plan for every dollar you earn; Goodbudget, which digitizes the “envelope system” of budgeting and allows you to share your budget categories with family or friends, or Honeydue,which helps couples sync bank accounts, credit cards, and more for easier viewing of your financial picture.

Photo credit: iStock/Jacob Wackerhausen

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SOBNK-Q324-036

Sep

2024

What Is the Reverse Budgeting Method?

By Julia Califano | Budgeting & Goals, Family Finances, money | Comments Off

The reverse budgeting method is an approach that prioritizes savings. Budgets typically start by looking at monthly bills and expenses and allocating whatever is left over to saving. Reverse budgeting turns this approach on its head — it considers savings first and spending second.

Also known as the “pay yourself first” method, reverse budgeting starts by allocating a certain amount of your monthly income to your savings goals (such as retirement or an emergency fund). Whatever is left over after that is how much you have to spend. Essentially, it involves pretending that your paycheck is smaller than it actually is.

If your top goal is saving or you’ve tried budgeting in the past without complete success, the reverse budget might be for you. Here’s what reverse budgeting means and how it works.

Key Points

• Reverse budgeting prioritizes savings by allocating a portion of income to savings goals first, then spending the remainder on other expenses.

• Reverse budgeting simplifies budgeting since you can focus on saving a predetermined amount and then spend the rest as needed or desired.

• The reverse budgeting method can help achieve financial goals faster and allows guilt-free spending within remaining income limits.

• Reverse budgeting may not be ideal for those with high-interest debt or irregular income.

• Automating savings and periodically reassessing the budget are key steps to making reverse budgeting work effectively.

Reverse Budgeting Explained

The reverse budgeting method prioritizes setting money aside for your savings and investing goals. This might include building an emergency fund, saving for a new car or down payment on a house, or investing for retirement. Once that money has been set aside, the rest of your income can be used to cover your living expenses.

Reverse budgeting usually involves setting up automatic contributions to savings, typically on payday. As a result, the money leaves your bank account before you get a chance to spend it. That’s why this method is also known as the “pay yourself first” approach.

How Reverse Budgeting Differs from Traditional Budgeting

Making a budget typically involves listing all of your monthly expenses and assigning a portion of income to each category (e.g., housing, groceries, transportation). The goal is to ensure that expenses don’t exceed income, and any leftover funds can be saved or invested. This approach often requires meticulous tracking and discipline to avoid overspending in any category.

By contrast, reverse budgeting starts by looking at your financial goals and the things you want to save for. It helps you determine how much you need to put aside each month to accomplish them. You then subtract that sum from your monthly pay; what’s left is how much you have to spend on everything else.

Steps to Create a Reverse Budget

Creating a reverse budget tends to be less complicated than setting up other types of budgets. It doesn’t require establishing spending categories and totals for how much you will spend on each. That said, there are a few steps involved. Here’s a look at how to do a reverse budget.

1. Assess Your Spending

To know how to set your savings goals, you’ll need to get a general sense of your current cash flow. You can do this by pulling the last few months of financial statements, then adding up how much is coming in and going each month on average. You might also want to make a list of your essential monthly expenses, as well as how much you tend to spend each month on nonessentials.

This type of spending audit will give you a clear picture of your spending patterns. It can also help you identify any discretionary spending you may be able to reduce to accommodate your savings goals. There are also budgeting apps that can do a lot of this work for you. Start by seeing what your financial institution offers that could help with this process.

2. Identifying Your Savings Goals

Next, you’ll want to think about your savings goals. These might include building an emergency fund, saving for a down payment on a house, doing a home renovation, going on a vacation, paying for a wedding, contributing to retirement accounts, or any other financial objectives.

You’ll likely want to set your savings goals in terms of dollars as well as the timeframe within which you want to work.

3. Allocate Income to Savings

Once you’ve identified your savings goals, you might pick just a couple to start with. For each, as noted, you’ll have determined how much money you’ll need, along with a realistic timeline for reaching the goal. With that information in mind, you can then allocate a portion of your income to each goal.

For example, if you want to save $5,000 for an emergency fund over the next year, you would need to save approximately $417 per month.

As you go through this step, you’ll want to be realistic about how much you can afford to siphon off your paycheck for savings. It’s important to have enough spending money left over to cover your bills and also have some fun.

Recommended: 10 Most Common Budgeting Mistakes

4. Automate Your Saving

To ensure consistency and reduce the temptation to spend your savings, it’s a good idea to automate the saving process. If you have a 401(k) at work, you can do this by letting your employer know how much of your paycheck to put into your retirement account.

For shorter-term goals, consider setting up an automatic transfer from your checking account to a savings account for the same day each month, ideally right after you get paid. Some employers even allow you to split up your direct deposit into two different bank accounts.

5. Make Adjustments as Needed

Once you’re living on your reverse budget, you may find that you don’t have enough wiggle room to comfortably cover your bills and everyday spending. Or you might realize that you can afford to put more money towards savings and, in turn, reach your goals faster. Either way, it’s important to periodically reassess your reverse budget and, if necessary, make some adjustments in your savings rate.

This is especially important as your life circumstances and financial goals change. If you get a raise, for example, consider increasing your savings rate (this can help you avoid lifestyle creep). Conversely, if you encounter unexpected expenses, you may need to temporarily reduce your savings rate to accommodate these costs.

Pros and Cons of Reverse Budgeting

As with any financial strategy, reverse budgeting has its advantages and disadvantages. Understanding these pros and cons can help you determine if this method is right for you.

Pros of Reverse Budgeting

First, consider the upsides of reverse budgeting:

• It can help you reach your goals faster: One of the main advantages of reverse budgeting is that it takes savings right off the top of your paycheck. This can help you build an emergency fund, save for a major purchase, or invest for retirement more quickly than traditional budgeting methods.

• Low maintenance: Reverse budgeting simplifies the budgeting process. Instead of meticulously tracking every expense category, you focus on saving a predetermined amount and spend the remainder as you see fit. This low-maintenance approach can be particularly appealing for those who find traditional budgeting too time-consuming and/or restrictive.

• Spending without guilt: With reverse budgeting, you can enjoy spending within the limits of your remaining income. Since your savings goals are already met, you have the freedom to spend on discretionary items without worrying that you are derailing your future progress.

In these ways, the reverse budgeting method can help you prioritize savings and achieve financial security.

Cons of Reverse Budgeting

Next, keep these potential downsides of reverse budgeting in mind:

• It could lead to overspending: Since reverse budgeting doesn’t require setting up spending categories and strict spending limits for each one, you could end up overspending on certain things. Then, you might have to dip into savings to cover the shortfall.

• You might be better off focusing on debt: If you have high-interest debt, paying down those balances could provide a better return on investment than saving or investing. If this is the case, a more traditional budgeting approach that prioritizes debt repayment might be more effective.

• Not ideal for people with variable income: Reverse budgeting generally depends on earning a set amount of money each month. For people with variable income, such as freelancers or those with seasonal work schedules, maintaining a fixed savings rate could be challenging.

The Takeaway

Reverse budgeting, also known as the “pay yourself first” method, prioritizes saving and simplifies the entire budgeting process. By automating saving, it also reduces the chance that you’ll spend money today that you were intending to set aside for the future. However, reverse budgeting may not be the best approach if you have a lot of high-interest debt or your income fluctuates. You might be better off with another budgeting technique.

Choosing the right banking partner can also help you budget more effectively.

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 does reverse budgeting help with saving money?

Reverse budgeting helps with saving money by prioritizing savings over expenditures. With this approach, you allocate a set percentage or amount of your income to savings first and then use the remaining amount to cover your expenses. This ensures that you don’t spend money you were planning to use for future goals.

Can reverse budgeting work for irregular income?

Reverse budgeting can be challenging for those with irregular income, such as gig workers. Here’s why: It relies on setting aside a certain amount of money into savings each month — before other expenses are paid. If your income fluctuates significantly, it may be difficult to meet your savings goal monthly.

However, you may be able to make it work by taking a flexible approach. For example, you might set a minimum savings rate based on your lowest expected income and then, during higher-income months, increase your savings contributions. Building an emergency fund can also help smooth out the fluctuations.

Is reverse budgeting suitable for paying off debt?

Reverse budgeting isn’t ideal for paying off debt, since it focuses on saving first, which can divert funds from debt repayment. If you have significant high-interest debt, prioritizing debt repayment might provide better financial benefits in the long run compared to the returns from savings or investments.

However, you might consider a hybrid approach — allocating a portion of your income to debt repayment and another to savings, ensuring you address both goals.

Photo credit: iStock/Goodboy Picture Company

SOBNK-Q324-035

Sep

2024

How Much Does Tree Removal Cost?

By Julia Califano | Budgeting & Goals, Home Ownership, personal_loan | No Comments

Large trees, even landmark ones, sometimes have to be removed when they’re dead, dying, or growing too close to other structures. How much it costs to cut down a tree varies depending on where you live, the tree’s height and diameter, how accessible it is, and other factors. On average, you can expect to pay $750 to remove a tree.

While tree removal is costly, it’s often better to spend the money up front rather than risk a tree falling and causing injury or damage to nearby property. Keep reading to find out what tree removal costs and the complications that may drive up your price.

Average Tree Removal Cost

Removing a tree can range anywhere from $150 to $2,000, with the average landing at $750, according to Angi. Shorter trees will come in on the low end of the range, while larger trees can run between $800 to $2,000. A tall, hard-to-access tree can cost even more — as much as $10,000.

If you have multiple trees to remove, the costs can really add up. While many people throw it on a credit card, that can be an expensive solution. If you need financing, you might consider getting a home equity line of credit (HELOC), which allows you to borrow against the equity in your home as you need it.

Another option is to take out a personal loan for home improvement. These loans don’t require equity in your home or collateral, and many lenders offer same- or next-day funding. However, rates can be higher than home equity options.

Cost of Tree Removal by Type

A tree’s size generally impacts cost more than type. However, some species of trees are not as dense or as compact as others, making them easier (and less expensive) to remove. Determining the type of tree you need to have removed can also give you an idea of its height at maturity and provide insight into potential costs. Here’s a look at costs based on tree type.

Tree Type	Average Removal Cost
Oak	$200–$2,000
Cedar	$250–$1,500
Pine	$250–$1,500
Maple	$250–$2,000
Ash	$250–$1,800
Palm	$650–$1,500
Aspen	$1,000–$1,800

Recommended: Typical Landscaping Costs

Factors That Affect Tree Removal Cost

The cost of tree removal typically includes cutting down the tree, cutting it into pieces, and removing the debris. How complicated and time-consuming this process will be determines the price.

To find the right contractor, you may want to call multiple tree removal services and compare quotes on the project. Make sure to ask what exactly their price includes and what extra services or fees may come up.

Here’s a look at some key factors that can affect your tree removal quote.

Size of the Tree

Generally the larger the tree, the higher the cost. Price can make a particularly big jump when a tree exceeds 80 feet tall. At this point, the removal company will need a crane to access the highest branches, along with additional staff to work the machine. This can add as much as $500 to the job.

Here’s a look at tree removal price by tree size:

Size of Tree	Average Removal Cost
Up to 30’	$150–$450
30–60’	$450–$1,200
60–80’	$800–$1,500
Over 80’	$1,000–$2,000

A Tree That Has Already Fallen

Generally, a fallen tree will cost considerably less to remove than one that’s still standing, since the team doesn’t need to do any climbing or careful cutting. It’s just a matter of cutting it up, then removing the debris. You can expect to pay just $75 to $150 to remove a fallen tree.

That said, you generally don’t want to let a dying tree get to the point of falling, as it can do damage to nearby property and/or harm someone standing nearby.

Accessibility

If the tree you need to have removed is in a hard-to-reach or unsafe area, it can make the job harder for the team. This can add 25% to 50% to the total cost of removal. For example, a tree that has heavy branches near your home or is close to the local power lines takes more time and care to remove. A tree that is hard to get to due to obstacles can also be more costly. If possible, consider taking down fences or other structures in the way to reduce costs.

Number of Trees Needing Removal

The more trees you need to have removed, generally the higher the cost. However, you’ll typically save on the cost per tree, since the workers and equipment are already on your property. When multiple trees need to come down, some companies will charge by the acre instead of by specific tree count. Depending on how many trees cover the area, this can cost anywhere from $500 to $6,000 per acre.

Emergency Tree Removal

If a storm has caused a tree to lean perilously close to your home, you’ll want to bring in a tree removal company as soon as possible. Emergency tree removal generally costs more than standard tree removal, particularly after a storm, when these services are in high demand. A particularly urgent tree situation could run as high as $5,000.

Your homeowners insurance may cover the cost of tree removal relating to storm damage, so it’s worth checking your policy or calling them to find out. If a tree has already landed on your home or car, you may want to reach out to your insurer before getting it removed, since they may need to send an agent to assess the situation.

Cleanup and Debris Removal

Another factor that can impact the cost of tree removal is how you choose to handle the debris and stump. Options for debris removal typically include hauling away the tree (which runs around $70), putting it through a chipper so you can use it as mulch (on average, $95), or splitting it into firewood for your home (around $70).

If you don’t want to be left with a stump, the company will typically grind it up using a specialized stump grinder. The cost is around $100 to $150 for the first stump, and $50 for each additional stump.

Recommended: Five Curb Appeal Ideas for Your House

How to Determine If a Tree Should Be Removed

The biggest danger unhealthy trees pose is falling — onto people, homes, cars, or power lines. But even a healthy tree may need to be removed if it’s growing too close to a house or electrical wires. If you’re considering putting your home on the market, removing a threatening tree can give potential buyers one less thing to worry about.

Here are some telltale signs you might have to remove a tree:

• It’s no longer growing leaves

• Branches drop randomly (not related to high winds or storms)

• It’s been significantly damaged by a storm

• It has dead or dying branches

• It’s growing too close to your home or other structures

• The trunk is rotten and hollow

Generally, the first step is to hire a professional arborist to give you an opinion on your tree’s health. Some conditions may look concerning but not necessarily be damaging to the tree. Also, many cities require an arborist’s evaluation before you’re allowed to remove a tree.

How Much Does DIY Tree Removal Cost?

Tree removal can be dangerous and is generally best left to the professionals. If you have the experience and skills to do a DIY tree removal, however, you may be able to save some money. You’ll need several items for safety, including gloves, protective goggles, steel-toed boots, a hard hat, chainsaw chaps, and earplugs, which can run $200 to $300. In addition, you’ll need a chainsaw (which can run $50 to $150) and felling wedges (around $20 for six).

If you don’t have the necessary gear, you can expect to invest anywhere from $260 to $470 for a DIY tree removal. However, the risk involved may not be worth the cost savings. Tree removal professionals have access to tools and equipment that make the job significantly safer, including tree-rigging ropes, blocks and pulleys, hooks, ladders, lowering devices, and specialized saws.

The Takeaway

On average, homeowners pay $750 for a single tree removal. Your price will vary depending on the size of the tree, its accessibility, how many trees you’re getting removed, and what you want to do with the debris and stump.

A good first step is to hire an arborist to evaluate your trees and make an informed recommendation about how to manage any risk. If you learn that one or more of your trees needs to come down, it’s a good idea to get quotes from at least three tree removal companies. Generally, attempting DIY tree removal is not a good idea.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.

SOPL-Q324-037

Sep

2024

Using Collateral on a Personal Loan

By Maureen Shelly | Budgeting & Goals, Debt Payoff, personal_loan | No Comments

A “secured” personal loan is backed by an asset, called collateral, such as a home or car. An unsecured loan, on the other hand, is not collateralized, which means that no underlying asset is necessary to qualify for financing. Whether someone should pursue a secured or unsecured loan depends on a number of factors, such as their credit score and whether they have assets to put up as collateral.

If you’re planning to take out a loan, it’s important to do your research and find one that best fits your needs and financial situation. Learn more about when someone can and should take out a collateral loan.

Table of Contents

Why Secured Loans Require Collateral
Fixed Rate vs Variable Rate Loans
Installment Loans vs Revolving Credit
What Can Be Used as Collateral on Personal Loans?
Pros & Cons of Using Collateral on a Personal Loans
Qualifying for a Personal Loan

Why Secured Loans Require Collateral

With a secured personal loan, a lender is typically able to offer a larger amount, lower interest rate, and better terms. That’s because if the loan isn’t repaid as agreed, the lender can take possession of the collateral. This is not the case with an unsecured personal loan.

Collateral allows secured personal loans to be offered to a wider range of consumers, including those who are considered higher risk. The reason is that the lender’s risk is offset by the borrower’s assets.

Fixed Rate vs Variable Rate Loans

There are other types of personal loans beyond secured versus unsecured. One important distinction is whether a loan has a fixed or variable interest rate. A fixed rate is just as it sounds: The interest rate stays fixed throughout the duration of the loan’s payback period, which means that each payment will be the same.

The interest on a variable-rate loan, on the other hand, fluctuates over time. These loans are tied to a benchmark interest rate — often the prime rate — that changes periodically. Usually, variable rates start lower than fixed rates because they come with the long-term risk that rates could increase over time.

Installment Loans vs Revolving Credit

A personal loan is a type of installment loan. These loans are issued for a specific amount, to be repaid in equal installments over the duration of the loan. Installment loans are generally good for borrowers who need a one-time lump sum.

An installment loan can be either secured or unsecured. A mortgage — another type of installment loan — is typically a secured loan that uses your house as collateral.

Revolving credit, on the other hand, allows a borrower to spend up to a designated amount on an as-needed basis. Credit cards and lines of credit are both forms of revolving credit. If you have a $10,000 home equity line of credit (HELOC), for example, you can spend up to that limit using what is similar to a credit card.

Lines of credit are generally recommended for recurring expenses, such as medical bills or home improvements, and also come in secured and unsecured varieties. A HELOC is often secured, using your house as collateral.

What Can Be Used as Collateral on Personal Loans?

Lenders may accept a variety of assets as collateral on a secured personal loan. Some examples include:

House or Other Real Estate

For many people, their largest source of equity (or value) is the home they live in. Even if someone doesn’t own their home outright, it is possible to use their partial equity to obtain a collateral loan.

When a home is used as collateral on a personal loan, the lender can seize the home if the loan is not repaid. Another downside is that the homeowner must supply a lot of paperwork so that the bank can verify the asset. As a result, your approval can be delayed.

Bank or Investment Accounts

Sometimes, borrowers can obtain a secured personal loan by using investment accounts, CDs, or cash accounts as collateral. Every lender will have different collateral requirements for their loans. Using your personal bank account as collateral can be very risky, because it ties the money you use every day directly to your loan.

Vehicle

A vehicle is typically used as collateral for an auto title loan, though some lenders may consider using a vehicle as backing for other types of secured personal loans. A loan backed by a vehicle can be a better option than a short-term loan, such as a payday loan. However, you run the risk of losing your vehicle if you can’t make your monthly loan payments.

Awarded Best Online Personal Loan by NerdWallet.
Apply Online, Same Day Funding

Pros and Cons of Using Collateral on a Personal Loans

Using collateral to secure a personal loan has pros and cons. While it can make it easier to get your personal loan approved by a lender, it’s important to review the loan terms in full before making a borrowing decision. Here are some things to consider:

Pros of Using Collateral

• It can help your chance of being approved for a personal loan.

• It can help you get approved for a larger sum, because the lender’s risk is mitigated.

• It can help you secure a lower interest rate than for an unsecured loan.

Cons of Using Collateral

• The application process can be more complex and time-consuming, because the lender must verify the asset used as collateral.

• If the borrower defaults on the loan, the asset being used as collateral can be seized by the lender.

• Some lenders restrict how borrowers can use the money from a secured personal loan.

Qualifying for a Personal Loan

Common uses for personal loans include paying medical bills, unexpected home or car repairs, and consolidating high-interest credit card debt. With secured and unsecured personal loans, you’ll have to provide the lender with information on your financial standing, including your income, bank statements, and credit score. With most loans, the better your credit history, the better the rates and terms you’ll qualify for.

If you’re considering taking out a loan — any kind of loan — in the near future, it can be helpful to work on building your credit while making sure that your credit history is free from any errors.

Shop around for loans, checking out the offerings at multiple banks, credit unions, and online lenders. Each lender will offer different loan products that have different requirements and terms.

With each prospective loan and lender, make sure you understand all of the terms. This includes the interest rate, whether the rate is fixed or variable, and all additional fees (sometimes called “points”). Ask if there is any prepayment fee that will discourage you from paying back your loan faster than on the established timeline.

The loan that’s right for you will depend on how quickly you need the loan, what it’s for, and your desired payback terms. If you opt for an unsecured loan, it might allow you to expedite this process — and you have the added benefit of not putting your personal assets on the line.

The Takeaway

Using collateral to secure a personal loan can help borrowers qualify for a lower interest rate, a larger sum of money, or a longer borrowing term. However, if there are any issues with repayment, the asset used as collateral can be seized by the lender.

The right choice for you will depend on your financial situation, including factors like your credit score and history, how much you want to borrow, and what assets you can use as collateral.

Looking for a personal loan that doesn’t require collateral? Check out SoFi Personal Loans, which have competitive rates and no-fee options. Apply for loans from $5K to $100K.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

SOPL-Q324-030

Sep

2024

The Cost of Being in Someone’s Wedding

By Maureen Shelly | Budgeting & Goals, Life & Career, personal_loan | No Comments

It’s an honor to be asked to be a member of a friend’s or family member’s wedding, but it also comes with a cost. Between buying/renting attire, attending pre-wedding events, and purchasing gifts, it can run around $1,650 to be a bridesmaid and $1,600 to be a groomsman.

Just one wedding can take a bite out of your budget, not to mention the familiar scenario of attending several weddings in one year. We’ll help you understand the expenses that go into being a part of the big day so you can prepare and budget well in advance.

How Much Does It Cost To Be a Bridesmaid?

While the average bridesmaid can spend $1,650 to be a part of the bridal party, costs vary significantly depending on location of the wedding, number of events, and dress code. Before you agree to participate as a bridesmaid (or maid of honor), it’s important to consider what costs you may be responsible for.

Recommended: What Are Personal Loans Used For?

The Dress

Etiquette dictates that bridesmaids cover the cost of their dress, shoes, and any accessories the bride has selected for them to wear. According to The Knot’s 2023 Real Weddings Study (which surveyed nearly 10,000 couples who wed in 2023), the average bridesmaid dress cost is $130 per person.

You’ll likely also be responsible for any alterations, which can run from $45 to $150, depending on what adjustments are needed. While there are ways you can save — such as renting a dress — that decision is often not up to the bridesmaid.

Hair and Makeup

Traditionally, if the bride requests everyone in the party have their hair and makeup done in a certain style, she will cover the cost. If, on the other hand, bridesmaids are given the option to opt in or do their own thing, the bridesmaids generally cover the cost of getting glammed up for the big day. The average cost of wedding hair for bridesmaids is $95, tack on another $90 for makeup.

Bachelorette Party

Bachelorette parties have gotten more elaborate in recent years. Typically, every attendant pays for their own expenses, while also splitting the cost to cover most, or all, of the bride’s expenses.

According to The Knot, the average cost of a bachelorette party in 2023 was $1,300 per person. Of course, the cost of attending a bachelorette party varies significantly depending on the type, location, and length of the event. Celebrations that last between one to two days cost, on average, $1,135 per attendee, while those that go on for three to four days can run $1,630. Also, the farther you need to travel to the event, the more you’ll need to spend. Guests who travel to the bachelorette party locale by plane spend an average of $2,000, while those who travel by personal car spend an average of $900 to attend the event.

Wedding Travel and Accommodations

For the wedding itself, the bridal party is typically expected to cover the costs of travel and accommodations, which can vary significantly depending on the location of the event and length of stay (with members of the bridal party possibly needing to arrive early or stay late).

On average, wedding guests who need to travel outside of their town or city to attend a wedding spend around $456 on travel and accommodations. You could end up spending significantly more if you’re covering travel costs for yourself and other family members, or if the wedding involves long-distance travel. When the wedding is local, travel costs are likely to be minimal.

Gifts

Bridesmaids traditionally give shower and wedding gifts, which add to the cost of being in someone’s wedding. According to The Knot, the average bridesmaid bridal shower gift cost between $50 and $75, while the average bridesmaid wedding gift lands at around $170. A group gift may allow you to spend less while giving something nicer than you could afford on your own.

What Does the Maid of Honor Pay For?

Being the maid of honor generally doesn’t cost more than being a bridesmaid, but it does come with additional duties and a greater commitment of time. Generally, the maid of honor is there to assist with any tasks she can take off the bride’s to-do list. They may be involved in planning pre-wedding events and generally take charge of communicating with other members of the wedding party.

In some cases, the maid of honor might plan the shower and help cover the costs. However, these days, the cost of a wedding shower is more commonly covered by family.

Recommended: How to Save for Your Dream Wedding

What Do Groomsmen Pay for?

Groomsmen typically pay for their wedding attire, the cost to attend a bachelor party (which may include sharing the cost for the groom’s attendance), the cost to attend the wedding (which might involve travel and accommodations), as well as a wedding gift. Here’s a look at what it all adds up to.

Formalwear or Tuxedo Rental

Just like bridesmaids generally pay for their dresses, groomsmen typically pay for their wedding day clothing. This might be a suit, tuxedo, shirt and slacks, or another type of attire selected by the groom or couple. Typically the groomsmen’s attire is purchased or rented, but in some cases, a groom will let their wedding party choose from their own wardrobe, which can be a more affordable option.

If you need to rent a tux for the event, costs vary depending on what style, design, brand, and accessories you’ll need to wear. On average, you can expect to pay between $100 and $250 to rent a tux for the standard period.

Bachelor Party

Groomsmen normally take part in planning the bachelor party and may cover their own costs and the groom’s. According to a recent survey by The Knot (which included roughly 500 respondents who attended, or plan to attend, a bach party in 2023), the average cost of a bachelor party is $1,400 per person. The survey also found that the average bachelor celebration lasts for two days, and roughly one-fifth of attendees are flying to the party destination. Indeed, 29% of those surveyed are actually spending $2,000 (or more) to celebrate in a major metro city.

For guests who drove or were planning to drive to the event’s location, spending was less — averaging $1,000 per attendee.

Wedding Gift

Groomsmen are generally expected to give the couple a wedding gift, though they are not expected to spend more on a gift than other guests do. According to The Knot’s 2023 Real Wedding Guest Study, wedding party members spend an average of $160 on their gifts. If you want to save money, consider chipping in for a group gift with other wedding party members.

The Takeaway

It’s not unusual for a bridesmaid to spend $1,650, including the dress, bachelorette party, and gifts. Groomsmen may spend just a little bit less ($1600) for a rental tux, bachelor party, and wedding gift. Keep in mind, however, that the cost to be in someone’s wedding can run much higher or lower, depending on the location and style of wedding.

If you haven’t saved up enough money to be in a friend’s or family member’s wedding in advance, there are better options than throwing it all on a credit card. Personal loans are designed to help cover life’s big events. SoFi Personal Loans offer low fixed rates, no-fee options, and a quick and easy online application process. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

SOPL-Q324-038

What Is Loud Budgeting?

The Psychology of Loud Budgeting

Benefits of Practicing Loud Budgeting

Reduced Financial Stress

Improved Financial Transparency

Enhanced Support System

Earn up to 4.00% APY with a high-yield savings account from SoFi.

How To Implement Loud Budgeting in Your Life

Determine Your Priorities

Build a Basic Budget

Be Honest With Others

Suggest Alternatives

Find Allies

The Takeaway

FAQ

How can I start loud budgeting without oversharing?

Does loud budgeting work for all income levels?

What apps or tools can help with loud budgeting?

What Is the Reverse Budgeting Method?

Reverse Budgeting Explained

How Reverse Budgeting Differs from Traditional Budgeting

Earn up to 4.00% APY with a high-yield savings account from SoFi.

Steps to Create a Reverse Budget

1. Assess Your Spending

2. Identifying Your Savings Goals

3. Allocate Income to Savings

4. Automate Your Saving

5. Make Adjustments as Needed

Pros and Cons of Reverse Budgeting

Pros of Reverse Budgeting

Cons of Reverse Budgeting

The Takeaway

FAQ

How does reverse budgeting help with saving money?

Can reverse budgeting work for irregular income?

Is reverse budgeting suitable for paying off debt?

How Much Does Tree Removal Cost?

Average Tree Removal Cost

Cost of Tree Removal by Type

Factors That Affect Tree Removal Cost

Size of the Tree

A Tree That Has Already Fallen

Accessibility

Number of Trees Needing Removal

Emergency Tree Removal

Cleanup and Debris Removal

How to Determine If a Tree Should Be Removed

How Much Does DIY Tree Removal Cost?

The Takeaway

Using Collateral on a Personal Loan

Why Secured Loans Require Collateral

Fixed Rate vs Variable Rate Loans

Installment Loans vs Revolving Credit

What Can Be Used as Collateral on Personal Loans?

House or Other Real Estate

Bank or Investment Accounts

Vehicle

Awarded Best Online Personal Loan by NerdWallet. Apply Online, Same Day Funding

Pros and Cons of Using Collateral on a Personal Loans

Pros of Using Collateral

Cons of Using Collateral

Qualifying for a Personal Loan

The Takeaway

The Cost of Being in Someone’s Wedding

How Much Does It Cost To Be a Bridesmaid?

The Dress

Hair and Makeup

Bachelorette Party

Wedding Travel and Accommodations

Gifts

What Does the Maid of Honor Pay For?

What Do Groomsmen Pay for?

Formalwear or Tuxedo Rental

Bachelor Party

Wedding Gift

The Takeaway

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