Budgeting & Goals Archives | Page 94 of 186

Nov

2023

9 Money Hacks To Try This Year

By Julia Califano | Budgeting & Goals, Financial Independence | No Comments

Financial wellness doesn’t have to be complicated. While you’ll eventually want to work up to a financial plan that includes a detailed budget, savings goals, and a retirement plan, there are small things you can do today to set you off on the right foot. What follows are nine hacks for money that can help you get organized, save more, knock down debt, and master the basics of personal finance.

9 Money Hacks to Help Save You Money

These simple moves can help you boost your financial health, reach your goals, and avoid financial pitfalls like impulsive spending and unmanageable debt spirals.

1. Use Multiple Savings Accounts

Having a different savings account for each one of your goals — whether it’s a new car, a down payment on a house, or even a big vacation — can be a great way to keep track of your progress. If you only have one account, it can be difficult to know what money is earmarked for which goal. For example, if you have $15,000 in your savings account, it may be hard to track that you have $5,000 saved for an emergency fund and $10,000 for a home purchase.

Separate savings accounts makes it easier to prioritize the goals you’re eager to reach, allowing you to fund those accounts first. It also decreases the chances you will raid the account to cover another expense. If an account is clearly labeled Emergency Fund, you may think twice about using it for a trip to Tulum.

And since many banks now offer savings accounts that feature the same interest rate, no matter how low your balance, you don’t need to put all your savings in the same account to get the highest yield.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

2. Ditch Your Low-Interest Savings Account

Is there anything better than money you don’t have to work for? The interest you’re paid for keeping money in a bank account is basically that. If you’re still using your first savings account, however, chances are you’re getting a low interest rate.

Right now, the best online savings account interest rates are around 5%. Traditional brick-and-mortar banks, on the other hand, generally offer rates that are close to the national average, which is currently 0.46%. If you have a $10,000 savings balance, choosing an account that pays 5% will earn you about $500 in a year. If it stays in a bank account that pays 0.40% APY, you would earn about $40. The difference increases the more you deposit and the longer you keep the money in the account.

Failing to open a high-interest savings account means you’re giving up free money.

3. Put Saving on Autopilot

Automating your savings is a great way to separate your savings from your spending without any extra effort on your part. If you wait to see what you have left at the end of the month to make a manual transfer to savings, you may forget or, worse, you may have nothing left to move.

There are two ways to automate your savings: One is to split up your direct deposit and funnel part of it into a savings account; the other is to set up a recurring transfer from your checking account into a savings account for the same day each month (ideally right after you get paid). If you have different savings accounts for different goals, you can choose to have a set amount for each account.

4. Pay Down High-Interest Debts

Credit card annual percentage rates (APRs) are now averaging a record 28.93%, up from 26.72 percent in 2022. To whittle down high-interest debt, consider making at least one extra payment on your credit cards per month. If you have multiple balances, here are two ways to knock them down:

• The snowball method With this approach, you make your extra payment on your smallest debt, while maintaining minimum payments on the others. When that debt is paid off, you focus on paying off the next-smallest debt, and so on.

• The avalanche method Here, you put your extra payment towards the debt with the highest interest rate, while making minimum payments on the others. When that debt is paid off, you focus on the debt with the next-highest rate, and so on.
The money you save in interest payments can then go towards saving (and earning interest).

5. Audit Your Subscriptions

There’s a good chance you are paying monthly for things you no longer need or use. To find out, review your credit card or bank statement to see what subscriptions services you’re paying for each month. Do you have cable, but only watch streaming services like Netflix and Hulu? Are you paying for streaming services you never, or rarely, watch? You might also audit your music services — if you are paying for more than one, you might keep your fave and get rid of the others.

The monthly fee for each streaming service may seem small but, when you pay it every month, year after year, it can seriously add up.

6. Put a Free Budgeting App on Your Phone

Keeping tabs on how much is going in and going out of your accounts is crucial to financial wellness. But who wants to spend hours coming through statements? A budgeting app does the work for you, and many are free (at least for the basic service).

Popular budgeting apps, like Goodbudget, EveryDollar, and PocketGuard, allow you to connect with your financial accounts (including bank accounts, credit cards, and investment accounts) and give you a bird’s eye view of your finances. Right from your phone, you can see what’s in your bank account, your current credit card balance, what you’re spending the most money on, how your spending compares to last month, and more. This can be eye-opening and help you make smarter financial decisions.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

7. Practice the 3-Day Rule

Online shopping has made it easier than ever to impulse buy. You’re only one click away from a new jacket, blender, or television. So try this smart spending hack: Whenever you see something you want to buy, either online or in-person, DO NOT buy it that day. Put the purchase on pause for at least three days. Tell yourself that if, after three days, you still want the item, and you can afford it, you’ll buy it. This gives you time to reflect. You may well decide that you don’t need or want the item that badly. If you’re worried about missing a “one-day” or “flash” sale, don’t — retailers run sales all the time.

8. Use Cash

This may sound counterintuitive, but spending cash can actually help you save money. The reason: When you spend in cash, you actually have to physically give up your money when you spend it, unlike with a credit or debit card.

You might try taking out a set amount of money for discretionary spending for the week, and when the money is done, you’re done spending. Or, consider using the envelope budgeting system, where you take out a certain amount of cash for the week and divide it into envelopes for food, gas, etc. As you see the money go down in each envelope, you’ll have to think hard about every purchase.

9. Gradually Boost Retirement Savings

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You may have heard that you “should” be putting 15% of your income into your 401(k) or other retirement fund each year. It’s a solid goal. But for many young people, it may not be remotely realistic. That said, you shouldn’t give up on the whole idea. Why not try baby steps? You might start by putting just 1% of each paycheck into your retirement fund, then increase it by 1% every three to six months.

While 1% is a small percentage of your annual earnings today, after 20 or 30 years it can make a big difference in your account balance when you retire. That’s because the longer you give your money a chance to grow, the better.

The Takeaway

Getting a better handle on your finances may perennially be on your to-do list. The problem is that this goal can seem too vague and too overwhelming to even know where to begin. The good news is that you don’t have to overhaul your personal finances overnight. Simply adopting some smart money habits (or hacks) can snowball into long-term financial stability and wealth. And there’s no better time to start than today.

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.

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.

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

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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Nov

2023

The Investor’s Guide to Navigating 401(k) Fees

By Pam O’Brien | Budgeting & Goals, invest, Preparing for Retirement | No Comments

Approximately 60 million Americans have 401(k) plans through their employer. But many of them aren’t aware of the fees these plans charge. In fact, the majority of investors have no idea how much they’re paying in 401(k) fees, according to a 2022 survey.

Learning about these fees is important because 401(k) fees can add up to tens of thousands of dollars over time and cut into your retirement savings. That’s why you’ll want to find out what these fees consist of and how much they are.

Read on to learn more about 401(k) fees and the steps you may be able to take to help reduce them.

Understanding the Basics of 401(k) Fees

401(k) fees are charged by the provider of your 401(k) plan and the investment funds within the plan. There are three main types of 401(k) fees: investment fees, administrative fees, and service fees. Here’s what these fees cover.

Investment fees: Sometimes also referred to as the expense ratio, investment fees cover an investment’s operating and management costs. These fees are deducted from the investment’s performance and are generally expressed as a percentage.

Administrative fees: These are used to cover the management of your account, including record keeping, accounting, and customer service, among other things. They may be a flat fee or a percentage of the account’s total balance.

Service fees: These fees cover additional services related to your 401(k), such as taking out a 401(k) loan or using financial advisory services. You are only charged these fees if you use the services.

The Impact of Fees on Your Retirement Savings

According to the Investment Company Institute, the average 401(k) participant is in a plan with fees of 0.55%. That means the fees on the average 401(k) account balance of $141,542 would be approximately $778 a year. Over 20 years, that would add up to $15,560 in fees. Over 30 years, fees would total $23,340.

As you can see, this could significantly reduce your retirement savings. And, of course, the greater your account balance, the more fees you would pay.

The types of investments you make will also affect the fees you pay. For instance investments that are actively traded tend to have higher fees, while those that are passively traded typically have lower fees.

How to Interpret Fees on Your 401(k) Statement

Fees are included in your 401(k) statement or prospectus, as required by the U.S. Department of Labor. They may be listed as “Total Asset Based Fees,” “Total Operating Expenses,” or “Expense Ratios.”

Fees should be listed for each investment in your plan. For instance, if a fund had 1.25% of Total Operating Expenses, that means 1.25% of the fund’s assets are used to cover the fund’s operating expenses. So for every $1,000 invested in that fund, the operating expense fees are $12.50.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

How Your 401(k) Fees Stack Up

Once you find the fees in your 401(k) plan, you can determine how they compare to standard 401(k) fees. Here’s a look at what 401(k) fees generally are.

What Are Typical 401(k) Fees?

401(k) fees are based on such factors as the size of the plan, the number of employees in the plan, and the provider offering the plan. These fees can run anywhere from 0.5% to 2%. As mentioned earlier, the average 401(k) participant’s plan fees are approximately 0.55%.

The Significance of Expense Ratios and Industry Averages

You may hear the term “expense ratio” and wonder what it is. An expense ratio is how much you’ll pay over the course of a year to own a particular investment fund such as a mutual fund or an exchange-traded fund (ETF). This fee typically covers the cost of operating and managing the fund. In 2022, the average expense ratio for actively managed mutual funds was 0.66%.

Practical Ways to Minimize 401(k) Fees

While you can’t avoid 401(k) fees, there are some actions you can take to reduce their impact on your retirement savings.

Identifying and Reducing Excess Fees

The fee charged by the plan’s provider is a set fee, however, you may be able to lower the investment fees you pay. To do that, review the expense ratios for the different investment funds in the plan. Then, if it makes sense with your overall investment strategy, pick funds within the plan that have lower expense ratios and avoid funds with higher fees.

In addition, if you think the 401(k) fees charged by your plan are too high in general, speak to your human resources department and ask if they would consider switching to another 401(k) plan with lower fees. This may not be possible, but it doesn’t hurt to ask.

Addressing Hidden Fees in Your 401(k)

The fees in your 401(k) aren’t technically hidden. But they do go by names you may not be familiar with. Here’s how to spot them.

Tools for Uncovering Hidden Fees

The best way to find the fees in your 401(k) is to carefully read through your plan’s prospectus. You now know to look for investment fees or expense ratios, administration fees, and service fees. In addition, look for “12-b1” fees. You may find them fees listed under marketing and distribution. These fees are for the agent or broker who sold the 401(k) plan to your employer. 12-b1 fees are capped at 0.75% of a fund’s assets annually.

Understanding Revenue Sharing and Its Implications

Revenue sharing means adding non-investment fees to a fund’s operating expenses. A 12-b1 fee is one example of this. Revenue sharing fees typically pay for things like record keeping.

Not every 401(k) plan uses revenue sharing, and not all investment funds use them either. Revenue sharing tends to be more likely for actively managed funds rather than passively managed funds like index funds.

That means if you have more actively managed funds, you could be paying more than a colleague who has index funds.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with a traditional IRA. The money you save each year is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

How Fees Affect Your Retirement Savings Over the Long-Term

401(k) fees can add up over the years, substantially reducing your retirement savings. And one percentage point in the amount of fees you pay can make a big difference.

Case Studies: The Cumulative Effect of Fees Over Time

Let’s say two individuals work for different companies with different 401(k) plans. Person A has a 401(k) that charges 0.50% in fees, and Person B has a plan that charges 1% in fees. If they each invest $100,000 over 20 years with a 4% annual return, 401(k) fees would reduce the value of Person A’s retirement savings by $10,000, while Person B’s retirement savings would be reduced by almost $30,000.

Proactive Measures to Safeguard Your Retirement Funds

In order to minimize the impact of fees on your retirement savings, find out what fees your 401(k) charges. Also, look at the expense ratios for each fund in the plan and choose funds with lower expenses if you can.

In addition, if you leave your job and move to a new employer, you may pay additional 401(k) fees if you keep your old plan with your former employer. And if you’ve changed jobs multiple times and left your 401(k)s with your former employers, then you could be paying 401(k) fees on multiple accounts.

Fortunately, there are steps you can take to avoid these 401(k) fees. You aren’t required to keep your account with your former employer, and you won’t be forced to liquidate it. Instead you could roll over your 401k into your new 401k plan with your new employer, or roll it over into an IRA managed by you.

The benefit of setting up a separate account is that the next time you change jobs, you will automatically have somewhere to rollover your 401(k). With your money in one place, you can more easily see whether you are on track to reach your retirement goals.

The Takeaway

401(k) fees could potentially cost you tens of thousands of dollars or more and substantially reduce your retirement savings. If you have a 401(k), it’s important to learn about the fees charged by your plan. Read over your statements and the plan’s prospectus to find out what and how much these fees are. If possible, choose investment fund options with lower fees to help save money.

And when you leave a job, rather than letting the 401(k) sit with your former employer, consider rolling it over to your new employer’s 401(k) or into a traditional or Roth IRA. One advantage of an IRA is that you will likely have more investment options to choose from and more control of your retirement funds.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

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Nov

2023

How to Set and Reach Savings Goals

By Julia Califano | Budgeting & Goals, Growing Wealth, money | No Comments

Whether you want to save money for a trip to Japan, a down payment on your first home, or the wedding of your dreams, you are probably going to need a well-funded savings account. And for many people, that means implementing and sticking to a savings strategy.

A great first step to saving money is defining your savings goals. What is it that you’re working for? Whatever the answer is, having a specific goal — and not losing sight of it — can help you reach it. While getting to the finish line may require some planning and discipline, the reward will likely be well worth the effort.

Because living your best life probably requires having money saved, here are some strategies you might find helpful when trying to set and reach your savings goals.

1. Identifying Your Goals

There are some savings goals that are nearly universal, like retirement and an emergency fund, and others that will be unique to you. Everyone’s finances and goals are different. Before you can reach your savings goals, it’s important to know what they are. This is the fun part — you may want to spend some time dreaming and planning here.

Next, you’ll want to list those goals in order of priority. Keep in mind, priority doesn’t necessarily mean which happens soonest (although it could). For example, even though retirement is far away, it will likely be the most expensive savings goal a person will have during their lifetime. Therefore, it may rank higher in priority than other savings “wants,” such as a new television or an exotic vacation.

Because many people won’t be able to save for each of their big goals right away, ranking them in order of importance can help you determine which to work on first.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.00% APY, with no minimum balance required.

2. Determining Monthly Amounts

This is a necessary — and often eye-opening — exercise. First, list out your top two or three financial goals. Next, think about how much money you need to accomplish each goal and the time frame, in months, for accomplishing the goal. Then, divide the former by the latter.

For example, let’s say you want to save $6,000 for an emergency fund in one year (12 months), $10,000 for a wedding in four years (48 months), and $20,000 for a down payment in six years (72 months).

By dividing the savings goal by the number of months, you’ll find you need to save $500 per month for your emergency fund, $208 per month for your wedding fund, and $278 per month for your down payment.

This may be another exercise in prioritization, helping you hone in on what to focus on first.

Recommended: 10 Ways To Save Money Fast

3. Writing Down Your Goals

Research suggests that people who write their goals down are more likely to reach them than those who don’t. There could be a few reasons for this.

One is that a written list can serve as a practical reminder that you have goals to work toward. You can give yourself an extra visual cue by posting your goal (or goals) in a place where you’ll see it often, like on the fridge.

Writing down a goal may also help connect the creative, thinking part of the brain with the action-oriented and pragmatic parts of the brain. To translate your savings dreams into reality, it may be important to get as many parts of your brain and consciousness involved as possible.

You may find it valuable (and fun) to take this idea a step further and create a vision board for your goals.

4. Tracking Your Progress

There’s an old saying that goes “what gets measured gets improved.”

If you truly want to get better at spending and saving, then you may want to track both your daily spending habits and your long-term progress on your savings goals. This may feel difficult at first, but will likely get easier with practice and as you hone the methods that work for you.

With daily or weekly spending habits, there are lots of ways to track how you’re doing. If you don’t know where to start, there’s always the old-fashioned way — with a pen and paper. This is a great way to really wrap your head around where your money is going, and the act of writing down each “spend” may actually help you to spend less. Or, you could collect receipts and enter your expenses in an Excel spreadsheet or Google Sheet. Or, even easier, you may want to get a budgeting app (like SoFi’s) for your phone or other mobile device. These tools connect to your bank and credit card accounts and automatically track and categorize your spending.

With savings goals, it’s also possible to track your progress via pen and paper or using a spreadsheet — simply write down your goal and jot down your progress every time you make a transfer to your savings account. Budgeting apps are also a great way to track your savings, since they automatically import your transactions when you link your bank account(s).

5. Celebrating Small Successes

To help avoid savings fatigue and to keep the fire burning, don’t forget to treat yourself along the way. Positive reinforcement might be an important element to your success.

How might you do this? You don’t have to wait until you’ve reached your big goal to celebrate — you can give yourself some love throughout the journey. For example, if the goal is to save $10,000, then you might celebrate when you hit $5,000 in addition to when you cross the finish line.

Celebrating can be as simple as treating yourself to a hot chocolate or the fanciest coffee in town, but it can help to find a way to give yourself that mental victory.

6. Automating

If you’re like many people, you’re busy and not wild about taking on another chore. So, what can we do to make saving money less of a chore? One potential way to do this is to automate.

Automating is a simple and powerful way to make progress toward savings goals without having to think about it all the time.

To automate your savings, you might set up a recurring transfer from your checking account to your savings account on the same day each month, ideally right after you get paid. Financial experts refer to this strategy as “paying yourself first.” If you wait until you’ve paid all your bills and done your spending for the month to make a manual transfer, you might (a) forget and (b) not have anything left to move to savings.

7. Choose a High-Yield Savings Account

As you work toward your financial goals, you’ll want to make sure to put your accumulating funds in a high-yield savings account to maximize your money. A high-yield savings account is a type of federally insured savings product that earns rates that are much better than the national average. This allows your money to grow faster and can help you reach your savings goals sooner.

Some banks offer special, high-interest savings accounts that earn better rates than traditional accounts. One of the best places to look for high-interest savings accounts is online banks. Online banks, which save significant costs by not having to maintain branches, rarely charge monthly fees. They also typically offer rates that are much higher than those paid by traditional banks.

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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Nov

2023

8 Ways to Keep Your Finances Organized

By Julia Califano | Budgeting & Goals, money | No Comments

You try to set goals and stay on top of your finances. But sometimes life gets in the way and throws you off your game. You forget to pay a bill or accidentally overdraw your checking account — then kick yourself for getting hit with hefty fees.

Without an organized system in place, it’s easy to lose track of what’s coming in and going out every month. People with cluttered finances are more likely to miss payments, continue poor spending habits, and save less. Disorderly bills and budgets are not only stressful but can actually help drive you deeper into debt.

Organizing your money takes a little up-front time and effort but comes with a big payoff: It can help you live within your means, pay bills on time, reach your financial goals, and build wealth over the long term. Keeping track and organizing your finances also gives you a better sense of control over your financial life.

And, it’s not that hard to do, especially if you break the process down into small, manageable steps. What follows are eight effective ways to keep your finances organized and in check.

How to Keep Your Finances Organized

Whether you’re aiming to save for a big purchase, build an emergency fund, or invest for the future, a structured approach to managing your finances can make a significant difference. The following steps can help you stay on top of your financial life and save you money in the long run.

1. Set Some Financial Goals

Having a few clear, realistic financial goals is essential for staying organized. Knowing what you want to accomplish in the next months and years can guide your financial decisions. You can break down goals — like paying down debt, going on vacation, or putting a downpayment on a home — into smaller tasks and set deadlines to track your progress. This strategy can help motivate you to stay focused and disciplined with your finances. For example, brown bagging lunch might not feel like a pain if you have your sights set on a winter getaway to Mexico.

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2. Create a Budget and Stick to It

One of the fundamental pillars of financial organization is creating a budget. Having a basic plan for spending and saving can lead to more financial freedom and a life with a lot less stress. Start by assessing how much, on average, is coming in and going out of your checking account each month. If you find that your monthly outflows tend to equal — or exceed — your monthly inflows, you’ll need to rejigger your spending.

There are all different ways to budget — the best approach is simply the one you’ll stick to. One simple framework is the 50/30/20 budget, in which you divide your monthly take-home income into three categories, spending 50% on needs, 30% on wants, and 20% on savings and extra debt payments. Once you have a budget in place, it’s a good idea to periodically check in and make sure you’re sticking to the plan.

3. Get Help From an App

There are a number of personal finance apps that are free to use on your phone and make it easy to organize your money. Basic budgeting apps, like Goodbudget, EveryDollar, and PocketGuard, allow you to connect with your financial accounts (including bank accounts, credit cards, and investment accounts), track spending, and categorize expenses so you can see where your money is going. Regularly reviewing your expenses will help you determine if you’re sticking to your budget plan, as well as identify any unnecessary costs and areas where you can cut back.

Automate Bill Payments

One way to make sure you always pay your bills on time is to automate the process. You can do this by setting up automatic payments for recurring bills, such as rent or mortgage, utilities, insurance premiums, and loan repayments. Simply log into each account and authorize the provider to debit your checking account or charge your credit card each month. Alternatively, you can use your bank’s online bill pay service. Just be sure to keep track of the payments you have automated, so you know when to stop them or update credit cards.

5. Put Saving on Autopilot

If you wait until after you pay your bills and do all your spending to move money into savings, you may not have anything left to transfer. Why not pay yourself first? Also known as automating your savings, this organizational step ensures you are always working towards your goals.

Simply set up an automatic transfer for a set amount of money from checking into a savings account each time you get paid. It’s fine to start small — since the transfer happens every month, even small deposits can grow to a significant sum over time. If you want to earn a competitive rate and pay the lowest fees on your savings, consider storing this money in an online savings account. Thanks to reduced overhead, online banks are typically able to offer more favorable returns than national brick-and-mortar banks.

6. Manage Mail as Soon as It Arrives

Despite living in a digital world, many important bills and documents likely still arrive in your regular mail. This might include stock statements, property tax bills, homeowners’ insurance bills, and medical bills. As a result, you’ll need a system for managing paper bills and statements. Generally, the most efficient way to deal with mail is to organize it as it comes in. You might create three “in” boxes or files labeled: “to pay,” “to file,” and “requires action.” Set a day and time each month to go through these boxes to make sure nothing gets ignored.

7. Organize Your Online Accounts

You likely have a number of online accounts — including bank and brokerage accounts, service provider accounts, and shopping accounts — each with a unique (a.k.a, hard-to-remember) password. It’s a good idea to make a list of all of your online accounts, including usernames and passwords, and keep it in a notebook stored in a safe place. Even better: Consider using a password manager tool, such as Dashlane, 1Password, or Apple’s built-in Keychain. These tools will start saving the passwords you use to log into your accounts and will automatically insert them into log-in forms. Typically, they will also generate hard-to-guess options when you sign up for new sites (no more “123456”).

Recommended: 11 Tips for Cleaning Up Your Finances

8. Make a Plan to Manage Debt

If you typically pay just the minimum on your high-interest debt, like credit cards, you are likely spending a lot on interest, while never getting ahead on your debt. Coming up with a system to knock down — and eventually eliminate — high-interest consumer debt can help you save money and make it easier to reach your financial goals.

To get a better handle on your debt, you may want to make a list of all your high-interest debts, including amounts owed and interest rate. Then focus your efforts on erasing one debt at a time while still making the minimum payment on all other debts. Where to start? You can use the debt snowball method and start with the smallest balance first, or use the debt avalanche method and pay down the highest interest debt first.

The Takeaway

If it feels like your money is all over the place and you’re living paycheck to paycheck without a plan, don’t get discouraged. You can get your financial act together one step at time.

By implementing some basic systems — like setting goals, creating a budget, automating payments and saving, and using an app that tracks your spending —- you can gain control over your finances and pave the way for a more secure financial future. Remember, financial organization is an ongoing process that requires consistent effort, but the rewards of financial stability and peace of mind are well worth it.

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 do I organize my personal household finances?

You can organize your personal finances by setting up a budget and putting some simple systems in place. You might, for example, put all of your regular bills on autopay so you don’t accidentally miss a payment and get hit with late fees. It’s also a good idea to automate savings by setting up a recurring monthly transfer from your checking account into your savings account right after you get paid.

For statements and bills that still come by regular mail, consider setting up an organization station with three in-boxes: “to pay,”“to file,” and “requires action.” Set a day and time each month to go through these boxes to make sure nothing gets ignored.

How do I organize my monthly bills?

Start by making a master list of all of your regular bills, including the provider, billing amount, and due date. To simplify payment (and avoid late payments and fees), consider setting up autopay for each bill. If you prefer to handle payments yourself, set aside a day and time each month that’s dedicated to bill paying. A structured schedule will help you meet all of your deadlines. An alternate approach is to pay each bill as soon as it comes in, then file it away.

SOBK1023020

Nov

2023

How Much Should You Pay For a New Home?

By Janet Siroto | Budgeting & Goals, Family Finances, Home Ownership, mortgage | No Comments

If you’re thinking about buying a property, you may wonder how much you should pay for a new home. After all, that can impact the size (and type) of mortgage you apply for.

The truth is, though, your mortgage is just one piece of the puzzle when deciding how much to spend on a home. To figure out what you can realistically afford, you need to understand all of your potential housing costs, including what may seem like unexpected costs that crop up when you own a property. That way, you can truly prepare for how much money it will take to cover your expenses as a homeowner.

So, are you in the club of those who are wondering, “How much home can I afford?” Then read on for four important tips to help determine whether a home will suit your budget. Given how big an expense homeownership can be, you will likely want to be well armed with information before you start hitting the open houses and making bids.

1. Calculate Potential Housing Costs

If you’re calculating how much you should pay for a new home, it can be an important step to write down all potential costs connected with buying a house and then paying the monthly expenses. This list can include:

• Down payment

• Mortgage payment

• Property taxes

• Homeowners’ insurance

• Mortgage insurance, if applicable

• Closing costs.

Since the mortgage payment is typically a big-ticket budget item, it can be a good move to check out a few different options (say, fixed-rate vs. adjustable-rate; 15-year vs. 30-year terms) from a few lenders and at a couple of different amounts to get a handle on what that cost is likely to be.

Also, you may want to also make a list of:

• Expected repairs

• Planned updates/renovations.

Don’t forget about ongoing costs. It may be tempting to leave this out of your initial budget, but it’s unlikely you’ll find a place that won’t require some changes. These estimates could be a factor in your budget and your decision about what to buy. For instance, you’ll want to prepare for such expenses as:

• Utilities. If you’re moving to a house from a small apartment, you could be paying considerably more in, say, heating and cooling costs.

• Landscaping or other maintenance of your property beyond the house.

You’ll also likely want to make your new house a home, and there is nothing wrong with that as long as you’ve budgeted for the estimated expense. In other words, include the following in your calculations:

• Moving costs

• The cost of new furniture and furnishings (curtains, hardware, the works).

Although these latter expenses aren’t part of your required monthly housing payments, they’re worthwhile to keep in mind.

💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

Estimate Your Future Housing Costs

Need help figuring out these costs in more detail? The home affordability calculator below provides additional insight into how much it costs to purchase a home and the expected monthly payment associated with being a homeowner, including insurance costs, property taxes, and closing costs.

2. Determining What Is Paid Up Front

Now that you have an all-encompassing list of what you think a potential property might cost, both for a monthly payment and possible expenses, you can divvy up those costs into two categories: upfront costs and monthly costs.

Upfront costs include things like the down payment on the home and other fees such as closing costs and paying for home inspections. Monthly costs are your recurring mortgage payment, property taxes, and insurance(s), which may be rolled into the mortgage payment or paid separately. There are also other possible expenses you may pay down the line for furniture, repairs, renovations, etc.

This will help you get a handle on how much cash you will need to spend when getting a mortgage and becoming a homeowner. And it will also tell you what it will look like to keep your home up and running, month after month.

As you consider how much you should pay for a new home, know that it may be wise to have a cash buffer as you go into homeownership. In other words, don’t clean yourself out when buying a home. You don’t want to risk overdrafting your bank account, and you need to be prepared for how inflation could cause your expenses to tick up.

3. Look at Monthly Costs in Terms of Your Budget

Now that you have an idea of what your monthly housing costs could be, you can begin to fit those into your overall budget.

There are different budgeting methods, but most involve knowing and balancing your take-home pay, the cost of your “needs” and “wants” each month, and how much you are putting towards savings.

As you evaluate your projected homeowner figures, you want to ask yourself:

• Do the numbers work, leaving you with some room to breathe?

• Are you able to save for other financial goals, such as retirement?

• Will you be able to maintain your current quality of life, or will you have to make cuts to accommodate your new housing expenses?

• What do the numbers look like if you were to buy a somewhat more or less expensive home? (This can help you, especially if you are interested in a house that winds up in a bidding war and potentially selling for over the asking price.)

Overextending yourself in order to purchase a home is not recommended. Living paycheck to paycheck and worrying about money after you buy a property could take some joy out of your new nest.

💡 Quick Tip: You never know when you might need funds for an unexpected repair or other big bill. So apply for a HELOC (a home equity line of credit) brokered by SoFi today: You’ll help ensure the money will be there when you need it, and at lower interest rates than with most credit cards.2

4. Considering Unexpected Costs

Being a homeowner can be wonderful and rewarding, but it can also be expensive and, at times, exhausting. Roofs leak. Hot water heaters fizzle out. Gutters need cleaning.

You may want to set proper expectations regarding not only how much homeownership will cost in terms of the typical expenses, but also in terms of the full universe of maintenance and potential costs. Budget accordingly.

Next, you might want to consider what could happen in the event of a job layoff. Even great employees can lose their jobs, so have a plan in the event that this happens. And how would you keep up with costs in the unfortunate event of illness?

If you have no plan for how to make a mortgage payment in the event that you or your spouse loses work, you might not be quite ready for homeownership. You may want to build up your cash reserve before diving in.

For instance, most financial experts recommend that you save three to six months’ worth of expenses in an emergency fund in case of a job loss, health emergency, or other financially difficult events.

Those funds can be vital to see you through a tough financial moment. And if you do have this amount of money set aside (good job!), don’t be tempted to raid it for, say, your down payment or other costs related to buying a home. It’s a very important bundle of cash to have on reserve.

The Takeaway

Buying a house can be a huge rite of passage and a big part of adulting. As you contemplate owning your own home, it’s important to be sure you understand both the upfront and ongoing costs of homeownership and know how they fit into your budget. In addition, understanding the unexpected expenses that may crop up can be a wise move.

A key part of your calculations will be checking your mortgage options and how much that will cost you every month. This can be one of the big recurring costs to budget for.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

SOHL1023239

9 Money Hacks To Try This Year

9 Money Hacks to Help Save You Money

1. Use Multiple Savings Accounts

2. Ditch Your Low-Interest Savings Account

Get up to $300 when you bank with SoFi.

3. Put Saving on Autopilot

4. Pay Down High-Interest Debts

5. Audit Your Subscriptions

6. Put a Free Budgeting App on Your Phone

7. Practice the 3-Day Rule

8. Use Cash

9. Gradually Boost Retirement Savings

The Takeaway

The Investor’s Guide to Navigating 401(k) Fees

Understanding the Basics of 401(k) Fees

The Impact of Fees on Your Retirement Savings

How to Interpret Fees on Your 401(k) Statement

How Your 401(k) Fees Stack Up

What Are Typical 401(k) Fees?

The Significance of Expense Ratios and Industry Averages

Practical Ways to Minimize 401(k) Fees

Identifying and Reducing Excess Fees

Addressing Hidden Fees in Your 401(k)

Tools for Uncovering Hidden Fees

Understanding Revenue Sharing and Its Implications

How Fees Affect Your Retirement Savings Over the Long-Term

Case Studies: The Cumulative Effect of Fees Over Time

Proactive Measures to Safeguard Your Retirement Funds

The Takeaway

How to Set and Reach Savings Goals

1. Identifying Your Goals

2. Determining Monthly Amounts

3. Writing Down Your Goals

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

4. Tracking Your Progress

5. Celebrating Small Successes

6. Automating

7. Choose a High-Yield Savings Account

8 Ways to Keep Your Finances Organized

How to Keep Your Finances Organized

Get up to $300 when you bank with SoFi.

1. Set Some Financial Goals

2. Create a Budget and Stick to It

3. Get Help From an App

Automate Bill Payments

5. Put Saving on Autopilot

6. Manage Mail as Soon as It Arrives

7. Organize Your Online Accounts

8. Make a Plan to Manage Debt

The Takeaway

FAQ

How do I organize my personal household finances?

How do I organize my monthly bills?

How Much Should You Pay For a New Home?

1. Calculate Potential Housing Costs

Estimate Your Future Housing Costs

2. Determining What Is Paid Up Front

3. Look at Monthly Costs in Terms of Your Budget

4. Considering Unexpected Costs

The Takeaway

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