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Thinking about your family’s financial security? Life insurance could help put a plan in place for the unexpected and cover a myriad of expenses.

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What is universal life insurance? Universal life insurance plans let policyholders receive the contracted coverage over their lifetime. Here’s more info.

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The idea behind life insurance — that it’s one way to help protect loved ones — is fairly simple. But navigating the sea of options and figuring out which policy to go with isn’t always so straightforward.

Below are tips for comparing life insurance policies and understanding the insurance buying process.

Choosing the Right Policy

Before you start reviewing different life insurance options, it’s a good idea to first decide which type of policy you need. The following guidelines can come in handy.

Buying Term Life Insurance

Term life insurance offers protection for a specific time period, usually in five, 10, 15, 20, 25, or 30 years. If you die during that time, your beneficiaries receive a cash benefit.

A term policy can be matched to a particular length of time when coverage is needed. For example, if your top priority is to provide enough income for your dependents to pay for college, then a 20-year policy may fit your needs. Or if you need a policy that will help your beneficiaries repay outstanding debts, maybe a 25-year policy would make more sense.

If your budget is limited, buying term life insurance may make more sense. These policies tend to be more affordable than permanent life insurance because they are statistically less likely to pay out than permanent life policies.

Typically, there are a couple of reasons a term policy expires: if the insured stops paying the premiums or if they live past the term of the policy. Renewal is possible, but terms and rates may vary based on the applicant’s health and age. (The renewal is typically in one-year increments, and the cost will likely be significantly more than the cost during the initial term.)

Insured people who wish to extend their policies may want to contact different providers to determine how continuing coverage after the end of their life insurance terms generally works.

If your financial needs change during the term of the life insurance policy, contact your insurer. Some may offer a convertible policy, which involves converting a term life policy to a permanent policy in exchange for higher premiums.

Buying Permanent Life Insurance

Permanent life insurance works a bit differently. For starters, it provides protection for the insured’s lifetime, as long as the premiums are paid.

Unlike term life, a permanent life insurance policy will pay a death benefit no matter when the insured passes away. It may also come with a savings component, which can grow on a tax-deferred basis and be used to borrow funds for a variety of reasons or pay premiums. Even if the insured has less than ideal credit, the funds can still be borrowed against. In that case, the death benefit is considered collateral for a loan. (Make sure to check with your insurance provider or other advisor before withdrawing money because taking cash out of the policy can cause it to collapse unless the death benefit or premiums are adjusted.)

In practice, this can mean that when the insured passes away before repaying what was borrowed against the policy, the life insurance company deducts what’s still owed from the beneficiary payout.

There are several other options for permanent life insurance, including:

•   Whole life insurance. This coverage provides foreseeable lifelong coverage, which includes a fixed premium and death benefit.

•   Universal life insurance. Universal life insurance provides flexible lifelong protection and several cash accumulation options.

•   Variable universal life insurance. This type of coverage offers flexible death benefits and several investment options for the cash accumulation component.

It’s important to note that permanent life insurance is typically more expensive than term life insurance. So, when weighing out the options, the cost of the policy might be a crucial factor to calculate.

Recommended: Term vs. Whole Life Insurance

Calculating the Right Amount of Coverage

There are several different ways to calculate how much coverage is necessary. Some insurers recommend multiplying the insured’s salary by five or 10. While that can be an effective rule of thumb, be sure to account for all your beneficiaries’ anticipated needs. For instance, you might need a higher coverage amount if you have children and plan on helping them pay for college. On the other hand, if additional resources or assets are available to your beneficiaries at the time of your death, a lower coverage amount might make more sense.

Another option is to use an online life insurance calculator to estimate the cost of different levels of coverage. If you go this route, be sure to include all the debt that beneficiaries or an estate may be responsible for, including shared revolving debt.

Keep in mind that the amount of life insurance coverage you choose will impact the price of your monthly premiums.

Comparing Life Insurance Providers

Once you’ve determined the right type and amount of life insurance coverage you need, it’s time to gather life insurance quotes. Look for insurance companies with established financial histories, strong consumer ratings, and flexible product offerings. Several credit rating agencies look at insurance providers’ overall financial strength and their ability to meet existing insurance obligations (i.e., pay out the benefits).

But ratings aren’t a guarantee, so be sure to review ratings for all the companies you’re considering. For example, A+ and A++ are A.M. Best’s superior ratings. They denote companies that, according to the agency’s analyses, have shown an exceptional ability to meet their insurance obligations and have evidenced financial strength. (All 50 states, the District of Columbia, and Puerto Rico have a program to ensure that insurance proceeds are paid if an insurer becomes insolvent.)

Recommended: How to Buy Life Insurance in 9 Steps

Gathering Multiple Life Insurance Quotes

Some providers require you to complete a simple online application before you receive a quote. In order to provide an accurate quote, the insurance company may ask you to share some personal details, such as your age, location, gender, health, and desired coverage.

Since permanent life insurance policies tend to be more complex, it can be wise to consult with an agent who can help you compare the pros and cons of different types of policies.

Comparing Life Insurance Quotes

Here are some things to pay close attention to as you’re reviewing life insurance quotes and considering which policy meets your needs.

Cost

The cost of a policy is generally determined by underwriters employed by the life insurance provider. They look at numerous factors, including applicants’ age, health conditions, and medical history to determine the risk for covering them.

While each provider may use similar methodologies, costs can vary depending on the amount of coverage they are willing to provide and the price paid by the insured.

Again, the value of the company and the services offered can also play a role in how much a policy may cost. So while aiming to get the lowest monthly bill may seem like the right solution, it’s wise to evaluate if that lower-priced option can provide the desired coverage over the life of the policy.

Customization

Since no two people have the same financial goals or coverage expectations, some insurers offer policies designed to match a given applicant’s specific needs.

For example, insurers may offer different riders or payment plan options to customize a policy to fit an individual’s goals. Insurers who offer more flexibility might be a better fit for some buyers.

Product Range

Buying life insurance from a company that offers a wide range of products is not only a convenient way to shop for insurance, it may even help you save money. That’s because insurance companies sometimes offer discounts for bundling multiple insurance policies together, like life, automobile, or rental insurance.

People shopping for life insurance can review the other products each insurance company offers to determine if buying a bundled policy can save time, money, and the potential hassle of working with more than one provider.

Long-Term Cash Value Potential

Since permanent life insurance has a cash value component that can grow over time, it’s important to factor this trait when comparing each policy’s potential value. Although low-cost policies may seem like an attractive option, they may not provide as much coverage over the life of the policy.

For buyers who prioritize cash value and dividend distribution, picking a life insurance policy that offers either or both of those features may be a good choice. But keep in mind: Policies with higher dividend payouts are, typically, more costly each month. Many policies have guaranteed rates of return depending on the investment options. However, the market will often outpace the guarantees in insurance policies so consider your investment objectives and risk tolerance before getting a life insurance policy as an investment vehicle.

Using an Agent

While it’s possible to buy life insurance online, sometimes it’s wiser to contact an insurance agent. Because different life insurance products come with varying fine print details, an insurance agent could help buyers grasp the key differences between policies and products. Buyers can also ask them any lingering questions.

An agent who is well versed in the product’s details can also explain important distinctions like cost, coverage limits, and varying terms. It’s worth noting that many insurance agents are paid on commission. In most cases, you will not pay more by going through an insurance agent. The commission is included in the quote and goes to the insurer if the policyholder buys a policy directly from an insurance company.

The Takeaway

Life insurance can be a good way to provide for your loved ones after you’ve died. There are different types of policies to consider. Term life insurance offers coverage for a specific period of time; if you die during that time, your beneficiaries will receive a cash benefit. Permanent life insurance offers protection for the rest of the insured’s life and will pay beneficiaries a death benefit no matter when the insured dies. It often comes with a savings component that can grow on a tax-deferred basis and be used for a variety of purposes.

As you begin to research companies and gather quotes, take note of the cost, ability to customize, long-term cash potential, and range of products the insurer offers. An agent can help you make sense of your options and select the plan that’s right for you.

SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.

Explore your life insurance options with SoFi Protect.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

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

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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Thinking about buying a horse? While it’s an exciting move, it’s also quite an investment. The average cost of a horse can range from a few hundred dollars to over $50,000, sometimes even more depending on the type of horse you’re buying. Using a horse loan, also called equine financing, can help make this purchase more manageable.

Read on to learn what you need to know about getting a horse loan so you can make an informed decision when welcoming a new horse into your family.

Can You Get a Personal Loan for a Horse?

Personal loans offer a flexible way to borrow money for big ticket items, like paying off high-interest debt, completing a home renovation, or even buying a horse. You can find a personal loan through banks, credit unions, and online lenders.

When you get a personal loan, you receive a lump sum of money and then pay it back in monthly installments, which include interest. There are different types of personal loans. Here are some common ones:

•  Secured and unsecured loans: Secured loans are backed by something valuable, like your home or car, while unsecured loans aren’t tied to any assets.

•  Fixed-rate and variable-rate loans: Fixed-rate loans have an interest rate that stays the same, while variable-rate loans have an interest rate that can go up or down based on changes in the market.

•  Single borrower vs. cosigner loans: With some loans, just one person is responsible for payments. But others allow a cosigner, or someone who agrees to help with payments if needed.

Pros and Cons of a Personal Loan for a Horse

To help you decide if a personal loan is a good option to finance your horse, it’s helpful to look at both the pros and cons.

Pros:

•  Personal loans usually have lower interest rates than credit cards. For example, the average rate on a personal loan is around 12.40%, as of October 2024. Meanwhile, the average interest rate on credit cards is closer to 21.76%. This means that unless you qualify for a 0% introductory APR on a credit card, using a personal loan might save you money on interest in the long run.

•  You don’t have to touch your savings. A good rule of thumb is to keep three to six months of income saved for emergencies. If buying a horse empties your savings, you could be in a tough spot if an unexpected expense comes up. A personal loan lets you keep your savings safe while still making your purchase.

•  Wide range of lending requirements. Since each lender has its own criteria, some may approve a personal loan even if your credit score isn’t the best.

Cons:

•  Your debt-to-income ratio will likely go up. Taking on more debt changes the balance between your income and what you owe. Lenders use this debt-to-income ratio (DTI) to decide on your loan approval and interest rate. Most lenders look for a ratio under 36%, so if you make $5,000 a month, your monthly debt should be under $1,800. Some lenders are more flexible, but staying within this limit could improve your chances of getting a competitive rate and terms.

•  You’re taking on additional debt. Buying a horse is a major purchase, so make sure you’re able to repay any money you borrow.

•  Missing or late payments may harm your credit score. Lenders may report late or missing payments to credit bureaus, and this could make your credit score drop. You may also have to pay a late fee, which can add to your costs — especially if it happens more than once.

Recommended:Where to Get a Personal Loan

How to Qualify for a Horse Loan

Before applying for a personal loan, here are a few questions to ask yourself:

•  How much do you need to borrow?

•  What can you afford to pay each month? (A personal loan calculator can help you determine potential monthly payment amounts based on interest rates and terms.)

•  How long do you need to pay it back?

Once you have a good idea of what you’re looking for, it’s wise to check your credit score since lenders use it to decide if you qualify. You can get a free copy of your credit report once a week from the major credit bureaus — Equifax, Experian, and TransUnion — at AnnualCreditReport.com. Take a look to make sure everything is accurate, and address any errors you see.

Ready to apply for your equestrian loan? See which lenders offer prequalification, which will give you an idea of the rates and terms you could qualify for before applying. To prequalify, you’ll typically need to provide basic information like your ID, address, income, and employment status.

Each lender has different requirements, so prequalifying with a few different lenders could help you find the best rates and terms. Once you choose a lender, they’ll guide you through the application process. They’ll likely do a hard credit check at this point, which may lower your credit score slightly, but this is usually only temporary.

Once you’re approved, the lender will ask you to sign a loan agreement. If you have any questions, make sure to speak with your lender.

Recommended:How Hard is It to Get a Personal Loan?

Tips for Successfully Repaying Your Horse Loan

Bringing your new pony home is a great feeling, but it also means it’s time to start repaying your loan. To streamline the process, here are a few strategies to help you repay the amount you borrowed.

Make a Budget

Setting a budget helps you see where your money is going and how much you’ll have left after each loan payment. Budgeting apps can make this easier by tracking your spending, setting limits, and even creating savings goals.

Set Up Autopay

To ensure you never miss a payment, consider setting up autopay. This way, your loan payment is automatically taken out of your account each month without any extra effort. Some lenders even offer discounts for using autopay.

Combine Your Debts

If you have multiple loans or debts, you might consider combining them into a single loan. This is called debt consolidation, and it involves taking out a separate loan to pay off your debt balances. Consolidating your debt can make paying down debt more manageable.

Make Extra Payments

If you want to pay off your loan faster, you could try making extra payments or switching to biweekly payments. By paying off your loan early, you can potentially save money on interest. But check with your lender to see if there’s a fee for early payoff.

Alternative Financing Options

Horse loans aren’t the only way to finance your purchase. Here are a few other options to consider:

Savings

If you can wait a bit before buying a horse, saving up for this big purchase can be a smart move. First, decide how much you’ll need, then set a timeline for reaching that goal. You may also want to consider setting up automatic transfers, which can help you put your savings on autopilot.

Keeping your money in a separate account, like a high-yield savings account, can also help it grow over time. Just keep in mind that once you have the horse, you’ll still need a budget for ongoing care and maintenance.

Horse Rental

Buying a horse comes with extra costs for things like care, food, and shelter. If you’re not ready for these ongoing expenses, renting a horse could be a better option. This way, you can enjoy riding without the full commitment.

Sharing Ownership

You could also consider sharing ownership with someone you trust and splitting the cost of the purchase and ongoing care of the horse. However, keep in mind that if the co-owner decides to back out of the arrangement, you might be responsible for all the expenses yourself, which could be financially burdensome.

Credit Card

Using a credit card to buy a horse might work if you have a high enough credit limit. But keep in mind, credit cards usually come with high interest rates, so if you can’t pay off the full balance right away, you could end up paying more in interest than with other financing options.

However, if you have good credit, some credit cards offer a 0% introductory APR. This lets you avoid interest — provided you pay off the balance before the introductory period ends. If you can’t pay it off by then, you may face a higher interest rate.

Other Factors to Consider Prior to Buying a Horse

Buying a horse is only the beginning of the costs involved. Depending on where you live, your horse’s needs, and other factors, caring for a horse can average between $8,600 to $26,000 per year.

For starters, horses need regular vet visits, a place to live, food, and lots of daily care. So before buying a four-legged friend, make sure you know your horse’s health history, and you have a reasonable budget set aside for yearly expenses.

Here are a few other important things to keep in mind:

•  Lifespan: Horses usually live between 25 and 30 years. Owning one is a long-term commitment that should be carefully considered.

•  Time: Horses need plenty of attention each day. If you’re short on time, you might have to hire someone to help care for your horse.

•  Training and equipment: Horses need plenty of exercise, which requires pricey equipment like saddles, blankets, bridles, and lead lines.

•  Transportation: If you plan to show or travel with your pony, remember that you’ll need a way to transport them, which adds to your ownership costs.

The Takeaway

Taking out a horse loan can be a smart way to finance a new pony. But before signing a loan agreement, it’s important to understand how equine financing works and to compare your options. Also, keep in mind the ongoing costs of horse ownership.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

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

FAQ

How much can I borrow with a personal loan for a horse?

The amount you can borrow for a horse loan depends on factors like your credit score, your lender, and other financial details like your income. Personal loan amounts usually range from $1,000 to $100,000. Before applying, figure out what you can afford and what you’re likely to qualify for.

What is the typical repayment period for a horse loan?

Repayment terms vary by lender, but you can generally find personal loans with terms between two and seven years. Keep in mind that while longer terms may make the monthly payment more affordable, you may end up paying more in interest than you would with a shorter loan term.

Are there any additional costs associated with a horse loan?

Besides interest, some lenders charge extra fees, like an origination fee, which is usually a percentage of your total loan amount. Lenders might also charge a late fee if you miss a payment, so check with your lender to understand all potential fees.

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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.

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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While bad financial decisions can set you back, it’s important to remember that mistakes can also be an opportunity to learn and grow. While you can’t go back and undo the things you’ve done or didn’t do (if only!), you can acknowledge where you went wrong and change your behavior moving forward.

Below, take a look at some of the most common financial missteps people make, as well as what can be done to overcome them.

15 Bad Financial Decisions

Here’s a look at where things can go wrong, and how you set them right.

1. Not Paying Down Your Credit Card Debt

Just making the minimum payment on your credit cards each month can drain your pockets and damage your credit. The reason: When you carry a balance, interest keeps on building, making the total balance higher and even more challenging to pay off. Debt also shows up on your credit report and can have a negative effect on your scores.

To break the pattern, consider putting any extra money toward the card with the highest interest rate, while paying the minimum on the rest. When that card is paid off, you can tackle the next-highest interest debt, and so, until you’re out of debt.

Recommended: Creating a Credit Card Debt Elimination Plan

2. Putting Important Financial Decisions off to the Side

Delaying important financial decisions, such as saving, investing, and paying off debt, can cost you money and put your goals further out of reach. A good way to stop the procrastination cycle is to break down your financial goals into small to-dos that feel manageable. You might want to set aside time once a month to check in on your finances and make one small change that can help you get closer to your goals.

3. Not Protecting Personal Financial Information From Fraud

Identity theft and financial fraud are all too common these days, and not taking a few steps to protect your personal and financial information can come back to haunt you. The financial damages caused by fraud can last for months or even years. What’s more, the recovery process usually isn’t easy, and may even involve working with the IRS or Social Security Administration to clear your name.

To protect your information, it can be smart to regularly check your credit reports (and report any suspicious activity immediately). You’ll also want to avoid sharing your personal data unless absolutely necessary and never over public wifi.

4. Overspending so You Can’t Save

Overspending means you’re spending everything you earn (and not putting anything into savings) or, worse, you’re spending more than you’re bringing in. This can be a costly financial mistake that puts your goals further from your grasp. It means you may be living just paycheck to paycheck.

To change course, you may want to take a look at the last three months of financial statements and assess exactly how much you are spending each month and on what. This can be eye-opening, and you may immediately see some easy ways where you can cut back. Any money you free up can then become money saved, and little by little, it will add up.

5. Not Having Any Backup Options

A recent study found that not even 44% of Americans could not afford an unexpected expense of $1,000 from their savings. Without an emergency cushion, many Americans are at risk of going into high-interest debt should they face an unexpected bill or any loss of income.

It’s generally recommended to have enough cash set aside to cover all your living expenses for three to six months. In some situations, this amount should be as much as 12 months. To get there, you may want to put a percentage (10%, for example) of your monthly take-home income into a high-yield savings account or online bank account — online banks often offer higher interest rates than traditional banks. If that doesn’t seem doable, it’s fine to start smaller and gradually work up. Consistently saving a modest amount, such as $25 per paycheck, can be a good habit to start.

6. Paying High Amounts on Multiple Monthly Subscriptions

Subscription streaming services, box deliveries, and apps that bill on a monthly basis can add up to a significant sum. And, since these service providers typically bill automatically, you may not even be fully aware of what you are paying for each month, or that you may be overpaying for some of these services.

To cut your monthly bills, go through your statements and tally up everything you are currently paying for on a recurring basis. Can anything go? Could you get a better deal on some of these services? It never hurts to shop around or call up a service provider and ask for a lower price.

7. Not Investing Any of Your Money

You may think you have to be rich or an expert on stocks to start investing, but this is a common money misconception. And one that can leave you ill prepared for the future.

While investing can be intimidating (and does come with some risk), there are easy ways to get started. If you don’t want to do the work of picking and choosing investments, for example, you might start investing with a robo-advisor. These are digital platforms that provide automated investment services based on your goals and tolerance for risk. Robo-advisors are typically inexpensive and require low opening balances.

8. Not Planning for Retirement

When you don’t plan for retirement, you forgo the factor of time that is key to achieving your goals. Giving your investments a long time to grow is vital to having a nest egg you can retire on. If your employer puts any matching funds towards your retirement fund, that can be a valuable boost, too.

However, there is more to retiring than starting an IRA or contributing to a 401k. You’ll also want to consider when you want to retire, what kind of lifestyle you will want to lead, and how much money you will need. This can help you determine how much you should be putting away each month starting now.

9. Making Small but Unnecessary Purchases

An iced cappuccino here, a pay-per-view there. These little extras may not seem like a big deal, but they add up. Consider that spending just $50 a week eating out costs you $2,600 a year. That sum could go a long way toward paying off your credit card or car and help you take a big step toward achieving financial freedom.

To curb impulse buys and cut back on spending, you might want to set a weekly spending limit for “extras.” (Yes, you are earmarking some money for fun little splurges.) To keep to your limit, consider taking out that amount of cash at the beginning of the week and leaving your credit card at home. That way, when the money’s gone, you can’t spend any more.

10. Allowing Your Credit Score to Drop

A low credit score can keep you from obtaining competitive rates on loans and credit cards. It could block you from housing and employment opportunities. Poor credit can also be costly, since the financing options available to you will be more expensive.

To start building a better credit profile, you may want to put all your bills on autopay, so you never make a late payment. Paying down any credit card debt can also be helpful, since how much of your available credit you are using also factors into your score. If you have an old credit card you rarely use, it can be a good idea to still keep that account open, since the length of your credit history is another factor that impacts credit scores.

11. Not Making Budgeting an Important Priority in Your Life

Budget may sound like a bad word. But in truth, not tracking how much money you’re making versus how much you’re spending can be a bad financial decision with many repercussions, including never getting ahead and having constant money stress.

Making a budget, on the other hand, can mean the difference between staying in debt vs. getting out of it, remaining in your rental vs. becoming a homeowner, and working overtime vs. going on vacation. Convinced? You can start budgeting by assessing what’s currently coming in and out of your bank each month, and making a plan for how you want to allocate your income, making sure that some money goes to savings each month. There are multiple budget methods and apps; take some time to experiment until you find the right fit.

12. Financing Purchases Rather Than Saving for Them

While some purchases, such as a house, usually require financing, many others can be achieved through saving instead of going into debt. Whether you want a new laptop or a high-end refrigerator, financing can make a big purchase more expensive. Plus, the ease of buying on credit can make you think you can afford a lot more than your income allows.

A wiser strategy can be to determine what you want to buy, how much it will cost, and when you, ideally, want to get it. You can then start putting money aside each month and when you meet your goal, buy the item with cash.

13. Using Savings to Pay Off Debt

It may seem counterintuitive, but paying off debt with your savings is not always a good idea. Draining your bank account can leave you vulnerable to financial emergencies, causing you to plunge back into debt.

A better strategy can be to use a debt repayment method such as the snowball method. This involves putting extra money toward the smallest revolving debt balance each month, while continuing to make minimum monthly payments on your other debt. When the smallest balance is paid off, you can move on to the next smallest balance, and so on. This can help you start saving money right away and motivate you to keep going.

14. Withdrawing From Retirement Savings Early

It can be exciting to watch your retirement account grow throughout your career. And, it can be tempting to want to touch that money before you are officially “retired.” However, taking early distributions from your retirement account can be among the worst money mistakes you can make. For one reason, you will likely have to pay penalties and income tax on the amount you withdraw. For another, you will lose the opportunity to continue accruing gains on that money.

Remember: The main benefit of a retirement account is to let your money compound and grow over time. When you withdraw retirement funds early, you lose that opportunity to secure your future and take a big step backward.

15. Not Recognizing and Avoiding Scams

Yes, it’s getting harder to detect scams; they are becoming ever more sophisticated. And they prey upon both young and old consumers. To avoid scams, you’ll want to be suspicious of any text, email, or snail mail offer that seems too good to be true, and avoid clicking on any links in an email or text claiming to be from one of your financial institutions. If you receive this kind of message, a smart move is to call customer service or log onto your online accounts to see if the information in the email or text is correct.

Also beware of appeals with a sense of urgency; say, that you must pay a fee immediately to unlock your account or receive delivery of an important package.

Since scams are constantly evolving, it’s worth your time to search online every six months or a year to see what’s new and make sure you have your guard up as much as possible.

Tips for Recovering From Bad Financial Decisions

If you’ve made some poor financial decisions, you might feel embarrassed or scared. It can help to remember that one accident or blunder doesn’t spell doom for your finances forever. Here are some ways you can start turning things around.

Acknowledging Bad Financial Decisions and Taking Action

Even if you’ve made one of the worst money mistakes, a smart first step is to simply acknowledge your misstep, take a step back, and at first do nothing. A rash attempt to fix a problem can actually make it worse. Once you’ve accepted and assessed the damage, you can put a recovery plan into action.

Taking Steps One at a Time

Building your credit or paying off a mountain of credit card debt won’t happen overnight. And, if you set your sights too high, you might be tempted to give up before you even get started. A better bet is to break your larger goals into a series of small, achievable steps. Each time you accomplish one of these mini-goals, you’ll likely feel a sense of accomplishment. This can motivate you to save money and crush other goals, little by little.

Do Not Shame Yourself, but Forgive Yourself

Everyone makes mistakes. Even if you have been doing your best, it’s possible to have a credit card balance get out of hand or have your identity stolen after you accidentally click on a phishing text link.

Forgiving yourself is crucial to your emotional health and will help you take positive action to undo your mistake. A bad decision doesn’t have to define you; instead, it can be something you learn from and overcome. The mental energy spent beating yourself up can be better used to help address the problem.

Improving Your Money Mindset

If you have a positive money mindset, you will likely make better money decisions. Having a negative view, on the other hand, can keep you from setting goals and taking positive action. For example, if you think you will never get out of debt, you may not feel motivated to even try. However, putting a positive spin on the situation — that, with a plan, you will be able to one day be debt-free — can motivate you to start (and keep) attacking your debt.

The Takeaway

Though everyone tries to do their best with their money, mistakes happen all the time. No one likes losing money, but it’s vital to remember that one or even several financial slipups can be overcome by keeping a positive mindset and taking the recovery process one step at a time.

If you want to gain better control of your finances, help is available, starting with the right banking partner.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What are the consequences of poor financial decisions?

Poor financial decisions can lead to a low credit score, lack of savings, and overreliance on debt. It can also make you vulnerable to financial emergencies and limit your access to loans and credit cards with favorable rates and terms.

Do bad financial decisions lead to bad financial habits?

Yes, if left unaddressed, bad financial decisions can lead to bad financial habits. Not putting money aside for emergencies, for example, can cause you to rely on your credit card to cover a large, unexpected expense, and lead to a cycle of high interest debt that can be hard to get out of.

Can bad financial decisions be overcome?

Yes, you can overcome bad financial decisions by identifying where you went wrong and coming up with a realistic plan to address the problem moving forward. You can also likely benefit from budgeting and managing debt well.

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About the author

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Photo credit: iStock/bob_bosewell

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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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 .

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