Mar
23
2024
Business Cash Management Explained

Business Cash Management: Tips for Managing Cash

By | Building Your Career, Life & Career, money, SMB | Comments Off on Business Cash Management: Tips for Managing Cash

If you’re running a business, you probably know that managing cash is critical to your success — so let’s share some tips on doing that even better. Solid cash flow is vital to keep a business thriving, whether you’re a sole proprietor or the head of a larger enterprise. Even businesses with strong earnings can struggle with cash flow. That’s why cash flow can be a sure sign of how healthy a business is — or is not.

So let us help you optimize that cash flow. We’ll share some smart insights and helpful tips on:

•  What cash management for business is

•  Why it’s so important

•  Ways you can improve your business cash management

Let’s get started.

What Is Business Cash Management?

Simply put, business cash management is basically the way you track and manage the money coming into and going out of your business – usually on a cash flow statement. Positive cash flow means more money is coming in through revenues or borrowing than is being used to pay expenses, such as payroll and rent.

That said, good cash management also means not having too much cash on hand. In that scenario, business owners, while cautious, may be missing out on future earnings growth when they neglect to invest cash back into the business.

Here’s another way to frame this principle: Take a look at your business’s balance sheet and check the ratio of current liquid assets to liabilities. A ratio that’s greater than one indicates good health (you’re not losing money), but if that ratio gets too high, you could be holding onto too much cash or other assets that could better be invested elsewhere.

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

The Importance of Cash Management for Businesses

Cash flow is the essence of all businesses. Without cash, a business will struggle to meet expenses, pay suppliers, repay any investors, and, often most importantly, grow the business through marketing and/or new opportunities.

Strong cash management strategies can help business owners avoid taking on debt. It also gives them more control over everyday activities, decisions, and growth opportunities. What’s more, smart cash management is the best way for owners to fulfill their vision for their enterprise while meeting both their short, intermediate and long-term needs. There’s certainly a lot riding on cash management, so let’s dive into ways to optimize it.

6 Tips for Managing Cash Flow

Cash management can be especially challenging for entrepreneurs and small business owners. Yet it is one of the most important financial strategies business owners must master. These six tips can help.

1. Learning Your Cash Flow Cycle

A cash flow cycle is the time it takes to purchase your supplies and materials (or prepare the work that goes into providing a service), transform them into a product, sell your offering, and collect payment that can go into your business bank account. Sounds simple but a lot can go haywire during that process.

That’s why it’s important for business owners to constantly update and monitor their balance sheets and profit and loss statements. Ideally, you want to know at any given time what happened in the cash-flow cycle last month. Also important: Knowing your projections for what’s going to happen next month.

Understanding your cash flow cycle can help identify and address inconsistencies such as a late-paying customer or a build-up of inventory. If your business is seasonal or cyclical, you want to be well-prepared for both the intensely busy times…and the lulls.

Recommended: How to Track Your Monthly Expenses: Step-by-Step Guide

2. Getting Payments on Time

Reminding customers to pay on time is one of the easiest but most necessary ways to manage cash flow. Late payments are a fact of life; common, even. Having receivables come in even a day or two past the due date can wreak havoc with your cash flow cycle and your bank account.

Consider setting up email reminders to all customers ten days, seven days, and two days before payment is due. Technology today makes it a snap to pre-schedule email blasts. If the payment is still late or only a partial payment was made, don’t hesitate to follow up with a personal note or phone call.

This simple solution can really work. Customers will pay more attention to timely payments when they know you are paying close attention.

3. Turning Over Inventory Quickly

Having an abundance of inventory on hand at a given time means that a bundle of cash is tied up in that unsold stock. That could be an issue, because those funds might otherwise be working to pay for operations and expenses. What’s more, if all of that inventory bought upfront doesn’t sell as expected, it could mean losses on top of that lack of cash. That could hurt your growth and business valuation.

Many small business owners have learned that, in terms of cash, it’s better to turn inventory more quickly. Of course, this will vary widely depending on your business – perhaps your product is handmade jewelry, perhaps its reconditioned air conditioners. As an example, you might want to boost inventory turn-over from twice a year to five times. More targeted marketing could contribute to this acceleration.

That said, finding the right inventory management to fit with your cash flow cycles takes some time and experience. Recent supply chain issues have shown how challenging inventory management can be. Again, constant monitoring of the cash flow cycle can help guide how you tweak things.

Recommended: How Much Does It Cost to Start a Business?

4. Understand Invoice Financing

Let’s say you hit a cash management hitch. If you do find yourself in a position where you have too much inventory on hand and you need cash to cover expenses, there is a path forward. Invoice financing companies will advance a full or partial amount of your outstanding invoices. You repay that amount plus interest after the invoice is paid.

This generally should only be considered as a stop-gap measure. Like credit cards, interest payments on invoice financing can add up fast and quickly get out of control. Consider the fact that annual percentage rates for invoice financing products can reach as high as a jaw-dropping 64%.

5. Cutting Costs

Monitoring and cutting costs on expenses is another tool for managing cash flow. After all, if less cash goes to pay overhead, more can be invested in the business. A few suggestions: Relying on online marketing efforts that can be less costly than traditional methods, outsourcing tasks that take too much time and money in-house, and reducing energy costs. You might also want to renegotiate outdated contracts and prices with suppliers. These are all areas business owners can consistently monitor to keep costs low.

💡 Quick Tip: Are you paying pointless bank fees? Open a checking account with no account fees and avoid monthly charges (and likely earn a higher rate, too).

6. Comparing Loans

Sometimes, a business could use a helping hand to smooth out its cash flow. Let’s say you have outstanding accounts receivable — in other words, you know money is due but you don’t have it yet — and you need the cash now. In this situation, taking a business loan can be an option to help bridge the gap.

Cash flow loans (like invoice financing explained above) are short-term loans or lines of credit. These are often used to cover expenses or to take advantage of opportunities that can increase revenue.

A working capital loan is another option that can be used to finance everyday business operations such as rent, payroll, or restocking inventory. These loans are not designed to finance long-term assets or investment. Companies with seasonal or cyclical sales often rely on working capital loans to provide relief during slow periods.

One caveat: Working capital loans are often tied to your personal credit, so missed payments or defaults will affect your credit score. Consider that carefully before you sign on.

In addition, there are a variety of small business loans available that are used to finance long-term expenses such as real estate, equipment purchases, or business expansion. These include SBA loans, business lines of credit, and term loans.

Whatever type of loan you choose, be sure to compare your options carefully. Look at terms, APR, and how much lending you qualify for among several lenders before taking on any short or long-term debt. Spending some time and energy on research will help ensure you get the right form of financing.

The Takeaway

Cash flow management is an essential part of running a successful business of any size. Carefully monitoring cash flow, and learning some simple strategies to maximize it can take your small business to the next level.

Whether your business is a full-time job or just a side gig, it’s important to keep your business cash flow separate from your personal cash flow. In both cases, you’ll want to find a bank account that pays a competitive rate, charges no or low fees, and makes it easy to access your money.

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.

Photo credit: iStock/AlexSecret

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
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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Mar
23
2024
Can You Get a Home Loan While on Maternity Leave?

Can You Get a Home Loan on Maternity Leave?

By | Family Finances, Home Ownership, mortgage | Comments Off on Can You Get a Home Loan on Maternity Leave?

It is possible to get a home loan while on maternity leave. The process may involve your lender verifying your “temporary leave income,” if any; your regular income; and your agreed-upon date of return. Anyone on a standard temporary leave is considered employed, whether the absence is paid or unpaid.

Read on to learn more about buying a home while pregnant and how this will impact your ability to get a mortgage.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Buying a House While Pregnant

Hey, why not take on two of the biggest life stressors at once? Sometimes it just happens this way, with parents preparing for a baby and a new home and mortgage.

First, consider if you can wait a bit to buy a home. It may lead to less stress overall during the pregnancy. Plus, the added pressure of a deadline may lead to hasty decision-making that buyers could regret.

And unless an employer is covering moving expenses, add that sizable cost to all the rest.

But if the move can’t be avoided because of a job relocation or other circumstances, it may be important to find a home before the baby arrives. Which does have a silver lining: Saving for a down payment could interfere with goals like saving for a child’s college tuition.

Another possible benefit to buying a house while pregnant is that the relocation could lead to a better school district or area to raise a child.

Ultimately, the decision to buy a house while pregnant is personal.


💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

What Is the FMLA?

The Family and Medical Leave Act, or FMLA, gives eligible employees job protection and up to 12 weeks of unpaid leave a year in the event of:

•   Childbirth

•   Adoption or foster child care

•   Care for a spouse, child, or parent with a serious health condition

•   A personal serious health condition

•   Qualifying exigencies arising from covered active duty or “call to covered active duty status”

The FMLA guarantees that the employee can return to their job or an equivalent one and that they’ll receive health care benefits during their leave.

Employees are eligible if they work for a company that has 50 or more staffers and have completed at least 1,250 hours of work in the previous year.

In addition to the FMLA’s 12 unpaid weeks off, more and more states are enacting paid family leave laws. Currently, 13 states plus the District of Columbia have made this mandatory. And your employer may cover your pregnancy, childbirth, and recovery thanks to short-term disability insurance. Your benefit would be a percentage of your normal earnings.

Recommended: How Much Does it Cost to Adopt a Child?

How Maternity Leave Impacts a Mortgage

Before diving into the nuances of maternity leave and its impact on qualifying for a mortgage, here’s a quick refresher course on the home-buying process.

Mortgage approval from a lender primarily hinges on two factors:

•   Creditworthiness. How likely is the borrower to pay back the loan, based on their credit history?

•   Ability to pay. Does the borrower generate enough income, and have a certain debt-to-income ratio, to make the monthly mortgage payments?

The lender may contact an employer to verify a borrower’s employment status and income.

Why could getting loans for pregnant women prove a challenge? Income. Consider these points:

•   As long as the lender can verify that the borrower is employed — and remember, someone on temporary leave is considered employed — and generates enough income to cover the mortgage, that could be enough.

•   Expectant borrowers aren’t legally required to disclose their pregnancy to a lender. However, the employer can tell the lender about impending maternity leave when they call to verify employment status.

•   If a borrower is going on unpaid leave, they may need to disclose it to the lender. That’s because the period without pay may qualify as a financial hardship, which a borrower is required to inform a lender of.

•   The lender can’t assume the mother-to-be won’t return to work after maternity leave. Lenders consider that the mother will return to work after maternity leave and continue bringing home paychecks.

•   Before approval, the lender will ask the borrower for written notice of her intent to return to work, and may ask for an expected return date.

•   The mortgage lender may request a tax slip from the last calendar year if the borrower is a salaried employee.

•   A lender may approve the mortgage if your employer verifies in writing that you will return to your previous position or a similar one after your maternity leave. The lender will also consider the timing of the first payment.

•   If the borrower will have returned to work when the first mortgage payment is due, the lender can consider regular income in qualifying for the mortgage.

•   If the borrower will return to work after the first mortgage payment due date, the lender must use the borrower’s temporary leave income (if any) or regular employment income, whichever is less, and then may add available liquid financial reserves.

•   VA loans don’t count temporary leave income towards qualifying for a mortgage, however.


💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

Should I Buy a Home While on Maternity Leave?

For those who qualify for a mortgage while on maternity leave, the question may be, “Should I buy a house while on maternity leave?” not “Can I buy a house while on maternity leave?”

As mentioned, moving can be an incredibly stressful process, pregnancy or no pregnancy. And even if you made a budget for a baby, life has a way of throwing in surprises.

Homeownership can also come with financial surprises. The majority of homeowners reported paying for an unexpected repair within the first year.

Having a child and buying a home both require saving some significant cash. By budgeting, doing the two simultaneously is possible. So it’s your call. Not taking the double plunge could give you time to review what you need to buy a house.

Recommended: First-Time Homebuyers Guide

Home Loans With SoFi

Pregnancy is not a legal limiting factor in a mortgage lender’s eyes, but getting a home loan while on maternity leave will depend on your income, savings, work return date, and credit history.

Whether you’re on a temporary leave or not, it can be worthwhile to take a look at your home loan options.

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.

FAQ

Does being on maternity leave affect getting a mortgage?

It can, but only in the sense that maternity leave can affect a homebuyer’s reported income. If buyers anticipate an unpaid maternity leave, they may need a sizable savings account.

Should you buy a home on maternity leave?

Buying a home while on maternity leave depends on your family’s needs and finances. But moving can be stressful, and adding infant care can be a lot to handle.

Who does FMLA cover?

The Family and Medical Leave Act provides 12 weeks of unpaid, job-protected leave per year for eligible employees in the case of the birth or adoption of a child or placement of a foster child, and for other reasons.

Photo credit: iStock/FatCamera

*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.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Mar
22
2024
woman looking at papers in kitchen

Understanding Market Sentiment

By | Growing Wealth, invest, Investing, Terminology | Comments Off on Understanding Market Sentiment

Market sentiment concerns a complicated blend of thoughts, feelings, and actions, all of which have an effect on stock prices and markets. Flip on the cable news and the vibe might have you believe that political statements, economic data points, natural disasters, or global unrest have some sort of predictable or unilateral effect on investing behavior.

And they might! But in a slightly more roundabout way. These events may well change how investors feel about owning certain investments, which leads them to buy or sell those investments. And it is the forces of supply and demand that push asset prices higher or lower. Said another way, investor sentiment, also known as market sentiment, can cause price volatility.

Market Sentiment Defined

The collection of all investor feelings — and actions — amounts to what is called market sentiment. It is a powerful force in the markets and is the subject of much study (and cable news discourse).

Market sentiment is affected by millions of factors daily. That’s because there are at least as many participants in popular marketplaces, like the stock market.

While one investor may be selling stocks because of poor corporate earnings, others might simply sell because they woke up on the wrong side of the bed. It is overly simplified to assume only one cause of changes to asset prices.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.

*Probability of Member receiving $1,000 is a probability of 0.028%.

Collective Mood Swings

Market sentiment is the phrase used to describe the overall spirit of investors in a market. (The stock market was used in the example above, but market sentiment exists in all investment markets.) Think of market sentiment as a giant mood ring for a particular market at a particular time.

The collective psychology of the market has the power to move stock prices. (How much “we” demand something gives it its value.)

When prices go up, the overall tone of the market is said to be positive, or bullish. When prices move downward, it generally means that investor sentiment is negative, or bearish. Investor attitudes about investments are realized in the price of those investments.

And anyone who watches the market knows that investors can be quite emotional at times. It’s human nature. It’s best that investors accept this reality.

In fact, investors should find it freeing that humans aren’t always rational and that sometimes asset prices can have major swings along with global moods. It is not up to the investor to control the swings of the stock market, but instead to weather them calmly.

While company earnings are the engine that drives stock market returns over time, it is the act of buying and selling that, in the shorter term, can cause the stock market to wiggle.

The stock market is of particular interest when looking at market sentiment. It’s a popular, global market, for one. Second, volatility can be dramatic, unlike markets for bonds. Third, it is easy to witness changes happening in real time.

The stock marketplace is like few marketplaces in the world, where prices are updated constantly in direct relation to the buying and selling of items in question. (Imagine how wild that would be if it happened at a grocery store.)

Market sentiment is considered an important tool for market analysis. It is used to make decisions about the very market the sentiment applies to.

Market Sentiment as an Indicator

When analyzing markets in an effort to predict them, indicators are used. An indicator is a sign or trigger that may hold some sort of valuable information. Market sentiment is one such indicator.

Compare market sentiment as an indicator with fundamental analysis, which largely relates to business performance, projected business performance, and the prevailing conditions for business performance.

Imagine a new tax law that’s expected to have a strong impact on the profitability of businesses in a certain industry. This would be considered a fundamental indicator.

Sometimes sentiment indicators and fundamental indicators can be at odds with each other. Fundamental indicators appear to point in one direction, but investor emotion may say otherwise.

For example, a business could have poor business fundamentals, and investors may still feel exuberant about that company and pile into its stock, which pushes the price of that stock higher.

Examples of Market Sentiment as an Indicator

There are many ways in which market sentiment is used as a market indicator. Then there are even more interpretations for what that data could mean.

It’s important to realize that no market indicators should be taken alone as fact. Why? Market indicators are in the business of predicting the future, which, in the stock market and otherwise, is a difficult thing to do.

In forecasting the general trajectory of the stock market, investor sentiment is sometimes used as a contrary indicator.

As the old adage goes, “Be fearful when others are greedy and greedy when others are fearful.” In a broad sense, when market sentiment is poor, it could indicate that it’s a good time to invest. When market sentiment is hot, it could be a bad time to invest.

When do people feel the worst about investing? At market bottoms, when prices are low. When do investors feel best? After the market has done well, which could indicate that prices are too high.

This is a characteristic of market bubbles, where investor mania causes prices to soar beyond their fundamental value. (Exhibit A was the dot com bubble, which saw investors piling into internet stocks, some of which never had so much as a quarter of positive earnings.)

Another instance in which sentiment might be used to assess an investment is through a strategy called value investing. With this method, investors attempt to uncover underpriced stocks — stocks whose price is lower than the believed value.

This could mean looking for a stock that has a strong fundamental foundation but that has yet to catch fire with investors, or a stock that is being punished (perhaps unnecessarily) by investors. Finding the proverbial diamond in the rough requires both an understanding of a company’s fundamentals and the market sentiment surrounding it.

Day trading, which is the practice of making bets on the price movement of a security during the trading day, relies on what are called technical indicators. And because of the power of investor attitudes to move prices, factors of sentiment can play an important role in short-term market changes.

For example, technical traders may look at a security’s historical price movement, called moving averages, in an attempt to surmise what will happen going forward. It is common to look at both 50-day and 200-day simple moving averages in an attempt to predict what happens next.

Other examples of sentiment indices are the High-Low Index, the CBOE Volatility Index, also known as the “fear” index, and the Bullish Percent Index.

The BPI measures the number of stocks with bullish and bearish patterns according to point and figure charts, ultimately producing a read on the sentiment of the overall market. An output of 50% is neutral, while reads above 80% are bullish and below 20%, bearish.

Some investors might argue that the above technical indicators have a serious limitation: They are using data from the past to project into the future and that the future is more or less unknown.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

Building an Investment Strategy

Market sentiment concerns the overall thoughts, feelings, and actions of market participants, and has an effect on what happens in the stock market. Negative sentiment can drive stock values down, while positive sentiment can lead to market euphoria and higher values.

It can be difficult to keep up with market sentiment, or to even read it accurately. But knowing what sentiment is, and how it can affect the markets, can be important when making investment decisions.

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).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

SoFi Invest®

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

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

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

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Mar
21
2024

Should I Go to Community College?

By | Going to College, Student Loans, student_loan | Comments Off on Should I Go to Community College?

When considering higher education, you have options. Some might include applying to a four-year college or considering community college. Everyone’s path is different, just know that you can chart your own course.

If you’re wondering, “Should I go to community college?”, let’s take a look at some important factors to think about first.

Key Points

•   Community colleges offer affordable education options with lower tuition costs compared to four-year universities, allowing students to save money while pursuing an associate’s degree.

•   Admission to community colleges is often less competitive, with many institutions maintaining open admission policies, making it easier for students to enroll.

•   The flexibility of class schedules at community colleges accommodates students who work or have other commitments, and smaller class sizes can enhance learning experiences.

•   Limited academic offerings could be a drawback, as community colleges primarily focus on associate degrees and may not provide all courses needed for specific bachelor’s programs.

•   Social opportunities may be reduced at community colleges, making it challenging for students to build friendships and participate in extracurricular activities compared to traditional four-year universities.

What is Community College?

Community colleges typically offer two-year degrees known as an associate’s degree. Students often attend community colleges for two years before transferring to a four-year university to gain their bachelor’s degree.

Working with a counselor can help you solidify your academic goals and work towards them, from choosing a major to earning the right credits that can be transferred to your bachelor’s degree.

This can be an exciting time in your life, but also an overwhelming one. Let’s take a look at the pros and cons of attending community college, in addition to other factors you should consider when choosing a college.

Pros and Cons of Community College

Attending community college can have some upsides, but like anything, it may not be the right option for everyone. Just remember — your own experience is going to be unique and what might be best for you might not be the same case for your classmates or friends. No need to feel pressured by what might be the “right” or “wrong” path.

Read on for more pros and cons of community college.

Pros of Going to Community College

Some benefits of attending a community college include affordability, increased flexibility in classes, and the opportunity to stay local.

Affordability

Because community college can be less expensive than their four-year counterparts, attending a community college before a university could help you cut tuition costs significantly. According to Education Data Initiative, the average cost of tuition at a two-year college in 2023 was $3,501, as compared to $9,678 at a four-year public institution with in-state tuition.

Students attending community college may also be able to live at home, which can cut down on living expenses, too. Living at home while taking community college classes can also offer you some transitional time to get accustomed to a new schedule and new academic expectations before committing to a four-year university.

Easier Admissions Requirements

It’s also relatively easy to gain admission into community college. Some community colleges even have open admission policies, which generally means that there are limited academic requirements needed for admission, so most students who apply are accepted.

Note that even if a community college has an open admission policy, certain more competitive programs, like a nursing program, might have more stringent academic requirements.

Flexibility with Classes

Another major benefit of community college is that students have flexibility with classes and the opportunity to explore a variety of academic interests before committing to a major at a four-year university. Class times also may be more suitable for students that work full-time or have other commitments outside of school.

In addition, community colleges can offer you the chance to experience smaller class sizes (instead of large lecture hall classes that can be common at universities).

Recommended: Financial Benefits of Community College

Cons of Going to Community College

While there are many pros to attending a community college before transferring to a four-year university, there are some cons to consider, as well.

Possible Limited Academic Offerings

While community college can offer the opportunity to explore courses, the academic offerings may be more limited at a community college than at a four-year institution. Consider finding out which classes are available at each community college you are interested in so you can make sure they have exactly what you need. Not all community colleges might include the classes you are interested in taking.

Generally, community colleges are limited to associate degrees, so if you are interested in obtaining a bachelor’s, you’ll need to eventually transfer to another institution. It can be helpful to talk to a counselor at the community college about what classes you might choose so that you don’t end up earning too many credits that can’t be transferred.

Missing Out on Social Benefits

Another potential downside to attending community college is that students may miss out on some of the social benefits of attending a four-year college, including friendships, extracurriculars, and enjoying campus life. While you can experience all of these things if you transfer, it can be challenging to make friends as a transfer student.

Choosing Which College to Go To

If you know for sure that you want to attend community college, now it’s time to see what options are available near you. According to The Princeton Review, 90% of the U.S. population is within commuting distance of a community college.

Due to one life situation or another, many students attend colleges as commuter students, trading a fully on-campus experience for greater flexibility. As a commuter student, you can choose to live somewhere more affordable and create a schedule that works with your work hours.

Commuter student life can also include a mix of on-campus classes and online work. Some community colleges offer a variety of online classes. Taking advantage of these resources can help if you find yourself with a complicated schedule, or if you just want more flexibility.

Other Factors to Consider When Choosing a College

Your academic goals will guide which college you choose. As you evaluate colleges, take a look at which colleges offer the major you want to pursue. If you are in the process of choosing your major, see if you can find out more about the programs that the community college near you offers. You could talk to current students or professors and evaluate whether it seems like a good school for your interests.

If you are applying for a mix of community colleges and public universities, creating a list of all your potential applications can be helpful.

You can organize this list by “match,” “reach,” and “safety” schools in order to help you consider all your options.

Thinking About the Cost of Community College

While the cost of community college is less than a four-year university, it’s still an expense that should not be taken lightly. You might consider a combination of scholarships, grants, and loans to help offset the total costs of college.

To start, students can fill out the Free Application for Federal Student Aid (FAFSA®) each year. This application is used to determine aid including work-study, federal student loans, scholarships, and grants.

Once you start tackling the process of paying for community college, keep in mind that the financial aid offices can be a great resource if you have any questions about finding aid for college. You can find more information on whether or not the college offers its own scholarships and how to apply.

There may also be state-specific financial aid available, and it’s recommended to use a scholarship search tool to find scholarships you may qualify for.

If these resources aren’t enough, it is possible to borrow private student loans for community college. While private loans can be helpful, they’re generally considered after other options have been exhausted. That’s because they don’t have to offer the same benefits to borrowers as federal student loans do — things like income-driven repayment plans and student loan forgiveness.

Financing Your Education

Whether you decide to attend a community college first or head straight to a four-year institution, you’ll need to find a way to pay for your education. A few options may include federal student loans, scholarships, and grants.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.


Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Is going to community college worth it?

Going to community college can be a worthwhile experience, offering students an opportunity to take college-level coursework at an affordable price. Other benefits include increased flexibility in scheduling and the possibility to live at home while taking classes. Students also have the opportunity to transfer to a four-year college.

Does community college look bad on a resume?

Including your time at community college does not look bad on a resume. If you earned a professional certificate or other degree at the community college, feel free to include it.

Is it hard to get a job after community college?

The ease of finding employment after community college may be influenced by the field you studied. For example, students graduating with a certificate in a high-demand field such as nursing or dental hygiene may find it is relatively easy to secure employment.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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

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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Mar
20
2024

Is 810 a Good Credit Score in 2024?

By | Credit, Financial Independence, relay | Comments Off on Is 810 a Good Credit Score in 2024?

If you have an 810 credit score, congratulations. The score is considered excellent and could help you qualify for loans with more favorable terms or premium rewards credit cards.

Let’s take a closer look at what an 810 credit score means and some different strategies that could help boost your credit score.

What Is a Credit Score?

A credit score is a three-digit number that reflects a consumer’s creditworthiness, or ability to pay back loans in a timely manner. Scores range from 300 to 850. Generally speaking, the higher the credit score, the better you tend to appear to a potential lender.

The two most popular credit scoring models are FICO and VantageScore. To calculate your score, both use credit history information provided by the three major credit bureaus: Experian, TransUnion, and Equifax.


💡 Quick Tip: Your credit score updates every 30-45 days. Free credit monitoring can help you learn about your score’s normal ups and downs — and when a dip is cause for concern.

Reasons to Care About Credit Scores

There are several reasons why a good credit score is essential to your financial health. Here are three to keep in mind.

It can increase your chances of being approved for a loan

The higher your credit score, the more likely lenders will approve loan or credit card applications. Whether it’s to purchase a house, buy a car or private student loans, having access to loans can help you achieve some big financial goals. Note that some banks may also run credit checks before issuing you an account.

You may have access to better loan rates and terms

Lenders are more likely to offer consumers with better credit scores lower interest rates and more favorable terms because they’ve proven they pay back their loans on time. A higher credit score may also get you access to other types of products such as premium rewards credit cards.

You could save money

When you move into a new home, the utility company or your landlord may check your credit score to determine how much of a security deposit you’ll need to put down. Typically, the lower your score, the higher your deposit. Though the money is often refundable, it’s usually held in a third-party account that you won’t have access to. Potential employers may also run a credit check before you’re offered a job.

Is an 810 Credit Score Considered Good or Bad?

An 810 credit score is considered very good. In fact, just 21% of consumers in the U.S. have a credit score of 800 or higher, according to Experian. By comparison, the national average credit score is 715.

What Does an 810 Credit Score Mean?

Having an 810 credit score means you’ve proven through your credit behavior that you are likely to pay back loans on time. As mentioned above, a score of 800 or above places you in the top tier of consumers.

You are also considered to be in the “exceptional” range for your FICO score and “superprime” for your VantageScore. This means lenders are more likely to approve you for loans and offer you access to products such as loans with lower interest rates and premium credit cards. Landlords and utility companies may also ask for a lower security deposit amount (if at all).

Check your score with SoFi

Track your credit score for free. Sign up and get $10.*

How to Build Credit

Looking to build your credit? You have several avenues to explore. Below are a few to consider. Note that there’s no one-size-fits-all solution, so it’s a good idea to research all the options available to you.

Use a Credit Card

Even if you’re just starting out in your career or only have fair credit, you may still be able to be approved for a credit card. For instance, you can open a credit card that’s specifically for college students. Or you may want to consider a secured credit card, where you pay a refundable security deposit that acts as your credit line.

Whatever purchases and payments you make on the card are reported to the three major credit bureaus. This in turn helps to establish your credit history.

Become an Authorized User

An authorized user means that your name will be put on someone else’s credit card account. You can use the credit card much like the primary cardholder can, though this person is ultimately responsible for ensuring the minimum payments are paid on time.

If the primary cardholder has a good credit score, then their positive credit history may be added to yours.

Add Monthly Bills to Your Credit Report

Some free credit monitoring services will report your utility and rent payments to your credit report. Doing so can help build your credit history. Even if there is a small fee involved, it may be worth using for a few months, depending on your financial situation.

Take Out a Credit Builder Loan

Credit builder loans are designed to help borrowers who are looking to build their credit. They’re similar to a personal loan, except you don’t initially receive the loan proceeds. Instead, the money will be held in a separate savings account until you pay off the loan. Meanwhile, your payment activity will be reported to the credit bureaus.

How Long Does It Take to Build Credit?

It can take several months for you to establish and build credit. This is because credit scoring models need enough information from your credit history in order to assess your creditworthiness.

As you work on building your credit, do your best to practice good financial habits, such as making on-time payments.

Credit Score Tips

Even if you have an excellent credit score, it’s a good idea to keep up good credit behavior. This includes:

•   Consistently making on-time payments

•   Keeping your credit utilization, or the percentage of the available limit you’re using on revolving credit accounts, as low as possible

•   Avoiding applying for too many new loan or credit accounts at once

•   Keeping your longest credit card or loan account open

•   Regularly monitoring your credit score

•   Checking your credit history and immediately disputing any errors you find

How to Check Your Credit Score

Wondering how to find out your credit score for free? You have several options. The first is your credit card statement. Many credit card issuers provide customers with a complimentary look at their score. To find it, you may need to log into your account or check your monthly credit card statement.

Another option is to use credit score monitoring tools; some are free, others require a payment. Before opening an account, compare each tool to see which one best serves your needs.


💡 Quick Tip: One way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

The Takeaway

It’s good news if you have an 810 credit score and a sign that you have a track record of paying back your loans. A good score may help improve your access to loans with better terms or premium or luxury credit cards. If you want to improve your score — or just maintain it — you can try practicing good financial habits, like consistently making on-time payments, keeping tabs on your credit score, and disputing any errors.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What is a decent credit score for a 23-year-old?

Chances are, at 23 you’re probably still building your credit. According to Experian data, the average credit score for people aged 18 to 25 is 679. If yours is higher, then it’s considered above average.

What is the highest credit score possible in 2024?

The highest credit score you can achieve is 850 for both FICO and VantageScore scoring models.

Is a credit score of 800 good at age 23?

Whether you’re 23 or not, an 800 credit score is considered excellent.

Photo credit: iStock/Makhbubakhon Ismatova

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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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✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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