Sep
02
2023
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Are You Bad with Money? Here’s How to Get Better

By | Debt Payoff, Financial Independence, Life & Career, money | No Comments

There are moments when you may feel as if you are bad with money: You overdraft your account, pay a bill late, can’t put any cash towards retirement, or realize your savings account balance hasn’t budged in months.

If you feel as if you aren’t managing your money as well as you could in these instances, you might be right. But by taking a closer look at these signals and then shifting your course, you can get on a better track to taking control of your cash, building wealth, and reaching your financial goals.

So instead of just thinking, “I’m bad with money” and sidestepping the issue, read on to learn the signs that you could boost your money management. Then try the simple strategies that can help you improve.

4 Signs You’re Bad With Money

Sometimes the signs are clear, like getting multiple notifications for overdraft fees in a week. Sometimes, however, being bad with money is less obvious. Here are some red flags that can indicate you’re heading down the wrong financial path.

You Tend to Live Paycheck to Paycheck

Even if you are able to pay your bills in full each month, if you’re often broke after paying them, it can be a sign that you’re not all that financially stable.

Whatever your income or budget is, it can be wise to always have at least a little bit of extra money to put into savings. If that extra doesn’t exist, then you could be walking a financial tightrope, where a major crisis could be waiting just around the corner.

💡 Quick Tip: Make money easy. Enjoy the convenience of managing bills, deposits, and transfers from one online bank account with SoFi.

You Don’t Have an Emergency Savings Fund

Not starting an emergency fund (rainy-day money tucked away in a separate savings account) is an indication that you’re living too close to the edge. It’s important to have that cash to cover an unexpected expense, such as a medical bill, car repair, or sudden loss of income.

Although the specific dollar amount you should have in your emergency fund varies from person to person, many financial experts say you should try to have at least three months’ worth of living expenses set aside to cover the unexpected.

Without this cushion, a single large expense or loss of paycheck even for a couple of months could put you in a debt spiral that can be hard to get out from under. You might be tempted to put too much on your credit card and wind up with high-interest debt.

You Only Make the Minimum Payment on Your Credit Cards

Speaking on high-interest debt: Here’s another sign that you may be bad with money. Paying the minimum on your credit cards may seem like you’re keeping up, but in reality you are gradually getting further and further behind.

If you don’t pay the card in full each month, every dollar you put on a card can end up costing you many times more in interest charges over time. Credit card debt that you can’t get rid of can be a clear sign that you’re not being as good with your money as could be.

You Often Overdraft Your Account

If you’re gotten into the habit of spending almost everything you earn, it can be easy to overdraft your account. This often results in a high overdraft or NSF fee, which can make keeping up with your expenses even harder.

Overdrafts can also result from disorganization. Maybe you have the money, but didn’t transfer it over to your checking account in time. This can be a sign that you’re not keeping close enough tabs of your money.

Recommended: How to Avoid Overdraft Fees

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How to Be Better With Money: 11 Tips

Becoming better at money management doesn’t have to happen overnight. In fact, the best approach to lasting change is often to take one small step at a time. This can be much easier to do and, as you start to see the rewards (more money, less stress), you will likely be inspired to keep going.

The following tips can help put you on the path to being good with money.

1. Setting Some Specific Money Goals

You likely have a few things you’d like to do in life that having enough money can help you accomplish. Maybe you want to take a great vacation next year, buy a home in a few years, or retire early.

Setting financial goals, both for the short- and long-term, can give you something to work towards — or, in other words, a reason to be better with your money.

Recommended: What is Financial Therapy?

2. Tracking Your Cash Flow

In order to get better with money, it can help to know exactly where you currently stand.

You can do this by gathering all your financial statements for the past several months, and then adding up all of your after-tax income to see how much is coming in each month.

Next, you can tally up how much you are spending each month. To do this, you may want to make a list of all your spending categories and then come up with an average amount you’ve been spending on each.

You may find it helpful to actually track your spending for a month or two, either by journaling or using an app that tracks spending right on your phone.

Ideally, you’ll want to have more coming in than going out each month. That means you have money you can siphon off into saving and investing, which can help you build wealth over time.

3. Coming Up With a Budget Method That Works for You

Once you have a clear picture of what’s coming and going out each month, you can create a budget for your money moving forward — in other words a budget.

While budgeting may sound onerous, it’s simply a matter of going through your expenses, seeing where you may be able to cut back, and then coming up with target spending amounts for each category.

One budgeting framework that may help you get started is a 50/30/20 budget breakdown. The idea is that 50% of your after-tax income should go to necessities, 30% goes to fun spending or “wants,” and 20% goes to savings goals.

These percentages may not work for everyone, especially if you live in an area with a high cost of living, but they can give you a general rule of thumb as you get started with budgeting.

💡 Quick Tip: Want a simple way to save more each month? Grow your personal savings by opening an online savings account. SoFi offers high-interest savings accounts with no account fees. Open your savings account today!

4. Curbing Impulse Purchases

If you tend to shop without a plan, it can be easy to grab this and that without realizing how quickly these small costs can add up. A perfect example is going grocery shopping. But the same thing can happen if you are mindlessly browsing shops at the mall or online.

Making a list — and sticking to it — whenever you shop can help you avoid overspending. If you see something you really want but you weren’t planning to buy, it can be a good idea to put the purchase on pause for a day or two.

Once you have a cool head and a fresh perspective, you can then ask yourself if you’ll actually use this item and if you can afford it, meaning you can pay cash for it now. If not, it may be a good idea to skip it.

5. Thinking About Larger Spending Cuts

There are only so many lattes you can skip or cents per gallon you can save by heading to the cheaper gas station around the corner. So when you’re trying to find places to save money in your budget, you may also want to think bigger.

For example, you might decide to ditch your car in favor of biking to work — a move that means you save not only what you’d be spending on gas each month, but also insurance, registration, and likely a monthly car payment. (And you might even be able to ditch your gym membership, with all that moving around!) Or, you might consider moving to a less-trendy neighborhood or getting a roommate to help split the rent and other household expenses.

While lifestyle changes might be harder to enact up front, once you commit to them, they can help you save large amounts of money on a regular basis.

6. Automating Your Savings

Building an emergency fund and saving for future financial goals are key steps toward fiscal wellness. So once you have graduated from being at risk of overdrafting your accounts, a great next step can be to automate your savings.

That means setting up an automatic transfer of money from your checking account (or wherever your money is deposited) to one or more accounts designated for saving. This can be done on a monthly (or bimonthly) basis, and can be timed to happen right after your paycheck hits.

If saving is a chore that you have to remember to do every month, you may get busy and forget. Why not let technology do the heavy lifting for you?

7. Bringing in More Income

Do you feel like you’re cutting back on spending as much as possible but not getting anywhere? You may need to work on earning more money.

How exactly you go about this goal is up to you, of course. Maybe this means sitting down with a boss and creating a path towards earning more money. Or, it could mean picking up some freelance work in your profession, or starting a side hustle (like pet-sitting or signing up with a ride-share or delivery app).

8. Listing All of Your Debts

Many bad financial habits are born from the easy access consumers have to money that isn’t theirs — and the need to pay those debts back, with interest.

As with budgeting, the first step in conquering your debts is knowing exactly what you’re up against. To get the big picture, you may want to create a computer spreadsheet (or just make a chart with pen and paper) and then list each source of debt that you currently hold.

This includes student loans, credit cards, car loans, and any other debts you may have. You may also want to include the loan servicer, the size of the debt, the interest rate, and the amount and date of the monthly payment on each debt.

9. Knocking Down Debt One at a Time

If you’re paying the minimum on more than one high interest credit card, you may want to focus on getting rid of one entirely. It could be the debt with the highest interest rate, or it might be the smallest overall balance to give you the psychological victory of kicking a source of debt to the curb.

Whichever one you choose, you can then put as much extra money as you can towards the balance (principal) of that debt, while paying the minimum amount due on all the others. Once you pay that debt off, you can move on to the next one.

10. Avoiding More Credit Card Debt

Getting better at managing your money can be hard to do when you’re adding to your credit card balance. Credit cards are notoriously difficult to pay back when you’re only making the minimum payments and can be nearly impossible if you’re doing that while adding to the balance.

So, you may want to use your newfound money management skills to find ways around going further into credit card debt. Maybe there are more cuts that can be made to your budget or some overall shifts in lifestyle that could help. No matter how you do it, it can be helpful to focus on spending only the money you actually have.

11. Contributing More to Your 401(k)

You might think saving for retirement is something you don’t really need to focus on until you’re older. But the truth is that the earlier you start saving for retirement, the easier it will generally be to save enough to retire well. That’s thanks to the magic of compounding interest, which is when the interest you earn on your money earns its own interest.

If your company offers a 401(k), it can be a good idea to contribute at least a small percentage of each paycheck. If your employer offers matching funds, you may want to take full advantage of this perk by contributing the max amount your company will match.

Recommended: When to Start Saving for Retirement

The Takeaway

You don’t have to master all of the above concepts right away. Becoming a person who is “good with money” is a journey. Start with one area and move on to the next as you feel you have mastered each financial tool.

One simple step that can make it easier to manage your money is to find the right banking partner, one who can help you with tools for tracking and managing your cash.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

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

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SoFi 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.

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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Sep
01
2023
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How Often Are Dividends Paid?

By | Growing Wealth, invest, Investing | Comments Off on How Often Are Dividends Paid?

Some companies make regular payments, called dividends, to investors who own shares of its stock. For investors, this may be considered an advantage of investing in a company — though they may wonder, when are dividends paid?

Not all companies pay dividends, so if steady dividend income is the goal, an investor would need to look specifically for dividend-paying investments.

How often do dividends pay? Dividends are typically paid quarterly, though there are cases where they are paid more or less frequently. But there’s more to it than simply investing in a stock and waiting for one’s dividend to roll in.

What Are Dividends?

Companies will sometimes share a portion of their profits with shareholders, and this is called a dividend. Dividends are typically distributed as cash, although it’s also possible to receive a dividend in the form of stock.

Typically, dividends work on a per-share basis. For example, if Company A pays a cash dividend of 50 cents per share, and an investor owns 50 shares, they would receive $25 in cash.

If a company pays a stock dividend, it’s usually a percentage increase in the number of shares an investor owns. So if Company A awards a 5% stock dividend and an investor owns 100 shares of Company A, they would have 105 shares after the dividend payout.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

How Often Are Dividends Paid Out?

In most cases in the U.S., dividends are paid quarterly, or four times a year, on the same schedule as they must report earnings (quarterly). If you’re wondering why companies generally pay quarterly vs. monthly dividends, logically, it makes sense that dividends would come only after a company has finalized its income statement and its board of directors has reviewed (and approved) the numbers.

Some investments pay dividends on other schedules, such as twice a year, once a year, or as monthly dividend stocks, or on no schedule at all (called “irregular” dividends), but this isn’t typical in the United States. Ultimately, the dividend payout schedule is up to a company’s board of directors.

It’s also possible for a company to pay a special one-time dividend. Usually a special dividend is paid out when a company has had a stronger-than-usual earnings period or has excess cash on hand — from the sale of a business, perhaps, or the liquidation of an investment, or a major litigation win. These special one-time dividends may be paid as cash, stock, or property dividends.

When it comes to mutual funds that invest in dividend-paying companies, they may pay dividends on a more frequent basis, such as monthly or even weekly.

Recommended: Do IPOs Offer Dividends?

Important Dividend Dates

Although the answer to the question “How often are dividends paid out?” may vary, there are four essential dates involved in the payment of dividends:

1.    Declaration date: This is the day that a company’s board of directors states their intention to pay a dividend.

2.    Date of record: This is the date on which a company will review its records to establish who its shareholders are. In order to receive a dividend, an investor must be a “holder of record,” which means they owned shares on or before the ex-dividend date.

3.    Ex-dividend date: This is the date by which an investor must have purchased shares of a stock in order to receive an upcoming dividend. If an investor bought shares of Company A on or after the ex-dividend date, the dividend would go to the investor from whom they purchased the shares — they themselves would not receive a dividend.

4.    Payment date: This is the date a dividend is paid to company shareholders.

IMPORTANT DIVIDEND DATES

for 5 Companies in the S&P 500 Dividend Aristocrats Index
Company

 Dividend Payout

 Declaration Date

 Ex-Dividend Date

 Date of Record

 Payment Date
AbbVie Inc. (ABBV) $1.48 June 22, 2023 July 13, 2023 July 14, 2023 August 15, 2023
Atmos Energy Corp (ATO) $0.74 May 3, 2023 May 19, 2023 May 22, 2023 June 5, 2023
Chevron Corp (CVX) $1.51 July 28, 2023 August 17, 2023 August 18, 2023 September 11, 2023
General Dynamics (GD) $1.32 August 1, 2023 October 5, 2023 October 6, 2023 November 10, 2023
Nucor Corp (NUE) $0.51 June 8, 2023 June 29, 2023 June 30, 2023 August 11, 2023

Typically, investors wondering, when are dividends paid?, can get information about a company’s dividend dates by visiting its investor relations page. To find this, search for the company’s name and “investor relations” online. Or check a company’s dividend history online. Many investment websites, including Nasdaq.com, track this information.

When Are Dividends Paid?

Once a company’s board of directors approves a plan to pay out dividends, the company announces the dividend payment information, including: the amount to be paid out, the date it will be paid, the date of record, and the ex-dividend date.

On the payment date, the dividend is paid to investors who owned the stock before the ex-dividend date.

Example:

The Coca-Cola Company (NYSE: KO) announced a dividend of $0.46 per share on February 16, 2023. The payment date for the dividend was April 3, 2023 to shareholders of record on March 17, and the ex-dividend date was March 16. That means, to receive the dividend that was paid on April 3, you would have had to buy or have already owned Coca-Cola shares before March 16. (The Coca-Cola Company was chosen as an example only; this is not a recommendation to buy, sell, or hold KO.)

Different Dividend Payout Methods

These are some of the ways dividends may be paid to investors.

Cash Dividends

Dividends are often paid in cash. Companies typically send cash dividends directly to an investor’s brokerage, where the money is deposited into their account. The company might also mail a check to stockholders.

Company Stock Dividends

In other cases, investors will be paid in company stocks. Some companies and mutual funds offer the option of a dividend reinvestment plan (DRIP) that will automatically buy additional shares for an investor with their dividends. This provides the advantages of both simplifying the process (since investors won’t have to receive the cash and buy more shares themselves) and potentially being more cost effective, since many DRIP programs don’t charge commissions.

Additionally, some DRIP programs discount the purchase of additional shares. For this and other reasons, some investors may specifically look to find dividend reinvestment stocks.

Property Dividends

More rarely, a company might award a property dividend instead of cash or stock payouts. This could include company products, shares of a subsidiary company, or physical assets the company owns.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Are Dividends Taxable?

Dividend income is always taxable, but tax treatment will depend on how long an investor has held the investment and what kind of account they’re holding it in.

For instance, if an investor is holding the investment in a retirement account such as a 401(k) or IRA, the dividend isn’t taxable at the time of distribution. (Though depending on the account, the income may be taxed upon withdrawal during retirement.)

If the investment is held in a taxable account, then a dividend is considered income, and the tax rate will depend on whether it’s a qualified dividend or nonqualified (ordinary) dividend.

Tax Rate for Qualified Dividends

These are dividends paid by a U.S. corporation or a qualified foreign corporation on stock that an investor has held for a certain period of time—generally more than 60 days during the 121-day period that starts 60 days before the ex-dividend date.

For some preferred stock, the investor must have held it for 91 days out of the 181-day period starting 90 days before the ex-dividend date. Taxes on qualified dividends are paid at long-term capital gains rates, which range from 0% to 20% based on an individual’s modified adjusted gross income.

In other words, the taxes investors pay on qualified dividends are based on their overall income tax bracket, and they could pay 0%, depending on their income. Because the long-term capital gains tax rate is lower than ordinary income tax rate, qualified dividends are preferable to nonqualified dividends.

Tax Rates for Long-Term Capital Gains

Tax Rates for Long-Term Capital Gains
Filing Status 0% Rate 15% Rate 20% Rate
Single
Up to $44,675
$44,676 to $492,300
Over $492,300
Head of household
Up to $59,750
$59,751 to $523,050
Over $523,050
Married filing jointly
Up to $89,250
$89,251 to $553,850
Over $553,850
Married filing separately
Up to $44,675
$44,676 to $276,900
Over $276,900

Tax Rate for Nonqualified Dividends

The more common type of dividend is a nonqualified — or ordinary — dividend. When companies pay ordinary dividends, they’re considered ordinary income, so an investor will be taxed at ordinary income tax rates.

In general, investors should assume that any dividend they receive is an ordinary dividend unless told otherwise. (The payer of the dividend is required to identify the type of dividend when they report them on Form 1099-DIV at tax time.)

Can You Live on Dividends?

In general, retirees should plan to live off a combination of Social Security, interest income from bonds, and selling a small portion of their investments each year. The 4% retirement rule maintains that if one withdraws no more than 4% of their portfolio each year, they’ll be able to make their nest egg last — although some financial professionals believe this formula is too conservative.

Investments that pay regular dividends may shift an individual’s retirement equation by providing steady income over time that may allow them to sell fewer investments — or no investments at all. The amount of dividends a stock pays often grows over time as companies get larger and continue to increase their profits.

Investing with an eye toward dividend income may allow an investor to create an income stream that could successfully supplement their Social Security and other income in retirement.

Investing With SoFi

Dividends — cash or stock rewards from a company to its shareholders—are typically paid quarterly to qualifying shareholders. These financial “bonuses” can be attractive to investors, who may seek out dividend-paying companies specifically in hopes of boosting their bottom line. Some investors look specifically for investments that pay dividends as a way to generate income and savings for retirement.

Dividends may provide a source of consistent and predictable income, which may be a helpful addition to an individual’s portfolio, depending on their investing goals. Investors may choose to use dividend income to supplement other income or to reinvest in their portfolio.

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


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

FAQ

How long do you have to hold a stock to get a dividend?

In order to get a dividend, an investor needs to be a “holder of record.” That means they need to buy, or already own, shares of the stock before what’s known as the ex-dividend date, which is the business day before the date of record. The date of record is when the company reviews its records to determine who its shareholders are. The date of record is generally announced when the dividend is announced.

Are dividends taxed if they are reinvested?

Yes. Dividends that are reinvested are considered income, just like cash dividends, and must be reported on your tax return. The way you are taxed on dividends depends on whether your dividends are qualified or nonqualified. The more common type of dividend is nonqualified, and these dividends are taxed at ordinary income tax rates. Qualified dividends are taxed at long-term capital gains rates.

What happens if you take more dividends than profit?

Typically, a portion of a company’s earnings should go to paying out dividends. This is known as the dividend payout ratio. Investors typically look for payout ratios that are 80% or less — meaning that the company is not paying all of its earnings in dividends.

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.

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.

SoFi Invest®

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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.
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Sep
01
2023
Exit Strategy for Investors: Definition and Examples

Exit Strategy for Investors: Definition and Examples

By | Growing Wealth, invest, Investing | Comments Off on Exit Strategy for Investors: Definition and Examples

An exit strategy is a plan to leave an investment, ideally by selling it for more than the price at which it was purchased.

Individual investors, venture capitalists, stock traders, and business owners all use exit strategies that set specific criteria to dictate when they’ll get out of an investment. Every exit strategy plan is unique to its situation, in terms of timing and under which conditions an exit may occur.

What Is an Exit Strategy?

Broadly speaking, the exit strategy definition is a plan for leaving a specific situation. For instance, an employee who’s interested in changing jobs may form an exit strategy for leaving their current employer and moving on to their next one.

What is an exit strategy in a financial setting? In this case, the exit strategy definition is a plan crafted by business owners or investors that cover when they choose to liquidate their position in an investment. To liquidate means to convert securities or other assets to cash. Once this liquidation occurs, the individual or entity that executed the exit strategy no longer has a stake in the investment.

Creating an exit strategy prior to making an investment can be advantageous for managing and minimizing risk. It can also help with defining specific objectives for making an investment in the first place. In other words, formulating your exit strategy beforehand can give you clarity about what you hope to achieve.

Exit strategies often go overlooked, however, as investors, venture capitalists, and business owners may move ahead with an investment with no clear plan for leaving it.

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

How Exit Strategies Work

Investors use exit strategies to realize their profit or to mitigate potential losses from an investment or business. When creating an exit strategy, investors will typically define the conditions under which they’ll make their exit.

For instance, an exit strategy plan for investors may be contingent on achieving a certain level of returns when starting to invest in stocks, or reaching a maximum threshold of allowable losses. Once the contingency point is reached, the investor may choose to sell off their shares as dictated by their exit strategy.

A venture capital exit strategy, on the other hand, may have a predetermined time element. Venture capitalists invest money in startups and early stage companies. The exit point for a venture capitalist may be a startup’s IPO or initial public offering.

Again, all exit strategies revolve around a plan. The mechanism by which an individual or entity makes their exit can vary, but the end result is the same: to leave an investment or business.

When Should an Exit Strategy Be Used?

There are different scenarios when an exit strategy may come into play. For example, exit strategies can be useful in these types of situations:

•   Creating a succession plan to transfer ownership of a profitable business to someone else.

•   Shutting down a business and liquidating its assets.

•   Withdrawing from a venture capital investment or angel investment.

•   Selling stocks or other securities to minimize losses.

•   Giving up control of a company or merging it with another company.

Generally speaking, an exit strategy makes sense for any situation where you need or want to have a plan for getting out.

Exit Strategy Examples

Here are some different exit strategy examples that explain how exit strategies can be useful to investors, business owners, and venture capitalists.

Exit Strategy for Investors

When creating an exit strategy for stocks and investing, including how to buy stocks, there are different metrics you can use to determine when to get out. For example, say you buy 100 shares of XYZ stock. You could plan your exit strategy based on:

•   Earning target return from the investment

•   Realizing a maximum loss on the investment

•   How long you want to stay invested

Say your goal is to earn a 10% return on the 100 shares you purchased. Once you reach that 10% threshold you may decide to exit while the market is up and sell your shares at a profit. Or, you may set your maximum loss threshold at 5%. If the stock dips and hits that 5% mark, you could sell to head off further losses.

You may also use time as your guide for making an exit strategy for stocks. For instance, if you’re 30 years old now and favor a buy-and-hold strategy, you may plan to make your exit years down the line. On the other hand, if you’re interested in short-term gains, you may have a much shorter window in which to complete your exit strategy.

Exit strategies can work for more than just stock investments. For instance, you may have invested in crowdfunding investments, such as real estate crowdfunding or peer-to-peer lending. Both types of investments typically have a set holding period that you can build into your exit plan.

Recommended: Bull Put Spread: How This Options Trading Strategy Works

Exit Strategy for Business Owners

An exit strategy for business owners can take different forms, depending on the nature of the business. For instance, if you run a family-owned business then your exit strategy plan might revolve around your eventual retirement. If you have a fixed retirement date in mind your exit plan could specify that you will transfer ownership of the business to your children or sell it to another person or company.

Another possibility for an exit strategy may involve selling off assets and closing the business altogether. This is something a business owner may consider if the business is not turning a profit, and it looks increasingly unlikely that it will. Liquidation can allow a business owner to repay their creditors and walk away from a failed business without having to file bankruptcy.

Exit Strategy for Startups

With startups and larger companies, exit strategies can be more complex. Examples of exit strategy plans may include:

•   Launching an IPO to allow one or more founders to make an exit

•   A merger or acquisition that allows for a transfer of ownership

•   Selling the company

•   Liquidating assets and shutting the company down

If a founder is ready to move on to their next project, they can use an IPO to leave the company intact while extricating themselves from it. And angel investors or venture capitalists who invested in the company early on also have an opportunity to sell their shares.

Startup exit strategies can also create possible opportunities for some investors. IPO investing allows investors to buy shares of companies when they go public.

The mechanics of using an IPO as an exit strategy can be complicated, however. There are IPO valuations and regulatory requirements to consider.

It’s important for startup founders to know how to value a business before taking it public to ensure that an IPO is successful. And early-stage investors may have to observe IPO lock-up period restrictions before they can sell their shares.

💡 Quick Tip: IPO stocks can get a lot of media hype. But savvy investors know that where there’s buzz there can also be higher-than-warranted valuations. IPO shares might spike or plunge (or both), so investing in IPOs may not be suitable for investors with short time horizons.

5 Types of Exit Strategies

There are different types of exit strategies depending on whether you’re an investor, a business owner, or a venture capitalist. Some common exit strategies include:

1. Selling Shares of Stock

Investors can use an exit strategy to set a specific goal with their investment (say, 12%), reach a certain level of profit, or determine a point at which they’ll minimize their loss if the investment loses value. Once they reach the target they’ve set, the investor can execute the exit strategy and sell their shares.

2. Mergers and Acquisitions

With this business exit strategy, another business, often a rival, buys out a business and the founder can exit and shareholders may profit. However, there are many regulatory factors to consider, such as antitrust laws.

3. Selling Assets and Closing a Business

If a business is failing, the owner may choose to liquidate all the assets, pay off debts as well as any shareholders, if possible, and then close down the business. A failing business might also declare bankruptcy, but that’s typically a last resort.

4. Transferring Ownership of a Business

This exit strategy may be used with a family-run business. The owner may formulate an exit plan that allows him to transfer the business to a relative or sell it at a particular time so that he or she can retire or do something else.

5. Launching an IPO

By going public with an IPO, the founder of a startup or other company can leave the company if they choose to, while leaving the business intact. As noted, using an IPO as an exit strategy can be quite complicated for business founders and investors because of regulatory requirements, IPO valuations, and lock-up period restrictions.

Why Exit Strategies Are Important

Exit strategies matter because they offer a measure of predictability in a business or investment setting. If you own a business, for example, having an exit strategy in place that allows you to retire on schedule means you’re not having to work longer than you planned or want to.

An exit strategy for investors can help with staying focused on an end goal, rather than following the crowd, succumbing to emotions, or attempting to time the market. For example, if you go into an investment knowing that your exit plan is designed to limit your losses to 5%, you’ll know ahead of time when you should sell.

Using an exit strategy can prevent doubling or tripling losses that could occur when staying in an investment in the hopes that it will eventually turn around. Exit strategies can also keep you from staying invested too long in an investment that’s doing well. The market moves in cycles and what goes up eventually comes down.

If you’re on a winning streak with a particular stock, you may be tempted to stay invested indefinitely. But having an exit strategy and a set end date for cashing out could help you avoid losses if volatility sends the stock’s price spiraling.

How To Develop an Exit Strategy Plan

Developing an exit strategy may look different, depending on whether it involves an investment or business situation. But the fundamentals are the same, in that it’s important to consider:

•   What form an exit will take (i.e. liquidation, IPO, selling shares, etc.)

•   Whether an exit is results-based or time-based (i.e. realizing a 10% return, reaching your target retirement date, etc.)

•   Key risk factors that may influence outcomes

•   Reasons and goals for pursuing an exit strategy

If you’re an individual investor, you may need to formulate an exit plan for each investment you own. For instance, how you exit from a stock investment may be different from how you sell off bonds. And if you’re taking on riskier investments, such as cryptocurrency, your exit strategy may need to account for the additional volatility involved.

For business owners and founders, exit strategy planning may be a group discussion that involves partners, members of the board, or other individuals who may have an interest in the sale, transfer, or IPO of a company. In either situation, developing an exit strategy is something that’s best done sooner, rather than later.

SoFi Investing

Investing can help you build wealth for the long-term and an exit strategy is an important part of the plan. It allows you to decide ahead of time how and when you’ll get out of an exit, and could help you lock in returns or minimize losses.

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


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

FAQ

What are different exit strategies?

Examples of some different exit strategies include selling shares of a stock once an investor realizes a certain return or profit, transferring ownership of a family business so an owner can retire, or selling all the assets and closing down a failing business.

What are the most common exit strategies?

The most common exit strategies depend on whether you’re an investor, the owner of an established business, or the founder of a startup. For investors, the most common exit strategy is to sell shares of stock once they reach a certain target or profit level. For owners of an established business, the most common exit strategy is mergers and acquisitions, because doing so is often favorable to shareholders. For founders of startups, a common exit strategy is an initial public offering (IPO).

What is the simplest exit strategy?

For an investor, the simplest exit strategy is to sell shares of stock once they reach a certain profit or target level of return. At that point they can sell their shares for more money than they paid for them.

Photo credit: iStock/Christian Guiton

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.

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.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.

New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.

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What Are Real Estate Options? Advantages for Buyers

Understanding the Basics of Real Estate Options

By | Growing Wealth, invest, Investing, Terminology | Comments Off on Understanding the Basics of Real Estate Options

Another way to invest in real estate is through buying or selling real estate options. With an options contract, a buyer is granted the right to purchase a property for a specific price by a specific date, but they are not obligated to buy it.

In order to purchase this option, the buyer of the contract pays the seller a premium.

This is a flexible and typically less expensive way to enter the real estate market that may also help reduce risks involved in single property investment.

What Are Real Estate Options?

Real estate options are contracts between a potential buyer and seller. They grant the buyer the exclusive right to purchase a particular property within terms set in the contract. But the buyer doesn’t have to purchase the property.

However, if the buyer decides to exercise the option and purchase the property, the seller is obligated to sell the property at the agreed-upon price. Once the agreement is entered into, the property owner can’t sell to anyone else within the time period set in the option.

An options contract for a purchase is also known as a call option, whereas an option to sell would be called a put option.

Recommended: Call vs Put Options: Main Differences

How Do Options in Real Estate Work?

Generally, real estate options set a particular purchase price and are valid for anywhere from six months to one year. The buyer doesn’t have to purchase the property, but if they want to, the seller is obligated to sell to them even if the market price has gone up.

The buyer pays what is known as a “premium” in options terminology to enter into the contract. If they decide not to buy the property, the property owner (the seller) keeps that premium.

Real estate options are most often used in commercial real estate, but they can be used by retail investors as well. They aren’t sold on exchanges, and each contract is specific for the property it represents. Usually a contract is only for a single property, not multiple properties.

Real estate options are similar to stock options in that they set a specific price, premium, and period of time for a contract related to an underlying asset. Options can be exercised early or at the expiration date. They can also be sold to another investor.

•   Most of the benefits involved in real estate options tilt in the buyer’s favor.

•   If the property value goes up a few months into the contract, the buyer can exercise the contract and purchase the property, and sell it for a profit.

•   If the property value drops, the buyer can simply let the option expire — thus losing only the premium they paid, which is typically a small percentage of the value of the underlying asset or property in this case.

If the buyer decides not to exercise the contract, they can sell it to another buyer at a potentially higher premium (and pocket the difference).

For a seller, there is the potential for them to make a profit if the buyer exercises their option to purchase the property. They may also profit if the buyer doesn’t exercise the option — at which point they can keep the premium amount, and then sell the contract (or the property) to someone else.


💡 Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.

Lease Options

In addition to real estate options for purchases, there are also lease options. These are rent-to-own agreements between a buyer and seller. They let someone lease a property with the option to buy it after a certain amount of time, but not the obligation.

Generally with a lease option, some or all of the rental payment goes towards the purchase. Some lease options lock in a particular price, but others just give the buyer the exclusive right to buy at whatever the market price is.

Although lease options can be great for buyers, they are also more expensive than simply renting a property since they involve a premium. For this reason, it’s important for a buyer to carefully consider the contract and their future plans before entering into a lease option agreement.


💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.

2 Advantages of Real Estate Options for Buyers

Options are a common investing strategy for commercial real estate investors. There are several reasons a buyer might enter into a real estate option contract with a seller.

It Can Allow Time for the Buyer to Amass Funds

One might choose a real estate option if they want to secure a piece of land or property at a certain price but they need some time to get funds in order for the purchase.

A Real Estate Option Locks in a Price

If a buyer thinks the price of a property might go up, they can purchase an option to lock in the current market price. However, some real estate options are not completely set in their sale prices. There may be clauses in the contract to determine what the final sale price will actually be.

2 Advantages of Real Estate Options for Investors

Real estate investors can also use options to their advantage.

It’s a Lower-Risk Way to Develop Property

For example, let’s say an investor finds a property they’re interested in developing into housing. The investor needs to create a plan for the property and get other investors involved before they can buy it, so they purchase a real estate option to give them the exclusive right to buy the land.

The investor can make a profit by bringing in investors at a higher rate than the option. They can then buy the land and sell it to the developers they brought in to make a profit.

If they aren’t able to get developers and investors involved before the contract expires then they simply don’t buy the land.

An Investor Can Buy and Sell Real Estate Options

Investors can also make a profit just on buying and selling real estate options contracts rather than the properties themselves. This is a much less capital-intensive way to get involved in real estate investing.

For instance, an investor might find a property they expect will increase in value in the coming months. They purchase a real estate option to buy the land at the current market rate within the next year, pay a premium, and wait.

At any point during the period of the agreement the investor can either act on the contract and buy the property, or they can sell the contract to someone else. Let’s say the value of the property increases three months into the contract. The investor can find another investor who wants to purchase the contract for them for a higher price than the premium the original investor paid.

Whether any investor buys the property or not, the seller of the property keeps the premium.

The Takeaway

Real estate options are a way for investors to get involved in real estate investing without directly buying properties. As with any other kind of options, the investor buys the right to buy or sell at a certain price, but is not obligated to do so.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.


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

Photo credit: iStock/Melpomenem

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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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01
2023
students studying

10 Ways to Prepare for College

By | Student Loans, student_loan | No Comments

Preparing to go to college starts long before your senior year in high school. In fact, soon after starting your freshman year in high school, you may want to begin thinking about what you can do to put your best foot forward on your college applications.

With the right college preparedness plan, choosing where to apply, filling out your applications, and (yes) getting in to your top choices can be significantly easier. Here’s a smart 10-step plan that can help ensure you are ready for college when the time comes.

Ways to Get Prepared for College

1. Take the Required Courses

It’s a good idea to consult with your high school guidance counselor about what classes you should take for college preparation. Generally, high school students will take courses like English (American and English literature), Math (Algebra I and II, Geometry, Trigonometry, and Calculus), Science (Biology, Chemistry, Physics, and Earth Science), Social Studies (U.S. History, U.S. Government, World History, and Geography), a Foreign Language, and the Arts.


💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

2. Enroll in AP, IB, and College Courses

Your high school may offer you the opportunity to take Advanced Placement (AP) or International Baccalaureate (IB) classes, which are college-level and will allow you to earn college credit. Then, you can skip these courses when you get to college and ensure you have a head start. Both require that you take exams, and you can send your scores into colleges. Keep in mind that IB classes would be more useful if you plan on going to college outside the U.S., since only U.S.-based schools recognize AP coursework.

3. Do Test Prep

A key step in preparing for college is studying for the SAT or ACT. Taking one of these tests is required for many college applications in the U.S. You can study by forming study groups with friends, taking the PSATs/pre-ACTs and practice tests, getting an SAT/ACT tutor, and enrolling in SAT/ACT practice classes. You may want to look at the average SAT/ACT score of students who have been admitted to your top choice schools and aim to get those scores — or higher — to ensure your application impresses the admissions officers.

If standardized tests aren’t your strong suit, there are some colleges that do not require them as a part of the application process.

Recommended: ACT vs. SAT: Which Do Colleges Prefer?

4. Hone Your Study Skills

In college, you’re going to take a rigorous set of courses. Your academics are likely to be a lot more challenging than they were in high school. This means you should hone your study skills now to prepare for college. Find a quiet place to study, turn off all distractions, organize your lecture notes, join study groups, and take breaks when you need them in order to effectively study.

5. Go to College Fairs

Whenever there is a local college fair happening, try to attend it. That way, you can learn about different colleges you may want to apply to. Typically, a college fair will consist of college representatives who set up booths, give presentations, talk to prospective students, and hand out pamphlets about their schools. College fairs can be a great opportunity to learn about a number of colleges in a short time period.

They also offer the opportunity for you to connect with representatives at the colleges. As an attendee, you’ll have the opportunity to ask the representatives specific questions and take the handouts so you can continue your research at home.

6. Take College Tours

Before applying to a school, try to go on a campus tour to see what it’s all about. A college that has a great website or looks good on paper may not end up being the right fit once you actually visit it. While on the tour, ask your student tour guide and other students around about the pros and cons of the school to get a real feel for whether or not you’d like it there.

Some colleges may do interviews as a part of the application process. If you’re heading to campus for a college interview, make time for a tour too.

7. Meet With Your High School Guidance Counselor

Your high school guidance counselor can help you with preparing for college in a number of different ways. They can advise you on what classes to take and extracurricular activities you can enroll in to ensure you have a competitive college application when the time comes.

Your counselor can also help you determine what you want to major in and the kind of career you might enjoy by steering you towards career fairs and giving you a test that will show your strengths and reveal your talents. If you’re worried about paying for college, they can let you know your options and ensure you fill out all the right forms in time.

8. Fill Out a FAFSA Form

The Free Application for Federal Student Aid (FAFSA®) is the form you need to fill out to apply for federal financial aid. This includes federal grants, scholarships, work-study, and federal student loans. Some schools also use the information provided on the FAFSA to determine scholarship awards.

If you anticipate needing support to cover the cost of attendance in college, this is usually the place to start. The Department of Education is rolling out a new simplified FAFSA for the 2024-2025 academic year. It will be available in December 2023, a delay from the usual October 1.

9. Look Into Student Loans

Filling out the FAFSA isn’t the only thing on your financial to-do list when you’re prepping for college. You could also weigh your student loan options. As mentioned, the FAFSA puts you in contention for federal student loans — among other tuition subsidies like work-study or grants. Federal student loans have fixed interest rates, which means the rate will not change for the duration of the loan.

Each year, Congress determines what the fixed interest rate on federal loans will be — and interest rates vary across federal undergraduate loans, including PLUS loans for parents and grad students. While these loans can be an important resource when it comes to funding your education, there are limits to the amount you can take out each year. For example, first-year undergraduates currently have a federal loan limit of $5,500.

If federal aid and other sources of funding aren’t enough to cover the cost of tuition, you may consider looking into private student loans to fund the rest of your education. Private student loans don’t always offer the same benefits as federal student loans — like the option to pursue Public Service Loan Forgiveness — so they are generally considered only after all other options have been reviewed and exhausted.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

10. Apply for Scholarships

Once you start applying to colleges, you may also want to search out and apply for private scholarships. Your school may offer specific scholarships you can apply to that will help you pay for your education. Online databases are another resource to check out. One option, Fastweb , a free national scholarship database that has a scholarship algorithm; it will match you to scholarships, internships, and grants you could potentially qualify for.

The Takeaway

There are many things you can do to prepare for college. Above all else, you’ll want to focus on your academics and make your college application as competitive as possible so that you can get into the school of your dreams. You’ll also want to think about what your education will potentially cost and work with your parents to come up with a plan for how you will pay for college. Your options include savings, grants, scholarships, work-study, and federal or private student loans.

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.

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 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.

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.

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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