Feb
25
2025
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How Do You Cash Out Stocks? Guide to Selling Stocks

By | Growing Wealth, invest, Investing, Terminology | Comments Off on How Do You Cash Out Stocks? Guide to Selling Stocks

Cashing out stocks essentially means selling them, and most investors should be able to sell their stocks without too much trouble. Buying stocks can be fairly straightforward, whether online or through a financial advisor. But, when it’s time to sell shares, some beginning investors struggle with how to turn their stocks back into cash. After all, money invested in stocks is not immediately cash.

Investors may want to sell stocks for a wide variety of reasons. They might wish to reinvest the cash into another asset with an eye toward long-term gains. Or they could choose to withdraw funds from the stock market to cover short-term, daily expenses with cash earned from the sale. So, how might investors go about cashing out stocks? And, what factors might individuals curious about how to cash out stocks bear in mind? Here’s an overview of the how and when of selling stocks.

Key Points

  • Stocks can be cashed out by selling them through a broker on a stock exchange.
  • Selling stocks can provide cash for major expenses or to reinvest in other assets.
  • Steps to cash out stocks include determining investment goals, accessing a brokerage account, placing a sell order, waiting for the sale to be completed, and receiving the proceeds.
  • Motivations for selling stocks include accessing cash for expenses, cashing out profits, preventing significant losses, day trading, and offloading low-performing stocks.
  • Types of sell orders include market orders, limit orders, stop orders, and trailing sell stop orders.

Can You Cash Out Stocks?

Investors can cash out stocks by selling them on a stock exchange through a broker. Stocks are relatively liquid assets, meaning they can be converted into cash quickly, especially compared to investments like real estate or jewelry. However, until an investor sells a stock, their money stays tied up in the market.

What Happens When You Sell a Stock?

When you sell a stock for a higher price than you paid, the proceeds from the sale will include your original investment plus your gains and minus any fees. If you sold your stock at a lower price than you paid, your total return will be less than your original investment (depending on how much of an overall loss you’re taking), minus any fees. So, you can have either a positive or negative return.

How to Sell Stocks: 5 Steps

There are several steps involved in selling stocks, including the following:

1. Determine Your Investment Goals

Consider why you want to sell your stocks and whether it aligns with your overall investment goals.

2. Access Your Brokerage Account

You need to access or log in to your brokerage account to sell your stocks.

3. Place an Order to Sell your Stocks

Once you’re logged into your brokerage account, you can place a sell order (like the orders outlined below) to sell your stocks. You can choose to sell at a specific price or through a market order, which will sell the stocks at the current market price.

4. Wait for the Sale to be Completed

After placing an order to sell your stocks, you will need to wait for the sale to be completed. This can take anywhere from a few seconds to several days, depending on market conditions and the type of order you have placed.

5. Receive the Proceeds From the Sale

After the sale is completed, the proceeds from the sale will be deposited into your brokerage account or sent to you in the form of a check.

Motivations for Selling Stocks

Some investors watch their portfolios closely, selling stocks regularly to cash out profits or avoid significant losses.

However, one common reason investors decide to sell stocks is that they need the cash from the investments to pay for living expenses. While different investors might sell for various reasons, it can be helpful to understand the motivation that drives the desire to sell.

So, why might investors want to cash out stocks? Some common reasons could include the following:

Motivation for Selling Stocks

Accessing Cash for Life Expenses

If investors know they’ll need cash for a major life expense, such as buying a car or home, they may choose to cash out some stocks. Selling shares might ensure there’s enough cash around to cover big expenses.

One benefit to having cash on hand instead of having money invested in stocks is that cash is not subject to the ups and downs of the stock market. However, the value of cash is impacted over time by inflation.

Some investors might also opt to move money out of stocks into potentially more secure investments, such as bonds or a money market account, until they’re ready to pay for that large expense.

Cashing Out Profits

If it appears as though a recession is coming or investors have seen significant gains in their portfolio, they might choose to cash out to lock in the profits. It’s important to understand, however, that attempting to time the stock market to avoid losses during unstable economic conditions is risky. What seems to be a trend in the market one day may or may not indicate how the markets may perform in the future.

Investors may want to ask themselves whether they’re interested in cashing out based on an emotional reaction (fear of recent market ups and downs, for instance) or a need for profits.

Preventing Significant Losses

The goal of investing in stocks is to earn profits or generate a positive return – online investing, or otherwise – is to not take losses. Still, there are some instances in which it could make sense to sell at a loss.

For example, an investor may sell specific stock holdings to prevent the likelihood of deeper losses in the future. Another scenario that might drive an investor to want to sell stocks is an industry-wide hardship, where numerous companies in one sector of the economy experience financial calamity at the same time. Industry-wide hardships may negatively impact the value of specific stock holdings.

In other instances, a company might reduce or eliminate shareholder dividends. Earning dividends may be a prime reason an investor bought the stock in the first place, so they decide to sell the stock because it’s no longer part of their investment strategy.

Day Trading

Day trading is one way of selling stocks, but it can involve significant risks. Day trades are the purchasing and selling (or vice versa) of the same stock on the same day. Here, traders are attempting to gain profit through short-term trades — typically through the use of technical or market analyses, which can require an in-depth knowledge of the intricacies of trading.

If it were possible to clearly predict future stock movements, everyone might want in on the stock market. But, stocks are volatile. Rather than guessing based on company news and technical indicators, traders who wish to make shorter term trades might choose to set a price goal. For instance, if they buy shares at $10 each, they could set a goal to sell them when they reach $18 per share.

Offloading Low Performing Stocks

Even if investors conduct thorough research on a company before buying a stock, they may later realize it wasn’t a boon for their portfolio. If a purchased stock continues to decline in value over time, investors may opt to offload the low-performing stock.

Also, some investors sell low-performing stocks at the end of the year for tax-loss harvesting, where investors sell investments at a loss to reduce their overall tax burden.

What Are the Different Types of Sell Orders?

Once an investor has decided to cash out a stock, there are several options for how to sell. Each comes with different amounts of control over the sale. Here’s an overview of the most common types of sell orders:

Types of Sell Orders

Market Orders

When placing a market order, an investor agrees to sell their shares at the current market price per share. The sell order will be placed immediately or when the market reopens if the order is placed after hours.

One upside of market orders is that the trade can usually be executed quickly. A downside is that the investor has no control over the selling price.

Limit Orders

With a limit order, however, an investor can set the minimum price they are willing to sell their shares for. The sell order only gets executed if and when the stock reaches that price or higher.

For example, if you want to sell a stock currently trading at $50 per share and place a sell limit order at $55, the order will only be filled if the stock price rises to $55 or above.

The upside of limit orders is that investors can control the selling price (and potentially get a higher price than the current market rate). But, one possible downside is that their order won’t go through instantly and, potentially, might never go through (if the stock doesn’t reach the selected price).

Stop Orders or Stop-Loss Orders

A stop-loss order is placed with a brokerage to automatically sell a security when it reaches a specific price, known as the stop price. The reason investors set stop orders is to prevent incurring significant losses if a stock plummets in value.

For example, if you own a stock currently trading at $50 per share and place a stop-loss order at $40, the order will be triggered, and the stock will be sold if the price falls to $40 or below.

The upside of stop orders is that they can help protect against significant losses if the stock price drops unexpectedly (but not guarantee that you’ll avoid them). However, stop-loss orders do not guarantee a specific price, and the actual sale price may differ from the stop price due to market fluctuations.

Trailing Sell Stop Orders

Investors may also choose to place a trailing sell stop order, which allows you to set a stop price for a security that adjusts automatically as the price of the security moves in your favor.

With a trailing sell stop order, you can set the initial stop price at a certain percentage or dollar amount below the market price. The stop price will then adjust automatically as the market price of the security increases so that the stop price remains a fixed percentage or dollar amount below the market price. If the market price of the security then falls and reaches the stop price, the order will be triggered, and the security will be sold.

Trailing sell stop orders may allow traders to benefit from gains when a stock’s price rises while still protecting themselves from potential losses.

Factors to Assess When Selling and Cashing Out Stocks

There are several factors that you should consider when cashing out stocks:

  • Capital gains taxes: Cashing out stocks may result in capital gains, which are subject to taxes. It is important to consider the tax implications of cashing out stocks. Not all stock holdings are taxed similarly, which could impact an investor’s decision to sell or not to sell.
  • Investment goals: Consider why you are cashing out stocks and whether it aligns with your overall investment goals. If you are cashing out stocks to meet a short-term financial need, selling may be necessary even if the stock price is not optimal. However, if you are cashing out stocks as part of a long-term investment strategy, it may be worth holding onto the stocks, even if they’ve declined in price, because they may still appreciate over time.
  • Fees and commissions: Brokerage firms generally charge investment fees and commissions for executing trades, which can impact the overall profit or loss on the sale of your stocks. Considering these fees and commissions is important when deciding whether to cash out stocks.

Pros and Cons of Reinvesting Profits

Investors may choose to sell stocks to gain or spend cash. But, individuals may want to reinvest earnings from the stocks sold into other assets. If investors decide to reinvest their profits, they need to consider the advantages and disadvantages of doing so.

Pros

  • Compound growth: Reinvesting stock profits allows you to compound your returns on your investments, which may significantly increase your overall returns over time.
  • Diversification: Reinvesting stock profits can help you diversify your portfolio and reduce risk by investing in various stocks rather than holding a lot of cash.
  • Hedge against inflation: Cash is subject to inflation, which makes cash savings lose value over time. Over a long-term period, cash tends to lose value, whereas the stock market tends to grow. By reinvesting rather than holding on to cash, investors may be less likely to lose money due to inflation.

Recommended: 5 Tips to Hedge Against Inflation

Cons

  • Opportunity cost: Reinvesting stock profits means that you are not using the proceeds from the sale of your stocks to meet other financial goals or needs, such as paying off debt or saving for a down payment on a house.
  • Taxes: Reinvesting stock profits may result in capital gains tax, which can reduce the overall returns on your investments.
  • Market risk: The value of your investments can fluctuate due to market conditions, and reinvesting stock profits means you are exposed to the risks of the stock market.

Platforms for Buying and Selling Stocks

People just getting started with building a portfolio of stocks have several options. Options might include online platforms or traditional phone-in and in-person traders, including:

Online Brokerage Accounts

There are numerous online brokerage accounts and digital apps where investors can buy and sell stocks to build a portfolio. Online brokerage accounts and apps can be a convenient investment method, allowing users to sell from anywhere. Unlike many traditional brokerage firms, many trading apps don’t charge a commission on trades.

Opening a brokerage account will require identity verification and connection with a bank account for deposits and withdrawals.

Financial Advisors

Investors can also make stock trades over the phone or in person by working with a financial advisor. Sell orders placed through these individuals generally get executed within 24 hours, so it can be a slower method to cash out stocks. Before the arrival of web-driven trading, most stocks were bought and sold through traditional investment brokers or financial advisors.

Test your understanding of what you just read.

The Takeaway

Before selling any stocks, investors might opt to evaluate their short- and long-term financial goals. Then, they could devise a plan to pursue those objectives, which may lead to cashing out stock holdings. However, knowing when to sell a stock can take time and effort. Rather than trying to time the market and sell stocks to lock in immediate profits and avoid future losses, individuals may want to invest for the long term.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

How long does it take to cash out stocks?

The time it takes to cash out stocks can vary depending on the type of order you place and market conditions. Generally, it can take anywhere from a few seconds to several days for a sale of stocks to be completed.

Do you get money when you sell stock?

Yes, you will receive money when you sell stock, as long as its value is more than $0. The proceeds from the stock sale will be deposited into your brokerage account or sent to you in the form of a check. The amount of money you receive will depend on the price you sell the stock and any fees or commissions charged by the brokerage firm.

Can I withdraw money from stocks?

To access cash from stocks, you need to sell your holdings and use the proceeds from the sale to withdraw cash from your brokerage account.

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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Feb
25
2025
What Is the MOASS and When Will It Happen?

What Is the MOASS?

By | Growing Wealth, invest, Investing | Comments Off on What Is the MOASS?

“MOASS,” or, the “Mother of All Short Squeezes,” was largely unknown to investors prior to 2021. But a saga involving so-called “meme stocks,” most notably GameStop stock, changed that, and MOASS entered the investing lexicon. In short, that specific scenario, bringing the Mother of All Short Squeezes, as a strategy, to investors’ attention, involved a rag-tag band of day traders taking on the hedge fund giants, with a short-sale “squeeze” that greatly impacted some of those giants.

Meme stocks, including GameStop and AMC Theatres, saw further short squeeze action in mid-May 2024, too. But the episode in 2021 shined a light on investors, short-sales, trading squeeze strategies, and digital trading on a massive scale, all of which fell under the MOASS umbrella.

Key Points

•   MOASS stands for “Mother of All Short Squeezes,” a phenomenon where stock prices skyrocket due to mass buying.

•   It gained prominence with the GameStop stock saga, where day traders challenged large hedge funds.

•   The strategy involves a high volume of purchases to drive up stock prices, countering short sellers.

•   Effective execution of MOASS can lead to significant profits for traders who initiate the squeeze.

•   The approach carries high risks, especially for those who join late or cannot sell off at peak prices.

Short Squeeze Basics

A short squeeze is an orchestrated effort to drive up shares of a stock that’s being heavily shorted. MOASS, meaning the Mother of All Short Squeezes, as noted, is a trading strategy in which a high volume of buyers drive up shares of stocks that were being “shorted” by other investors.

A short squeeze trading strategy needs two components to work — a short seller or, more preferably, several short sellers on one side and a group of disciplined contrarian investors who unroll a short squeeze and buy shares of the stock being shorted.

How the MOASS Works

In order to understand how a short squeeze — or a massive short squeeze — works, you first need to understand short selling.

Short sellers aim to profit from the fall in a stock’s price. They do so by borrowing and selling shares of a stock that they believe will decline in value. Then, when the stock price falls, a short seller buys the stock at the reduced price, returns the shares, and pockets the profit.

If the short seller makes the right call, meaning the price does fall, they earn the difference between the price when they entered the short position and the lower stock price at which they bought to cover.

If the short seller makes the wrong call, and the price goes up, the investor must buy the stock at a price higher than when they entered the short position, thereby losing money — and negating any potential for a profit.

As short sellers wind up leaving their short positions when they execute a buy order on the stock, those “short-squeeze” buy positions get noticed by other day traders, who also jump in to purchase the stock. That, in turn, drives the stock’s price even higher, since there are fewer shares of the stocks available to purchase.

Short-sellers, highly alarmed by the rising share price, also issue buy orders on the stock to exit the short sale strategy and reduce their investment risk, which completes the cycle and puts the short squeeze in full effect. This can result in the short sales losing money and the MOASS day traders making a profit on the rising stock price.

Recommended: Understanding Low Float Stocks

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GameStop: The Prime Example of MOASS

Perhaps the best example of MOASS in action is the GameStop saga in early 2021. At the time, several hedge fund firms had “shorted” GameStop stock, which essentially meant betting the share price of the stock would decline. That didn’t happen with GameStop shares. Some context is important to understand, too, as many retail stocks, like GameStop, had been heavily affected by the pandemic at the time.

But GameStop shares bucked the trend.

A group of day traders hanging out on a Reddit investing forum called “Wallstreetbets” banded together and started buying up shares of GameStop stock. The gambit worked, with GameStop shares skyrocketing from $19 per share to around $350 per share. The retail investors had successfully “squeezed” the short sellers, causing several hedge funds to lose hundreds of millions of dollars on their short positions on GameStop.

If the short squeeze works, the share price will continue to rise and the short investors, many of whom have fixed deadlines built into their short sales positions, will have to sell their shares and cut their losses, thereby driving the stock price even higher. That rewards the short squeeze investor, who profits from the rising share price, especially as other buyers enter the fray and drive the share price up even higher.

Once victory was declared with the GameStop short squeeze, the Reddit traders turned their attention to other so-called meme stocks where short selling activity was particularly high. That group included AMC Entertainment Holdings, Koss Corporation, and Blackberry, which all saw share volumes rise after the MOASS traders entered the fray.

Thus, a series of short squeezes that target more and more short sellers is really what MOASS is all about: squeezing enough short-sellers to achieve critical mass in the trading markets, and making huge profits in the process.

Also, as mentioned, a similar situation played out in May 2024, when certain stocks (including GameStop and AMC Theatres) were at the center of another short squeeze, though smaller in scale than the 2021 events.

Recommended: Pros and Cons of Momentum Trading

MOASS Trading Tips

Investors who want to participate in the next short squeeze effort should be careful. So-called “meme” stock trading can be fraught with risk, especially if you’re left holding the bag after other short-squeezers sell out of their positions before you do.

Take these risk considerations with you before participating in a mass short squeeze play.

Consider Minimal Purchases to Limit Losses

While the adrenaline level can be high when participating in a short squeeze trading event, tamp down emotions by limiting the amount of money you invest in a GameStop-type situation. As the old gambling adage says, never risk money you can’t afford to lose. That goes double when chasing the thrill of a MOASS scenario.

Should You Expect to Lose Money?

There’s a significant chance that you’ll lose money at some point with a short squeeze play.

Nothing is guaranteed in the stock market and that’s especially the case as short-sellers have learned their lesson after meme-stock related events in recent years, and grow more cautious about their investing habits. MOASS trading patterns can be something of a roller coaster ride for investors, and the odds that your ride will dip along the way are high. That can translate into days or even weeks of your short-squeeze buying strategy where your investment returns are written in red ink.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

MOASS Tip: Have a Plan to Sell Quickly

Short squeeze investing isn’t exactly an orderly process and you need to put your interest first ahead of other MOASS investors. Why? Because volatility can be high and prices can swing at a moment’s notice when trading MOASS-themed stocks. Additionally, nobody really has any idea how high a price can go with a short squeeze in play, and nobody really knows if a stock will rise higher at all.

That’s why it’s a good idea to have a fixed “sell price” in mind when engaging in a short squeeze situation — a stop loss order to automatically sell the stock at a specific price can be a good idea in this scenario.

If you buy a targeted MOASS stock at $50 and it goes to $70, there’s no way of knowing if the stock will go any higher — it might and it might not. Worse, the price could slide back to $30 when buyers lose interest in the stock.

Having a good investment exit strategy in a short squeeze scenario, can help minimize investment losses and capitalize on a stock increase when and if it happens.

Test your understanding of what you just read.

The Takeaway

“MOASS” means the “Mother of All Short Squeezes,” and perhaps the best example of it in action involved so-called “meme stocks” in 2021. Short squeeze trading strategies can bring a great deal of portfolio-shaking volatility to the investment table, and there are plenty of heavily shorted stocks that could be the next MOASS, but it’s impossible to know which one could trigger a squeeze.

That means MOASS may not be the best strategy for long-term investors or those with an aversion to risk. A short squeeze takes a significant amount of discipline, patience, and attention on the part of the investors, with continual risk in play until the squeeze is played out.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

Photo credit: iStock/PeopleImages

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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Feb
25
2025

How to Calculate Stock Profit

By | Growing Wealth, invest, Investing | Comments Off on How to Calculate Stock Profit

To calculate stock profit, it’s a relatively simple calculation that involves taking the original price you paid for the stock and subtracting it from the price at which you sold it. So, if you paid $50 per share and the stock is now worth $55, your profit would be $5 per share, minus applicable fees or commissions. If the stock price has dropped since you bought it, you would subtract the current price from the original price, to arrive at the amount of your loss.

Understanding the implications of those gains (or losses) in terms of dollar amounts as well as percentages — and what to do next — is another matter. In most cases you’ll owe taxes on your gains, and/or you can use losses to offset gains. But when and how is where investors need to pay attention.

Key Points

•   Calculating stock profit involves subtracting the purchase price from the selling price, resulting in either a gain or a loss based on market fluctuations.

•   Differentiating between realized and unrealized gains is crucial; only gains from sold stocks are considered realized and subject to taxes.

•   Investors can calculate percentage changes in stock value to compare performance, using the formula: ((Selling Price – Purchase Price) / Purchase Price) x 100.

•   Capital gains tax may apply to profits from sold stocks, with differing rates for short-term and long-term holdings based on the holding period.

•   Tax-loss harvesting allows investors to offset capital gains with losses, potentially reducing overall tax liability while adhering to specific rules like the wash-sale rule.

How Do You Calculate Stock Profit?

As noted, calculating stock profit involves a simple calculation to find the difference between the current share price and the price you initially purchased it – often called the “cost basis.”

Given the history of the stock market, and the constant price fluctuations of almost every stock, most investors should expect the price of the shares they buy to change over time. The question for investors, however, is whether the change is positive (a profit) or negative (a loss).

Realized Gains vs Unrealized Gains

Another question that’s critical for investors: Are those gains or losses realized or unrealized?

When a stock in your portfolio gains or loses value, but you hold onto it, that is considered an unrealized gain or loss. Your asset has appreciated in value, but you haven’t sold it to reap the benefits, or “realized” the gain. As such, you wouldn’t pay additional trading fees and you wouldn’t (yet) face any tax implications because you haven’t actually sold the shares.

If you sell the shares through an online brokerage account or other means, that’s when you realize (or take) the actual cash profit or loss in your account. At that point, trading fees and taxes would likely come into play.

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Formula to Calculate Percentage Gain or Loss of Stocks

Calculating stock profit can be done as a dollar amount or as a percentage change. The same is true of losses. While knowing the dollar amount that you’ve gained or lost is relevant for long-term planning and tax purposes, calculating the percentage change will help investors gauge whether one stock had good return when compared with another.

Percentage change = (Price sold – Purchase price) / (Purchase price) x 100

The important thing to remember about this formula is to always keep the purchase price (cost basis) in the denominator. That way the percentage change in the shares is always divided by what an investor paid for them.

Calculating Stock Profit Example

Here’s a hypothetical example using the formula above, but incorporating the number of shares an investor may hold. This will give the total dollar profit as well as the percentage move.

1.    Let’s say an investor owns 100 shares of Stock A, which they bought at $20 a share for a total of $2,000.

2.    The investor sells all of their shares when the stock is trading at $23, for $2,300.

3.    Ignoring any potential investment fees, commissions, or taxes in this hypothetical example, the investor would see a gain of $3 per share or $300 in profit.

4.    What’s the percentage gain? ($23 – $20) / $20 = 0.15 x 100 = 15 or a 15% gain.

Calculating Stock Loss Example

Now let’s look at an example where Stock A declines.

1.    Here, an investor owns 100 shares of Stock B, which they bought at $20.

2.    This time, the investor sells all 100 shares at $18.

3.    This means, the investor has to subtract $18 from $20 to get a $2 loss per share.

4.    What’s the percentage loss? ($20 – $18) / $20 = 0.10 x 100 = 10, or a 10% loss.

As an investor, you can also compare your stock profit with the average historical stock return, that number has historically hovered around 9%.

And if you’re wondering about how to calculate stock profit when shorting stocks, note that that is a more complex investing strategy that requires a more careful and detailed understanding and calculation.

Calculating Percentage Change in Index Funds and Indices

Index funds are mutual funds that track a specific market index, which means they include the companies or securities in that index. An S&P 500 index fund mirrors the performance of the companies in the S&P 500 Index.

To calculate the percentage change of your shares in an index fund, you can approach it the same way you would when you calculate profit or loss from a stock.

You can also calculate the difference between the percentage change of the index itself, between the date you purchased shares of the related index fund and sold them. Here’s an example, using the S&P 500 Index.

Let’s say the index was at 4,500 when you bought shares of a related index fund, and at 4,650 when you sold your shares. The same formula applies:

4,650 – 4,500 / 4,650 = 0.032 x 100 equals a 3.2% gain in the index, and therefore the gain in your share price would be similar. But because you cannot invest in an index, only in funds that track the index, it’s important to calculate index fund returns separately.

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Importance of Calculating Stock Profit

Calculating stock profits (and losses) is important because it can help inform you of how successful your overall strategy has been. That can have a downstream effect in numerous areas:

•   Taxes owed

•   Your overall tax strategy (more on that below)

•   Your asset allocation

•   Your long-term financial picture

How Are You Taxed on Profit From a Stock?

To determine any tax liability resulting from a stock-trade profit, you would start by subtracting the cost basis from the total proceeds to calculate what you’ve earned from a sale. If the proceeds are greater than the cost basis, you’ve made a profit, also known as a capital gain. At this point, the government will take a slice of the pie — you’ll owe taxes on any capital gains you make.

Capital gains tax rates are the rates at which you’re taxed on the profit from selling your stock (in addition to other investments you may hold such as bonds and real estate). You are only taxed on a stock when you sell and realize a gain, and then you are taxed on net gain, which is the difference between your gains and losses.

You can deduct capital losses from your gains every year. So if some stocks sell for a profit, while others sell for an equal loss, your net gain could be zero, and you’ll owe no taxes on these stocks.

Short-Term vs Long-Term Capital Gains Tax

There are two types of capital gains tax that might apply to you: short-term and long-term investment capital gains tax. If you sell a stock you’ve held for less than a year for a profit, you realize a short-term capital gain.

If you sell a stock you’ve held for more than a year and profit on the sale, you realize a long-term capital gain. Short-term capital gain tax rates can be significantly higher than long-term rates. These rates are pegged to your tax bracket, and they are taxed as regular income.

So, if your income lands you in the highest tax bracket, you will likely pay a short-term capital gains rate equal to the highest income tax rate — which is higher than the highest long-term capital gains rate.

Long-term capital gains, on the other hand, are given preferential tax treatment. Depending on your income and your filing status, you could pay 0%, 15%, or a maximum of 20% on gains from investments you’ve held for more than a year.

Investors may choose to hold onto stocks for a year or more to take advantage of these preferential rates and avoid the higher taxes that may result from the buying and selling of stocks inside a year.

When Capital Gains Tax Doesn’t Apply

There are a few instances when you don’t have to pay capital gains tax on the profits you make from selling stock, namely inside of retirement accounts.

The government wants to incentivize people to save for retirement, so it encourages people to set up tax-advantaged retirement accounts, including 401(k)s and/or an individual retirement account, or IRA.

You fund tax-deferred accounts such as 401(k)s and traditional IRAs with pre-tax dollars, which may help lower your taxable income in the year you make a contribution. You can then buy and sell stocks inside the accounts without incurring any capital gains tax.

Tax-deferred accounts don’t allow you to avoid taxes entirely, however, when you make qualified withdrawals after age 59 ½, you are taxed at your regular income tax rate. Roth accounts, such as Roth IRAs function slightly differently. You don’t avoid taxes with these types of accounts, either, since you fund these accounts with after-tax dollars.

Then you can also buy and sell stocks inside a Roth account where any gains grow tax free. Once again, you won’t owe capital gains on profit you make inside the account. And in the case of a Roth, when you make withdrawals at age 59 ½ you won’t owe any income tax either.

Recommended: How to Open an IRA: A 5-Step Guide

Understanding Capital Losses

Though it seems counterintuitive, capital losses may help investors manage their tax liabilities, thanks to a strategy called tax-loss harvesting.

Capital losses can be used to offset gains from the sale of other stocks. Say you sold Stock A for a profit of $15 and Stock C from another company for a loss of $10. The resulting taxable amount is now $5, or $15 minus $10.

In some cases, total losses will be greater than total gains (i.e. a net capital loss). When this happens, you may be able to deduct excess capital losses against other income. If an investor has an overall net capital loss for the year, they can deduct up to $3,000 against other kinds of income — including ordinary and interest income.

The amount of losses you can deduct in a given year is limited to $3,000. However, additional losses can be rolled over and deducted on the following year’s taxes.

There are other limitations with claiming capital losses. The wash-sale rule, for example, prohibits claiming a full capital loss after selling securities at a loss and then buying “substantially identical” stocks within a 30-day period.

The rule essentially closes a loophole, preventing investors from selling a stock at a loss only to immediately buy the same security again, leaving their portfolio essentially unchanged while claiming a tax benefit.

Another way investors try to defer taxes is through automated tax-loss harvesting, or strategically taking some losses in order to offset taxable profits from another investment.

Other Income From Stocks

You may receive income from some stock holdings in the form of dividends, which are unrelated to the sale of the stock. A dividend is a distribution of a portion of a company’s profits to a certain class of its shareholders. Dividends may be issued in the form of cash or additional shares of stock.

While dividends represent profit from a stock, they are not capital gains and therefore fall into a different tax category. (Different types of investment income are taxed in different ways.) Dividends can be classified as either qualified or ordinary dividends, which are taxed at different rates. Ordinary dividends are taxed at regular income tax rates.

Qualified dividends that meet certain requirements are subject to the preferential capital gains tax rates. Taxpayers are responsible for identifying the type of dividends they receive and reporting that income on Form 1099-DIV.

Brokerage Fees or Commissions

Investors need to remember that there are brokerage account fees or commissions that you might have paid when you bought the stock. You may have overlooked these costs, but they do have an effect on your investment’s profitability and, depending on the amounts involved, these fees could make a profitable trade unprofitable.

Tally all the fees you paid and subtract that sum from your profit to find out what your net gain was. Note that your brokerage account may do these calculations for you, but you might want to know how to do them yourself to have a better understanding of how the process works.

Some brokerage firms offer zero commission trading, but they may be engaging in a practice called payment for order flow, where your orders are sent to third parties in order to be executed.

When to Consider Selling a Stock

There are a number of reasons investors may choose to sell their stocks, especially when they may generate a positive return. First, they may need the money to meet a personal goal, like making a down payment on a home or buying a new car. Investors with retirement accounts may start to liquidate assets in their accounts once they retire and need to make withdrawals.

Investors may also choose to sell stocks that have appreciated considerably. Stocks that have made significant gains can shift the asset allocation inside an investor’s portfolio. The investor may want to sell stocks and buy other investments to rebalance the portfolio, bringing it back in line with their goals, risk tolerance, and time horizon.

This strategy may give investors the opportunity to sell high and buy low, using appreciated stock to buy new, potentially cheaper, investments. That said, investors might want to avoid trying to time the market, buying and selling based on an attempt to predict future price movements. It’s hard to know what the market or any given stock will do in the future.

Sometimes investors may decide that buying a certain stock was a mistake. It may not be the right match for their goals or risk tolerance, for example. In this case, they may decide to sell it, even if it means incurring a loss.

Test your understanding of what you just read.

The Takeaway

Assuming a stock’s price is higher when you sell it versus when you bought it, learning how to calculate stock profit is pretty easy. You simply subtract the original purchase price from the price at which you sold it. (If the selling price is lower than the purchase price, of course, you’d see a loss.)

It’s important to calculate stock profits and losses because it can impact your taxes. If you realize a gain, you may owe capital gains tax; if you realize a loss, you may be able to use the loss to offset your gains. Of course, if you’re trading stocks within an IRA, Roth IRA, or 401(k), you avoid any tax consequences.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

Why is it important to calculate stock profit?

investing in stocks comes with a certain amount of risk. It may help you to know what your gains and losses are so that you can gauge the winners and losers in your portfolio. Calculating stock profit also helps with tax planning and portfolio rebalancing.

How can you calculate stock profit?

Calculating the dollar amount is relatively simple (you subtract the final selling price from the original purchase price, or vice versa). The formula for determining the percentage change is also straightforward:

(Price sold – Purchase price) / (Purchase price) x 100 = Percentage change

What is an example of calculating stock profit?

An investor owns 100 shares of Stock X, which they bought at $50 a share for a total of $5,000. The price rises to $55, a gain of $5, and the investor sells all their shares for a $500 profit ($5,500 total), excluding commissions, taxes, fees.

What’s the percentage gain? ($55 – $50) / $50 = 0.10 x 100 = 10 or a 10% gain.

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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Feb
25
2025
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Guide to Share Lending

By | Growing Wealth, invest, Investing | Comments Off on Guide to Share Lending

Share lending is when investment firms loan shares to borrowers as a way to collect additional revenue on stocks they already hold. This produces another revenue stream on equities that would otherwise sit untraded in their portfolios.

The borrowers of the shares are often short sellers, who give collateral in the form of cash or other securities to the lenders.

Key Points

•   Share lending involves institutional investors temporarily transferring shares to borrowers for a fee, enhancing revenue.

•   Short selling, a key use of borrowed shares, is a high-risk strategy that allows investors to seek potentially high returns from price declines and increased market liquidity.

•   Benefits of share lending include additional income and turning inactive investments into potential profit generators.

•   Risks include counterparty default, loss of SIPC protection, negative tax implications, and loss of voting rights.

•   Concerns exist over the transfer of voting rights and lack of transparency in the securities lending market.

What Is Share Lending?

Share lending involves institutions lending out investors’ shares of stock to other investors in order to generate more revenue. The lenders are often pension funds, mutual funds, sovereign wealth funds, and exchange-traded fund (ETF) providers, since these types of firms tend to be long-term holders of equities.

Brokerages can also practice securities lending with shares in retail investors’ brokerage accounts, so long as investors agree to it. Share lending can help such firms keep management fees down for their clients.

Share lending is also known as securities lending, as the practice can extend beyond equities to bonds and commodities. Securities lending has become more popular in recent years as increased competition in the brokerage space drove down management fees to near-zero, and investment firms sought other sources of revenue. Worldwide revenue from securities lending totaled $9.64 billion during 2024.

Share lending is also useful to investors who are shorting stock, because those investors need to borrow shares in order to open their positions.

Critics argue that the practice comes at the expense of fund investors, since investment firms forgo their voting rights when they loan out shares. They might also try to own stocks that are easier to rent out.

Other concerns about share lending include a lack of transparency, and an increase in counterparty risk. That said, because short-sellers often use margin trading as a way to increase their potential returns, they’re likely used to assuming risk.

How Securities Lending Works

Here’s a deeper breakdown of how share lending works:

1.    Institutional investors use in-house or third-party agents to match their shares with borrowers. Such agents receive a cut of the fee generated by the loan. Sometimes, retail investors may loan or borrower shares through their broker as well.

2.    The fee is agreed upon in advance and typically tied to how much demand there is for the lent-out security on the market.

3.    The institutional investor or lender often reinvests the collateral in order to collect additional interest or income while their shares are out on loan.

4.    Borrowers tend to be other banks, hedge funds, or broker-dealers, and sometimes include other lending agents, retail investors, or short sellers. When the borrower is done using the shares, they return them back to the lender.

5.    If the collateral posted was in the form of cash, a percentage of the revenue earned from reinvesting is sometimes given back to the borrower.

Retail investors should learn whether their brokerage offers securities lending or share-lending programs. If you have a margin account at a brokerage or with a specific investing platform, there’s a good chance that you may be eligible or given access to a share-lending program. But you’ll need to ask your specific brokerage for details.

For some dividend stocks, investors could get some form of payment from the borrower, rather than the dividend itself. This payment may be taxed at a higher rate than a dividend payout.

Share Lending and Short Selling

In order to short a stock, investors usually first borrow shares. They then sell these shares to another investor or trader, with the hope that when or if the stock’s price falls, the short seller can buy them back and pocket the difference, before returning the loaned shares.

In share lending, a share can only be loaned out once — but when the borrower is a short seller, they can sell it, and the new buyer can lend it again. This is why the short stock float – the percentage of the share float that is shorted — can rise above 100% in a stock.

The fee generated by lending out shares depends on their availability. A small number of stocks tend to account for a large proportion of revenue in securities lending.

Criticism of Securities Lending

The lack of transparency in securities lending is a concern for many investors — both retail, and institutional.

The Dark Side of Share Lending

In December 2019, Japan’s Government Pension Investment Fund, among the world’s largest, announced that it would halt stock lending, saying the practice is not in line with its goals as a long-term investor. They further cited a lack of transparency regarding the identity of the individuals or entities borrowing the loaned securities, as well as their motivations for borrowing.

This became a bigger concern for investors after the “cum-ex” scandal in Germany, where borrowed shares were allegedly used in a tax evasion scheme.

Voting Rights Transferred

Another one of the biggest criticisms of share lending is that shareholder voting rights attached to the actual stock are transferred to the borrower.

This practice challenges the traditional model, in which institutional investors vote and push for change in companies in order to maximize shareholder value for their investors. Money managers can recall shares in order to cast a vote in an upcoming shareholder meeting. But there are concerns that they don’t, and it’s unclear how often they do.

A Hidden Problem

Another concern is that share lending programs incentivize money managers to own stocks that are popular to borrow, but may underperform. A 2017 paper entitled “Distortions Caused By Lending Fee Retention,” updated in June 2023, found that mutual funds that practice securities lending tend to overweight high-fee stocks which then underperform versus funds that do not rent out shares.

Pros and Cons of Share Lending

There are numerous pros and cons to share lending.

Pros

The most obvious upside for investors is that they may be able to open up an additional revenue stream to increase their returns by lending their shares. Along the same lines, share lending can also help investors turn otherwise dormant investments into return-boosters, under the right circumstances.

Also, lending shares allows for investors to lend their shares to short-sellers – thereby greasing the wheels of the market and allowing short-sellers to do their work. It adds liquidity to the market, in other words.

Cons

One downside to share lending is that retail investors should take note that securities that have been loaned are not protected by the Securities Investor Protection Corporation (SIPC). The SIPC, however, does protect the cash collateral received for the loaned securities for up to $250,000.

There can also be negative tax consequences when lending out shares of stock. You don’t receive dividends for the stocks you’ve loaned out, but you do get Payment in Lieu that’s equal to the value of the dividends paid on loan shares. Unfortunately, though, these payments are taxed at your marginal tax rate, not the more favorable dividend rate.

Another concern is the increase in counterparty risk (similar to credit risk). Let’s say a short seller’s wager goes sour. If the shorted stock rallies enough, the short seller could default and there’s a risk that the collateral posted to the lender isn’t enough to cover the cost of the shares on loan.

Finally, there may be additional and special criteria that investors need to meet in order to qualify for share-lending programs. This will depend on individual brokerages or platforms, however. And a final note: If you use a platform that allows you to buy or trade fractional shares, those fractional shares may not be eligible for share lending, either.

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Pros:

•   Potential to earn more revenue

•   Allows investors to boost returns from dormant investments

•   Adds liquidity to short-seller market

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Cons:

•   Lack of SIPC protection

•   Increased counterparty risk (the borrower may default)

•   You’re taxed at the marginal rate on payments in lieu of dividends

•   Investors may need to qualify

Test your understanding of what you just read.

The Takeaway

Share lending or securities lending is a potential source of revenue for institutional investors and brokerage firms, who rent out shares that otherwise would have sat idly in portfolios. The practice has ramped up in recent years as management and brokerage fees have shrunk dramatically due to competition and the popularity of index investing.

There are pros and cons, however, as there’s always a risk that a borrower could default. That’s offset, naturally, by the chance to earn additional revenue and boost your ultimate returns. But there are no guarantees.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What are the risks of share lending?

Some of the biggest risks of share lending are counterparty risk (or, the risk that a borrower will default and not be able to return your shares); the fact that you may lose SIPC protection on your shares; and that you may need to qualify in order to actually lend shares.

What exactly happens when you lend shares?

When you lend shares, ownership is temporarily transferred to a borrower, who transfers other shares or investments to the lender as collateral. The borrower also pays the lender a fee for the privilege of borrowing their shares.

Does share lending save money?

It doesn’t necessarily save money, but it can be a way to earn more money or drive more revenue from your owned investments. By lending out shares, you can garner fees from borrowers, amounting to a boost to your overall return.

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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Feb
25
2025
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15 Creative Ways to Save Money

By | Budgeting & Goals, Financial Independence, money | No Comments

You may not think of saving money as being a creative pursuit, but with a little effort, you can find fresh (and even fun) ways to help you stash away some cash. This can make the process more engaging and motivating.

Whether your goal is to save for the down payment on a house, build up your kid’s college fund, or simply take a great vacation next year, these clever ways to save money can help you get there — without feeling bored or deprived. Get set to save more.

Key Points

•   Set clear, specific savings goals to stay motivated and focused.

•   Automate savings by setting up monthly transfers and using round-up apps.

•   Reduce expenses by negotiating bills and switching to a bank that charges low or no fees.

•   Make savings fun with challenges, milestones, and a savings buddy.

•   Increase income through side gigs, freelancing, and selling unused items.

15 Creative Ideas to Save Money

You’re probably familiar with some of the usual strategies for saving money, such as comparison shopping and clipping coupons. If you’re ready to mix things up and try some less common tactics, consider the following 15 quirky but effective ideas.

1. Identify Your Saving Goals

Not sure how to make saving money fun or prioritize it? You could start by identifying your goals, a target savings amount, and a timeline for achieving them. For example, if you’re saving up to purchase a car in one year, determine how much you’ll need, then divide that amount by 12 to come up with a monthly savings goal. You might even open up a separate savings account earmarked for a new car. Seeing your “car” account grow over time can motivate you to keep going, even throw in some extra cash whenever you can.

2. Find a Saving Buddy

With the right company, even the most mundane tasks can be enjoyable. You might talk about your savings goals with your friends and family members to potentially identify a saving buddy with similar objectives.

An ideal saving buddy will be supportive of your financial goals, offer good advice, and have a positive money mindset.

Checking in with your buddy regularly could help keep you both stay on track and you can celebrate each other’s accomplishments. This person might also be able to talk you down if you’re on the verge of making a big impulse buy. If you’re stressed about how to make saving money fun, you could brainstorm creative tactics with your saving buddy and implement them together.

3. Seek Out Free Activities

Saving money does not have to be synonymous with missing out. There are likely a number of free activities offered in your area. Perhaps your local park offers free theater performances or concerts in the summer, or your area bookstore hosts interesting literary panels and author discussions with no attendance fee. This can be a great alternative to pricey movie or concert tickets.

Also think about the resources provided by your local library, such as book clubs, language exchange programs, craft nights, and movie screenings. You might also find a way to save money on streaming services: Many libraries offer services like Hoopla or Kanopy at no cost to card holders.

4. Get Creative and DIY

Another clever way to save money is to think about what you could create rather than buy new. For example, you may be able to make your own household cleaning products with items you already own (like vinegar and baking soda) or whip up a facial mask using fresh ingredients like avocado, tea, honey, and oatmeal. Out of wrapping paper? You don’t necessarily need to run to the store. Consider using old newspapers, maps, magazines, brown paper bags, or scraps of fabric. It’s free – and kinder to the earth.

5. Gamify Savings

To break up the monotony of saving, consider incorporating games and challenges into your overall savings plan. For example, you might try a “no-spend week,” where you refrain from spending money on anything other than necessities for seven days. If you succeed at that, you might want to ramp up to a 30-day no-spend challenge.

If a full no-spend challenge feels like too much, you could simply challenge yourself to not spend in a certain category for one month, like clothing, shoes, or take-out. You might choose something else the next month to keep the savings going.

6. Swap Goods and Trade Skills

Getting serious about money management doesn’t mean you need to give up on “luxuries” like exercise classes or new clothes. Rather than pay cash, you might explore trading skills or goods for pricey things or experiences on your wish list. For example, you could see if your favorite yoga studio offers a work-trade program where you can do administrative duties in exchange for classes. Or if your wardrobe needs a refresh, consider setting up a clothing swap with friends to score finds — and have fun — at no cost.

You might also consider an informal exchange with skilled friends. For example, if you’ve been eyeing an original painting from your artist pal but don’t have the funds to pay her, you could offer your website design services (or some other helpful skills) for the painting.

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*Earn up to 4.00% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.30% APY as of 12/23/25) for up to 6 months. Open a new SoFi Checking and Savings account and pay the $10 SoFi Plus subscription every 30 days OR receive eligible direct deposits OR qualifying deposits of $5,000 every 31 days by 3/30/26. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.

7. Increase Income

Sometimes, cutting down on expenses might not be the most effective way to reach a savings goal. It might be easier, in some cases, to look for ways to make more money rather than reduce costs.

If a salary raise isn’t in the offing, you might consider your particular skills and/or hobbies to see if there is a way to translate one of them into an income stream. For example, if you love to knit, you might start an online store for your yarn creations. Or if you’re a wordsmith, you could potentially offer your writing or editing services in a freelance capacity. A successful low-cost side hustle could help bring additional money into your bank account and even add more fun and enjoyment in your life.

8. Switch Your Bank

If your financial institution seems to be charging you endless fees and offers little interest on your savings account, consider switching banks.

You might shop around and see what online banks and local credit unions are offering. Online-only institutions don’t have brick-and-mortar locations to fund and can pass those savings along to customers in the form of lower or no fees and higher interest rates. Credit unions, on the other hand, are run as financial co-ops, meaning each member has a stake in business. As nonprofits, they are designed to serve their members, typically paying higher interest rates on deposits and charging lower fees.

9. Split Your Direct Deposit into Checking and Savings

If you have regular paychecks, one of the easiest ways to start saving more is to have some of each paycheck go directly into a savings account, where you’ll be less tempted to spend it. Many employers will allow you to do a split direct deposit, where some of your pay goes into your checking account and some goes into your savings account. Evening saving off 5% or 10% of your paycheck each pay period can add up to a serious sum over time. If you choose a high yield account, you can help your savings grow faster.

If you don’t have the option to split up your paycheck or would prefer not to, another way to automate savings is to set up a recurring monthly transfer from checking to savings for the same day each month, perhaps the day after you get paid. You won’t have to remember to make the transfer or give saving a second thought.

10. Change Your Due Dates for Bills

If you frequently overdraft your checking account or have to pull money from savings to cover bills, consider this unique way to save money: Changing some of your billing due dates.

Moving due dates for large payments — like credit card bills or student loans — away from the due date for your rent or mortgage, could help you avoid getting hit with overdraft or non-sufficient fund (NSF) fees. It can also keep you from transferring money from savings to checking to cover a temporary shortfall, and then never transferring it back.

11. Save Every $5 Bill

This is a classic adult remix of the piggy bank you had as a kid. Only this time, instead of squirreling away pocket change, you take every $5 you get and put it in an envelope tucked into the back of a drawer.

Once you get into the habit of identifying $5’s as “no spend” bills, you’ll find it can really be a creative way to save money. You likely won’t miss the money (it’s just $5) but at the end of the year, it could easily add up to enough cash to help with holiday shopping, a loan payment, or even a nice charity donation, without having to touch your savings in the bank.

Recommended: 39 Passive Income Ideas to Build Wealth

12. Take Advantage of Cash Back Credit Cards

Need another clever way to save money? Look for a credit card that offers a good rewards program like SoFi Plus. Depending on the card, you may be able to redeem cash back rewards as statement credits, checks, or direct deposits. Just keep in mind that a cash back credit card isn’t a good saving solution if you tend to carry a balance — the money you’ll pay in interest is likely to be significantly higher than your rewards rate.

13. Round Up Your Purchases Automatically

There are plenty of apps available that will round up your purchase to the nearest dollar and then save the change for you. Your bank may offer this kind of savings tool, which can be an easy way to save money automatically.

The amount these apps save for you is small, so you aren’t likely to notice 25 or 80 cents here and there when the round-up transfers, but it can potentially add up to hundreds saved per year.

14. Consolidate Credit Card Debt with a Personal Loan

If credit card debt is preventing you from saving as much as you would like, you might use a personal loan as a creative way to save some extra money every month.

If you can qualify for a personal loan with a significantly lower interest rate than you’re paying on your credit card balances, you could use it to pay off your credit cards. While you’ll still be paying off the personal loan, you could save on interest. You might also be able to pay off your debt faster. Once your loan is paid off, you can redirect those monthly payments to your savings account.

15. Take Advantage of an Employer’s 401(k) Match

If your employer offers a match on your 401(k) savings, it’s wise to take full advantage — this is essentially free money. For example, if your employer matches 50% of employee contributions up to 5% of your salary, consider putting at least 5% of your paycheck into your retirement account each month. Otherwise you’ll be leaving money on the table.

Creative Savings Challenges to Try

Saving money can feel like a chore, but making it a fun challenge can turn it into an exciting goal. Here are some ways to keep things interesting.

•   52-Week Savings Challenge: This challenge encourages you to save a small, increasing amount each week. Start with $1 in the first week, $2 in the second, and so on until you reach $52 in the final week. By the end of the year, you’ll have saved $1,378.

•   Receipt Challenge: Love to shop sales or use coupons? Collect your receipts that show your purchase savings in a drawer. Once a month, add up your savings, then transfer that amount into your savings account.

•   100 Envelope Challenge: Label 100 envelopes with numbers from 1 to 100. Each day (or week), pick an envelope randomly and place the corresponding amount inside. If you complete all envelopes, you’ll save $5,050!

•   Vacation Savings Challenge: A year before you want to go away, set a savings goal that will cover all of your vacation costs (including airfare, lodging, and spending money). Divide that total by 12, and transfer that amount into a savings account each month.

How To Stay Motivated to Save Money

Staying motivated to save money requires setting clear goals and making saving a rewarding habit. A good place to start is by defining a specific reason for saving, whether it’s for an emergency fund, a vacation, or a major purchase. Next, break your savings into small, manageable milestones to make it feel achievable.

Tracking your progress with a savings app or chart, and sprinkling in fun challenges (like a $5 or no-spend challenge), can also help you stay motivated. In addition, you might reward yourself for reaching savings milestones with a low-cost treat, like going out for ice cream or a fancy coffee.

Why Is Making Saving Money Fun Important?

Trying tactics like the ones above can help make saving money feel less like deprivation and more like fun. That’s important for a couple of reasons. Shaking up your savings routine can make socking away cash seem fresh and more engaging, meaning you are more likely to get the job done. Basically, it can rev up your motivation to save money.

Also, when you find a technique that is fun, such as a spending challenge, it can help encode the new savings behavior in your routine. If it’s enjoyable, you are more likely to keep up the good work.

How Can You Make the Most of the Money You Save?

When you save money, you likely want it to grow over time, not just sit there. One good way to do that is to stash your money in an interest-earning account. This can be especially effective if the financial institution charges low or no banking fees.

You might look for a high-interest or high-yield savings account. These can pay a significantly higher rate than standard savings accounts, and your money will be accessible and likely insured (up to certain limits) by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).

Optimizing Your Savings

Beyond the creative ways listed above, there are other important ways to optimize your savings.

•   Assess your cash flow. Coming up with a basic monthly budget can help you better understand your personal finances and get a grip on your earnings, spending, and savings. When you see where your money goes, you can tweak your spending to help funnel more towards savings.

•   Negotiate your bills. You may be able to reduce some of your recurring bills (such as cable, car insurance, and cell phone) by negotiating a lower rate or switching to another service provider. Even a small reduction in a monthly bill can save significant cash by the end of the year.

•   Lower your living costs. If you’re living well beyond your means, one dramatic shift that can help you save more is to move to an area that has a lower cost of living. Whether that means moving across town or across the country, it could make a major difference in your finances.

The Takeaway

Putting away money for your short- and long-term goals doesn’t have to be a boring task — there are countless fun ways to save money that can be customized to your specific financial needs and wants. From finding a savings buddy to gamifying the saving process, creative tactics can help enhance your motivation and your ability to put away cash.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is a clever way to save money?

There are several clever ways to save money. Automating savings so you don’t have to remember to transfer funds is one good tactic; so is giving yourself a “no-spend” challenge, finding free activities, and doing a skills swap (i.e., bartering your expertise/skills to receive a service or product in return for free).

How can you save $1000 in 30 days?

To save $1,000 in 30 days, you might try a “no spend” challenge. This involves putting a freeze on all non-essential spending for a full month. You might also try selling items you no longer want online, taking on a side gig or freelance project, cancelling unnecessary subscriptions (like streaming channels you rarely watch or a gym membership you don’t use), and meal-prepping to save money on food.

What is the 50-30-20 rule?

The 50-30-20 rule is a budgeting method that divides your income into three categories: 50% for needs (rent, utilities, groceries, minimum debt payments), 30% for wants (entertainment, dining out, hobbies), and 20% for savings and extra debt payments. This structure can provide a starting framework for money management, but you may need to adjust the formula based on your monthly living expenses and savings goals.

How can I use automated tools to help save money?

One of the easiest ways to automate saving is to set up a recurring monthly transfer from your checking account to your savings account on the day after you get paid. Or, if your employer offers split direct deposit, you could have most of your paycheck go into checking, and a small portion go directly into savings.

You might also try a “round-up” app: Each time you make a purchase, the app will automatically round it up to the nearest dollar and deposit the difference into savings.

What is the best method to start a savings habit?

One of the best ways to start a savings habit is by making it automatic. You can do this by setting up a recurring transfer from your checking to your savings account for a set amount on the same day each month, perhaps the day after you get paid. It’s fine to start small, even just $5 a week, and gradually increase the amount over time.

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

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

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

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

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

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

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

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 Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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