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When you’re worried about money and feel your options are limited, debt can feel like a pair of handcuffs. And if it feels like you can’t do what you want to do — which is to pay it all off and get yourself free — there’s the temptation to do nothing. The right debt reduction plan, however, can help you start paying down your balances, stay on track with your budget, and work towards your future financial goals. Here are some options to get you started.

Tips to Build a Debt Reduction Plan

Prioritizing Expenses

A good first step is to look at everything you have coming into your bank account each month (income) and everything that is going out (spending). You can do this with pen and paper, or by leveraging an all-in-one budgeting app, such as SoFi..

Once you have a list of all of your monthly expenses, you can divide them into essential and nonessential expenses. Looking over your nonessential expenses, you may find easy places to cut back (such as streaming services you rarely watch or a membership to a gym you hardly ever use) to free up more funds for debt repayment. You may also need to cut back in other areas, such as meals out, clothing. and other discretionary purchases, at least temporarily.

A budgeting framework you might try is the 50-30-20 rule, which recommends putting 50% of your money toward needs (including minimum debt payments), 30% toward wants, and 20% toward savings and paying more than the minimum on debt payments.

Next, you can come up with a debt repayment strategy. Here are four popular approaches to knocking down debt. The debt avalanche method is probably best suited to those who are analytical, disciplined, and want to pay off their debt in the most efficient manner based solely on the math.

The debt snowball method takes human behavior into consideration and focuses on maintaining motivation as a person pays off their debt.

The debt fireball method is a hybrid approach that combines aspects of the snowball and avalanche methods. Here’s a closer look at each strategy.

Debt Avalanche

The avalanche method puts the focus on interest rates rather than the balance that’s owed on each bill.

1.    The first step is collecting all debt statements and determining the interest rate being charged on each debt.

2.    Next, you’ll want to list all of those debts in order of interest rate, so the debt with highest interest is on top and the debt with the lowest interest rate is at the bottom of the list.

3.    Now, you’ll want to focus on paying more than the minimum monthly payment on the debt that is first on the list, while continuing to make the minimum payments on all the others.

4.    When the first debt is paid off, you can move on to paying more than the minimum on the second debt on your list. By eliminating debts based on interest rate, you can save money on interest.

Debt Snowball

The debt snowball method can be effective in getting a handle on debt by getting rid of debts on your list more quickly than the avalanche method. However, it can cost a bit more.

1.    You’ll start by collecting debt statements and making a list of those debts, but instead of listing them in order of interest rate, organize them in order of size, with the smallest balance on top and the largest balance at the bottom of the list.

2.    Next, you’ll want to put extra money towards the debt at the top of the list, while continuing to pay the minimum on all of the other debts.

3.    Once you wipe away the first debt, you can start putting extra money towards the second debt on the list and, when that is one wiped out, move on to the third, and so on. This method provides early success and, as a result, can motivate you to keep going until you’ve wiped out all of your debts.

Debt Fireball

This strategy is a hybrid approach of the snowball and avalanche methods. It separates debt into two categories and can be helpful when blazing through costly “bad debt” quickly.

1.    You’ll want to start by categorizing all debt either “good” or “bad” debt. “Good” debt is debt that has the potential to increase your net worth, such as student loans, business loans, or mortgages. “Bad” debt, on the other hand, is normally considered to be debt incurred for a depreciating asset, like car loans and credit card debt. These debts also tend to have the highest interest rates.

2.    Next, you can list bad debts from smallest to largest based on their outstanding balances.

3.    Now, you’ll want to make the minimum monthly payment on all outstanding debts — on time, every month — then funnel any excess funds to the smallest of the bad debts. When that balance is paid in full, you can go on to the next-smallest on the bad-debt. This helps to keep the fireball momentum until all the bad debt is repaid.

4.    Once the bad debt is paid off, you can simply keep paying off good debt on the normal schedule. In addition, you may want to apply everything that was being paid toward the bad debt towards a financial goal, such as saving for a house, paying off a mortgage, starting a business, or saving for retirement.

Using Personal Loans for Debt Reduction

Another debt payoff strategy you may want to consider is refinancing your debt. This involves taking out a personal loan, ideally with a lower rate than you are currently paying on your “bad” debts, and using it to pay off your balances.

Personal loans used for debt consolidation can help pull everything together for those who find it easier to keep up with just one monthly payment. A bonus is that because the interest rates for personal loans are typically lower than credit card interest rates, you can end up saving money.

Here’s a look at the process.

1.    You’ll first want to gather all of your high-interest debt statements and total up the debts to be paid.

2.    A good next step is to research your personal loan options, comparing rates, terms, and qualification requirements from different lenders, including traditional banks, online lenders, and credit unions. You may be able to “prequalify” for a personal loan for debt consolidation to get an idea of what rate you are likely to qualify for. This only requires a soft credit check and won’t impact your score.

3.    Once you’ve found a lender you want to work with, you can apply for the debt consolidation loan. Once approved, you can use the loan to pay off your high-interest debts. Moving forward, you only make payments on the new loan.

The Takeaway

Having a debt reduction plan in place is key to getting rid of those financial handcuffs and being able to look forward to a successful financial future. To get started, you’ll want to assess where you currently stand, find ways to free up funds to put towards debt repayment, and choose a debt payoff method, such as the avalanche or snowball approach.

Another option is to get a debt consolidation loan. This can help simplify repayment and also help you save money on interest. If you’re curious about your options, SoFi could help. With a lower fixed interest rate on loan amounts from $5K to $100K, a SoFi debt consolidation loan could substantially lower how much you pay each month. Checking your rate won’t affect your credit score, and it takes just one minute.

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

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While opening up your home and your heart to a new child may seem like the natural next step for you and your family, the process can actually be pretty complicated — and costly.

There are a few different adoption methods and each comes with its own unique costs and fees. Read on for a breakdown of some expenses you might run into in the adoption process.

Cost of Adoption from Foster Care

Adopting a child from foster care tends to be less expensive than other options. The process is often funded by the state and, typically, there are few or no fees passed on to the parents. However, some parents may opt to hire a private agency to help them through the process, which can come with out-of-pocket expenses. Parents may be able to recoup some or all of these costs through federal or state programs once the adoption is completed.

Home Study

One of the most important costs to account for in any adoption is the home study, which is when the prospective parents’ home is screened so that the adoption agency or a social worker can get a sense of their day-to-day life. While the cost of a home study might be included in the overall adoption fee from a private agency, the fees can range from a few hundred dollars to several thousand dollars.

Foster care adoptions will also generally have a home study where a social worker observes the interaction between the potential adoptive parents and the child. In some cases, there may be state or federal programs to offset the cost of a home visit.

Tax Credits for Foster Care (and Other) Adoptions

The tax code currently offers an adoption tax credit that can help offset some of the costs involved in adoption, whether you adopt via public foster care, domestic private adoption, or international adoption. The total amount of adoption credits will depend on the tax year, so it’s a good idea to talk to an accountant for more specifics.

Families adopting children from foster care might also qualify for other types of federal assistance depending on the child’s eligibility. This assistance might include:

•   A one-time, non-recurring reimbursement for adoption transaction costs

•   Recurring monthly maintenance payments for the child’s care (Not to exceed what the state would have paid to keep the child in foster care).

Children adopted through foster care may also be eligible for health insurance coverage under Medicaid, and other medical assistance to cover some or all of the child’s needs like special education or therapy.

Planning for Private Agency Adoption

Private adoption costs in the U.S. can vary from state to state. According to the Children’s Bureau, the cost of a private, agency-assisted adoption can range anywhere from $30,000 to $60,000.

Court Documentation Fees

Legal representation for the adoptive parents can run as high as $4,500. Depending on the state, these fees may or may not be covered as part of an agency’s overall pricing.

Independent Adoption Costs

Some families choose to adopt a child without the assistance of an adoption agency and instead work directly through an attorney. It might seem like a cost-saving measure at first, but pricing can still vary. Expenses might be low if you match with a birth parent through word of mouth, or if the birth mother’s expenses are minimal.

However, these adoption costs can still range from around $25,000 to $45,000. This typically includes most of the same costs of any other domestic adoption, including the home study, the birth mom’s medical expenses, and legal and court fees for the adoptive parents and birth parents.

Recommended: Common Financial Mistakes First-Time Parents Make

Expenses for Intercountry Adoption

Adoption fees will differ depending on which country you plan to adopt a child from. Intercountry adoption costs tend to be higher than a U.S.-based adoption because there is usually foreign travel and immigration processing to factor into the equation, in addition to other higher court costs, mandatory adoption education, and other documentation. The average cost can range from $20,000 to $50,000 for a foreign adoption.

Costs can depend on the organization managing the adoption as well — whether it’s the government, private agency, orphanage, non-profit organization, private attorney, or some combination of the above. Some intercountry adoptions are finalized in the child’s home country, while others must be finalized in the United States. Finalizing an adoption in U.S. court can come with extra costs, but also provides additional legal protections and documentation.

Other costs to adopt a child from another country can include:

• Escort fees for when/if parents can’t travel to accompany the child to the U.S.
• Medical care and treatment for the child
• Translation fees
• Foreign attorney or foreign agency fees
• Passport and visa processing
• Counseling and support after placement

Recommended: New Parent’s Guide to Setting Up a Will

Financing the Cost of Adoption

So, with costs ranging from at least a few thousand dollars to up to $60,000 or more, funding an adoption may require some planning. Financially preparing for a child typically means looking into all associated costs, including raising your new child and tackling your own debt.

Some employers may offer financial and other support to help with the adoption process. According to the Dave Thomas Foundation for Adoption , these policies include financial reimbursement and paid leave for adoption, among other benefits.

Additionally, companies with 50 or more employees are required by federal law to grant parental leave to employees who have adopted a child. Mothers and fathers are eligible for up to 12 weeks of unpaid leave after the birth or adoption of a new child.

Grants and loans also exist to help with the cost of adoption and can help with any type of legal adoption, whether a foster care adoption, private agency, or overseas adoption. Most grants and loans have their own eligibility criteria based on things like marital status, income level, and other specifics.

You can also consider taking out a personal loan to help cover the cost of adoption. Some lenders actually offer “adoption loans,” which are typically personal loans designed to cover costs associated with adopting a child.

Recommended: 5 Tips for Saving for a Baby

The Takeaway

The cost of adopting a child can vary widely, from a few thousand dollars to $60,000. Foster care adoptions tend to be less expensive than private agency or intercountry adoptions. There are state or federal tax credits and programs that can help offset the cost of adoption. Other resources to pay for adoption include grants and personal loans.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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

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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.

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

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.

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.

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Investors, at one point or another, may find that a security they’re interested in trading or investing in is the subject of a trading halt or trading restrictions. The two are similar, but distinct – and it can be beneficial to understand the differences. A trading halt, for instance, is a temporary pause in trading, whereas trading restrictions are put in place by regulators to suspend trading by individuals who may be bending the rules.

Again, it can be helpful to understand the differences, so if investors do find themselves dealing with a trading halt or trading restrictions, they can make wise decisions about their next moves.

What Is the Difference Between a Trading Halt and a Trading Restriction?

A trading halt is a market event in which the trading of a particular asset or an entire stock exchange is temporarily suspended, whereas a trading restriction is a trading limitation enforced by the Securities Exchange Commission (SEC) and/or investing brokerages that prevent investors from participating in frequent and short-term trading activities at larger scales.

In other words, trading halts are reactionary and trading restrictions are preventative. To better understand, we’ll take a closer look at both trading halts and trading restrictions.


💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

What Is a Trading Halt?

A trading halt can be stock-specific or market-wide, affecting traders of all sizes, backgrounds, and geographic locations. The duration of a trading halt can vary, freezing securities of various types or entire markets for minutes or even hours at a time.

Trading halts are artificial, meaning they are not a natural part of markets—however, they have been in existence for some time. Stock market halts date back to 1987, when the SEC mandated the creation of market-wide circuit-breakers (MWCBs) to prevent a repeat of the Oct. 19, 1987 market crash, also known as “Black Monday,” which was one of the worst days for the market in history.

Reasons for Trading Halts

Trading halts are a method of pausing market action to prevent volatility from snowballing in response to unexpected stimuli.

Trading halts are designed only to be triggered when a certain market event occurs that is extreme, unprecedented, or otherwise affects market trading. Halts may be triggered by severe price rises or drops, commonly referred to as “circuit breakers” or “curbs.” Halts are implemented for a variety of reasons, including the following.

1. Anticipation of a Major News Announcement: Code T1: Pending News

A trading halt might be called during the day to allow a company to make an announcement. If the announcement is pre-market, it might result in a trading delay rather than a halt. A trading halt or delay allows investors time to assess the news’ impact.

2. Severe Price Drop: Code LUDP: Volatility Trading Pause

The NYSE also imposes trading halts based on the severity of price moves or stock volatility, applying to both upside and downside swings in short amounts of time. Whereas news-induced trading halts are usually one hour in duration, stocks can get halted for five to 10 minutes for increasing or decreasing rapidly in price over a short period, typically exceeding 10% in a five minute period.

3. Market-Wide Circuit Breakers

There are also three tiers of market-wide circuit breakers that pause trading across all U.S. markets when the benchmark indices the S&P 500, the Dow Jones 30, and the Nasdaq exceed pre-set percentages in terms of price from the prior day’s closing price:

•   Level 1: 15-minute halt when the S&P 500 falls 7% below the previous day’s closing price between 9:30am EST and 3:24pm EST.

•   Level 2: 15-minute halt when the S&P 500 falls 13% below the previous day’s close between 9:30am EST to 3:24pm EST. Level 1 and 2 circuit breakers do not halt trading between 3:25pm EST and 4:00pm EST.

•   Level 3: Trading is closed for the remainder of the day until 4pm EST when the S&P 500 falls 20% below the previous day’s close.

4. Correct an Order Imbalance

Non-regulatory halts or delays occur on exchanges such as the NYSE when a security has a disproportionate imbalance in the pending buy and sell orders. When this occurs, trading is halted, market participants are alerted to the situation, and exchange specialists communicate to investors a reasonable price range where the security may begin trading again on the exchange. However, a non-regulatory trading halt or delay on exchange does not mean other markets must follow suit with this particular security.

Recommended: Understanding the Different Stock Order Types

5. Technical Glitch: Code T6: Extraordinary Market Activity

Trading is halted when it’s determined that unusual market activity such as the misuse or malfunction of an electronic quotation, communication, reporting, or execution system is likely to impact a security’s market.

6. Regulatory Concerns

A trading halt may be placed on a security when there is uncertainty over whether the security meets the market’s listing standards. When this halt is placed by a security’s primary markets, other markets that offer trading of that security must also respect this halt. These include:

•   Code H10: SEC Trading Suspension: A five minute trading halt for a stock priced above $3.00 that moves more than 10% in a five minute period. H10s are commonly imposed by the SEC onto penny stocks and other over-the-counter stocks suspected of stock promotion or fraud.

•   Code T12: Additional Information Requested: A trading halt that occurs when a stock has rallied significantly without any clear impetus. This can be common among orchestrated pump-and-dumps or short squeezes, and in many cases when the halt is lifted, the stock reverts back down because there are no underlying fundamentals supporting the drastic rise in price.

How Long Do Trading Halts Last?

Trading halts are typically no longer than an hour, the remainder of the trading day, or on rare occasions up to 10 days. However, if the SEC deems appropriate, the regulatory body may revoke a security’s registration altogether.

Example of Trading Halts

Stock Volatility

Amid the late-January 2021 Gamestop vs Wall Street meme stock spectacle, Gamestop’s stock saw huge capital inflows over the course of a couple weeks, leading the NYSE in terms of daily volume. The stock’s intraday volume was so high that it triggered the volatility circuit breaker dozens of times over the last week of January and again on February 2, 2021, when it dropped 42%.

Pending News

On February 1, 2021, Adamas Pharmaceuticals’ trading was halted for news pending linked to the day being the FDA action date for the company’s marketing application for Gocovri (amantadine) to treat OFF episodes in Parkinson’s disease patients receiving levodopa-based therapy.

Regulatory Concerns

In June 2020, bankrupt car rental company Hertz’s stock trading was halted pending news around a planned controversial stock sale. The stock was trading down about half a percent to under $2.00 when the SEC told Hertz that the regulator had issues with the company’s stock sale plan.

Market-wide circuit breakers

MWCBs were triggered four times in March 2020 in response to the global COVID-19 pandemic lockdowns that caused two of the six largest single-day drops in market history. This was the first occurrence of market-wide circuit breakers since 1997.


💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

What is a Trading Restriction?

Trading restrictions are trading limitations imposed by the SEC to restrict day trading of U.S. stocks and stock markets. Trading restrictions attempt to prevent “pattern day traders” from operating in the markets unless they maintain a minimum equity balance of $25,000 in their trading account.

Trading restrictions ensure a minimum standard is met by all market participants to trade assets to the fullest extent to which they have access. Margin requirements, pattern day trading, and occasionally limited market hours narrows the potential pool of traders to those with the designated criteria deemed necessary to effectively play by market rules at a certain scale.

Pattern Day Trading

The SEC defines a day trade as “the purchasing and selling or the selling and purchasing of the same security on the same day in a margin account.” Accordingly, the SEC defines a pattern day trader as anyone who executes four or more trades within five trading days. In other words, opening and closing one trade per day is enough to classify a trader as a pattern day trader, applying the $25,000 minimum equity capital restrictions.

In addition to the SEC, some stockbrokers may impose even more stringent definitions of a pattern day trader, classifying pattern day trading as making two or three day trades in a five-day period, thus imposing the $25,000 minimum equity balance on anyone who meets this criteria.

Leverage/Margin

Day traders in the U.S. are permitted to trade on up to 4:1 leverage, meaning day traders can open positions up to four times the amount of cash in their trading account. For example, if a trader has $25,000 in their account, they can open up positions up to $100,000 for the day. However, traders that hold positions overnight are limited to 2:1 leverage, or up to double the amount of cash in their trading account.

Since day traders’ positions are intraday and each trade is less likely to experience larger price swings compared to positions held longer, day traders are allowed to have more leverage. If a trader exceeds their allowed margin, then the day trader’s broker will issue them a margin call, a demand for additional funds to maintain a certain account ‘margin’ requirement. Margin calls are usually brought on by a position decreasing sharply in value or an overleveraged position decreasing enough to fall below the margin requirement.

Recommended: What Is Leverage in Finance?

Examples of Trading Restrictions

PDT Suspended Trading

If Trader Smith has $20,000 in their trading account — $5,000 less than the minimum equity requirement for pattern day, they may only open and close three total trades in a week. If Smith opens and closes five total trades in one week with their same $20,000 account, they will be flagged as a pattern day trader.

Because their account’s equity doesn’t meet the minimum PDT margin requirement, their account may be suspended from trading until they add additional funds to their account to meet the $25,000 minimum equity requirement — or wait five or so days for the suspension to end. All margin and leverage is suspended during a PDT trading suspension, however some brokers may allow for cash account transactions while in PDT suspension.

Margin Calls

A late February 2021 25%+ selloff in the crypto markets was believed to have been started by margin calls that were liquidated, thereby creating a snowball of market sell orders that cascaded lower to then trigger lower liquidation levels and stop-loss orders, creating a feedback loop of selling.

The initial margin calls were triggered when a trader’s leveraged long trade came under pressure during a pullback, at which point the position was liquidated, force-sold after not meeting the margin requirements.

The Takeaway

Trading halts and trading restrictions are similar but different, and can both affect any trader at one time or another. From an individual perspective, there are minimum capital requirements to sign up for trading, especially for those intent on day trading. If a trader doesn’t maintain a certain level of margin, their trading account can be suspended or be limited to trading only with cash available.

Even if traders follow all the rules and maintain their margin requirements, there are certain trading days when trading of particular stocks pauses due to reasons outside of any one person’s control — whether it’s pending news, volatility, suspected fraud, or even a technical error. On rare occasions, the entire market may be halted or shut down for the day due to severe drops.

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