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Gross income is the amount of money earned before any payroll deductions for taxes, insurance, retirement contributions, and such. To calculate gross monthly income from a biweekly paycheck, find the gross amount listed on the pay stub (usually the starting number). Multiply that figure by 26 (the number of paychecks received in a year), then divide by 12 (months in a year).

The calculation for gross monthly income can differ depending on paycheck frequency. Below we’ll show you how to calculate your gross pay for different payroll schedules.

How to Calculate Monthly Pay From Biweekly Pay

There are two different monthly pay figures to understand, gross and net. Each is useful in different situations. When you’re applying for a loan, most lenders use gross monthly income to determine your debt-to-income ratio (DTI). However, many people find it easier to budget based on net or take-home pay. A budget planner app can help you decide the best approach for your situation.

As we spelled out above, if you’re paid biweekly (every two weeks), the formula for gross monthly income is:

(Gross pay amount × 26) ÷ 12

Hourly workers can also use this next formula if they work a consistent number of hours per week:

(Hourly salary × weekly hours worked × 52) ÷ 12

To find net monthly pay, substitute the actual amount of your paycheck for the gross amount in the first formula.

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How Many Bi-Weeks in a Year

There are 26 biweekly pay periods in a year. Employees who get paid biweekly will receive 26 paychecks from January to December.

It’s important to note that receiving pay biweekly differs from receiving pay twice a month on the same dates. Workers who receive biweekly checks can’t just multiply one paycheck by two to find their monthly salary.

Employees who get paid twice a month — for instance, on the 15th and 30th — can find their monthly gross income simply by adding together the gross figures on their two monthly paychecks.

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The Different Types of Payment Periods

The most common pay periods for employees are:

•   Biweekly: Paid every other week, or 26 paychecks per year.

•   Semimonthly: Paid twice a month on the same dates, or 24 checks per year.

•   Weekly: Paid once a week, or 52 checks per year.

•   Monthly: Paid once a month, or 12 checks per year.

Employees who receive biweekly pay get two checks or direct deposits each month, except for two months of the year when they receive three paychecks. Employees who are paid biweekly might get a paycheck every other Wednesday or Friday, or whatever day their employer chooses.

With semimonthly pay, an employee might get paid on the 15th and 30th of every month. There are always two paydays, for a total of 24 per year instead of 26.

An employee who gets paid twice a week is on a semiweekly schedule. This would entail eight paychecks each month.

Pros and Cons of Biweekly vs Semimonthly Pay

For employees, there are pros and cons to biweekly pay. Depending on their expenses and savings strategy, someone might prefer a biweekly or semimonthly schedule.

For most workers, the main pro to biweekly pay is the third “bonus” check they receive two months out of the year. By budgeting for two paychecks every month, workers can designate the occasional third check for special line items like vacations, holiday gifts, paying off debt, or boosting savings.

For others, biweekly checks just make budgeting and managing expenses more challenging. Semimonthly pay is preferable because it offers an accurate reflection of real monthly income.

Also, each semimonthly check can be dedicated to particular expenses. For example, the second check of the month can go to rent, utilities, and other housing costs, which are often due the first of the month.

Compared to weekly paychecks, both biweekly and semiweekly checks require better cash management on a weekly basis. For someone who lives paycheck to paycheck, biweekly pay periods might mean they run out of money before the next check arrives.

The Takeaway

To calculate gross monthly income from a biweekly paycheck, find the gross amount listed on the pay stub, multiply by 26, then divide by 12. (Do not use this formula if you’re paid twice a month on the same dates, rather than the same days of the week.) For your monthly net pay, substitute your net or take-home pay for the gross amount in the same calculation.

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FAQ

How do you convert biweekly pay to monthly income?

To calculate gross monthly income from a biweekly paycheck, find the gross amount listed on the pay stub (usually the starting number). Multiply that figure by 26 (the number of paychecks received in a year), then divide by 12 (months in a year).

How do I calculate my gross monthly income?

Gross monthly income is the total of all paychecks and income received in a month, including any side hustles, rental income, etc., but before taxes and other deductions.

How do you calculate gross income from a W-2 form?

Gross wages cannot always be found on a W-2 form due to various pre-tax deductions. Instead, look at the gross amount listed on the employee’s final paycheck for the year.

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

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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.

SORL-Q224-1921206-V1

A Form 1098 is a tax document that reports amounts that may affect a tax filer’s adjustments to income or deductions from their income on their annual tax return. There are several variations of the form — some are used to report amounts paid and some are used to report charitable contributions made. Any of the forms a person may receive are important documents to refer to when completing annual income tax returns.

Reasons for Getting a Form 1098

There are several variations of Form 1098. The standard form, Mortgage Interest Statement, is probably the one most people are familiar with. It reflects mortgage interest a borrower paid in a calendar year. If a borrower paid $600 or more in interest on a mortgage debt in a calendar year, they should receive a Form 1098 to use when completing their annual tax return. The form includes the amount of mortgage interest paid and any refund of overpaid interest, the outstanding mortgage balance, mortgage insurance premiums paid, and other amounts related to the mortgage loan.

1098-T vs 1098-E

For those who have paid tuition to a college or university or who have paid interest on student loan debt, the Forms 1098-T and 1098-E may be familiar.

•   Form 1098-T, Tuition Statement, includes amounts of payments received by the school for qualified tuition and related expenses. It also includes amounts of scholarships and grants a student may have received, adjustments to those scholarships and grants, and other information.

•   Form 1098-E is a Student Loan Interest Statement. Lenders who receive interest payments of $600 or more from a student loan borrower in a calendar year must provide this form to the borrower. The form includes the amount of student loan interest paid by the borrower, the account number assigned by the lender, and other information.

Other Variations of Form 1098

•   Form 1098-C is connected with a very specific form of charitable giving. It shows any donation a tax filer made to a qualifying charity or non-profit of a car, truck, van, bus, boat, or airplane worth more than $500 and that meets other requirements.

•   Form 1098-F shows any court-ordered fines, penalties, restitution or remediation a person has paid.

•   Form 1098-MA reflects mortgage assistance payments made by a State Housing Finance Agency (HFA) and mortgage payments made by the mortgage borrower, the homeowner.

•   Form 1098-Q is connected with a specific form of retirement-savings vehicle, called a Qualifying Longevity Annuity Contract. This form is a statement showing the money the annuity holder received from such a contract over the course of a calendar year.

Using Form 1098 at Tax Time

For homeowners who are still paying mortgage payments, Form 1098-Mortgage Interest Statement is an important part of completing a tax return. A tax filer’s deductions depend on a number of specific factors, but there are some general rules to keep in mind when looking at Form 1098.

•   It is necessary to itemize deductions on a tax return to claim the mortgage interest deduction.

•   Deductions are limited to interest charged on the first $1 million of mortgage debt for homes bought before December 16, 2017, and $750,000 for homes bought after that date.

•   To take the mortgage interest deduction, the property that secures the debt must be a main or second home.

•   Separate forms will be provided for each qualifying mortgage.

The potential deduction of interest paid on student loans, shown on Form 1098-E, follows different rules. Notably, this deduction is an adjustment to a tax filer’s income, so it’s not necessary to itemize deductions.

•   The student loan interest deduction is limited to $2,500 or the amount actually paid, whichever is less.

•   The deduction is gradually phased out or reduced if the taxpayer’s modified adjusted gross income (MAGI) is between $80,000 and $95,000 ($165,000 and $195,000 if married filing jointly) for 2024, and $85,000 and $100,000 ($170,000 and $200,000 if married filing jointly) for 2025.

Form 1098-T provides information that will be useful for tax filers who qualify for education credits provided by the American Opportunity Credit or the Lifetime Learning Credit.

•   The American Opportunity Credit may be claimed by certain tax filers who paid qualified higher education expenses. To claim the credit, certain qualifications must be met, including income level, dependency status, the type of program the student is enrolled in, the enrollment status of the student, among others. The maximum credit is $2,500 per eligible student and may be claimed for only four tax years per eligible student.

•   The Lifetime Learning Credit may be claimed by certain tax filers who paid qualified education expenses, but has some differences from the American Opportunity Credit. The annual limit is $2,000 per tax return (not per student). It’s not limited to college-related expenses — courses to acquire or improve job skills are also eligible. There is no limit on the number of years this credit can be claimed, and there is no minimum number of hours a student must be enrolled.

Both the American Opportunity Credit and the Lifetime Learning Credit have income phase-out levels. Like the student loan interest deduction provided by Form 1098-E, both of these credits are adjustments to income and don’t require a tax filer to itemize deductions.

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The Takeaway

Any of the variations of Form 1098 contain important information for filing your taxes. They all include financial information that has the potential to affect the amount of money a tax filer may be able to deduct. For specific information about a tax situation, it’s recommended to talk to a tax professional. The information in this article is only intended to be an overview, not tax advice.

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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.

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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.

SOBNK-Q424-075

When buying or selling a property, you may come across the term “fee simple.” What does fee simple mean, and why is it important in real estate? Fee simple is the highest form of property ownership, and it’s the most common type of homeownership in the U.S. Here’s a closer look at the meaning of fee simple and how it works in practice.

Definition of Fee Simple

Fee simple, also known as fee simple ownership, provides full control and rights to a property. This includes the right to use, sell, or lease the property as the owner sees fit. Another important aspect of fee simple definition: Ownership is indefinite, meaning that it can be passed on to heirs or beneficiaries for any amount of time.

Fee simple ownership dates back to the feudal system in medieval England. While this system originally required services on behalf of both the tenant and landlord, it gave rise to our modern system of private property rights.

Fee simple meaning can vary based on the type of fee simple ownership, which we’ll elaborate on below.

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Types of Fee Simple Ownership

There are two types of fee simple ownership that you’ll want to acquaint yourself with before you make a home purchase, whether you’re buying a foreclosed home or getting a home mortgage loan for a vacation property: fee simple absolute and fee simple defeasible.

Understanding both types of fee simple ownership can help buyers uncover any conditions on a property before making an offer on a home. Here is an overview of the different types of fee simple ownership:

•  Fee simple absolute: This form of fee simple ownership gives unrestricted rights to a property title in perpetuity. The property can be used, leased, sold, or transferred without any limitations other than liens, local zoning, or failure to pay property taxes. This type of fee simple ownership is the most common.

•  Fee simple defeasible: This type of ownership comes with certain restrictions and conditions. As with fee simple absolute, owners can keep their property in perpetuity. But if conditions are violated, even after closing, the property could legally be transferred back to the seller or a designated third party. For example, fee simple defeasible could require that property remains as agricultural land. As you might imagine, if you are selling a property, this could affect how much a house is worth.

Rights and Responsibilities of Fee Simple Owners

Fee simple owners have considerable rights in how they use their property within the limits of zoning. Owners also have the right to lease, sell, improve, bequeath, or mortgage the property.

There are also responsibilities to be mindful of as a property owner. If you own a condo or apartment, for example, you typically have fee simple ownership of the individual unit. However, the owners may also be responsible for the upkeep of shared common areas, which often have restrictions on their use.

Fee Simple vs. Other Forms of Property Ownership

Fee simple is one of several forms of property ownership. Here are some other types of property ownership to keep in mind.

•  Leasehold ownership: Whereas fee simple grants indefinite ownership, leasehold ownership is subject to the duration and terms set in a lease agreement. In a leasehold arrangement, landlords can set conditions on how a tenant uses the property, such as restricting pets in an apartment. When the lease ends, the lessee’s rights to use the property end.

•  Life estate: This is a type of joint ownership that transfers a property to another person after the owner’s death. This allows an heir, or grantor, to receive the property without going through probate. The owner retains their full rights to use the property, but selling the property or mortgage refinancing would require the grantee’s approval.

Importance of Fee Simple in Real Estate Transactions

Buying a home or property is a major investment. It’s important to understand how fee simple impacts property value, financing, and the marketability to prospective homebuyers.

Generally speaking, fee simple ownership comes with higher property values than other forms of ownership, since there are fewer restrictions on how it’s used. Because owners have full control of the property, it also makes the homebuying process and commercial real estate transactions less complex. This reduced risk can help buyers secure financing and enhance a property’s appeal when it’s time to sell.

Limitations on Fee Simple Ownership

There are limitations to any type of property ownership, including fee simple. Fee simple ownership is subject to encumbrances — legal claims against a property from a party other than the owner. In other words, encumbrances impact an owner’s ability to use and transfer the property.

The main types of encumbrances to be aware of include: deed restrictions, easements, encroachments, and liens.

•  Deed Restrictions: These are rules and restrictions on how a property can be used by the owner. They’re often used by homeowner’s associations (HOA) to limit how a property can be improved and used.

•  Easements: This type of encumbrance grants land use rights or property access to a third party. For example, an easement can grant a neighbor access to a shared driveway.

•  Encroachments: This occurs when a neighbor violates an owner’s property rights by putting up a structure that limits the full use of the property. A common example is building a fence that crosses a property line.

•  Liens: This gives another party the right to seize a property for nonpayment of a debt. Examples include HOA fees, home mortgage loans, and property taxes.

Another potential limitation to note is eminent domain, which allows governments to claim private property if it’s considered necessary for public use. In the rare case of eminent domain, owners are compensated for the value of their property.

How to Obtain Fee Simple Ownership

To reiterate, fee simple ownership is the most common type of property ownership. Checking the deed is the most reliable way to confirm whether a property is fee simple or another type of ownership. Once you’ve ticked this off your to-do list you can get on to other things, like ordering up a home inspection and preparing your moving checklist.

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Fee Simple in Commercial Real Estate

Fee simple ownership applies to both residential and commercial real estate. Since fee simple is the highest form of ownership with the least restrictions, it can make obtaining financing easier for commercial properties. With fee simple ownership, keep in mind that local zoning dictates what commercial activities can take place at a specific property.

The Takeaway

It’s important to take note of any encumbrances that could impact how a property is used before getting to the closing table. If you’re in the market for a new home or investment property, keep in mind that fee simple ownership is the most common type of property ownership in the U.S. and fee simple ownership — specifically fee simple absolute ownership — grants the greatest level of control and rights over a property.

Unless you’re a realtor or building out a portfolio of properties, fee simple and other real estate terms may go beyond your needs. But understanding your rights with different types of homeownership can help inform your property search.

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FAQ

Is fee simple a good thing?

Yes, fee simple absolute (one of two types of fee simple property) gives unrestricted rights to a property title in perpetuity. The property can be used, leased, sold, or transferred without any limitations other than those imposed by liens, local zoning rules, and unpaid property taxes.

What are the restrictions on a fee simple property?

The only restrictions on a fee simple absolute property are those posed by local zoning rules — and of course any restrictions posed as a result of unpaid property taxes or mortgage debt, for example. Fee simple defeasible property has more restrictions. Specifically, the property could legally be transferred back to the seller or a designated third party if a pre-established rule of ownership isn’t followed. For example, a rule might specify that property be used for agricultural purposes.

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SOHL-Q424-005

A short-term bridge loan allows homeowners to use the equity in their existing home to help pay for the home they’re ready to purchase.

But there are pros and cons to using this type of financing. A bridge loan can prove expensive.

Is a bridge loan easy to get? Not necessarily. You’ll need sufficient equity in your current home and stable finances.

Read on to learn how to bridge the gap between addresses with a bridge loan or alternatives.

What Is a Bridge Loan?

A bridge loan, also known as a swing loan or gap financing, is a temporary loan that can help if you’re buying and selling a house at the same time.

Just like a mortgage, home equity loan, or home equity line of credit (HELOC), a bridge loan is secured by the borrower’s current home (meaning a lender could force the sale of the home if the borrower were to default).

Most bridge loans are set up to be repaid within a year.

Note: SoFi does not offer bridge loans at this time. However, SoFi does offer HELOC options.

How Does a Bridge Loan Work?

Typically lenders only issue bridge loans to borrowers who will be using the same financial institution to finance the mortgage on their new home.

Even if you prequalified for a new mortgage with that lender, you may not automatically get a bridge loan.

What are the criteria for a bridge loan? You can expect your financial institution to scrutinize several factors — including your credit history and debt-to-income ratio — to determine if you’re a good risk to carry that additional debt.

You’ll also have to have enough home equity (usually 20%, but some lenders might require at least 50%) in your current home to qualify for this type of interim financing.
Lenders typically issue bridge loans in one of these two ways:

•   One large loan. Borrowers get enough to pay off their current mortgage plus a down payment for the new home. When they sell their home, they can pay off the bridge loan.

•   Second mortgage. Borrowers obtain a second mortgage to make the down payment on the new home. They keep the first mortgage on their old home in place until they sell it and can pay off both loans.

It’s important to have an exit strategy. Buyers usually use the money from the sale of their current home to pay off the bridge loan. But if the old home doesn’t sell within the designated bridge loan term, they could end up having to make payments on multiple loans.

Bridge Loan Costs

A bridge loan may seem like a good option for people who need to buy and sell a house at the same time, but the convenience can be costly.

Because these are short-term loans, lenders tend to charge more upfront to make bridge lending worth their while. You can expect to pay:

•   1.5% to 3% of the loan amount in closing costs

•   An origination fee, which can be as much as 3% of the loan value

Interest rates for bridge loans are generally higher than conventional loan rates.

Repaying a Bridge Loan

Many bridge loans require interest-only monthly payments and a balloon payment at the end, when the full amount is due.

Others call for a lump-sum interest payment that is taken from the total loan amount at closing.

A fully amortized bridge loan requires monthly payments that include both principal and interest.

How Long Does It Take to Get Approved for a Bridge Loan?

Bridge loans from conventional lenders can be approved within a few days, and loans can often close within three weeks.

A bridge loan for investment property from a hard money lender can be approved and funded within a few days.

Examples of When to Use a Bridge Loan

Most homebuyers probably would prefer to quickly sell the home they’re in, pay off their current mortgage, and bank the down payment for their next purchase long before they reach their new home’s closing date. They could then go about getting a mortgage on their new home using the down payment they have stashed away.

Unfortunately, the buying and selling process doesn’t always go as planned, and it sometimes becomes necessary to obtain interim funding.

Common scenarios when homebuyers might consider a bridge loan include the following.

You’re Moving for a New Job, or Downsizing

You can’t always wait for your home to sell before you relocate for work. If the move has to go quickly, you might end up buying a new home before you tie up all the loose ends on the old home.

Or maybe you’ve fallen in love with a smaller home that just hit the market, decided that downsizing your home is the way to go, and you must act quickly.

Your Closing Dates Don’t Line Up as Hoped

Even if you’ve accepted and offer on your current home, the new-home closing might be weeks or even months away. To avoid losing the contract on the new home, you might decide to get interim funding.

You Need Money for a Down Payment

If you need the money you’ll get from selling your current home to make a down payment on your next home, a bridge loan may make that possible.

Bridge Loan Benefits and Disadvantages

As with any financial transaction, there are advantages and disadvantages to taking out a bridge loan. Here are some pros and cons borrowers might want to consider.

Benefits

The main benefit of a bridge loan is the ability to buy a new home without having to wait until you sell your current home. This added flexibility could be a game-changer if you’re in a time crunch.

Another bonus for buyers in a hurry: The application and closing process for a bridge loan is usually faster than for some other types of loans.

Disadvantages

Bridge loans aren’t always easy to get. The standards for qualifying tend to be high because the lender is taking on more risk.

Borrowers can expect to pay a higher interest rate, as well as several fees.

Borrowers who don’t have enough equity in their current home may not be eligible for a bridge loan.

If you buy a new home and then are unable to sell your old home, you could end up having to make payments on more than one loan.

Worst-case scenario, if you can’t make the payments, your lender might be able to foreclose on the home you used to secure the bridge loan.

Alternatives to Bridge Loans

If the downsides of taking out a bridge loan make you uneasy, there are options that might suit your needs.

Home Equity Line of Credit (HELOC)

Rather than the lump sum of a home equity loan, a home equity line of credit lets you borrow, as needed, up to an approved limit, from the equity you have in your house.

The monthly payments are based on how much you actually withdraw. The interest rate is usually variable.

You can expect to pay a lower rate on a HELOC than a bridge loan, but there still will be closing costs. And there may be a prepayment fee, which could cut into your profits if your home sells quickly. (Because your old home will serve as collateral, you’ll be expected to pay off your HELOC when you sell that home.)

Many lenders won’t open a HELOC for a home that is on the market, so it may require advance planning to use this strategy.

Home Equity Loan

A home equity loan is another way to tap your equity to cover the down payment on your future home.

Because home equity loans are typically long term (up to 20 years), the interest rates available, usually fixed, may be lower than they are for a bridge loan. And you’ll have a little more breathing room if it takes a while to sell the old home.

You can expect to pay some closing costs on a home equity loan, though, and there could be a prepayment penalty.

Keep in mind, too, that you’ll be using your home as collateral to get a home equity loan. And until you sell your original home, unless it’s owned free and clear, you’ll be carrying more than one loan.

401(k) Loan or Withdrawal

If you’re a first-time homebuyer and your employer plan allows it, you can use your 401(k) to help purchase a house. But most financial experts advise against withdrawing or borrowing money from your 401(k).

Besides missing out on the potential investment growth, there can be other drawbacks to tapping those retirement funds.

Personal Loan

If you have a decent credit history and a solid income, typical personal loan requirements, you may be able to find a personal loan with a competitive fixed interest rate and other terms that are a good fit for your needs.

Other benefits:

•   You can sometimes find a personal loan without the origination fees and other costs of a bridge loan.

•   A personal loan might be suitable rather than a home equity loan or HELOC if you don’t have much equity built up in your home.

•   You may be able to avoid a prepayment penalty, so if your home sells quickly, you can pay off the loan without losing any of your profit.

•   Personal loans are usually unsecured, so you wouldn’t have to use your home as collateral.

The Takeaway

A bridge loan can help homebuyers when they haven’t yet sold their current home and wish to purchase a new one. But a bridge loan can be expensive, and not all that easy to get. Only buyers with sufficient equity and strong financials are candidates.

If you find yourself looking to bridge the gap between homes, you might also consider a personal loan or a HELOC, a home equity loan, or a personal loan among other alternatives. With a little due diligence and some paperwork, you’ll soon be financially prepared to purchase your next home.

FAQ

What are the cons of a bridge loan?

It can be harder to qualify for a bridge loan than for a standard home loan, and both costs and interest rate may be higher as well. And taking out a bridge loan means you may have to make payments on two loans if your first property doesn’t sell.

Why would someone get a bridge loan?

A homebuyer who has found their perfect next property but who is in a short-term cash crunch might opt for a bridge loan if they feel very confident that they can sell their current home quickly. This might be especially true in a hot market, where there is lots of competition for homes and the buyer wants to move quickly.

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Reducing water usage at home is a great way to lower your monthly expenses and be a better steward to the environment at the same time. But how exactly can you save H2O as well as money spent on water in your daily life?

What Is the Average Monthly Water Bill Per Household?

The average water bill in the U.S. was approximately $50 in 2023. While that may not seem to be too big a strain on the typical checking account, keep in mind that water bills can vary significantly depending on where you live, how much water your family uses, and the time of year.

On average, families use more than 50% of their water in the bathroom alone. Those living in an apartment without an outdoor space may spend less on water; outdoor water usage (for gardens, lawns, and pools) accounts for about 30% of the average American’s water bill — up to 60% in the summer.

Does Using Less Water Save Money?

You can save money by using less water. That’s because your monthly water bill reflects water usage: The more water you use, the more money you’ll spend. Beyond financial savings, conserving water is great for the environment and can help to provide reliable water for families today and in the future.

12 Ways to Reduce Your Water Bill and Save Money

If you’re looking to economize on your water costs, here is a list of 12 helpful ways to save on your water bill every month:

1. Only Use the Washer for Full Loads

Washing machines are an essential appliance for keeping our clothes and linens clean, but they require a lot of water to operate. Waiting until you have enough dirty clothes for a full load — or using the machine’s “small load” option in a pinch — can go a long way in reducing water usage.

Bonus Tip: Because washing machines and laundry detergents have improved significantly over the years, you rarely need to use the hot water option. Using cold water only can keep gas or electric bills down as well, providing another way to save money.

2. Use a Dishwasher — But Only If It’s Full

Dishwashers are more efficient at washing dishes than our own hands. The trick? Only run it if it’s fully loaded. That’s how to save money on water usage and your water bill.

Bonus Tip: Save even more water by simply scraping food scraps off your plate before loading it in the dishwasher. No need to rinse it, which wastes water!

Recommended: How Much of Your Paycheck Should You Save?

3. Upgrade to Water-Efficient Appliances

Today’s washing machines and dishwashers are far more efficient than appliances from even 15 years ago. In fact, an ENERGY STAR-certified dishwasher saves nearly 3,800 gallons of water in its lifetime, and an ENERGY STAR washing machine uses 33% less water per cycle (and requires 25% less electricity to run, too).

While replacing home appliances has an upfront cost, you’ll save money on water and energy bills in the long run. Some energy-efficient appliances may even come with rebates.

Bonus Tip: Look for front-load washers; these can use up to half as much water per cycle as top-load units.

4. Upgrade Plumbing Fixtures, Too

Major appliances aren’t all you can upgrade. Plumbing fixtures like toilets and showerheads offer another opportunity to cut back on water usage. If it’s bathroom remodeling time (whether you’re finding a contractor or in DIY mode), search for low-flow (and dual-flush) toilets that use less water per flush. Low-flow showerheads better conserve water (saving up to 2,700 gallons per year) but actually offer superior performance. In both cases, look for the WaterSense label, created by the EPA or Environmental Protection Agency.

5. Taking Shorter Showers

This tip is pretty simple but bears repeating: The less time you spend in the shower, the less water you’ll use. And as long as you keep your showers short, you’ll save water — and money — by showering instead of taking a bath. How’s that for a creative way to save money?

Bonus Tip: Want to reduce your usage and save more money on water? Get wet when you first step into the shower, then turn off the water while you lather and scrub; then rinse.

6. Fix Leaks

Leaky faucets and toilets that won’t stop running are noticeable, but your home may have other, less obvious plumbing leaks to watch out for, like your hot water tank or supply line. Because many drain pipes exist behind your walls, you may only catch a leak by hearing it, so keep your ears sharp throughout the year.

The cost to repair a plumbing leak can be high, but doing so will lower your water bill in the long run — and leaks left alone can develop into larger, more expensive problems down the road.

7.Turn Off the Water When Brushing Your Teeth

Letting the water run the entire time you brush your teeth — especially if you brush them for the ADA’s recommended two minutes — has become the poster child for wasting water. Turning off the water while you brush can be such an easy way to cut back on water usage and avoid the consequences of not saving money.

Bonus Tip: This also applies while shaving; only run the water when you need it.

8. Compost Instead of Using the Garbage Disposal

Have food scraps? Don’t throw them all in the garbage disposal, which uses water; try composting instead. You can compost foods like fruits, vegetables, eggshells, meat, and coffee (filters included!); doing so can be great for your garden.

Bonus Tip: Another way to reduce water usage in the kitchen is to thaw frozen meat overnight in the refrigerator, rather than running it under warm water.

9. Keep a Pitcher of Water in the Fridge

If you let the tap run until the water gets cold enough to fill your drinking glass, you’re wasting water. Consider putting a pitcher of water in the fridge instead so that it’s cold when you want it. As a bonus, you can invest in a pitcher with a water filter for cleaner drinking water.

10. Care for Your Lawn Strategically

Before watering your lawn, check the weather forecast. If rain is predicted in the next few days, don’t bother watering the lawn at all. Even if it’s hot out and hasn’t rained lately, your grass may not need water. Try stepping on it; if it springs back up, you don’t need to water it yet.

If you must water your lawn, check your sprinkler system to ensure there are no leaks, and don’t overwater. That’s another way to avoid common budgeting mistakes when it comes to water usage.

Bonus Tip: Mowing your lawn less regularly is actually a good thing. Longer grass allows for deeper root growth — and thus a drought-resistant lawn that doesn’t need to be watered as often.

Recommended: APY Interest Calculator

11. Use a Commercial Car Wash

Car aficionados may insist upon washing their car every other week (or every week, if they’re dedicated). While washing and waxing your car is good for protecting its paint and maintaining its value, you can get away with fewer car washes. To keep water usage down, try once a month at most.

You can also cut your own water costs entirely by paying for a commercial wash. Commercial car washes use 60% less water and are designed to prevent water pollution from runoff. Many locations also recycle their wash water multiple times.

Recommended: How Much Auto Insurance Do You Need?

12. Cover Your Pool

Here’s the last way to stay motivated to save money on water costs: Have a pool outside? Make sure you cover it when not in use. Not only does this keep unwanted debris out of the swimming area, but it also helps reduce the amount of water that evaporates each day.

The Takeaway

Saving money on water isn’t just great for your wallet; it’s also great for the environment. From composting to upgrading appliances to cutting back on car washes, you can dramatically reduce your family’s water consumption — and see great savings on your water bill as a result.

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.

FAQ

How much money can you save on your water bill by using less water?

The average American spends about $50 a month on their water bill. If your family reduces water usage by 25%, your bill could drop to roughly $37.50, putting an extra $150 into your savings per year. How much money you can save on your water bill depends on how much water you’re able to conserve and what the cost of water is in your city.

Why is saving water important?

Reducing water usage does more than lower your water bill. Saving water means that we use less water from rivers, bays, and estuaries — and this is a big deal for our environment. When we use less water, we also reduce water and wastewater treatment costs. Plus, it takes a lot of energy to treat, pump, and heat our water, all of which contribute to air pollution. In areas threatened by drought, reducing our personal water usage ensures our neighbors, friends, and family also have access to the water they need.

How much water is used per household a year?

The EPA estimates that the average American uses 82 gallons of water per day. For a family of four, that’s 328 gallons a day or nearly 120,000 gallons a year. Families can save a lot of water by taking simple measures: For example, the EPA estimates families save 13,000 gallons of water per year by replacing inefficient toilets — and 9,400 gallons of water annually by repairing leaks.

Photo credit: iStock/vorDa

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

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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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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