Dec
16
2019
old bank front

9 Reasons to Switch Bank Accounts

By | Budgeting & Goals | No Comments

Is your bank ghosting you? Charging fees out of the blue? Do you feel like you’re settling instead of looking for “the one”?

It can be tough to tell when it’s time to call it quits with your bank, especially after all these years and bank statements you’ve shared. Knowing how to switch banks isn’t always easy, but neither is detecting those red flags.

If you’re generally happy with your bank, it might be best to stay put, especially if it’s a busy time. While it’s typically easy to open a new account, you’ll need to transfer your balance over, change autopay settings and more. If you’re not up for the task, you could end up with late fees, penalty payments, and more.

But, if you and your current bank account are on the rocks, it might be time to move on—for the right reasons, of course. A brokerage checking and savings account, which combines checking and savings accounts under one virtual roof, could be one option. The accounts tend to offer higher interest rates and also often don’t charge fees that a brick-and-mortar location might.

Learn why you might consider trading up and switching accounts.

Reasons to Switch to a New Bank

Fees

What’s worse than the dreaded 2am “U up?” text? Possibly an unexpected fee or charge from your banking institution to your account. Some banks charge up to $30/month in checking fees, then there are fees for using out-of-network ATMs and more.

If minimum balance fees, maintenance fees, paper statement fees, and weighty overdraft fees plague your monthly account balance, it might be time to consider switching accounts.

You could research alternative financial institutions and see if they charge similar rates or if they waive fees in certain circumstances. If you’re noticing unnecessary fees popping up in your account, it could be time to look for a new institution to better manage your money with.

Bad Customer Service

Does it feel like your bank is never there for you when you actually need them? When you detect fraud on your debit card, does it take half a day to straighten the charges out? Maybe the call center hours aren’t great, or you haven’t been happy with the in-person service at your bank’s retail location.

Whatever has given you pause, bad customer service is a common reason for leaving a bank. You might want better branch hours or online chat service instead of a customer service line. Your reasons might vary, but if you don’t feel you’re being treated as a valued customer, then it’s worth considering a move.

Joint Accounts

If you’re getting married or joining a partnership and want to open a joint account, it might be time to switch accounts. Your partner’s financial institution might offer better features, or have better customer service. In that case, it might be time to say farewell to your current account.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.30% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Lack of Branches

Maybe you’ve been with the same bank for years but moved to a different city. It could be a struggle to find your bank’s location, leading you to incur hefty ATM charges from using other ATMs when you’re in need of cash.

If your bank isn’t convenient location-wise to you, and you often find yourself in need of a brick-and-mortar location, then you might think about making the switch to a bank more common in your area. If brick and mortar doesn’t matter much to you, it might be time to consider an online-only checking and savings account, which often offer ATM reimbursement across the country.

Safety and Security

If you’re concerned about the safety of your funds at your current bank, then it might be time to switch. Check to see if your current bank is FDIC-insured. This insurance would mean your cash is still covered, even if the bank goes under.

You Want “In” on Incentives

If you’ve been with your bank for a while, you probably haven’t thought about incentives or sign-on bonus offers. While a one-time offer shouldn’t be the primary reason your switch bank accounts, taking advantage of an additional benefit might just be the cherry on top of your sundae.

Pay attention to rewards programs, or a bonus for a first-time deposit of a certain amount—it might end up being the tipping point to open something new.

Multiple Accounts

When it comes to bank accounts, you might be considering playing the field and opening multiple accounts at once. For business owners, freelancers, or foreign travelers, this can be a common practice.

If you’re looking to keep these accounts separate, you could consider opening a new account at a different bank or financial institution.

Lack of Features

You might’ve been floored by the rates and specials you had when first signing up with your current bank, but if you notice peers getting better features with other institutions, then maybe it’s time to move.

This could be ATM-fee reimbursement, a better online portal, and mobile check deposit, or overdraft fee forgiveness. If you feel like you’re missing out on special features with your current bank, then take a look around to see what other institutions offer. You might be surprised by what you’ll find.

Better APY

Wouldn’t we all like to make money just for putting our cash in a financial institution? Most offer some kind of APY (annual percentage yield), for using their services. The thing is, APYs can vary dramatically depending on where you’re banking or managing your money.

It might be only the difference of a few dollars a year, but hey, if you’re considering a new financial institution, take note of their APY as compared to your current institution.

Another Reason to Switch

If the signs are pointing you in a new direction, you might consider trying SoFi Checking and Savings®. With a 4.30% APY, no fees, and ATM fee reimbursement, it could be the perfect match you’re looking for.

SoFi works hard to give you high interest and charge zero account fees. With that in mind, our interest rate and fee structure is subject to change at any time. See our terms and conditions to learn more. Remember, you deserve more, and if something’s not meeting your needs, there are plenty of other fish in the sea.

Check out SoFi Checking and Savings — a high yield bank account that offers 4.30% APY and no fees!

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC . SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.

SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOMN19053

Read more
Dec
13
2019
Two people sitting together at a table with laptop mobile

Who Should Pay The Bills in a Marriage?

By | Budgeting & Goals | No Comments

Money touches almost everything we do, from our basic living expenses to vacations and outings with friends to planning for the future—whether that includes a house, kids, or some other long-term goal. And yet, it can sometimes be hard to make space for important financial conversations with a spouse or partner.

Discussions about money can sometimes be awkward and unpleasant. Whether it’s figuring out how to breach the topic of who should pay the bills in a relationship or which partner is responsible for which expenses—whether based on earnings or some other criteria—these conversations aren’t always easy to start. But prioritizing them can be the key to a strong and sustainable partnership.

Take a look at some of the ways that couples might start having these discussions regularly. This article will also explore some possible strategies for divvying up financial responsibilities in a way that feels manageable and fair so the next time the topic of splitting bills in a relationship comes up in your life, you may feel more prepared.

No matter your financial situation, it can be important to find ways to have open money discussions in your relationship so that you can focus on making memories and building a strong foundation with the person you love.

Talking About Money in Your Relationship

When you’re in a long-term relationship, whether you’re married or cohabitating, talking about finances can be a worthwhile investment into your life together.

Living together often means splitting costs for day-to-day things, such as rent, utilities, groceries, and other costs.

So, it can be wise to start these conversations early, although it’s up to you to decide when makes the most sense in your relationship.

For many married couples, combining finances is the logical approach, so the question of who should pay the bills in a marriage isn’t as pressing as it can be for others.

But, there are couples—married or otherwise—that still like to have a sense of financial independence and who prefer to split shared expenses in a way that makes sense for them.

Every couple is different, so there is no one-size-fits-all approach to talking about money and splitting costs. Though, for some, marriage means enmeshing accounts and finances, other couples choose to keep their accounts separate.

Additionally, some partners earn similar salaries and prefer to split things evenly, while others earn drastically different incomes and adjust their financial responsibilities accordingly. What’s more, sometimes one person is carrying a substantial debt while the other is debt-free.

There are many factors that can impact the way that a couple chooses to split bills and other financial responsibilities in a relationship, and it may be helpful to keep in mind that there isn’t a single right way to do it.

A strategy that can potentially help to avoid financial elephants in the room is to find a time to establish a budget as a couple or other financial guidelines with your partner.

You may also want to a set time check in with your partner about finances, whether that’s once a week or once a quarter. It can also be helpful to come together to identify your shared goals and financial weaknesses so that you can support one another.

Some couples may opt to work with a financial advisor or another professional, while others prefer to manage things on their own. Regardless of your approach to splitting finances, consistent communication can be crucial.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.30% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Splitting Bills Evenly

For some couples, splitting bills evenly makes the most sense. This could mean keeping track of all of the monthly receipts for groceries and other shared living expenses along with rent, utilities, gas, or other common expenses you and your partner share.

At the end of each month, both partners can calculate the total expenses and settle them evenly. Of course, this strategy isn’t for everyone, and sometimes splitting bills and living expenses equally doesn’t make sense, especially, for instance, if both partners are making drastically different incomes.

If splitting things evenly doesn’t make sense for your relationship, there are other strategies that could be a better fit.

Splitting Bills Individually

In some cases, it may be preferable for each partner to be responsible for specific bills. This could look like one partner taking responsibility for the gas and electric bill, while the other covers water and internet.

Though this type of set-up can be great in terms of distributing responsibility, it’s highly unlikely that each partner will end up paying the same amount each month. For some couples, this may make sense and be an ideal set up. For others, partners may want to decide on a way to reconcile the bills at the end of the month.

Paying Bills Proportionally

Many couples, both married and unmarried, prefer keeping separate bank accounts for their own personal expenditures and having a joint bank account from which to pay for big household expenses.

Opening a joint account may make bill pay a bit easier every month and can make sense for recurring expenses, like utility bills, rent, and other shared costs. Joint accounts can also make it easier for each partner to transfer the money they are responsible for into the account before the bills are due.

Of course, the question of how to split up the money for these expenses will depend on the discussions you have had with your partner. If you both decide to split the costs evenly, then both of you can transfer the same amount into the shared account once a month or before the bills are due, otherwise you can decide to reconcile things in a way that makes sense for you.

Regardless, having one central location from which to pay for all shared bills can take a lot of the guesswork out of your financial big picture and could also make it simpler to look back at what you’ve spent and analyze your shared spending habits over time.

Keep in mind that when you open a joint account each person has equal rights to the account. This means that one of the account owners could make withdrawals or close the account without the consent of the other. Opening a joint account requires a certain level of trust and commitment.

Splitting Bills in a Way That Works for You

Though many married couples have traditionally merged their finances, this is not the automatic course of action for all couples.

As such, it’s important to consider what strategies make the most sense based on your unique situation.

Ultimately, prioritizing open, honest, and regular conversations about money may help you to avoid money arguments, ensure you and your partner are on the same page, and help you both feel more in control of how you’re approaching your financial life together.

Whether you decide to open a shared bank account, split bills up based on your income, or simply combine your bank accounts and pay everything together, know that there is no right or wrong decision.

Consider giving yourself the freedom to try a few different approaches to find the one that best suits you and your partner, and remember that communication is often the key to success.

Thinking of getting a joint account with your partner? Open a SoFi Checking and Savings® account today.


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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC . SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOMN19134

Read more
Dec
13
2019
pastel colored eggs mobile

Asset Allocation for Beginners

By | Growing Wealth, Investing | No Comments

When it comes to investing, there’s an old adage, “Don’t put all your eggs in one basket.” (Who carries their eggs in a basket anymore?) This is generally referred to as portfolio diversification.

The idea does make sense. Buying only one or two similar stocks might feel risky (and may be risky), no matter how profitable the companies currently are.

But did you know that diversification goes beyond the stock portfolio? For many investors, diversification might mean investing in other asset classes that don’t perform like stocks.

In fact, instead of considering which stock to buy, it may be more important to decide if it’s appropriate to own stocks in the first place. And, if it is appropriate, an investor may also want to ask: what proportion of a portfolio should be stocks?

Another way to describe the mix of stocks, bonds, cash, and other asset types in a portfolio? Asset allocation, or quite literally, the amount of money that is allocated to each of the different asset classes.

So what is asset allocation? Although it sounds like investing jargon, asset allocation is one of the more important investing concepts to understand. And although there is not a universal consensus about the right allocation mix for each investor, this big-picture decision could drive a majority of returns over time.

What Does Asset Allocation Mean?

Asset allocation is the investment strategy of balancing risk and reward by divvying up a portfolio into different asset types.

Generally, asset allocation is determined by looking at goals, risk tolerance, the investing timeline for the investor’s money, and comparing that to what the different asset classes have done over history. That way, an investor can determine what mix of assets is a good fit for what an investor is trying to accomplish.

Each asset class will have its own path of performance over time. The goal of diversification is to invest in such a way that not all investments perform the same or even similarly during different periods over the course of an investment journey.

For example, some investors may find it helpful to make investments beyond stocks during a stock market crash, which could have a sweeping and dramatic impact on all stock prices. Historically, bonds have performed well during stock market crashes, and aren’t considered to be correlated to stock market prices.

Therefore, bonds can act as a portfolio hedge during those stock market downturns. Another way to think about diversification? Stocks zig while bonds zag—or at least they have historically.

Using Modern Portfolio Theory

For all the statistics buffs out there, it may help to think of asset allocation in terms of Modern Portfolio Theory (MPT) . MPT assumes that investors are risk averse, and builds portfolios with the lowest level of risk given the desired level of return.

It does this by analyzing the historical return of each asset class, the variability of that return (called the variance), and the degree to which the price level of different asset classes experiences volatility at the same time (the correlation).

Within portfolios, volatility and risk are often measured by their standard deviation (which happens to be the square root of the variance).

For example, if there were two portfolios and both have the same expected rate of return, but one has a lower standard deviation, the investor may want to choose that one.

Managing Risk by Asset Class

Whether the goal is to try to minimize risk, maximize potential returns, or some combination of the two, a good place for an investor to start is to study the risk and return characteristics of the various asset classes, such as stocks, bonds, cash or money market funds, real estate, private equity, investment partnerships, and natural resources, like gold. Much of the time, the discussion about risk and reward of the different asset classes is focused only on the tradeoff between stocks and bonds.

Common stocks, also known as equities, historically fall on the higher risk and higher reward end of the spectrum. Bonds are often considered to be lower in risk but also lower in reward.

Cash and cash equivalents (like money market funds) are typically considered to be the safest options, in the sense that cash experiences little price volatility. But be aware: The value of cash is eroded by inflation over time, which means potentially losing purchasing power.

Not all stocks or bonds are the same. Categories within each of the asset classes may carry different risk and reward characteristics. For example, small cap stocks are typically considered to be riskier but may come with higher returns than large cap stocks (also known as big cap stocks), which are generally more established. This is because small cap stops have the ability to grow into large cap stocks, whereas large cap stocks may not experience as much volatility—in either direction.

That said, the difference between the two is somewhat subjective, and small cap stocks can be established (in other words, they’re not just start-ups), while large cap stocks can crash as well (think Enron). Within the category of bonds, for example, junk bonds may be riskier while U.S. Treasury bonds are considered a safer option.

Determining Asset Allocation

After learning what to expect from the different asset classes, a good next step is to think about goals, risk tolerance, and investing time horizon—for each pool of money to be invested. For example, an investor may want to invest retirement money differently than emergency money.

A couple questions an investor might begin by asking: What is their goal with this money? When will they need to use this money? The latter is the idea behind investing time horizon.

To determine an appropriate asset allocation, an investor may want to conceptualize how long this money needs to last or what amount is needed for a set goal. Last, they might consider asking: How much risk (volatility) are they comfortable with?

Recommended: age-based rule of thumb is to start with 100, subtract age, and the resulting number is the percentage to invest in stocks. (Or, simply invest current age in bonds, and the rest is allocated to the stock market.) So, for example, if someone is 30 years old, then this rule would have them invest in a portfolio of 70% stocks and 30% bonds.

Because people are living longer and healthier lives that require a longer-term focus on growth, this asset allocation model may be too conservative for some. Instead of 100, it might be more appropriate to use 110 or 120 .

Pro: This method for determining asset allocation is straightforward and may work for people in a straightforward financial situation that is typical for a person of their age group.

Con: These rules will not work for everyone. Investors can use this strategy as a guide, but may want to consider amending it based on some personal reflection regarding their current financial situation, financial goals, investing time horizon, and tolerance for risk.

Non Age-Based Asset Allocation Models

There are four general investment allocation models that may be used as guides for determining one’s asset allocation.

Capital Preservation

This model is for the investor who wants to preserve their capital. Said another way, it is an investment strategy for those who do not want to risk losing any money. Capital preservation is generally utilized by those with short-term goals.

Capital preservation may work for someone saving to buy a car in a year, or about to start a business, or building an emergency fund. (Emergency funds might not need to be used within a year, but the whole point is that they are available for use immediately in the event of an emergency.)

To deploy a capital preservation strategy, an investor would likely keep their entire portfolio in cash or cash equivalents, like a money market fund. Both stocks and bonds can lose money in the short term, and therefore may not be appropriate for an investor whose primary concern is not losing anything at all. If they are going to invest, they might consider investing in Treasury bills or certificates of deposit.

Income-Producing

This investment model aims to do exactly what it sounds like: produce income for the investor. An investor targeting this allocation is likely to be living off of their investments in some capacity. This investor is choosing income over growth.

This strategy might be utilized by a person in retirement who needs their investment income to replace or serve as a supplement to their pension or retirement funds.

Such a portfolio will likely consist of investments that are known to produce income, but may be less likely to grow in value over time: bonds for large, profitable corporations and the U.S. government (often called treasury notes); Real Estate Investment Trusts (REITs); and shares of dividend-paying stocks, such as those of blue-chip (large) companies.

Growth

This is an investment model for those looking to target long-term growth in their portfolio—i.e. investors who are willing to take on additional risk, hopefully in exchange for higher returns. This portfolio is not necessarily geared toward income-producing assets, potentially because the investor is working and earning a livable salary and not looking to use their investment portfolio to produce income, or at least not yet.

This strategy could be used by a person who is early in their career, targeting growth for retirement, and who has a high risk tolerance.

A growth-oriented portfolio is typically invested, primarily or completely, in common stocks, whether via individual stocks, mutual funds, or exchange-traded funds.

Balanced

A balanced asset allocation model is typically a blend of the income-producing and growth models. Such an allocation may make sense for a person nearing retirement or in the early stages of retirement.

A balanced strategy is also used by folks at all stages of their investment journeys because it can make sense from an emotional standpoint. The volatility of the stock market can be unnerving, and investors should take this risk seriously.

While the blend of investments will be different for each investor, a balanced portfolio is often invested in some combination of common stocks, medium-term, investment-grade bonds, and potentially REITs.

The idea behind a balanced portfolio is to strike a compromise between assets that grow over time and those that will experience smaller fluctuations while providing some income or growth in portfolios.

Pro: This method of determining asset allocation is closely tied to the actual goals and risk tolerance of a portfolio, which may be a more useful method than a generalized approach, such as an age-based method.

Con: This method does not directly address the fact that different pools of money may require a different allocation model and that these goals may change over time.

No matter which method of determining asset allocation chosen, it’s important to know that allocations can change over time. For many people, asset allocation may change when the goal for the money changes.

And it’s worth being careful when making changes based off of market behavior; an investor might put themselves at risk of making a detrimental change at the wrong time, like selling stocks at a low because they’re spooked.

Additionally, most asset allocations will require some amount of upkeep over time—this is called rebalancing. While research says it doesn’t matter if a person rebalances monthly, quarterly, or annually, checking too often can lead to loss.

That said, it’s probably a good idea to periodically check in and make sure that none of your asset classes has significantly outgrown its initial allocation size.

Getting Started

Once an investor’s determined asset allocation, the next step is to invest to fulfill those allocations. There are several options for this.

Some investors may find using funds to be the easiest and most efficient way to invest. A fund, whether a mutual fund or an exchange-traded fund (ETF), is a basket of some other investment types.

With funds, it is possible to be instantly diversified not only across different asset categories, but within the categories themselves. For example, one broad U.S.-stock ETF could be invested across multiple industries, or at various companies within one industry, or both.

Some investors may prefer to buy individual securities, such as stocks themselves. This method requires more work as the responsibility to research companies and diversify rests fully on the investor. But this may give the investor more control over the implementation of the strategy, which some people may prefer.

No matter which investing technique you choose, SoFi Invest® can help put your money to work. And investors don’t have to invest a lot of money. With SoFi’s fractional share investing, investors can buy just a portion of a stock—starting at $5. And because there are no trading fees, 100% of your money is invested.

Perhaps most importantly, because you don’t have to invest much money in individual stocks, that leaves more room for asset allocation—helping you to find and follow through on the investment strategy that’s right for you.

Interested in fractional sharing? SoFi can help put your money to work—at a fraction of the cost of a share.

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.


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

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, LLC and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

SOIN19113

Read more
Nov
21
2019
man with glasses using tablet mobile

Is it Better to Pay off Student Loans or Save?

By | Debt Payoff, Student Loans, student_loan | No Comments

Student loan repayment often begins after a six-month grace period. In that time, you’ve (ideally) settled into a job and a new, post-school routine. That means you’re ready to take on all your financial responsibilities—including building up a savings account—right?

If that sounds daunting, you’re not alone. One in five Americans report that they save less than 5% of their yearly earnings, and another 20% save no part of their annual income.

Building up an emergency fund is an important step toward financial stability, but paying your student loans is required, too.

Is it better to pay off student loans than to save? When both feel important, what do you choose?

Unfortunately, there may not be one right answer—but it is possible to do both. Here are some moves to help make both student loan repayment and saving more manageable.

Considering Refinancing Your Student Loans

In the last decade, interest rates on federal student loans have ranged between 3.4% and 8.5% . Rates on private loans—those provided by private institutions such as banks, credit unions, or schools themselves—can be even higher.

Refinancing your student loans is an opportunity to lower your interest rate. If you can refinance at a rate lower than your existing one, you may pay less on interest throughout the life of your loan.

Alternately, you could elect to lengthen your loan term in refinancing, which could lower your monthly payment and may allow more wiggle room in your budget to pay down other debts or save more. That said, lengthening your loan term can mean you’ll pay more interest over the life of the loan.

Considering Consolidating Your Student Loan Debt

Another reason to consider refinancing student loans is that doing so can simplify the repayment process. If your initial loans are with multiple institutions, you are keeping track of several due dates and recipients. Refinancing gathers all of those loans into one place—with one lender—leaving you with a single bill to pay each month.

Refinancing can consolidate both private and federal loans. However, if you only have federal loans, you can also consolidate them with the government through a Direct Consolidation Loan.

This may not reduce your interest rate, but it would combine all of your loans into one. And with a Direct Consolidation Loan, you’re able to keep your federal student loan benefits. On the other hand, refinancing means you’ll no longer be able to take advantage of federal loan benefits.

Explore SoFi student loan refinancing
options to help you pay off
your loans.

Paying Student Loans On Time Can Help Build Your Credit Score

A silver lining to student loan debt is diligently paying your student loans on time may help build your credit score, which is a number that reflects your credit risk at a
given time. On-time student loan payments in the long term are an opportunity to show a long history of consistent payment, which may positively affect your credit score.

Consider setting up automatic payments or an electronic calendar reminder to avoid missing student loan payments. If you do miss a payment, you may want to call your lender immediately to ask how you can rectify the situation.

In some cases, a lender may be willing to waive the fee on a missed payment if it’s your first one, and if you pay it before 30 days have passed, you may be able to avoid getting the missed payment reported to the credit bureaus.

Trying Increasing Your Student Loan Payment Each Month

Paying more than the minimum on your monthly student loan bill can lessen the amount of interest paid over the life of your loan, and may help you pay off loans earlier than your original loan term.

If you get a windfall of extra cash—from a holiday gift or professional bonus, for example—consider using a portion of it to send in one extra payment on your student loan. There are no prepayment penalties for federal or private student loans. Manage to do this every year and you can help reduce the interest you pay and therefore the total cost of your loan.

Finding a Way to Save In Addition To Your Payment Plan

Even if it feels like a negligible amount in the moment, you can try to prioritize putting some money in a savings account each month.

None of us is exempt from the unpredictability of the future, so growing an emergency fund can help you weather an unexpected financial strain, such as a medical bill or car repair.

Saving between three to six months’ worth of expenses is a common goal suggestion. But if that sounds overwhelming on an entry-level salary, remember that even a small start is just that—a start.

Trying to Paying Your Savings Account Like a Bill

There is urgency in the word “bill,” so trick yourself a little by thinking of your monthly savings as a bill to be paid. Or you can consider setting up automated monthly payments, so that you don’t need to lift a finger to save.

Considering a Side Hustle

If you’re already working a full-time job, chances are you’d want a side hustle that requires minimal effort or that brings you a good deal of joy. If you’re social and happy to meet new people regularly, renting out a room in your home via Airbnb is one way to earn extra cash.

If you have a car, you can rent that, too, via companies like Turo and Getaround . Or use your wheels and join the ride-sharing economy, offering transport via Lyft .

It isn’t necessary to try all of the above strategies at once. But the more ideas you have, the more likely you are to find the ones that work for your life and financial situation.

And striking a balance between saving, spending, and paying down debt is a win in itself.

Learn more about how SoFi student loan refinancing can potentially help you get out of student loan debt faster than you’d planned.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.


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.

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

SoFi 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.

SOSL19018

Read more
Nov
19
2019
messy work desk mobile

Things to Consider if You Are Behind on Your Student Loan Payments

By | Debt Payoff, Financial Independence, Student Loans, student_loan | No Comments

We all know paying student loans on time is important, but sometimes life gets in the way. Perhaps you’ve been laid off or are having trouble finding a job. Maybe you’ve run into an unexpected expense, like car repairs or medical bills. Or maybe you got so busy with work and personal commitments that you just forgot.

If you’re behind on student loans, you’re not alone. As the cost of college and total student loan debt continues to rise, it is naturally becoming increasingly more difficult to keep up. In fact, over 10% of borrowers are more than 90 days behind on their student loans. And recent research suggests that nearly 40% of borrowers may default of borrowers may default on their student debt by 2023.

If you are falling behind on your student loan payments, just about the worst thing you can do is … nothing. Letting your loan payments lapse can have serious consequences for your financial future.

The good news is there are options for getting back on track with your loans and choosing a repayment plan that works for you.

Student loans can feel like a burden, but they don’t have to hold you back. By taking the right steps for you, you can help make your student debt manageable.

Why You Shouldn’t Ignore Missed Payments

Denial is a normal response when you’re feeling overwhelmed. But avoiding your late payments isn’t going to solve the problem and could potentially make things worse for you down the line.

Once you miss a payment, your loan is technically delinquent. With federal loans, if you make the payment within 90 days, everything will go back to normal. If more time passes, your loan servicer will likely report the delinquency to the major credit reporting agencies, and your credit score will suffer.

If you continue to be behind in payments, usually for 270 days, your loan may go into default. This is serious: Your entire loan amount may become due right away, and you won’t be able to take advantage of deferment, forbearance, or other options for relief until you get out of default.

This could harm your credit score, and the government may eventually be able to garnish your tax refund and more. If you miss a private student loan payment, the lender can usually take action more quickly by adding on late fees, referring your loan to a debt collection agency, or more.

Unlike other types of debt, student loans generally can’t be discharged during bankruptcy except in cases of undue hardship. As you can see, the consequences of ignoring an overdue loan are serious. Luckily, there are things you can do to avoid that.

Review Your Spending by Making a Budget

It sounds simple, but many of us don’t have a clear idea of how much money we have coming in and going out—or what we’re spending it on. If you’re having trouble keeping up with any of your bills, including student loans, making a budget is a good first step towards seeing your whole financial picture.

The total of your after-tax salary or wages, any income from a side hustle, and any help you might regularly get from family will be the starting point at which you can see how much money is coming in.

Next, tally up your expenses—how much money is going out. This includes fixed expenses, which typically stay about the same every month, such as rent, insurance, utilities, transportation, and groceries. Include your minimum loan payment in this calculation. This tally might also include variable expenses, which may fluctuate month to month, such as money spent on shopping or eating out.

If your spending exceeds your income, that could be a contributing factor if you’re unable to afford your loan payment. To address this, you might consider thinking about ways to increase your income or to reduce your expenses.

Can you ask for a raise or get a supplemental gig? Can you cancel that gym membership and jog outdoors instead? Or propose low-cost activities, like a picnic, instead of going out to bars and restaurants with friends?

Making a workable budget—and sticking to it—can go a long way to ensuring you have money in your account to make payments on time. And setting up auto-billing (sometimes called autopay) with a bank account or loan servicer may also help ensure payments are made automatically.

Looking into Deferment or Forbearance

Sometimes, making a budget isn’t enough. If you’re going back to school or encountering an economic hardship, it might not be feasible to pay your loans for a certain time period.

In cases like this, if you have federal loans, you can apply for a deferment or forbearance with your loan servicer. Both of these options could allow you to temporarily stop payment or reduce the amount you pay.

Borrowers may qualify for federal student loan deferment if they’re in school at least half-time, are on active military duty, or while you’re in certain graduate fellowships. You may also be eligible for up to three years of relief if you’re unemployed, in the Peace Corps, or facing economic hardship.

If granted deferment status, a borrower won’t be responsible for the interest that accrues on certain types of federal student loans, including Direct Subsidized Loans, Federal Perkins Loans, and other subsidized loans; however, borrowers will likely need to pay interest on Direct PLUS loans and other unsubsidized federal loans.

Borrowers could be eligible for federal student loan forbearance if unable to pay their loans because of medical bills, changes in employment (such as reduced hours, reduced pay, or job loss), or other financial difficulties. In these situations, it’s up to the loan servicer to decide whether to grant a borrower forbearance.

In other selective situations, on certain qualifying loans they must grant it. These include if a borrower is completing a medical or dental internship or residency, serving in AmeriCorps, or using 20% or more of their gross income each month for student loan payments.

It’s important to note that with forbearance, borrowers are responsible for interest that accrues regardless of the type of loan they have. And all that unpaid interest will be added back onto the principal of the loan—which could make the total amount you’ll eventually have to repay substantially higher.

Private lenders, on the other hand, aren’t required to offer relief if you’re struggling financially, but some are willing to temporarily reduce your payments if you’re unemployed or have another short-term setback. It could be worth reviewing your contract terms or reaching out to your provider about options.

Considering an Income-Driven Repayment Plan

If your financial situation doesn’t seem like it’ll improve anytime soon, and you can’t make ends meet while paying your student loans, there are federal repayment programs that may be able to help.

With federal loans, you may have the option of switching to a repayment plan that ties your monthly payment to your discretionary income in order to make it more affordable. The plan you may qualify for depends on the types of loans you have, your financial situation, and when you took them out.

All income-driven repayment plans limit monthly payments to between 10% and 20% of discretionary income. If the loan is not fully repaid at the end of the repayment period, the loan balance may be forgiven. However, a number of factors will determine if there will be a balance to be forgiven, such as income increase over the life of the loan and debt-to-income ratio.

The downside to going with an income-driven repayment plan is that you may end up owing more in interest compared to some other plans, since the term is longer.

If the monthly payment is not enough to cover the monthly interest charge, all or a portion of the difference will be paid by the government, depending on the type of income-driven repayment plan you have. There may be some instances in that the unpaid interest is capitalized, meaning added back to the principal balance of the loan.

Either way, making the minimum payment on time every month can be an important factor in having strong credit and avoiding negative consequences.

Refinancing Your Student Loans

Another potential solution to unaffordable payments can be student loan refinancing. Federal or private student loans may be able to be refinanced by taking out a new loan with a private lender, which will pay off your existing student debt.

The new loan may come with a lower interest rate or a lower monthly payment than the existing loans, especially if the borrower has a strong credit and employment history. Refinancing with SoFi means there won’t be any origination fees or prepayment penalties.

It is important to remember that if you refinance your student loans with a private lender you will lose access to federal benefits such as deferment, income-driven repayment plans, and public student loan forgiveness.

Getting Your Loans Back on Track

Missing student loan payments is a sign that you need to take action. Ignoring the problem and letting late notices pile up won’t make the issue go away and could open you up to serious consequences.

But if you face the problem head on, you have options for catching up and getting back on track.

Looking for ways to make student loans more manageable? Consider refinancing with SoFi.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.


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

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

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.

SOSL18217

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ 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.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender