Dec

2024

19 Financial Questions to Ask Yourself

By Ashley Kilroy | Budgeting & Goals, Financial Independence, money | Comments Off

You may have questions you’d like to ask a financial expert, but did you know there’s also value in asking yourself some questions about your money? These queries can help you organize your finances to spend efficiently, save more money, and achieve your goals, such as retiring comfortably.

While making money might be straightforward enough (you work and receive a paycheck), using your hard-earned dollars to improve your quality of life and achieve your goals can be less clear. Healthcare expenses, education, and keeping up with daily expenses (plus inflation) can be all-consuming.

Fortunately, good money management can help you think big-picture as well as identify small-scale ways to improve your finances. And checking in with yourself can be a vital step.

So here are 19 questions to ask yourself about money that can help you save, spend wisely, and retire well. They’re grouped into categories (baseline, weekly, monthly, and annually) to make them easy to navigate.

Key Points

• Asking yourself a series of financial questions on a weekly, monthly, and annual basis can improve money management.

• Start with baseline questions about short- and long-term goals, values, job satisfaction, and whether you need a financial advisor.

• Consistent budgeting and paying yourself first every month are essential for financial security and freedom.

• Build an emergency fund and plan for retirement to ensure long-term financial stability.

• Check in on retirement savings and reassess other savings goals at least once a year.

Benefits of Keeping Yourself in Check Financially

Taking stock of your financial circumstances is more than a box to check off or a simple chore. It has numerous benefits for your bank account and mental health, such as:

• Reflecting on and changing your spending habits

• Creating a plan for achieving financial goals and building wealth

• Gaining control over your finances and reducing stress

• Adopting an investment style that fits your needs and risk tolerance

• Reviewing your tax burden to see if allocating pre-tax dollars can boost your financial potential

• Understanding how you can increase your financial security through budgeting and saving

• Fostering a sense of confidence and independence

Now it’s time to dive into the questions themselves, including ones you can ask as a baseline, weekly, monthly, and annually to help keep your finances on target.

Baseline Questions to Ask About Money

Now that you know the benefits of investigating your finances, start here. These questions to ask about money can help you lay the groundwork for where you want to go financially. It’s a good idea to refer back to them throughout the year to stay on track.

1. What Do I Want Retirement to Look Like?

A precursor to financially preparing for retirement is asking yourself what you want it to be like. For instance, you might imagine yourself vacationing in foreign countries throughout the year or taking it easy at home with an occasional visit to the golf course. You might also consider part-time retirement, where you work around 20 hours a week, whether to pursue a passion project or earn extra money.

In any case, your desired retirement will determine your financial needs once you leave the workforce. Developing as detailed a picture as possible will help you answer the next question.

2. How Am I Preparing for Retirement?

Planning for retirement is more than starting a retirement fund contributing to a 401(k) or IRA (although this helps!). Your retirement age determines your healthcare situation, Social Security income, and investment strategy.

For example, if you’re planning on retiring at an older age, you’ll receive higher Social Security distributions, and your investment accounts can stay aggressive, earning you more money.

As a result, a sophisticated approach to retirement is crucial. Planning early and in depth will help you build wealth and afford the lifestyle you want. Foundational elements of a healthy retirement approach include diversifying your investments, figuring out when you can retire, and identifying your target annual income.

3. How Much of My Budget Should Be In Investments?

There’s no one universal rule that dictates how much you should invest per paycheck, and everyone’s financial circumstances are different. However, the following four guidelines can help you see where you are and then ensure you’re investing a sensible amount:

• Investing a specific amount might substantially lower your taxes. For example, if you make $95,000 per year and put $20,000 pre-tax dollars into investments, you’ll drop your tax bracket and may pay a lower percentage of your paycheck to the government.

• Taking advantage of any available employer match is critical. If your employer-sponsored 401(k) usually has matching funds up to a certain percentage, budget to snag it. For example, if your employer will match the first 5% of your paycheck contributions to your 401(k) plan, it’s wise to invest up to that amount to double your investment. It’s free money, and that’s hard to beat.

• Sticking to your retirement plan is key. A detailed retirement plan should define a target amount to invest every month. For example, your plan might require you to invest $150 a month in an IRA. If you’re not saving for retirement already, it’s not too late to start a retirement fund.

• Your debt burden might be more pressing than depositing money in a retirement account. For example, let’s say your investment portfolio has an estimated return of 6%. However, you also have credit card debt with an APR of 25% and an auto loan with a 7% interest rate. These debts are accruing faster than your investments. Therefore, it’s a good idea to pay them off ASAP so you can invest efficiently.

4. Do I Need to Have a Financial Advisor?

If you feel in over your head when asking yourself financial questions, a financial advisor can help. Financial advisors create customized financial plans and investment strategies. While they usually are competent across most financial subjects, you can also get specialized financial advice.

Remember, financial advisors charge you for their services. Usually, you’ll pay a percentage of the assets managed (around 1% for a human advisor, while robo-advisors can be as cheap as 0.25%) or a flat fee. However, if you’re feeling lost trying to organize your finances, the price can be well worth it.

5. How Can I Improve My Financial Literacy?

From student loans to home ownership, the financial world has many complex aspects. If you are feeling as if you could use more insight in one or more areas, educate yourself. There are plenty of books, podcasts, and websites that share knowledge on a multitude of financial topics. It’s also likely that your financial institution has content on money topics.

6. What Are My Financial Values?

Asking yourself this question can help shed light on your money mindset. Your financial values drive your decisions, whether you’re aware of them or not. For example, you might scrimp and save every penny but not pay any attention to investment opportunities. This value of preserving rather than growing your cash could be detrimental to your long-term financial health.

Or, you might buy luxury items as status symbols but be unable to afford a much-needed vacation. Writing down your financial values and asking yourself if you need to change any of them can help you evaluate your beliefs and direct your money to what matters most.

7. Am I Happy With My Job?

This question could help you understand your financial and/or emotional health. For example, your job might be financially stable but unfulfilling. In that case, you might need to weigh if it’s worth continuing in a job you don’t enjoy.

On the other hand, your job might not provide the income you need to reach your financial goals and retire comfortably. In this situation, you might consider whether you should ask for a raise or look for a better-paying job. Boosting your income might require going to school part-time to get a degree or evaluating the pros and cons of a part-time job.

Questions to Ask About Money Weekly

You will likely benefit from the previous questions on big-picture topics. However, the following are applicable in a weekly personal check-in. These financial questions to ask yourself don’t take long to answer and can help you readjust your spending.

8. Is My Budget Proper and Up to Date?

Budgeting is the structure that makes your financial plan realistic. As a result, updating it regularly to reflect your monthly expenses can help you focus your progress. For example, suppose you signed up for a new streaming service or changed internet providers to save money. You can revise your budget accordingly (reallocating any surplus money to a high yield savings account or investments can be a good way to get ahead). Or you might also realize that you need to cut back on spending and decide to, say, minimize dining out for the next couple of weeks.

9. Am I Staying Consistent in Saving Money?

Eyeballing your total income versus expenditures over the last few weeks can help you answer this question. If you’ve been able to set aside your target amount of money every paycheck, then you’re on track.

Recommended: Savings Calculator

10. Do I Have Enough Money for a Financial Emergency?

A crisis, such as job loss or needing a new furnace, can throw your finances into a tailspin. Gradually building up an emergency fund of three months’ of expenses can help you handle whatever comes your way. Earmarking even a few dollars per week can help you get there.

11. Is There a Way to Increase My Income?

When you ask yourself this financial question, you might decide to work weekends or ask your employer for a raise. Remember, your income isn’t set in stone, and increasing it is a matter of considering your options and taking action.

Questions to Ask About Money Monthly

Every month or so, you might want to check in with how your spending habits are evolving and whether you’re on the path toward achieving financial security.

12. Did I Pay Myself First This Month?

The purpose of paying yourself first is to allocate money towards your goals — usually retirement, savings, or an investment account — before all other expenses. While this strategy might make money tight the rest of the month, it can help you stay disciplined directing money toward what matters most.

13. Am I on Pace to Reach My Goals?

Asking yourself this financial question regularly can spare you from getting to December first and realizing, oops, you forgot to reach a goal. By checking in monthly, you can reset your budget or, if necessary, lower your goal accordingly. Your budget should reflect your financial capabilities, not set discouraging standards.

14. Do I Need to Make Any Financial Adjustments?

Making adjustments is a topic to tackle head-on and often; tweaks are what making a budget is all about. That’s what helps it provide the right guidance and guardrails. You may find that your budget is working perfectly or that there’s a bit of extra money you could be saving or an unnecessary expense to eliminate from your budget.

15. Have I Regretted a Recent Purchase?

You’re not asking this question to rub salt in the wound. It’s possible that you made an expensive purchase outside your budget and your conscience is catching up. When this happens, it can be wise to forgive yourself. Your budget is a guide, and next month is your opportunity to follow it and stay disciplined.

Questions to Ask About Money Annually

The following questions have a broad scope and can help you analyze your overall financial health. As a result, revisiting them annually or semiannually can provide helpful reminders for creating financial stability.

16. Am I Getting Closer to Financial Freedom?

Financial freedom may look like being able to retire without working. Or, you might define it as living without debt. In any case, finding ways to financial freedom likely entails accumulating savings, contributing to an investment account, and repaying debt. Asking this money question annually can help you prioritize these habits and progress toward financial freedom.

17. How Is My Credit and Could It Be Improved?

When was the last time you checked your credit score? Generally, lenders consider credit scores of 670 or higher as “good,” with better scores garnering consumers lower interest rates and favorable loan terms. Therefore, solid credit can help you get a less expensive mortgage or credit card. If you review your credit reports, you can pay down high-interest debt and report any mistakes you found as first steps towards building your credit.

18. How Am I Preparing for Retirement?

Having a dollar goal to save for your later years is crucial, but so is preparing a retirement plan to get you there. Checking in on your retirement assets can be a very wise move.

If you have an employer-sponsored 401(k), you can see whether there’s a way to increase your contribution in pre-tax dollars from your paycheck. This may be a highly accessible asset for retirement (not to mention your employer might match your contributions, doubling your investments). Otherwise, a traditional or Roth IRA can be your primary investment account for retirement.

19. What Are Your Personal Priorities for the Coming Year?

Life moves quickly, and your financial priorities can, too. When asking this question, you can zero in on key goals, such as paying for sleepaway camp for your child or reaching a specific dollar amount in your emergency fund. Setting your budget while also factoring in your personal goals can help you put money aside throughout the year.

The Takeaway

Managing your money well is an important responsibility, and it’s one that requires frequent check-ins to ensure you’re accounting for life’s twists and turns. The path to building wealth can involve asking yourself questions annually, monthly, and weekly to assess how you’re doing. You can then make necessary adjustments — from tweaking your budget to opening a retirement account — that keep you oriented toward your goals.

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FAQ

How can I change my financial goals?

You can change your financial goals by asking yourself what you’d like to achieve and then saving money for a new purpose. For example, if you add a child to your family, you might want to start a 529 plan to pay for their future education and make monthly contributions.

How do I financially plan?

You can financially plan by making a budget outlining your monthly income and expenses. Besides life’s essentials, such as food and housing, your expenses can also contain allocations for your goals, such as contributions to your retirement account or deposits into a savings account. A budget allows you to direct your income toward various priorities and re-assess as needed.

How often should I ask myself financial questions?

It’s a good idea to ask yourself financial questions regularly to keep tabs on your financial health. Some questions you can ask annually (such as those about retirement), but others are best asked and answered weekly and monthly. This allows you to course-correct in real time if you hit any issues with spending and saving.

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Dec

2024

What Is a Wholesale Club?

By Rebecca Lake | Budgeting & Goals, money | Comments Off

Wholesale clubs or warehouse clubs offer shoppers the opportunity to buy items in wholesale quantities at discounted prices, typically in exchange for an annual membership fee.

Shopping wholesale is a tactic favored by the frugal and thrifty, since in theory, bulk buying usually results in a lower unit price. But are wholesale clubs worth it? Can you truly save enough to make it worth the annual fee, not to mention the massive packages of soap and cereal in your closets?
Understanding how warehouse club shopping works can help you decide if it makes sense for you. Read on to learn the pros and cons of wholesale clubs.

Key Points

• Wholesale clubs offer bulk buying at lower per-unit prices in exchange for an annual membership fee.

• Additional perks may include discounts on insurance, gas, travel, and vision/hearing-aid services.

• BJ’s, Costco, and Sam’s Club offer varying membership costs and benefits.

• Membership fees range from $50 to $55 for basic tier; $110 to $130 for premium tier.

• The value of a club membership will depend on usage and lifestyle.

How Does a Wholesale Club Work?

A wholesale club works by offering consumer goods in large quantities at wholesale prices. So, rather than buying a six-pack of toilet paper for $8.99, you might have the opportunity to purchase 30 rolls in a single package for $29.99.

You don’t have to do too much math to see that you typically save money by buying in bulk. But you might be wondering how wholesale and warehouse clubs make money if they’re charging low prices for their items.

One of the main ways these clubs make a profit is through annual fees. The wholesale club gets your membership fee and in exchange, you get to buy items at a discount. Some wholesale clubs even offer additional incentives, such as discounts on home and auto insurance.

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Wholesale Clubs vs Grocery Stores

Wholesale clubs and grocery stores differ in a few ways.

• Selection. While both can offer food, household items, and petcare items, the range of products available at a wholesale club may be different than what you’re used to at a grocery store. For example, you may be able to find frozen vegetables in bulk at a wholesale club, but you’ll need to hit the grocery store for fresh veggies.

• Sizing. Instead of buying one can of crushed tomatoes for pasta sauce at a grocery store, you might be buying a case of eight at the wholesale club. Or the 48-ounce orange juice you buy at the grocery store may only be available in a 96-ounce size at the warehouse club.

• Membership.Grocery stores don’t charge a membership fee. Anyone can walk into a grocery store and shop. Without a membership pass, however, you generally won’t be able to shop at a wholesale club. Not having to pay a fee might appeal to you if you’re used to grocery shopping on a budget.

Factors That Determine if a Wholesale Club Is Worth It

While many people enjoy shopping at warehouse clubs, these retailers aren’t necessarily right for everyone. If you’re debating whether joining a wholesale club makes sense, here are some factors that can determine if it’s worth it to you:

• Membership fee. The first thing to consider is the fee you’ll pay to shop. If you can’t easily make the fee back in savings, then a wholesale club might be a waste of money.

• Discounts. To gauge how much savings you might net, you’ll need to look closely at the size of the discounts. This can involve a little homework as you’ll need to compare unit prices for the items you typically buy at the grocery store to unit prices for the same items sold at wholesale clubs.

• Time savings. In addition to the financial aspect, consider whether shopping at a wholesale club would save you time. Will you be able to get in and out quickly and make fewer trips by buying in bulk? Or will you eat up an entire day wandering the aisles of a giant warehouse full of stuff?

• Returns. If you change your mind about a bulk purchase, it’s important to know whether you’ll be able to return it and get your money back. What if you buy a 12-pack of laundry detergent and discover it’s not the unscented kind you like? Would you be stuck with it? Different wholesale clubs have different policies regarding what they will and won’t take back.

• Usefulness. Buying 20 apples or four pounds of quinoa at rock-bottom prices might seem like a deal, but it’s important to consider how much use you’ll get out of those items. If you don’t frequently eat or use the things you’re buying in bulk at a wholesale club, then you’re essentially throwing money away.

• Extra savings. Aside from potentially saving money on food and other items, consider whether you can get a break on anything else you typically buy. For example, some warehouse clubs sell gas at prices that are typically several cents lower than regular gas stations. You might also be able to pick up free samples of items or, as mentioned above, get discounts on home and auto insurance.

If you only plan to hit the warehouse club every few months, then you might not get the full range of benefits from your membership. On the other hand, if you’re a more regular shopper with a large family, a wholesale club membership could pay itself back (and beyond) in savings.

Advantages of a Wholesale Club

If you’re wondering what are wholesale clubs good for, consider some of the benefits that come with membership.

Lower Prices and Bargains on Certain Products

One of the chief selling points of wholesale clubs is their prices. Wholesale clubs can limit markups on products by selling them in bulk (and charging membership fees). So while a grocery or regular big-box store might mark up items 25% to 50%, a wholesale club might cap its markup at 15%.

Wholesale clubs may also offer special deals on certain items that can’t be matched anywhere else. For example, you might be able to take advantage of online-only exclusive coupons or savings.

Brands Can Be Higher Quality

You might assume that just because you’re buying items in bulk or at discounted prices at a wholesale club, they’re cheap and perhaps not top-notch. That’s not necessarily the case. Warehouse clubs can and do sell quality, name-brand items. This is not limited to grocery or household items. You can also find brand-name tires, electronics, and appliances for sale at wholesale clubs.

Having Access to Services

If you’ve never joined a wholesale club, you might not be aware that they can offer services beyond just shopping. For instance, you might be able to order checks through your wholesale club, get pet insurance, sign up for identity-theft protection, get a garage-door opener installed, or get business cards printed at discounted rates through your membership.

Depending on the club, you might also be able to get access to car-buying programs, vision and hearing-aid services, banking services, home renovation and repair services, or special discounts on travel. All of these things can help to increase the value that you’re getting in exchange for your membership fee.

Disadvantages of a Wholesale Club

Shopping a wholesale club can take some getting used to if you’re primarily used to shopping at grocery stores or big-box retailers. And there are a few potential drawbacks to know before signing up.

Membership Fees

As mentioned, one thing that sets wholesale clubs apart from other retailers is the membership fee. The amount you pay and the perks the fee unlocks will depend on which club you join.

Here’s how the fees compare at three of the top wholesale clubs in the U.S. for basic and premium plans:

• BJ’s – $55/year for Club Card Membership; $110/year for Club+ Card Membership

• Costco – $65/year for Gold Star Membership; $130/year for Executive Membership

• Sam’s Club – $50/year for Club Membership; $110/year for Plus Membership

Keep in mind that you’re not limited to joining just one club. But you’ll need to pay each one’s membership fee. And you generally need the higher-tier membership to take advantage of the full range of features and benefits a wholesale club offers.

Having to Buy Many Items in Bulk

While not every item is sold in bulk at a wholesale club (you wouldn’t buy five air conditioners, for example), many of them do come in multi-unit packages. So before you shop, you need to be reasonably sure that you’re going to use all of what you buy. If you’re not into stockpiling or you don’t know someone you can split your purchases with, they could just end up cluttering up your home and costing you money.

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Higher Potential for Impulse Buying

Part of the lure of the wholesale club is the opportunity to get a great deal. But that could lead to impulse buys if you spot something on sale at a price that seems too good to be true. While you might save if you can find true bargains, you’re not really saving if the money you spend isn’t in your budget. If you’re struggling with how to stop impulsive spending, then a wholesale club membership might be a stumbling block to your efforts.

Tips for Shopping at a Wholesale Club

If you’re heading out to your local wholesale club to shop for the first time, it helps to know some insider tips to make the most of your shopping experience. Here are a few pointers for getting the most value when buying from a warehouse club:

• Pre-shop at home. Checking out your wholesale club’s website can give you an idea of what’s in stock at your local store and what kind of deals you’ll find once you get there. You can also look for exclusive online-only offers that might be worth scooping up.

• Compare unit prices. Unit price is everything when you’re buying in bulk to save money. So as you shop, note the unit price (if posted) or calculate it yourself on your phone. You can then compare that to the price you’d pay for the same item at your local grocery store.

• Watch out for sizing. What’s known as shrinkflation is a real threat to your wallet when prices are on the rise. This practice occurs when companies downsize items but charge the same price for them. Again, you’ll want to look at the unit price to see how much value you’re getting for your money when shopping wholesale clubs.

• Take advantage of freebies. Wholesale clubs commonly offer freebies and free samples to shoppers. So be on the lookout for those as you’re cruising the aisles.

• Shop with a list. Shopping with a list can be an easy way to curb impulse spending. The key is committing to buying only what’s on your list and not being swayed over by any surprise deals you come across.

• Consider splitting the trip. If you have a friend or family member who doesn’t have a wholesale club membership, you could still take them along with you to shop. You can pick out items together, purchase them using your membership, then split the cost. That way, you’re only getting what you need, and they get a deal at the same time.

Also, you might consider upgrading to a premium membership if doing so could help you to earn rewards on purchases. If you can get 2% of what you spend back, for example, it might be worth it to pay a higher annual fee for that added savings.

Recommended: How to Save Money: 33 Easy Ways

Are Wholesale Clubs Worth It?

Whether a wholesale club is worth it to you or not really depends on your lifestyle and shopping habits. For example, if you often rely on takeout because there’s no food in the house, buying staple items like frozen chicken breasts, frozen veggies, rice, and oil in bulk could allow you to make more meals from scratch. It’s generally cheaper to buy groceries than eat out.

The Takeaway

Buying groceries in bulk can lead to significant savings, since warehouse clubs typically offer generous discounts per unit when you purchase items in large quantities. However, these stores generally require memberships. Annual fees can run from $50 to $130 per year, depending on the club you join and whether you choose a basic or premium tier. If you’re able to save more than you spend on annual dues, joining a wholesale club may be financially worth it. If, on the other hand, you could potentially come out behind, or find that combing the aisles of these stores often leads to impulse purchases, it’s probably not a good deal.

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FAQ

How do wholesale clubs make money?

Wholesale clubs primarily make money by charging membership fees. Since they don’t charge the same high markups on items as other retailers, they use membership fees to make up the difference in their profits.

What services do wholesale clubs provide?

Wholesale clubs can provide a variety of services, including pet insurance, home and auto insurance, life insurance, home-improvement services, travel services, and vision services. The range of services offered will depend on which warehouse club you join, and whether wholesale clubs are worth it will depend on the annual fee and how well the perks line up with your spending habits and lifestyle.

What are some common wholesale clubs?

BJ’s, Costco, and Sam’s Club are among the most well-known wholesale clubs in the United States. Boxed.com is an online store that sells wholesale items, with no membership fees. Alibaba is another online wholesaler that ships a wide variety of items to buyers around the world.

Photo credit: iStock/nycshooter

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBNK-Q424-042

Dec

2024

11 Tips for Buying a High-Mileage Car

By Timothy Moore | Family Finances, Life & Career, money | Comments Off

Though car prices have eased from their pandemic highs, getting a new set of wheels still doesn’t come cheap: As of September, 2024, the average price of a new car was $48,397, while the average used car was listed for $25,361. One way to get around these high costs is to purchase a high-mileage vehicle — those with 100,000 miles or more on them. But is this a wise idea?

Conventional wisdom once held that 100,000 miles was a critical turning point in a vehicle’s value and reliability. In other words, the advice was to proceed with extreme caution. But today, a well-cared-for high-mileage vehicle can still be a smart purchase — if you know what to look for when buying a high-mileage car.

Key Points

• Set a budget and stick to it, considering how much you have in savings and/or car loan options.

• Research reliable makes and models, using resources like Consumer Reports and Kelley Blue Book.

• Test-drive the car and get a mechanic’s inspection to identify issues.

• Obtain a vehicle history report to check for past ownership and accidents.

• Consider paying with cash and maintain an emergency fund for repairs.

Is It Wise to Buy a High-Mileage Car?

Buying a high-mileage car can be an easy way to save money. In fact, if the price is right, you may be able to buy a used car with cash, meaning you won’t have to worry about monthly car payments and high interest rates.

However, cars with higher mileage are understandably more prone to mechanical issues. When buying high-mileage cars, it’s important to consider models with a clear history of routine maintenance. It’s also wise to look at automotive manufacturers that are well-known for building longer-lasting cars; Consumer Reports singles out Honda and Toyota specifically, though some people are loyal to other makes, too.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

Buying a High-Mileage Car: Pros and Cons

So what are the pros and cons of buying a high-mileage car? Let’s break it down:

Pros of High-Mileage Cars	Cons of High-Mileage Cars
Affordability: Used cars are generally cheaper than new cars; the more miles on the odometer, the more affordable it typically is. And expect continued savings: For the most part, used cars are cheaper to insure than new ones.	Maintenance costs: A high-mileage automobile is more likely to need repair work. Eventually, a necessary repair may cost more than the car’s value, at which point you may want to consider buying a different car.
Depreciation: A new car typically loses 20% of its value in the first year; then 60% by the 5-year mark. By buying an older, high-mileage car, you don’t have to worry about such large depreciation hits.	Safety: A car with high mileage is likely at least several years old, so it may not have the industry’s latest safety technologies.
Ease of purchase: You can likely drive a high-mileage car off the lot as soon as you sign. Getting a new car, on the other hand, may involve a wait time. In addition, you may be able to purchase a high-mileage car with cash, meaning you can skip the credit check and financing discussions./td>	Financing challenges: While paying with cash is an option for a higher-mileage car, the price may still be too steep for your bank account. Because of the increased chances for mechanical issues, lenders might be hesitant to offer financing for cars with more than 100,000 miles on them.

11 Practical Tips for Buying a High-Mileage Car

If buying a high-mileage car is right for your budget, the following tips for buying a used car could be helpful:

1. Having a Budget

Before researching used cars, it’s smart to have an idea of what you are willing to spend. This might involve analyzing your savings or discussing your car loan options with a lender.

Once you have settled on a budget that you can afford, respect that limit. Even if you see a must-have car that’s slightly over your budget, remember that you set a max number for a reason: It’s what you are comfortable paying.

2. Researching Makes and Models with Good High-Mileage Ratings

While many cars can make it to 200,000 miles and beyond when taken care of, not all cars are created equal. Research makes and models that are well-known for lasting beyond 200,000 miles; Consumer Reports is one solid, objective resource for this.

You can also use resources like Kelley Blue Book, Edmunds, and Cars.com to understand fair prices for the specific make and model you have chosen, given its mileage and condition.

Recommended: Can You Get a Car With a Credit Card?

3. Researching Reviews on the Car Model

Next up when thinking about what to look for when buying a high-mileage car: What do the experts have to say?

Once you have selected your preferred car model, read independent reviews from popular car sites (like Edmunds, Consumer Reports, and Car and Driver) and actual drivers on car forums. Doing so may help you get a feel for how this model performs, particularly once it has 100,000 or more miles on it.

While it might not cover the specific year, make, and model of the car you are considering, J.D. Power’s annual Vehicle Dependability Study can give you a good idea of automakers that excel at designing long-lasting vehicles.

If it appears that the vehicle you have chosen may not be as dependable as you thought, you may want to start your research over, focusing on a different model.

Recommended: 10 Ways To Save Money Fast

4. Researching Risks and Costs

No matter which high-mileage car you are considering, there will be inherent risks as far as reliability goes. It’s wise to familiarize yourself with the potential problems associated with a higher-mileage car. This may provide you with a better understanding of what could go wrong.

Knowing the common issues that high-mileage cars encounter can help you calculate how much to save for car maintenance.

5. Researching Car Insurance

Before you drive home in your used car, it’s a good idea to have car insurance figured out. In fact, every state but Virginia and New Hampshire legally requires you to carry car insurance if you own a vehicle.

Check out minimum car insurance requirements for your state as you research. Often, the minimum level of coverage is an adequate amount for a high-mileage vehicle.

That said, determining the right amount of car insurance coverage is entirely up to your discretion. Think about what will make you feel safe and well protected.

6. Not Being Impatient

Patience is important when shopping for a used car (as it is for many big purchases). This is especially true if there is a specific model you have in mind. It might be tempting to buy the first high-mileage car that meets your basic criteria, but it is a good idea to take your time, view multiple options, and compare them before making a decision.

If your current vehicle is nearing the end of its life, you might want to start car shopping before it is totally out of commission. That way, you are less likely to be rushed into a decision.

Recommended: Leasing vs. Buying a Car

7. Test-Driving the Car

Test-driving a car is a good idea whether you’re buying new or used. When buying new, it allows you to determine if the vehicle is right for you. Are the seats comfy? Are the controls intuitive? Can you work around its blind spots?

Checking these things for a high-mileage car is also important. On top of that, a test drive in a used car allows you to monitor for potential problems. You can visually inspect the car, but you can also feel how it drives, listen for weird sounds, and even smell for things like water damage.

8. Getting a Vehicle Inspection

Though paying a mechanic to inspect a car you don’t own might sound like a waste of money, it can be a good idea when considering a used vehicle. Private sellers and dealerships might not disclose (or even know about) every small issue. An independent mechanic inspecting a high-mileage car, however, will be able to point out potential problems and estimate your costs for repairing them.

If a dealer or private seller is unwilling to let you take the vehicle to a mechanic during your test drive, consider insisting upon this — and even offer to follow the private seller to your mechanic. If the seller is still unwilling, it is probably wise to pass on the vehicle. There might be major issues lurking under the hood.

If your mechanic uncovers problems and they are expensive to fix, you may also want to skip the purchase and continue your search.

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

9. Getting a Vehicle History Report

Whenever you are purchasing a used car, whether it’s high- or low-mileage, it is a good idea to get a vehicle history report. Some dealerships and private sellers may have already ordered a vehicle history report for you to review. Even if they haven’t, consider proceeding. The cost is often negligible, typically between $25 and $40.

Why get a vehicle history report? These reports contain information about the number of previous owners, any major accidents, mileage accuracy, potential flood damage, and more helpful info for determining if the vehicle is worth the cost and what issues it may have faced in the past.

10. Paying Cash If You Can

When buying high-mileage cars, you may be able to use cash to negotiate a better car deal. Paying with cash also means you can set aside any money you would have used for a monthly car payment to use for car repairs, as needed.

Cash is also a good way to keep within your means — and the original budget you set for yourself.

11. Having an Emergency Fund for Your Car

A high-mileage car is more likely to encounter regular problems requiring potentially costly repairs. It can therefore be a good idea to have an emergency savings fund held as a savings account, ideally earmarked to include any car-related issues. Repair costs can rise significantly at the 100,000-mile mark.

The Takeaway

Buying a high-mileage car can feel like a risk, since more mileage means more wear and tear. But today’s cars typically perform well, even when the odometer reading goes well past 100,000 miles. And there is usually significant savings to be had, since mileage is a key factor in pricing. A lower price tag may mean you can pay cash and avoid the cost of financing for added savings.
Saving up to buy a used car with cash and setting aside money for care and any potential repairs means you’ll need a high-yield bank account with good savings features.

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

FAQ

What is the most reliable high-mileage car?

In general, Honda and Toyota manufacture some of the most reliable high-mileage cars. Other automakers that rate well on reliability include Lexus, Mini, Acura, Subaru, and Mazda. Cars models that often get ranked as longest-lasting by credible automotive sites include: Honda Civic, Lexus LS 400, and Toyota 4Runner.

What is the highest mileage you should buy for a used car?

While mileage limits can vary depending on the vehicle’s maintenance records and the brand, it can be wise to make 200,000 miles your max limit when shopping for a high-mileage car.

Is mileage more important than age?

It is important to consider both mileage and age when shopping for a used vehicle. In general, the more miles a car has, the more likely it is to need repairs. However, a newer car with the same high mileage as an older car is more likely to have newer safety systems and better fuel economy.

Photo credit: iStock/HABesen

Dec

2024

Guide to New Money vs. Old Money

By Timothy Moore | Growing Wealth, money, Terminology | Comments Off

The key difference between old money and new money is how a person obtained their wealth. Old money represents what may be called generational wealth — money that has been passed on from generation to generation in the form of cash, investments, and property. New money refers to self-made millionaires and billionaires, those who earned their money (or lucked into it, like in the lottery).

Learn more about this construct and why this distinction is made.

Key Points

• Old money refers to generational wealth passed down through families, while new money refers to self-made wealth.

• Old money is often associated with traditional investments and long-standing traditions, while new money may spend more lavishly and take riskier investment decisions.

• Lessons from old and new money include the importance of protecting wealth, analyzing spending, and avoiding stereotypes.

• Those with old money may face challenges ensuring wealth for future generations.

• The distinction between old and new money may be relevant to the wealthy class but does not affect the daily lives of most people.

What Is Old Money?

Old money refers to people who have inherited significant generational wealth; their families have been wealthy for several generations.

In the past, old money would have referred to an elite class: the aristocracy or landed gentry. In the U.S., families like the Vanderbilts and Rockefellers represented early examples of old money. Today, old money families include the Waltons (Walmart), the Disneys (The Walt Disney Company), and the Kochs (Koch Industries). Should families like the Kardashians continue to generate and pass down the great wealth they have in their bank accounts or other assets, they could one day be considered old money as well.

Recommended: How to Build Wealth at Any Age

What Is New Money?

New money then refers to people who have recently come into wealth, typically by their own labor or ingenuity.

Common examples of new money include tech moguls and self-made billionaires like Jeff Bezos, Mark Zuckerberg, and Bill Gates. Someone who wins millions of dollars in the lottery or becomes famous from a reality TV series (like the cast of Jersey Shore) would also qualify as new money.

You may sometimes hear the French term “nouveau riche,” which means “newly rich.” This tends to describe people who recently became wealthy and spend lots of money from their checking account in a flashy, ostentatious manner.

Recommended: Building Wealth in Your 30s

Differences Between Old and New Money

So what is the difference between old money and new money? There are quite a few distinctions, but remember that these are all generalizations. Each person who obtains wealth is unique.

Source of Wealth

The most obvious difference between new money and old money is the source of wealth. Old money has been passed down from generation to generation. Each member of old money typically feels a fierce responsibility to protect — and increase — that wealth.

Members of new money have earned that money in their lifetime, whether for building a tech empire, becoming a famous actor, making it to the big leagues as a sports player, or even making money on social media as an influencer. Some new money members might come into money through a financial windfall like winning the lottery or a major lawsuit.

Long-Standing Traditions

Inheriting generational wealth comes with a responsibility: Old money recipients usually must protect the family’s wealth to pass on to future generations. For that reason, those who come from old money may stick to their traditional investments and ways of life. Many inherit their parents’ business and then pass it on to their own children.

Those who are self-made or come into money quickly do not have long-standing traditions to fall back on. They are often the first in their community to make multimillion dollar spending decisions. This can mean a steep learning curve and the need for guidance, which could make them vulnerable to poor advice and unscrupulous hangers-on.

Spending and Investing

How old and new money generally approach wealth management is one of their starkest contrasts.

Though they do live lavishly, members of old money can be more frugal (or calculated) with purchases than you might expect. For members of old money, spending is often more about investing than shopping for pleasure.

People who are a part of new money may feel more entitled to and excited by their funds. They may spend it more lavishly (and publicly). Some might feel that they worked hard to earn their money — and they’d like to enjoy it. They might want to show off their newly achieved status with designer watches or mega mansions.

That’s not to say that members of new money don’t invest. Famous celebrities, athletes, and businesspeople often invest in real estate or buy companies to increase their wealth. Generally speaking, new money might make riskier investment decisions for faster yields. They’re not thinking about generational wealth to protect with tried and true investment methods.

Taken to its extreme, this can have disastrous results. It’s not uncommon to hear stories of people who make a lot of money for the first time and spend it all, leading to bankruptcy and even mental health issues.

Recommended: How to Deposit a Check

Leisure

The stereotypes might be a little tired, but in general, people associate old money with traditional activities like golf, skiing, horseback riding, and polo. On the flip side, members of new money might buy courtside seats to a basketball game, a garage full of shiny new luxury cars, or even a rocketship for a joyride into outer space.

Social Perception

Interestingly, some of the richest people in the world come from new money. They’re today’s self-made tech giants. Yet some members of old money may consider themselves to be a higher class than the likes of Gates and Bezos.

To generalize, old money often perceive themselves — and are perceived by outsiders — to be more educated and refined.

On the other hand, the public may view members of new money as harder workers and more innovative — clear examples of the American dream.

Old and New Money Lessons

What can one learn from comparing old and new money? Even if you are not wealthy, you can learn some valuable life and financial lessons from considering the difference.

• It’s hard to protect generational wealth. Old money is very privileged; there’s no denying it. But many families lose their wealth in just a few generations. Old money families do work hard to maintain and grow their wealth for their future generations. They are able to avoid seeing their fortune dwindle.

• It’s important to analyze your spending. Many people who come into wealth quickly don’t take adequate steps to protect their funds and invest it wisely. Horror stories of lottery winners losing everything should be enough to serve as a reminder that — if a person comes into a large amount of money suddenly — they should take the time with a finance professional to build out their money management goals. Doing so may ensure your wealth grows, rather than runs out.

• Stereotypes aren’t everything. Reflecting on the differences between old and new money, it’s important to note that these are merely stereotypes, and not everyone fits the bill. Just as one hopes that others don’t judge us before they know us, the discussion of old vs. new money is a reminder not to form assumptions about someone until you get to know them.

Recommended: How to Achieve Financial Discipline

The Takeaway

Old money refers to families who have maintained wealth across several generations. New money, on the other hand, refers to someone who earned their wealth in their lifetime. Key traits typically differentiate old vs. new money, but at the end of the day, both refer to members of an ultra-wealthy class.

No matter how much wealth you have — and whether you inherited or earned it — it’s a good idea to protect it in an FDIC-insured bank account that actively earns interest.

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

FAQ

Is it preferable to be from new or old money?

It depends on whom you ask. Old money members often regard themselves as a higher class, but they also have less agency to spend their money on “fun” things, as they have to guard their wealth for future generations. While members of new money might feel freer to spend on things they want, they can be more likely to run out of money if they don’t follow good financial planning.

Does new vs. old money matter?

If you are a member of the wealthy class, the distinction might matter to you. Those with old money might feel it’s superior to new, but those with newly minted wealth may well be proud of their success in building their fortune. However, most people are not considered to be new or old money, and so this shouldn’t affect their daily lives.

How has old vs. new money changed since the terms were first coined?

Old money once referred to the landed gentry in Europe, but in today’s world, it might refer to a few families who struck it big a century or more ago in the U.S. New money is more common nowadays, with the advent of television, sports, and social media as the source of riches.

Photo credit: iStock/South_agency

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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.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBNK-Q424-057

Dec

2024

Tips for Financially Recovering From Money Addiction?

By Rebecca Lake | Family Finances, Life & Career, money | Comments Off

When you think of addiction, you might automatically think of people who are dependent on drugs or alcohol as a coping mechanism. But it’s also possible to be addicted to money. This issue can manifest itself through unhealthy behaviors such as gambling, frequent overspending, or extreme saving (yes, it’s possible to overdo a good thing).

Having an addiction to money can be harmful financially and emotionally; it can also put a strain on your personal relationships. Recognizing the signs of a money addiction can be the first step in making a recovery. Read on for a closer look at the signs and symptoms of money addiction, how it can impact your life, and strategies that can help you overcome it

Key Points

• Money addiction involves compulsive financial behaviors that can harm personal and financial well-being.

• Signs of money addition include an obsession with obtaining, spending, or saving money, as well as risky financial behaviors like gambling.

• An addiction to money can lead to stress, debt, and strained relationships.

• Recovery requires acknowledging the problem, seeking help, and using money positively.

• Improving your financial habits and mindset can help break the cycle of addiction.

What Is Money Addiction?

Broadly speaking, addiction is defined as a chronic disease that leads people to engage in compulsive behaviors, even when the consequences of those behaviors may be negative. The precise cause of addiction isn’t known, but it is believed to be a combination of a person’s genetics, brain circuitry, environment, and life experience.

When someone has a money addiction, their compulsive behaviors are centered around money, and they may approach their finances in a way that’s outside the norm of what people typically do.

For example, having a lack of savings or too much debt are common financial challenges that many people face. If you have a healthy relationship with money, you might try to remedy those issues by opening a high-yield savings account and setting up an automatic transfer of 5% or each paycheck into the account, or by creating a workable debt payoff plan. While your finances might not be in great shape, there isn’t any indication of compulsive behavior.

Someone with a money addiction, on the other hand, will typically have a different relationship with their finances. They might commit to an aggressive savings plan, for example, because they believe they have to save even if it means sacrificing basic needs. Or they may compulsively shop for emotional fulfillment while turning a blind eye to their debt.

Can You Be Addicted to Money?

Money addiction is a real thing for many people. The Diagnostic and Statistical Manual of Mental Disorders (DSM), which is the official manual of the American Psychiatric Association, specifically recognizes certain financial behaviors as addictive. For example, the DSM classifies gambling disorder as an addictive disorder.

Whether you end up addicted to money can depend in part on your experiences and the money values you developed in childhood. If you frequently ask yourself, “Why am I bad with money?” the answer could be that you learned negative financial behaviors from your parents and the people you grew up around. Genetics and biology also play roles.

What money addiction looks like for one person might be very different for another. And it can sometimes be difficult to recognize those behaviors as addictive. For example, someone who spends $20 a day on lottery tickets in the hope of someday winning the jackpot might not see that as compulsive or having a money addiction. They could fail to realize how that behavior might be harming them financially because they’re so focused on the idea that they’ll win eventually.

Signs You May Be Addicted to Money

How do you know if you have an addiction to money or are just bad at managing it? As mentioned, experiencing common money issues such as debt or a lack of savings can indicate that you might need to work on learning personal finance basics like budgeting. But there are other signs that could point to a full-fledged money addiction. Here are some signals:

Life Revolving Around Obtaining Money

One major clue that you might be addicted to money is feeling obsessed with the idea of getting it. It’s one thing to wonder how you’re going to stretch your finances until your next paycheck; it’s another to spend most of your waking hours thinking about how to get money. If you often think of how you can obtain money instead of considering how to make the most of the money you do have, that could be a sign of a money addiction.

You don’t have to be broke to have this mindset either. You might be making $250,000 a year at your job, for example, but still not think it’s enough and constantly consider ways you could make more money.

Engaging in Dangerous or Risky Behavior

Certain behaviors could signal a money addiction if they involve your taking big risks that you’re not necessarily comfortable with. For example, when a money addict gets paid, they might take that money to the casino instead of using it to pay bills. Their addictive mindset doesn’t allow them to factor in the risk that instead of winning big, they might lose it all.

Money addiction can play out in other ways that might not seem risky at first glance. Trading stock options or futures, for example, is something plenty of people do every day. If your guess about which way a stock will move pays off, you could net some decent profits.

Where that kind of behavior becomes problematic is if you’re constantly losing money, but you continue investing anyway. It’s similar to the person with a lottery ticket addiction. You keep telling yourself that your winning number is sure to come up eventually, but in the meantime, you’re steadily losing money.

Not Wanting Others to Know Your Money Struggle

Covering up your money behaviors can be another strong hint that you have a financial addiction. That includes things like hiding receipts, credit card bills, or bank statements, or hiding the things you’re purchasing from a spouse, significant other, or another family member. You may act defensive or defiant when someone tries to ask you about your money situation.

Here’s another simple test to determine if you’re addicted to money. If you have to ask yourself, “Why do I feel guilty spending money?“, that could suggest that you know there’s a problem with what you’re doing.

Living in Denial About Spending

Your spending patterns can be one of the best gauges of whether you have a money addiction, provided you own up to them. Avoiding your financial life can be a symptom: If you shy away from checking your bank statements or adding up how much credit card debt you have, those could be red flags for money addiction.

Understanding why you spend the way you do can be a first step toward recovery. For instance, there’s a difference between compulsive vs. impulsive spending. Knowing which one you engage in more often can help you identify the triggers that are leading to bad money habits.

Unwilling and Unable to Change Money Habits

Another sign of money addiction is a sense of resignation, or knowing that you have a problem with money but not doing anything about it. You might feel ashamed to let someone else know that you need help with money, for instance. Or you might take the attitude that things have been the way they are for so long already that there’s no point in trying to change the situation.

Fearing the Loss of Money

No one wants to lose money but having an unnatural fear of doing so could be a clue to a money addiction. Being afraid of losses can keep you from making smart decisions with your money that could actually improve your financial situation. For example, you might be so afraid of losing money in the stock market that you never invest at all. In the meantime, you could potentially miss out on thousands of dollars in compound interest growth over time. Or it might have you working 24/7 and never enjoying downtime because you are so focused on making as much as possible to avoid feeling poor.

Another expression of money addiction could be saving so much that you have very little spending money. If you feel compelled to save a certain, possibly excessive, amount, it could keep you from paying bills on time and enjoying the occasional dinner out or movie because you feel every penny must go into your bank account. This behavior can be akin to hoarding and can likewise interfere with daily life.

Effects of Money Addiction

How money addiction affects you personally can depend on what form your addictive behaviors take. Generally, there are a number of negative side effects you might deal with as a result of money addiction, including:

• Constantly feeling worried or stressed over money

• Failing to set or reach financial goals

• Carrying large amounts of debt

• Having little to no money in savings

• Missing out on legitimate opportunities to grow your money

• Getting no enjoyment from the money that you do have

• Living with a scarcity mindset

• Having strained personal relationships because of money.

In short, money addiction can keep you from having the kind of financial life and daily life that you want. The longer you’re addicted to money without addressing the causes, the more significant the financial and emotional damage might be. The sooner you learn to manage money better, the less you will pay (literally and figuratively) for it.

Tips to Recover From Money Addiction

If you have a money addiction, you don’t have to stay stuck with it. There are things you can do to cope with and manage an addiction to money, similar to how you’d deal with any other type of addiction.

Improving your money mindset can lead to positive actions and break the addictive cycle. Here are some key steps on your path to recovery.

Being Honest

Before you can break your addiction to money, you first need to be honest with yourself that you have a problem. It can be difficult to acknowledge that you have an issue with money, but it’s necessary to identify what’s behind your compulsive behaviors.

You may also need to come clean with others around you if your financial behaviors have affected them directly or indirectly. For example, if you’re hiding $50,000 in credit card debt from your spouse, that’s a conversation you need to have. They probably won’t be thrilled to hear that you’ve run up so much debt, but they can’t help you address the problem if they don’t know about it.

Seeking Help

Fixing a money addiction might not be something you can do on your own. You might need professional help, which can include talking to a qualified therapist to understand your money behaviors and improve them. Or it could mean working with a nonprofit credit counseling company to hammer out a budget and a financial plan for getting back on track. Or it might mean taking both of these steps.

Even having an accountability partner can be helpful if you’re struggling with overspending. Any time you’re tempted to make an impulse buy, you can call up your accountability buddy and ask them to talk you through it until the urge to spend passes.

Using Money for Good

Depending on how it’s used, money can do a lot of good. If you have negative associations with money, you can help turn that around by using it for positive purposes.

For example, you might start making a regular donation to a charitable cause you believe in. Or if you’ve neglected saving in favor of spending, you might try paying yourself first by putting part of every paycheck into a high-interest savings account. Prioritizing savings and focusing on your needs vs. wants can be a form of financial self-care that can help with breaking a money addiction.

Understanding Why Basing Your Self-Worth on Money Is Unhealthy

When you’re addicted to money, you might have a mindset that the amount of money you have determines your value. That’s an easy trap to fall into if you spend a lot of time on social media, where you’re likely to see a steady stream of influencers living dream lives. You can end up in a cycle of FOMO (or fear of missing out) spending in an effort to live a lifestyle that you can’t really afford.

That’s not a healthy place to be financially or mentally because you can find yourself constantly chasing “things” in order to feel whole. Recognizing that your self-worth goes beyond how much money you have in your bank account or which designer brands you wear can be a key step in recovering from a money addiction.

The Takeaway

Money addiction can strain or even wreck your finances, but it doesn’t have to. If you identify the issue and then are willing to take steps to manage it, you may well be able to thrive. Consider taking some first steps, whether that means opening a new bank account for savings and automating deposits into it, or contacting a credit counselor. Moves like these can help you develop a positive relationship with money.

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FAQ

What is it called when you are addicted to money?

It’s called a money addiction when you have an unhealthy relationship with money that leads to compulsive or dangerous behaviors. Being addicted to money means that you have an emotional or mental dependence on it that can have potentially harmful side effects.

Can saving money be an addiction?

Saving money can be an addiction if you’re so focused on saving that you neglect meeting your basic needs or you’re blind to your ability to use money for good. If you’re only interested in seeing your savings account balance go up, you might miss out on opportunities to put your money to work in other ways or enjoy life.

Does money create dopamine?

The release of dopamine in the body is associated with pleasurable or novel experiences. If you get a rush from certain money behaviors, like saving excessively or impulse shopping, then that’s a sign that those behaviors might be triggering a dopamine release.

Photo credit: iStock/Povozniuk

SOBNK-Q424-035

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