Aug
10
2023

The Effects of Lifestyle Creep and Ways to Manage It

By | Budgeting & Goals, Financial Independence, Life & Career, money, Terminology | Comments Off on The Effects of Lifestyle Creep and Ways to Manage It

Have you noticed that as you earn more, you may not seem to have more in terms of growing your wealth, including your retirement account or that fund for the down payment on a house?

You might be experiencing lifestyle creep, which means that as you earn more, you spend more. It may well be human nature that, when you get a salary hike, you decide to splash out on a fancier car lease, a bigger home, or a luxurious vacation.

However, your spending may actually be outpacing your salary and even ringing up more credit card debt.

That’s lifestyle creep in action: Spending on “fun” non-essentials instead of putting that money to work for a more stable financial future. Learn more about it and how to rein it in while still enjoying the things money can buy.

What Is Lifestyle Creep?

Lifestyle creep can be a common phenomenon experienced as one progresses through their career. Lifestyle creep, sometimes known as lifestyle inflation, is the process by which discretionary expenses increase as disposable income increases.

Disposable income is income that isn’t already budgeted for necessities like housing, transportation, and food.

It could include anything from concert tickets to morning lattes to book buying sprees — basically anything that is likely to fall more into a “want” category rather than something strictly “needed.”

Lifestyle creep can put you squarely behind the 8-ball when it comes to getting out of debt, saving for retirement, or meeting other big financial goals. And it’s one reason people can’t escape the vortex of living paycheck-to-paycheck.

It might seem counterintuitive at first, but here’s a simplified example using a clothing budget. If you make $100 a month and set aside 5% for a shopping allowance, that’s $5 a month. If you earn a promotion at work and are now making $150 a month, that 5% now equates to $7.50 a month.

Lifestyle creep happens when you up your clothes budget to match the percentage, instead of putting the extra $2.50 toward savings or investments. Over time, those numbers can add up. And earning more isn’t all fun and games. It can also mean more expenses, and larger retirement goals.

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

What Causes Lifestyle Creep?

Graduating from the penny-pinching college life to your first full-time job is only one instance that can trigger lifestyle creep. It also can happen with any type of bump in cash flow that’s not part of your monthly budget, such as a raise, bonus, tax refund, gift, or winning a scratch-off ticket.

There are also psychological factors at play here, including the sometimes compulsive urge to keep up with the Joneses.

And before you blow it off as just envy with a lack of willpower, consider this: One examination of a lottery winner’s effect on the neighborhood found that the larger reward the lucky gambler collected, the more likely their neighbors were to incur more debt and even file for bankruptcy.

Say what?!

The social pressure to keep up with the consumption habits of family and friends, even when it’s conspicuous, can cause real and serious financial stress.

Social media can make matters even worse, with studies showing that post envy could be causing people to live beyond their means just so their feeds can reflect their acquaintances’.

But how do you resist the urge to upgrade your 2010-era sedan when your neighbor rolls up in a shiny new SUV? The answers might be simple on paper, but switching your mindset from “Should I spend this on a shopping spree or a vacation?” to “Should I put this money into savings or invest it?” can be easier said than done.

Discerning Needs Versus Wants

It’s normal to want to celebrate a new raise, but to avoid lifestyle creep, it can be important to make sure not to celebrate with something that will increase costs to the point of making the raise irrelevant.

For example, a person gets a raise that increases their income by $200 a month and then immediately trades in a fully paid-off car for a newer, fancier car (want), which results in a $300 monthly car payment.

Not only is the raise spent, but the amount of money available each month has also actually diminished. Sure, that person might have a car worthy of bragging about, but they may not be any healthier financially, even though they’re making more money.

On the other hand, for someone scraping by month to month, there might not be much of a choice but to fund some lifestyle upgrades with a raise. Lifestyle creep is not always a bad thing for someone working on being financially independent and secure.

Using the same example of the $200 monthly raise above, the recipient of the raise uses that money to buy a car needed to get to work to replace a lengthy public transportation commute each day, or perhaps invests in a professional development class to gain career advancement.

Either of those decisions might be perfectly worthwhile lifestyle changes that someone might be happy to pay for with a new raise. After all, part of financial wellness is investing in oneself when possible to achieve goals.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Tips for Avoiding Lifestyle Creep

Giving every extra penny of a cash windfall to a credit-card company doesn’t sound like much fun. But just knowing that lifestyle creep exists, and recognizing it in your own life, can put you ahead of the game when it comes to making better decisions with your money.

Here are a few possible ways you can avoid lifestyle creep while still enjoying the good things in life.

Celebrating Small

If you earn a raise, you should absolutely celebrate — especially if it’s higher than the average 2.9%. But to outsmart lifestyle creep, you may want to take a deep breath and resist the urge to run to the store for that expensive thing you’ve had your eye on. (What would Marie Kondo do?) Instead, consider a small way to congratulate yourself, like a dinner with friends.

Creating a Budget

One way to avoid lifestyle creep may be to give all income a job to do. Yep, that extra $200 a month shouldn’t just be chilling in a checking account with no purpose, like a freeloading cousin camping out on the couch.

Letting that extra money hang out in the checking account too long with nothing to do might lead to unplanned spending on a weekend trip or that budget-busting espresso maker that would be a tempting purchase. Putting that money to work might allow protection against impulse spending.

What exactly is “putting money to work”? It all comes down to budgeting. But don’t panic — gone are the days of lengthy kitchen-table sessions with bills and statements fanned out and calculations done by hand.

With the advent of online banking, most people are likely equipped with everything needed to make a budget right on your phone or computer.

Don’t have a basic budget already? Getting a raise can be a great time to crunch the numbers and be financially stable and responsible with that money. If there’s already a budget in place, a new raise is a great time to reconfigure the budget to make sure it still ticks all the financial boxes.

Avoiding Mindless Spending

Mindless or pointless spending might happen when there is unexpected extra cash sitting in the bank account. Much like the itch to spend that crisp, new $20 bill included in a childhood birthday card, there may be psychological and emotional temptation to spend money in the bank account without considering whether or not those new, modern table lamps or that brand new gaming system is really needed.

Casually buying unnecessary items could indicate compulsive or impulsive spending. This in turn could mean missing an opportunity to put money to work for the future, sustainably upgrading a lifestyle by planning ahead for financial growth.

Tracking Your Spending

When it comes to managing money, one question you don’t want to ask yourself is “Where did that money go?” Losing track of expenses could not only lead to a blown budget, but also overdraft fees, returned checks, or other unnecessary fees that could put you even further behind.

If you really struggle with this one, there’s an app for that. A large number of them, as a matter of fact. SoFi, for example, lets you see all of your accounts in one place to help you categorize and track your spending, set goals, and look for ways to streamline. It also can serve as the central hub for automatic payments to your bills, savings, and investment accounts.

Turn on the Auto-Pilot

One of the easiest ways to ensure that you’re only spending what’s in the budget is to automate as many payments and contributions as possible. After all, money you don’t have is a lot easier to not spend.

This strategy can start at work. If you get a raise, you might elect to increase your 401(k) contribution (or start one if you haven’t yet). And while it means that your take-home pay may not change, your retirement account can painlessly grow.

You also can automate bill payments and savings and investment contributions, all with the intention of getting the money out of your tempted hands ASAP.

Outlining Clear Goals

What’s your endgame? Do you want to retire early with a million dollars or more in the bank? Is owning a home a part of your plan? One key to avoiding lifestyle creep is to set long-term financial goals and keep your eye on the prize.

Two financial goals that can be beneficial to almost everyone include growing a short-term emergency fund and longer-term savings plan. But from there, the sky’s the limit and your goals are entirely up to you.

Avoiding New Debt

This might seem like a no-brainer, but you aren’t likely to get out of debt if you keep adding new debt to the pile. A recent report revealed that consumers are willing to spend up to 83% more using a credit card than they would with cash.

Ditching the credit cards is entirely possible — your parents and grandparents lived without them every day. Modern credit cards weren’t introduced in the U.S. until around 1958, which means that Boomers and their parents were raised on the philosophy that if you can’t afford it right now in full, you wait until you can.

And as the old saying goes, they turned out just fine.

Getting Your Head in the Game

Lifestyle creep likely isn’t impossible to reverse, but one could argue that the further you’ve allowed yourself to fall into the luxury lifestyle, the harder it could be to pull yourself out.

One way to get your head in the game is to make lists, starting with your needs (electricity) vs. wants (electric car.) From there, you could prioritize your “wants” and start to cut from the bottom.

Are there things in your life that just exist because they can? Consider eliminating them completely, or finding crafty ways to keep them around in more affordable ways, such as shopping consignment vs. retail or eating lunch out one day a week vs. all five.

And the jealousy that can mess with your head? All that glitters isn’t gold.

Choosing Your Friends Wisely

Peer pressure is a powerful motivator, but the perceived wealth of your friends, neighbors and acquaintances can be a far cry from the actual state of their finances.

If you seem to find yourself in situations where there’s pressure to overspend, including kids sports activities, nights out on the town, or an invite to a destination wedding, you may want to consider finding a circle of friends who share the same financial goals as you.

After all, it’s a lot easier to say “Let’s just cook at home to save money” to a friend who won’t pressure you to try the trendy new restaurant in town.

💡 Quick Tip: If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt, so try to eliminate that ASAP.

Spending a Raise

So what exactly should someone do with extra money after a raise? Paying more into a retirement account, paying off debts, or just putting some extra dollars towards a specific savings goal are some approaches to take.

A checking and savings account might be one helpful way to manage a raise and stay on top of a budget.

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

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


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

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 Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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Aug
08
2023
ATM Cards vs Debit Cards

ATM Cards vs Debit Cards: What’s the Difference?

By | Financial Independence, money | Comments Off on ATM Cards vs Debit Cards: What’s the Difference?

ATM cards and debit cards may look very similar, but they actually have very distinct functions: ATM cards allow you to withdraw or transfer money from your bank account when you need cash. A debit card, however, delivers the same benefits but has more bells and whistles. For example, you can use debit cards to pay bills or earn rewards for your spending habits. So, although many think debit cards and ATM cards are one and the same, they actually work differently.

Understanding how each card works ensures you make the most of your banking services. That said, here’s everything you need to know when comparing ATM cards vs. debit cards, including:

•   What is an ATM card?

•   How do ATM cards work?

•   What is a debit card?

•   How do debit cards work?

•   When should you use an ATM card vs. a debit card?

What Is an ATM Card?

An ATM card allows you to withdraw cash from these machines up to certain ATM withdrawal limits and transfer money between bank accounts.

However, the card has limited functionality. You cannot use it to make in-person or online purchases like you can with a debit card.

Worth noting: Those who hold money market accounts (which are a kind of savings account blended with some checking account features) often have ATM cards.

💡 Quick Tip: Want a new checking account that offers more access to your money? With 55,000+ ATMs in the Allpoint network, you can get cash when and where you choose.

How Do ATM Cards Work?

A bank links your ATM card to your account. When you use your ATM card at a machine, you enter your four-digit personal identification number (PIN) to access your account.

You can then use the ATM to view your account balance, withdraw cash, review recent transactions, and move money from one account to another. If you withdraw cash, you may have to pay a small ATM fee, depending on your bank and the machine you use.

What Is a Debit Card?

So, is a debit card the same as an ATM card? While they have similarities they are not the same.

Like an ATM card, your debit card links to your bank account and allows for cash withdrawal and checking account management. However, debit cards have higher withdrawal limits, meaning you can access more cash every day than with an ATM card. Generally, banks give debit cards to customers who have checking accounts.

A debit card is also a payment card. In other words, you can use your debit card at physical storefronts and shops to purchase goods and services. Likewise, your card enables you to make online purchases.

However, debit cards have purchase limits, meaning you can only conduct so many dollars’ worth of transactions per day. Usually, purchase limits range from a couple of hundred dollars to a few thousand dollars. Your limit depends on the bank or credit union that holds your account.

Recommended: What Is Cardless ATM Withdrawal?

How Do Debit Cards Work?

At an ATM, a debit card works identically to an ATM card: You enter your credit card PIN to manage and withdraw funds from your bank account. However, debit cards also allow you to forgo using cash. Instead, you can skip the ATM, go to the store, and use your debit card to make the purchase.

Your debit card will use your checking account to pay, making the transaction cashless. For security, you must use your PIN to complete a purchase.

By the same token, you can use a debit card online by entering your details when making a purchase on a website. This feature allows for electronic transactions where giving or receiving cash isn’t possible.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Pros and Cons of ATM Cards

Here is a summary of the advantages and disadvantages of ATM cards to help you understand ATM cards vs. debit cards:

Pros of an ATM Card

 Cons of an ATM Card
Quick access to your cash Your bank limits how much cash you can withdraw daily, restricting your purchasing capabilities
You can check your account balance Using an ATM out of your bank’s network will likely incur fees
You can move money between your accounts Losing your card means you can’t access your money
Your four-digit PIN prevents theft A thief might steal your card and guess your PIN correctly
You can review recent transactions

Pros and Cons of Debit Cards

This list of pros and cons of debit cards can help you see the difference between a debit card vs. an ATM card:

Pros of a Debit Card

 Cons of a Debit Card
Same functionality as ATM card Debit card usage doesn’t build your credit history or score
PIN enhances account security Like an ATM card, a thief could steal it and guess your PIN
Linked to your checking account, enabling online banking You might be subject to ATM fees
Can transact physical and online purchases Daily spending limit
You can cancel or freeze a debit card if you lose it
You might receive reward points for transactions
Can complete international purchases

Recommended: Guide to Using a Credit Card Like a Debit Card

When to Use an ATM Card Over a Debit Card

ATM cards only let account holders transfer money to and from accounts. For this reason, an ATM card might be more suitable for those who only have an ATM card linked to their bank account and need to move money. For example, an ATM card is a good option if you have a money market account and need to withdraw or deposit funds.

When to Use a Debit Card Over an ATM Card

On the other hand, if you want to make purchases online and pay bills, you will need to use a debit card since ATM cards don’t have these capabilities. Plus, if you want access to your bank account while traveling abroad, you’ll need to use your debit card (for purchases, you might decide to get an international credit card as well). This is because ATM cards can only be used in the United States.

Deciding which card to use will really depend on which type of card is linked to your bank account and what type of transaction you’re trying to complete.

Can I Have Both a Debit and ATM Card?

It’s possible to have both an ATM card and a debit card. Of course, the type of cards you have depend on your bank, account type, and needs. But, if you have both, ensure you know which card is linked to which account. This way, you can be mindful of potential fees and overdrafting your account.

The Takeaway

When you need to deposit or withdraw cash from your checking, savings, or money market account, an ATM card can help you do just that. However, with an ATM card, you can’t complete other banking transactions like making purchases or paying bills. A debit card gives you the ability to do all of it. But, the card you use will depend on your bank’s offerings as well as your financial needs.

If you’re in the market for a new debit card, you can open a bank account with SoFi and enjoy many perks. For instance, you’ll have access to the global Allpoint Network of no-fee ATMs. In addition, you’ll enjoy spending and saving in one convenient place, earning a competitive Annual Percentage Yield (APY), and paying no account fees. All this can help you manage your money more easily and maybe even grow your funds faster.

Ready for better banking? Discover everything SoFi Checking and Savings has to offer.

FAQ

Do you need an ATM card?

Not necessarily. Debit cards also give you access to ATMs to withdraw or deposit money.

Are debit cards more useful than ATM cards?

Yes, debit cards have more functionality than ATM cards. For example, you can make purchases and conduct internet banking with debit cards. ATM cards don’t allow you to do that.

What are the main differences between an ATM card and a debit card?

The primary difference between ATM and debit cards is that you can only use the ATM one to transfer money from your bank account via ATM or electronic transfer. A debit card does the same, but you can also make purchases in-store or online and use it for other internet banking services.

Photo credit: iStock/Nastasic

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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

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.

SOBK1222015

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Aug
08
2023
What Is Consumerism?

What Is Consumerism?

By | Budgeting & Goals, money | Comments Off on What Is Consumerism?

Consumerism is both an economic theory and cultural phenomenon that typically flourishes in a capitalist society. The theory of consumerism states that increased consumption of goods and services by the population will improve the economy. The people in this society, in turn, believe they must consume more goods and services to achieve happiness, fulfillment, and wellbeing.

While consumerism in the United States has historically boosted the economy, critics point out that it leads to a materialistic society in which people never feel satisfied with what they have. They may also experience anxiety over their imagined need to consume more. Opponents also criticize consumerism’s impact on the environment and, in instances such as cigarettes, alcohol, and unhealthy foods, overall physical health.

In this article, you’ll learn the following:

•   Consumerism definition, history, and examples

•   Pros and cons of consumerism

•   Tips for combating consumerism

Consumerism Definition

What is consumerism? Consumerism refers to the economic theory that consumer spending on goods and services is crucial to bolstering the economy. It also refers to the cultural phenomenon that has happened in capitalist societies as a result. Specifically, it describes individuals’ feeling that they must partake of goods and services to be happy, often spending more money than they can afford on things that they don’t really need.

Recommended: Compulsive Buying vs. Impulse Buying

History of Consumerism

While many point to the post-World War II era as the beginning of U.S. consumerism, historian William Leach believes it dates back a little further to the turn of the century. In his 1993 book, Land of Desire, Leach argues that this time period marked a surge in department stores, assembly lines, investment bankers, and mail-order catalogs — all of which were early hallmarks of a consumer society.

As businesses headed into the 1920s, their production prowess was unprecedentedly strong — but American consumers were not yet used to the idea of, well, consuming. Economists realized that they needed to persuade consumers (“through advertising and propaganda,” as author Edward Bernays once wrote) that they needed more.

In short, businesses could manufacture plenty of supplies; now they needed to manufacture demand for the items that were being pumped out.

While the Great Depression slowed down the progress of consumerism, the effects of World War II and the rise of mass media fueled consumerism in the decades that followed. By this time, economists agreed that excessive consumption was the best way to improve the economy.

This belief is evidenced by this telling quote from retail analyst Victor Lebow in 1955: “Our enormously productive economy demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfaction, our ego satisfaction, in consumption … We need things consumed, burned up, replaced, and discarded at an ever-accelerating rate.”

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Examples of Consumerism

You can find many examples of consumerism in today’s society, including:

•   Huge shopping sales like Black Friday and Cyber Monday.

•   Ads on TV, websites, and social media that encourage you to buy a new product or subscribe to a new service.

•   Holidays built around gift-giving and consuming candy or food.

•   New cars, phones, and other innovative tech releasing every year — sometimes with upgrades more than once a year.

•   Services, like streaming platforms and video game systems, built around a subscription model where you must pay every month to retain access to the service.

Recommended: How to Improve Your Money Mindset

Pros and Cons of Consumerism

Consumerism can offer both advantages and disadvantages to society:

Pros

 Cons
Boosts the economy Can cause anxiety and unhappiness
Creates jobs Can lead to debt
Creates a connected global society Can create environmental problems
Encourages creativity, innovation, and better products Can lead to poor physical health
Enables entrepreneurship and self-employment May contend with spiritual or religious beliefs

Read on to consider these pros and cons of consumerism in more depth.

Recommended: How to Spend Money Wisely

Consumerism Pros

Consumerism can bestow a number of benefits to a society, such as:

•   Improved economy: The primary tenet of consumerism is that individual spending will drive economic growth. While history has taught us that this is generally true, many opponents may ask, “At what cost?”

•   Job creation: The more that a society spends on goods and services, the more that businesses need to hire people to create those goods and services. And it’s not just a phenomenon that impacts the U.S. Because America relies on raw materials from other parts of the world, consumerism typically creates jobs around the globe.

•   Connected global society: Consumerism now happens on a global scale. America depends on other countries for products and services — and they in turn depend on us. While globalization is itself a nuanced topic, many believe that a more connected global society is a good thing.

•   More creativity and innovation: Advocates of consumerism argue that it encourages and rewards creativity. When consumers vote with their dollars, companies are more likely to push the boundaries to deliver newer, better, safer products and services — and at lower prices. This can be especially important for medical advances.

•   Entrepreneurship: In a consumerism-driven society, if you have an idea for a product or service that others want, you are free to pursue it. Launching your own business or working as a freelancer may mean that you can make money and take care of your family using your creativity and business acumen, as well as doing what you love to do.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online checking account.

Consumerism Cons

Outside of an improved economy, however, critics argue that consumerism can be bad for mental and physical health, as well as the environment. Downsides to consumerism may include:

•   Anxiety and unhappiness: When people feel they always need newer, better things, they may never be satisfied. The pressure to have a new phone or car may lead them to work extra hours, unfairly compare themselves to others, and feel bad about themselves when they can’t afford the next best thing.

•   Debt: Consumerism can motivate individuals to spend money on new things in an effort to achieve happiness. Unfortunately, many consumers spend more than they should on everything from cars and vacations to clothing and jewelry — and take on debt in the process. The average American had nearly $5,600 in credit card debt at the end of last year. Unmanageable debt can destroy families, but it can also be detrimental to the entire economy, as the subprime mortgage crisis of 2008 demonstrated.

•   Environmental impact: Producing, using, and throwing away goods is harmful to the environment, with studies indicating that consumerism has a large part to play in global greenhouse gas emissions. Not only that, but as the human race grows and likely demands more and more things, the nonstop manufacturing of consumer goods could possibly harm or even destroy animal habitats.

•   Poor physical health: Consuming unhealthy foods, alcohol, and cigarettes can be detrimental to one’s health. But it’s not just what is consumed; as innovators introduce more technologies that make life easier — like robotic vacuums, gutter guards, and apps for grocery delivery — it’s easier for consumers to do less, leading to a more sedentary lifestyle.

•   Spiritual and religious issues: Those whose spiritual or religious beliefs promote minimalism and charitable giving may find those beliefs at odds with the spirit of consumerism, which is about increasing your own wellbeing through the consumption of more goods.

Recommended: 14 Reasons Why It’s So Hard to Save Money Today

Tips to Combat Consumerism

Consumerism can be a good thing: It creates jobs and bolsters the economy, and it allows opportunities for individuals to create new things. But when consumerism becomes excessive, it can damage an individual’s finances and possibly be harmful to their emotional and physical health.

Here are some ways you can be a more responsible consumer:

Creating a Budget

By creating a line-item budget that prioritizes the things you need, it’s easier to see how much money you can spend on the things you want. It’s unrealistic to think that you’ll completely stop buying goods and services that you enjoy. Instead, through budgeting, you might gain a better understanding of how much you can afford to splurge without taking on debt or adding anxiety to your life.

Recommended: 10 Most Common Budgeting Mistakes

Giving Things Away (or Selling Them!)

If your home currently has too much stuff, you might have been a victim to excess consumerism at some point. But it’s not too late: Try giving things away to those less fortunate, or have a garage sale to make some extra cash. Doing so may show you that you can be happy with less.

Thinking About What Really Makes You Happy

It’s easy to see what others have and think you need to buy it too. But is a new phone really going to make you happier? What’s wrong with the one you have?

If you challenge yourself to define what happiness is for you, you may find that having new things isn’t a large part of the equation. In keeping this realization with you at all times, you can cut back on spending money on things you don’t need — and instead focus on the people, places, and hobbies that bring you happiness.

Recommended: Guide to Financial Downsizing

The Takeaway

Consumerism has likely been great for the economy: It’s probably created more jobs and opportunities for self-employment, and it’s led to better-quality, safer products for a larger number of people. However, consumerism may also be responsible for negative impacts on our environment, physical health, and mental health. Consumerism is a nuanced topic with implications in nearly every aspect of life; it’s wise to be aware of how consumerism can affect you so that you can make smarter financial decisions.

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 a consumerism example?

There are several examples of consumerism in everyday life, including the seemingly constant release of new smartphone models, yearly mega sales on Black Friday and Cyber Monday, and the constant ads we’re exposed to on TV and the internet.

Is consumerism positive or negative?

Consumerism has pros and cons for society. While consumerism creates jobs, boosts the economy, and leads to better-quality goods and services, it can also lead to debt, anxiety, and even physical health issues. Further, consumerism can help create a more connected world, but it can also have negative environmental impacts.

What is the simple definition of consumerism?

Consumerism is the economic theory that consumer spending on goods and services is key to driving the economy. To that end, businesses create new products and services to market to individuals. Individual consumers may feel like they need those new products and services to improve their wellbeing and happiness. While consumerism creates new jobs and bolsters the economy, critics believe that it can be harmful to our physical and mental health.

Photo credit: iStock/Dimensions

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® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

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08
2023
Taxable vs Non-Taxable Income

Taxable vs. Non-Taxable Income: What’s the Difference?

By | Family Finances, Life & Career, money | Comments Off on Taxable vs. Non-Taxable Income: What’s the Difference?

Nothing is as certain as tax season. Like it or not, it comes every year, and taxpayers need to report and pay their dues on all taxable income. But did you know that some income is non-taxable?

That’s right: In some rare cases, Uncle Sam won’t be asking for his fair share. But you may wonder how to know the difference and how you can correctly file your taxes. This guide can help you understand this important distinction.

Read on to learn:

•   What is taxable income vs. non-taxable income?

•   What are some examples of taxable income?

•   What are some examples of non-taxable income?

Taxable and Non-Taxable Income Explained

The difference between taxable and non-taxable income is pretty straightforward:

•   Taxable income is subject to taxes. That means you must report it to the IRS on your tax return and pay taxes on it based on your filing status and tax bracket. And remember: Income isn’t just money that you earn. Income can come in the form of money, property, or services rendered.

•   Non-taxable income is not subject to taxes. Though you may have pocketed money throughout the year (perhaps child support), you do not need to pay taxes on it. However, you may still need to report it on your tax return.

Understanding the differences between these two terms is easy. It’s understanding just what is considered taxable income vs. non-taxable income that can be more challenging without the help of an accountant.

Understanding your taxes is an important aspect of managing your finances. Incorrectly accounting for income could leave you owing the government money plus penalties, so read on to learn more.

💡 Quick Tip: If your checking account doesn’t offer decent rates, why not apply for an online checking account with SoFi to earn 0.50% APY. That’s 7x the national checking account average.

What Is Taxable Income?

Taxable income is money, property, or services that you received that the IRS requires you to pay taxes on. Common types of taxable income include wages, self-employment earnings, and stock dividends.

Examples of Taxable Income

Wages are an easy example of taxable income, but the list of what kind of earnings are taxed is much more extensive. Below are some examples of taxable income to keep in mind when filing, but note that this list is not exhaustive, meaning you should research each type of income you earned throughout the year to determine if you owe taxes.

•   Salary, wages, tips, bonuses, and self-employment income: First and foremost, the income you make for doing your job counts as taxable income. That includes both salaried and hourly workers who receive a W-2. If you earn tips — even cash tips — you’ve got to report those, too. Bonuses are also taxable, as is any income you make as a self-employed individual.

Self-employed taxpayers who receive 1099 forms have to pay more in taxes than salaried employees. That’s because they also owe self-employment taxes to cover items like Social Security and Medicare contributions.

•   Investment income: If you rent out property (like a house or a vehicle), you must report that income to the IRS and pay taxes on it. If you have investments that pay interest and unqualified dividends, those are taxable as well.

•   Fringe benefits: The IRS is careful to spell out that income isn’t just money you earn. For example, if your employer pays for an off-site gym membership or sends you a Christmas gift every year, these are considered fringe benefits — and you’ve got to report and pay taxes on the monetary value of those benefits. Not all fringe benefits are taxable; if you’re unsure whether you need to pay taxes on something, you can check out the IRS’s resource on fringe benefits or work with an accountant.

•   Some retirement income: If you contributed to a traditional IRA or traditional 401(k) plan, those contributions were pre-tax. When you start withdrawing those funds, you unfortunately have to pay taxes on that money.

•   Income from the sale of assets: When you sell something — whether it’s your car, a stock, or even an old couch — you generally have to report the capital gain from that sale. There are exceptions, including the big tax break you may receive when you sell your house (more on that below).

•   Royalties: If you earn royalties from copyrights, patents, or oil, gas, and mineral properties, you’ll have to pay taxes on those royalties.

•   Alimony, sometimes: Tax law on alimony payments has changed. If you got a divorce before 2019 and have not altered the agreement to expressly state that alimony isn’t considered income, then you’ll pay taxes on it.

•   Unemployment compensation: Yes, even if you’re out of work and receiving unemployment benefits, you’ve got to pay taxes.

Remember, this list is not all-encompassing. The IRS has guidance on everything from cash for babysitting to bartering to lottery winnings. If you’re unsure what income to report, you may benefit from working with an accountant. As you prepare for tax season, these professionals can help you sort out what is taxable vs. non-taxable income so you can file correctly.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
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What Is Non-Taxable Income?

Non-taxable income is money, property, or services that you received that the IRS does not require you to pay taxes on, though you may still need to report it on your tax return. Common types of non-taxable income include child support payments, cash rebates, and welfare payments.

Recommended: What Is Unearned Income?

Examples of Non-Taxable Income

As with taxable income, the list of non-taxable income is extensive (and has a lot of fine print). We’ve compiled some examples of non-taxable income below, but it’s a good idea to work with an accountant if you’re unsure how to report your income on your tax return. Again, this is not a complete list.

•   Child support payments: Child support payments are not taxable income — and there’s no fine print to worry about with this money, either.

•   Welfare: Welfare benefits are not taxable. Like child support payments, guidance is very straightforward on this.

•   Alimony, sometimes: If you receive alimony for a divorce in 2019 or later, you do not pay taxes on that income. If you got a divorce before 2019 and modified the agreement after 2018, you may not have to pay taxes on alimony.

•   The sale of a house, sometimes: If you’re quickly flipping houses for a profit, those capital gains are taxable. However, the government has provided a sizable tax break for homeowners. If you sold your home and lived in it for at least two of the last five years, you don’t have to pay taxes on the first $250,000 in profit ($500,000 if married, filing jointly). There’s more fine print about this tax break, so it’s a good idea to reference IRS materials if you have large capital gains from the sale of a house.

•   Some fringe benefits: In general, fringe benefits are taxable, but the IRS does have a list of exclusions, like adoption assistance and dependent care assistance (up to certain limits). For full details, review the IRS’s detailed breakdown of fringe benefits and taxation; the link is provided above.

•   Some retirement income: While you’ll pay taxes when withdrawing from your traditional IRA and 401(k) in retirement, you won’t have to worry about taxes when drawing from a Roth IRA and Roth 401(k). Why? Contributions are post-tax, so you’ve already paid taxes on the funds.

•   Gifts and inheritances: You usually don’t have to pay taxes on (property) gifts you receive; the IRS doesn’t come for Santa’s presents!). What’s more, you likely don’t have to pay taxes on inheritances. Instead, the deceased’s estate pays taxes on the money before you receive the inheritance.

•   Life insurance payout: If you receive proceeds as the recipient of a life insurance policy when the policyholder dies, that money is not taxable. But if you cash in a life insurance policy, some or all of it is taxable.

The IRS has a more comprehensive list to review before filing.

Recommended: Different Types of Taxes

The Takeaway

It’s possible to earn both taxable and non-taxable income. While the most common source of income — your paycheck — is taxable, you might receive some income for which you pay no taxes, like child support or capital gains on the sale of your home. It’s wise to make sure you fully understand how money you receive is categorized, so that you can file your taxes correctly. This could be accomplished by working with a tax professional, using tax software, or doing your own research.

Looking for a way to make more money from your cash? Open a SoFi bank account, which boasts a competitive annual percentage yield (APY) and charges no account fees, both of which can help your savings grow. You can also spend and save in one convenient place and have savings tools like Vaults and Roundups at your fingertips.

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 are the pros and cons of taxable income?

The largest pro of taxable income is that it inherently means you’re making money. Whether it’s from a salary or an investment, having income that’s taxable implies you are receiving the money you need to survive. And, of course, the con of taxable income is that not all of the income is yours — you’ll have to pay taxes on it, and generally, the more you earn, the more you’ll owe.

What are the pros and cons of non-taxable income?

The biggest pro of non-taxable income is that you don’t have to pay taxes on it. Every dollar you earn is yours to keep. Non-taxable income can have some cons, however, depending on the source. For example, you may receive non-taxable income as a life insurance payout or inheritance, which implies you’ve lost someone special in your life. Non-taxable income can also be more confusing to navigate on your tax return and could necessitate the help of a professional accountant.

How do you calculate taxable and non-taxable income?

The IRS has a comprehensive guide to taxable vs. non-taxable income. In assessing each source of your income, you can review IRS guidance for how to report it and whether it’s taxable or not. If you’re feeling overwhelmed, you may benefit from using tax preparation software or a professional tax preparer.

Photo credit: iStock/atakan

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 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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

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08
2023
Financial Assistance Options for the Disabled

Financial Assistance for People With Disabilities

By | Family Finances, Life & Career, money | Comments Off on Financial Assistance for People With Disabilities

Approximately 26% of Americans live with a disability that can impact cognition and mobility skills, according to the National Center for Birth Defects and Developmental Disabilities. These disabilities can make it challenging to manage daily tasks or full-time employment, putting a significant strain on finances and possibly making it challenging to make ends meet.

On top of that, according to research from Stony Brook University, the University of Tennessee, the National Disability Institute, and the Oxford Institute of Population Ageing, a household containing an adult with a disability (with limited ability to work) requires 28% more income (or an extra $17,690 annually) to meet the same standard of living as a household without someone with a disability.

Fortunately, various programs are available that provide financial assistance to disabled adults. So, whether you need help with housing costs or healthcare, understanding your options can help you get the assistance you need.

Read on for the details.

How Many People Have Disabilities in the U.S.?

As briefly noted above, about 26% of Americans live with a disability; that means more than one in four people are facing issues with mobility or cognition.

That is a significant number. If you or someone you care about is living with a disability, it’s important to know about the programs that can help access aid.

Types of Help Available for People With Disabilities

When it comes to financial help for the disabled, there are many options. Here are some programs that can assist in this situation.

Healthcare

There are healthcare programs that provide financial help for disabled adults, so medical bills don’t seem so overwhelming. Available programs include:

•   Medicare. Usually, enrolling in Medicare is a program associated with seniors. However, Medicare also offers medical cost assistance for folks with disabilities under 65 years old. If you just began receiving Social Security Disability Insurance (SSDI) benefits, you usually have to wait 24 months before your Medicare coverage kicks in. However, eligible applicants can forgo the waiting period if they meet specific requirements.

•   Medicaid. Medicaid is designed to offset the cost of medical bills for low-income and disabled individuals. To see if you qualify for this federal and state-funded program, you can check with your state’s Medicaid office. Usually, your eligibility depends on your age, income, the number of people in your family, and if you’re disabled.

•   Marketplace health insurance coverage. If you don’t qualify for instant Medicare coverage, you can apply for a low-cost private insurance plan to fill in your coverage gap while you complete the waiting period. In addition, depending on your income and level of need, you may qualify for a “premium tax credit,” which can reduce your monthly premium payment.

Housing

Housing assistance can help you identify an affordable place to live, modify your home for your disability, or help you toward a path to live independently. Housing programs that provide financial help for people with disabilities include:

•   State-run independent living centers. Living independently can be difficult for those with a disability. That’s why states and local municipalities offer independent living centers to help folks develop their skills to live without assistance.

You can also contact your state’s department of human services or disability office to discover programs that assist with home modifications, locating housing, and housing counseling for first-time home-buyers.

•   Housing Choice Vouchers (HCV). Public Housing Agencies (PHA) offer this government-backed housing program to help people with disabilities buy homes and pay housing expenses. However, since every PHA jurisdiction is allowed to decide whether or not HCVs are offered within their jurisdiction, check with your local PHA to see if this program is available in your neck of the woods.

•   Non-Elderly Disabled (NED) Voucher. If you’re not a senior but have a disability, you may qualify for a Non-Elderly Disabled (NED) Voucher. This voucher gives you access to housing communities usually explicitly reserved for seniors.

•   Public housing. Local housing agencies (HA) offer affordable public housing to low-income families or individuals with disabilities. Each local HA determines eligibility based on your income and disability. Nationwide, close to a million families live in public housing units.

•   Low-Income Home Energy Assistance Program (LIHEAP). This government-funded program offers financial help for people with disabilities who have difficulty paying their utility bills. Also, if your utilities are turned off due to unpaid bills, the LIHEAP can provide emergency assistance.

Income and Daily Expenses

If you have a disability, you may also need help paying for basic expenses, such as food and clothing. Here are some programs available that can provide monthly financial assistance for disabled individuals and their families.

•   The Social Security Administration. Through the Social Security Administration (SSA), you may qualify for either Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), which both offer financial assistance for people with disabilities. SSDI offers financial support to disabled individuals who have worked and paid Social Security taxes long enough to qualify for assistance (you may be able to have a savings account while on SSDI incidentally). SSI also offers financial support to meet the basic needs (food, clothing, and shelter) of disabled people with limited (or no) income.

Recommended: 9 Common Social Security Myths

•   Supplement Nutrition Assistance Program (SNAP). Also known as the food stamp program, SNAP helps low-income or disabled folks suffering financial hardship save on their grocery bill. This can include using food stamps online. As a disabled adult, you could qualify for increased assistance.

•   Temporary Assistance for Needy Families (TANF). If your SSI benefits haven’t kicked in yet and you’re tight on cash, you may qualify for TANF. This is another government-backed program that offers grants to families in need of immediate financial support. It can be a source of financial assistance for the disabled in the short-term.

•   Veteran disability compensation. If you have a disability that either resulted from or worsened due to service in the military, you could qualify for a government grant or other financial assistance through government disability programs.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and an online bank are more likely than brick-and-mortar banks to offer you the best rates.

Education

If you have a disability but want to achieve a degree, financial assistance for people with disabilities is available. Here are some programs worth exploring.

•   Free Application for Federal Student Aid (FAFSA). To ease the financial burden of higher education costs, you can use the FAFSA to determine if you qualify for a variety of aid programs such as the Federal Supplemental Educational Opportunity, Grant Federal Pell Grant, and Federal Work-Study programs.

•   State and independent education agencies. You can also seek financial support from your state’s department of education or independent agencies around where you live. Remember that eligibility requirements and guidelines will vary by state and organization.

•   Total and Permanent Disability (TPD) Discharge. If you took out federal student loans to pay for higher education costs but can no longer work due to your disability, you could qualify for a TPD discharge. If you’re eligible, the TPD will serve as a disability discharge for student loans, wiping away your student debt.

What’s more, you won’t have to repay your federal loans or meet your TEACH Grant service obligations.

Other Financial Assistance for Disabled Adults

There are other programs that can offer financial assistance for disabled adults. Here are a few other options to consider.

•   Achieving a Better Life Experience (ABLE) savings account. Individuals with disabilities may qualify for an ABLE account, a tax-advantaged saving vehicle. This means account holders are not taxed on the earnings if they use the money within the account to cover qualified disability expenses such as education, housing, or medical costs. You can contribute up to $17,000 per year as an account holder as of 2023.

•   Disability loans. A disability loan is a personal loan that provides financial support for disabled adults while they wait for disability benefits to kick in. Applicants can use this type of loan to cover living costs, medical bills, or any other expense they have pertaining to their disability. Borrowers must meet the lender’s eligibility requirement to qualify. Remember, the disability loan must be repaid according to the lender’s terms and conditions.

•   Disability insurance. Many employers offer disability insurance as part of their compensation package. So, if you become disabled, your disability insurance will pay a portion of your income. Usually, short-term disability insurance supplements your salary for three to six months, while long-term disability can supplement your income from two years until the time when you can retire, depending on the plan and your condition. Plans can pay between 40% and 70% of your salary.

Worth noting: You can buy private disability insurance if you don’t have a plan through your employer.

•   Debt repayment plans.You can consider a debt management plan if your credit card debt is weighing you down. With a debt repayment plan, you work with a credit counseling agency that helps you create a solid repayment plan and can even negotiate with your creditors.

•   Loan forbearance. Some lenders offer forbearance programs if you’re struggling to pay your mortgage, halting your payments for a provisional amount of time. Your lender may also be willing to revamp the terms of your loan to make payments more manageable.

Tips on Applying for Financial Assistance

Applying for disability benefits from the Social Security Administration (SSA) might be a great place to start sourcing financial assistance if you have recently become disabled from a medical disorder.

To determine if your disability meets the eligibility requirements for benefits, you’ll want to complete the Social Security Disability (SSD) application online, via or at your local Social Security office. The application is detailed and requires documentation to support your case. Preparing carefully in advance may help you improve your chance of approval.

Here are some tips to streamline the process.

•   Include detailed responses to all application questions. It’s best to provide as much information on your application as you can. Since the purpose of the application is to prove your disability doesn’t allow you to work, you’ll want to make your answers very detailed. Simply providing “yes” or “no” answers can result in an application denial.

•   Submit ongoing medical records. Your doctor will provide your initial medical records for your application proving your disability. In addition, you should provide any other medical records when you receive them. Medical records can include lab tests, medication paperwork, treatment documents, and more. Whenever you receive a medical record from your medical professional’s office, you could forward it to the SSA. The more supporting documentation you have, the better your chances of qualifying.

•   Partner with a disability lawyer. Disability lawyers are well-versed on SSD applications. Yes, it could be an additional expense, but their expertise could be advantageous when completing the application. It might even increase the odds of benefit approval.

You can expect the entire application process usually takes anywhere between three to six months. However, the SSA may grant you an expedited process if you have a rare condition or aggressive disease.

In addition to benefits from the SSA, other government and non-profit organizations provide financial assistance to disabled adults and their families. If you’re in need, explore all available options starting with the list above. Once you pinpoint several programs to apply for, gather all your documentation (i.e., income documents, medical records, etc.) in advance to streamline the application process. Keep in mind there might be a waiting period before benefits are approved. So, it’s best to apply as soon as you can.

The Takeaway

Having a disability can be emotionally, physically, and financially challenging. The same applies if you care for a person with disabilities, literally or figuratively. Fortunately, plenty of programs are available to help with medical bills, income, housing, education, and much more. These can be available to help with short-term and ongoing needs. By doing some research and outreach, you may be able to get financial assistance to help with your needs.

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 there an income limit for these financial assistance options for the disabled?

Income limits vary by the program you’re applying for. For example, the monthly income limit is $1,470 for non-blind disabled SSDI or SSI applicants, and $2,460 for blind SSDI applicants in 2023.

Is there a chance that someone can get denied assistance?

Yes, but it depends on the program. For example, only about 20% to 30% of disability benefits applicants are awarded financial support. Denials can result from a variety of factors, including technical errors and issues with medical information.

What is the criteria for getting financial assistance as a disabled person?

Criteria and eligibility depend on the program. So, before you apply, make sure you understand the requirements of the aid you are hoping to qualify for.

Photo credit: iStock/Renata Hamuda

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