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Q: How do you do kakeibo?

The kakeibo budgeting method is fairly simple. All someone has to do is write down all of the money they have coming in each month (income) and, as they spend it, record where it goes. This method involves tracking spending in four different spending categories: general, wants, culture, and unexpected extras.

Q: How do you make a kakeibo journal?

All anyone needs to create a kakeibo journal is to grab an empty notebook they have on hand or buy an inexpensive one. There’s no need to get fancy here; a blank or lined notebook does the trick.

Aug

2024

Guide to Kakeibo: The Japanese Budgeting Method

By Jacqueline DeMarco | Budgeting & Goals, Financial Independence, money | Comments Off

Sticking to a budget can be challenging, but one of the best ways to succeed is to find a system that works for you. Following a method that meets your needs and preferences can go a long way towards getting your spending and saving on track.

One Japanese budgeting method that’s gaining a lot of attention these days is the kakeibo (pronounced kah-keh-boh) method. Essentially, this budgeting method involves keeping a journal of all incoming and outgoing money to encourage a more mindful approach to spending.

Let’s take a closer look at how this unique Japanese money management method works, including:

• What does kakeibo mean?

• How does the kakeibo method work?

• What are the kakeibo categories?

• How can you properly use kakeibo to budget better?

What Is the Kakeibo Method?

Kakeibo translates to “household financial ledger” and is a very simple budgeting method. All you have to do to embrace the kakeibo method is keep a journal and log all of your incoming earnings and all of your outgoing expenses. By keeping this journal, you, the spender, will become more mindful of each purchase you make. This can help you focus more on your goals than on impulse purchases.

At its most basic, the kakeibo method could be thought of as “slow budgeting,” meaning it slows down the pace of managing your finances. In a world of apps and websites, it may suit those who want to unplug a bit and let the details of a budgeting program really sink in by working with pencil and paper, although there are digital tools that can make kakeibo work for those who love one-click convenience.

How Does Kakeibo Work?

The kakeibo method works by creating a kind of detailed line item budget at the beginning of each month based on your projected income and spending, while keeping savings goals in mind. As you spend money throughout the month, you will keep a diary or journal of sorts where you track every single penny you spend.

At the end of the month, you can review your journal to see the progress you’ve made on your savings goals and if you stuck to your original targets. This reflection period can also help you adjust your monthly budget or behaviors as needed in the upcoming month.

History of Kakeibo

Kakeibo was invented in 1904 by Hani Motoko, who is often referred to as Japan’s first female journalist. She designed this system as a way to make a budget for beginners. Specifically, she was creating a budget system for homemakers to keep track of their household spending. The concept she designed is simple and gives people control over their budgets while helping them become more aware of their spending habits.

Properly Using Kakeibo

There are four important questions you can ask yourself in order to use this Japanese budgeting method properly.

How Much Money Do You Have to Spend?

First, it’s important to write down how much income you expect to come in. If you are a W2 employee, you can simply look at past paychecks to figure out how much you bring into your bank account after taxes in a month If you are self-employed or work variable hours, you can look at multiple months of past income to get a general idea of how much you earn.

How Much Would You Like to Save?

An important part of any budget that’s easy to forget is adding savings goals as a fixed expense. You can ask yourself how much you want to save each month and add it into your budget so you don’t accidentally spend that money.

If you’re wondering how much money to save each month, financial experts typically recommend 20% should go towards funding your savings goals. This is part of the popular 50/30/20 budget rule, which you’ll learn more about below.

How Much Money Are You Spending?

While it can be hard to nail down exactly what you spend in a month, you can start with the “needs” in life. What are the basic expenses of living? These include the essentials you need to survive, such as:

• Housing

• Food

• Basic clothing

• Utilities

• Healthcare

• Transportation for work and school

• Debt payments

As you watch your budget, kakeibo encourages you to see how your discretionary spending is evolving. For instance, you may realize that during the pandemic, you signed up for a variety of streaming services which you forgot about. You might opt to unsubscribe for one or more of them.

However, it also (as you will see from how expenses are categorized, below) encourages you to think about how to use your dollars to make your life more enjoyable.

How Can You Improve Next Month?

Any budget is a work in progress. A key element of the kakeibo method is journaling spending to encourage mindfulness. At the end of the month, you can look back at your spending to see where you can improve.

In this way, you become more intentional with your money. By getting granular with your understanding of your spending, you will better realize the impact of unplanned, impulsive or compulsive spending. And you will hopefully be better able to rein it in.

Kakeibo’s Category System

The kakeibo method involves tracking spending in four different budget categories. Here’s how they stack up:

1. General

This category consists of essentials that you can’t cut from your budget like food, utilities, healthcare, rent, and transportation. Now, while it’s true these expenses can’t be cut entirely because they are necessities, they could be decreased if needed. You could look for ways to decrease your heating bill in winter, or even move to a smaller home or one in a less expensive neighborhood.

Recommended: How Much Should I Spend on Rent?

2. Wants

Wants are purchases someone enjoys like travel, clothing, and dining out, but that aren’t essentials. Sometimes, it’s easy to blur the lines between needs vs. wants and believe that discretionary expenses are musts. A few examples:

• Thinking you need your fancy takeout latte every morning when you really could have made a cup of joe at home for a fraction of the price.

• Saying you “had” to take an Uber when, if you’d woken up a bit earlier, you could have used public transportation.

• Insisting that you “must” buy new clothes every fall, even though you might have a closet full of wearable garments.

It can be helpful to do a little soul-searching as you categorize your spending to make sure you properly identify your purchases.

3. Culture

This unique budgeting method carves out space for cultural activities. These could include:

• Museum admission or membership

• Tickets to a concert, play, or dance performance

• Books

• Admission to a local garden or zoo

Thanks to this category, the kakeibo budgeting method can get you thinking about spending towards quality of life and valuable experiences, rather than just material goods.

4. Unexpected Extras

This category includes purchases that aren’t recurring and may come as a surprise. Some examples are:

• Birthday or holiday gifts

• Car repairs

• Unexpected medical bills

These kakeibo categories can help you get a clearer understanding of where your money is going. This can, in turn, make it easier to adjust spending habits and meet savings goals. While it can feel a bit tedious to write down every single purchase, doing so can help make spending become much more mindful.

How Kakeibo Is Different From Other Budgeting Methods

Each budgeting method puts its own spin on money management. The kakeibo method is different from other types of budgets because it focuses more on creating better spending habits than strictly sticking to a budget.

By making you aware of your spending in detail, you become better attuned to your money and more aware of how impulse spending can derail your budget.

Benefits of Kakeibo

Having a budget that illuminates your financial situation and helps you avoid overspending can be a key step in financial self-care. Kakeibo has helped many people with this. Some of the specific benefits associated with this method include:

• Makes spending more mindful

• Simplifies budgeting into four distinct categories

• Encourages realistic savings goals

• Emphasizes making slow but steady progress

• Celebrates small achievements.

Disadvantages of Kakeibo

There are also some disadvantages associated with kakeibo that some budgeters may find discouraging.

• Can be time-intensive

• Detailed record-keeping is required, which can be tedious to some people

• May not provide enough structure to motivate some

Who Is Kakeibo Suited for?

The kakeibo method is best suited for someone who wants a simple budgeting method, who needs to make their spending habits more mindful, and who wants to work towards savings goals.

It may also be best for people who don’t get impatient with record-keeping, as it does involve very detailed tracking of expenses.

Alternatives to Kakeibo

If you feel the kakeibo method isn’t the right budgeting system for you, consider one of these budgeting systems instead:

• Envelope budgeting method. This technique relies on budgeting out purchases for the month in cash envelopes labeled with each intended spending category. So you’d distribute your income into envelopes marked with things like food, clothing, etc. When you’ve spent the money allocated in a given envelope, that’s it; no more is available.

• The 50/30/20 rule. With this type of budget (briefly mentioned above), 50% of expenses go toward necessities, 30% goes toward lifestyle spending, and 20% goes toward saving for financial goals. There’s also a similar budgeting principle called the 70/20/10 rule for those who have higher living expenses.

• Zero-based budget. This budgeting method requires budgeting out every single dollar of income that comes in during a month. This doesn’t mean someone has to spend all of that money; it’s possible to allocate money towards a savings goal.

Banking With SoFi

The kakeibo method is a simple budgeting technique that can help consumers break bad spending habits and become more mindful with their money. It may not work for everyone, but it may be worth a try if you’re ready to devote time and energy towards spending less and saving more.

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.

FAQ

How do you do kakeibo?

The kakeibo budgeting method is fairly simple. All you have to do is write down all of the money you have coming in each month (income) and, as you spend it, record where it goes. This method involves tracking spending in four different spending categories: general, wants, culture, and unexpected extras.

Is there an app for kakeibo?

While it’s possible to manage a kakeibo budget with good old-fashioned paper and pen, some people might want to record their spending digitally. There are a variety of apps on the market designed to help people manage their kakeibo budget.

How do you make a kakeibo journal?

All you need to do to create a kakeibo journal is to grab an empty notebook you have on hand or buy an inexpensive one. There’s no need to get fancy here; a blank or lined notebook does the trick.

Photo credit: iStock/mphillips007

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.

*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.

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.

SOBNK-Q324-040

Aug

2024

Simple Guide to Using Savings Clubs

By Jacqueline DeMarco | Budgeting & Goals, money | Comments Off

Spending money is typically fun, while saving money is hard — all that temptation to buy cool new things or try the latest restaurant. Which is why we can all use a little extra motivation to stash away some cash, and a savings club can play a role in that process.

Basically, savings clubs are a type of bank account in which the account holder contributes to the account over time to meet a specific goal. It can be a valuable option vs. breaking out your plastic and running up credit card debt.

What Is a Savings Club?

So, what is a savings club? A basic savings club definition is that it’s a bank account that the account holder uses to hold funds to meet a specific savings goal. For example, some people set up what are known as “Christmas clubs” in which they make regular contributions throughout the year to save for holiday gifts, travel, decor, and parties. By saving gradually in advance, they may be able to avoid the wallop of that major end-of-year credit-card bill.

Usually, savings clubs accounts that can be opened at a bank or credit union. They can be a good idea in terms of where to put short-term savings, as they typically earn interest. Often these savings clubs have other incentives attached to them to encourage account holders to follow through on their savings goals. There can also be penalties associated with savings clubs — such as forfeiting earned interest for withdrawing funds from the account early — to help motivate people to keep saving.

Recommended: How Much Money Should I Save a Month?

How Do Savings Clubs Work?

Usually, savings clubs create a schedule the depositor can follow to make regular deposits of a certain amount. So, say you open a savings club account to gather cash for a vacation next summer. If you want to save $1,200 over one year, the club would guide you through depositing $100 a month to meet that goal. Typically, the end date associated with a savings club aligns with your goal, whether that’s heading to Hawaii, getting married, or celebrating the holidays.

Deposits for savings clubs can be drawn from the account holder’s paycheck, which can make it easier to steadily progress towards meeting a savings goal. Automatic savings transfers can be a real helping hand because you don’t see the money in your checking, as if it’s available to be spent.

Some savings clubs allow multiple people to contribute to it — similar to another type of savings account, the joint account — so they can work together towards a savings goal. While usually only couples share a bank account, friends, or family members can choose to contribute to a savings club together to save up for a group vacation, present, or family reunion. Or some financial institutions will allow parents to help a child open a holiday savings account. In all cases, this can be a good strategy, since savings club accounts may offer higher interest than a typical savings account, though there can be penalties for early withdrawal.

Benefits of a Savings Club

There are quite a few benefits attached to savings clubs, including:

• Saving on a schedule towards a specific goal

• Offering saving incentives

• Creating discipline in a savings routine

• Teaching children about financial literacy and the value of saving

• Paying higher interest rates than typical savings accounts

Drawbacks of a Savings Club

There are also some downsides associated with savings clubs worth being aware of:

• Withdrawing funds early can lead to penalties

• Not contributing on schedule can lead to penalties

• Some savings clubs can be banking scams if not hosted by a financial institution such as a bank or credit union (beware “money board” and “circle game” schemes)

• Investing money elsewhere may lead to more growth

Savings Club vs Savings Account: What’s the Difference?

There are many reasons why you would put money in a savings account, and savings clubs offer a specific financial product to serve a specific goal. Let’s look at some differences between these two account types.

Savings Clubs Can Offer Higher Interest Than a Traditional Savings Account

One of the reasons savings clubs can be so motivating is because they often offer a higher interest rate than traditional savings accounts do. Knowing your money can grow faster can be an exciting prospect.

Savings Clubs Have Penalties for Premature Withdrawal

There are no penalties when someone withdraws money from a standard savings account. Nor is there a set period of time they have to keep their money in the account.

With a savings club, however, there can be penalties (such as losing the interest accrued) for actions such as withdrawing funds before the predetermined end date or for not making a contribution according to the savings club schedule. These penalties can be an incentive to save, but they can also create a challenging savings environment.

Savings Clubs Often Require a Minimum Deposit and Term Lengths

While basic savings accounts don’t usually have strict requirements attached to them, savings clubs often have minimum deposit requirements. These requirements may be as low as $1 or can be much higher. Savings clubs can also come with predetermined term lengths — usually six months to a year — and may require automatic weekly or bi-weekly deposits. Some people don’t like feeling “locked in” in this way.

Recommended: How Do Savings Accounts Work?

Starting a Savings Club

In most cases, you’ll start a savings club that’s hosted at a bank or credit union, review the terms, make an initial deposit, and continue funding the account.

Some people may choose to set up social savings clubs with friends and/or relatives by taking the following steps.

• Define a savings goal for the club

• Find people to join the savings club

• Create savings club rules and structure

• Commit to the planned schedule and follow through

Where the funds are actually kept can be decided by the group; an interest-bearing savings account will offer the nice perk of having your money earn money.

Banking With SoFi

Savings clubs can offer a motivating way to stockpile cash, thanks to their usually higher interest rates (compared to traditional savings accounts) and their structured schedule.

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

Why would someone join a savings club?

Savings clubs can help you efficiently save towards a specific short-term goal, like accumulating money for the holidays or for a vacation. Benefits of saving this way include a motivating format and often a higher interest rate vs. traditional savings accounts do. Also, the potential penalties associated with not sticking to the schedule can also motivate people to save.

Should I have a savings club or savings account?

Whether or not you should have a savings club vs. a standard savings account depends on your personal goals and preferences. If you benefit from having a savings schedule and are offered a good interest rate, it may be a great fit. If, on the other hand, you want the ability to withdraw funds from your account penalty-free, it may not be the right move.

Can I use a savings club for long-term savings?

Savings clubs are usually designed to meet short-term goals, not long-term savings goals. They typically last for six months to a year. Those looking for long-term growth may find that investing money elsewhere can lead to more growth than a savings club can offer.

Photo credit: iStock/MicroStockHub

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.

*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.

SOBNK-Q324-039

Aug

2024

17 Tips to Save Money on Coffee Expenses

17 Ways to Save Money on Coffee Expenses

By Marcy Lovitch | Budgeting & Goals, Financial Independence, money | Comments Off

We’re a nation of coffee lovers, with java consumption at a two-decade high, according to the National Coffee Association’s 2024 research. Whether you like a cup of basic black coffee or an iced latte with all the bells, whistles, and whipped cream, coffee may feel like an affordable treat.

However, that little indulgence and energy booster is getting more expensive. In fact, between inflation and the higher cost of coffee beans, java prices have increased nationwide. Specifically, in April 2024, the price was 26.5% higher than it was in April 2010, according to U.S. Bureau of Labor Statistics data. This means you’re most likely paying more for your coffee at home and in neighborhood and national chain coffee shops.

While you might not consider spending an extra 25 or 50 cents a cup a big deal, these expenses can add up and mess with your budget. Fortunately, there are lots of ways you can still enjoy your daily cup of joe without going broke. Read on for 17 practical ways you can save money on coffee.

How Much Does the Average Person Spend on Coffee?

It’s estimated that women shell out $2,327 on coffee each year, while men spend $1,934, according to the Perfect Brew. Statistics show Millennials are the biggest spenders with the average 25 to 34 year-old dishing out $2,008 a year on their coffee habit, followed by 35 to 44 year-olds, who spend $1,410 on coffee each year.

How Spending Money on Coffee Shops Can Add Up

The average price of a cup of coffee-shop joe costs nearly $5 according to the latest data. If you’re buying your coffee five days a week, that’s $25 a week and $100 a month. It might not sound like a lot, but do the math and you’ll find even if you’re only ordering one cup, you’re shelling out $1,200 a year just on to-go coffee. By making a few small changes to your routine, you could potentially save yourself hundreds of dollars and then use that money to open a savings account and sock the funds away for future goals, like a vacation or even a down payment on a house.

17 Great Ways to Save Money on Coffee

Think you might be spending a small fortune on coffee? It may be time to take stock of how much of your money is going towards those pots of Italian roast at home and pumpkin spice lattes when out and about. By incorporating some small changes, you can end up with extra money that can go into savings.

Here are 17 great ideas on how you can lower the cost of buying coffee every day.

1. Grind Your Own Beans

Even though bags of pre-ground coffee and whole beans may cost the same, grinding beans can be more economical in the long run. Why? Whole beans stay fresher longer compared to pre-ground coffee, which is often made with lower quality beans, additives, and fillers, tending to go stale faster. Coffee that’s lost its aroma and flavor may go unused or tossed, resulting in pouring money down the drain along with your brew.

2. Improve Your Brew Method

One reason why you might skip making coffee at home is because it doesn’t taste like it does at the coffee shop. If this is the case, it’s time to up your brewing game. Start by using the right grind size for your coffee method, such as a coarse grind for a French press or a medium-coarse grind for automatic drip. Also try figuring out your preferred coffee strength for the ratio of coffee to water, and understand the best water temperature for your chosen brewing method.

3. Invest in a Quality Coffee Maker

Here’s another smart idea for how to save money on coffee: Get a coffee maker you’re excited about. It will likely inspire you to drink more coffee at home. Purchasing a coffee maker may feel like a bit of a splurge, but in the long run, you’re likely to be spending money wisely. Making coffee at home will offset the cost of daily trips to the coffee shop.

4. Get an Inexpensive Milk Frother

Instead of paying extra for a latte or a cappuccino from your local barista, make your own at home with a milk frother. Milk frothers work by aerating the milk and creating the foam to add to your hot or cold coffee drinks. There are different types of frothers, from handheld to electric, which vary considerably in price, but you can find one on Amazon for as low as $4. Little savings like this can help you live below your means.

5. Drink Your Coffee Black

It might take time to get used to it, but by drinking black coffee, you’ll be saving money on buying milk or creamer in the supermarket and at the cafe. Some national coffee chains charge as much as 80 cents extra or more if you order coffee with certain types of dairy-free milk, such as almond, oat, soy, or coconut. What’s more, when you keep it simple and black, you can really appreciate the coffee’s true aroma and flavor.

6. Switch to a Cheaper Alternative

If you’ve been toying with giving up coffee for a less expensive fix, consider switching to tea, which can cost up to three times less than coffee you make at home. Caffeinated teas such as black, matcha, and Oolong can provide plenty of flavor while still providing you the buzz you need.

The cheapest choice? Decrease the amount of coffee you drink everyday or quit entirely.

7. Refrigerate or Freeze Leftover Coffee

Made too much coffee? No problem. Refrigerate it later and drink it iced, or add it to a smoothie with other ingredients such as peanut butter, banana, vanilla extract, and the milk of your choice. Leftover coffee can also be used to make coffee popsicles or fill an ice tray for cubes you can add to iced coffee.

8. Make Your Own Creamer

Those French vanilla and other flavored creamers can liven up your cup of joe, but they don’t come cheap. Cut your grocery bill by saying no to those costly supermarket creamers. Do a search for homemade creamer recipes on the internet, and you’ll find many different variations. Making your own creamer can be as easy as combining 1 can of sweetened condensed milk, 1-¾ cup skim milk, and 2 teaspoons of vanilla extract.

9. Add Your Own Flavorings Instead of Paying Extra

Before you head out to a coffee bar for one of those flavored treats, try spicing up your coffee at home by sprinkling in cinnamon, powdered cocoa, cayenne pepper, or vanilla extract. Fancy syrups used by coffee shops are easy to create yourself and you can find a variety of recipes online. A couple of teaspoons of maple syrup can sweeten up your java too.

Recommended: 30 Ways to Save Money on Food

10. Order the Smallest Size Coffee

The difference between buying a small and a large size coffee can be as much as 80 cents or more. Opting for a smaller cup over the largest size over the course of a week could save you about $5. That’s $20 a month and a yearly savings of $240.

11. Pay with Cash Instead of Credit

When paying for coffee, it’s easy to whip out a credit card. However, using your card each time and not keeping track can be an eye-opener when your bill comes due. If you’re carrying a balance and have an interest rate of, say, 19%, you’re paying almost 20% more by using your plastic for that cup of joe. Instead, switch to cash only for coffee to become more aware of how much you’re really spending — and to avoid getting into a position of having to pay off outstanding debt.

12. Ask for Gift Cards

For special occasions like birthdays or holidays, put a coffee gift card on your wishlist. A $15 or $20 gift card from a loved one can give you a week or two reprieve from spending your own money at coffee shops.

13. Pay with an EBT Card

The USDA’s Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, provides financial assistance towards groceries for individuals in need. SNAP recipients receive an Electronics Benefit Transfer (EBT) card to buy food items and non-alcoholic beverages at most major supermarkets as well as Amazon, Instacart, and more. This means you can use your benefits in participating retailers to buy such brands as Califia Farms, Starbucks, or Dunkin’ brand packaged coffee, K-cups or cold bottled drinks. Although Starbucks doesn’t accept SNAP at their stand-alone stores, some of its licensed kiosks found inside certain grocery sellers such as Target, Fred Meyer, and Safeway, accept EBT.

The catch? You can only purchase SNAP-eligible items that have a nutritional label. Hot foods and beverages are excluded so barista-prepared coffee isn’t covered. You can check to see what stores in your area take EBT cards with the USDA Snap locator .

14. Check out Coffee ‘Happy Hours’

Look for coffee shop happy hours where you can get your favorite beverages at lower prices. Starbucks, Peet’s, and Ziggi’s Coffee are some national chains that often offer happy hour deals, and your local coffee shop may have them as well.

15. Avoid Hanging Out in Coffee Shops

With more people working remotely, coffee shops have become a popular place to get out of the house and get one’s job done. But, as the hours pass, you’re likely to order more coffee. Just like the price of eating out vs. eating at home can be more expensive, camping out for a longer period of time also means you may feel obligated to purchase food, plus contribute to the tip jar.

16. Budget for Your Coffee

Sometimes you just have to reward yourself with a fancy coffee. This is doable as long as you work it into your weekly budget. That gives your spending some structure and gives you permission to buy that treat guilt-free. As you hone your money-saving skills by sticking to your budget, a PSL can be a great way to celebrate a job well done.

One way to create a flexible budget is to try following the 50-30-20 rule, which teaches you to allocate your take-home income into three categories: needs (50%), wants (30%), and savings (20%). That weekly peppermint mocha can be factored in as a non-essential want.

17. Use a Reusable Cup

In an effort to reduce single-cup waste, some national chains such as Starbucks, Tim Hortons and Peet’s, give customers 10 cents off of each cup of coffee if you bring a reusable cup. Drinking out of an insulated cup not only means you’re helping the environment, but your coffee tends to stay hotter longer too.

Banking With SoFi

Want to find room in your budget for a little more java? Opening the right bank account could help you save and potentially even grow your money. That way you can order a special coffee from time to time and really savor it.

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 cheaper to make or buy coffee?

Making coffee at home turns out to be much more affordable than buying coffee at a shop. Depending on the type of coffee maker and coffee you use, you can spend pennies per cup. Using a drip coffee maker can cost about 29 cents a cup compared to $3 or more at a cafe.

How much money do you save if you make your own coffee?

At about 29 cents a cup, making coffee at home can cost as little as $105.85 a year if you drink it every day. On the flip side, getting a $4 coffee at a popular cafe every day can be as much as $1,460 a year. Based on those figures, drinking coffee at home can save you a little more than $1,354 annually. In the bigger picture, over the course of 10 years, you’d save more than $13,540. And that’s without interest.

Is coffee worth the money?

For people who can’t live without their daily coffee, this is a no brainer. Spending money on coffee you love is worthwhile, as long as it fits within your budget. You shouldn’t have to sacrifice your daily pick-me-up. The key is deciding if regular visits to the coffee shop are worth the money, or if you can still enjoy a quality cup of coffee with a less costly alternative.

Photo credit: iStock/Toms93

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.

4.00% APY
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.

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.

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.

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.

SOBNK-Q324-038

Aug

2024

Effects of Social Media on Your Finances

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

Social media makes it easy to stay in touch with friends and family, spot the latest trends, and follow the news while enjoying the occasional cat meme. But your social media habits could have a negative effect on your finances if you feel pressured to spend unnecessarily in order to maintain a lifestyle that you can’t really afford.

FOMO, or fear of missing out, is a well-documented phenomenon that can drive people to make decisions based on things they see other people doing on social media. When the concept of FOMO is applied to money, it can lead to overspending and dangerous financial behaviors, all for the sake of getting likes and clicks.

Understanding how social media can hurt your finances can help you break the FOMO cycle and make smarter decisions with your money. Read on to learn:

• The negative financial effects of social media.

• At worst, how social media can impact your finances.

• How to reduce the financial impact of social media.

Negative Financial Effects of Social Media

If you’re busy checking your favorite influencers, you may not realize how social media can actually keep you poor. After all, these people might be making a living on social media, so how can it possibly be bad?

The reality is that social media can influence how you manage your money, along with the balance in your bank account, in a number of ways. If you’re wondering how Twitter or Facebook can impact your finances or whether Instagram and Snapchat are contributing to your lack of cash, here are some of the potentially dangerous side effects to consider.

Overspending

Social media can contribute to impulsive or compulsive spending if you’re constantly trying to keep up with trend-setters or you’re buying “stuff” to satisfy your emotional needs. For example, you might see your favorite beauty influencer touting a new $50 lipstick or $500 dress and decide that you need to buy it too to feel beautiful.

What you might not know is that the influencer is likely being paid to advertise these items on their social media accounts and they didn’t purchase it themselves. In that sense, social media can be a trap for overspending because it’s easy to adopt the mindset that since everyone else seems to be doing it, you should too.

Distractions Causing Less Time for Budgeting and Managing Finances

Social media can also keep you poor if you’re spending so much time online that you’re not staying on top of your financial situation and making sure you’re sticking to your budget. Whether you use an envelope system or the 50/30/20 budget rule, a budget is at its core a personal plan for spending the money that you earn each month. Without a budget, it’s much easier to lose track of expenses and give in to FOMO spending.

You might also turn a blind eye to how much debt you might be racking up as a result of social media-driven spending. By the time you get around to taking a break from social media, you could have a stack of credit card bills to deal with.

Trying to Keep Up With Your Friends

The types of people you surround yourself with can have an impact on how you manage your money. If your social media feeds are full of friends who are going off on expensive vacations, driving flashy cars, or buying big homes, it can be very tempting to try to match those behaviors in your own life.

The problem is that unless your friends are being open about their finances, you don’t really know how they’re able to afford those things. They could be living in a beautiful home, for example, but struggling to make the mortgage payments each month. Or they might drive a luxury vehicle with a four-figure car payment. Or perhaps their family is wealthy and helps them with their bills.

If you try to replicate their lifestyle, it’s possible that you could quickly find yourself struggling financially. On the other hand, developing financial discipline can make it easier to live a lifestyle that you enjoy, without causing yourself unnecessary stress.

Buying Trendy Items

Ever bought something just because you saw it advertised on your social media feeds? That’s one tricky way that social media platforms keep you broke.

You might buy something because the ad makes the item seem as if it will dramatically improve your life. Or perhaps it’s something that everyone else is buying and you want to feel like you’re part of the trend. The trouble is that once the trend eventually dies, you’re stuck with that item and you’re out the money you paid for it.

That’s not just limited to clothes, bags, or accessories either. Many young people turn to “finfluencers” to get their financial, and even investment, advice. This exposes them to potentially bad advice, as well as outright fraud.

Dealing With Constant Advertisements

Ever been searching for something on Google, then you open up social media and see an ad for it? If you’re trying to wrap your head around how Snapchat or Facebook can impact your finances, targeted advertising could be the answer.

The average person can see thousands of ads per day and quite a few of them are concentrated on social media outlets and search engines. And once you see an ad, it’s hard to unsee it. The flashier the ad, the more you might be tempted to click and make a purchase. If you’re trying to quit spending money, ads can be the biggest roadblock to your success.

Falling Into the Trap of an Influencer’s Fantasy Life

At first glance, influencers seem to have it made. They’re living in nice homes and wearing the latest designer clothes, they look perfect, and they’re rich. Or at least, that’s the way it seems.

Following influencers can be harmful to your mental and financial wellbeing if you feel like you need to try to emulate their lifestyle. Once again, you don’t know what their life is like behind the scenes or how they’re financing it. For every big influencer making six or seven figures, there are scores of micro-influencers who are making much less. And in some cases, they may be dressing up their lifestyle for the camera to hide the fact that they’re not truly wealthy. Or they may just be showing off swag that they got for free or are being paid to promote. Try to keep up, and you could see your financial wellness spiral downward.

Helpful Tips to Reduce the Financial Impact of Social Media

What happens if you fall into any of the traps above? High credit card debt, empty bank accounts, and increased stress can all be signs that social media may be negatively affecting your money management.

Fortunately, there are some things you can do to reduce the negative impacts social media might be having on your financial life.

Unfollowing Brands and Influencers

Hitting the “unfollow” button on brands and influencers can remove those accounts from your social media feeds. And it can be a major, positive moment in your financial self-care. When you can’t see what an influencer is up to or what a brand is advertising, there’s much less temptation to spend. You can instead focus on following accounts that add to your quality of life in some way (perhaps with money-saving hacks).

Focusing on Yourself and Managing Finances

Turning your attention to mastering personal finance basics is another way to break the cycle of allowing social media to influence your money decisions.

For example, if you don’t have a budget in place yet, you can block off an afternoon or evening to sit down and make one. Or you could spend time researching the benefits of an emergency fund and the best place to open a checking account.

Replacing social media time with these kinds of tasks can help you to improve your financial situation little by little. And the more you learn about personal finance, the more motivated you might become to save more while spending less.

Improving Your Money Mindset by Removing FOMO

Taking the FOMO out of your financial decision-making can go a long way toward bettering your money situation. Instead of automatically allowing yourself to spend, ask yourself why you feel tempted to do so. For example, if you see an influencer sporting a new $500 bag that you’d like to buy, take time to analyze what that bag is really going to cost you.

How many hours of work will you need to do to make the $500 after taxes needed to pay for it? And how often will you use the bag? What will it add to your life? Asking these kinds of questions can help you to decide if a purchase that’s FOMO-driven is truly worth it.

Budgeting for Any Purchases You Make

A budget is a simple but powerful tool for controlling spending. You can use a budget to minimize the negative impacts of social media by committing to only spend money on planned purchases. That means no impulse buys or unanticipated spending.

True financial emergencies can be the exception to this rule. If you’re building an emergency fund, you can use that money to pay for any unexpected expenses that might come along. Otherwise, if it’s not in the budget, you don’t spend it.

Setting a Waiting Period Before Making a Purchase

Applying a temporary 30-day rule can help to curb FOMO. The 30-day rule advocates delaying impulse buys for 30 days to decide whether you really want to spend money on them or not. Taking time to let the idea of the purchase cool off can give you perspective on whether you should spend the money.

At the end of the 30 days, you might decide that the purchase isn’t that necessary after all. Using the 30-day rule can keep you from wasting money on things you don’t need or won’t use.

Setting a Screen Time Limit on Your Phone

The average person spends two and a half hours on social media per day. If you’ve never kept track of how much time you spend scrolling each day, you might be surprised by what it adds up to.

A simple fix is setting limits on screen time. So, for example, you might allow yourself 10 minutes to check social media on your lunch break and another 20 to 30 minutes in the evening. Spending less time on social media can free you up for other things, like managing your finances or developing healthy, inexpensive hobbies.

Deleting Social Media

If you continue to feel like social media is negatively impacting your finances, you could simply delete it altogether. Removing social media apps from your phone means you can’t just scroll mindlessly and find yourself in a sea of ads and promotions.

This action can also make it easier to set limits on screen time if you’re having to open up your laptop to check social media. Yes, you still have your accounts; removing the apps alone won’t delete them.

If you want to take your social media purge to the next level, you can delete your accounts and profiles altogether.

Curating Social Media Feeds

If you don’t want to abandon social media entirely, you could try curating your feeds instead. Social media algorithms are designed to show you more of the things you’re already searching for or suggest things based on your search history. By focusing your searches on things that provide you with real value and inspiration, you may be able to weed out influencers or excessive ads that could lead you to overspend.

Removing Payment Apps From Your Phone

Mobile payment and mobile wallet apps can make buying things online or in stores convenient. Instead of fishing out your debit or credit card and typing in all those digits, you can pay with a click or a tap at checkout.

The problem is that mobile payment apps can make it all too easy to make purchases without thinking. Removing those apps from your mobile device (typically, just by holding your finger on the app till the x appears), unlinking your cards, or deleting your accounts altogether can make it easier to avoid situations where you might spend without thinking. Having to take the extra time to break out your plastic and type in the digits might provide much-needed time to think over the urge to buy.

Improving Financial Accountability

Being accountable to yourself about what you spend can act as a motivator to limit unnecessary or frivolous spending. If you’re having a hard time staying accountable and sticking to your budget, you might enlist the help of a friend or family member to reinforce positive financial behaviors.

For example, if you’re about to spend money on the latest accessory or electronic gadget, you can call up your accountability partner and ask for advice. They can talk you through whether the purchase is a good idea or not and help you put into perspective why you should — or shouldn’t — spend the money.

Managing Finances With SoFi

Being aware of how social media can hurt your finances can help you take steps to counteract its negative impacts. For example, streamlining your financial accounts can make it easier to keep tabs on your money.

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

Are there positive financial impacts of social media?

Social media can have a positive impact on your finances if you’re following accounts that genuinely help people manage their money better. For example, you might learn about new budgeting techniques, pick up savings hacks, or get tips on how to reduce expenses by following reliable financial accounts on social media.

Does social media lead to debt problems?

Social media can lead to debt problems if you’re charging more than you can pay off on your credit cards or taking out loans to finance a lifestyle that you can’t realistically afford. You might get into a situation where you can’t afford to pay your bills.

What are good financial accounts to follow on social media?

When deciding who to follow on social media for financial tips or advice, do your research. Look at their follower count, but also consider the quality of the advice they’re offering. You can look at their credentials to see if they have any financial certifications, are affiliated with respected financial institutions, or have personal experience dealing with the type of advice they’re offering. And be wary of any influencer whose only goal seems to be to sell something to you.

Photo credit: iStock/Suwaree Tangbovornpichet

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.

*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.

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-Q324-051

Aug

2024

14 Tips for Saving Money on a Low Income

By Krystal Ndoni | Budgeting & Goals, Family Finances, money | Comments Off

If you have a low income and sometimes struggle to make ends meet, you are hardly alone. According to a February 2024 MarketWatch Guides survey, as many as 66.2% of Americans currently feel like they’re living paycheck to paycheck, meaning roughly two out of every three people are feeling somewhat strapped.

Factors that can make saving money challenging include inflation (the cost of living has risen sharply in recent years) and heavy debt loads, with the average person carrying $6,000+ on their credit cards. These two forces can quickly eat away income, making it feel impossible to save.

Thankfully, there’s a way forward. What follows are 14 smart tips for how to save money on a low income. They can help boost your financial wellness.

Smart Ways to Save Money with Low Income

1. Finding a Budget Method That Suits You

A budget is a way for you to track your income, help you make good financial decisions, and plan towards goals. It paints a picture of how much money you have coming in and going out and how you are allocating funds, which you can use to identify areas for improvement. A budget can also help you see what resources you have available to cover your living expenses. With it, you can see how to make money stretch further.

There are a wide range of budget methods to choose from. A traditional approach is building a line item budget, which involves tracking your expenses in a spreadsheet. You can build a spreadsheet from scratch, or use a template.

Google Sheets has a free template that’s great for beginners, and you can also create a budget in Excel. If you prefer to simplify the process, you might want to download a budgeting app that can categorize and track your spending for you.

Whatever budgeting style you choose, it’s a good idea to automate the saving process. Once you see how much you can realistically set aside each month, consider setting up an automated recurring transfer from your checking account into a savings account (ideally a high-yield savings account).

2. Watching Money Spent on Food and Drink

If you’re thinking about how to save money with a low income, one wise move can be dining in. That may mean opting for pasta at home instead of the cute Italian place nearby.

Making meals at home is typically cheaper than eating out. And the gap has widened: In recent years, restaurant prices have risen faster than general inflation. Just keep in mind that cooking at home can cut costs as long as your grocery bill is sensible. Look for budget-friendly recipes that are simple and use all the ingredients in your pantry. Search online for affordable recipes, including “recipes under $10.” You’ll likely find many options.

Another way to save money on groceries is to choose more affordable proteins like eggs, beans, chicken, fish, and quinoa over beef and lamb. Also consider saving alcoholic beverages for weekends or special occasions only, and reach for lower-cost drink options like home-made iced tea, flavored seltzers, or good old tap water on the weekdays.

3. Getting Rid of Debt One Step at a Time

Studies show that debt can cause stress and negatively impact mental and even physical health. Paying off debt can be a major motivation to save money. It’s one less bill to pay at the end of the month, and the freedom is empowering.

How to approach debt reduction? Always be sure to pay at least the minimum amount due. Then consider these two techniques that can help you become more financially stable with a low income:

• In the snowball method, you use extra funds to pay off the smallest debt first, giving you a sense of accomplishment for wiping out a balance. Then you move on to the next smallest debt.

• In the avalanche method, you use extra funds to pay off high-interest accounts first, regardless of the balance. That can be a wise move since this is the kind of debt that often keeps people owing money for a long period of time. Credit card debt is a common example of high-interest debt.

You also can combine your debts into one account with a debt consolidation loan. These personal loans typically have a lower annual percentage rate (APR), which can save you considerable money in the long run.

4. Finding Ways to Get Rid of Nonessentials

When creating a budget, it’s a good idea to create two main spending categories — essential and nonessential expenses.

Essential expenses will include housing, groceries, transportation, utility bills, and more. An example of transportation costs might be car payments, car insurance, gas, monthly train passes, and so forth.

Nonessentials usually include wants vs. needs (such as items like clothing you like but don’t require and entertainment). If you’re a sneakerhead or handbag collector, it may be time to pause shopping. But if you need fresh clothes and shoes for work, set a target amount you can afford to spend that month. Make your dollars stretch with sales racks at stores or second-hand steals.

5. Changing to a Cheaper Entertainment Subscription Model

Can’t live without Netflix? What about HBO, Disney, and Hulu? Combined, those streaming services can debit a fair amount of money out of your checking account each month (or, depending on how you pay, year).

While it’s important to unwind, sometimes cutting entertainment is worth the savings. Consider free entertainment on your TV or computer. There are plenty of apps that offer free on-demand and live streaming services. You can also get classic TV antennas that pick up the major networks for free.

Finally, try the library. Most carry more than just books — movies too. You just need a library card.

6. Cutting Back on Larger Expenses

Looking for other ways to save money on a low income? You may also be able to cut some of your large monthly bills. Your biggest expense is likely housing, so you might start there. Several factors affect rent or mortgages, like location and amenities. Consider living in a cheaper neighborhood temporarily. Also, a home with fewer amenities like a patio or pool are typically cheaper.

Other options include getting roommates or, if it’s feasible, even going rent-free. If you have family nearby, it might be worth asking to live with them for a low fee or even rent-free, provided you have a plan to get on your feet or can contribute to the household (say, by cooking or cleaning).

Transportation is another large cost. If your job is a safe and reasonable distance to bike to, try it out. Bikes are generally inexpensive to maintain, plus offer the benefit of staying fit and going green.

7. Saving What You Can

It’s also a good idea to cut smaller costs that, due to frequency or habit, tend to add up. An $8 fancy coffee once a week costs $416 a year. On a smaller income, that can eat away your earnings. If you can save $5 or $10 a week by making one or two minor changes — that’s a good start. It’s better than saving zero dollars. And even small savings can add up to a significant sum over time.

8. Separating Money for Yourself From Other Expenses

One simple way to make sure you save is to pay yourself first. That means that before you pay your other bills, you take out a set amount of money and put it into savings as soon as you get paid. Whatever is left over is the money you can spend on everything else. Once the money you set aside for yourself (and your goals) is out of your checking account, you won’t be tempted to spend it.

9. Turning On Alerts for Bill Payments

Setting up reminders for your bills can help you avoid late fees, which can eat up your funds. You can set up alerts using the calendar on your phone, or you can use a budgeting or payment app to keep you on top of upcoming payment due dates.

Even better: Consider setting up autopay for all of your regular bills. This can help ensure you never miss a payment. Just keep in mind that you will need to make sure you have sufficient funds in your account before payments are pulled.

10. Spending Less on Your Car

A car can be expensive. Some tips to make it more affordable:

• Buy a car — don’t lease. You generally get more value paying off a car compared to leasing a car.

• Buy used. Used cars are typically cheaper than new cars. And, because they’re used, the insurance tends to be cheaper as well. Buying a pre-owned car also means it won’t lose value as quickly as a new car. Some estimates say that a new car loses 20% of its value in the first year.

• Aim to get a car that gets great gas mileage. An SUV or truck can easily cost $100 for a full tank. If you’re paying for a gas guzzler, it might be worth downsizing to a car that gets better gas mileage.

11. Finding Ways to Cut Entertainment Costs

Reading, listening to music, and tuning into your favorite program are all free or low-cost ways to relax and have fun.

Instead of booking concert tickets for your favorite band, consider listening to their tunes on free apps (YouTube, for instance). Also check listings and see which local bands are playing; that could be a good way to discover some new favorites.

If you enjoy a good show, check out free TV streaming apps like Tubi or Pluto TV. Both have a great selection of movies and shows on demand or live.

12. Eliminating Your Bad Habits

If you’re looking to improve your financial situation, it’s a good idea to look at your good and bad spending habits.

Do you buy groceries at the gourmet deli instead of a cheaper supermarket? Do you tend to eat out because you didn’t pack a lunch? Do you leave the AC running in your apartment while you’re out all day?

These are all costly habits you can change. Find a cheaper grocery store. You’ll find your dollar can stretch a lot further with cheaper prices. Try meal prepping on weekends so you can pack lunches for work each week. Lastly, run electricity only when you need it — and compare bills. You’ll likely see a difference.

13. Committing to a Month of No Spending

A no-spend challenge can be a fun way to save.
A no spend-challenge means that you avoid discretionary spending altogether for a set period of time, such as 30 days. During that time you only spend on necessities like rent and groceries, and don’t spend money on movie theater tickets, clothes, or even chocolate. You might want to let your friends know you are doing the challenge so they don’t tempt you into spending. They might even join you.

At the end of the challenge, you’ll have likely saved a significant sum of cash. You may also find that you didn’t miss some of the things you stopped spending on and decide to cut them out of your budget or reduce how much you spend on them.

14. Getting Help if You Need It

If you find yourself still living paycheck to paycheck, there’s help.
If you have substantial debt, consider reaching out to the nonprofit National Foundation for Credit Counseling (NFCC)). They offer free and low-cost debt and credit counseling, along with other services.

Also, cities, states, and the federal government provide help in the form of subsidized housing, discounted healthcare, and free groceries. Simply call the 211 network 24/7 to share your situation and get connected to the right people.

You can also use the government’s benefit finder that can match you with the right programs.

15. Automating Your Savings

Once you have a budget in place, it’s easier to know how much you should save a month.

As mentioned above, one way to simplify saving is to try automating transfers, a feature many banks offer that moves money from your checking account to your savings account on a certain date. For example, if you’re paid every Friday, you can set up an automatic transfer of the desired amount to your savings or investment accounts.

If you put away $50 each week, you’ll have $2,600 at the end of the year.

Why Saving Money With a Low Income Is Possible

No matter what your income, it’s tempting to live like a rock star or just try to keep up with your higher-earning friends. Or you might feel like your smaller earnings are not worth saving, and you’ll wait till you make more. But it’s possible to save more than you think even on a lower income.

If you make savings a priority and adjust your lifestyle to your income, it can pay off and help you increase your financial well-being. Simple changes like learning to budget, choosing lower-cost groceries, swapping out driving for cheaper (and greener) forms of transportation, and buying second hand can all help you take control. These moves can also help you pay down any debt you may have, build your rainy-day savings, and achieve longer-term financial goals.

The Takeaway

Whether you earn a lot or a little, living within your means always pays off.
Budgeting is the first step to getting your finances organized. It’ll help you see how much money you have to cover your monthly expenses and how much you have leftover for savings. You’ll also see a clearer picture of your spending habits.

Once you have a sense of your spending habits, you can find ways to spend smarter. That means finding cheaper options for necessities and cutting nonessential spending.

Finally, be sure to set attainable savings goals and put your cash away in a high-yield account to help it grow faster.

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

Why is saving money so hard?

Saving can often be hard because of our mindset. We don’t focus on creating and sticking to a budget and instead spend feely, in the moment. If you are following a budget but find it hard to free up cash to save, you might take on a side hustle to help bring in more income.

What happens if you don’t save money?

Having money in savings is a safety net for unexpected expenses like a medical bill or job loss. Without one, you may find yourself unable to pay for bills, which could cause you to take on high-interest debt and/or pull you closer towards poverty. It’s wise to have at least three to six months’ worth of living expenses stored away in case of emergency.

How do I get the motivation to save when I do not make much?

With social media in today’s culture, it might seem like everyone has what they want (except you). So it’s important to put on blinders, and focus on your journey. Delete apps that encourage you to overspend, and ask trusted friends or mentors to navigate this territory together. Save whatever amount you can: Don’t get discouraged by comparing yourself to others’ savings plans.

Photo credit: iStock/Rocco-Herrmann
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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.

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