Jan
27
2025

Creating a Financial Vision Board

By | Financial Independence, money, Money & Life | Comments Off on Creating a Financial Vision Board

A financial or money vision board can serve as a regular visual reminder of what you’re hoping to achieve. Creating a money vision board can help you stay motivated if you have some big (or small) financial milestones you’re working toward. That might mean culling images and quotes about owning your first home to inspire you, or it could be pictures of the trip to Hawaii you’re saving for.

Visualization can help you develop the mindset and focus you need to crush your money goals. Here’s advice on how to create a financial vision board.

Key Points

•   To create a money vision board, start by defining specific financial goals such as debt repayment, home savings, or retirement planning.

•   Choose between a digital or physical board, using appropriate platforms or materials.

•   Select images and words that align with your financial aspirations and organize them inspirationally.

•   Regularly review and update the board to reflect achieved goals or financial changes.

•   Place the money vision board in a visible location to stay motivated and focused on financial goals.

Understanding Money Vision Boards and Their Purpose


A vision board is a collection of images, quotes, phrases, and words that reflect what you want your ideal life to look like. A money or financial vision board (sometimes called a wealth vision board) is specifically related to what you’d like to achieve financially.

In theory, visualization is meant to help you harness the mental power to reach savings goals. The idea is that if you can visualize yourself doing something in your head, that can help you to do it in real life.1

Using a vision board for money goals could help you overcome mental roadblocks that may have prevented you from achieving them. For example, say you’ve always struggled to save money. You might use a savings vision board to picture what your life would look like when you’re in the habit of setting aside money regularly.

Steps to Create Your Financial Vision Board


Creating a money vision board is a fairly simple process. You first decide what goals to include in your board and then find images that reflect the lifestyle you’re working toward.

Defining Your Financial Goals


The first step in this process is creating your vision board financial goals. When it comes to setting financial goals, the more detailed you can be, the better.

Ask yourself what you want to achieve with your money. If nothing is coming to you, here are some money vision board ideas to get your creativity flowing.

I want to…

•  Pay off $10,000 in credit card debt in the next 12 months

•  Save $25,000 toward a down payment on a home

•  Establish a savings account to serve as an emergency fund and contribute to it regularly

•  Start an online business so I can quit my job

•  Max out my 401(k) every year

•  Retire at age 50 and travel full-time

The beauty of a financial vision board is that you can shape it around whatever goals speak to you the most. Your vision board can include small and big goals (say, buying a new phone or buying a house) or long and short-term financial goals. It’s entirely up to you to decide what your ideal financial future looks like.

Recommended: Average Savings by Age

Gathering Materials and Images


Once you have some ideas for your financial vision board, it’s time to start curating your images. How you complete this step will depend on whether you’re creating a physical or digital vision board.

If you’re creating a digital money vision board, then you might draw your images from:

•  Pinterest

•  Instagram and other social media platforms

•  Digital magazines

•  Free stock photography websites

•  Search engines

Choose a spot to organize your image files in one place. You may download them to a specific folder on your computer or phone, or upload them to an online vision board platform.

If you prefer a physical vision board, you’ll need something to attach your images to. That could be a piece of cardstock, poster board, cardboard; anything that’s firm enough and large enough to hold your collage will do. You’ll also need scissors and glue.

Where can you look for images? Magazines are an excellent resource but you may also thumb through books or use personal photos you’ve taken. You could also print out images you find online.

What should you be looking for? Consider using these tips to decide which images to collect.

•  Pick anything that speaks to you, even if you’re unsure whether the image will make it to your final collage.

•  Be open to different image sizes, colors, and content. Words and phrases can work well, too.

•  Once you’ve collected all your images, look at each one and ask yourself how it connects to your goals.

•  Choose the images that resonate most with your overall vision.

Now, how should you arrange your images and words? It’s entirely up to you. You might group images according to whether they relate to a short-, mid-, or long-term goal. Or you might group them by color to create a harmonious aesthetic. Whatever appeals you and makes your financial goals visible will do.

If you need some financial vision board examples, a simple online search can turn up plenty of results that you can use as inspiration.

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Key Elements to Include in Your Money Vision Board


Every vision board is different, but they share some things in common. The basic elements of a money vision board include:

•  One or more clearly defined money goals that are personal and meaningful to you

•  Images that are relevant to each of your financial goals

•  Quotes, phrases, words, or affirmations that reinforce your goals and motivate you to pursue them

•  A timeline or deadlines for realizing each goal that you’ve included

Some people like to include a photo of themselves and/or their family at the center of their money vision boards. This is just another way to reinforce the goals that you’ve set and remind yourself of the lifestyle or achievement that you’re dreaming of.

Recommended: How to Open a Bank Account

Digital vs. Physical Financial Vision Boards


Is a digital or physical wealth vision board better? It’s a matter of preference.

•  A digital board is portable and you can access it on the go. It’s also relatively easy to edit since you can add and remove images as you achieve older goals and set new ones.

•  Physical vision boards may not be as easy to update but they can be more visible if you’re placing yours in a conspicuous spot. For example, you might hang your vision board above your desk if you have a home office or tack it to the front of the refrigerator.

With a digital vision board, you run the risk of it becoming an out-of-sight, out-of-mind situation if you’re not looking at it regularly. One fix for that could be to download your vision board as an image file and use it as a wallpaper for your devices.

Using Your Vision Board for Financial Motivation


Vision boards are meant to drive you to action and get you started on your goals. Here are some helpful tips for using your vision board to keep your eyes on the financial prize.

•  Keep your vision board in a place that’s easily accessible and take time to look at it daily.

•  Consider choosing one image each day to meditate on.

•  Develop a mantra that you can associate with your vision board and goals and incorporate it into your meditation routine.

These types of activities keep the images you’ve chosen front and center in your mind.

What if you aren’t hitting your goals as quickly as you’d like? You can use your vision board to re-center and regain focus if you’re feeling unmotivated. And when you do reach a milestone that you’ve included on your vision board, be sure to celebrate it. (Within reason, that is. You don’t want to deplete your checking account.)

Updating and Evolving Your Money Vision Board


A money vision board isn’t meant to be static; it should reflect your goals and motivations as you move through different life stages and seasons. Updating your financial vision board can help you keep sight of your goals, even if what you’re working toward now is different from where you started. Some pointers:

•  You may want to review your money vision board each time you achieve one of the goals you’ve included on it. Perhaps you hit the goal amount for the savings account that holds your emergency fund. It could be the right time for a reset.

•  Another time to review your financial vision board could be when there’s a major change in your life that could impact your goals. For instance, if you get married, switch jobs, or have a baby, you may want to revisit your money vision board and update it. Or perhaps you received a major refund into your online bank account and are thinking about how to allocate it: That could be a time to rethink your financial vision board to encourage you as you get closer to your goal.

•  At a minimum, it’s helpful to sit down with your board at least a couple or a few times a year to see how far you’ve come and gauge whether your goals have changed.

•  The beginning of the year is a great time for a check-in if you use January as a jumping-off point for goal planning.

But any time of year can be the right time to review your vision board and make any changes that might be needed. If you feel motivated, it’s probably a sign that it’s time to dive in.

Recommended: Budgeting Guide

The Takeaway


Most of us have goals that money will enable, from buying a home to retiring comfortably. A money or financial vision board is a visual representation of those goals that can help inspire you to actualize your aspirations. Whether you make a digital or physical one, it can help you contemplate and actualize your dreams.

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FAQ

How often should I update my financial vision board?

It’s helpful to review your vision board at least a couple of times a year, though you may schedule reviews more often if you’re making steady progress toward your goals. Reviewing your money vision board is a chance to make sure your goals still fit where you are now and where you’d like to be. If your goals no longer align or you’ve been able to cross some of them off your list, you can update your vision board to reflect that.

Can I create a money vision board with my partner or family?

You might create a money vision board with your partner or family if you have shared financial goals. For example, you might work with your partner or spouse to create a vision board centering around your joint goal of buying a home. Or you might help your kids create money vision boards of their own if they have goals they’d like to achieve.

Are there apps for creating digital money vision boards?

Digital vision board apps and graphic design platforms are great for creating vision boards online. Canva, for example, offers vision board templates that you can customize. You could also use Photoshop or ProCreate to whip up a visually appealing money mood board.

Photo credit: iStock/Barbara Lorena Vergara

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 3.80% 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.

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Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

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

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

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Jan
27
2025

What Is the Kiddie Tax?

By | Family Finances, invest, Investing | Comments Off on What Is the Kiddie Tax?

The kiddie tax is a tax rule designed to prevent parents from shifting investment income to their children to take advantage of lower tax rates. Introduced in 1986, it ensures that unearned income from a child’s investments, such as dividends and interest, is taxed at a higher rate once it exceeds a certain threshold.

Understanding how the kiddie tax works is important for parents of children under age 24 who may be earning money from their own savings and investments. What follows is a simple breakdown of the kiddie tax rules, including who is subject to kiddie tax and how to keep your child’s unearned income below the kiddie tax threshold.

Key Points

•   The kiddie tax prevents parents from shifting investment income to children to take advantage of lower tax rates.

•   If a child’s unearned income exceeds the kiddie tax threshold, it’s taxed at the parents’ tax rate rather than the child’s tax rate.

•   The kiddie tax threshold is $2,600 for 2024 and $2,700 for 2025.

•   Unearned income includes dividends, interest, and capital gains.

•   Tax-efficient investment strategies can help minimize the impact of the kiddie tax.

Definition and Purpose of the Kiddie Tax


The kiddie tax applies to unearned income of children under age 24 (with some exceptions). Unearned income refers to any income that is not acquired through work, and includes income received through investing, such as capital gains distributions, dividends, and interest.

Kiddie taxes were introduced in 1986 as part of the Tax Reform Act to prevent parents from transferring wealth to children as a tax loophole.2 Before the kiddie tax, wealthy families could transfer income-producing assets or make large stock gifts to their children, who were in lower tax brackets, thereby reducing their overall tax liability. The kiddie tax rule ensures that high levels of unearned income are taxed at a rate comparable to the parents’ tax rate rather than the child’s lower rate.

Who Is Subject to the Kiddie Tax?


The kiddie tax applies to children aged 18 and younger, as well as full-time students who are aged 19 to 23, whose unearned income is higher than an annually determined threshold. For 2024, the kiddie tax threshold is $2,600; for 2025, the threshold is $2,700.

If a child meets the above criteria, any unearned income that exceeds the annual threshold will be taxed at the parents’ higher marginal tax rate rather than the child’s lower rate.

An exception to this investment tax rule is a child aged 18 or a full-time student aged 19 to 23 with enough earned income (from working) to cover more than half the cost of their support. Those under 24 who file tax returns as married filing jointly or who are not required to file a tax return for the tax year (due to income below the filing threshold) are also exempt.

It’s also important to note that the kiddie tax does not apply to a child’s earned income; their wages, salaries, or tips are taxed at the child’s own tax rate.

Recommended: When Do You Pay Taxes on Stocks?

How the Kiddie Tax Is Calculated


The kiddie tax is calculated based on the child’s unearned income. This generally includes interest, dividends, capital gains, taxable scholarships, trust distributions, and income from gifts or inheritances. It also includes any taxable welfare or Veterans Affairs benefits distributed to a child.

Here’s how the kiddie tax rate applies for tax year 2024 (filed in 2025):

•   The first $1,300 in unearned income qualifies for the kiddie tax standard deduction and is tax-free.

•   The next $1,300 in unearned income is subject to the child’s tax rate.

•   Unearned income above $2,600 is taxed at the parents’ marginal tax rate.

The kiddie tax threshold increases for for tax year 2025 (filed in 2026):

•   The first $1,350 in unearned income is tax-free.

•   The next $1,350 in unearned income is subject to the child’s tax rate.

•   Unearned income above $2,700 is taxed at the parents’ marginal tax rate.

Marginal tax rates for parents range from 10% to 37% for the 2024 and 2025 tax years.

Recent Changes to Kiddie Tax Laws


The kiddie tax first emerged as part of the Tax Reform Act of 1986 as a way to ensure that wealthy parents could not significantly reduce tax obligations by shifting large amounts of investment income to their children. The rule stipulated that all unearned income above a certain threshold is taxed at the parent’s marginal income tax rate rather than the child’s tax rate.

In 2017, the Tax Cuts and Jobs Act made an adjustment to the kiddie tax rule effective for tax year 2018: It substituted the tax rates that apply to trusts and estates for the parents’ tax rate. However, this made the kiddie tax significantly more costly to certain families, including Gold Star children that receive survivor benefits.

In response, Congress included a provision in the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), which became law in 2019, to revert the kiddie tax to the old rules, where unearned income is taxed at the parents’ marginal tax rate rather than the trust tax rates. This change was retroactive to the 2018 tax year, allowing affected taxpayers to amend prior-year returns (if desired).

Since then, no major revisions have been proposed or enacted regarding the kiddie tax, though that’s always subject to change.

Recommended: How to Calculate Stock Profit

Strategies to Minimize Kiddie Tax Liability


To reduce potential kiddie tax liability, parents can implement several tax-planning strategies:

•   Track your child’s investment income throughout the year: If their earnings or gains get close to the threshold, you may be able to sell losing stocks to trigger a capital loss. This strategy, known as tax-loss harvesting, could help offset the gains and potentially allow your child to avoid a kiddie tax hit.

•   Invest in tax-efficient accounts: Consider placing your child’s assets in tax-advantaged accounts like 529 college savings plans or Roth IRAs for kids (if they have earned income), where investment gains grow tax-free.

•   Explore municipal bonds: Interest earned from municipal bonds is generally tax-free at the federal level and may also be exempt from state and local taxes.

•   Shift investments to growth stocks: For tax-efficient investing, you might choose growth stocks that focus on appreciation rather than paying dividends. This can defer taxable income until your child sells the investment (likely at a lower tax rate).

•   Encourage earned income: The kiddie tax does not apply to a child who is age 18 to 23 if their earned income exceeds 50% of their support for the year.

Reporting Kiddie Tax on Your Tax Return


To report and pay the kiddie tax on a child’s unearned income, you can have your child file their own tax return using IRS Form 8615. Or, if your child’s gross income is less than $13,000 in 2024 (less than $13,500 in 2025), you may be able to include your child’s unearned income on your own tax return using IRS Form 8814. This simplifies tax filing but may result in a higher overall tax burden if it increases your adjusted gross income.

It can be a good idea to consult an accountant or tax professional to determine the best approach for your situation.

The Takeaway


The kiddie tax serves as an important safeguard against income shifting by taxing a child’s unearned income at their parents’ tax rate when it exceeds a certain threshold. Understanding the limits that may apply to your child’s unearned income and how the kiddie tax is calculated can help you understand their tax liabilities, as well as tax-efficient strategies that may be employed.

Determining the tax rules and obligations your family may be subject to can be complicated, however, so it can be a good idea to consult with a tax or financial advisor.

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FAQ


What types of income are subject to the kiddie tax?


The kiddie tax applies to a child’s unearned income, which includes interest, dividends, capital gains, taxable scholarships, trust distributions, and income from gifts or inheritances. It does not apply to earned income from wages, salaries, or self-employment.

If a child’s unearned income exceeds the annual threshold ($2,600 for tax year 2024; $2,700 for tax year 2025), the excess is taxed at the parents’ marginal tax rate. This prevents parents from transferring income-producing assets to children to reduce their tax liability.

Are there any exemptions to the kiddie tax?


Yes, the kiddie tax only applies to a child’s unearned income, which may include income from savings and investments above a certain threshold. Earned income from a part- or full-time job or self-employment is not subject to the kiddie tax. Other exceptions include a child with earned income totaling more than half the cost of their support or who is not required to file a return for the tax year (due to income below the filing thresholds).

At what age does the kiddie tax no longer apply?


The kiddie tax no longer applies once a child turns 19, or 25 if they are full-time students, by the end of the tax year. After that cut-off age, all income — both earned and unearned — is taxed at regular individual rates. This means that investment income will be taxed based on the child’s own tax bracket rather than their parents’ rate.

Photo credit: iStock/Morsa Images

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

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Jan
27
2025

Basics of Cannabis ETFs

By | Growing Wealth, invest, Investing, Terminology, Tools & Calculators | Comments Off on Basics of Cannabis ETFs

Cannabis ETFs are funds that concentrate their holdings in the cannabis or marijuana industry. Investing in a single weed ETF could allow you to gain exposure to dozens of cannabis-related companies, without having to buy individual stocks. As such, you might consider adding a cannabis ETF to your portfolio if you’re looking for diversification, as exchange-traded funds or ETFs may offer exposure to a collection of investments in a single basket.

Investors should learn more about ETFs as investments, and the specifics of the marijuana industry, however, before investing.

Key Points

•   Cannabis ETFs offer diversification and potential returns in a growing industry.

•   Higher volatility and legal, regulatory challenges in the cannabis sector can pose significant investment risks.

•   Cannabis ETF selection factors may include expense ratio, holdings, trading volume, liquidity, and regulatory compliance.

•   A handful of issuing companies provide some of the more popular U.S. cannabis ETFs.

•   Investors should also consider minimum investment, share price, and custodian availability.

What Are Cannabis ETFs?

Cannabis ETFs are exchange-traded funds that invest in companies that are connected to the cannabis industry. A marijuana ETF works the same way as any other type of ETF, in terms of how it’s traded, as they can be bought and sold on the stock market. As for how they work, ETFs pool money from multiple investors and trade on an exchange. All that sets a cannabis ETF apart from other ETFs is what it invests in — in this case, the cannabis industry.

There are only a handful of cannabis ETFs that trade in the U.S. which suggests that there may be room in the market for newcomers. The world’s first marijuana ETF, Global X Marijuana Life Sciences Index (HMMJ) was launched in Canada in 2017. The first U.S.-focused cannabis ETF landed in 2020, with the introduction of AdvisorShares’ Pure US Cannabis ETF (MSOS).

Marijuana legalization efforts have spurred interest in cannabis investments. At the time of writing, 24 states and the District of Columbia have legalized marijuana for recreational use. Another 14 states have legalized cannabis for medical use. Under federal law, marijuana remains illegal.

Recommended: Stock Market History

Understanding the Cannabis Industry

The cannabis industry is multilayered and diverse. Cannabis products are typically categorized according to their purpose and use.

Medical Cannabis

Medical marijuana is used to treat pain and symptoms of illness. It’s derived from the Cannabis sativa plant, which contains chemicals and active compounds. These chemicals, which include delta-9 tetrahydrocannabinol (THC) and cannabidiol (CBD), produce reactions in the brain and body that may help to ease pain or create psychoactive effects.

Doctors may prescribe medical marijuana for a variety of conditions, including:

•   Glaucoma

•   Crohn’s disease

•   Epilepsy/seizures

•   Multiple sclerosis

•   HIV/AIDs

•   Alzheimer’s disease

•   Amyotrophic lateral sclerosis (ALS)6

It can also be used as a form of pain management for people suffering from other chronic or terminal conditions.

Recreational Cannabis

Recreational or adult-use cannabis is cultivated for non-medical purposes.7 In terms of its composition, the underlying chemicals are the same but the strength of each one can vary. With recreational marijuana, there may be higher amounts of THC present. THC is the chemical that produces a “high” when using marijuana.

There’s also a difference in how recreational vs. medical marijuana is sold. Both can be sold at dispensaries but you may need a state-issued cannabis card to purchase the medical version. With recreational marijuana, you may just need a state-issued ID card proving that you’re old enough to make the purchase. Note that the laws regulating how, when, to whom, and even if any type of cannabis is sold varies from state to state.

Hemp and CBD Products

Hemp is any part of the Cannabis sativa plant that has a THC concentration of no more than 0.3%. CBD is derived from hemp products and is the second most active ingredient in marijuana.

The legality of hemp and CBD products varies from state to state. Legality typically ties into the concentration of THC present. Again, some states are more stringent than others. In Idaho, for instance, CBD must be derived from one of five acceptable parts of the Cannabis sativa plant and have 0% THC.

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*Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

Types of Companies in Cannabis ETFs

Cannabis ETFs vary in the underlying investments they hold. Some marijuana ETFs invest in a range of companies across different segments of the industry. Others choose to target a specific niche.

Typically, cannabis investing extends to companies that:

•   Grow, distribute, or sell marijuana (medical or recreational)

•   Conduct research into the chemical composition of marijuana and its range of uses

•   Have an ancillary connection to the industry or have substantial exposure to marijuana stocks

•   Marijuana ETFs may have many underlying holdings or few; reading the ETF’s prospectus can give you a better idea of how investments are concentrated.

For example, Cambria Cannabis ETF (TOKE) offers broad exposure that includes cannabis growers, cannabis retailers, and cigarette manufacturers. Amplify Alternative Harvest ETF (MJ), meanwhile, is largely focused on cannabis pharmaceutical companies.

Advantages of Investing in Cannabis ETFs

Since this is a relatively new asset class, there are some risks, but if your ETF picks perform well you could realize solid returns with marijuana investments.

Cannabis is a growing industry and investors have the opportunity to get in on the ground floor of new companies as they emerge. As legalization efforts expand, there may be more demand for growers, distributors, sellers, and pharmaceutical companies.

In terms of how much of your portfolio to invest in cannabis ETFs, it depends on your risk tolerance and diversification needs. You may start with a smaller allocation and increase it over time as you get comfortable with the cannabis ETF market and its risks.

Risks Associated with Cannabis ETFs

All investments have some risk, but cannabis ETFs tend to be more volatile. The market’s relative newness makes it more susceptible to pricing and trading fluctuations. Beyond that, there are legal and regulatory considerations to keep in mind.

Here are some things to weigh before investing in a marijuana ETF.

Regulatory and Legal Risks

Cannabis ETFs are subject to greater scrutiny from the Securities and Exchange Commission (SEC) due to the nature of the underlying investments and the overall legality of marijuana. Weed ETFs must adhere to regulatory guidelines regarding the use of a custodian to hold assets, which can sometimes spell trouble if a fund is unable to find a willing custodian.

Aside from that, the legality of marijuana, hemp, and CBB products is not uniform across all 50 states and the various territories held by the U.S. For that reason, it’s important to do your due diligence to understand what you’re really investing in when you buy a cannabis ETF.

If a fund holds investments in cannabis companies that are operating illegally, that could put the entire ETF in jeopardy. Aside from that risk, certain jobs, including government jobs, may revoke your security clearance if you invest in marijuana stocks or ETFs.

Popular Cannabis ETFs in the Market

There are a handful of cannabis ETFs available for trade in the U.S., and those include:

•   AdvisorShares Pure US Cannabis ETF (MSOS)

•   Amplify Alternative Harvest ETF (MJ)

•   Cambria Cannabis ETF (TOKE)

•   Roundhill Cannabis ETF (WEED)

•   AdvisorShares MSOS Daily Leveraged ETF (MSOX)

Some of these ETFs have more than a dozen holdings while others have less than ten. They also vary with regard to dividends, returns, and expense ratios.

Recommended: What Is a Stock?

Factors to Consider When Choosing a Cannabis ETF

Choosing a cannabis ETF typically starts with researching and evaluating what type of cannabis companies you’d like exposure to. Once you narrow that down, you can then compare specific metrics for different funds, including:

•   Expense ratio. An expense ratio represents how much you’ll pay to own the fund annually. Typically, the lower this number is, the better.

•   Holdings. Holdings are what an ETF invests in. You’ll want to look at what a cannabis ETF owns and how much of the fund’s money is concentrated in each investment.

•   Trading volume and liquidity. Trading volume and liquidity can give you an idea of how in-demand a marijuana ETF is and how easy (or difficult) it will be to sell it when you’re ready to unload it.

It’s also helpful to consider the minimum investment required, if any, and the share price of the fund. If you have a limited budget for cannabis investing you’ll have to decide whether you want to spread your money across multiple funds or concentrate all of it in a single fund.

Recommended: How to Analyze a Stock

How to Invest in Cannabis ETFs

The simplest way to invest in cannabis ETFs is through a brokerage. If you don’t have a brokerage account, you can open one and start investing online. Before you do, take time to review the brokerage’s investment options to make sure you’ll have access to marijuana ETFs. Then consider the minimum account deposit required, if any, and the fees you’ll pay to trade.

Once your account is open and funded, you can begin buying cannabis ETF shares. If you skipped the previous step and haven’t researched any funds yet, you’ll want to backtrack and do that before you get started with trading.

Recommended: Shares vs. Stocks: What’s the Difference?

Tax Implications

ETFs held in a brokerage account are subject to capital gains tax if you sell them at a profit. There are two capital gains tax rates:

•   Short-term capital gains apply when you hold an investment for less than one year. The rate is equivalent to your ordinary income tax rate.

•   Long-term capital gains apply when you hold an investment for longer than one year. Capital gains tax rates range from 0% to 20%, with some exceptions.14

If you’re trading cannabis ETFs it’s to your advantage to consider how selling them at a profit might affect your tax situation. You might consider holding them in a Roth IRA vs. a traditional brokerage account, which allows for tax-free distributions in retirement. Note, however, that you may incur a tax liability in some circumstances.

The Takeaway

Cannabis ETFs can help you mix things up with your investment portfolio but it’s important to know the pros and cons. Specifically, there may be some legal and ethical concerns related to cannabis ETFs that investors should be aware of. It is also a relatively new industry, too, which means it could grow in the years ahead, but may be more volatile than other investments.

And if you’re brand new to the market, learn how to invest in stock and build a portfolio from the ground up. You can explore different types of stocks, including marijuana stocks, to decide which investments align with your needs and goals.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

What sectors of the cannabis industry do these ETFs typically cover?

Cannabis ETFs can cover all sectors of the industry, including growers and distributors, pharmaceutical companies and researchers, and related businesses, such as tobacco manufacturers. Marijuana ETFs may offer exposure to companies that deal in recreational marijuana, medical marijuana, and/or hemp and CBD products.

How do regulatory changes affect cannabis ETFs?

Regulatory changes can affect demand for cannabis ETFs if legal changes make marijuana more accessible. On the other hand, regulators could add hurdles to marijuana investing by implementing changes that require cannabis ETFs to meet more stringent guidelines.

Are cannabis ETFs more volatile than traditional ETFs?

Cannabis ETFs may be more volatile than traditional ETFs since the industry is so new and there are still plenty of questions about legality and regulatory requirements. Knowing that going in can help you decide how much of your portfolio to commit to marijuana ETFs if you want to diversify while still managing your risk exposure.

Photo credit: iStock/panida wijitpanya

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Claw Promotion: Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN-Q424-046

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Jan
27
2025

Are Classic Cars Good Investments? Weighing the Pros and Cons

By | Growing Wealth, invest, Money & Life | Comments Off on Are Classic Cars Good Investments? Weighing the Pros and Cons

It’s widely accepted that a car begins to lose value when it’s driven off the lot — but collectible cars can be an exception to that rule. Many types of classic cars, particularly those that are distinctive or exceptional in some way, can gain value over time.

Are classic cars a good investment? Classic car investments fall within the category of alternative investments, which include various asset classes that don’t move in sync with traditional stock and bond markets. Thus, alternative investments — including collectibles like antiques, art, and cars — can offer portfolio diversification beyond traditional stocks and bonds, and may offer high return potential for people who understand the market’s inner workings and complexities.

But similar to other types of alts, classic cars are highly illiquid, lack transparency, and investing in classic cars includes a number of risks.

Key Points

•   Older cars that are distinctive, historic, or extraordinary in some way can become valuable collectibles.

•   Classic cars, like other types of collectibles (e.g., sports cards, jewelry, art) are considered a type of alternative investment, meaning these assets don’t move in sync with traditional stocks and bonds.

•   Like other types of alternatives, classic cars are illiquid and the market for these collectibles lacks transparency and can be hard to predict.

•   Classic cars come with a number of related expenses that would-be investors need to consider, including: storage, maintenance, and insurance costs.

•   Collecting cars may be profitable for those who know the market well, and are able to handle the inherent risks of this market.

What Is a Classic Car?

The Classic Car Club of America defines a classic car as a “fine” or “distinctive” automobile that is:

•   American or foreign-built

•   Produced between 1915 and 1948

•   Generally a higher-end, limited-quantity vehicle

Other definitions of classic cars use a different time frame. For example, the California Department of Consumer Affairs defines a collector car as a special interest vehicle that’s 25 to 35 years old. Additionally, California state law specifies that collector cars must be primarily used in shows, parades, charitable functions, or historical exhibitions and not as transportation.2

Whether a car is labeled as classic, vintage, or antique typically hinges on age. Here’s how the ranges break down:

•  Classic: Manufactured in 2000 or earlier

•  Antique: Manufactured in 1975 or earlier

•  Vintage: Manufactured between 1919 and 1930

These differences are important to know when considering a classic car as an alternative investment. SoFi does not offer any ways to invest in classic cars at this time.

Recommended: Alternative Investment Definition

Factors Affecting Classic Car Values

What makes some classic cars a good investment and others less so? Determining car value requires considerable knowledge and skill as you can’t always rely on modern vehicle valuation sites. Kelley Blue Book, for instance, is a popular valuation site but it doesn’t offer estimates for cars that are more than 21 years old.4

Numerous factors influence what a classic car is worth, including:

•   Age

•   Condition

•   Rarity/scarcity

•   Popularity

•   Brand recognition

All of these factors can affect a classic car’s investment return. Older vehicles in good or excellent condition that have a rarity factor are more likely to command higher prices compared with a more recent-year vehicle that’s more common, less popular, or in poor condition.

Recommended: Evaluating the Pros and Cons of Alternative Investments

Potential Benefits of Investing in Classic Cars

Here are some of the positives of becoming a classic car investor.

•  Appreciation potential. Your everyday vehicle might lose value over time but some classic cars can gain in value as they age. In some cases it’s possible to sell a collector car for much more than what you paid for it. A 1955 Mercedes-Benz 300SLR Uhlenhaut coupe sold at auction for $143 million in 20225 — but it was one of only two such cars ever made. That situation is rare, and most types of collectible cars won’t command nine-figure prices.

•  Enjoyment factor. If you’re a classic car aficionado, investing in them could be a source of pleasure. You might draw enjoyment from seeking out in-demand vehicles, restoring them to their original condition, joining collector associations, or simply driving them around town on the weekends.

•  Diversification. Classic cars can offer some portfolio diversification, which could theoretically help you manage risk in your portfolio. Continued appreciation of vehicle investments can help offset slower or negative growth from the stock portion of your portfolio if market volatility increases. But appreciation is never guaranteed, no matter what type of asset is in hand.

•  Tangible asset ownership. Some investors prefer assets they can see or touch in person and classic cars deliver that. You may feel more connected to your investments when you can be more hands-on with them.

Risks and Challenges of Investing in Classic Cars

Classic car investments carry risk like anything else. It’s important to have perspective on those risks before you begin investing to make sure classic cars are a good fit for you.

•  Market volatility. Classic cars are worth what a buyer is willing to pay for them at any given time. If the market fluctuates, or investors are pulling back on classic car investments out of fear of a broader economic downturn, that could affect the values of the vehicles you own.

•  Maintenance costs. Even if you’re not driving a classic car daily, you still need to spend time maintaining it. Maintenance costs — and potentially restoration costs — should be factored into your investment expectations as these expenses effectively lower returns.

•  Storage and insurance. Once you acquire a classic car as an investment you’ll need a place to store it where it’s protected from extreme temperatures, excessive humidity, and the risk of vandalism or theft. If you don’t have such a place available at your home you’ll need to pay storage fees to park your classic car elsewhere. In addition, like most valuables, a collectible car will need to be insured.

•  Authenticity concerns. Authenticity is always a concern with any type of collectible investment. Buying a classic car requires extensive due diligence on your part to ensure that what you’re purchasing is the real deal.

Recommended: Is Investing in Art a Good Idea?

Understanding Classic Cars as an Alternative Investment

Before considering whether to invest in collectible cars, it may be helpful to understand some of the basics about alternative investments in general. Classic cars — like antiques, art, sports cards, jewelry — have some of the typical advantages and disadvantages of alternative investments. Investors can access some alternatives through a traditional brokerage or online investing platform.

Potential disadvantages of alts

•   Alts are often higher risk, and/or can be subject to greater volatility, depending on the market involved.

•   Markets for most alts are not transparent, making it difficult to track prices and determine the asset’s real value.

•   Are usually less liquid than traditional investments due to limited number of buyers and lack of a convenient market.

•   Often have higher minimum investment requirements (e.g., higher purchase price), and higher maintenance costs.

Evaluating a Classic Car for Investment

How do you find a classic car to invest in? It can take time and you’ll need to do your homework. Here are some guidelines for evaluating whether a classic car is a good investment.

•  Set your criteria. First, decide what you’re looking for. Are you interested in a specific make and model, or do you want to invest in a car that was manufactured in a certain year? Establishing the basics can help you refine your search.

•  Shop around. There are different ways to find a classic car to buy. You might look in auto trader magazines or online, visit auction houses, or attend classic car shows. Looking at different buying options can give you an idea of how much prices may differ from one place to the next, and where the best deals can be found.

•  Don’t buy blind. It may be tempting to buy a classic car you find online but it’s a mistake to do so without seeing the vehicle in person first. If the seller allows it, bring along a mechanic and/or a professional appraiser to inspect the vehicle with you.

•  Check the condition and provenance. Take time to examine the car’s condition and its details. Look into how many were produced, where it was made, and what kind of demand exists for any vehicle you’re interested in to assess whether its valuation is fair.

•  Consider the timing. The best time to buy a classic car investment is usually when you can get it for the best price. Following market trends can give you an idea of how prices are moving at any given time so you can better time your purchase.

Alternatives to Direct Classic Car Ownership

You can still invest in classic cars even if you don’t want to own one directly. Some of the alternatives to physical ownership include:

•  Fractional ownership. Fractional ownership allows you to invest small amounts and claim a partial ownership stake in a work of art or other collectibles like cars. Drift Capital, for instance, offers fractional share investing in the world’s rarest and most valuable cars.6

•  Classic car funds. Classic car funds work similarly to mutual funds, in that they accept money from multiple investors. Those funds are then pooled to make investments in classic vehicles.

•  Classic-car-themed ETFs. ETFs or exchange-traded funds are structured like mutual funds but trade on an exchange like stocks. Auto ETFs can offer exposure to a range of vehicle-related companies, including car manufacturers and classic car storage facilities.

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.

The Takeaway

Classic car investments are not limited to the ultra-wealthy; virtually anyone can invest if they have the capital to do so and the willingness to learn how the collectible car market works.

Classic cars are considered a type of alternative investment, though, and as such come with certain potential risk factors, such as lack of liquidity and markets that aren’t transparent. Alts can be profitable, and may offer a hedge against inflation or portfolio diversification.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

How liquid are classic car investments?

Liquidity for classic car investments is tied to what’s happening in the market and what type of car you own. The more in-demand a vehicle is and the stronger the classic car market, the easier it may be to find a buyer.

What insurance considerations are there for classic cars?

Insuring a classic car is a smart move as you want to protect your investment, but you’ll need a policy that’s designed for the type of vehicle you have. Several insurance companies offer coverage for classic, vintage, and antique vehicles. How much you’ll pay for a policy can depend on your level of coverage, the age and condition of the car, and how it’s used.

Can I use a classic car while it’s an investment?

You can use a classic car investment but it’s important to consider how wear and tear might affect its value. You’ll also need to discuss use with your insurance company and review your state’s laws, as some states won’t consider your car a classic if you’re using it for personal transportation.

How do economic conditions affect classic car values?

Economic conditions can affect demand for classic car investments and the returns they generate. During a downturn, for instance, demand for classic cars may slow which could drive prices down. When the economy picks up and demand increases, prices could rise as well. Some car brands may hold their value better during economic ups and downs.

What expertise do I need to invest in classic cars successfully?

Investing in classic cars requires knowledge of how that market works and what affects valuations. You’ll need to know how to identify a classic vs. vintage vs. antique car, and what paperwork is required to purchase and insure one. You’ll also need to understand how selling a classic car for a profit may affect your tax situation.

Photo credit: iStock/welcomia

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.


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

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
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.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

SOIN-Q424-045

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Jan
27
2025

What Is Values-Based Budgeting?

By | Budgeting & Goals, Financial Independence, money | Comments Off on What Is Values-Based Budgeting?

Values-based budgeting involves managing your money mindfully and allocating it toward the things that matter most to you. For some people, that might mean keeping sustainability in mind when designing their budget. For another, it might translate into earning and spending with the goal of securing their loved ones’ future.

Values-based budgeting can have you thinking at a deeper level than just what you need or want in the moment. It can help you manage your money effectively while reflecting your core beliefs and higher-order goals. Here’s a closer look at how this practice can bring balance and deeper meaning to your money management.

Key Points

•   Values-based budgeting involves aligning one’s spending with core values to ensure financial decisions reflect personal beliefs and priorities.

•   A key step is to identify core values before setting budget categories to guide spending decisions.

•   Core values can include priorities such as sustainability, educational achievement, and sharing time with extended family, among others.

•   Connecting financial management with long-term goals and values can enhance satisfaction.

•   Reducing impulse spending can allow an individual to focus more on meaningful financial commitments.

Understanding Values-Based Budgeting

While there are many budgeting methods out there, they are all similar in the fact that they help you manage your income and expenses and reach your goals. Living within your means (or living within your budget) is one of the most important things you can do to help improve your financial future. With values-based budgeting, however, you are typically taking additional steps to align your money with your core beliefs.

Definition and Core Concepts

A values-based budget is one where your budget categories tie back to your core values. To create a values-based budget, you must first determine your core values — the things that are most important to you. For some, that might mean charitable giving plays a key role in their money management, or for another, it might involve prioritizing family “together time” across the generations.

Only then do you set up your budget categories and determine how much to spend where and how much of your paycheck to save.

Comparison to Traditional Budgeting Methods

There are many strategies for saving money, and values-based budgeting shares a lot of similarities with other traditional budgeting methods. The big difference is determining your unique and individual core values before starting the budgeting process. This can help guide your budgeting decisions and inform how much money you spend in various areas.

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Benefits of Values-Based Budgeting

Here are a few of the top benefits of values-based budgeting:

•  Increased satisfaction — When your budget is tied to your core values, it can often lead to increased personal satisfaction.

•  Better long-term planning — Values-based budgeting ties into the things that are most important to you. That helps make it not only a weekly or monthly thing, but something that ties into your long-term planning.

•  Reduced impulse spending — You may be less likely to, say, go on a holiday spending spree and break your budget when you know that the categories tie back to the things that are most important to you.

Identifying Your Personal Values

The first step in values-based financial planning is identifying your personal values. While this process is likely to be different for everyone, here are a few questions that might help you clarify your personal values:

•  What is your perfect life?

•  Finish the sentence — “More than anything, before I die, I want to ___ ”

•  If you could spend today doing whatever you desire, what would it be?

•  What causes are important to you?

•  If you could be paid in something other than money, what would it be?

•  What are the things in your life that you would like to get rid of?

Try to not just answer these questions superficially — instead, try to drill down to find the “whys” behind each question. For instance, if the way you would like to spend every day revolves around hanging with your high-school BFFs, you might learn that spending time with old friends is a core value. If the way you’d like to be paid involves college tuition credits for your kids, that could reveal that higher education is a priority for your family.

This process can put you on the path to finding your personal values and goals.

Steps to Implement Values-Based Budgeting

When you’ve identified your core values, you can then move ahead and start practicing money management in a way that embraces those beliefs.

Assessing Current Spending Patterns

The first step to implementing values-based budgeting is to figure out what your current spending patterns are. One way to do this is to look through your checking account and credit card statements.

It’s important to understand where you are spending money before starting a new budget. You might find a few simple ways to save money, while other money-saving strategies may require deeper cuts and more dedication.

Aligning Expenses With Values

Once you’ve identified your current spending habits, you can start aligning your expenses with the values you identified previously. For each spending category, ask yourself whether spending in this category is consistent with your values.

For instance, if you’re budgeting for a kitchen remodel and sustainability is a core goal of yours, you might begin to see how you can uphold your values and save money by seeing what’s available on Facebook Marketplace or from a freecycle site.

Creating Your Values-Based Budget

As you make your budget and go through each of your spending categories, it’s now time to adjust your spending based on your values.

•  In some cases, you might find that you are spending a high amount of money for something that is not that important to you. Perhaps it’s a case of FOMO (fear of missing out) spending, which amounts to “keeping up with the Joneses.” In those cases, you might reduce or eliminate spending in that category.

•  You might also find that you have things that are very important to you where you aren’t spending much (or any) money. If that’s the case, you should increase your spending in that category to align with your long-term goals and values.

Challenges and Solutions

Here are a few of the common obstacles in values-based budgeting plus ideas for resolving them:

•  Running out of money: If you have too many spending categories that align with your core values, you may run out of money. One of the risks of not saving money is that you may not have enough money in retirement to fulfill all your aspirations.

•  Conflicting values: If you are budgeting with a spouse or partner, you may not always agree on values. In that case, you’ll need to compromise and work together to form a shared budget.

•  Staying motivated: Finally, staying motivated to stick to your values-based budget may be just as hard as with traditional budgeting. Budgeting well does involve paying attention to how your income and expenses are tracking, which requires a time investment. However, you may find it easier to engage with this process if your budget is tied to your long-term goals.

Tools and Resources for Values-Based Budgeting

The tools for values-based budgeting are similar to those used for traditional budgeting. The exact tools that you use will depend on your own style and personality, and there is no one “right” tool that is best for everyone.

•  You might start by seeing what tools your financial institution offers with your accounts, whether that’s a traditional or online bank. They often have a variety of helpful trackers and alerts available.

•  You might use a budgeting and spending app, an online spreadsheet, or simple pencil and paper spreadsheet method to follow your income and expenditures.

•  You may want to open savings accounts that allow you to save money toward different meaningful goals, whether that’s a new electric car or an intergenerational vacation.

Again, there isn’t a set tool that is best for everyone — instead, experiment with different tools to find one that you feel comfortable with.

Recommended: How to Write a Check

The Takeaway

Making and sticking to a budget is one of the most important things that you can do to improve your financial outlook. Values-based budgeting takes traditional budgeting to the next level by making sure that your budgeting decisions tie into your long-term goals and values. This can help you stick to your budget since you know that it’s leading you on a path that aligns with your beliefs.

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FAQ

How does values-based budgeting differ from traditional budgeting?

Values-based budgeting shares a lot of similarities with traditional budgeting. Where it differs is in determining how to allocate your money across various spending categories. In values-based budgeting, you try to make sure that your spending categories are in line with your core personal and financial values. It asks you to see your financial management through the lens of whether or not you are supporting your big-picture beliefs.

Can values-based budgeting help in achieving long-term financial goals?

Yes, values-based budgeting can help you to achieve your long-term financial goals. In fact, you might argue that it is a superior way to achieve your long-term goals. Making sure that your everyday spending is in line with your core values is the definition of values-based budgeting.

How do you identify your core values for this budgeting method?

Identifying your core values is one of the most important parts of values-based budgeting. After all, if you aren’t crystal clear on the things that are most important to you, you won’t be able to make sure that your spending lines up with those values. While the process will vary depending on each individual, you’ll want to ask yourself long-term questions like where you see yourself in 30 years or what things are most important to you. Try to not only answer these questions superficially and drill down to get the answers behind the answers.

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 3.80% 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.

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Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

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