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We all feel the effects of inflation: Groceries cost more, childcare seems to be a luxury service. But that’s subjective. To nail down the real-world impact of inflation, economists like to compare rising prices to salaries, which are more static. This is where the wage inflation calculator comes in. The tool illustrates how much buying power your earnings currently have compared to past years.

We’ll take a closer look at how wage inflation calculators work and what they can tell us about making a living in the U.S. in 2024. We’ll also examine what inflation is and how much wages have grown compared to home prices, gold, and other metrics.

What Goes Behind an Hourly Wage Inflation Calculator

A wage inflation calculator may go by other names, such as an inflation wage calculator, hourly wage inflation calculator, minimum wage inflation calculator, or a wage adjusted for inflation calculator. But they’re all the same. You can see an example at https://www.bls.gov/data/inflation_calculator.htm.

The calculator is one way to represent inflation, which is the change in price of goods and services. It tells you how much buying power a dollar amount has on a certain date compared to another date — usually today or a year-over-year equivalent. For example, someone may enter their hourly wage on Jan. 1, 2010, and then compare how much that same wage bought them on Jan. 1, 2024.

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Historical Inflation Rates, Compared

The table below shows the annual rate of inflation from 1920 to present. See the next section for more information on how to read the table.

How to Read Our Historical Inflation Rate Table

To understand the table shared above, first you need to know what CPI means. The Consumer Price Index comes from the U.S. Bureau of Labor Statistics (BLS), which began collecting family expenditure data in 1917. The annual average CPI-U in the second column represents Urban CPI data. The annual percent change between each year’s CPI represents the rate of inflation.

How to Calculate Hourly Wage Adjusted for Inflation

Using a wage inflation calculator is an easy way to see how our income’s buying power changes with inflation. Just enter the starting year of your choice, your hourly wage, and then the current year.

Let’s say someone was making $25 per hour in 2018 and wants to know what the equivalent hourly rate is in 2024. In this case, making $25 per hour in August 2018 is equivalent to making $31.21 in August 2024. Assuming the individual makes the same money today, this shows that the buying power of their hourly wage has decreased over the years.

If you’re negotiating a raise, you could argue that $31.21 is the minimum you should be making to keep up with the cost of living.

What Is Inflation and How Does It Work?

Inflation represents changes in prices of services and goods throughout the economy. The way the government measures inflation is by comparing the current cost of goods and services to prices in previous years.

Inflation weakens the purchasing power of the dollar, as consumers have to pay more for things than they did in previous months and years. Inflation can also deflate the value of cash held in savings accounts.

What Is Actual Inflation?

Actual inflation is a term used to refer to what the current rate of inflation really is versus what consumers perceive the current rate to be, or their “inflation expectations.” Consumer expectations influence actual inflation.

Hyperinflation

Hyperinflation is a term used when rapid inflation occurs. This is when prices rise uncontrollably over a period of time. Hyperinflation is extreme — 50% a month or more — and fortunately rare.

The U.S. has never experienced hyperinflation, and no one believes it’s on the horizon. The most recent example of hyperinflation is Venezuela, where inflation reached 65,000% in 2018.

Deflation

Deflation is the opposite of inflation, when prices of goods and services go down. The U.S. experienced deflation of 7% (or -7% inflation) during the first few years of the Great Depression.

Recommended: What Is Stagflation?

How Is Inflation Calculated?

The formula for measuring inflation is:

•   Percent Inflation Rate = (Final CPI Index Value/Initial CPI Value) x 100

How Is Wage Adjusted for Inflation Calculated?

It’s complicated. The easiest way to calculate a wage adjusted for inflation is to use an online wage inflation calculator.

How Inflation Impacts You

There’s some confusion surrounding whether inflation is good or bad. Some inflation is normal, and shows that the economy is growing. But for consumers it feels like a bad thing. It can be especially worrisome for borrowers with variable-rate-interest debt like student loan debt.

Economists can measure the impact of inflation on consumers in a number of ways. You’ve probably seen articles discussing college tuition vs. inflation, which show how American incomes have not kept up rising education costs. Other metrics tell similar stories.

Let’s look at a few different metrics that reveal how consumers may feel the impact of inflation.

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How Your Wage Is Doing Relative to the Housing Market

Inflation can sneak up on consumers when prices at grocery stores rise slightly. But they really feel it when making a large purchase, such as buying a home. People who have saved for many years to buy a house find that their income and savings are no longer enough to reach their home buying goals.

That’s because median home prices have far outstripped median wages: Nationwide home prices have grown 129% since 1960, while household income increased only 39%. This may have been great news for our parents and grandparents, who saw their real estate investments soar. But for today’s first-time homebuyers, it’s a disaster.

Also, mortgage interest rates can rise during periods of inflation.

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How Your Wage Is Doing Relative to Gold

Because gold tends to hold its value, it makes a good unit of measurement for economists. By converting wages to gold, we can get a better sense of how wages have held up, or not, over the years.

In 1965, the minimum wage was equal to 71 ounces of gold annually. Given the price of gold in 2024, that’s equal to a salary of $179,491.55. Compare that to the current federal minimum wage of $7.25 per hour, or $15,080 annually.

How Your Wage Is Doing Relative to CPI

Remember, CPI represents consumer prices. Inflation impacts prices of essential goods and services such as groceries, gas, and childcare. This means that salaries and savings don’t extend as far as they used to. This is why many people push for raising the minimum wage during periods of inflation.

If you’re looking to take control of your money during inflation, a money tracker app can help you gain valuable insight into your financial life.

The Takeaway

Inflation, and the rising prices that come with it, means your income doesn’t buy as much as it used to. Using a wage inflation calculator is one way for consumers to get a more objective idea of how much buying power their hourly wage has during periods of inflation. Of course, inflation doesn’t affect all prices equally. That’s why economists use different metrics to measure inflation’s impact, such as the Consumer Price Index (CPI), the housing market, and gold.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How do you calculate wages adjusted for inflation?

Using a wage inflation calculator can make it easier to get insight into how much buying power an hourly wage has in the current economy. With a wage adjusted for inflation calculator, it’s easier to understand what someone’s income is currently worth compared to prior years.

How much is $15 an hour in 2000?

According to the CPI Inflation Calculator from the U.S. Bureau of Labor Statistics, $15 an hour in August 2000 is equivalent to $27.33 of buying power in August 2024.

What is the inflation rate for 2024?

The current inflation rate for 2024 is 2.5%. This is based on the 12 months ending August 2024.

How do you calculate real hourly wage from CPI?

Wage inflation calculators take the current CPI and past CPI into account to help consumers calculate their real hourly wage.

Photo credit: iStock/new look casting

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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SORL-Q324-047

Calling California home can be expensive, and some locations carry a much higher cost of living than others. In fact, if you’re wondering where to live in the Golden State, your income may be the deciding factor. A good salary for a single person in California varies widely depending on location and industry: $50K may be enough in some areas, $150K in others.

Here, we’ll provide real-world stats to show you what the cost of living is really like. And we’ll compare annual salaries for different occupations to offer some insight into what a single Californian typically earns.

What Is the True Cost of Living in California?

California is the second-most expensive state in the U.S., according to the Missouri Economic Research and Information Center (MERIC). Only Hawaii, Washington, D.C., and Massachusetts have a higher cost of living. Data from the Bureau of Economic Analysis (BEA) calculated that the average annual cost of living in California is $60,272.

Average cost of living numbers reflect both the highs and lows of what people spend to live in California. Cost of living generally means necessary expenses, such as:

•   Housing

•   Food

•   Utilities

•   Transportation

•   Taxes

•   Health care

•   Child care

•   Clothing

•   Education

Where someone chooses to live in California and their lifestyle can influence their personal cost of living. Their choice of career can determine how easily they’re able to keep up with the cost of living. What is considered a good salary for a single person in a metro area may be very different from that of someone living in a farming community.

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What Is the True Cost of Living in Los Angeles?

Households in the Los Angeles metro area spent an average of $77,024 per year in 2021-22, according to the Bureau of Labor Statistics (BLS). The majority of spending was divided across eight categories:

•   Housing

•   Transportation

•   Food

•   Personal insurance and pensions

•   Healthcare

•   Entertainment

•   Cash contributions

•   Apparel and services

August 2024 data from the BLS shows that the Consumer Price Index (CPI) for goods and services in Los Angeles has increased 2.9% from August 2023. Some of the biggest price increases have been in the food and medical care categories. Meanwhile, the average weekly wage across all industries in Los Angeles was $1,411.60, which adds up to $73,403 in annual salary.

What Is the True Cost of Living in the San Francisco Bay Area?

Residents of the San Francisco Bay Area spent an average of $101,880 per year in 2021-22, according to BLS data. San Franciscans spent the most on housing, followed by:

•   Personal insurance and pensions

•   Food

•   Transportation

•   Personal insurance and pensions

•   Cash contributions

•   Entertainment

•   Education

Similar to Los Angeles, San Francisco saw its consumer price index increase 2.7% between August 2023 and August 2024, with consumers paying more for food, energy, and apparel. In terms of weekly salary, workers in the Bay Area bring in $1,874 on average, or $97,468 annually.

Why Is the Cost of Living in California So High?

California’s high cost of living can be attributed largely to supply and demand. Generally speaking, when demand for goods and services outpaces supply, that can result in higher prices.

High demand vs. low supply for things like housing, for instance, can send real estate values soaring. California is an attractive place to live because of its strong economy and job market, prompting more people to move there, driving up demand for housing. The state ranks second for the highest rent prices. And the typical home is valued at $784,989, according to Zillow.

Meanwhile, California residents are subject to higher property tax rates, which adds to the cost of living. They also typically pay more for fuel due to a combination of higher taxes and environmental regulation surcharges.

Inflation can add to the high cost of living in California. As of August 2024, the CPI increased 2.5% year over year. When inflation rises, everything you spend money on tends to become more expensive, driving up the cost of living even further.

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Living Wage Calculation for California

A living wage in California is the hourly rate that someone must earn to support themselves and their family, if they have one. It’s not the same thing as the federal minimum wage. The gap between the two is often used as an argument for raising the minimum wage across the board.

Here’s what an hourly living wage calculation looks like for different household sizes in California. Note that the state minimum wage for companies with 26 or more employees is $16.00 an hour.

So what is a good annual salary for a single person in California? Using living wage data, you could assume that $56,825 in annual pay would be a good salary for a single person with no children. On the other hand, a single adult raising three kids would need to make $170,892 yearly. Those income numbers assume a 40-hour workweek and 52 weeks of work per year.

It’s important to understand the distinction between salary vs. hourly pay, in terms of how much work is involved to earn a living wage. A salaried employee who works 60 hours a week may end up earning the same average hourly wage as someone who works 40 hours per week, even though they’re spending more time on the job.

Typical Expenses

Comparing typical spending to living wage calculations can offer some perspective on how easily Californians are able to keep up with their cost of living. Here’s a closer look at what adults spend in several key budget categories. Comparing typical spending to living wage calculations can offer some perspective on how easily Californians are able to keep up with their cost of living. (If you’re struggling to get a grip on spending, then using a money tracker app like SoFi’s can help.)

Here’s a closer look at what adults spend in several key budget categories.

“Civic” refers to civic activities and includes costs related to entertainment, culture, pets, hobbies, and education.

Typical Annual Salaries in California

A good yearly salary for a single person in California varies widely, as does what is considered competitive pay. It mostly depends on the industry someone works in. Here’s an overview of annual salaries in California across different industries and sectors.

The highest paying jobs by state tend to be in the management, legal, technology, and healthcare fields. That makes sense, given how much big business and tech contribute to the state’s economy.

California’s large population also means greater demand for things like legal services and health care. These are not the best jobs for antisocial people, since they demand a good deal of interaction and communication, but that doesn’t mean introverts can’t find great opportunities here.

So, what is a good entry level salary in California? Entry level pay is likely to be higher in industries that have higher demand for talent. The downside is that hiring can be much more competitive.

New hires seeking jobs in the state may do well to read up on how to ask for a signing bonus or more perks in their benefits package, which can help supplement a lower entry level salary.

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Is the Cost of Living in California Worth It?

California is far from the cheapest state to live in. Whether it’s worth it to you to make your home there can depend on your reasons for wanting to live in the Golden State. If you’ve landed a high-paying job in a promising field, for instance, then a higher cost of living might be a trade-off you can accept to launch your dream career.

On the other hand, you might find that California’s cost of living is simply too much for your budget. In that case, you might consider relocating to a less expensive state or, at the very least, moving to a different part of California.

Regardless of where you end up, using a budget planner app can be a great way to keep track of your spending. You can link the app to your bank accounts and credit cards to keep tabs on where your money goes and see at a glance where you might need to cut back. Maintaining a budget is one of the most effective ways to keep your cost of living under control.

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The Takeaway

What is a good yearly salary for a single person? The simplest answer might be this: An amount that allows you to meet all of your basic expenses, save a little, and pay down debt or work toward another financial goal. Whether that’s $50,000, $150,000 or more can depend on your preferred lifestyle and where you choose to live.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What is a livable salary for a single person in California?

A living wage for a single person in California with no children is $27.32 per hour or $56,825 per year, assuming a 40-hour workweek. Whether that salary is livable for someone can depend on where they live in California and how they typically spend their money.

What is a comfortable salary in California?

The salary that’s required to live comfortably in California depends on how many people live in the household, how many people in the household earn an income, where you live in the state, and your typical annual expenses.

What is a good monthly income in California?

A good monthly income in California is $5,002, based on what the Bureau of Economic Analysis estimates that Californians pay for their cost of living. A good monthly income for you will depend on what your expenses are and how much you typically spend per month.

Photo credit: iStock/lechatnoir

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

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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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If you’re interested in how to make extra income from home, today there are more opportunities than ever before. Some ways to earn extra income from home include side hustles, online businesses, and remote jobs. Finding the right money-making project for you just depends on your skills, experience, and interests.

We’re sharing some of the most popular ideas for how to bring in extra income from home in 2024 and beyond.

How to Make Extra Income From Home

There are a variety of ways to make extra income from home, many of which allow you to use the skills you already have. Others may require a little training or research to get started before you can begin earning supplemental income.

When comparing side hustles, business ideas, and work-from-home second jobs for extra income, consider:

•   How much time is required to make money

•   Typical earnings and how much you can expect to make

•   What, if anything, might be required to get started

Timing can also influence the types of ideas you explore for making extra income from home. For example, if you need to make a quick $1,000, then selling things around the house can put cash in your pocket faster than starting an online business. If you need a little help staying on top of your side-hustle earnings, a money tracker app like SoFi’s can help.

And remember, the benefits of a side hustle go beyond making extra income. Side gigs can be a creative outlet, source of fulfillment, or a stepping stone to a new career. With that in mind, here are 23 of the best extra income ideas from home.

1. Tutor

Tutoring can be a fulfilling way to make extra income from home for stay-at-home parents or students. There are numerous websites that connect tutors with students who need help with their school work. You can also offer tutoring to students locally in your home to make extra income.

2. Online Teacher

Teaching online is another popular work-from-home extra income idea. While tutoring may involve working with a single student one-on-one, you might teach multiple students online at the same time. For example, anyone can sign up to teach K-12 classes live via Zoom on Outschool.com. You don’t need a teaching degree or previous experience, though you will need to be able to pass a background check.

3. Course Creator

Course creation is one of the best passive income ideas for people who like teaching but don’t want to do it all the time. Platforms like Udemy, Skillshare, and Teachable allow you to create and upload virtual courses then sell them to people online. These types of platforms charge fees to host your course, but if you come up with a popular topic or idea, you can earn money from teaching online.

4. Sell Artwork and Designs Online

Selling artwork and designs can be a great way to earn residual income from home. For example, you can create unique designs and license them to a platform like Canva or Creative Fabrica. You earn money as people purchase licensing rights to use your designs.

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5. Online Bookkeeper

Bookkeeping is an in-demand skill, and if you’re experienced at tracking accounts and managing financial statements, this can be a reliable way to make extra income from home. It’s possible to find virtual bookkeeping jobs online with companies that are interested in outsourcing their bookkeeping and payroll.

6. Low-Content Book Publishing

Low-content books are books that have little to no content inside. Composition notebooks and blank journals are two prime examples of low-content books. If you have a knack for design, you can create low-content books and upload them to a self-publishing platform like Amazon Kindle Direct Publishing (KDP). Amazon lists your books for sale and handles the printing and shipping for you. Meanwhile, you earn royalties for each unit sold.

7. Affiliate Marketing

Affiliate marketing is another option for earning residual income or passive income from home. Affiliate marketing simply means recommending products or services and linking to a sales portal. If someone purchases the product or service through your link, you earn a commission. You can try affiliate marketing through a blog or social media channels such as Instagram or Twitter. Just keep in mind that the Federal Trade Commission (FTC) has specific disclosure rules influencers are required to follow.

8. Copywrite or Edit

Copywriting is another high-demand skill as companies and businesses are often willing to pay good money for website or marketing copy. Editing is also something you might consider doing to make extra income from home if you’re skilled at writing and have a good eye for detail.

9. Data Entry

Work-from-home extra-income jobs in data entry might appeal to you if you’re good at typing and you know your way around databases or spreadsheets. It’s possible to find remote data entry jobs by searching job boards like Indeed.com or FlexJobs.

10. Start a YouTube Channel

YouTube is one of the most visible social media platforms. You might consider starting your own channel as a way to make extra income without leaving the house. To get started, you’ll need a decent camera and a great idea for content, and you’ll need to meet YouTube’s minimum requirements to monetize your channel with ads. You can also make money with a YouTube channel by selling digital products, creating sponsored content, and affiliate marketing.

11. Freelance Your Skills

Freelancing can span a wide range of work from home jobs for extra income. For example, you might work as a freelance photographer, website developer, or project manager. The great thing about freelancing is that you can apply skills that you already possess to make money while potentially increasing your income even more by learning new skills along the way.

12. Sell Your Photos

If you’re great with a camera, selling your photography is another idea for how to make extra income from home. Sites like Shutterstock, Foap, and SmugMug allow amateur and professional photographers to list photos for sale and earn money by selling licensing rights. You can study a range of websites that sell pictures to get an idea of which subjects are most popular and in-demand.

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13. Print on Demand

Print-on-demand is a terrific way to make passive income from home. With print-on-demand, you create unique designs and upload them to a POD shop. When someone buys an item, such as a coffee mug or tote bag, the POD shop prints your design onto it and ships it out to the customer. If you’re looking for a place to get started with print on demand, Redbubble, Society6, and Printify are a few sites you might consider.

14. Online Transcription

Transcriptionists make money by transcribing digital files into written or typed documents. Online transcription jobs can be a good way to put your typing skills to use, and there are even remote work opportunities out there for beginners. You may need to purchase special transcription software to start this work-from-home idea, but with the right gigs, you can easily make a part-time income from home.

15. Get Paid to Proofread

Proofreaders review written documents for spelling errors, grammatical errors, and typos. The work that they do is similar to copyeditors though it’s more focused on finding flaws in the mechanics of a piece of writing, rather than issues with tone or flow. Remote-work job boards can be a good place to begin looking for proofreading jobs for beginners.

16. Virtual Assistant

Virtual assistants help business owners run their companies. You might do a variety of things as a VA, including managing email, setting appointments, keeping track of scheduling changes, posting social media content, or copywriting. This is another low-cost side hustle you can start from home as long as you have an internet connection and a laptop.

17. Start a Blog

Blogging is not necessarily a way to get rich quick, but it can be a way of making extra money from home. There are different ways blogs can earn money, including ads, affiliate marketing, sponsored posts, product sales, and services. If you’re interested in starting a blog, you might want to spend some time on YouTube checking out tutorials to see what you’ll need to get up and running.

18. Get Paid to Chat

Remote chat operator jobs and remote customer support jobs are a fun way to put your people skills to work while earning extra income from home. Plenty of companies hire people to handle customer support via live chat or by phone from the comfort of their own home. This can be a good flexible job option for a stay-at-home parent.

19. Pet Sit

Pet sitting might be a perfect way to earn extra income from home if you love cats or dogs. You can advertise your services locally as a pet-sitter or dog walker, and make money according to a schedule that works for you.

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20. Earn Cash Back From Shopping Apps

Cash back apps pay you back a percentage of what you spend, either in cash or points that can be redeemed for cash or gift cards. For example, you might use a cash back app to earn 5% back when shopping for clothes at your favorite online retailer. Cash back apps are an easy way to make extra income from home doing things that you’re already spending time on.

21. Babysit in Your Home

In addition to pet-sitting, you might consider offering child care or senior care services in your home. If you’re planning to keep multiple children in your home, you’ll want to first check your state’s laws. Once you reach a certain number of children, you might be considered a daycare, which means you’ll need to get licensed and be regulated by the state.

22. Grow a Garden

Gardening can be a relaxing hobby, but it also has potential to be an excellent way to make extra income from home. You can sell the fruits and veggies that you grow at your local farmer’s market or to people in your neighborhood. Depending on where you live, you might even be able to branch out and raise chickens so you can sell fresh eggs for supplemental income.

23. Bake or Prep Meals

If you love to bake or are a pro at meal planning, you might be able to monetize those hobbies and skills to earn money at home. For example, you can sell your homemade baked goods at your local farmer’s market or craft fair, or to local restaurants. You can also sell readymade meals to busy parents and seniors who need a little help with cooking. Just be sure to check any regulations regarding home kitchens that might apply where you live.

Reporting Extra Income on Your Taxes

Finding ways to make extra income from home can offer some financial breathing room, but it’s important to consider the tax consequences. IRS rules require you to report side hustle income or money earned in the gig economy on your taxes, even if you make money at home. Generally, there are two rules to know about reporting extra income:

•   Form 1099 must be issued when gig earnings exceed $600.

•   Gig workers may be required to pay estimated quarterly taxes.

Unless you’re specifically hired as an employee of a company that you’re doing work for, then the IRS considers you to be an independent contractor. You’ll need to keep track of all your earnings throughout the year and make sure you’re reporting them accurately on your taxes when you file.

You’ll also want to include receipts for any expenses you might be able to deduct. For example, if you’re making extra income from home as a freelance writer and you need to buy a new laptop, you may be able to write that off as a business expense. Or you may be able to deduct home office expenses.

Downloading a free budget app can make it easier to keep track of your business or side gig expenses. If you’re unsure how to handle a tax return with extra income, you may want to talk to a tax professional.

The Takeaway

Making extra income is one of the main benefits of a side hustle, though you may also want to start a second job as a creative outlet. Today, there are many flexible work-from-home gigs for all sorts of skill sets and backgrounds. Some require training or certification, but many can be started with just a laptop and dream. Ideally, you can leverage a hobby or passion into a side job, such as meal-prep, pet-sitting, childcare, design and photography, and more.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How can I make an extra $1,000 a month?

Some of the best ways to make an extra $1,000 a month are freelancing, blogging, monetizing a YouTube channel, and selling digital products. These are all extra income jobs that you can do entirely online. You may also be able to make an extra $1,000 a month by pet-sitting, making homemade baked goods, or selling things around the house you no longer need.

What can I do for an extra income?

There are lots of different ways to make extra income. You could start by increasing your hours at work if you get paid on an hourly basis. Or you might negotiate a pay raise at your current job. You can also get a second job, start a side hustle, get paid to do gig work, or start an online business.

What is a good side hustle?

The best side hustle for you is the one that works for your schedule and allows you to use the skills you have to make a good income. That said, good side hustle options include freelancing, editing and copywriting, blogging, and taking surveys online for cash or gift cards.

Photo credit: iStock/Alessandro Biascioli

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

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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If you neglect to pay a bill for a significant period of time, your creditor may send your debt to a collection agency, which then seeks repayment from you. This can have serious — and lasting — repercussions for your credit score. Understanding how long collections stay on your credit report and how to manage them is essential for maintaining good financial health. Here’s a closer look at how debts end up in collections and how they impact on your credit.

What Are Collections?

Having a debt in collections typically means that the original creditor or lender has written your debt off as a loss and has sent it to a debt collector. The collector may be an internal team within the same company that goes after delinquent debts or a third party debt collection agency.

Most of your monthly bills (including credit cards, mortgage, auto loan, student loans, and utilities) can go to collections if you neglect to pay them for long enough. This means that bills that might not typically appear on your credit report (electric, phone, or cable, for example) could show up on your credit report as debts in collections.

There’s no set time frame as to when a lender or company will place a past-due account into collections. Generally speaking, however, creditors will wait until after 90 to 180 days of nonpayment before they will send your debt to collections.

What Happens if a Bill Goes to Collections?

Some creditors have in-house collection departments, but many will “charge off” your debt. This means the original creditor closes your account and sells your debt to a third-party collection agency. When your account is sent to collections, the balance on your original unpaid account goes to $0, and a new collections account will be added to your credit reports. Having a collection account on your credit report is one of the many things that can affect your credit score.

How Long Will Collections Stay on Your Credit Report?

Like other negative information, a collection account can remain on your credit reports for up to seven years from the date you first miss a payment to the original lender or creditor. Even if you eventually pay what you owe or settle with the company that owns your debt, the collection will typically remain on your credit reports (though it will say “Paid Collection” in the account information).

Recommended: How Long Does It Take to Build Credit?

Medical Debt on Your Credit Report

Medical debt is not included in your credit reports, provided it stays with your health-care provider. If you have a medical bill that is several months overdue, the provider may sell it to a collections agency. But even if that happens, it won’t show up on your credit reports right away.

That’s because the three major credit bureaus (Equifax®, Experian®, and TransUnion®) give consumers a one-year grace period to clear up any medical debt that’s gone to collections before listing the account in your credit reports. This waiting period allows time for bills to make their way through the insurance approval and payment process. It also gives consumers a chance to report any billing errors to their insurance company and/or health care provider, perhaps negotiate a smaller bill amount, or get on a payment plan.

More good news: Medical debts under $500 will not appear on your credit reports. In addition, medical debts in collections that have been paid off are removed from your credit reports — they won’t stick around for seven years.

Managing and Preventing Collections Accounts

One of the best ways to protect your credit reports (and credit scores) is to avoid having a debt ever go to collections. Here are some tips that can help.

•  Stay organized: Keep track of payment due dates by setting reminders on your phone or switching to autopay. A budgeting and spending app can help ensure you aren’t short on cash when it comes time to make your payments.

•  Communicate with creditors: If you’re having trouble paying some of your bills on time, it’s a good idea to contact your creditors or service providers. They may be to offer a more manageable payment plan or offer temporary relief.

•  Monitor your credit report: It’s wise to regularly check your credit reports for any inaccuracies or any accounts labeled “delinquent” (a sign they may be headed to collections).

•   Establish an emergency fun: Having savings to cover unexpected expenses, like medical bills, can help prevent debt from going to collections.

If you already have an account in collections, you’ll want to make sure the debt and collection agency are legitimate and, if so, create a plan to resolve the unpaid balance. Generally, it’s a good idea to pay off the debt in collections, either as a lump sum or payment plan, so your debt can be marked “paid” and the collection agency stops contacting you.

How Collections Impact Your Credit Report and Credit Score

Collections fall under payment history, which is the biggest factor in your FICO® Score calculation (representing about 35% of your score). People with collections on their credit reports tend to have lower credit scores than those who have no collections.

How much damage a collection account will do to your credit will depend on the size of the debt, how recent the collection is, and the overall strength of your credit profile. A collection account tells future lenders that you’ve had trouble managing debt in the past, making them less likely to offer favorable loan terms or approve you for new credit.

In general, the more recent a collection, the bigger the impact. However, over time, the damage to your credit score diminishes, especially if you maintain good credit habits, like making on-time payments and keeping credit card balances low. Also keep in mind that paid collection accounts may not affect your credit scores in the same way that unpaid collection accounts can.

Recommended: How to Check Your Credit Score Without Paying

How to Find Out if You Have Accounts in Collections

There are a few different ways you may find out that you have an account in collections.

•   A debt collector must contact you about your debt before it sends information about the debt to a credit reporting company. If you receive a “validation notice” about a debt from a debt collector, it means they have satisfied their requirement to contact you and can begin to report the debt to credit reporting companies.

•   If you aren’t sure about the status of an unpaid bill, you may want to check your credit reports. You’re entitled to a free credit report from each of the three major credit bureaus once a week through AnnualCreditReport.com. On your report, collections accounts will appear as a separate section, listing the original creditor, the collection agency, and the outstanding balance.

•   You also can contact the original creditor to learn the status of your account. Just remember that if your debt has been sold, the original creditor is no longer able to collect your debt. You’ll have to deal with the debt buyer.

•   Some credit monitoring services will automatically alert you if a new collection account is added to your report, allowing you to address the issue as soon as possible.

How Do You Remove Collections From Your Credit Report?

You generally can’t remove a collection account from your credit report unless the account is listed in error or as a result of fraud.

If you see an error on your credit report, such as an account you don’t recognize or a paid account that shows as unpaid, you can file a dispute using the credit bureau’s online process by phone or by mail. The credit bureau is required to respond within 30 days.

If you think the error is on the part of the debt collector, you can contact the collection agency using the phone number listed on your credit report. They can confirm if the debt belongs to you and provide other relevant information about the account.

If the entry is legitimate, one way you might be able to get it removed from your credit reports is to write a “goodwill letter” to the creditor that explains your situation and why you would like the debt removed. It may not work, but there’s no downside in trying.

Recommended: Why Did My Cresit Score Drop After a Dispute?

When Will Credit Bureaus Remove Medical Collections?

In 2022, the three major credit bureaus agreed to remove medical collections from consumers’ credit reports once they were paid. They also decided to exclude unpaid medical collections under $500, and to extend the time before medical bills in collections can appear on credit reports from 180 days to one year. These changes provide some relief for consumers facing medical debt, giving more time to settle the bills before they affect credit.

Medical collections that meet these criteria should have automatically come off your reports, but if they are still listed on any of your credit reports, you can file a dispute with the credit bureau.

Will Making Payments Change the Timeline?

Making payments on a collection account does not restart the seven-year timeline for when the collection falls off your credit report. The original delinquency date remains the same, even if you make partial payments. However, paying off or settling a collection account can have positive effects. While it won’t immediately remove the collection from your credit report, a paid collection may be viewed more favorably by lenders than an unpaid one. It also stops the collection agency from continuing to pursue you for the debt.

But there is another timeline to keep in mind — the statute of limitations on the debt. The statute limits how long a creditor or debt collector can take legal action against you in pursuit of repayment. The time frame depends on the type of debt and where you live but is typically three to six years. Once the statute of limitations expires, the debt becomes “time-barred,” meaning that debt is no longer legally enforceable.

If you make a payment on a time-barred debt, it can restart the statute of limitations. This means the creditor can take you to court and, potentially, sue you for the full amount owed plus interest and fees.

The Takeaway

Collections can have a significant impact on your credit score, but they don’t last forever. Typically, collections remain on your credit report for seven years from the date of delinquency, but recent changes have provided some relief for medical debt.

The best way to protect your credit is to manage your accounts carefully and be sure to pay all of your bills in full and on time. If you do have accounts in collections, taking steps to resolve them — whether through payment, negotiation, or disputing inaccuracies — can help improve your financial health over time.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Should I pay off a three-year old collection?

Paying off a three-year-old collection can be beneficial, especially if you’re looking to build your credit or apply for new credit. While paying it off won’t remove it from your credit report, it can stop further damage and prevent additional actions like lawsuits or wage garnishments. Paid collections also tend to be viewed more favorably by lenders than unpaid ones. In fact, some credit scoring models don’t include paid collection accounts when calculating credit scores.

Can you have a 700 credit score with collections?

Yes, but it’s not common. Factors such as the size of the debt in collection, how old it is, and the overall makeup of your credit profile play significant roles in determining your score. If the collection is small, paid off, or several years old, and the rest of your credit history is strong, you may be able to achieve a 700 score. Larger or recent collections, on the other hand, typically have a more negative impact on your credit.

What happens if you never pay collections?

If you never pay collections, the debt will remain on your credit report as an unpaid collection account for up to seven years, significantly harming your credit score. Unpaid collections can also lead to lawsuits, judgments, and wage garnishments. On a positive note, many states have statute of limitations in place to prevent creditors and debt collectors from suing you to collect on an older debt.

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

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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Seeing your credit score go down after paying off debt may seem illogical, but there are likely valid reasons for the drop, including a potential change in your credit mix or in the age of your accounts. Although a lower score may feel like a setback, rest assured the dip is usually temporary.

Let’s take a closer look at some reasons why your credit score dropped after paying off debt and what you can do to help turn things around.

Why Would My Credit Score Drop After Paying Off Debt?

Credit scores are calculated based on a variety of factors. For instance, if you’ve finally paid off a car loan and all of your other debts are from credit cards, your score might drop because you no longer have a diverse credit mix. Creditors and lenders like to see someone who’s been able to manage an array of accounts over time.

But a varied credit mix is only one of the components that make up your credit score. Read on to learn what affects your credit score and how much each factor is impacted when you pay off debt:

Credit Score Factors

According to FICO™, the credit scoring company used by 90% of the top lenders, your credit score is based on data from five different categories: payment history, credit utilization, length of credit history, credit mix, and new credit applications.

Let’s take a closer look at each one.

Payment History

Showing lenders you can consistently make on-time payments is the top factor in determining your credit score. In fact, under the FICO model, your payment history accounts for the biggest percentage of your credit score (35%).

A late or missing payment can lower your credit score anywhere from 17 to 83 points, depending on where you fall in the credit score range. Generally speaking, the higher your credit score, the greater the impact of a late payment.

Even if you’ve paid off a debt, a delinquent payment can remain on your credit report for up to seven years and negatively affect your credit score.

Credit Utilization

Credit utilization accounts for 30% of your credit score. Your credit utilization is the amount of money you owe versus the amount of credit available to you, and this configuration is called your utilization rate or credit utilization ratio.

Most lenders prefer you to keep your credit utilization ratio below 30%.

Paying off a debt typically improves your credit score, but there are instances when it could have the opposite effect. For example, if you pay off a credit card and then close the account, you may see your score fall. That’s because you now have a lower amount of available credit, which could raise your credit utilization ratio.

Length of Your Credit History

The average age of your credit accounts make up 15% of your credit score. Keeping accounts open — and establishing a track record of timely payments — can help improve your credit score. So if you’re paying off a credit card or other type of revolving debt, consider leaving the account open afterward.

Installment loans, like a personal loan, work a bit differently. When you pay off an installment loan, the account is considered closed. And if you’ve had that account for a long time, your average account age — and your credit score — could drop.

Credit Mix

As previously noted, having a variety of different types of credit, or a credit mix, counts toward your credit score. In fact, it makes up 10% of your FICO score.

Having a combination of revolving credit and installment credit can help boost your credit. But paying off a home, car, or personal loan could change your credit mix, which might cause your score to dip.

New Credit Card Applications

Applying for new credit determines 10% of your credit score. So if, for instance, you decide to open a few new credit cards to help pay off another debt, your score could take a hit. That’s because each time you apply, a hard credit check, or inquiry, is made.

When a lender does a hard credit check, they will pull your credit report from one of the three main credit bureaus: TransUnion, Equifax, and Experian. A hard inquiry can decrease your score by as much as 10 points, so if you’re trying to sign up for multiple credit cards at once, this can have a cascading effect on your score.

How to Pay Off Debt and Help Your Credit Score

There’s no hard and fast rule on how to pay off your debt and build up credit. But it’s always a good idea to make timely, regular payments on balances. Try not to use all your available credit (keep it under 30%). And if you’re overextended, consider reevaluating your purchasing habits with a spending app or other tool.

How Do I Keep My Credit Score From Dropping?

There are other strategies you can take to help prevent your credit score from falling. Here are five to consider:

•   Limit applications for new credit, especially if you’re applying for several at one time.

•   Try to avoid closing out a credit card account, even if you’ve paid off the balance.

•   Review your credit report at least once a year, and dispute any errors. You can get your report for free at AnnualCreditReport.com.

Recommended: Why Did My Credit Score Drop After a Dispute?

How Long Does It Take for Your Credit Score to Improve After Paying Off Debt?

After you make a payment, most large credit issuers and lenders update your account information with the credit bureaus within 30 to 45 days. Smaller credit entities may only report a paid off debt once a quarter, so in that case, it could take several months for your credit score to update.

Ways to Increase Your Credit Score After Paying Off a Loan

In addition to making timely payments, there are several ways to build credit and boost your score.

One tactic is to take the money you were using for the now paid off loan and apply it to one or more of your credit card payments. For example, if you were only making minimum payments, try paying double the minimum each month. If this isn’t possible, even kicking in an extra $10, $20, or $30 can make a difference. Paying double the minimum doesn’t just bring down your balance. It can also lower your credit utilization ratio by increasing the available credit on that card.

Another trick: Contact your card issuer and ask for an increased credit limit so your credit utilization on that card is lower. Or consider becoming an authorized user on a loved one’s credit card account.

Recommended: How Long Does It Take to Build Credit?

How to Get Credit Score Monitoring

There are various ways to check your credit score for free.

•   Contact your credit card issuer. Most provide cardholders with complimentary access to their credit score.

•  Inquire with your bank. Many financial institutions offer customers either their FICO score or VantageScore for free.

•  Sign up with Experian. You can monitor your credit score for free through Experian, one of the three major credit bureaus.

•  Download a free money tracking app, which provides you with your score and can alert you to any changes.

The Takeaway

Zeroing out the balance on a loan or credit card can be a big stress reliever, though it may not always provide the credit score boost you were hoping for. Changes in credit mix or account age are among the reasons for a drop.

The good news is, there are ways to help protect your credit score: Pay your bills on time, keep credit card accounts open even after you’ve paid off the balance, and explore credit score monitoring services that alert you to any changes in your score.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How long does it take to rebuild credit after paying off debt?

The amount of time it takes to rebuild credit is different for everyone. For some people, it may only take three to six months, while for others it could take years, especially if credit card bills have high balances or are maxed out. Certain factors such as missed payments, which can remain on your credit report for up to seven years, or a declared bankruptcy (which can linger for up to 10 years) can keep your credit score from increasing.

Why does my credit score go down after paying off debt?

Eliminating one debt means you’ve changed your overall credit “portfolio,” which can impact some factors that go into determining your credit score. For instance, if you’ve paid off a car loan and all of your other debts are credit cards, you’ve affected the diversity of your credit mix. As a result, you may see a slight drop in your credit score.

How much will my credit score increase after paying off debt?

There’s no exact number of points your credit score will increase from paying off a debt. However, it’s possible credit scores can increase anywhere between 10 to 50 points after eliminating a credit card debt.

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

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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