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As crypto credit cards gain popularity, it’s becoming critical to understand how crypto credit card rewards are taxed. In some cases, crypto credit card rewards are considered a rebate on spending and therefore not taxable. But in other cases, the cryptocurrency you earn with a credit card may be taxable.

In either case, it’s important to keep in mind that you’ll also pay tax on any gains you make when selling the cryptocurrency you earned as credit card rewards. Keeping good records is important to ensure you accurately pay taxes associated with crypto credit card rewards.

What Is a Crypto Credit Card and How Does it Work?

There are several different kinds of crypto credit cards, and each one might work differently. The most common type of crypto credit card is one that will earn crypto rewards instead of cash back or travel rewards. You might earn cryptocurrency as part of a welcome offer, or on every purchase, or both.

Outside of the involvement of cryptocurrency, crypto credit cards otherwise don’t diverge from how credit cards work usually. Cardholders are extended a line of credit they can borrow against, and they’ll pay interest on balances that carry over from month to month.

Recommended: How to Avoid Interest On a Credit Card

What Are Crypto Credit Card Rewards?

Crypto credit card rewards are a type of credit card reward that you can earn with a crypto credit card. Crypto credit card rewards are similar to cash-back rewards or airline miles that you might earn with a different type of credit card.

With many crypto credit cards, you earn a certain cash percentage with each transaction (e.g. 1.5% back). But instead of getting the actual cash back, the rewards you earn are converted to the applicable cryptocurrency.

Recommended: Can You Buy Cryptocurrency With a Credit Card?

Are Crypto Credit Card Rewards Reported as Income?

The IRS has stated that income generated from any source must be reported on your tax return. That being said, the IRS has also given guidance that most credit card rewards are considered a rebate against spending rather than taxable income.

While most credit card issuers do not issue a 1099 form for credit card rewards, some may. If you receive a 1099 form, you will probably want to report the amount as income, or contact a tax professional for advice.

Are Crypto Credit Card Rewards Taxable?

The IRS has generally given guidance that most credit card rewards are considered a rebate on spending, and therefore not taxable. However, any gain you realize from the cryptocurrency that you earn as crypto credit card rewards is taxable.

If you receive cryptocurrency as a credit card reward, typically your cost basis will be the fair market value of the coins on the date you earn them. That means if and when you sell them, you’ll have to pay tax on the full crypto redemption amount minus your cost basis.

Do You Have to Pay Taxes on Crypto Credit Card Rewards?

Whether or not you have to pay taxes on crypto credit card rewards depends on how you receive your rewards. While the IRS has not ruled definitively on crypto credit card rewards, you may want to consider how the IRS treats non-crypto credit card rewards, like cashback, points or miles.

Generally, one of the credit card rules that the IRS has held is that rewards earned as part of spending are considered a rebate against that spending, and therefore not taxable. However, if you receive a reward (like a sign-up bonus) without having to make any purchase, that may be considered taxable income.

When Are Crypto Rewards Taxed?

In some scenarios, crypto rewards are taxable, while in other cases they are not. If you’re not sure if or how your crypto rewards should be taxed, consult with a tax professional.

When Crypto Are Taxable

If you receive cryptocurrency as part of a sign-up bonus where you did not have to make any purchase to earn that bonus, the cryptocurrency you receive may be considered taxable income.

You also will have to pay capital gains tax when you sell any cryptocurrency, even if you got it as a reward from a crypto credit card. The crypto rewards that you receive from a credit card generally will have a cost basis of the fair market value of the cryptocurrency on the date you receive the rewards. That means that when you sell, you’ll pay tax on any increase in the value.

When Crypto Rewards Are Not Taxable

Generally speaking, any credit card rewards that you receive after making a purchase are considered a rebate against that purchase. That means that in most cases, you won’t need to pay income tax on these rewards. However, you would still need to pay tax on any gains you make when you sell the crypto you earned as a crypto credit card reward.

Recommended: Can You Buy Crypto With a Credit Card

Can You Protect Yourself from a Crypto Tax Audit?

While there’s no strategy that will completely eliminate the chance that you’ll be audited, there are a couple things you can do to help minimize your risk:

•   Make sure that you include any income or information that you receive via an official IRS form, like a 1099-MISC form.

•   Keep detailed and accurate records of all of your cryptocurrency transactions. That will minimize your chances of being audited as well as any interest or penalties you might have to pay if you are audited.

How to Know If You Owe Taxes on Crypto Credit Card Rewards

If you receive cryptocurrency as a bonus without a purchase as a credit card requirement, it will almost certainly be classified as taxable income.

Another indicator to know if you owe taxes will be if you receive an official IRS form like a 1099-MISC. Any income on such a form is reported to the IRS, so you’ll want to declare it on your return or indicate with your return why you are not declaring it.

Finally, remember that you will owe tax on any gains you make when selling cryptocurrency, including crypto that you got as a credit card reward.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

The Takeaway

Generally, the IRS has provided guidance that credit card rewards earned as part of a purchase are considered a rebate related to that purchase. Rebates on purchases generally are not considered taxable income. On the other hand, any cryptocurrency that you receive as a bonus without making a purchase in order to earn it may be considered taxable income. Consult your tax professional for advice if you’re not sure whether you should pay taxes on crypto credit card rewards.

If you’re looking for a new credit card, consider the SoFi credit card. You can earn unlimited cash-back rewards, which you can use to invest in fractional shares, redeem for a statement credit, or meet other financial goals you might have, like paying down eligible SoFi debt. Learn more and consider applying for a rewards credit card with SoFi today.

Apply for a SoFi credit card!

FAQ

Are crypto credit rewards payouts or rebates?

Whether or not crypto credit rewards are considered a payout or rebate depends on how you earn them. Generally, the IRS has held that credit card rewards received as a result of spending are considered rebates. On the other hand, if you receive crypto credit rewards or any other type of credit rewards without making a purchase, that may be considered income.

Are crypto credit rewards considered virtual currency?

IRS Notice 2014-21 does mention that cryptocurrency (such as Bitcoin) is considered a convertible virtual currency. There are certain tax laws and regulations that deal with virtual currencies, so you’ll want to be aware of that if you receive crypto credit rewards or purchase crypto with a credit card.

What will the IRS do if I do not get audited for my crypto credit card rewards?

The IRS manages tax compliance primarily through taxpayer audits. While the IRS does not publish the criteria it uses to determine who gets audited, there are a few things that you can do to minimize your chances of being audited. But even if you haven’t been audited yet, you may not be out of the woods — the IRS can go back several years in the past. The best thing to do is make sure you keep good records and fully record and report any income that you earn.

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Photo credit: iStock/Delmaine Donson

¹See Rewards Details at SoFi.com/card/rewards.

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.

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.

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Automated Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit www.sofi.com/card/rewards?cardtype=c. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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Millennials continue to make up the biggest share of homebuyers, at 43%, according to a 2022 National Association of Realtors® report.

And Gen Y is the most educated group of buyers, so if you’re a millennial, you’re smart; you already know a few things about home buying.

But if you’re part of the generation of people born between 1981 and 1996, you may still have questions. Here are eight tips to buy a house.

Smart Homebuying Tips for Millennials

1. Pay Down Debt First

The average millennial had about $28,300 in nonmortgage debt in 2021, according to Experian’s latest State of Credit Report. The average balance on retail credit cards was over $1,800.

Gen Y’s credit utilization rate — the percentage of available credit you’re using on your revolving credit accounts — was 30.2% on average. That’s the top end that’s generally advised, but lower is considered better.

As many millennials know, savvy credit card users maximize the rewards they earn or take advantage of interest-free offers. But carrying a revolving credit card balance can add up.

Clearing out at least some debts may be a great place to start on a millennial homeownership journey. You’ll likely need to take out a mortgage to purchase a new house, which will account for an even larger portion of personal debt.

There are several strategies to pay off debt, including the snowball and avalanche methods.

Those methods are part of six ways to become debt free.

Recommended: How Many Credit Cards Should I Have?

2. Start Saving for a Down Payment

After whittling down at least some debt, it’s time to think about how to afford a down payment.

Though a 20% down payment may allow you to avoid paying private mortgage insurance on a conventional (nongovernment) loan and get a better rate, borrowers often are able to put down as little as 3%.

The down payment on a house can be as low as 3.5% for an FHA loan if you have a FICO® score of at least 580 (but mortgage insurance always comes along for the ride with an FHA loan and will not drop off unless you’re putting at least 10% down).

USDA and VA loans usually do not require any down payment, but the eligibility for those loans is pretty narrow.

Many lenders give first-time homebuyers a break, and income-qualifying first-time buyers may be able to get down payment assistance from state or city programs.

Younger millennials use a gift or loan from friends and family to help fund the purchase more than any other generation, the National Association of Realtors has found. A gift will need to be documented in a gift letter for the mortgage.

Recommended: 31 Ways to Save for a House

3. Determine Your Must-Haves

Here’s one of the most fun parts about purchasing a home: plotting a dream space.

Before starting your home search, it’s helpful to take some time and think about what you really want. Do you want an open-concept home, or need a minimum number of bedrooms and bathrooms?

Are you considering a condo or townhouse? The maintenance will be minimized, but regular fees are usually part of the deal.

Or is your heart set on buying a single-family home? You’ll usually be responsible for maintaining everything from the roof to the yard (hope you don’t mind mowing, blowing, and edging or paying to have that done).

Maybe you’re open to a frumpy house because you know you can easily upgrade your home with a smart front door, outdoor lighting, paint, and more.

Or maybe new construction — everything shiny and new — is calling your name.

To narrow the search, think about everything on your must-have vs. like-to-have list.

Recommended: How Do Home Improvement Loans Work?

4. Find a Real Estate Agent

Though you don’t have to use a real estate agent to purchase a home, a buyer’s agent can be your guide from the first viewing to the closing.

Real estate agents have access to a multiple listing service (MLS), which allows them to sift through every home in your area at once. They may also have pocket listings, or whisper listings, few others know about.

A real estate agent is also well versed in what needs to take place before a buyer can take ownership of a home, including making an offer, scheduling a home inspection, and obtaining homeowners insurance.

They know how to handle counteroffers, contingencies, and putting an offer on a house that’s contingent.

They may also have a list of trusted inspectors, lawyers, contractors, and insurance agents a buyer may need along the way.

Recommended: Guide to Buying, Selling, and Updating Your Home

5. Set Up Real Estate Alerts

Millennials are digital natives, so this part is cake.

Once your list of must-haves is complete and you’ve picked a real estate agent to assist you, it could be a good idea to set up alerts across listing sites such as the MLS, Zillow, and Redfin. You’ll be notified whenever a home in your chosen area, price range, and desires comes onto the market.

These websites also typically allow users to save favorites and gather intel on a specific home, such as its tax and sales history. They also allow users to book viewing appointments.

6. Think About Long-Term Value

While viewing homes, it may be easy to fall in love with fresh subway tiles, staged furniture, and the simple shine of a brand-new spot. However, it helps to take a beat and a breath and think about the long-term value of the home.

Are you buying this home as a spot to raise a family? Then make sure the schools are a good fit and it’s a walkable neighborhood. Looking at purchasing a home to rent out short term? Check local laws to ensure you’re zoned properly.

Are you buying a house from a family member? A gift of equity is a lovely thing for a buyer indeed.

Recommended: Local Housing Market Trends by City

7. Consider a ‘Love Letter’ and Incentives

Once you’ve found a home in your price range that comes with all your must-haves, it’s time to put in an offer. There is something you can add to your offer to stand out from the crowd: a personal real estate offer letter, or so-called love letter.

If you choose this route, write a letter to the current homeowner expressing how much you love the space and why you feel you’d make the next great owner. You may also want to point out all the things you love about the home design.

To make your offer stand out, you could also provide a quick closing date, suggest paying for things like a termite inspection, and offer a leaseback to the owners until they are ready to move out.

8. Shop for a Mortgage

With any luck, you’ve gotten prequalified or preapproved and know how much of a mortgage you can afford.
Now it’s time to look for a home loan.

When shopping for a mortgage, realize that advertised rates may differ from what you’re offered. Multiple factors determine your rate.

You can apply for a mortgage online with any number of direct lenders and mortgage brokers. Just try to do so within 14 days to protect your credit score.

Then you can compare all the details of the mortgage offers in the loan estimates you’ll receive after applying with each.

The Takeaway

As multitudes of millennials suit up to take the homebuying plunge, they will benefit by getting their finances in order, hiring an agent, setting up real estate alerts, and shopping for a mortgage.

SoFi is there for Gen Y with competitive rates, a variety of terms, and low down payments.

Look into the advantages of SoFi mortgage loans and get a quick rate quote.

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SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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

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

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If you plan to take out a $300,000 mortgage, the costs of the loan can vary considerably based on your rate, term, property tax and insurance costs, and whether you need mortgage insurance.

Read on to learn how much a $300,000 mortgage could cost over the life of the loan.

What Are the Monthly Payments on a $300k Mortgage?

In April 2022, Redfin found that the monthly mortgage payment on the median asking price home had risen 39% from a year earlier, thanks to rising mortgage rates.

Ouch. But calculating the average monthly payment on $300,000 mortgages is not straightforward.

The lower the interest rate, the lower the monthly mortgage payment, holding other loan terms constant. The interest rate can be calculated differently for different types of mortgages. For instance, fixed-rate mortgages maintain a steady interest rate, whereas an adjustable-rate mortgage fluctuates over time based on market conditions.

The mortgage term also affects mortgage costs. The 30-year fixed-rate mortgage is by far the most popular choice, but a 15-year loan translates to a higher monthly cost for a $300,000 mortgage yet much less total interest paid.

Owning a home comes with annual property taxes based on the local tax rate and the home’s assessed value, which can change over time. Generally, this expense is divided across your monthly mortgage payments.

Your down payment also matters. Borrowers putting less than 20% down on a conventional mortgage usually need to pay for private mortgage insurance, often 0.5% to 1.5% of the original loan amount per year, until the mortgage balance reaches 80% (homeowner requests cancellation) or 78% of the home’s value, or the mortgage hits the halfway point of the loan term.

FHA loans require mortgage insurance premiums, which will last for the whole loan term if your down payment is less than 10%. MIP ranges from 0.45% to 1.05% of the loan balance, divided by 12 and added to your monthly payments.

Homeowners insurance is typically required by mortgage lenders regardless of the down payment amount.

How Much Income Is Needed to Qualify?

When taking out a home loan, lenders often ask for proof of consistent income, such as W-2s. But income is just one aspect of your personal finances a lender will evaluate to determine if you qualify for a mortgage on a $300,000 house.

Lenders use borrowers’ debt-to-income ratio to get a more holistic assessment of their ability to make monthly payments. DTI is calculated by dividing your monthly debt payments by your gross monthly income, then coming up with a percentage.

For example, if you gross $5,000 a month and have a $400 car payment and a $600 student loan bill, your DTI ratio is 20%.

A DTI ratio of 43% is usually the highest a borrower can have to obtain a qualified mortgage, according to the Consumer Financial Protection Bureau. However, lenders may prefer a lower DTI ratio — usually below 36% — for greater certainty that borrowers can afford their mortgage payments.

Programs like the FHA loan and Fannie Mae HomeReady® loan allow a DTI of up to 50% when compensating factors like a higher credit score exist.

Your credit history is another important factor to qualify for a mortgage on a $300k house, and will determine the rate you’ll pay.

How Much of a Down Payment Is Needed?

So how much do you have to put down for a $300k mortgage? The traditional ideal of a 20% down payment is not always necessary or doable. In fact, the latest median down payment is 13%.

How much you need for a down payment depends on the mortgage type, the lender, and if you’re planning to occupy or rent the property.

This is how much you’ll need to put down for different loan types.

•   Conventional loan: As little as 3% down for a primary residence. Buying a second home or investment property typically calls for at least 10% down and 25% down, respectively.

•   FHA loan: As little as 3.5% down if your credit score is 580 or higher. Borrowers with lower credit scores will need to put down at least 10%.

•   VA loan: Usually available with no down payment. This option is only available for active and veteran service members and some surviving spouses.

•   USDA loan: No down payment required. Eligibility is based on income and buying a home in a designated rural area.

But do down payment requirements change for different types of houses?

If you’re planning on buying a duplex or up to four units, you’d still qualify for residential financing, with the same parameters, if you plan to live in one of the units.

Recommended: A Guide to Buying a Single-Family Home

What Are the Parts of a Mortgage Payment?

What you pay to your lender each month includes more than just what you owe on the loan. The mortgage payment consists of the principal, interest, and potentially, escrow costs.

Principal

The principal portion of the mortgage payment goes toward gradually paying the amount initially loaned to you.

When you start making mortgage payments, the amount paid toward the principal is somewhat low. Over time, greater proportions of each monthly payment will chip away at the principal balance.

Interest

The interest rate — how much you’re being charged to borrow the money — is determined by the type of loan, your personal finances, and market factors outside your control.

Borrowers with high credit scores are usually able to snag the best rates. Just a 1% increase in mortgage rate can add tens of thousands of dollars over the life of a 30-year loan.

The bulk of the mortgage payment goes toward interest at the beginning of an amortized loan.

You may be able to recoup some of the interest cost through the mortgage interest deduction.

Escrow

Most lenders require an escrow account to roll tax and insurance bills into monthly mortgage payments. This includes property taxes, homeowners insurance, and, if applicable, mortgage insurance.

How Much Interest Will Be Paid on a $300k Mortgage?

If you have a fixed-rate loan, the total interest can be easily calculated for the life of the loan. Borrowers with a 30-year fixed-rate mortgage at 5.6% APR would pay about $320,000 in interest on a $300,000 home loan.

Shortening the loan term to 15 years and getting a rate of 4.8% APR would reduce the total interest paid to $121,302.

With an adjustable-rate mortgage, the interest rate can change over time with market conditions.

Try out this mortgage payment calculator to see how much you might pay in interest with different rates and down payments. You can also toggle the amortization chart on a desktop.

How Much Is the Mortgage on a $300k House?

Using the previous example of a 30-year fixed-rate loan with a 5.6% annual percentage rate, the principal and interest would be $1,720 per month, and would total about $620,000 over the 30 years. To capture the full mortgage cost, you also need to estimate the tax and insurance costs.

•   PMI (if applicable): often 0.5% to 1.5% of the original loan amount but up to 2.25%. Assuming a 1% rate, monthly PMI would be $250, with $21,303 the total amount of PMI you’d pay until you reach 20% equity.

•   Homeowners insurance: $2,305 on average annually, or $192 per month.

•   Property taxes: 0.28% to 2.49% of assessed value on average, depending on U.S. state. Most states have a homestead exemption that gives homeowners a tax break.

Recommended: A Guide to Mortgage Relief Programs

How to Get a $300k Mortgage

Prospective homebuyers can take steps to help qualify for a $300k mortgage and obtain more favorable terms.

•   Budget: First, it’s important to estimate how much you can afford.

•   Check your credit: Assess your credit history and take care of any late payments to improve your FICO® scores.

•   Get pre-approved: Starting the mortgage pre-approval process with one or more lenders gives you tentative approval for a loan amount and type, making you a more competitive buyer.

   Consider the interest rate, fees, and closing costs among lenders when shopping for a mortgage.

•   Make an offer: When you find a home that meets your needs and budget, consult with a real estate agent to submit an offer with your pre-approval letter.

•   Apply for the mortgage and get loan estimates: Now that you have a property address, you might want to request loan estimates from a number of lenders. A loan estimate is a three-page standard form that details the loan after you apply for a mortgage. Applying with more than one lender within 14 to 45 days counts as a single credit inquiry.

•   Choose a lender, and wait for the lender to verify your finances and appraise the property to underwrite the loan.

•   Close the deal: Get your cash to close and homeowners insurance ready and finalize the paperwork to close on your $300,000 mortgage.

Recommended: SoFi’s 2022 Home Loan Help Center

Where to Get a $300k Mortgage

The Consumer Financial Protection Bureau and others recommend getting quotes from multiple lenders. Buyers can choose from banks, credit unions, online lenders, and mortgage brokers to finance a home purchase.

While we’ve identified the interest rate and loan term as key information to compare, keep an eye out for fees paid directly to the lender, like origination fees and mortgage points.

The Takeaway

How much will a $300,000 mortgage cost you? The interest rate, loan term, insurance costs, and taxes will determine the amount you pay each month and over the life of the loan.

As you begin comparing lenders, give SoFi a look. SoFi fixed rate mortgage loans require as little as 3% down for qualifying first-time homebuyers.

Check your rate in just minutes

FAQ

How much is a $300,000 mortgage per month?

The monthly payment on a $300,000 mortgage depends on the loan length, interest rate, whether mortgage insurance is required, and more.

How much do I need to earn to get a mortgage of $300,000?

The required annual income to get a $300,000 mortgage is affected by your other debts and the down payment amount.

Can I get a $300,000 mortgage with a bad credit history?

You might be able to obtain a $300,000 mortgage with subpar credit, but the terms may be less competitive. For instance, borrowers with credit scores from 500 to 579 could be eligible for FHA loans, but they’ll have to make a down payment of at least 10% instead of 3.5%.

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Photo credit: iStock/Vertigo3d

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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

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

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.

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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Cash management is a term often used by businesses to determine how much revenue coming in is available for day-to-day operations, and how much is available for investing in the future of the business.

But cash management is important for individuals, too. Your own personal balance sheet is not unlike that of a business. You want to determine how much of your income is available for covering expenses, discretionary spending, and investing for your future.

When you take control of your spending and saving in proportion to your income, you’re engaging in cash management. Here, we’ll explain the process in more depth, highlight the benefits you’ll reap, and guide you through this process, step by step.

What Is Cash Management?

You may wonder about the meaning of cash management; it can sound like a complicated term. But here’s the simple truth: Cash management is all about managing the money that’s coming in and the money that goes out in the best way possible for your day-to-day living. You can also think of it as cash planning, as it helps you stay in good financial shape today and tomorrow. Let’s look at this through a somewhat different lens: Solid money management strategies like the ones we’ll explore help you maintain healthy cash balances, stay on budget, earn a return on your savings, and reduce expensive debt.

💡 Recommended: Business Cash Management, Explained

Why Is Cash Management Important?

Good cash management is essential for a business’s financial stability. By the same token, borrowing cash management techniques that businesses use can help individuals enhance their overall financial wellness.

Cash Management Strategies

The concept of cash management is straightforward, but implementing it can become a bit more complex as individuals deal with financial ups and downs. These five strategies can help you adopt an efficient cash management process worthy of any corporate Chief Financial Officer.

1. Create a Realistic Budget

Think of your budget like a personal cash flow statement, which is a financial statement businesses often use to monitor income and expenses each month. Your personal budget can work the same way, becoming your personal cash flow statement.

If you’re often wondering at the end of the month where all your money went, that’s likely a sign it’s time to create a realistic budget. This can give you a clear picture of your monthly cash flow (money you earn) and your monthly cash outflow (money you spend).

From there, you can take the necessary steps to manage your cash flow to help you avoid too much debt, set financial goals, and save for the future. Once you accomplish that, you’ll be enjoying a good example of cash management. And it’s easier than you might think! Creating a budget isn’t difficult. You’ll simply need to gather some of your financial information and do some calculating. Let’s explore what financial info you’ll need below.

Income

Income includes your salary, bonuses, self-employed income, rental income, and all investment income including interest, dividends, and returns.

For the purposes of cash flow budgeting, you want to work with after-tax income, or the money that’s actually available to you instead of pretax gross numbers. So, this means take-home pay, not your gross salary.

Any extra money — such as bonuses, tax returns, or money from side gigs — should be factored in, as they are earned and with taxes owed in mind.

Expenses

Essential expenses should include things like the following:

•   Housing and utilities

•   Food

•   Childcare

•   Medical expenses

•   Insurance premiums

•   Car payments and maintenance

•   Public transportation costs

•   Clothing

Expenses can also include discretionary spending. This includes the things you want but don’t necessarily need, such as entertainment, travel, and other non-essential items.

Then there’s debt. Do you have student loans, credit card debt, or any other debt? If so, this is the liability side of your cash flow statement. You’ll need to take a close look at that.

2. Accurately Estimate Costs

Just like a business, the more accurate your budget is, the more efficient your finances will be.This is where tracking expenses comes in. You may find it makes sense to track your expenses for one to three months so you can determine exactly where your money is going. You can do this using your own spreadsheet or budgeting apps such as SoFi Relay.

Here are a few common living expenses that can help you create your own list. Once you have a finalized list, you can then use it to determine how much you’re spending on living expenses.

•  Housing

◦  Rent

◦  Mortgage

◦  Utilities

◦  Maintenance

◦  Insurance

•  Transportation

◦  Car payments

◦  Maintenance

◦  Gas and tolls

◦  Parking

◦  Public transportation costs

◦  Taxis and ride shares

◦  Auto insurance

•  Childcare

◦  Day care

◦  After-school programs

◦  Summer camp

◦  Tuition

◦  Babysitting

◦  College tuition

•  Insurance

◦  Health insurance premiums (if not deducted from your paycheck)

◦  Auto and home insurance premiums

◦  Life insurance premiums

◦  Disability income insurance premiums

•  Food

◦  Groceries

◦  Takeout and restaurants

•  Health

◦  Deductibles, copays, and coinsurance

◦  Prescription drug costs

◦  Over-the-counter (OTC) drugs

◦  Eyeglasses and contacts

•  Entertainment

◦  Concert, theater, and movie tickets

◦  Paid streaming and podcast services

◦  Books

◦  Travel

•  Pets

◦  Food

◦  Flea and tick prevention/other medications

◦  Vet bills

◦  Pet insurance

•  Personal

◦  Clothing/shoes/accessories

◦  Haircare and other grooming

◦  Toiletries/cosmetics

◦  Gym membership

3. Be Mindful of Cash Flow

You can use your income and spending data to better manage your cash flow. One approach to consider: Separating your income into different “buckets” using a percentage system.

With the 70-20-10 rule, you aim to put 70% of your income into essential and discretionary spending, 20% toward savings or paying off debt, and 10% toward investing and charitable giving.

These “buckets” can help you prioritize and achieve your financial goals. If your spending exceeds 70% of your income, you can find ways to reduce discretionary spending. How, exactly? Cutting back on takeout and restaurant meals, streaming services, and clothing purchases can all add up to more savings.

You may also find you need to make more drastic cost-cutting moves, such as finding less expensive housing or transportation. This can be especially important if you are paying off debt. If you are carrying heavy student loans and/or credit card debt, you may find you need to devote even more than 20% of your income to paying that down so you can avoid the high-interest payments and make way for other savings. This could include an emergency fund or health savings account (HSA).

The 10% investing allocation is where you focus on long-term financial goals, such as saving for retirement or future education expenses. It also offers a place to give back with charitable contributions.

4. Invest Extra Cash

Successful companies invest extra cash back into the business so it can grow. The same notion works for personal finances. Where you invest your extra cash that’s destined for short- and long-term savings is an important aspect of cash management.

For short-term savings, high-yield savings accounts, money market funds, certificates of deposit (CDs), and cash management accounts may all pay more interest than a traditional savings account.

Funds earmarked for long-term savings are usually best made as contributions to the following kinds of accounts:

•   IRAs

•   401(k)s

•   403(b)s

•   Self-employed retirement savings plans

•   Other long-term tax-advantaged accounts

This isn’t money you need soon, so it can be invested more aggressively than your short-term savings.

5. Avoid Bookkeeping Inaccuracies

With any cash management or budgeting process, being fluid and staying on top of your finances is key. There are times when you may need to allocate more toward debt payment and other expenditures, as well as times when you can focus on saving.

Regularly tracking expenses and adjusting your buckets accordingly will help ensure no inaccuracies creep in and keep you on track for your financial goals. Also, regularly checking your account balances and reviewing statements (online, in an app, or on a hard copy) is vital too. Accurate bookkeeping enables you to stay on top of cash management while balancing short-term needs with long-term financial planning.

The Takeaway

As you’ve seen from these examples of cash management, it’s a process that need not be complicated. By adopting these cash management concepts, you’ll be able to manage your cash flow, create a budget, and stay on top of your finances. What’s more, they’ll also guide you towards meeting your long-term goals as well by helping you manage debt and save for tomorrow.

Bank Better With SoFi

Cash management strategies work as well for individuals as they do for businesses. But it can help a person along to have a partner in growing your money. A SoFi Checking and Savings bank account can be just that. We offer eligible accounts a super-competitive APY, plus we don’t charge you minimum balance or monthly fees. What’s more, you’ll have access to a network of 55,000 fee-free ATMs. All of this means you’ll have more money to manage!

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

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Photo credit: iStock/ptasha

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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.

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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