Dec
04
2024
Cheap Ways to Live: 12 Low Cost Housing Alternatives

13 Cheap Ways to Live

By | Budgeting & Goals, Financial Independence, money | Comments Off on 13 Cheap Ways to Live
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The cost of housing is the biggest living expense for most people, and lately, it’s been rising fast. If you’re struggling to make ends meet, finding cheaper housing alternatives could be the solution to mending your money woes. There are less expensive ways to live that don’t involve selling your worldly possessions and couch-surfing indefinitely. With a little creativity, and a willingness to simplify your life, you may be able to find affordable, comfortable housing.

Key Points

•   Explore moving to cheaper areas to significantly reduce housing costs.

•   Consider living in unconventional spaces like RVs, tiny homes, or shipping container homes for affordability.

•   Renting out a room or becoming a live-in caretaker can lower expenses.

•   Living on a boat or abroad offers unique, cost-effective housing options.

•   Mobile homes and guest houses provide budget-friendly living alternatives.

What Is Considered Affordable Housing?

The average American spends $2,120 per month on living accommodations. A sound financial goal is to allot 30% of your gross monthly income toward your housing budget, including electricity, heat, and water.

The cost of living by state can vary tremendously, but with rents and utilities rising across the country, the suggested 30% rule can be unrealistic. In certain cities and areas with a high cost of living, housing can eat up 50% of a person’s budget, straining their ability to save and meet financial goals.

13 Cheap Housing Alternatives

When thinking about the cheapest ways to live and trying to open up some breathing room in your budget, ask yourself, “Is my housing situation affordable?” If you are living paycheck to paycheck and not saving, your living situation may have to change. Fortunately, there are a range of possibilities when it comes to seeking cheap housing.

Here are 13 housing alternatives to help cut the cost of living and bring balance to your budget.

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1. Moving to a Cheaper Area

When looking for cheaper accommodations, one of the biggest moves you can make is a literal one: Move to a place with lower housing costs.

For instance, the costs of the Los Angeles housing market are typically far more than in rural Idaho. Your choice of locale can add hundreds, sometimes thousands of dollars to your monthly bill.

If your job and life situation permits, you could look for a less pricey neighborhood nearby or something more affordable that is within commuting distance of your work. If that doesn’t help make ends meet, it might be wise to consider relocation to another state where the rents are cheaper.

Unfortunately, relocating can be expensive. It can be difficult to tabulate how much money you’d need to move. Resettling in another state may involve the cost of typical moving expenses and supplies, getting a new license and vehicle registration, and other costs.

2. Living in a Recreational Vehicle (RV)

The use of recreational vehicles surged during the pandemic, with people itching to get out of their quarantines and onto the open road. Having an RV can do more than satiate your wanderlust, it can be an affordable housing option.

While a new RV is not cheap, you can find used ones for around the price of a used car. Despite their somewhat restrictive quarters and the constant need for parking, the sense of freedom, including financial, could be worth it, especially if you’re a nature lover. While it may not be a forever move, it can give your budget a break for a while.

3. School Bus Homes

Here’s a quirky way to live more cheaply for a period of time: Get on the bus. A converted school bus is cheaper than an RV. A used school bus can run between $3,000 and $10,000 dollars.

The interior renovations are the biggest cost factor. A school bus conversion, complete with hookups for electricity and water, can cost $20,000 to $30,000.

Parking can be an issue, so do your homework first on everything from national forests to a friend’s roomy property in terms of where to pull up.

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4. Living on a Boat

Perhaps you prefer life on the water vs. life on the road. In that case, choosing a boat as your primary residence could satisfy your inner sea captain and your financial needs.

Not including the cost of a boat, maintaining your nautical lifestyle can run an average of $500 to $2,000 monthly for a couple. But you can reduce your costs by spending more time at sea and less on marina fees. Of course, if you have a Monday-to-Friday office job, this will be a challenge. For those with flexible or work-from-home schedules, it could work.

5. Living Abroad

With the cost of living rising in the U.S., some people are looking beyond the borders for affordable housing. Your dollar can go far in places like Vietnam, Costa Rica, and Thailand, as long as you can work and procure the proper visas.

However, establishing a permanent residency in a foreign country can be tricky, and shipping your stuff internationally can be a hefty expense. You’ll want to do the research and do the math before making a move, but it could be an option — and an adventure — for some.

6. Renting a Guest House

You can lower your housing costs by moving into a garage apartment or a mother-in-law suite in someone’s home. What you sacrifice in space and privacy can be made up in savings on rent and utilities. If a friend or acquaintance has one to let, great. Also look at the usual rental listings for options on this front.

Recommended: How Much Should I Spend On Rent?

7. Living in a Mobile Home

What else is among the cheapest ways to live? Purchasing or renting a mobile home can be way more affordable than an apartment or house. Utilities are sometimes included, but be sure to factor in the costs of the lot fees, community fees, and other charges imposed by the trailer park landlord.

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8. Moving into a Tiny Home

Tiny houses have exploded in popularity, popping up on TV shows and social media feeds. The term describes compact dwellings of no more than 600 square feet or so, with many of them being just 225 square feet. If you don’t have enough of a down payment for a traditional house, a tiny home offers a more budget-friendly alternative and hip design options. The cost of a 250- to 300-square-foot prefab tiny home runs between $30,000 and $80,000, a fraction of the figure for a full-sized home.

Not ready to commit to close quarters? Renting a tiny house can run between $600 and $900, still cheaper than a lot of apartment rentals. But you may have to pay for storage for all your oversized belongings.

9. Living in a Shipping Container Home

Believe it or not, one of the newest cheap ways of living can involve cutting-edge high design. Repurposing shipping containers into industrial-chic small homes has become a trend lately. These containers are way cheaper than a house and can be configured in unique ways, combining multiple containers for more square footage.

In terms of how much you’ll spend, converting a container to a livable space with one bedroom and a bath could cost you $25,000 to $82,000.

10. Living as a Live-In Caretaker

If you’re looking for employment as well as more affordable housing, being a live-in caregiver can be an ideal situation. You could look after an elderly or disabled individual in exchange for a free room and a monthly salary. Another option is being an au pair or nanny, which can work well if you love kids.

11. Being an On-Site Property Manager

In terms of finding cheap ways to live, you might explore becoming an on-site property manager if you’re handy. You’d be responsible for superintendent-type duties — garbage removal, cleaning common areas, and the basic upkeep of the building — in exchange for low-cost or free rent.

12. Renting Out a Room in Your Home

Here’s a way to save on housing costs that flips the script. If you are fortunate enough to have a spare room in your house or apartment and don’t mind having a roommate, renting out your extra space can cut your expenses significantly. Just be sure to properly vet the renter before agreeing to an arrangement.

Recommended: 39 Passive Income Ideas to Build Wealth in 2024

13. Move in with Friends or Family

If you need to cut housing costs to the bare bones (perhaps you’re trying to financially survive a layoff), think about family members or close friends who could make room for you. In some cases, you may be able to pay no rent but contribute to the household via cooking, cleaning, and other chores.

While likely a temporary move, it can give you time to save up some funds and, if necessary, break out of habits that make you bad with money and prepare to get your own place again.

The Takeaway

Housing costs can take a big bite out of your budget. If you want to save money or stop living beyond your means, reevaluating your housing situation is a great place to start.

If you are willing to be flexible, and a little unconventional, you can secure an affordable home that suits your lifestyle and your bank account.

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


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FAQ

Is living cheaply worth it mentally?

Living cheaply and within your means can typically bring financial peace of mind and allow you to save for the future. However, if taken to an extreme, frugality can cause some people a high level of stress.

What are the hidden costs of living in affordable housing?

While affordable housing can save you money down the line, there are expenses such as down payments, first-and-last month’s rent, security deposits, and the costs of moving or storage units to consider. Also look out for broker’s fees when renting if cheap ways to live is your goal.

Are there monthly rent payments at mobile homes?

Yes, you can rent a mobile home by the month. Be sure to ask the landlord about common fees, who covers utilities, and other potential additional costs. Different properties have different policies, and you don’t want any surprises if you move in.

Photo credit: iStock/Marje

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Dec
04
2024
11 Tips for Surviving on $1,000 a Month

11 Tips for Surviving on $1,000 a Month

By | Budgeting & Goals, Family Finances, money | Comments Off on 11 Tips for Surviving on $1,000 a Month

While adopting a frugal lifestyle is a choice for some people, it may be a necessity for others. For example, you might be trying to figure out how to live on $1,000 a month if you’re in school, if you’re working part-time, or if you lost your job and are trying to find a new one.

Getting by on $1,000 a month may not be easy, but it is possible to live well even on a small amount of money. Try these tactics.

Key Points

•   Surviving on $1,000 a month requires careful budgeting, prioritizing essential expenses, and finding ways to save money.

•   Cutting down on housing costs by sharing living spaces or finding affordable options is crucial.

•   Utilizing public transportation or opting for a bike can help save on transportation expenses.

•   Cooking at home, meal planning, and buying groceries in bulk can significantly reduce food costs.

•   Exploring free or low-cost entertainment options, utilizing discounts, and avoiding unnecessary expenses are key to making $1,000 a month work.

What Does Living on $1,000 a Month Look Like?

If your income is limited to $1,000 a month, you might be wondering exactly how far it will go. Breaking it down hourly, weekly, and by paycheck can give you some perspective on how much money you’ll actually have to work with.

An income of $1,000 a month is….

•   $230.77 as a weekly salary

•   $46.15 daily

•   $6.15 an hour, assuming you work 37.5 hours a week full-time

•   $11.54 an hour, assuming you work 20 hours a week part-time.

The numbers above assume that you’re talking about net income, which means the money you bring in after taxes and other deductions.

By comparison, the real median household income in the United States was $80,610 in 2023, according to Census Bureau data. That works out to $6,717.50 in monthly pretax income, but note that it’s for a household, not an individual.

Is It Possible to Live Off of $1,000 a Month?

Living off $1,000 a month is possible, and it’s a reality for many individuals and families. Again, you might be living on a low income because you’re in school. So your monthly budget might look something like this:

•   Food: $250

•   Gas: $100

•   School supplies/equipment: $50

•   Rent: $400 (assuming you’re sharing with roommates)

•   Utilities: $100

•   Miscellaneous: $100

As you may notice, there isn’t room in this budget for debt repayment coming out of your checking account, nor is there money to set aside as savings.

In addition to students living on a frugal budget, this kind of scenario may apply to older people on a fixed income. Retirees may choose to cut their expenses to the bone once they stop working. In addition to students living on a frugal budget, this kind of scenario may apply to older people on a fixed income. Retirees may choose to cut their expenses to the bone once they stop working. And in some cases, money may be tight because you’re getting through a financial hardship (such as job loss or illness impacting one’s ability to be employed), and income is lower than normal.

Can you live well on just $1,000 a month? That’s subjective, as the answer can depend on how responsibly you use the money that you have as well as what the cost of living is in your area. Being frugal and flexible are essential to making life on a smaller income work.

How to Live on $1,000 a Month

Figuring out how to live on $1,000 a month, either by choice or when money is tight, requires some creativity and planning. Whether your low-income lifestyle is temporary or you’re making a more permanent shift to financial minimalism, these tips can help you stretch your dollars farther.

1. Assess Your Situation

You can’t really learn how to manage your money better if you don’t know where you’re starting from. So the first step is creating your personal financial inventory to understand:

•   Exactly how much income you have

•   Where that money is coming from

•   What you’re spending each month

•   How much you have in savings

•   How much debt you have.

It also helps to consider why you might need to know how to live on $1,000 a month. For example, if you’re knee-deep in debt because you’ve been living beyond your means, that can be a strong incentive to curb spending and live on less.

(Also check to see if bank fees are eating away at your funds. You might consider switching to a low- or no-fee account, which are often offered by online banks, if you are getting hit with charges.)

2. Separate Needs From Wants

Needs are things you spend money on because you need them to maintain a basic standard of living. For example, needs include:

•   Housing

•   Utilities

•   Food

•   Health care

Wants are all the extras that you might spend money on. So that may include dining out, hobbies, or entertainment. If you’re trying to live on $1,000 a month, needs should likely take priority over wants. One good budget plan can be the 50/30/20 rule, which allocates 50% of one’s take-home pay to needs, 30% to wants, and 20% to savings.

Here’s a hard truth, however: When working with $1,000 per month, you may have to get rid of most (or all) of the wants to make your spending plan work. As you make your budget, focus on the needs first and if you have money left over, then you can add one or two small extras back in.

For an idea of how your income could be broken up into needs and wants, use the 50/30/20 calculator below.


3. Lower Your Housing Costs

Housing might be your biggest expense, and, if you want to make a $1,000 a month budget work, getting that cost down can help. Some of the ways you might be able to reduce housing costs include:

•   Taking on one or more roommates

•   Moving back in with your parents

•   Renting out a room

•   Refinancing into a new mortgage

•   Selling your home and moving into something smaller or less expensive.

Are these options ideal? Not necessarily. Living with parents, roommates, or strangers who are renting out part of your home can mean sacrificing some of your privacy. Refinancing a mortgage or downsizing can be time-consuming and stressful.

But if you’re trying to get your budget to $1,000 or less, these are all legitimate ways to slash your housing expenses.

4. Get Rid of Your Car

Cars can be expensive to own and maintain. A car payment could easily run several hundred dollars per month. Even if you own your car outright, putting gas in it, buying tires, and paying for regular maintenance could still make a sizable dent in your income.

If you have the means to do so, selling your car could free up money in your budget. And you could use the money you collect from the sale to pad your savings account, pay down some debt, or simply get ahead on monthly bills.

If you do sell your vehicle, use an online resource like Kelley Blue Book to check your car’s potential resale value before setting a price.

5. Eat at Home

After housing, food can easily be a budget-buster, especially if you’re eating out rather than preparing meals at home. The good news is that there’s a simple way to cut your food costs: Ditch the takeout and restaurant meals.

Planning meals around low-cost, healthy ingredients can help you to spend less on food and still eat well. You can also save on food costs by:

•   Using coupons

•   Shopping sales and clearance sections

•   Downloading cash back apps that reward you with cash for grocery purchases

•   Relying on pantry staples that you can make into multiple meals

•   Trying Meatless Mondays (which means eating vegetarian on Mondays; meat tends to be a pricey buy)

•   Repurposing leftovers as much as possible.

You could also save money on food if you’re able to make things like bread, pizza dough, or pasta yourself using basic ingredients. When shopping at your local grocery stores, take time to compare prices online before heading out. And consider whether you can get in-season vegetables and fruits for less at a local farmer’s market.

6. Negotiate Your Bills

Some of your bills might be more or less unchanging from month to month. But others may give you some wiggle room to negotiate and bring costs down.

For example, if you’re keeping your car, you don’t have to keep the same car insurance if it’s costing you a lot of money. You can shop around and compare rates with different companies, or ask your current provider about discounts. You could also raise your deductible, which can lower your monthly premium, but keep in mind that you’ll need to have cash on hand to pay it if you need to file a claim.

Other bills you might be able to negotiate or reduce include:

•   Internet

•   Cable TV (bonus points if you can get rid of it altogether)

•   Cell phone

•   Subscription services (or better yet, cancel them for extra savings)

•   Credit card interest.

Also, if you are hit with a major doctor’s bill, know that it can be possible to negotiate medical bills. It’s definitely worth talking with your provider’s office about this.

There are also services that will handle bill negotiation for you. While those can save you time, you might pay a fee to use them so consider how much that’s worth to you.

7. Learn to Barter and Trade

Bartering is something of a lost art, but reviving it could be a great idea if you’re trying to live on $1,000 a month. For example, say you need to cut the grass, but there’s no room in your budget to buy a new lawn mower to replace your broken one. You could barter the use of your neighbor’s mower in exchange for a few hours of raking leaves at their place.

Or, say that you have kids who have outgrown their clothes. Instead of resigning yourself to using a credit card to buy new outfits for school, you could set up a clothes swap with other parents in your neighborhood. You can clean out clutter and get things you need, without having to spend any money.

8. Get Rid of Debt

Debt can be one of the biggest obstacles to making a $1,000 a month income work. If you have debt, whether it’s credit cards, student loans, or a car loan, it’s important to have a plan for paying it down.

When you only have $1,000 a month to work with, you may only be able to pay a little to your debts at a time. But you might be able to make each penny count more by making debts less expensive.

For instance, you might try a 0% APR credit-card balance transfer to save on interest charges. Or if you have loans from getting your diploma that have a high interest rate, you may consider the benefits of refinancing your student loans to reduce your rate and lower your monthly payment.

If you’re really struggling with how to pay off debt on a low income, you may want to talk to a nonprofit credit counselor. A credit counselor can review your situation and help you come up with a budget and plan for paying off debt that fits your situation. One option is the National Foundation for Credit Counseling, or
NFCC.

9. Adopt a No-Spend Attitude

When you want or need to know how to live on $1,000 a month, the fastest way to get overspending in check is to do a no-spend challenge. How this works: You commit yourself to not spending any money on nonessentials for a set time period.

A no-spend challenge can last a day, a weekend, a week, a month, or even a year. The time frame doesn’t matter as much as being all-in with the idea of not spending money on things you don’t need. And you might be surprised at how much money you’re able to save by avoiding wasteful spending.

10. Find Free or Low-Cost Ways to Have Fun

Living on $1,000 a month might mean you don’t have much room in your budget for fun. But you can still enjoy life without having to spend money.

Some of the ways you can do that include:

•   Checking out free events in your community, like festivals or fairs

•   Adopting hobbies that are low or no-cost, like walking or bike-riding

•   Checking out books, DVDs, and CDs from your local library

•   Volunteering

•   Visiting local spots that offer free admission days, like museums or aquariums.

Those are all ways to spend an enjoyable afternoon without costing yourself any money. And if you do want to do something that requires a little spending, you can use a site like Groupon to check for coupons or special deals to save some cash. Or try Meetup to see if any free or low-cost events of interest are brewing in your area.

11. Grow Your Income

If you try living on $1,000 a month and find that it just isn’t enough, the next thing you can do is see if you can figure out how to bring in more money. Fortunately, there are plenty of ways to do that.

Here are some ideas for making more money to supplement your income:

•   Increase your hours if you’re working an hourly job

•   Take on a part-time job in addition to your full-time job

•   Start an online low-cost side hustle, like freelancing or Pinterest management

•   Consider an offline side hustle, like walking dogs or shopping with Instacart

•   Sell things around the house you don’t need for cash

•   Check for unclaimed money online

•   Sell unwanted gift cards for cash.

The great thing about making more money is that you can try multiple things to see what works and what doesn’t. And you can also use found money, like bonuses, rebates, or refund checks deposited into the bank to help cover bills or shore up your savings.

The Takeaway

Making your budget work when you have $1,000 in monthly income is possible, though it might take some serious work. Drastically reducing expenses can be a great place to start, and bringing in more income can of course help, too.

Changing banks is one more money-saving tip to know.

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


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

FAQ

Where can you live on $1,000 a month?

The best places to live on $1,000 a month are ones that have an exceptionally low cost of living. In the United States, that may mean living in a rural area or a smaller city. When searching for the cheapest places to live, consider what you’ll pay for housing, utilities, transportation, and food, which are among the non-negotiable “musts” in your budget.

How can I live on very little income?

The secret to living on a very little income is being careful with how you spend your money and minimizing or avoiding debt as much as possible. Keeping a budget, cutting out unnecessary expenses, and using cash only to pay can make it easier to live on a smaller income.

What is the lowest amount of money you can live on?

The lowest amount of money you can live on is the amount that allows you to cover all of your basic needs, including housing, utilities, and food. For some people, that might be 25% of their income; for others, it might be 75%; it really depends on your specific situation (household size, debt, etc.) and the cost of living. Residing in a less expensive area can make it easier to live on less of the money you make.

Photo credit: iStock/David Commins

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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.

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.

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Dec
04
2024
What Is Mystery Shopping?

What is Mystery Shopping?

By | Budgeting & Goals, Financial Independence, money | Comments Off on What is Mystery Shopping?

Being a mystery shopper (or secret shopper) can sound like a dream come true: A company pays you, as an independent contractor, to hit the stores and buy things. You earn money by posing as a patron at a place of business and help evaluate the quality of the products and services.

However, not all mystery shopping jobs are legit (there are plenty of scams out there) and even the real jobs generally don’t pay enough to allow you to leave your day job. Still, working as a secret shopper can be a fun way to earn some extra cash. Read on to learn more about this type of marketing work and how to become a mystery shopper.

Key Points

•   Mystery shopping involves evaluating businesses by posing as a customer, providing feedback to improve services.

•   Payment for mystery shopping tasks can take 30 to 90 days to process.

•   Earnings from mystery shopping are variable and often modest, averaging $12.23 per hour.

•   Scams are prevalent in mystery shopping; legitimate opportunities don’t require upfront fees or promise unrealistic earnings.

•   Taxes apply if mystery shopping earnings exceed $400 annually, making detailed record-keeping essential for deductions.

What Is Mystery Shopping?

Mystery shopping means a company hires you to use its services covertly. For example, you might bring your car into a shop for an oil change, buy a new pair of jeans at the mall, or eat at a new restaurant. The crucial factor is that the company’s employees don’t know by whom you are employed or that you are evaluating them, so you’ll gain insight into what typical operations are like. The purpose is for the company to gather your feedback to improve their business.

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

What Happens During Mystery Shopping?

During mystery shopping, you’ll head to the assigned business location and act like an average customer. You might have the job of returning something or noting the tidiness of the workspace.

After you complete your task, you’ll likely submit a write-up or complete a survey describing your experience, including what went well or how the company could sharpen their services. Generally, once the company receives your feedback, they will pay you.

How Much Do Mystery Shoppers Make?

According to Indeed, mystery shoppers across America earn $12.23 per hour on average, which would equal $28,597 if employed full time. Typically, you receive compensation per task instead of per hour. However, mystery shopping can be time-consuming, which is why the hourly pay is relatively low. Additionally, some mystery shopping opportunities don’t offer compensation.

While some side jobs, such as renting out a portion of your home, help you build passive income streams, mystery shopping pays by the gig. Therefore, to make continuous money, you’ll have to repeatedly take on mystery shopping jobs.

Can Mystery Shopping Be a Full-Time Job?

Companies pay mystery shoppers for their help, usually in the form of a flat fee. They may also repay all or part of the expenses you incurred performing the work. In either case, mystery shopping isn’t typically profitable enough to be a full-time job, though it can be a fun, low-cost side hustle. Remember, the time that mystery shopping takes and the hidden expenses such as unreimbursed travel expenses can reduce the value of your reimbursements.

Additionally, as independent contractors, mystery shoppers don’t receive benefits, such as health insurance and paid time off. Also, if you are self-employed, saving for retirement is on you.

As a result, you’ll need to subtract those costs from what you think you could earn as a full-time mystery shopper. With an average salary of $28,597 a year, it may be challenging to make ends meet.

Would Mystery Shopping Be Considered Variable or Fixed Income?

Fixed income is a set sum of money that you can expect on a regular basis. For example, when you earn a salary, you will usually get paid the same amount weekly or bi-weekly.

On the other hand, variable income fluctuates weekly or bi-weekly. Since the income earned from mystery shopping can vary by company and project, your mystery shopping income is usually variable.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

Do Mystery Shoppers Pay Taxes?

The IRS requires you to file an income tax return if your net earnings from mystery shopping (or any side hustle) were $400 or more for the year. If you netted less than $400 from mystery shopping, the IRS stipulates that you still have to file an income tax return if you meet any other filing requirements listed in the Form 1040 and 1040-SR instructions. Remember to keep records of your expenses so you can maximize your deductions.

Becoming a Secret Shopper

If you strategically acquire legitimate mystery shopping jobs, you can make quick cash to pad your budget every month. Here are steps to becoming a secret shopper:

•   Search online for mystery shopping opportunities from businesses.

•   Vet the advertisement and company to ensure the opportunity isn’t a scam.

•   Apply to the mystery shopping job.

•   If necessary, submit a background check and sign any related disclosures or professional agreements.

•   After the company grants you access, check their website for jobs and select one you’d like to complete.

The Mystery Shopping Providers Association (MSPA) has an online database to help you find honest, authentic mystery shopping jobs. In addition, the organization offers two certifications that make you a more desirable mystery shopper for companies. You can earn the MSPA’s silver certificate online and participate in a day-long workshop for the gold certification.

Recommended: A Guide to Ethical Shopping

Benefits of Becoming a Mystery Shopper

By becoming a secret shopper, you’ll enjoy the following perks:

•   You earn money for shopping, trying a delicious meal, or spending the night at a hotel.

•   You can create your own schedule and practice a healthy work-life balance.

•   You may get to keep what you buy.

•   You can often work during evenings and weekends if that is your only available time.

•   You decide for whom you want to work, meaning you can be selective when choosing jobs.

•   You are your own boss to a large extent, setting your schedule.

•   You can supplement income from your day job with mystery shopping or even try going full time.

•   You’ll have variety and excitement from new experiences every day.

•   You can help companies you like improve their products and services.

Drawbacks of Becoming a Mystery Shopper

If you’re considering becoming a mystery shopper, it’s a good idea to be mindful of potential downsides:

•   You likely won’t have steady earnings like a typical job, meaning some weeks will be more lucrative than others. In addition, each job may pay differently.

•   Frequent travel can put extra miles on your car and possibly cause damage. Even if you’re reimbursed for miles, you may still lose more money through oil and tire changes.

•   You’ll probably have to sift through countless scams while looking for jobs. If you fall prey to one, you’ll likely lose money or waste time.

•   Payment could take up to 90 days to receive.

•   Starting out, you usually won’t be able to access some of the better assignments available only to seasoned shoppers.

Recommended: How to Earn Residual Income

Tips Before Becoming a Mystery Shopper

If you’re planning on becoming a secret shopper, consider this advice on staying organized and achieving success.

Keeping Receipts

You’ll likely submit receipts for many mystery shopping jobs. Therefore, you may spend time mailing, faxing, or scanning receipts. It’s recommended to make copies for your own records to ensure you retain proof of completed jobs.

Signing Up for Multiple Sites and Companies

To make substantial income, you’ll probably work with numerous companies. As a result, you’ll typically have to become well-versed in the methods and preferences of a plethora of businesses. It can be a good idea to organize your work into files for each company to keep you from getting mixed up.

Watching Your Income and Taxes

You’ll likely owe taxes on the income if you earn more than $400 as a mystery shopper. Therefore, it’s recommended to meticulously track your earnings to ensure your income level is accurate on your tax return.

Watching for Scams

Unfortunately, not all mystery shopping jobs are legitimate. Scammers devise websites and advertisements to look authentic. Here, some signs to watch out for:

•   A dead giveaway of a scam is typically the requirement that you must pay to access a job. Companies with legitimate mystery shopping opportunities won’t charge you or demand that you transfer money from your bank account. Additionally, since MSPA lists mystery shopping jobs at no charge, you should not have to pay to view opportunities.

•   Any mystery shopping job that promises you’ll make thousands of dollars during your first month is also likely to be fraudulent. While it is possible to generate significant income by mystery shopping, it takes time and certifications to access better-paying work. Even then, you would have to work at least 40 hours per week to earn enough to live on.

•   Beware scammers who use the MSPA name to con you into their fraud. MSPA is an excellent resource, but scammers posing as the organization try to lure mystery shoppers. The MSPA posts jobs but does not directly employ mystery shoppers. It can be wise to avoid advertisements for jobs with the MSPA, as they tend to be fake.

Knowing What You Signed Up For

It’s easy to get carried away when perusing mystery shopping opportunities. So before you click away, it’s a good idea to read the details about the opportunity first. For example, although you might see a job at your favorite store, the location might be an hour away instead of the one that’s a five-minute drive from home. Therefore, it’s wise to study jobs carefully before committing to something you may not enjoy or receive enough compensation for it to be worthwhile.

The Takeaway

Mystery shopping can be a fun way to earn extra money. Just keep in mind that it may not be the most profitable side hustle out there, and finding legitimate opportunities can be challenging. Still, the added perks of trying new products and having new experiences can make mystery shopping an enjoyable hobby that also puts a little extra padding in your bank account.

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


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

FAQ

Is mystery shopping too good to be true?

Mystery shopping is a viable side gig that can increase your income by completing jobs for businesses that are looking to improve. However, scammers try to lure in would-be mystery shoppers by promising huge paychecks for quick jobs. Any mystery shopping job that sounds too good to be true probably is. That said, a wide array of mystery shopping jobs pay modest rewards that can pad your wallet.

Do mystery shoppers get to keep what they buy?

Mystery shoppers sometimes get to keep what they buy. It depends on the company’s policies for the specific job. The business might allow you to keep purchases in some cases and ask for you to return them in others.

Do mystery shoppers get paid upfront?

In most cases, mystery shoppers do not get paid upfront. It usually takes 30 to 90 days to receive payment for a mystery shopping job.

Photo credit: iStock/PeopleImages

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

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.

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04
2024
14 Budgeting Questions to Ask

14 Budgeting Questions to Ask

By | Budgeting & Goals, money | Comments Off on 14 Budgeting Questions to Ask

Making a budget is often the first step in building a solid financial foundation. It helps you get better acquainted with how much money you earn, spend, and save. What’s more, it provides guidance and guardrails to help you hit the financial goals you’re focused on, whether that means saving for a vacation in Tuscany or the down payment for your dream house.

But budgets are not “set it and forget it” tools. The process can involve plenty of trial and error, and you may benefit from refining your plans along the way. In fact, it’s a good idea to check in on your budget every month, quarter, and/or year to make sure it’s still serving you well.

That’s where budgeting questions come in. Whether you’re just starting to budget or have been doing it for years, the following list of budget-specific questions can help you fine-tune your financial plan and stay on track. When asked regularly, these questions can yield surprising insights and adjustments to enhance how you manage your money.

Key Points

•   Reviewing your budget every month, quarter, and/or year can help ensure your spending is on track and you’re making progress towards your goals.

•   Having a list of budgeting questions can help simplify the budget review process.

•   It’s a good idea to save 10% to 15% of income for retirement, adjusting based on retirement timing.

•   Aim to build and maintain an emergency fund that can cover three to six months of living expenses.

•   Apply debt repayment strategies, like the 50/30/20 rule, to balance debt reduction with savings.

How Questions Can Help You Budget Better

Asking questions about budgeting can be a wise move because everyone’s financial situation is different. The way that your parents or best friends budget may be entirely different from the way you approach managing your money. By checking in and assessing where you stand, you can help improve your financial outlook.

The right budget questions can give you insight into things like:

•   Why you should budget in the first place

•   What you hope to achieve from keeping a budget

•   Where your biggest budget pitfalls are

•   How you can improve your budget

To put it another way, asking budgeting questions can help you better understand where you are financially, where you’d like to be, and how a budget can help you to get there.

In terms of how often you should be asking questions about budgeting, there’s no set rule of thumb. You might check in monthly if you’re just getting started, then ease back to every few months. At the very least, it’s a good idea to do an annual budget review to see how your spending has evolved over the year. It’s also a good time to see what adjustments you might need to make as you set new financial goals for the year ahead.

14 Budgeting Questions That Can Help You

Not sure which budget questions to ask? The following checklist covers some of the most important things to consider as you make your monthly spending plan and keep tabs on it.

1. Am I Prepared for Unexpected Expenses?

Saving for financial emergencies is an important part of budgeting. When you don’t have money to cover an unexpected expense, you run the risk of having to use a high-interest credit card or loan to cover, say, a car repair or a major dental bill.

One of the first budget questions to consider is how much you have saved toward emergencies. If the answer is “0” in liquid funds you could quickly tap, you may want to think about how much you need to save for emergencies and how to fit that savings goal into your budget each month.

2. What is a Good Amount for an Emergency Fund?

A general rule of thumb is to keep three to six months’ worth of expenses in a separate savings account earmarked for emergencies. However, a good amount for an emergency fund for you can depend on your income, expenses, and how much money you need to have in the bank to feel comfortable.

If you’re single and have side-hustle income on top of your regular paychecks from a job, for instance, you might be okay with one to two months’ worth of expenses saved. On the other hand, if you’re married with two kids and are the primary breadwinner, it’s a much different situation. You might be more at ease with nine to 12 months’ worth of expenses saved instead.

When you’re starting from zero, aiming for $500 or $1,000 can be a good way to ease into a savings habit. You can then review your budget monthly to see where you might be able to find additional money. Every little bit counts ($20 here, $35 there) until your emergency savings hits a level that allows you to breathe a sigh of relief.

Recommended: Savings Account Calculator

3. How Much Debt Should I Pay Down Each Month?

Debt can make it difficult to reach your financial goals, especially if a big chunk of your income is going to credit cards, student loans, or other debts. With high-interest debt (like credit cards), it’s generally a good idea to pay as much as you can in excess of the minimum payment each month. This will help speed up repayment and save you a significant amount of money on interest. With other types of debt, however, you may want to strike a balance between debt repayment and saving. With the 50/30/20 rule of budgeting, 50% of your income goes to needs; 30% goes to wants; and 20% goes to debt payments beyond the minimum and savings.

4. Did I Overspend? If So, Where?

This is another great budgeting question to ask when reviewing your budget monthly if you’re trying to stop overspending. Going through each budget category and analyzing how much you spent can help you pinpoint the money leaks in your financial plan.

Once you find the leaks, you can take steps to plug them. For example, if you noticed that you’re spending more money on dining out, then planning meals at home and committing to that plan is a relatively simple fix. Or you might decide to audit your subscription services and cut out anything you’re paying for but not using. Those are simple ways to cut back on spending.

5. Do I Need to Adjust Spending Limits?

Reviewing your spending each month can help you figure out where you might be overdoing it. But it’s also an opportunity to see how inflation and rising prices might be affecting your expenses. If you notice that you’re spending more on groceries or gas, for instance, then you may need to adjust your budget and trim other areas of spending to compensate for those higher costs.
You might also decide to adjust spending limits down if you want to dedicate more of your budget to saving or debt repayment. So again, instead of eating out you might stick to having meals at home which can be more cost-effective. If that saves you $100 a month, you could add that sum to your emergency fund or make an extra payment to your student loans.

Recommended: Budgeting for Beginners: A Guide

6. What Are My Money Priorities?

Knowing your money priorities is important as they can influence the financial decisions you make. You could ask this budgeting question monthly. But if that feels like too much, aim to consider it at least once a year to see how life changes might affect your answers.

For example, your money priorities might include spending on travel or recreation in your 20s. But once you hit your 30s, your focus may shift to saving, paying down debt, and taking other steps to work toward financial stability and security.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


7. Am I Tracking Toward My Financial Goals?

Tracking your financial goals can give you motivation to stick with your money plan. It’s also an easy way to see how you’re progressing toward them.

Whether your goals include paying down debt, building an emergency fund, or saving for a vacation, you can ask this budget question monthly to gauge how you’re doing.

If you see that you’ve made little progress over the past few months, for instance, you can then ask yourself what you can do to change that and get closer to your goals.

8. Am I Happy About the Purchases I’ve Made?

Some things you have to spend money on, but others you buy because you want to. That’s the difference between needs vs. wants, and understanding that is an important part of budgeting.

If you find yourself spending money more often than you’d like on things that aren’t necessities, ask yourself what you’re getting from those purchases. Dropping $5,000 on a once-in-a-lifetime vacation might be justified if you get a chance to create lasting memories. Spending that same $5K on new clothes, on the other hand, might give you a temporary boost, but you may end up regretting that purchase later.

Considering what you’re getting from spending money can give you clarity on your financial priorities. It can also help you to identify bad money habits that might be hurting your financial situation.

9. What Would My Budget Look Like Without Debt?

Living debt-free might seem like a dream but it’s possible to make it a reality with the right plan. If you have debt that you’re paying down monthly, ask yourself what your budget might look like if you didn’t have to make those payments. That could give you a push to dedicate more money toward debt repayment so you can eliminate those obligations faster.

There are lots of debt reduction strategies you can use, including the debt snowball and debt avalanche techniques. If you’re tracking your debt repayment progress and aren’t getting ahead as fast as you’d like, you might review your budget to see if another method might be more effective.

When it comes to credit card debt, you might investigate balance transfer credit card offers, which give you, say, 18 months during which you pay no interest. This can help some people pay down the amount they own. You might also seek advice from a nonprofit credit counselor.

10. Is There a Way to Increase My Income?

Making more money can give your budget a boost. When income goes up, paying bills becomes less stressful. It may also be easier to knock out debt or grow your savings.

How often you ask yourself this budget question can depend on your situation, but it’s worth pondering it at least once a year. Some of the ways you might be able to increase income include getting a part-time job, taking on more hours at your current job, negotiating a raise, or starting a low-cost side hustle.

11. How Much Should I Budget for Investments?

Investing money and saving it are two different things. When you invest money, you’re putting it into the market where it has more opportunity to grow. There’s greater risk involved vs. saving, but the rewards can be greater as well.

The amount you should budget monthly for investing can depend on how much you have left after covering basic expenses, how much you’re saving for emergencies or other short-term goals, and how much you’re paying towards debts. (You also want to spend a little on those “wants” mentioned above; otherwise, you’ll end up feeling deprived.)

Depending on the details of your situation, aiming to invest 10% might be a good place to start and you can build on that amount year over year as you pay down debt or increase your income.

12. How Much Should I Save Each Month for Retirement?

Paying yourself first is a fundamental rule of personal finance and it’s a good way to build the wealth you need to retire. When reevaluating your budget each year, it’s a good idea to look at how much you’re saving for retirement.

The exact amount you’ll need to save monthly will depend on your retirement goals and age. Financial experts often recommend saving at least 10% to 15% of your annual take-home income for retirement (including any company match).
However, you might need to double or even triple that if you’d like to retire early or you’re getting a late start.

Look at what you’re putting into your 401(k) at work if you have one. If you’re not contributing enough to get the full company match, then consider bumping up your contribution rate to max out this benefit (which is essentially free money).

13. What Are My Goals This Month?

Financial goal-setting often involves looking well into the future. For instance, you might want to save $50,000 for a down payment on a home or $1 million for retirement. But you can also set goals that you hope to achieve month to month.

For example, you might set a goal of getting three car insurance quotes from different companies if you’re hoping to get a better rate. Or you might have a goal of not spending money for 15 days out of the month. These kinds of short-term goals can help you move ahead financially without losing sight of your bigger money picture.

What’s more, succeeding at small financial goals can build your confidence to tackle larger ones.

14. How Can I Stay Consistent In Keeping My Budget?

Making a budget is important, but sticking to it matters even more. Examining your income and expenses monthly is helpful, but asking the key question, “How can I stay consistent with my budget?” can also be vital. Doing so can help you figure out what might be tripping you up and what you can do to be more consistent with your spending plan.

You might decide to do weekly or biweekly budget check-ins versus reviewing your budget once a month. Or you might start using a budgeting app that tracks your daily and weekly spending. These tools often link to your checking account and credit cards and will automatically download transactions. This can help you catch — and correct — small cash flow problems before they become bigger and completely derail your budget.

The Takeaway

The great thing about making a budget is that there’s always room to tweak and improve things. Asking the right budget questions is a good way to figure out what’s working (and what’s not) so you can make the most of your money each month.

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


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

FAQ

How many budget categories should I have?

There’s no single right answer to how many budget categories someone should have. It’s possible to have 100 budget categories or more, depending on how much detail you go into when dividing up your income and expenses. At a minimum, you may want to have budget categories for fixed expenses, discretionary expenses, variable expenses, saving, and debt.

What does a realistic budget look like?

A realistic budget takes into account all of your income and divides it up to pay for your needs (including debt repayment) and some wants, as well as allowing room for saving. It should allow you to manage your money without feeling stressed or anxious.

How do you plan a budget?

Planning a budget starts with understanding your income and then diving into your expenses. As you make your budget, you can assign income to each expense you have, starting with the most important ones first. That usually means housing, utilities, food, transportation, and insurance. Paying down debt is also often a priority. From there, you can continue dividing up income to cover discretionary spending and savings.

Photo credit: iStock/MicroStockHub

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.

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Dec
04
2024
What to Do When Someone Asks for Money

What to Do When Someone Asks for Money

By | money | Comments Off on What to Do When Someone Asks for Money

Dealing with people who ask for money can be uncomfortable, and it can put a strain on even the best of relationships. You may feel pressured to say yes when you can’t really afford to. Or you may get tired of handing over your hard-earned cash to someone you view as being financially irresponsible.

Having a strategy for answering when someone asks for money can make those situations feel less awkward — and keep you from making a poor financial decision.

Key Points

•   When someone asks you for money, assess your financial situation to ensure lending won’t jeopardize your stability.

•   Determine if the request for money is for a genuine need or simply a want.

•   Understand the risks involved in lending to friends and family, including potential non-repayment.

•   Offer alternatives like paying expenses directly or non-financial help.

•   Avoid guilt-driven decisions and be sure to prioritize your own personal financial goals.

Determining if You Have the Funds to Help First

Any time someone asks for money, there’s an important question to ask before you consider saying yes: What can I afford?

Giving friends money when they’re in a jam could make you deplete your bank account if your budget is already strained. So before agreeing to hand over any cash, review your financial situation first to see how much money you can realistically part with.

This is especially important when someone asks for money, and it’s more than just a few bucks. Say your aging parents ask you for $10,000 to help with medical bills, for example. That’s not exactly pocket change. Talking to parents about money may not be easy but if you can’t afford to part with that kind of money, it’s important to say so upfront.

Recommended: Guide to Practicing Financial Self-Care

Determining if It Is for a Genuine Need or Financial Situation

When someone asks for money, it’s natural to want to know what it’s for. And that might play a part in your decision to say yes or no.

For example, there’s a big difference between your younger sibling asking you for $1,000 to put a security deposit on an apartment and asking for $1,000 to buy a gaming console. One is a need, while the other is a want.

If you’re constantly dealing with family members or friends who ask for money to fund their desired lifestyle, you may begin to feel that you’re being taken advantage of. So it’s okay to set boundaries and specify that you’re only willing to give friends and family money in situations where there’s a genuine need.

However, be wary. Some people might use their hard-earned money on things like, say, the latest mobile device or a weekend away, and then come knocking for cash when a student loan or medical bill is due. Again, you don’t want to fund someone’s extravagant lifestyle.

Understanding the Risk Involved With Lending Money

Borrowing from friends and family isn’t the same as getting a personal loan from a bank. If someone asks you for money, they probably aren’t expecting you to whip out a loan agreement or charge them fees and interest, for instance. And they might assume that if they don’t pay you back, you won’t bombard them with collection calls the way a traditional lender would.

When you lend money to friends and family, you’re taking on risk. If they don’t pay you back, then you likely won’t be able to get that money back unless you’re willing to sue them in small claims court. When debts between friends or family members go unpaid, that can lead to the eventual breakdown of the relationship.

If people who ask for money regularly seek you out, there are two ways you can try to manage the risk factor:

•   Require them to sign a loan agreement

•   Consider the money a gift

The former can give you some legal protection if they don’t pay, but some people might balk at having to sign it. The latter, meanwhile, eliminates all risk since you’re assuming you’re never going to get the money back anyway. But you have to be sure beforehand that you can afford the loss.

Also, be aware that it may change the nature of your relationship with the person to whom you are gifting the money. Consider whether you want to set a precedent of bailing out, say, your younger sister’s or your fiancé’s finances.

Recommended: 5 Ways to Achieve Financial Security

Paying for Things Directly Instead of Gifting Money

If you’re not comfortable giving cash to friends or relatives who ask for money, you could offer to pay for things for them instead. If your best friend asks for $300 to pay their electric bill, you might not feel 100% sure they’ll use the money for that. You could offer to pay the bill for them instead.

You might also consider offering non-financial help. For example, if you have a cousin who is a struggling single parent and often requests cash, you might offer to watch their kids for free so they can spend time looking for a higher-paying job or take night classes to advance their education. You’re still helping them out, but you’re not giving them permission to turn to you for money every time they need it.

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Watching Out for Your Financial Goals

Saying yes when someone asks for money can be problematic if it means your financial goals suffer. Going back to the example of aging parents, helping them pay for medical bills or other expenses in retirement could mean that you’re shortchanging your own financial future.

Again, it all goes back to looking at how much you can afford to give and whether you’re comfortable giving money to friends and family, knowing that you might never see that moolah again.

If doing so would put your money goals at risk, it’s important to consider whether helping them out is truly worth it, especially if the money they’re asking for is to fund wants rather than needs.

Learning From Your Mistakes

If you’ve gotten into the habit of automatically saying yes when people ask for money or you’ve given someone money in the past and regretted it, it’s not too late to correct those mistakes.

For example, say you have that one friend who, when you dine out, always asks if you can pick up the tab when the check arrives. Maybe they say they haven’t gotten paid yet and that you are lucky to earn a higher, dependable salary.

Remember, it’s perfectly okay to say, “I can’t afford to keep picking up the tab for dinner. What’s another way we can enjoy time together without spending as much?”You could suggest that instead of going out, you do potlucks at home instead. This could help you to avoid feeling like you’re being taken advantage of.

If you feel like you’ve made a mistake with money by lending it or giving it to friends and family, don’t shy away from it. Analyze the situation to figure out what went wrong, then commit to not repeating those same mistakes again. Just because you gave a person money in the past doesn’t mean you must continue to do so.

Teaching Them Smart Financial Habits

If you find yourself dealing with someone who asks for money on a regular basis because they’re terrible at managing their finances, you could offer to help. For example, you might introduce them to some online resources for learning about money or share your favorite budgeting app or savings calculator with them.

Keep in mind that this doesn’t always work. If someone has learned poor financial habits from an early age and doesn’t seem inclined to change them, you may not be able to put them on a different path. In that case, you may need to kindly but firmly say no to their frequent requests for money and know that you tried to improve their situation via education.

Providing Financial Resources to Help Them

If someone asks for money and you either can’t afford to give it or would prefer not to, you can still point them in the right direction. You can help them explore other ways to borrow money, such as personal loans, lines of credit, or credit cards.

Just be mindful of steering them toward loans that might worsen their financial situation. Payday loans, for example, can feature astronomical interest rates that can quickly lead borrowers into a downward spiral of expensive debt. Cash advances on credit cards are another very expensive way to borrow money that one may want to avoid.

Valuing Yourself and Your Hard Work

You work hard for your money, so it doesn’t make sense to give it away without some thought beforehand. A request in and of itself isn’t a good reason to part with your cash. For all you know, the person asked half a dozen people who said no before they came to you, and they may have several people they are planning on asking for funds if you decline.

When people ask for cash, check in with your money mindset. Don’t undervalue the effort it took for you to make it, even if that’s not something that’s on their radar. Also, be clear about how it will be used.

For example, finding out after the fact that the $500 you thought was going to buy groceries for your sister and her kids actually went to funding a trip to an amusement park might make you feel resentful. You may feel like your hard work to make that $500 was all for nothing since it went to a frivolous expense.

Not Giving Out of Guilt

Guilt can play a big part in influencing financial decisions. For example, perhaps your spouse’s parents gave you the money to put down on a home after you were married. That can lead to sticky situations with how to handle money with in-laws for years to come if they later need financial help and automatically expect you to provide it.

You may feel too guilty about the down payment gift to say no, which could put a strain on your finances or even your marriage. Or it may be your parents who are putting a guilt trip on you to justify asking you to pay for their expenses in retirement. Talking about money with your partner can help you to avoid conflicts in these kinds of situations.

Guilt can also come into play in other ways. For instance, you might feel guilty about making more money than your friends and use that as an excuse to always pay for nights out or give them money. But allowing guilt to guide you can lead to everyone you know treating you like a personal bank. So it can be important to not let guilt cloud your decisions, and feel comfortable saying, “No, sorry I can’t” to money requests without feeling obligated to explain your reasoning.

The Takeaway

Knowing how to navigate the conversation when people ask for money can make those situations less stressful. You don’t always need to say no, but it’s important to know when doing so makes sense for your financial situation — and your personal relationships. Whether you do or don’t choose to loan money to friends and family, it’s important to keep working toward your own financial goals by saving regularly.

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

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

FAQ

When should you say no to someone who asks for money?

It may be a good idea to say no to someone who asks for money if you truly can’t afford to give it or if you believe the money will be wasted on wants vs. needs. You should also consider saying no if you suspect the money will be used for illegal purposes.

How can we trust if someone is telling the truth?

There’s no way to tell if someone is being truthful, short of giving them a lie detector test. When someone asks for money, you essentially have to trust your instincts. If you suspect they might not be truthful about why they need the money, then you can say no.

How can I avoid disputes if I choose to say no?

Telling someone who asks for money that your answer is no could lead to conflicts. If you’re worried about a dispute, you can explain your reasons for saying no or simply say, “I’m sorry; it’s just not a good time.” Don’t allow them to argue with you or try to wear you down to change your decision.

Photo credit: iStock/Sergey Nazarov

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.

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