Feb
27
2024
couple home on laptop

19 Budgeting Categories For Your Budget

By | Budgeting & Goals, money | No Comments

Building a budget can pay off quite literally: It provides guidelines for your money and helps you wrangle your spending and saving to achieve financial health. With smart planning, you can make your cash work harder for you and grow.

Many people think that a budget is all about deprivation, but it’s really about organization. A key step in developing a good budget is knowing how to categorize both your spending and saving. That can help you get a handle on where your money is going and how to make the most of it.

In this guide, you’ll learn how to divide your expenses into three main categories (namely, needs, wants, and savings), and then further separate things into smaller groups. This can help you truly understand your spending habits and optimize your finances.

Whether you’re just starting out on your independent financial life or if you’re looking to tweak your existing budget, this advice can help you better manage your budget categories and direct your spending goals.

Key Points

•   Personal budget categories help organize and track expenses for better financial management.

•   Common budget categories include housing, transportation, food, utilities, healthcare, debt payments, savings, entertainment, and personal care.

•   It’s important to customize budget categories based on individual needs and priorities.

•   Tracking expenses within each category helps identify areas for potential savings and adjustments.

•   Regularly reviewing and adjusting budget categories can help maintain financial balance and achieve financial goals.

9 Budget Categories for Needs

Of course, you probably are wondering what actually constitutes budgeting categories. First, focus on the needs of life.

This category, which represents the largest chunk, includes expenses that you must pay in order to live and work. You might think of these as things you actually need to survive — they’re sort of like the air, water, and food of your budget.

So, for instance, a fancy dinner out or a caramel latte are definitely food, but they wouldn’t necessarily go in this category. Groceries would though.

A good rule of thumb is to have this category take up about 50% of your after tax income. Housing and utilities are likely to take up the biggest chunk, but ideally no more than 30% of income.

The percentages, however, are just guidelines. Because the cost of living in different states varies across the country, you may need to adjust your budget according to where you live.

Recommended: How to Make a Budget in 5 Steps

1. Housing

Whether you pay rent or have a home mortgage, paying to keep a roof over your head is definitely a need. In addition, you may have property taxes to pay if you are a homeowner, and home maintenance costs can be part of this category for renters and owners alike.

2. Utilities

Depending on your living situation, you might pay for electricity, WiFi, heating fuel, telephone service, water, sanitation services, and other necessities.

3. Insurance

Having car, health, life, homeowners or renters insurance and possibly pet insurance can be important. You don’t want to wing it with this kind of protection (and auto insurance is required).

4. Groceries and Personal Care Items

Of course, you need food and toiletries as part of daily living. So the food you purchase to make meals and items like toothpaste go into your budget as “needs.” However, buying that $7 pack of cookies or $40 hair conditioner? Those might be better deemed “wants.”

5. Transportation

Car ownership expenses, public transportation, and the occasional Uber to get to urgent care can all be considered necessities.

6. Clothing

Yes, you need a warm winter coat if you live in the climates that get chilly, plus boots. And you need basic garments to wear to work and on your off-hours. However, if you buy a cool jacket because you love it or yet another pair of cute shoes since they are on sale, those are not vital to your survival and should go in the “wants” category.

7. Debt

Minimum payments on outstanding debts like credit cards, student loans, auto loans, or personal loans would also go into the 50% needs portion.

8. Parenting Expenses

Child care, as well as child support or alimony payments, go into the “must” bucket of your budget. Those are not discretionary expenses.

9. Healthcare

Depending on your insurance coverage, you may have expenses related to staying well, such as copays, prescription costs, and the like. Treating yourself to a massage that isn’t medically required? That’s not a “need” but a “want.”



Recommended: Input your monthly income to find out how much to spend on essentials, desires, and savings with our 50/30/20 Budget Calculator.

6 Spending Categories for Wants

These are expenses that don’t qualify as needs and don’t include your savings and payments towards debt. Though it can sometimes be tricky to separate needs from wants, if you can live and earn your income without it, then it’s probably a want.

If you can live and earn your income without it, then it’s probably a want.

This is where you could put spending on clothing outside of what you need on a day-to-day basis, dinner and drinks out with friends, going to the movies, gym memberships, personal care, and miscellaneous spending.

As a general guideline, this category shouldn’t take up more than 30% of your spending. While you may need to give and take depending on your situation, seeing how much you are spending on wants in black and white may cause you to start thinking more carefully about these expenditures.

1. Clothing and Personal Care

Treated yourself to a new but unnecessary shirt as part of a little retail therapy? Took yourself to the spa for a day? Or bought yourself a fancy watch since you got a promotion? Those are all wants. They aren’t necessarily bad things, but be clear that they are not vital to your survival.

2. Dining Out and Drinking

It’s part of life to meet friends and loved ones for happy hour or a nice meal, or to get a bubble tea while running errands on the weekend. Or maybe you don’t feel inspired to cook so you order some Pad Thai for pickup or delivery. These are all discretionary food expenses vs. those that are vital to your survival.

3. Entertainment

While entertainment can definitely enrich your life, it goes into the “wants” category. This includes things like concert, play, and movie tickets; books and magazines; cable and streaming services; downloading music; and attending festivals and fairs.

4. Gym Memberships, Self-care, and Grooming

You could just workout for free at home while watching a Youtube video, so health club memberships, yoga or Pilates classes are “wants.” Same goes with self-care and grooming: Facials, manicures, and the like are considered discretionary. That $50 hair conditioner you can’t live without? That isn’t a “need” either.

5. Travel Expenses

If you are traveling for business purposes to pitch a new account, that’s more of a “need,” but otherwise, a getaway is a “want.” So tally up any airfare, rental car costs, hotel or Airbnb, food, and tour/attraction tickets, and consider them “wants.”

6. Home Decor

If your mattress bites the dust and you replace it, that is a “need,” but deciding to buy a new couch because your home could use a spruce-up is a “want.”

💡 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.

Categorizing Your Savings

Under the 50/20/30 rule, it’s suggested that savings take up 20% of your post-tax income. This is the money you’re putting toward your retirement, emergency fund, and other savings. You can also put payments against debt above minimums here since this can ultimately save money on interest, it’s considered savings.

Here are specifics.

1. Emergency Fund

Financial experts recommend having three to six months’ worth of basic living expenses socked away in case of emergency. This could mean job loss or receiving an unexpected and major medical or car repair bill. You don’t want to have to resort to using your credit card for such things.

Recommended: Use our emergency fund calculator to determine how much you should be savings for an emergency fund.

2. Retirement Savings

If you aren’t offered a 401(k) or something similar at work, you can still contribute to retirement savings account like an individual retirement account (IRA). You might be able to find a low-fee, or no-fee, IRA online.

Recommended: How to Open an IRA: Step-by-Step Guide

3. Other Short- and Long-Term Savings

You’ll also probably want to fund non-retirement savings goals, such as saving for a summer vacation or the down payment on a house. It can be a good idea to open a separate savings account, ideally where you can earn higher interest than a standard savings account, such as a money market fund, online savings account, or a checking and savings account.

To make sure saving happens each month, you may also want to set up an automatic transfer from your checking account into this account on the same day every month, perhaps after your paycheck gets deposited.

4. Additional Debt Payments

If you can pay more than the minimum on your credit card bill or make extra payments on your loans, that can decrease what you are spending on interest. That in turn can help increase your overall financial health and wealth.

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.


Why Categorizing Your Budget Is Important

Categorizing your budget is important because it can give you a much better sense of where your money goes versus just paying whatever bills turn up.

•   When you see how much cash goes towards the different kinds of “needs,” “wants,” and savings, you can better manage your cash. Tracking your spending can bring greater financial insight.

•   Also, as you categorize and tally your spending, you may see that much more than 30% of your take-home pay is going to ”wants.” That could convince you to recalibrate and cut back.

•   Or you might notice that you are spending way more than 50% on “needs.” This can happen when you are just starting out in your career or if you live somewhere with a high cost of living. Again, you might look to lower costs.

Finalizing Your Budget Categories and Getting Started

Now that you have an idea of how to allocate your income based on standard budgeting categories, you may want to start building out your budgeting plan.

If you find that your monthly expenses (including savings) are higher than your monthly take-home income, you’ll likely want to make some adjustments. One of the easiest places to do this is within the “wants” bucket.

Here, you can scout for unnecessary expenses you may be able to do without. For instance, maybe you would be fine saving on streaming services by dropping one or two platforms, cooking at home a few more times per week, or cutting back on clothing purchases.

If your “musts” are eating up more than 50%, perhaps you want to consider moving to a less expensive home or taking in a roommate. Another option could be to start a side hustle to bring in more income or train up for a higher-paying line of work.

It can help to keep in mind that the 50/30/20 guideline is just that, a guideline. Everyone’s situation is different and your numbers may vary depending on many different factors, including where you live, your income, how much debt you have, and your savings and investment goals. (There are also other budgeting methods to try, if you like.)

The Takeaway

Putting expenses into categories and coming up with a spending plan can bring significant benefits. These include being able to pay off debt, saving up for short-term goals (such as an emergency fund, a vacation, or a down payment on a home), and funding your retirement.

The 50/20/30 rule can give you an general idea of how to allocate your income based on standard budgeting categories and help you start building out your budgeting plan.

Need some help keeping track of spending? Many financial institutions offer tools that can help you see where your money is going and make the most of your savings.

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

What are the 4 main categories in a budget?

There are different ways to categorize a budget, but commonly, people focus on their take-home pay, their spending on their “wants,” their “needs,” and how much they save.

What categories should you have in a budget?

When building a budget, it’s important to know how much income you have after taxes, what are the expenses that are necessary for your survival, what is your usual discretionary spending (which some people call the “fun stuff” in life), and how much are you saving. Within the last three buckets, you can subdivide into more specific categories.

How do you organize a budget?

One good budgeting technique is the 50/30/20 budget rule. This principle says that 50% of your take-home pay should go towards necessities, 30% to discretionary spending, and the remaining 20% should be saved.

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

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

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

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

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

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

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

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

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.

SOBK0923004U

Read more
Feb
27
2024

8 Ways to Make Your Money Work For You

By | Budgeting & Goals, Growing Wealth, money | Comments Off on 8 Ways to Make Your Money Work For You

If you want your money to grow more quickly and to feel confident that you’ll reach your financial goals, you’re in the right place. This guide will show you how to make your money work harder for you. There are smart ways to maximize every single dollar you earn. Yes, it will take some planning and focus, but it can have very real rewards.

A few tactics to make the most of your money involve leaning into your personal finances and recognizing the importance of financial literacy. Once you’re committed to doing that, you can take such steps and budgeting well, maximizing interest and rewards on your cash, spending smarter, and automating your savings.

Key Points

•   Effective budgeting is crucial for understanding your spending habits and making the most of your money.

•   Paying off debt should be a priority to free up funds and make your money work for you.

•   Opening a high-yield savings account can help you save money for short-term goals and earn more through higher interest rates.

•   Considering passive income streams, such as rental properties or investments, can provide additional income and financial stability.

•   Investing as part of your financial plan can help grow your wealth over the long term, but it comes with risks and requires careful consideration.

Making Your Money Work For you

These tips and ideas can help you put your money to work.

1. Learning How to Budget

An effective budget can help you make the most of your money, allowing you to understand where you are spending, so that you can feel empowered to save, and spend, on things that are most important to you. With the right tools on your side, you can learn how to make your money work for you.

These budgeting tips can help you get started:

Layout Your Finances

An effective budget is an accurate budget. If you are starting your budget from scratch, some recommendations suggest reviewing three months’ worth of receipts, bills, etc., before moving forward. This will give you insight into your current spending habits. Then, split those expenditures into needs and wants.

A budgeting tip: The information for making your budget should be accessible. Depending on your preferences that may be a physical copy, a spreadsheet, or using an app that can help you stay on top of your budget and expenses. SoFi, a money-tracking app, lets you see all of your accounts in one central location so that you can easily see where the money is coming, where it’s going, and where you can shift things around.

Figure Out Your Net Income

After you know how much you’ve been spending, you want to compare it to how much you earn. When making a budget, it can help to work with your take-home pay. This is the total income you earn from your job, after taking out all the required taxes, savings, and insurance payments from it. Those who are self-employed may work with different deductions than those who work a regular 9-to-5. In that case, subtract your self-employment tax (the sum of Social Security and Medicare taxes).

Using your after-tax pay can help you determine an accurate total for how much money you actually have available to spend. If you have any other income earners in your household, do factor in their income as well. Also include any investments or additional sources of income.

Plan Your Budget

Now comes the moment of truth. You have to create a step-by-step plan and put it into action. One method you may want to think about is the 50/20/30 budget. This budgeting method breaks your spending and savings into the following amounts: 50% for your needs, 30% for wants, and 20% for savings. If they need adjusting, shift the numbers to suit your plan.

Tracking multiple categories may not work for you, though. If you have trouble logging expenses in hyper-specific categories, simplify them. Overwhelming yourself will only make it harder for you to stay on target.

Review and Adjust

No matter how perfect the plan, things change. You might switch jobs, have a child, move somewhere else, or gain new needs. That’s why your budget can be flexible. When things change, change your budget to reflect those new priorities. If you have trouble fixing the plan, you may need to revisit some of the previous planning stages. Your budget and money should work for you, after all.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.00% APY, with no minimum balance required.

2. Getting Out of Debt

More than anything, getting out of debt means finding ways to make your money work for you. Whether it’s more robust savings tactics or new repayments strategies, there are options. So if you want to take the burden of debt off of your shoulders, here are some methods to try out.

It’s easy to say you need to pay off a debt. But it’s another thing actually to have the money for it. So before you cut down your expenses, you may need to save up first. A high-yield savings account is an available option that can help you build wealth to meet your financial goals.

Selecting a Debt Repayment Strategy

What do you think of when you hear the words “snowflake,” “snowball,” and “avalanche”? Perhaps you picture snow-capped mountains or blustery winter sports. But they’re the names for some of the most popular debt repayment strategies. While these strategies encourage individuals to make additional payments on some of their debts, making the minimum payments on all debt is important.

•  The snowflake method encourages individuals to put any extra cash earned toward debt repayment. Any time there’s excess to play with, you put it towards your debt. Since that helps you pay over your monthly minimum, you’ll eventually finish off the debt. You can earn additional money in any way that works for you. For example, some people start low-cost side hustles in their free time, or you can try selling items you don’t want anymore.

•  With the snowball strategy, you pay off your debts from smallest to largest, when evaluating the total amount owed. During this, you still make minimum payments on all your other debts. While it’s motivating to see some of your financial troubles disappear, this may not work for you. The snowball method ignores interest rates, which gives a chance for other debts to grow.

•  The avalanche method works on the debts with the highest interest rates first.

Unsecured debts, like credit card balances and personal loans, often come with unfavorable interest terms. Leaving them alone allows your debt to grow exponentially when you’re not looking. Focusing on debts with the highest interest rate first could help you escape debt quickly and potentially spend less in interest overall.

3. Opening a High-Yield Savings Account

A high-yield savings account is an available option that can help you build wealth to meet your financial goals. High-yield savings accounts work similarly to traditional savings accounts. However, they have a greater annual percentage yield (APY), which indicates how much money you can earn in interest. While you still have to pay income taxes on that interest, these accounts are a great way to save money for significant, short-term expenses.

Another critical feature high-yield savings accounts have is their limited accessibility. You can’t make withdrawals as frequently as you do with a checking account. In addition, they come with monthly limits on deposits and withdrawals. So, you won’t be as tempted to touch the funds.

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.


4. Considering Passive Income Streams

America’s workforce is changing with the times. As the cost of living rises, many people want to find ways to increase their income. Many are turning to passive income to combat these financial hurdles, which may be the solution to your debt.

Essentially, passive income is money that you earn without active involvement, outside of what you earn as a regular wage and salary. Instead, you put something you own to work, such as a rental property. Other examples of passive income include dividends from stock investments, royalties, and product sales.

So, you still might put in some effort getting started, but not as much as your full-time job. Side hustles are one of the best ways to pad that income. You can put the extra cash flow directly towards your debt and interest, weekly necessities, or your savings.

5. Considering Investing as a Part of Your Financial Plan

Analyzing your situation and finding an acceptable amount of money to invest can help long-term. Investing can be an important part of a well-rounded financial portfolio for long-term goals such as retirement.

Investing has the potential for a higher return on investment vs. a savings account, but the reward isn’t guaranteed. Unlike cash-based interest accounts, your portfolio balance will fluctuate with the market and isn’t covered by, say, Federal Deposit Insurance Corporation (FDIC) insurance.

Because of the risk associated with putting money into the market, some people may be hesitant to jump in, especially if they don’t fully understand how investing works. Getting a headstart on saving and investing can help you get prepared for retirement.

6. Automating Bill Pay or Automatic Savings

To avoid missing bill payments, consider an automatic payment system. Alternatively known as “autopay,” this technology automatically withdraws funds from your bank account or credit card. Then it transfers to the necessary vendor. Once you set it up, you don’t have to deal with the pressure of juggling repayments. Instead, you just have to make sure there are enough funds in your account for the withdrawal.

Paying bills on time history makes up about 35% of your overall FICO® score, so enrolling in autopay could potentially have the added benefit of building your credit score.

It’s also possible to automate contributions to retirement accounts or savings accounts. This could help keep you on track for your savings goals. It allows you to pay yourself first, and getting money siphoned out of your checking account right around payday can help you steer clear of spending it.

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no fees online — and earn up to 0.50% APY, too.

7. Ditching the Fees

Fees charged by financial institutions can add up. Here are a few to consider avoiding:

Bank Fees

The list can include account maintenance fees, returned deposits, foreign transactions, account minimum fees, replacing a lost or stolen card, ATM fees, making too many savings withdrawals, writing too many checks, closing an account, not using an account enough, speaking with a human, paying late, or even paying off a loan too early.

In fact, American households spent $133 billion in credit card interest and fees in the most recent year studied. That’s your money flying away…Ouch.

ATM Fees

At an average of $4.73 a pop, out–of-network ATM fees can add up quickly. One way to avoid paying ATM fees is to always make sure that you’re using one of your bank’s designated ATMs. However, if you’re on the road or your bank only has a few networked ATMs, that can be a challenge.

Just like bank fees, however, more and more financial institutions are offering fee-free ATM usage as part of their perks. Especially if you use an online checking account, this can add up to hundreds of dollars in savings.

Investment Fees

Paying a traditional financial advisor a percentage of your account balance to manage, monitor, and optimize your portfolio could be worth the expense, but it might not be an option that is available to everyone.

Financial advising is still a confidence-booster for the majority of investors who use it. But when advisors charge a typical fee of 1% a year based on your portfolio balance, your total return can be significantly impacted.

Fortunately, a growing number of competitors are offering the same types of advising service with little or no fees — and no humans. Robo-advisors are becoming more popular because they use algorithms to optimize portfolios, thus eliminating the overhead of live employees.

Still other products offer the best of both worlds, with human advisors willing to help at the cost of an automated system.

8. Getting Rewarded for Spending

You also can find several ways to get rewarded for spending, such as retailer loyalty programs, coupons, or rebate apps. Cashback or reward credit cards can also be an effective way to save at your favorite store, provided you pay your statement balance in full every time it comes due.

The Takeaway

Things like effective budgeting, opening a high-yield bank account, paying off debt, establishing a passive income stream, and investing can help you make the most of your money.

Everyone’s financial situation is different, and what works for one person may not work for another. A bit of experimenting can be helpful, as can finding the right banking partner.

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.

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

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

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

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

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

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

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

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

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

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

SOBK0823017

Read more
Feb
27
2024
percentage sign

APY vs Interest Rate

By | Budgeting & Goals, money, Terminology | Comments Off on APY vs Interest Rate

Interest rates and APY, or annual percentage yield, are likely words that you’ll hear throughout your financial life. If you are opening an interest-earning bank account, you’ll likely want to earn the highest return on your money that you can find. Conversely, if you are borrowing money (say, taking out a home loan), you’ll probably want to snag the lowest rate on your mortgage.

While you may see the terms interest and APY used interchangeably, they are not identical. APY expresses how much you will earn on your cash over the course of a year. Interest rate, however, is the interest percentage that you’ll earn or that a lender will change you.

Ready to learn more about APY vs. interest rate and how each impacts your finances

Key Points

•   APY (Annual Percentage Yield) and interest rate are two different concepts that are often used interchangeably but have distinct meanings.

•   APY represents the amount of money you will earn on your deposits over the course of a year, taking into account compound interest.

•   Interest rate, on the other hand, is the percentage at which your money will accrue interest, without considering compounding.

•   APY is higher than the interest rate because it includes the effect of compounding, which allows your money to grow faster.

•   Understanding the difference between APY and interest rate is important when opening a bank account or taking out a loan.

APY and Interest Rate Defined

If you deposit money into an interest-bearing account, you will earn an annual percentage yield (APY) on that money. The APY is a useful number because it tells you how much you’ll earn on your deposits over the course of a year, expressed as a percentage. The APY calculation takes into account the interest rate being offered, then factors in whether or not the financial institution offers compounded interest.

Compound interest is the interest you earn on the interest you’ve already earned. Depending on the bank or credit union, interest may compound daily, monthly, quarterly, or annually. The more frequently interest compounds, the faster your money grows.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.00% APY, with no minimum balance required.

What Is APY?

APY expresses how much money your cash will earn over the course of a year when it’s in an interest-bearing account.

APY is often confused with APR, which stands for annual percentage rate and comes into play when you take out a loan. A loan’s APR factors in the loan’s interest rate, as well as any additional fees and costs. It tells you how much you will pay for the loan over one year.

What Is an Interest Rate?

An interest rate is typically either the money you earn for keeping your cash at a financial institution or the cost that lenders charge you when they extend credit.

For example, if you put your money in a high-interest savings account, you might earn 4.50% for keeping your funds there. But if you take out a mortgage, you might be charged 7.00% interest for the privilege of borrowing that money to buy a house and paying it back over time.

Incidentally, the difference between the interest rates that banks pay depositors and charge borrowers is one of the ways these financial institutions earn money.

Earn up to 4.00% APY with a high-yield savings account from SoFi.

No account or monthly fees. No minimum balance.

9x the national average savings account rate.

Up to $2M of additional FDIC insurance.

Sort savings into Vaults, auto save with Roundups.


APY vs. Interest Rate Explained

So what is the difference between APY and interest rate? And why does interest rate vs. APY matter anyway? When you are opening a bank account, it can make a difference as one can give you a better picture of how your money will grow while on deposit.

The interest rate tells you the basic rate at which your money will accrue interest. The APY, however, gives you great insight to what you will have earned at the end of a year because it factors in the boost that compound interest can deliver.

Recommended: Different Ways to Earn Interest

The APY Formula

For those who want to delve in a bit deeper, the actual formula for APY calculation is as follows: (1 + r/n)ⁿ – 1.

•   The “r” stands for the interest rate being paid.

•   The “n” represents the number of compounding periods within a year.

If, for example, the interest rate is 3.50%, then that’s what you’d use for the “r.” If interest is compounded quarterly, then “n” would equal four.

Compounding frequency can cause two different savings accounts with the same interest rates to have different APYs. For example, if two different banks offer a certificate of deposit (CD) with the same interest rate and one of them compounds annually, that institution would have a lower APY than the institution that compounds quarterly or daily.

Fortunately, if you want to compare savings rates from one bank or credit union to another, you don’t need to perform these in-depth calculations.

Financial institutions are required to provide information on APY as part of the Truth in Savings Act. And, here’s the heart of it all: The higher the APY, then the more quickly the money you deposit can grow.

Recommended: Use the APY calculator below to see how much interest you can earn on your investments.


Calculating APR

The APR vs. interest rate of a loan tells you how much the loan will cost you over one year, including both the loan’s interest rate and fees, and is expressed as a percentage. A loan’s APR gives you a better sense of the true cost of the loan than the loan’s interest rate, since it includes fees. The higher the APR, the more you’ll pay over the life of the loan.

Thanks to the federal Truth in Lending Act, lenders must provide the APR of a loan. This allows you to compare loans apples to apples. A loan with a low interest rate but high fees may not be a good deal. In fact, you may be better off with a loan that charges a higher interest rate but no or lower fees. APR allows you to be a savvy consumer.

APR can be calculated with this formula: APR = ((Interest + Fees / Principal or Loan amount) / N or Number of days in loan term)) x 365 x 100. Lender’s will tell you the APR of a loan and you won’t need to perform any complicated calculations.

How Simple and Compound Interest Differ

Another dimension of interest rate vs. APY is seen when you consider how simple and compound interest differ. With simple interest, no compounding is involved. If you were to deposit $10,000 in an account earning 4.00% simple interest, at the end of three years, your money would earn $1,200 for a total of $11,200.

If, however, the interest were compounded daily, you would earn $408 the first year. The second year, interest would accrue on the principal and the interest ($10,408), and you would earn $425 the next year (for $10,833), and then $442 the year after that, for a total of $11,275.

While the dollar amount may not seem earth-shattering in this example of a few years, when you are talking about your decades-long financial life, it can really add up. Your money will grow faster with compound interest, helping you reach your financial goals.

Types of High-Interest Accounts for Savings

If you’re looking to earn a competitive rate on your savings, you’ll want to compare accounts by looking at APYs, as well as account fees and minimums. Generally, you can find competitive rates by looking at high-yield savings accounts, money market accounts, and CDs.

•   High-yield savings accounts, typically offered by credit unions and online banks, are accounts that typically pay a substantially higher APY than the national average of traditional savings accounts. They generally also have low or no fees.

•   Money market accounts are savings accounts that offer some of the features of a checking account, such as checks or a debit card. They often come with a higher APY than a traditional savings account, but typically require a higher balance, such as $1,000 or more, to avoid monthly fees.

•   Certificates of deposits (CDs) also tend to pay a higher APY than a regular savings account but require you to leave your money untouched for a certain period of time, called a term. If you take money out before then, you’ll likely pay an early withdrawal penalty. CD terms typically range from three months to five years. Generally, the longer the term, the higher the APY.

Recommended: How Does a High-Yield Savings Account Work?

High-Interest Checking Accounts

Checking accounts work well for everyday spending but typically offer no interest or very little. A high-yield checking account is a special type of account offered by some financial institutions (such as traditional and online banks, and credit unions) that offers a higher-than-average APY. These are accounts designed to give you the flexibility of a traditional checking account (with checks and/or a debit card) but with higher-interest returns.

A few points to note:

•   Often, to qualify for the highest rate the checking account has to offer, you need to meet certain criteria. This might be making a certain number of debit card transactions in a month, having at least one direct deposit or automated clearing house (ACH) payment each month, or choosing to receive paperless statements.

•   Some high-interest checking accounts will offer different APY tiers, with higher account balances earning a higher APY than lower account balances.

Creating a SoFi Savings 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

Why is APY higher than the interest rate?

There is a difference between APY and interest rate: The APY is higher than the interest rate because it reflects the effect of compounding, in which your money earns interest on its interest.

What does it mean to earn 5.00% APY?

If an account says it earns 5.00% APY, that means at the end of the year, your money on deposit will earn 5.00% (say, $500 on $10,000 on deposit). The interest rate may be lower, because the APY reflects the impact of compounding interest.

Why do banks use APY instead of APR?

When a bank tells you its APY, or annual percentage yield, it’s sharing how much your money can grow when on deposit for a year. On the other hand, APR stands for annual percentage rate, which is the amount charged if you borrow money. If you are interested in taking out a loan from the bank, you would be told the APR.

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

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

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

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

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

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

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

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

SOBK0723015

Read more
Feb
22
2024
Inexpensive Ways to Refresh Your Home Room by Room

33 Inexpensive Ways to Refresh Your Home Room by Room

By | Home Ownership, mortgage | Comments Off on 33 Inexpensive Ways to Refresh Your Home Room by Room

The change of seasons often brings on a flurry of cleaning and a home refresh. If you’re looking for some budget-friendly changes that will bring new life to your rooms, we have those for you.

Before you start, try to clear any clutter you may have. If you tend to hoard, begin your refresh by donating or throwing away items you no longer use. You may also want to review this list of home improvements that can increase the value of your home.

Living Room

Whether you’re entertaining guests or just hanging out, your living room should feel inviting and reflect your style, yet also be functional and versatile.

1. Paint

A fresh coat of paint can do wonders for any living space. Picking neutrals like white or beige ensures a clean and timeless look.

2. Statement furniture

If you don’t have the budget to buy all new furniture, you may want to consider picking one or two new pieces, such as an eye-catching chair or coffee table, that will update your space.

3. Area rug

A quality rug can anchor a room and add a subtle splash of color. It’s also a good idea to make sure it’s sturdy enough to handle high traffic. Adding a rug pad can be worth the additional cost because it feels luxe underfoot and prolongs the life of your rug.

4. Lighting

How you light a room can affect its overall feel. Installing dimmers can enable you to adjust the lighting depending on the mood you’re trying to set. A new floor or table lamps can also allow you to subtly adjust lighting.

5. Clutter containment

If you still have a lot of “stuff” after your initial purge, you may want to consider storing it in decorative receptacles such as woven baskets or a storage ottoman. This is especially useful for kids’ toys.

6. Framing

Buying nice frames to create a gallery on blank walls, or even just to display family photos on a side table, can really personalize your space. Consider a digital photo frame for convenient streaming.

7. Window treatments

Blinds or curtains can add depth to a room. The most affordable option is to buy premade curtains and rods from a home décor store and install them yourself. Measuring carefully is the key to success.

8. Sofa spruce-up

Purchasing a bold couch cover and swapping out your throw pillows can be a quick and inexpensive way to add color and patterns to your space. Toss a blanket over the arm of the sofa for both added texture and warmth.

9. Go green

Plants have always been a simple and effective way to bring life into a space. Good news if you don’t have a green thumb: You can now download an app (Planta is one example) that will help you remember to care for them properly.

10. Switch it up

Looking for a zero-cost home refresh option? You can try rearranging your furniture. Using apps like Modsy for floor plan ideas can help you find options that complement your lifestyle and make the most efficient use of your space.


💡 Quick Tip: Loans typically offer lower interest rates than credit cards. Consider a SoFi home improvement loan to fund your next renovation.

Kitchen

Dreaming about that perfect HGTV kitchen? You can use our calculator to estimate just how much a full remodel may cost you. (Hint: The average cost of a kitchen remodel taps in at more than $50,000.) Never fear: You can still refresh your kitchen with some of the following affordable upgrades — no permits or contractor required.

11. Cabinet facelift

If your cabinets are looking dated, you may want to try putting a fresh coat of paint on them. For an added touch, consider changing out the hardware and installing new handles and drawer pulls.

12. Seat swap

You may want to consider upgrading worn or outdated bar stools in exchange for something sleeker. If purchasing new stools isn’t in your budget, get out your staple gun and try changing the upholstery.

13. Appliance upgrade

If your appliances aren’t working as well as they used to, or they’re nearing the 10 year mark, it may be time to replace them. Although this can get expensive, you can find bargains on bundles, especially during holiday sales, and some outlet stores offer steep discounts on open box appliances.

14. Fill a wall

If you have unused wall space, you may want to consider installing floating shelves for smaller items such as cookbooks, plants, and other knick knacks. Not only will the extra shelving provide more storage in your kitchen, but it can also create an eye catching display.

15. Light it up

For a style update with a big impact, you can look into replacing old lighting fixtures with modern pendants. They come in such a wide variety of styles and price points that there’s something for just about anyone’s taste and budget.

16. Combine decor with utility

It’s easy to warm up a space with an attractive fruit bowl, colorful wall clock, or pretty serving tray. If you’re adding a TV to your kitchen, consider one that will display art or photos when you aren’t watching your favorite shows.

17. Streamline storage

Your storage areas can also be the focus of a spring upgrade. Toss expired foods from your pantry and do a deep clean of your fridge and freezer. If you want to really get organized, consider storing your dry goods and refrigerated items in clear canisters and bins for easy identification and access, and using drawer dividers to separate utensils.

Recommended: Interior Decoration Tips for Furnishing A New Home

Bathroom

In an ideal world, a bathroom remodel would include a new vanity, tile, and hardware. However, even if a demo is more idealistic than realistic, that doesn’t mean this space is out of bounds. Start small with a few less costly changes.

18. Hardware update

Replacing your outdated sink, bath and shower hardware can boost the appeal of just about any bathroom. By adding matching towel racks, door hooks, and vanity knobs and handles, you can achieve a cohesive upgrade that doesn’t break the bank.

19. Target: toilet

If your porcelain throne is starting to show wear and tear, it may be time to replace the lid and seat. You can go all in and buy a new toilet for just a couple hundred dollars, although you will likely need a plumber as well.

20. Mirror modern

If you have a long vanity with two sinks, you may want to consider installing two separate mirrors with bold frames. Mirrors with LED backlighting offer a more modern hotel-like look.

21. Shower showcase

The shower curtain is one of the first things people see when they walk into a bathroom. Introduce a new look by finding a curtain with a cool pattern and adding a new curtain rod and rings.

22. Spa retreat

A bamboo bath mat that’s easy to clean and water-resistant can elevate your space. So can candles or a diffuser. Add attractive shelving — or simply swap in plush new towels — and you’ll instantly create a serene scene that could compete with any day spa.

23. Accessorize

Placing your soap dispenser and toothbrush holder on a decorative tray easily gives your bath a tidy boost. Take a good look at all the personal care products that are visible in your space. Stow unattractive or less frequently used products in drawers and make sure what’s still visible is in attractive containers.

24. Grout out

No budget for new tiles? Put some elbow grease into cleaning the grout on your existing tile floor and walls, or regrout the entire space for a cleaner, brighter look.


💡 Quick Tip: You never know when you might need funds for an unexpected repair or other big bill. So apply for a HELOC (a home equity line of credit) brokered by SoFi today: You’ll help ensure the money will be there when you need it, and at lower interest rates than with most credit cards.

Bedroom

Your bedroom should be your haven after a long day of work, but you don’t need to do a complete bedroom remodel to reap more relaxation. Just make a few changes to create a more peaceful setting.

25. Headboard

For a few hundred dollars, you can find an upholstered headboard that’s both fashionable and easy to assemble. It can create a dramatic difference in your bedroom’s appearance.

26. Paint

It’s pretty easy to refresh your walls over a weekend. If you want to liven up your space with some color, stick with soft hues such as pale blue or gray. For the I-hired-a-decorator feel without the price tag, consider removable wallpaper.

27. New linens

To quickly liven up a boring bed, you can replace old sheets, blankets and pillows. Opt for soothing colors and muted patterns that will create a peaceful sleeping environment.

28. Floors

Whether you have wooden floors or carpet, layering an area rug can help to create a cozy environment. For a luxurious feel, try shag or sheepskin rugs.

29. Lighting

Designing a unique lighting setup doesn’t have to be hard or expensive. You may be able to freshen up your space by installing plug-in sconces (which require no rewiring) on each side of your bed. It can save table space and add decor to your wall.

30. Side tables

For a budget-friendly furniture refresh, just replace your bedside tables. Look for a pair with concealed storage to cut down on the cluttered look.

31. Closet clutter

Custom closets can get expensive very quickly. But you can get your closets under control by installing affordable hanging bars and shelves that not only look good, but help you organize your wardrobe.

32. Floor mirrors

A full-length floor mirror will reflect light and make your room feel bigger — not to mention that it comes in handy when you’re pulling together your daily outfit.

33. Art & photos

Many designers suggest thinking of your walls as a blank canvas to display your style and the people you love. You can achieve this by hanging your favorite photos or artwork in eye-catching frames.

What is Your Home Missing Quiz

The Takeaway

Even small changes can make your home feel new again. Figure out how much you want to spend on your home refresh before you start so you can prioritize which changes are most important to you. Staying within your budget by choosing upgrades that you can do yourself, shopping secondhand stores, and comparing prices carefully.

Inspired to tackle a larger home makeover project? A home improvement loan may be the way to go. SoFi’s no-fee home improvement loan could help you foot the bill of your kitchen reno or bathroom demo, with no collateral required. Plus, it’s possible to get your funds the same day* which can help fast track your remodel.

Learn more about how a home improvement loan can help with your remodel.

Photo credit: iStock/KatarzynaBialasiewicz

* Same-Day Personal Loan Funding: 82% of typical SoFi Personal Loan applications, excluding Direct Pay Personal Loans and Personal Loan refinance, from January 1, 2022 to January 1, 2023 that were signed before 7pm ET on a business day were funded the same day.

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

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

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

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

²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.


(Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL0224004

Read more
Feb
22
2024
woman doing taxes in kitchen

Can You Use a Personal Loan to Pay Taxes?

By | Budgeting & Goals, Debt Payoff, personal_loan | No Comments

Tax Day appears dependably every year and, ideally, you don’t end up owing the IRS money. Or if you do, hopefully you can easily pay your taxes. But that’s not always the case. If you do end up owing money to the IRS after filing your taxes, you may have options. Of course, you can dip into your emergency fund, but if you don’t have one yet, there are other options available for borrowing money when you’re in a pinch.

Everyone’s financial situation is different, so there’s not one right answer for covering your tax bill. We’ll go through the pros and cons of using a credit card, an IRS payment plan, or even a personal loan to pay your tax bill.

We should, of course, mention that this article is a broad overview of this matter. It’s always a good idea to consult a licensed tax professional for questions and help with tax-related matters.

Can I Get a Loan to Pay Taxes?

You may be able to get a loan for taxes you owe as long as you can qualify for a loan with the lender you choose. If you can qualify for a loan, you may want to consider whether it’s the right choice for your financial situation or if there may be a different option that works better for you.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

What Is a Tax Loan?

A loan for taxes is a personal loan that is used to pay taxes owed to the IRS. The borrower receives the funds in a lump sum and spends the personal loan funds to pay their tax debt.

When looking for a lender that does tax loans, you might consider traditional banks, credit unions, or online lenders, among other financial institutions.

Recommended: How to Apply for a Personal Loan

How Does a Tax Loan Work?

If a taxpayer does not have the funds to pay the taxes they owe the IRS, one option to pay the debt is to borrow money to do so. Often, this is in the form of a personal loan, which can be either secured or unsecured. After receiving the loan proceeds, the borrower pays the IRS and begins making regular installment payments to the lender.

How to Qualify for Tax Loan

Qualifying for a tax loan is like qualifying for a personal loan intended to pay for any other expense.

Lenders will look at an applicant’s credit score, employment history, income, other debt, and possibly other lender-specific criteria. Generally, the more creditworthy an applicant is, the more favorable their loan terms and interest rate.

There are a variety of lenders who offer personal loans, so if you don’t qualify at one, you might consider looking at other places to get a personal loan.

Reasons For Tax Refund Loans

If you’re getting a tax refund, you might want the money sooner than the IRS sends it to you. For that reason, you might consider getting a tax refund loan. Also called a refund advance loan (RAL), this type of loan is a short-term loan based on the amount of tax refund you are expecting.

RALs are often offered by your tax preparation service right after you file. Similar to other loans, the interest and fees for a tax refund loan will vary by provider.

Reasons Against Tax Refund Loans

The key word in “tax refund loan” is loan — a debt. There are considerable reasons not to use this option to get an anticipated tax refund amount quickly.

•   While some tax preparers will offer tax refund loans without any interest or fees, these loans often come with costs.

•   Even if your tax refund is smaller than expected, you still have to repay the full loan amount, including any interest and fees charged by the lender.

•   If the IRS denies, delays, or garnishes your tax refund to pay another debt, you still owe the RAL — including any interest and any fees charged by the lender.

•   Interest rates on RALs offered by payday lenders tend to be high, with APRs sometimes 10 times higher than average credit card interest rates.

Filing your taxes electronically and getting your tax refund, if you’re getting one, via direct deposit generally results in you getting your money faster, often in less than 21 days.

What Happens if You Can’t Pay Your Taxes?

If you owe taxes, you may not have enough cash on hand to make that payment to the IRS, particularly if it’s a large amount. Paying a tax debt in full is ideal, but there are options if you cannot do that.

Options to Pay Tax Debt

IRS Payment Plans

The IRS offers payment plans and the potential for an “offer in compromise,” which may allow you to settle your debt for less than you owe if paying in full would create financial hardship. In some instances, you may also be able to temporarily delay collection until your financial situation improves. Depending on your situation, there can also be set-up fees, application fees, interest, and penalties that continue to accrue, increasing the amount you owe until it’s paid in full.

Credit Cards

Another option is to charge your tax expense to a credit card. The IRS charges a processing fee , which varies depending on the payment system you choose, if you pay with a credit card.

If you fail to pay off your credit card balance when it’s due, interest will accrue until the balance is paid in full. If you qualify for a credit card with a zero-percent introductory period and pay the full amount before the promotional period ends, you could pay your taxes with a credit card without incurring any interest charges.

Loved Ones

Asking a friend or family member for a loan for taxes is an option some people consider. Borrowing from someone you know generally means you won’t have to undergo a credit check. So if you don’t have great credit but are able to repay a loan, this may be an acceptable option. A close friend or family member who is confident you’ll repay the loan may not charge you interest, or charge a lower percentage rate than you might qualify for with a bank or other lender.

If you do choose to borrow money from friends or family, be clear about expectations from the beginning. For example, setting up a repayment plan could lessen the chance for miscommunication and hurt feelings.

Payday Loans

Payday loans are high-cost, short-term loans for small amounts that are often made to people who have bad or nonexistent credit. Unfortunately, this borrowing option often works in the best interest of the lender, not the borrower.

Interest rates on payday loans are much higher than other types of loans, sometimes up to 400% APR. Even using a credit card, with their relatively high-interest rates, is generally a better option than a payday loan.

The repayment term for a payday loan is small — typically, the loan needs to be repaid with the borrower’s next payday. If your tax bill is too large to pay by the time the payday loan is due, the loan may need to be renewed, adding additional fees and accruing more interest on the initial loan balance. This strategy could lead to a cycle of debt that is difficult to break.

Lines of Equity or Credit

Whereas a loan lets you borrow a set amount of money in one lump sum, a line of credit (LOC) gives you a maximum amount of credit from which you can borrow, repay, and borrow again, up to the credit limit. You make at least a minimum payment each month toward your balance due. LOCs can be secured or unsecured — a home equity line of credit (HELOC) is an example of a secured LOC, using your home as collateral.

One advantage to a LOC is the typically lower interest rates they offer compared to credit cards. However, interest rates on a LOC are often variable and can rise over the life of the loan. A drawback to a HELOC is that if you can’t repay the loan, you could lose your home.

Personal Loans

You can apply for either a secured or unsecured personal loan, the former requiring collateral to back the loan. A secured loan may have a lower interest rate because the lender can seize the collateralized asset if you default on the loan. Essentially, this lowers the lender’s perceived risk.

It’s a good idea to compare the interest rates on personal loans. They tend to start out lower than credit cards, but they can vary widely depending on your creditworthiness. The average personal loan interest rate was 11.91% as of Feb. 14, 2024. However, the rate can range anywhere from 6.40% to 35.99% depending on the lender and your unique financial circumstances.


💡 Quick Tip: Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.

Pros and Cons of Using a Personal Loan To Pay Taxes

Using a personal loan to pay taxes comes with both advantages and disadvantages. Here’s a look at how they stack up.

Pros of Paying Taxes With a Personal Loan

 Cons of Paying Taxes With a Personal Loan
Typically unsecured, so no risk of losing an asset such as a car or home Some lenders may not lend small amounts
Potentially low interest rates if you have good credit Interest rate may be higher than an IRS repayment plan’s interest rate
With a fixed interest rate, monthly payments will be the same over the life of the loan Some lenders may not allow a personal loan for taxes

Recommended: Paying Tax on Personal Loans

The Takeaway

When Tax Day rolls around and you discover that you owe taxes to the IRS, it’s a good idea to consider multiple options to settle the bill. If you don’t have enough money in your bank account to pay your tax bill, you might turn to an IRS repayment plan, your credit cards, a loan from a loved one, or a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can I get a loan to pay taxes?

Yes, a personal loan can be used to pay taxes in most cases. Applicants must meet qualification requirements like any other personal loan, which typically include a credit check, employment and income verification, and other criteria.

What is a tax loan?

A tax loan is a personal loan used to pay taxes owed.

How does a tax loan work?

Tax loans are personal loans, either secured or unsecured. The borrower uses the loan proceeds to pay the IRS and then makes loan payments to the lender.

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

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

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOPL0124016

Read more

CATEGORIES

  • All
  • No categories
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2024 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender