Chapel Hill, often referred to as “The Southern Part of Heaven,” is a charming town filled with possibilities. With its picturesque landscapes, vibrant neighborhoods, and a rich cultural scene anchored by the University of North Carolina at Chapel Hill, it’s no wonder that many people dream of calling this town their home. However, life in this idyllic setting comes with its own set of challenges. So whether you’re searching for a cozy apartment in Southern Village or a peaceful apartment in Meadowmont, you’ve come to the right place.
In this ApartmentGuide article, we’ll explore the various pros and cons of living in Chapel Hill, helping you decide if this beautiful town is the right place for you.
Fast Facts About Living in Chapel Hill
What is Chapel Hill Known For: Chapel Hill is famous for the University of North Carolina at Chapel Hill, a vibrant arts scene, and its picturesque landscapes.
Population: Over 60,000 residents in Chapel Hill proper; over 500,000 in the Durham-Chapel Hill metro area
Average rent: $1,500 per month for a one-bedroom apartment
Median home sale price: $485,000
Days of sunshine: Approximately 220 days per year
Public parks: More than 30 parks within the town
Average summer high temperature: 89°F (32°C)
Major industries: Education, healthcare, research, and technology
1. Pro: Strong educational environment
Chapel Hill is renowned for its educational opportunities, primarily due to the presence of UNC, one of the oldest public universities in the United States. The town’s commitment to education extends beyond the university, with highly rated public schools and a focus on lifelong learning. This academic atmosphere fosters a community of thinkers, making Chapel Hill an ideal place for students, educators, and those who value education.
2. Con: High Cost of Living
While Chapel Hill offers many amenities, it comes with a higher cost of living compared to other towns in North Carolina. The overall cost of living in Chapel Hill is about 5% higher than the national average, with housing being the most significant factor. The median sale price for a home in Chapel Hill is around $605,000, and the average rent for a one-bedroom apartment in Chapel Hill is $1,751 per month. While utilities are 8% lower than the national average and transportation costs are 6% less, groceries and healthcare expenses are slightly above average, contributing to the overall higher cost of living.
3. Pro: Beautiful natural surroundings
Chapel Hill is known for its picturesque landscapes and outdoor recreational opportunities. The town is surrounded by lush greenery, rolling hills, and beautiful parks, making it an excellent location for those who love nature. Residents can enjoy hiking, biking, and picnicking in places like the North Carolina Botanical Garden, the Carolina North Forest, and various trails that weave through the town. The mild climate also means that outdoor activities can be enjoyed year-round.
Commute times to popular outdoor destinations
Eno River State Park: 20 minutes by car
Jordan Lake State Recreation Area: 30 minutes by car
Blue Ridge Mountains: 3 hours by car
North Carolina Coast: 2.5 hours by car
4. Con: Limited public transportation options
Chapel Hill does have a public transportation system, including the free Chapel Hill Transit bus service, which is a great benefit for residents. However, the town’s public transportation options are limited, especially when compared to larger metropolitan areas. Many residents rely on personal vehicles for commuting, which can lead to traffic congestion during peak hours. The town’s walkability is good in certain areas, particularly around the university, but less so in outlying neighborhoods.
Chapel Hill’s transportation scores
Walk score: 34
Transit score: 37
Bike score: 50
5. Pro: Vibrant arts and culture scene
Chapel Hill boasts a vibrant arts and culture scene that rivals much larger cities. The town is home to numerous galleries, theaters, and music venues that host a variety of performances and exhibitions throughout the year. The Ackland Art Museum, PlayMakers Repertory Company, and the Cat’s Cradle music venue are just a few examples of the cultural gems in the area. Additionally, Chapel Hill’s close proximity to Durham and Raleigh expands access to even more cultural experiences.
6. Con: Traffic congestion
As a small town with a large university, Chapel Hill can experience significant traffic congestion, particularly during the academic year. The influx of students, faculty, and visitors can lead to crowded streets and limited parking, especially in downtown areas and near the campus. While the town is working on improving infrastructure and traffic management, residents may still face delays during peak times.
7. Pro: Strong job market in key sectors
Chapel Hill has a robust job market, particularly in sectors such as education, healthcare, research, and technology. The presence of UNC and its affiliated hospitals provides numerous employment opportunities in education and healthcare. Additionally, the Research Triangle Park (RTP), located nearby, is a major hub for technology and research companies, offering a wide range of job prospects in various fields.
Top employers in Chapel Hill
University of North Carolina at Chapel Hill
UNC Health Care
Blue Cross and Blue Shield of North Carolina
Chapel Hill-Carrboro City Schools
Town of Chapel Hill
8. Con: High housing demand
Chapel Hill’s desirability as a place to live has led to high demand for housing, which can make it challenging for new residents to find affordable options. The competitive real estate market, combined with the town’s limited housing supply, has driven up home prices and rents. This trend is expected to continue as more people are drawn to the area for its quality of life and educational opportunities.
9. Pro: Access to excellent healthcare
Chapel Hill is home to some of the best healthcare facilities in the region, thanks to the presence of UNC Health Care. The university’s hospitals and clinics offer comprehensive medical services and are known for their cutting-edge research and patient care. This access to high-quality healthcare is a significant benefit for residents, particularly those with specific medical needs or those seeking employment in the healthcare industry.
10. Con: Humid summers
Chapel Hill’s climate is generally mild, but the summers can be quite hot and humid. Average high temperatures in the summer months often reach the upper 80s to low 90s, with humidity levels that can make it feel even warmer. This can be uncomfortable for some residents, particularly those who are not accustomed to Southern summers. However, the town’s abundance of trees and shaded areas can provide some relief from the heat.
11. Pro: Rich history and cultural heritage
Chapel Hill is steeped in history, with roots dating back to its founding in the late 18th century. The town’s historic districts, landmarks, and preserved architecture offer a glimpse into its past, while cultural institutions like the Morehead Planetarium and Science Center and the Carolina Performing Arts continue to enrich the community. This blend of history and culture creates a unique and vibrant environment for residents and visitors alike.
12. Con: Property taxes
North Carolina’s property taxes are generally moderate, but in Chapel Hill, they can be higher than in other parts of the state. The combination of town, county, and school district taxes can add up, making property ownership more expensive. This is something prospective homeowners should consider when budgeting for a move to Chapel Hill.
13. Pro: Diverse dining and food scene
Chapel Hill offers a diverse and thriving food scene, with a wide range of dining options that reflect the town’s multicultural population. From farm-to-table restaurants to international cuisine, there is something to suit every palate. Franklin Street, the town’s main thoroughfare, is lined with cafes, bars, and eateries, making it a popular destination for both locals and visitors. Additionally, the town’s farmers’ markets provide fresh, locally-sourced produce and artisanal goods.
Popular restaurants in Chapel Hill
Lantern
Crook’s Corner
Mama Dip’s Kitchen
The Carolina Inn
Mediterranean Deli
14. Pro: Proximity to outdoor recreation
Chapel Hill’s location in the Piedmont region of North Carolina provides easy access to a variety of outdoor recreational activities. The town is close to several state parks, including Eno River State Park and Jordan Lake State Recreation Area, where residents can enjoy hiking, camping, boating, and fishing. The nearby Blue Ridge Mountains and North Carolina coast are also within a few hours’ drive, offering additional opportunities for outdoor adventures.
Other outdoor activities in Chapel Hill
Hiking in the Carolina North Forest
Kayaking on the Haw River
Exploring the North Carolina Botanical Garden
Biking on the Bolin Creek Trail
Birdwatching at Mason Farm Biological Reserve
Pros & Cons of Living in Chapel Hill, NC (Summary)
Pro: Strong educational environment
Con: High cost of living
Pro: Beautiful natural surroundings
Con: Limited public transportation options
Pro: Vibrant arts and culture scene
Con: Traffic congestion
Pro: Strong job market in key sectors
Con: High housing demand
Pro: Access to excellent healthcare
Con: Humid summers
Pro: Rich history and cultural heritage
Con: Property taxes
Pro: Diverse dining and food scene
Pro: Proximity to outdoor recreation
Curious about what makes North Carolina special? Be sure to check out our article on what North Carolina is known for.
A minor drop in your credit score — like the less-than-five-point drop you’ll temporarily encounter after a hard inquiry when applying for credit — is nothing to sweat in the long term. But a 40-point drop is more worrisome.
Are you asking yourself, “Why did my credit score drop 40 points after paying off debt,” following a credit dispute or for no reason at all? We’ll break down what might be happening to your score below.
Why Did Your Credit Score Drop 40 Points?
Your credit score is a number based on several factors that appear on your credit reports from various credit bureaus. And in fact, you have more than one credit score, though the most common one people refer to is your FICO Score. Because it’s complex — and there’s more than one — there are many reasons your credit score may have dropped 40 points.
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Reasons Your Credit Score Went Down
There are several reasons your credit score could have gone down. Here are the main culprits:
• You made a late payment (or several late payments), which were reported to the credit bureaus. A spending app can help you track upcoming bills so you don’t miss a due date.
• You paid off a loan or credit card, which decreased your average age of credit and your credit mix and also affected your credit utilization.
• You applied for a new loan, which resulted in a hard inquiry.
• You’ve increased your credit utilization, perhaps by maxing out your credit cards.
Often, a sudden 40-point decrease in your credit score is the result of two or more of these actions happening all at once or close together. A hard inquiry, for instance, results in only a five-point decrease in your credit score. But if that hard inquiry was for a credit card that you immediately maxed out and then missed a payment on, you’re much more likely to see a larger decrease in your credit score.
There’s one other important reason your credit score may have dropped 40 points: You could be the victim of identity theft, meaning someone is using your personal information to open new lines of credit in your name and then maxing them out to purchase things for them.
Recommended: How Do I Check My Credit Score Without Paying?
Should You Be Worried About Your Credit Score Dropping?
A minimal drop in your credit score is no cause for concern, but a larger drop, such as 40 points, should be alarming.
If your credit score dropped because of your own actions — overspending on credit cards, missing payments, etc. — do your best to get your financial habits back on track. Tools like a money tracker can help you monitor your spending and credit score.
However, if your credit score dropped by 40 points for no reason, you could be the victim of identity theft. Check your credit reports for signs of suspicious activity. If you notice any, you need to freeze your credit reports and begin the remediation process. Here’s how to report identity theft.
What Can You Do If Your Credit Score Dropped by 40 Points?
If your credit score has dropped by 40 points, here are some things you can do:
• Make on-time payments. Ensure all your bills are paid on time and in full, every month.
• Reduce your credit utilization. Stop swiping your credit card unless you can immediately pay it off. Pay off as much of your card as you can, but resist the temptation to spend more with it. Lowering your credit utilization is crucial to repairing your credit score.
• Keep old accounts open. Average age of credit is one of the major factors that affect your credit score. Keeping an old account open, even if you don’t use it, will help keep your score from falling further.
• Review your credit report for errors. Simple reporting errors could be hurting your score. It’s a good idea to familiarize yourself with common credit report errors and how to dispute them.
• Report identity theft. If someone has opened a credit card in your name, follow the proper steps to report the identity theft to the lender, the credit bureaus, and the authorities.
Recommended: Why Did My Credit Score Drop After a Dispute?
How to Build Credit
While establishing and improving credit takes time, there are several steps you can take now to help repair your score after a 40-point drop. Here are some basic actions you can take:
• Make on-time payments. Turn on autopay for all your bills, and make sure there’s always enough money in your checking account to cover the costs.
• Stop spending on credit. Having a credit card with a high credit limit makes it easy to spend more than you should. But you should only use a credit card if you have the money to pay it off immediately (or for emergencies).
• Keep old cards open. Don’t forget — old cards that you don’t use help keep your credit utilization down and help keep your average age of credit higher.
• Monitor your credit. Regularly monitor your credit report and dispute any errors.
• Don’t apply for credit often. Apply for credit only if you absolutely need it, like to buy a car or a house.
What Factors Impact Credit Scores?
Several factors impact your two main credit scores (FICO Score and VantageScore). The two scoring companies use different algorithms to calculate your score; we’ll focus on FICO because it’s more common.
Here are the five major factors that affect your credit score — and how much weight each one has on your score:
• Payment history: This accounts for 35% of your score. Lenders want to see that you make on-time payments for all your debts. Mortgage and rent payments, utility bills, and other loan repayments (such as credit cards or personal loans) will show up on your credit report.
• Amounts owed: This is your credit utilization, and it accounts for 30% of your score. Creditors love to see that you have a high credit limit available to you, but that you use very little of it. This shows you’re a responsible borrower.
• Length of credit history: This accounts for 15% and is why keeping old cards and accounts open is important. It demonstrates to lenders that you’ve been borrowing responsibly for a long time.
• Credit mix: This makes up 10% of your FICO Score. Lenders like seeing that you can manage a healthy mix of credit accounts (credit cards, installment loans, home loans, etc.).
• New credit: If you open too much new credit all at once, that sends a sign to creditors that you may be a high risk. This makes up 10% of your score.
Allow Some Time Before Checking Your Score
After a major drop, it’s tempting to want to monitor your credit score every day for signs of an upswing. But be patient — it can take time before you see an improvement.
While credit score updates happen fairly often, they don’t happen on a set date. That’s because a lender or creditor can send information to the main credit bureaus at different times, which will impact when a score changes. That said, you can plan on an update occurring at least every 45 days.
Closing a Credit Card Account Can Hurt Your Score
Considering closing a credit card account? You may want to think twice, as doing so could negatively impact your credit score.
When you close a credit card, the amount of your available credit decreases. This, in turn, may lead to a higher credit utilization, which as we mentioned above counts for 30% of your score. Closing a card also decreases the length of your credit history, which makes up 15% of your score.
However, there might be times when closing a credit card makes the most sense for you, such as a separation or divorce or a card with a high annual fee. The good news is, there are ways to cancel a credit card without affecting your credit score.
How to Monitor Your Credit Score
You can monitor your credit score in a number of ways. Your bank or credit card issuer may offer credit score insights in your mobile banking app, and you can check your FICO Score for free with Experian. Several money management apps offer free credit score monitoring, including access to your FICO Score or VantageScore.
Pros and Cons of Credit Monitoring
Credit monitoring services offer several advantages, but there may be drawbacks to consider.
Pros
• Real-time alerts when your score changes
• Analysis and insights to help change borrowing behavior
• Identity theft protection
Cons
• Potential cost
• May not offer insights to all three bureaus
The Takeaway
A sudden, unexpected drop in your credit score can be scary. This is especially true if you’re trying to build credit and have been responsibly paying your bills on time and keeping your credit utilization in check. It’s wise to use credit monitoring services so you’re always updated when something changes on your credit report, as it can help you spot errors or even stop identity theft before it gets out of hand.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
Why is my credit score going down if I pay everything on time?
Even if you make on-time payments, your credit score can drop if you open too many new accounts at once or use up all your available credit every month. A major drop in your credit score could also indicate errors on your credit report or, even worse, identity theft.
Why has my credit score gone down when nothing has changed?
If nothing has truly changed in your finances, your credit score would likely only drop because of an error on your credit report or identity theft. It’s always important to monitor your credit to stay aware of these things. If it’s not a case of error or identity theft, consider your recent credit actions: Did you max out a card or close an old account? These can lead to drops in your credit score.
Why did my credit score drop 40 points when nothing changed?
If your credit score dropped 40 points and nothing changed on your end, check your credit reports with all three major credit bureaus immediately. It’s possible there is an error or that you are the victim of identity theft, meaning someone is using your name to open new credit accounts.
Photo credit: iStock/Miljan Živković
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Credit card companies don’t alway make it easy, but there are ways to pay your credit card bill with your debit card. To use your debit card to pay a credit card bill, you must do so via bank transfer payment. In other words, you have to use either a credit card provider’s payment portal or a third-party payment portal that includes not only your debit card information, but also your banking information.
Keep in mind, however, that credit card companies usually prefer to receive payment funds from the customer’s bank account over a physical debit card. Many credit card providers simply don’t accept monthly bill payments with physical debit cards, but they will allow debit card payments if you play by their rules. That may change the way you use a debit card to pay a credit card bill, but it doesn’t mean you can’t do it.
Can You Pay a Credit Card With a Debit Card?
You might be able to pay a credit card with a debit card. Whether you can do so really depends on the credit card provider’s policy on debit card payments — some credit card policies allow for them, and others don’t.
Consequently, you may have to go out of your way to get the job done. When you go to pay your credit card bill, there likely won’t be an option to enter a card number as a method of payment, whether that card is a credit card or a debit card. In most cases, however, you can pay your credit card bill with the bank account that the debit card is attached to by making an electronic transfer.
Recommended: Tips for Using a Credit Card Responsibly
How to Make a Credit Card Bill Payment (Indirectly) With a Debit Card
Even if you can’t use a debit card to directly pay a credit card bill, you can indirectly use a debit card — or rather the funds attached to that debit card — to pay your outstanding credit card debt. Here’s how:
1. Review your checking account, and get the bank routing number and checking account number. Do so privately and securely, so as not to attract financial fraudsters.
2. Go to your credit card account to set up automatic payment. A handy feature of how credit cards work, this will allow money to be withdrawn from your bank account ahead of the monthly payment due date. On that date, the credit card company will withdraw the specified cash amount from your bank account.
3. Make sure you have enough cash in your bank account to cover the withdrawal. If you don’t, your credit card company will reject the payment. It’s up to you to reach out and make good on your monthly credit card payment that’s due. Any delay in doing so could result in a missed or late payment, which could have financial consequences.
Recommended: When Are Credit Card Payments Due?
Paying a Credit Card Bill With a Debit Card Online
If you’re using a debit card to pay a credit card bill online, you’ll probably need to make that payment through the credit card’s payment portal. The good news is that credit card companies may accommodate online debit card payments.
Once you’ve signed into your credit card account, you’ll be given several options to pay your bill. The most common methods include ACH bank payment, a third-party payment platform, over the phone, or with your debit card.
Simply click on the debit card payment option and fill in your card details (this should only be a one-time occurrence as your debit card information should be securely held by your credit card provider in its payment portal.)
Once your debit card information is accurately entered, review the payment and hit “send.” Your payment should be confirmed immediately by the card carrier, and the money will leave your debit card account within 24 hours or so.
Paying a Credit Card Bill With a Debit Card Offline
Credit card companies likely allow you to use your debit card to make a credit card payment by phone, in person, and sometimes through the sponsoring bank’s ATM.
Make sure you have your debit card on you before paying at any bank or over the phone. If even one digit is wrong, the payment won’t go through, and you’ll have to revert to another form of payment to cover your credit card debt.
Are There Any Downsides to Paying Your Credit Card Bill With a Debit Card?
The fact is, while credit card companies will accept debit card bill payments, it’s not their preferred form of payment. It’s easier for credit card carriers to process bank ACH payments or third-party payments through platforms like PayPal, which handle the process for the card company. As such, you’ll have to jump through hoops or go an indirect route, similar to if you were to try to pay a credit card statement with another credit card.
Further, debit card payments may be prone to various outcomes that credit card companies don’t like. This includes scenarios such as the cardholder not having enough money in their account to cover the credit card payment or the fact that debit cards are common targets of financial fraudsters. In fact, a key difference between a credit card and debit card is their levels of payment protection.
The Takeaway
Just because you can use a debit card, even in limited fashion, to pay your credit card bill doesn’t mean you should. To keep payments flowing smoothly and to protect your debit card (and your bank account), it’s likely a better move to pay your credit card bills via bank ACH transactions or through secure third-party payment processors. That way, your payment still originates from your bank checking account — only without the potential payment and security headaches that may come with using a debit card to pay a credit card bill.
Whether you’re looking to build credit, apply for a new credit card, or save money with the cards you have, it’s important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
Can I pay a credit card online with a debit card?
Technically, yes, you can pay your credit card bill with your debit card. However, it may take some extra steps to do so.
Can I pay my credit card at an ATM with a debit card?
Yes, you can typically use a debit card at an ATM to pay a credit card bill — but only an ATM from the bank that offers the credit card.
Are there extra charges for paying a credit card with a debit card?
You generally won’t face any extra charges for paying a credit card with a debit card. You may simply have to jump through some extra hoops to do so.
Can I pay my credit card bill with someone else’s debit card?
While this is technically doable, it’s not advisable. Using another party’s debit card to pay a credit card bill can get complicated, especially if you’re not certain the other person’s bank account has sufficient funds to cover your balance.
Photo credit: iStock/insta_photos
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.
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn how you could save money by caring less about what other people think and how to weigh the pros and cons of a job offer.
How can you save money by not caring about others’ opinions? How does commute time factor into whether you should take an in-person job? Hosts Sean Pyles and Sara Rathner discuss freeing yourself from the pressures of social validation and adopting smart spending habits to help you understand how these approaches can boost your financial well-being. They begin with a discussion of saving money by “not caring,” with tips and tricks on avoiding unnecessary spending influenced by social media influencers, focusing on purchases that genuinely make you happy, and recognizing the fleeting dopamine rush from new buys. They also delve into strategies such as choosing unique vintage clothing, the benefits of a capsule wardrobe, and making thoughtful car-buying decisions.
Then, hosts Elizabeth Ayoola and Sara Rathner talk to Andrew, a listener in Miami, about his decision to start a new job that would increase both his salary and his commute time. They discuss the trade-offs of job changes, the impact on work-life balance, and questions you can ask yourself to help align your career progression with core values.
Check out this episode on your favorite podcast platform, including:
NerdWallet stories related to this episode:
Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Teddy Roosevelt once said, “Comparison is the thief of joy.” But if you’re not careful, it can also be the thief of your hard-earned money.
Sara Rathner:
In this episode, we’ll help you find ways to save money by simply not giving a hoot about what people think.
Sean Pyles:
Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.
Sara Rathner:
And I’m Sara Rathner. Later in this episode, I am joined by our co-host, Elizabeth Ayoola, to talk with a listener about how they should weigh the pros and cons of accepting a job offer that requires a big lifestyle change. Is a bump in salary necessarily worth it?
Sean Pyles:
But first, we’re going to talk about how you can save money and probably your self-esteem by not caring what people think or comparing yourself to others. If you are a millennial who was bullied into purchasing crew socks because the TikTok youths made you feel bad about your ankle socks, this segment is for you.
So, Sara, I know this idea of not caring what other people think, not basing your self-worth on how you stack up to others, and using it as a way to save money is something that’s been top of mind for you lately, right?
Sara Rathner:
It actually came up in a Slack conversation with a coworker where we joked about having to Google certain Gen Z phrases to find out what they mean. And I remember being 22 in my first full-time job, and coworkers at the time would ask me to define millennial slang, and now I’m the old. It’s kind of freeing not understanding what people are talking about sometimes.
Sean Pyles:
That’s true.
Sara Rathner:
I mean, part of it is the lived experience. You just let time pass, and you become more comfortable just being you. You’ve just been you for a longer period of time, and you accept your flaws. Also, part of it is just buying stuff over the years and then coming to an understanding as to what purchases will bring me greater happiness long-term, and then which won’t. So if something doesn’t matter to me, I don’t follow the trend. A friend of mine who’s a couple of years older than me once told me that the decade of life I’ve just entered is the FU 40s, where you reach this level of peace. You focus on what’s important to you, and the rest just kind of fades away. And you know what? She was right. The second I turned 40, my ability to care just really went down. It might be because I have a toddler and my ability to care is just pretty low.
Sean Pyles:
Yeah. Your priorities have shifted.
Sara Rathner:
Yeah, mostly it’s just about preventing him from falling off of stuff at this point.
Sean Pyles:
That’s a good thing to focus on.
Sara Rathner:
I don’t have time to care about anything else.
Sean Pyles:
Sara Rathner:
So anyway, my point is this: I am going to continue to use the ankle socks I already own and love. Thank you.
Sean Pyles:
And that is your right. Okay. Let’s talk about how people can vanquish the allure of comparison or caring what people think about you and using consumer purchases to prop up the image that you project to the world. I have a few quick tips here.
First, please remember this simple humbling fact: No one thinks about you as much as you think about you. People are not thinking days later about the new outfit that you wore into the office or the vacation pics that you posted on Instagram because they are too busy thinking about their outfits and their photos that they posted on Instagram.
Next, realize that the dopamine bump that you get from a purchase just doesn’t last. It won’t be long before you are hunting for something else to spend money on that makes you feel good. And put those two facts together, and you can begin to see why spending money on something with the hopes of impressing people just isn’t the best investment.
Sara Rathner:
And again, if something you love is, say, fashion, you’re spending money on something that brings you a lot of joy, you enjoy the creativity of putting outfits together, you enjoy hunting for something that you love in stores, then do it. Just put more of your budget into that and maybe avoid purchases that don’t matter as much so you have more money to fund the things that you love and then also fund your savings because that’s important, but you’re not really spending money to impress people in other areas. I’m not knocking people who like buying clothes. I like it too. Just understand that if there’s one thing you love, you can’t have everything.
Sean Pyles:
Yeah, you’re doing it because you want to do it to make yourself happy, not because you’re trying to impress this vague idea of someone else who might think that you look cool.
Sara Rathner:
Right. And if you’re spending a lot of time scrolling on your phone, you kind of develop these parasocial relationships with social media influencers. They’re not your friends. They’re trying to sell you stuff. They get paid when they sell you stuff. This is a very one-sided relationship, and they’re the only ones that benefit.
Let’s talk about a few specific areas where you can easily cut back on just spending money to look cool. And we’ve talked about fashion and your wardrobe. And the thing is, compared to years ago, clothing quality is total crap even for more expensive items. But on the lower-cost side, you buy a T-shirt or a sweater, wear it once, wash it once, and then it becomes a tissue. Chasing trends, you know, this shape of clothing is in style this season, and this detail is in style that season, and then this color, and constantly buying new and going on these clothing hauls, you are going to have a closet full of garbage after a while.
Sean Pyles:
One of my personal and financial goals for this year was to rethink the way that I consume clothes because I am one of those people that likes to have clothes that make me feel good and that are kind of unique and different. So I set out to not buy any new articles of clothing, as in brand new pieces of clothing from a store. Since I do like getting unique vintage pieces, I allowed myself to shop on eBay where I find a lot of cool stuff or at local thrift stores, and I did let myself purchase things from there. So far this year, I found that I’m spending less on clothing, my environmental impact is lower, and I’m also just much less likely to buy something for the sake of updating my wardrobe to get the latest style or cut of jeans or whatever.
Sara Rathner:
And one thing, if you’re trying to minimize how much clothing you buy as some sort of personal challenge, you could try the capsule wardrobe thing, wear the same 20 pieces of clothing in different ways for a month, and force yourself to be creative, and in a way, that can make you fall in love with some of your old clothing again.
Sean Pyles:
Yeah, God, I have so many pieces of clothing that I’ve not worn in over a year, but I will not get rid of them because maybe one day I will wear them again.
All right, well, let’s talk about another area where you can stop trying to impress people — your car. A lot of people buy or lease a flashy car as a status symbol, but that can be one of the riskiest financial decisions that you can make, especially since the average price of a new car was north of $48,000 in July of 2024 according to Cox Automotive. And new vehicles, which often come with loads of computers and sensors, are also more expensive to repair. So you have an expensive car payment, insurance is not going to be cheap, and repairs will also be pricey. There’s nothing wrong with getting an affordable, reliable used car and just driving it until the wheels fall off. So, Sara, I know that your household recently bought a car, right? So how did you approach that?
Sara Rathner:
Yeah, we bought a used 2022 Honda CR-V hybrid a year ago when prices on used cars finally started to come down somewhat. We traded in a 14-year-old compact car that was worth maybe $1,200 at that point because we needed a car that fit the car seat and the stroller and all that stuff, and the compact car didn’t. We had to push the front passenger seat up all the way to fit the car seat. So, not ideal. It wasn’t great for longer-term family use, and we share one car, my husband and I. So we needed something that worked for all of us—both adults, the baby, and the giant dog.
So I have to say, honestly, this is one of the nicest cars I’ve ever driven. It has all of those fancy safety sensors that are standard now. I have a backup camera for the first time in my life. The thing is, this is not a sexy car; it’s a mom-mobile. The trunk always has reusable grocery bags in it. I’m just in that phase of life, and I hope that we drive this thing long enough that the backseat is eventually filled with my future preteen son and his sweaty friends after soccer practice.
Sean Pyles:
Well, that sounds really well thought out. It’s like the kind of car that fits your needs for where you are in life right now.
Sara Rathner:
Yeah, I was saying maybe one day we’ll hand it to him, and it’ll be his car, and it’ll be like, “This car is older than you.” And it’ll still drive well. That would be ideal.
All right, so Sean, you bought a car a couple of years ago. How did you think about that purchase?
Sean Pyles:
Well, here’s the part where I say that buying a car for the right reasons doesn’t mean that you have to buy a total clunker or something that’s completely utilitarian. I drive a lovely 2016 BMW X1, which I named Bette Midnight after the character Bette Porter from the show The L Word. Maybe TMI, but I do really love my car, and having a BMW might sound fancy and obnoxious, but I got an amazing deal on my car back in May 2020, and my payment is a little under $350 monthly. I justify it however I want to, basically, but here’s why I bought this car.
In high school and in college, I drove a severely busted Honda Civic where the muffler was rusted out and literally dragged on the road behind me. When it came time to get my first big-boy car, I wanted something just a little nicer than that. I will admit that as much as I love my car, I do live with a certain amount of cognitive dissonance where whenever I see a BMW driver on the road, I think, “Wow, that guy’s such a jerk.” And then I realize that that’s me, that I’m the jerk now.
Sara Rathner:
Yeah, I think if every one of us took a moment to really think about it, we’re all the jerk sometimes.
Sean Pyles:
Sara Rathner:
Yeah. So when you see your own face reflected in the window of a BMW that you don’t actually drive, you can just live with that emotion.
Sean Pyles:
Yeah. Give yourself some grace for being a jerk every so often, but within reason.
Sara Rathner:
Yeah, and then just try to be better.
Sean Pyles:
Sara Rathner:
Sean Pyles:
Well, I would say go back to what we talked about in the beginning. Get the car that you want for the right reasons because it’ll make you happy and not because you’re trying to look cool. Also, do a lot of research on the kind of car that you want. When I bought my car back in 2020, I had a spreadsheet, of course, and I listed the models that I was considering, their average annual repair cost, their miles per gallon, among other factors. And then also know your personal numbers, as in how much car you can afford. NerdWallet recommends spending no more than 10% of your monthly take-home pay on your auto payment alone. That’s not including insurance, gas, etc. And if you want to see how much car you can really afford, check out NerdWallet’s Auto Loan Calculator. You can find a link in this episode’s show notes post or by just searching “NerdWallet Auto Loan Calculator.”
Sara Rathner:
Yeah. And once you figure out what you could comfortably afford, then you can just stroll into a car dealership with a bit more confidence. And you should do that because car salespeople can smell uncertainty from several miles away, and they will pounce on you, and then you’ll end up buying the car that is not right for you because of pressure. So you don’t want to deal with that situation. So switching gears…
Sean Pyles:
Pun intended.
Sara Rathner:
Hard joke, right? Pun intended. Let’s talk about one more area where you could save money by not trying to impress people. And that is when you go out of your way to do really expensive stuff just for the goal of bragging about it online. I’m talking meals out where you photograph every dish or taking vacations just so you can post photos of the Eiffel Tower or whatever on social media. And the thing is, if expensive vacations or nice dinners bring you joy, that’s great. I love vacations. I take them as often as I can. That can be a priority in your budget, but just doing it to show off and then going into debt to do those sorts of things isn’t a great idea.
Sean Pyles:
Yeah. I was recently having dinner with a group of people, and one of the folks at the table was talking about their recent travels and how they went to X, Y, Z locale just to check the box and say they’ve been there, not because they particularly cared about the place’s historical or cultural significance. And that struck me as a little bit odd. When you’re traveling, you want to see the important destinations, of course, but that should be because you want to do it for yourself, not because you are impressing people in your social media feed who, again, don’t really care that much about whatever you’ve seen.
Sara Rathner:
Yeah. If you want to go to Venice, Venice is beautiful. You should see it. It’s a lovely city, and I recommend it, but not just for the ‘gram.
Sean Pyles:
Sara Rathner:
It should be because you actually want to go and immerse yourself and get to know people there and just really have a wonderful time and not just hop in for a day, check the box, and run out. Cities deserve our attention. They always do. So this gets to a good question that people should ask themselves whenever they’re making any sort of discretionary purchase, which is simply, why? Why are you spending money on this thing or this experience, and what do you expect it to do for you?
Sean Pyles:
Sometimes the answer is just, “It’ll make me happy.” And that’s actually one of the best answers that you can give. And so far as saving money, there are some really easy ways to have great experiences and not break the bank. Travel-wise, we Nerds often recommend traveling in the off-season if your schedule is flexible. You’re likely to find cheaper airfare, plus you won’t have to elbow your way through hordes of strangers to see the sites.
Sara Rathner:
I think that’s enough on how to save money by not giving a… You could fill in that throat-clearing section with any word you’d like. Before we move on to this episode’s money question segment, a reminder, listener, that we are running another book giveaway sweepstakes ahead of our next Nerdy Book Club episode. Our next guest is Jannese Torres, author of Financially Lit!: The Modern Latina’s Guide to Level Up Your Dinero & Become Financially Poderosa. That means powerful, by the way, which offers tips to young people on how to get started with managing their money.
Sean Pyles:
To enter for a chance to win our book giveaway, send an email to [email protected] with the subject “Book Sweepstakes” during the sweepstakes period. Entries must be received by 11:59 PM Pacific Time on August 22nd. Include the following information: your first and last name, email address, zip code, and phone number. For more information, please visit our official sweepstakes rules page.
Sara Rathner:
All right. Now, let’s get into my conversation with our co-host, Elizabeth Ayoola, and a listener about a big job change that listener is considering.
Welcome to NerdWallet’s Smart Money Podcast, where you send us your money questions, and we answer them with the help of our genius Nerds. I’m Sara Rathner.
Elizabeth Ayoola:
And I’m Elizabeth Ayoola. Now, if you have a money question for the Nerds, call or text us on the Nerd hotline at 901-730-6373. Again, that’s 901-730-NERD. You can also email us at [email protected].
Sara Rathner:
Follow us wherever you get your podcasts. And if you like what you hear, leave us a review and tell a friend. We are back, and we’re joined by a listener, Andrew, who has some questions about the trade-offs of leaving a work-from-home job for one that might pay more. Andrew is 37 years old and lives in South Florida. Welcome to Smart Money, Andrew.
Thanks. Thanks for having me. Big fan.
Sara Rathner:
So before we get into the conversation, a quick reminder that we’re not here to give you individualized financial advice. Our goal is to provide the information you need to make the most informed financial decision for your situation. Does that make sense?
Yes, ma’am.
Elizabeth Ayoola:
All right, awesome. So let’s get into it, Andrew. Now, I know you have some really good questions for us about the trade-offs of leaving your work-from-home gig for one that is in the office but pays more. However, before we get into that, can you talk to us about your financial situation generally right now? Tell us, what are your financial goals, and what are some of your pain points?
Currently, I am building up my emergency fund, which I know you guys are well-versed with that. Three to six months of expenses, erring more towards the six. After that, just looking to automate everything—529, Roth contributions, saving for vacations, saving for a new car. Real estate-wise, we’re all set. We own one, are landlords on two others. Not looking to rent, not looking to move anytime soon. So I’d say we’re stable. We only have the mortgages, no other debt.
Sara Rathner:
And tell us a little bit about your home and family situation. Who else lives with you? Who are you supporting? What are you working for basically?
I got the missus and two little ones. One is in grade school now, so that daycare payment stopped, thankfully, but the other one is still in it for another two years. That’s a pain point just because there’s not going to be any tuition or scholarship until she’s four. So we have at least a year or two of these monthly payments. That’d be the biggest pain point right now.
Sara Rathner:
And you mentioned having a spouse. Are they also working?
She’s a props master, which is a super cool job—gets to make things and see them on stage in theater productions—but that doesn’t pay what I would call a living wage, and that’s also part-time. She’s the primary transporter of the children and making sure they’re clothed and shuttled around to all their activities.
Sara Rathner:
So you got a call from a recruiter about a new job that might pay a decent amount more, might be enough of an incentive to leave the job that you have now, but it’s in an office and you live in a really high-traffic city. So you want to tell us a little bit about that and what questions that potential opportunity has brought up for you?
Definitely. As we know, a couple of years ago, we experienced quite the phenomenon worldwide, which shifted everyone to working from home. Honestly, it was kind of a dream for me, even pre-pandemic. 2016, 2017, I thought to myself, “All I need is a laptop, and I can do almost everything from home” at the job that I was at. And I did do that sometimes, even back then. I’d come home and work more; I’d still have to go to work in the morning.
So post-pandemic, it’s been a blessing for a lot of people. I feel, at least me personally, I’ve gotten to get in shape and hang out in a very pivotal time in the kids’ lives, from zero to six. But Miami, in particular, poses its challenges. One, it’s a high-cost-of-living city. The switching costs of moving closer to our central business districts is not easy. The traffic is pretty bad, but what’s worse is likely the road rage, as Miami is the first and third place road rage capital of the country. So that’s where the stress versus money payoff comes into play.
Sara Rathner:
And I will say this, that I loved your question because Elizabeth and I are both intimately acquainted with South Florida traffic. I’m from Miami originally, Elizabeth is living in South Florida. I learned to drive in Miami, so I know that road rage too well. How long would your commute be, and how much more money are we talking?
So commute minimum would be an hour, and this is 20 miles, maybe less.
Sara Rathner:
And this is each way?
Each way. It’s likely closer to 80 minutes, 90 minutes. And if there’s an accident or something, it might even be two hours each way. And I believe the position when I first emailed you guys was four days a week in the office, maybe five days a week in the office. For where that one was located geographically, it just didn’t make sense to basically give up 10, 12, 14 hours a week just in the car. I’d get to listen to a lot of your guys’ podcast for sure, but I’d run out of that pretty quick. The money, anywhere from $60,000 to $70,000 increase. I tried running an analysis—extra gas, extra wear and tear, oil, increased tax. Given where that one was, I think the resounding response and what all the Redditors told me was absolutely not.
Elizabeth Ayoola:
What comes to mind for me, I always find these scenarios a great way to revisit your core values. I think a good way, especially for listeners who may be in this kind of dilemma, to weigh it out is to think about what your values are and think about what your ideal life looks like. I know for me personally in my career, that has been a guiding light for me. I know before this job, I was working at a job that was pretty comfortable, but I had to go to the office every day, and one of my highest values is flexibility and freedom. So being able to have the freedom to work from home and choose my lunchtime or maybe do a quick workout in between meetings is really important to me. So did you find that you weighed your values when you were kind of making this decision as well? I know you just mentioned things like taxes and other kind of quantifiable things, but did you think about your values as well?
I did. And I don’t know if it’s a faux pas to mention another money expert on this show, but I listened to and read Ramit Sethi, which I’m sure you guys are familiar with him, and he talks about the concept of your rich life. And for the majority of the people he talked to, fixed income is way too high. Their income-to-housing cost is way too high. We’re in an okay position there to where I don’t need necessarily to earn $50,000 more, but part of my rich life, as silly as it may sound, is now Brazilian jiu-jitsu, and the gym is 12 minutes away, and I can go every night or as much as my wife would allow.
If I’m working a downtown job, getting home at 6:45, hungry, have to go to the bathroom, then I don’t know that I’m going to have the energy to then go out and fight. And that’s my primary way of keeping in shape. So I just know that if I take a downtown job where I’m there every day, getting my Chipotle every day for lunch, it’s likely going to cause some health implications.
Sara Rathner:
It’s funny because when you sent us this question, it seemed like you hadn’t yet made the decision, and in that time you have, and in this case, you decided not to pursue this opportunity. But in the future, if you were faced with a similar potential opportunity, a similar decision, is there a number or a type of role that would make you say yes? What in your value system might make you make a different decision in the future?
Interesting you should mention that because a mere 90 minutes ago, I was talking to a recruiter who messaged me on LinkedIn, but she presented a pretty interesting opportunity. The increase in base pay would be about $42,000, which is less than the other job, but it’s also closer. And this one’s hybrid—three in, two home. So despite less money, I do get two days back, and it’s about an hour total, less commuting per day. The role itself is non-managerial, which at this stage, that interests me a little more just with the little ones that I’m already managing at home. I don’t necessarily want a team of five or six analysts under me that I need to manage as well. The talk went fine with the recruiter, and she’s going to pass along my info to the in-house recruiter. So that one’s a little bit more compelling, even though it’s less money, which I guess reveals to me that I really do value the time and the travel more than the dollars.
Sara Rathner:
And I asked some questions about your family life because I think when you have a two-partner household and maybe one person brings in more money, it’s very easy to continue chasing even more money because that’s your role. You’re the one that is largely the financial breadwinner. And I like to hear that you’re also thinking about the effect it might have on everybody that’s at home, not just your children but also your wife, because your greater absence would put more on her plate with no additional income on her part, and it might even interrupt her ability to continue earning an income because there’s just more at home to do while you are not physically there. It’s not just about the money; it’s also about the time, and getting to use your own bathroom is the best.
Yeah, that’s true.
Elizabeth Ayoola:
It is. And I will just add, I personally think there are some scenarios where you may sacrifice convenience a little bit if you have a financial goal. I definitely know last year that was the situation for me. I was behind on my retirement savings, and I basically picked up a whole bunch of freelance work to try to boost my retirement savings. So it did mean that I had less free time. But it’s nice to have a timeframe. If someone else, again, another listener, is in this scenario and decides, “Hey, I really need that extra $60,000 or $70,000,” to maybe have a timeframe to it and say, “Maybe I can do this for two or three years just so I can accomplish my goal.” And then I can circle back to whatever lifestyle I was living before, if that is a possibility.
Yeah. And I think from a long-term goal, my experience has been that whenever I’ve switched jobs, I’ve gotten more, and that more has now become my new floor. I’ve never taken a pay decrease, fortunately. That might not be the experience for everyone, but that’s been my experience. It’d be almost preposterous for me to two or three years from now request $175,000 as a base, getting paid what I’m getting paid now. Whereas this most recent opportunity would put me in striking distance, base and bonus, of the 200s. So there’s also the long-term 5-10 year consideration. But what if we have more children? What if we want private school? What if we want to buy a single-family in the city? That’s at least a million dollars to buy a single-family in the city. Those are some other considerations I’m going through.
Sara Rathner:
Yeah, braces and summer camp don’t pay for themselves, unfortunately.
Elizabeth Ayoola:
Sara Rathner:
As your kids get older, your family’s needs get more complicated. Just when you think daycare tuition is off your plate…
Sara Rathner:
…in come the travel sports.
Sara Rathner:
So Andrew, you mentioned that obviously a really great way to boost your salary over time is to switch jobs. You typically get bigger salary bumps when you switch companies than you would if you were to stay put and just accept periodic raises. But in your current job, in your current industry, your current employer, do you see opportunities to bloom where you’re currently planted and perhaps pursue higher salary positions, promotions, or even just make the case for a major salary bump and not have to switch jobs and start going into an office?
I would say yes. I work for a very, very large bank, which means we have a lot of departments. Fortunately, the powers that be are very pro-horizontal mobility, get experience in this department, this specialty area, and then not necessarily, you could always come back, every department has their staffing need, but you still have those relationships, which is a very cool culture and one of the reasons I like where I’m at. I’ve also been promoted once, asked for a decent raise—nothing out of this world, a couple percentage points—but they’ve been granted.
There is some wiggle room within my position, and then if I’m willing to make sort of a not horizontal, not vertical move, sort of a lateral move, diagonal, that could be $10,000 to $15,000. And lastly, my boss has expressed interest in me taking their job and then them getting promoted. Honestly, that’s not something I’m looking to do right now. Again, don’t want to add stress, but again, I might hit a ceiling in my rank, and that’s the next logical step. So I’ve been thinking about that, but not something I’m really wanting to do within the next six months, I would say. So there is some opportunity where I’m at, but I can’t just come out and say, “Hey, I want a 40% raise. Look what they’re trying to pay me.”
Sara Rathner:
Another thing to think about too is as you move up the ranks in your career and you’re approaching your 40s, for a lot of people, it means management or at least a senior-level position that’s not management, but also recognizing what extra hours are you potentially going to have to work in this new role? Are you still going to be able to cut it at a 40, maybe 50 hours a week position, or suddenly there are going to be increased demands on your time?
Yeah, I think company culture is huge. At my former employer a couple of employers ago, they had what I would call a Wall Street culture, which personally, it just wasn’t for me—the 7:00 to 7:00 minimum and then the ambitious people working Saturday and Sunday. Kudos, I hope you have a yacht by now, but that just wasn’t for me. Fortunately, where I’m at has more of a Main Street culture. Obviously, as a manager, I would be subject to more deadlines and responsibilities to those above me and managing the people below me to make sure that we can fulfill all our deadlines. But I wouldn’t see myself working till 6:30 or 7:00. They’re very big on PTO, and when you’re on PTO, they’re very good on work-life balance, which is another reason I like where I’m at.
Sara Rathner:
So one more thing to think about, if you were to take an opportunity in the future that even is a hybrid role, and this is something that people might realize if they transition from work-from-home to hybrid or a fully in-person position: are there any home tasks that you will need to pay to outsource to make up for the fact that you’re not physically present to help with those tasks? And is that something that you would need to work into your budget to make working away from home possible for you?
For the first one, even though it was even more money than the second one, I thought, “Well, I’m just going to have to hire a maid and a chauffeur.” So what’s even the point when I could do those things and it’d be a wash? I’d be working more, and then I guess I’d stimulate the economy by hiring two people. But I’m not really looking to be an economic stimulant other than through spending. As we free up cash flow from what were former debt payments, we could bring someone in to tidy the home. I think that’s the first thing people usually look to do, at least us upwardly mobile Miamians. If I’m meeting all my investment quotas, then why not?
Sara Rathner:
That’s definitely the first thing I outsourced in the home. Using your money to free up your time is, to me, such a tremendous use of money. It can be used to add convenience, not just stuff, but also the absence of something that you have to do is incredibly powerful. So yes, definitely, if you increase your salary and want to increase your quality of life in some ways by outsourcing some tasks, then that is a great use of money. It allows you to be around for your family more often too.
I think a lot of it is how you frame it as well. My friend, who’s in construction, does it quite well. He’s willing to take a pay decrease if he can work a third less hours because he always calculates on a per-hour basis. Which if someone tells me their hourly salary now, I couldn’t tell you if that’s a lot or little because I haven’t been hourly in years. So him being salaried, he always does that exercise, and he’s like, “Oh, I’m getting paid $6 more per hour, but I have to work 30% more. Absolutely not worth it.” Like, what does $6 get you? But I just did the exercise for role two, and I did it on a monthly after-tax, what it would come out to. And it’s enough to cover mortgage and daycare—just the raise after tax.
So when it’s framed like that, that tells a pretty compelling story. Like, “Oh, would you switch jobs and have to drive eight more hours if just the increase would pay for your mortgage and your daycare?” which are most people’s biggest expenses. That sounds pretty good. But when you frame it, do you want to spend 8 to 10 hours a week in Miami traffic and possibly get rear-ended and have people cutting you off? There’s almost no amount of money that you’d want to get paid to do that. So I think the framing is just a very, very interesting concept as well.
Elizabeth Ayoola:
So Andrew, tell us now, we’ve had this conversation, after this conversation, what are you thinking? Do you feel like you have more tools to consider if or when another tantalizing offer comes along for a new job?
I think I do. And shout out to the NerdWallet website, there’s a tax estimator calculator on there where you can put your filing status, your age, your household income. From a strictly math standpoint, I think it’s easy. From a value standpoint, it’s definitely more nuanced. So thank you guys for your time and your input as well.
Sara Rathner:
Yeah, no, we’re happy to be part of your decision-making journey because this is something that I think a lot of people go through as they progress in their careers and as their lives get more full and potentially more complicated in hopefully good ways, but sometimes hard ways too. So if you’re out there listening and you’re weighing a potential job change or you’re itching to change jobs, it’s absolutely not just a financial exercise, but it is also a values exercise.
Elizabeth Ayoola:
It absolutely is. And for me, values usually take the cake. But I say that knowing that I have certain privileges, and I’m able to choose. I know not everyone has that option.
So on that note, that’s all we have for this episode. Now remember, we are here for you and your money decisions. So turn to the Nerds and call or text us your question at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. Visit nerdwallet.com/podcast for more information on this episode. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio. And what happens there is you’re able to automatically download new episodes.
Sara Rathner:
And here’s our brief disclaimer: We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Elizabeth Ayoola:
And with that said, until next time… turn to the Nerds.
If you’ve been looking for a rental of any kind, you know how tough the hunt can be. Dozens of applicants for each vacancy, stricter credit, income, and referral requirements from landlords, bidding wars. These are, unfortunately, all part of navigating today’s tough rental market.
The culprit is a national housing shortage that has been brewing for more than a decade. After the housing crash of 2008, new construction of homes and rental units slowed dramatically. An uptick in building was later offset by supply chain and other pandemic-related delays. Meanwhile, rising mortgage rates made owning a home less affordable, prompting lots of would-be buyers to stay put in the rental market. The result? During the height of the rental crunch in early 2022, apartment occupancy hit an all-time high of 97.6% and rents jumped an average of 15.2% throughout the country.
Although the rental market has cooled somewhat since then, rents remain high and lower-cost rental units are in especially high demand. About half of people who rent are considered cost-burdened, meaning they spend more on rent than the recommended 30% of income.
If you’re competing in a tight rental market — or just competing for an affordable rental to call home — these four steps can help you anticipate what landlords are looking for and help you present yourself as the ideal tenant.
Tips to Get Approved for a Lease
Step 1: Know Your Number
Determine just how much you can afford for housing costs.
The advertised or asking rent is just the beginning. You’ll also need to take any fees, utilities, maintenance, parking, and renters insurance into account. If it’s been a while since you signed a new lease, you may need to adjust your estimates for these costs upward. Moving to a new area? Whether you’re renting or in the market for a house (and a home loan), check out a cost of living by state breakdown to get a feel for the numbers.
Take into account the possibility that you might find yourself in a bidding war. In the heat of the moment, you may outbid the others but also end up with an apartment you can’t comfortably afford. To avoid this scenario, determine your ideal monthly payment and stick to that number, no matter how tired you are of the apartment hunt.
Step 2: Prepare Your Rental Resume
Apply for a rental the same way you approach applying for a job. You want to make sure you fulfill all of the requirements, and then some.
The first step to getting approved for an apartment is usually filling out an application online. Be sure to do so accurately and thoroughly. When the time comes to see the place, you’ll help make your case if you bring the following:
Copies of Your Credit Reports
Landlords routinely do background and credit checks on applicants they are considering. Offering a copy of a credit report gives them on-the-spot information. If something on your report is confusing, you can attach your own letter of explanation.
Most landlords will look for a good FICO® score (670 to 739) or higher. Find your credit score on a loan or credit card statement or through an online credit score checker. Or get it for free from Experian.
Proof of Employment and Income
Landlords want to know that you can comfortably afford the rent. To prove you can, you could bring copies of your past three to six months of pay stubs, a copy of your most recent tax return, and contact information for your current employer. (This may be more than the landlord is asking for, but it helps build your case.)
Some, but not all, landlords also require employment history information. Having a list of former employers and their contact information on hand can help speed up this process. Even if it’s not required, the list helps paint a more complete picture of why you’re a trustworthy candidate.
References
Be ready to present credit references, which may include character references and asset documentation. Personal references from your boss, a co-worker, or another nonfamily adult who can vouch for you are a good idea. The landlord or agent may not call these people, but having them on your list is a sign of your professionalism and trustworthiness.
Landlords probably also will want the names, locations, and contact information of any previous landlords. A stellar rental history can help put you ahead of the crowd, so you want to make it easy for the agent or landlord to check on you.
If you’ve had trouble making rental payments, it’s best to be honest and offer an explanation.
Documentation for Service or Assistance Animals
According to the Fair Housing Act, a person with a disability may seek a “reasonable accommodation” from a housing provider so that they may have an equal opportunity as a nondisabled person to use a dwelling, even one that otherwise does not allow animals. The disability can be physical or mental.
Service animals, defined as dogs, are not considered pets, and housing providers cannot charge fees or deposits for them.
So-called emotional support animals have ruffled feathers throughout the country. First, applicants with assistance animals must make a request for reasonable accommodation, and not necessarily in writing. If the disability is not observable, they must provide reliable information — typically a letter from a medical provider or therapist — to the housing provider showing that the animal provides assistance.
Beyond that, the U.S. Department of Housing and Urban Development (HUD) does not allow housing providers to seek personal details of a person’s medical history. Importantly, HUD says that online certificates alone are not sufficient to reliably establish that a person has a nonobservable disability or disability-related need for an assistance animal.
So if you have assistance animals, it’s a good idea to bone up on the laws, which can be complicated, and have professional documentation.
Step 3: Show an Interest
It may sound trite, but landlords and rental agents are reassured when they know that someone really wants to live in the property. At a time when demand is high, this can be even more important as landlords become inundated with calls or online requests.
If you’ve visited the property before, have a friend in the same complex or nearby, love the neighborhood, or even appreciate the architecture or amenities, be sure to say so. Landlords want to know you’ll enjoy living there and, in turn, take good care of your new home.
Step 4: Prepare to Pay
Many leases have been lost when an early and promising applicant is ready to rent but doesn’t have the funds available.
Make sure you bring your checkbook or an electronic payment option so you can pay your security deposit, first month’s rent, and whatever else is required immediately. And, of course, make sure you have the funds available, while still leaving room in your budget to also cover moving expenses.
Move-in money can obviously be a challenge to come up with. If it’s several thousand dollars, a personal loan could help.
Did you snag the apartment or house? Once you move in and exhale, undertake a few renter-friendly updates to help you make the space your own.
Recommended: How Home Ownership Can Help Build Generational Wealth
The Takeaway
It’s a challenging time to look for a rental. But preparing thoroughly before you start your hunt and taking steps to show landlords your qualifications and genuine interest can help you stand out in the crowd. In this rental squeeze, however, some house hunters may find that it makes more sense to build equity in their own home than to pay rent.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How do I impress a potential landlord?
Make sure you fill out the rental application fully. When you tour the apartment, bring along a copy of your credit report, proof of employment and income, and contact information for some character references. Then express genuine interest in the property — comment on the building or neighborhood, for example — to show you’ll be invested in caring for your rental home.
What kind of background check do most landlords do?
A background check from a potential landlord might include a review of your credit history, employment and income history, and even a criminal background check. Some landlords also check for a history of eviction. They may also contact a former landlord or ask you for a character reference from a friend or colleague.
How much money should I have saved before renting an apartment?
You’ll want to have at least three months’ worth of rent saved before you start apartment hunting — the equivalent of your first and last months’ rent plus a security deposit. What’s more important, though, is that you have carefully considered the full cost of renting — including paying for utilities, renter’s insurance, and perhaps expenses such as parking. A good rule of thumb is that your housing expenses should not exceed 30% of your take-home pay.
Photo credit: iStock/cnythzl
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 for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Rising costs tighten margins for business owners. And to make up for that increased pressure, businesses usually have to raise prices — which, when it’s done month after month, can start to wear on customers.
Customers are facing “price increase fatigue,” says Kirk Jackisch, president of consulting firm Iris Pricing Solutions. “They’re done. They can’t take it anymore — just across-the-board price increases. So you have to look at more surgical solutions.”
Targeting price increases carefully and communicating them clearly can help ease the pain customers feel, Jackisch says. Here’s how you can go about it — and what you need to avoid as legislators across the U.S. focus on fees and surcharges.
Balance price increases with new deals
Matthew Heaggans is co-owner of Preston’s: A Burger Joint, a restaurant in Columbus, Ohio. When sambal, an ingredient they used in a signature sauce, more than doubled in price, Preston’s began buying chili peppers to make their own — but then those tripled in price, too.
In light of such rising costs, Heaggans says Preston’s raised prices by about 7% on average. But that doesn’t mean they’ve raised every price by 7%.
For example, while a burger might be more expensive than it used to be, sides are now cheaper when you buy them as part of a combo.
“People are driven very significantly in our market by price,” Heaggans says, so it’s essential that Preston’s keeps prices competitive.
If you’re concerned about the long-term impact of price increases, you can opt to adjust them temporarily to account for cost shocks. For example, as egg prices spiked in 2023, some restaurants temporarily increased the prices of dishes containing eggs. Shipping companies have long adjusted their fuel surcharges as gas prices rise and fall.
Fortunately, for all of the “agonizing” he put into price changes, Heaggans says customers didn’t mind.
“My constant plea to consumers is that if you really, really like a thing, you should support it or it’s going to go away,” Heaggans says.
Don’t inflate your fees to avoid raising sticker prices
Customers often feel duped by last-minute or opaque fees — and regulators are taking aim at them, too.
At the federal level, the Biden administration has announced plans to crack down on junk fees on everything from event ticketing to college textbooks. And as of July 1, California has banned “drip pricing,” or advertising a price that doesn’t include mandatory additional fees and surcharges.
California’s law is designed to target last-minute, high-cost service fees on products and services like concert tickets and hotel rooms, says David W. Wright, an attorney at Pillsbury Winthrop Shaw Pittman LLP in Los Angeles.
The law is “not necessarily preventing businesses from trying to recoup those costs, but instead trying to make it so that businesses disclose those costs up front so consumers know what they’re getting themselves into,” Wright says.
Under California’s rule, handling fees have to be listed as part of the advertised price. “Reasonable” shipping fees and taxes, however, do not.
“The safest way to protect yourself is to include all prices” within the sticker price, Wright says.
Other states limit pricing practices in additional ways. For instance, some companies pass credit card charges onto customers to offset their payment processing costs. But several states restrict the practice. For example, New York requires you to include these fees in the posted price but allows you to charge a lower price for customers paying cash. And Colorado caps credit card surcharges at 2%.
Offer customers fee-free alternatives when possible
Jackisch also recommends increasing prices in ways that focus on the customers who cost the most to serve — like those that request rush jobs or ask for last-minute changes.
For example, if your company typically delivers orders in four weeks and a customer requests a two-week turnaround, you might apply a rush charge. After all, your business will have to absorb the costs of disrupting your normal operations to meet that customer’s needs.
Most customers see fees tacked onto their bills as “punitive,” Jackisch says. The key is to make sure there’s a way to avoid those fees and explain what it is.
The fee-free alternative in this case? For the customer to wait the typical four weeks.
Salespeople should be able to explain that when it comes to customer requests, “we’re happy to do it. But just recognize that there’s a cost to us, and we’re passing some of that along to you,” Jackisch says. “That communicates the value and the fairness of the fee.”
There is no such thing as no-deposit car insurance. All insurers require payment before activating coverage.
You can lower your initial payment by taking advantage of discounts, only purchasing coverage you need and comparing rates to find the cheapest insurance company for you.
Your first car insurance payment can be as low as $29, according to NerdWallet’s August2024 analysis of minimum coverage rates from the country’s largest insurers.
A car insurance “deposit” counts toward your total premium. It’s not an additional fee.
Car insurance with no deposit doesn’t exist. Legitimate insurers require some money down before they’ll provide coverage. The good news is that an auto policy’s initial “deposit” isn’t a separate fee, but the first payment you’ll make towards buying and maintaining your coverage.
Most auto insurers will let you either pay in monthly increments or in full for the entire policy period, which is typically six months or a year. If you’re looking for the lowest possible payment to start your auto insurance coverage, the cheapest option will likely be to pay only your first month’s premium payment.
Even though you’ll have to put some money down to get car insurance, your initial payment doesn’t have to be astronomical. Read more to learn how to find cheap car insurance with a low initial payment.
Table of Contents
How to find car insurance with a very cheap “deposit”
Just because a policy requires a payment upfront doesn’t necessarily mean you’re overpaying for your auto insurance coverage. Still, there are ways to make sure you are paying as little as possible in that first transaction.
Here’s how to lower your first car insurance payment.
Shop around. Your “deposit” will likely just be your first premium payment, so look for the lowest possible premium. The best way to do that is to compare car insurance quotes from at least three insurers. Not sure where to start? Take a look at NerdWallet’s list of the cheapest car insurance companies.
Ask about discounts. You may be surprised by the variety of discounts some insurers offer, so be sure to ask your insurer or agent for any discounts you might qualify for. You could get a lower price for making electronic payments, being a good student, insuring multiple vehicles or even driving a low amount of miles.
Only get the coverage you need. Look over your policy and drop any coverage you don’t really need. For example, if you drive an older car that’s not worth much, you likely don’t need comprehensive and collision coverage, which only cover your vehicle up to its current market value, minus your deductible.
Lower your deductible. If you have enough of a cushion in your emergency savings, you can choose a higher car insurance deductible. Although this would require you to pay more out-of-pocket before your insurance pays for a covered claim, your monthly premium would decrease.
Pay month-to-month. Most insurers give the option to pay for coverage in full or monthly installments. If you want to lower the initial cost for your coverage, pay month-to-month.
🤓Nerdy Tip
Keep in mind, paying for the full six or twelve months of coverage can end up being cheaper in the long run if your insurer offers a pay-in-full discount.
How much does a car insurance initial payment cost?
The initial payment for a car insurance policy can be as low as your monthly policy rate, and can vary based on the overall cost of your policy and the payment plan you agree upon with your insurer.
Cheapest car insurance “deposits” for minimum coverage
Below are the five cheapest large insurers for minimum coverage, according to NerdWallet’s August2024 analysis, along with their median annual and monthly rates.
*USAA is only available to military, veterans and their families.
Cheapest car insurance “deposits” for full coverage
Below are the five cheapest large insurers for full coverage, according to NerdWallet’s August2024 analysis, along with their median annual and monthly rates.
*USAA is only available to military, veterans and their families.
Cheap coverage could leave you underinsured
When you’re shopping for a policy with a very low monthly payment, keep in mind that it may offer very limited coverage.
The absolute cheapest policies will provide only the minimum-required coverage in your state, which typically only includes a limited amount of liability insurance. This pays for damage and injuries you may cause to others in an accident, up to your policy limits. But it won’t cover things like damage to your car or for your own injuries if you’re hit by an uninsured or underinsured driver. In most cases, your state’s minimum required limits are probably not enough to protect you financially in the event of a serious accident.
Before you buy the cheapest car insurance you can find, make sure you’re getting enough coverage to protect you financially. Unsure of what the different types of car insurance are? Use our tool below to learn about what each type pays for.
The question of how student loan forgiveness would be funded doesn’t have a clear-cut answer, and ideas about how it would be paid for can be heavily influenced by a person’s political leanings. One recent survey found that the majority of Democrats support canceling some or all student debt, while most Republicans oppose any cancelation. Read on to learn more about this important issue.
Who Pays for Student Loan Forgiveness?
There’s no easy answer in terms of how plans to cut student debt would be funded. Government finance is complex. Typically, the federal government would need to foot the bill for student loan forgiveness, and the government would have two options to pay for it: cut spending or raise taxes. Making the situation more complicated is the fact that forgiven loans may have already earned a profit, which could make reconciling the impact of writing off this debt even harder.
In addition, viewpoints on student loan debt are often divided by political affiliation. Democrats are more likely to support debt cancellation and hold the government and lenders responsible for the high levels of student debt. Republicans, on the other hand, usually are against the idea of student loan forgiveness and often feel the borrowers themselves should shoulder some of the blame for the situation.
Spending Cuts and/or Higher Taxes
If some or all student loans were to be forgiven, here’s a closer look at some potential paths:
• Cutting spending, which can be challenging. Some financial and legal experts worry that cuts would wind up hurting education resources, such as universal pre-K and higher education initiatives. These could be trimmed to save money.
• Raising taxes, which could involve increasing individual income tax rates or reducing tax deductions, such as mortgage interest, charitable contributions, medical expenses, IRA contributions, and more. The government could also opt to raise taxes on corporations and the wealthy.
• A combination plan of the two methods: some tax cuts along with some tax hikes.
Neither Is Necessary
Another point of view to consider: Some pundits say that the cancellation of federal student loan debt won’t cost the government anything. They point to the fact that student loans were paid for by taxpayers when the funds were first disbursed.
They also hold that, over time, payments by borrowers of student loans to the Department of Education have almost been equal to the amount of money loaned out. In that way, they see the situation of forgiving loans as being close to break-even. One review found that the government collected about $85 billion a year in payments on about $95 billion a year in loans paid out. In terms of government spending, they believe forgiveness would not result in a major shortfall.
Proponents of this theory also say that records reveal that the Department of Education has been profiting on student loans over the years, and that gain can also be seen as an asset against which canceled federal loans can be compared.
Obviously, this is a complex issue with many different viewpoints regarding the best path forward.
💡 Quick tip: Some student loan refinance lenders offer no fees, saving borrowers money.
The Current State of Student Loan Forgiveness
It can be helpful to keep in mind the recent events surrounding student loan forgiveness.
• The Biden administration announced a $441 billion federal student loan debt relief program for borrowers who earned less than $125,000 ($250,000 for married couples) in 2022. This was blocked by the Supreme Court in 2023.
In the wake of this decision, the Biden administration proposed new initiatives in April 2024 to forgive $7.4 billion in student debt, including waiving:
• Accrued and capitalized interest for certain borrowers
• Debt for those eligible for the Saving on a Valuable Education (SAVE) Plan, in the event of a closed school discharge, and other forgiveness programs
• Student loan debt for those who entered loan repayment 20 years ago
• Debt for those who enrolled in programs or institutions that provided low financial value
• Debt for those who experience repayment hardship
In May, the U.S. Department of Education announced cancellation of $7.7 billion for certain borrowers under Public Service Loan Forgiveness Program (PSLF) and through the SAVE Plan, which offers borrowers a shortened forgiveness period. However, court orders recently halted the SAVE program after several states sued.
Where Does All the Canceled Debt Go?
It’s hard to say where all the canceled student debt would go, and it’s also difficult to forecast how much forgiving debt would cost the government, if anything. The government would at least have to adjust its revenue projections, even when the original principal has been paid off with interest.
One important note: Canceled student debt can have a positive impact on borrowers. It gives them more disposable income, which they can use in ways that stimulate the economy, from buying more consumer goods to taking out more mortgages.
Will My Taxes Increase if Student Loans Are Forgiven?
Many believe that federal student loan forgiveness, as planned, could transfer debt from borrowers who took out student loans to taxpayers, according to the U.S. House Budget Committee. This is a viewpoint that tends to be held by Republicans who are opposed to forgiveness for various reasons.
The Budget Committee has stated that approximately 87% of adults without student loans will wind up paying for the 13% of borrowers who borrowed for college and 56% of the student loan debt for graduate degree borrowers.
Currently, some estimates say that $1 trillion in federal student loan cancellation would mean an additional $2,500 tax bill for most Americans.
Another angle to consider: If borrowers’ debt is forgiven, it could be taxable. Borrowers would receive IRS Form 1099-C in this instance, and might need advice from a professional tax preparer.
Recommended: Guide to Student Loan Forgiveness
Will Private Student Loans Be Forgiven?
The Biden administration’s student loan forgiveness plans would not cancel private student loans, which come from private companies, including online banks. The forgiveness plans only apply to those with federal student loans, or loans that come from the U.S. Department of Education.
Unlike federal student loans, which borrowers apply for using the Free Application for Federal Student Aid (FAFSA), you can apply directly to the lender for a private loan. Unlike in the case of federal loans, you may need to undergo a credit check and may encounter less flexible repayment plans with private student loans.
However, private loan lenders may offer some benefits that are similar to those of federal student loans, including deferment (when borrowers can temporarily stop making payments and interest may not accrue), forbearance (when borrowers can temporarily stop making payments or make smaller payments and where interest does accrue), or unemployment protection.
It’s wise to check carefully with your lender to find out their exact policies.
Alternative Options for Paying Off Student Loans
Since the future of forgiveness is largely uncertain, borrowers can consider other ways to pay off student loan debt. They can take advantage of several alternative options, including putting extra toward principal, considering other repayment plans, making lump sum payments, and additional methods.
Here are several possible options:
• Put extra toward the principal: Putting extra cash toward your principal student loan can result in a faster payoff than by simply making your usual monthly payment. Putting an extra $100 toward your principal every month, for example, can make a difference. You will typically not pay prepayment penalties on private or federal loans, which is a charge that penalizes you from paying off your student loans early.
• Make lump-sum payments: If you have a lump sum, like a tax refund, a bonus, or other windfall money, you can put that toward your debt instead of spending it. If you can find extra money regularly (such as a couple of times a year), that could help you pay off your student loans. A side hustle can also help you make lump-sum payments as well.
You might also consider using the debt snowball method of taking care of your loans, which means you put money toward your smallest loan balance, then progress to larger loan balances after that.
• Check with your employer: Your employer may offer a student loan repayment benefit. Learn whether your employer will help pay for qualified educational expenses, including your student loan balance.
• Budget your money: Living on a budget is a great way to ensure you make on-time student loan payments. Though you’re shielded from penalties on late payments through September 2024 through an on-ramp period, it’s still good practice to avoid late payments so you don’t risk default later.
• Refinance or consolidate student loans: Refinancing means changing one or more loans to private student loans with a new interest rate, term, and monthly payment. Securing a lower interest rate means you’ll pay less interest over time. However, it’s important to be aware that refinancing federal student loans in this way means you will forfeit the right to certain benefits and protections, such as deferment. Also, if you refinance for a longer term, you may well pay more interest over the life of the loan.
• Consolidating federal student loans: This means pooling one or more federal student loans into a Direct Consolidation Loan with one monthly payment with one interest rate. You may save money over time when you consolidate, but check to be sure.
• Repayment plans: Several repayment plan options exist for both federal and private student loans. For example, with federal loans, you may look into several income-driven repayment plans, such as the SAVE, Pay As You Earn (PAYE), income-based repayment (IBR), and Income-Contingent Repayment (ICR) plans as repayment options. Check with your loan servicer to determine which makes sense for you, whether you have a mix of federal and private loans or just federal loans.
Recommended: Are Student Loans Forgiven After 20 Years?
The Takeaway
There are different opinions about how federal student loan forgiveness will be paid for, if and when it’s enacted. Viewpoints often align with a person’s political beliefs, with Democrats tending to favor loan cancelation and Republicans being against it.
Regardless of the future of student loan forgiveness, there may still be options to help you manage your student debt, such as budgeting, considering alternate repayment plans, or refinancing.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
How will student loan forgiveness be funded?
Some experts claim that the government would need to cut spending or raise taxes to fund student loan forgiveness.
What impact will student loan forgiveness have on borrowers?
Pending legal blocks, borrowers could see some of their student loans disappear, providing relief for millions of borrowers. It’s also important to understand that student loan forgiveness may be subject to tax. You’d receive Form 1099-C to document it; consider checking with a tax professional to learn more about how tax applies in your situation.
What are the potential drawbacks of student loan forgiveness?
In addition to the potential for taxpayers to shoulder the debt, other downsides of debt forgiveness might include the forgiven amount being taxed, cuts to government educational spending, and overspending and increased debt for students who find themselves with more disposable income.
Photo credit: iStock/Drazen Zigic
SoFi Student Loan Refinance If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
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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I started making extra money and side hustling around 15 years ago, and since then I have done over 20 different side hustles. I started so that I could stop living paycheck to paycheck, and so that I could pay off my student loans quickly (I ended up paying off $40,000 in student loans in…
I started making extra money and side hustling around 15 years ago, and since then I have done over 20 different side hustles.
I started so that I could stop living paycheck to paycheck, and so that I could pay off my student loans quickly (I ended up paying off $40,000 in student loans in just 7 months thanks to side hustling!).
Some were short-lived, while others turned into steady streams of income (and are even my full-time income today). Each side job taught me something valuable about money, time, and effort. I juggled everything from reselling clothes online to being a virtual assistant, mystery shopping, answering online surveys, having roommates, and more.
There isn’t one best way to make extra money; it depends on what you’re good at, what you like, how much time you have, and more.
If you want to start a side job, my experiences can help you decide. I’ll tell you what I learned from each one I tried, so you can see the pros and cons of each.
My Side Hustles Review
Below is my review of the different side hustles I have tried over the years. These are in no particular order.
1. Blogging
Blogging can be a great way to earn money while writing about topics you love. I’ve done it for years and have seen how it can grow from a hobby into a full-time job.
I enjoy blogging for many reasons such as:
It’s flexible – You can blog from anywhere, anytime.
It’s affordable to start – You just need a computer and internet.
It’s a great creative outlet – Share your thoughts and passions with the world. I enjoy blogging and running a website.
While there are a lot of great reasons to start a blog, there are some challenges such as it can be time-consuming and there is no guarantee that you will make money.
When I first started my blog, I was working over 40 hours a week on it and making nothing. It took me 6 months to make my first $100 from it, actually!
But, it was all worth it in the end.
Blogging used to be my side hustle and it is now my full-time job where I have earned over $5,000,000 over the years.
I would definitely say that blogging is my favorite side hustle.
For me, it was a great second job because I could work on my blog before my day job, during lunch, after work, and on weekends. You can make your own schedule, which is a big bonus!
You can learn more about how to begin in my free How To Start a Blog Course here.
2. Paid online surveys
Paid online surveys are a way to make some extra cash when you have spare time. With just a few clicks and some honest answers, you can see money rolling in.
Companies want to know what customers think about their products and services and that is why they pay for surveys. By sharing your opinions, you help them improve and develop better offerings. In turn, they pay you for your time and insights.
You usually can earn anywhere from $0.50 to $5 per survey, depending on the length and how hard the survey is. And, surveys can take anywhere from around 10 minutes to an hour, so they are not high paying.
I’ve taken a lot of surveys over the years, and what I like about them is that you can do them whenever you want – in the morning, during lunch, before bed – whenever it works for you. There’s no strict schedule, and they are really easy to do.
My tips for success:
Sign up for multiple sites: This increases your chances of getting more surveys and making more money.
Complete your profile: Some survey sites match you to surveys based on your profile.
Be honest: Giving truthful answers ensures you stay eligible for more surveys.
Payment methods are typically cash via PayPal, bank transfer, or free gift cards (such as to Amazon, Walmart, Starbucks, and more).
You won’t get rich from these surveys, but it’s a nice way to earn some side cash. I know that some people think that surveys are a waste of time – but I know several people (including myself) who liked doing them because they are so flexible. I think the right mindset to have is that they will definitely not make you rich, and some can take a long(er) time to earn $5.
The survey companies I recommend signing up for include:
American Consumer Opinion
Survey Junkie
Swagbucks
InboxDollars
Branded Surveys
Prime Opinion
Five Surveys
PrizeRebel
Pinecone Research
3. Focus groups and paid research studies
You can make money by participating in focus groups. Companies pay for your opinions to improve their products and services.
This is similar to paid online surveys, but paid research studies and focus groups typically pay more.
User Interviews is a popular site where you can find paid research studies and focus groups.
Big companies like Pinterest, Spotify, Macy’s, Home Depot, Trip Advisor, and Amazon use User Interviews to get feedback on their new products, apps, and websites.
You can make $50 to $100 per hour, or even more, just by sharing your thoughts and feedback.
I did a user interview myself and got paid $400 for just one hour of work. It was easy, and everything was done online through a video call where they asked for my opinion on a new feature for a website.
Please click here to learn more about User Interviews.
Also, if you’re interested in paid medical research studies, then that can be a high-paying option as well. When my husband was younger, he took part in a few medical research studies to help us make extra money. He usually got paid about $1,000 for a week’s worth of time.
4. Dividends
Okay, so this isn’t exactly a side hustle, but it is a way that you can make more money so I wanted to include it here, especially since it’s one of my favorite ways to increase my income.
Dividends are an awesome way to earn passive income. You don’t need to do much work, and the money comes in. Many companies pay dividends to their shareholders regularly.
Here are a few benefits of investing in dividend stocks:
Regular income: You can receive payments quarterly or even monthly.
Low effort: Once you buy the stock, you don’t have to do much else.
A dividend is a portion of a company’s profits given to its eligible shareholders. You can receive dividends in cash, stock, or even options to buy more stock.
If you own shares in a company that pays dividends, you’ll get a dividend for each share you own.
For example, if you have 10 shares in Company XYZ and they pay $5 in cash dividends each year, you’ll get $50 in dividends for the year. Dividends are usually paid out quarterly, which means 4 times a year. So, in the example, the $5 in yearly dividends would likely be paid as $1.25 per quarter for each share you own.
You can learn more at What Are Dividends & How Do They Work? A Beginner’s Guide.
5. Buy and sell flipping
Flipping items is a great side hustle, and this is when you buy items at a low price and sell them for more.
The benefits of buy and sell flipping include:
Flexibility: You can flip items in your free time.
Profitable: Potential to earn anywhere from $50 to $5000 a month.
Fun: The thrill of finding good deals and making a profit.
I have flipped many items for resale over the years, and I even had a small reselling business at one point. It’s a fun way to make extra money.
While flipping items by buying and selling them for profit can be exciting, it has some downsides. One big risk is that you might not always make a profit, especially if the market drops or you overestimate the item’s value. It can also take a lot of time to research products, find good deals, and manage your listings. There’s tough competition too, as many people are trying to flip items, which can lower prices.
You can learn more at How I Made $40,000 In One Year Flipping Items.
6. Sold clothing
Selling used clothing can be a great way to make extra money. You can find clothes to sell in many places: thrift stores, clearance aisles, garage sales, and even your own closet.
For me, I liked to sell clothing on eBay as well as in person to places like Plato’s Closet. There are many more options these days, such as Poshmark and Facebook Marketplace.
Selling used clothes as a side hustle has its ups and downs. On the plus side, it has low start-up costs because you can start with clothes you already own, and it’s eco-friendly, supporting sustainable fashion. You also get to work on your own schedule, and there’s a high demand for secondhand clothes, especially trendy or vintage items. But it can take a lot of time to sort, clean, photograph, and list the clothes. Plus, shipping costs can cut into your profits, especially for heavier items.
I’ve sold a lot of clothing over the years, both online and in person (I also used to work at a secondhand clothing store for many years). I even had a small clothing resale business at one point, so I have plenty of experience in selling used clothes!
You can learn more at 16 Best Places To Sell Clothes For Cash.
7. Social media management
Social media management is a great side hustle if you enjoy creating content and engaging with people online.
Social media managers handle businesses’ social media accounts like Facebook, Instagram, and Twitter. They create posts, reply to comments, and help grow their followers.
Some benefits include:
Flexible hours: Many times, you can work anytime, making it easy to fit around your main job. This is because you can schedule social media posts to go out at the exact time that you want.
You can be creative: You can express your creativity through different types of content.
Work from anywhere: All you need is a laptop and internet.
But, there are some cons too. This wasn’t my favorite side hustle, mainly because it was stressful at times. It is very time-consuming (creating good content and engaging with followers can take a lot of time), there is constant learning (social media trends change quickly, so you need to keep learning new skills), and some clients may have high expectations and tight deadlines.
If you like being creative and spending time online, social media management can be a fun and rewarding side hustle.
8. Virtual assistant
Being a virtual assistant is one of my favorite side hustles. It’s flexible, and you can work from anywhere. You handle tasks for other people or businesses, like managing emails, scheduling appointments, or doing research.
Why I like virtual assisting:
Flexible hours: You set your own schedule.
Work from home: No need to commute.
Variety of tasks: You can decide what virtual assistant tasks you want to provide.
Working as a virtual assistant is a great way to make extra money. It gives you flexibility, a variety of tasks, and you can get started with just a computer and an internet connection.
You can learn more at Best Ways To Find Virtual Assistant Jobs.
9. Freelance writer
As a freelance writer, you get to write for different clients and websites. You can work from home and set your own hours. This side hustle can be very flexible, especially if you enjoy writing.
I’ve been a freelance writer for many years, and I really enjoy it. I’ve written for lots of different websites and companies, and I’ve made good money doing it.
The positives of being a freelance writer include:
Flexible schedule: You can write during your free time.
You get to decide what you want to write about: You get to write about different topics.
Work from home: No need for a commute.
There are some cons, though, such as income can vary, with some months being busy while others are slower. Finding clients requires actively searching to keep work steady. Plus, meeting deadlines can also be stressful, adding pressure to the job.
Freelance writing is a great side hustle if you love to write and want to make extra money. It takes time to build a steady income, but it can be very rewarding.
You can learn more at 14 Places To Find Freelance Writing Jobs – (Start With No Experience!).
10. Receipt scanning apps
Using receipt scanning apps is an easy way to earn some extra money. You just take a picture of your receipts from shopping, and these apps give you points or cash back. Here are some of the best apps to try:
I’ve been using receipt-scanning apps for years, and I love how easy they are to use. You can earn points or cash without spending much time. Plus, since I already have the receipts, it’s great to make some extra money by doing almost nothing.
My favorite receipt-scanning apps are:
I like to use both Fetch Rewards and Ibotta on all of my receipts (yes, at the same time to stack rewards).
Receipt-scanning apps can be handy, but they do have some downsides. One of the main drawbacks is that the rewards are usually small, so it can take a while to earn a significant amount. You also have to remember to scan receipts regularly, which can be time-consuming and easy to forget.
For me, though, I like to use them on all of my receipts as it only takes a quick moment to do.
11. Mystery shopping
When I had student loans to pay off, I turned to mystery shopping to make extra money. It didn’t make me rich, but it helped increase my income and allowed me to enjoy some free meals and free stuff (like free makeup and household goods).
Mystery shopping involves acting like a regular customer and then reporting on your experience. You might review a restaurant, shop at a store, or even evaluate a phone call. Companies use your feedback to improve their service.
What I like about mystery shopping:
Extra cash (typically $10 to $15 per mystery shopping task)
Free items or meals (you’re usually given an amount to spend in the store or restaurant)
Flexible schedule
Mystery shopping helped me make around $100 to $200 a month.
Joining a reliable mystery shopping company is important, though, as there are a lot of scams. I used Bestmark and had a good experience with them.
Mystery shopping won’t replace a full-time job, but it’s a fun way to make some extra money.
You can learn more at How To Become A Mystery Shopper.
12. Babysitter
Being a babysitter is a flexible side hustle. You can choose your own hours and accept jobs that fit your schedule.
Parents often need help on weekends or evenings, which can be perfect if you are busy during the day.
What I liked about babysitting:
Good pay – around $15 to $25 per hour (depending on where you live)
Helps develop responsibility
Flexible hours
Of course, there are downsides to being a babysitter, such as it can be tiring watching kids for long periods, and sometimes this side job means that you’ll be working late nights or weekends.
I was a babysitter when I was younger and I really liked it. The kids I babysat were fun to be around!
13. Coaching
Coaching can be a great side hustle. You get to help people grow and achieve their goals. It also offers flexibility because you get to be your own boss and decide your work hours.
I used to offer blog coaching in the past, and I enjoyed helping people learn how to grow their blogs and make money blogging.
It was also really easy for me to do, as I have been blogging for many years and have learned a lot about what to do and what not to do.
If you have the expertise and enjoy motivating others to improve, then there is probably a topic that you can coach others on.
14. Course creator
Creating an online course can be a game changer for your income. I launched my first course, Making Sense of Affiliate Marketing, in July 2016. Within the first year, it brought in around $434,698. This wasn’t due to any fancy marketing techniques but mainly through word-of-mouth.
Even though the course was successful, it didn’t come easy. I was nervous about it, especially since it was my first. I had worries that no one would be interested. Plus, many people said that your first course usually isn’t great.
Yet, the desire to help others understand affiliate marketing kept me going. By sharing my knowledge, I aimed to help bloggers increase their income. Online courses are beneficial because they can include interactive materials, workbooks, and community support, which go beyond what an ebook offers.
Here are some success stories from my course:
One student increased their monthly income from $272 to $4,400.
A new blogger got their first affiliate sale just two days after taking the course.
Another went from earning $87 a month to over $1,700 the next month.
And I have helped countless bloggers earn well over $100,000 a year from their blog and turn it into a full-time income.
Creating a course is a lot of work, but it can also be very rewarding. It allows you to reach a wider audience and can become a substantial income stream. If you have knowledge to share, you may want to try creating your own online course.
This is a business idea that I recommend more people start! I enjoy taking courses from people and sign up for them all the time. I love learning, and so do others.
You can learn more at How I’ve Made Over $1,000,000 From My First Course Without a Big Launch.
15. Affiliate marketing
Affiliate marketing is one of the most popular side hustles. It’s easy to start and doesn’t need a lot of money up front.
You promote products and earn a commission for every sale made through your referral link. This can be done on social media, a blog, a YouTube channel, and more.
What I like about affiliate marketing:
Low start-up cost: You don’t need much money to start.
Flexible schedule: Work when you want.
Passive income: You can earn money even when you’re not working.
Affiliate marketing can be a fun and profitable side hustle. Just remember to stay patient and persistent!
You can learn more at What You Need To Know About Affiliate Marketing For Beginners.
16. Rent out a room in your home
Renting out a room in your house can be a simple way to make extra money. If you have unused space, like a spare bedroom or basement, you can turn it into a rental.
I have had several roommates in the past, and I liked this side hustle a lot.
What I liked about making extra money by renting out a spare room:
Extra income to help pay the mortgage
If you have unused space, then this can be a good way to fill it
Of course, there are challenges to having a roommate, and it isn’t always perfect. Sometimes, it can be hard to share common spaces (like the kitchen and bathroom), and it can also take time to adjust to someone else’s lifestyle.
Renting out a room isn’t for everyone, but it can provide steady income with minimal effort.
17. Shop at cash back websites
Shopping at cash back websites is an easy way to earn extra money. These sites give you a percentage of your purchase back as cash. You just have to sign up, shop through their site, app, or browser extension, and earn rewards.
I like cash back sites because they are easy to use and you don’t have to pay anything extra for using them.
Shopping through cash back sites can give you a nice little bonus on things you already planned to buy. It’s like getting paid to shop.
My favorite cash back sites are:
Rakuten (for online shopping like clothing, home goods, etc.)
Upside (for gas)
Honey (for online shopping like clothing, home goods, etc.)
Fetch Rewards (for groceries)
18. Earn credit card rewards
Using credit cards (the smart way) can help you earn rewards like cash, travel points, and more.
I’ve been using rewards credit cards for years, and now they’re the only cards I use. They help me save money on travel, earn cash back, and more.
By choosing the right credit card and using it wisely, you can enjoy great rewards and make the most of your spending.
Remember, carrying a balance on your credit card can lead to interest charges, which can outweigh the benefits of rewards. Always try to pay off your full balance each month to avoid these fees.
You can see my favorite credit card rewards at Best Rewards Credit Cards For This Year | What You Need To Know.
19. Brand ambassador
Being a brand ambassador is one of the more popular side hustles.
You represent a company and help promote its products. Often, you act as a public spokesperson. You can find opportunities on Facebook and many cities have brand ambassador groups where gigs are posted.
Brand ambassadors can earn between $15 to $20 per hour. Some high-end gigs can pay up to $100 per hour.
Benefits of this side hustle include flexible hours and the chance to work for brands you like. You may be able to get free products or swag, too, and this is one thing I really liked about being a brand ambassador in the past.
20. Newspaper delivery
Delivering newspapers can be an easy way to make money. It’s a job you can do before school or work, and it lets you get exercise too. You may drive, ride your bike, or walk to each house and leave the newspaper by the door.
The benefits of newspaper delivery include:
Exercise: If you walk or ride your bike, you can get plenty of fresh air and exercise.
Scheduling: Most routes are in the early morning, so you still have the rest of the day free.
Tips: Some customers might give you tips during holidays or for good service.
But, there are some downsides, with the main one being that you typically have to wake up really early for this job. For newspaper delivery, you usually have to wake up very early in the morning, often around 3:00 to 5:00 AM. The exact time depends on how big your delivery route is and what the newspaper company requires. The goal is to have all the newspapers delivered by the time most people wake up, usually around 6:00 or 7:00 AM, so starting early is really important.
The other main negative is that a big collection of newspapers is, of course, heavy!
When I was younger, I helped a friend’s family with their newspaper run whenever I slept over at their house. They used their van to deliver a bunch of newspapers, and I got to tag along.
21. Help others with their resume
Helping others with their resume can be a rewarding side hustle. You can earn extra money while also making a big difference in someone’s job hunt.
When I was in my last year of college as well as about a year after I graduated, I helped several people with their resumes. I didn’t charge a lot (and many times worked for free or for a free meal), but I liked looking at resumes and finding ways to make everything sound better.
I was also really good at it and it came so easy to me!
Some benefits of this side hustle include:
Flexibility: You can do this from home.
High demand: Many people need help with their resumes.
Work at your own pace: There’s no rush, and you can take on as many clients as you want.
By helping others with their resumes, you can earn money and provide help. It’s a great way to use your skills and make a difference in someone’s life.
22. Enter contests and giveaways
Entering contests and giveaways can be a fun and rewarding side hustle. You will definitely not win every time, but the more you enter, the higher your chances. People have won cash, gift cards, vacations, and electronics through these events.
You can spend a little time each week entering different contests. You can find them online, on social media, and in emails from brands you follow. Some people set aside about an hour each week to enter as many as they can find.
I found success this way. For example, I once won $10,000 from a financial blog’s anniversary contest, and this was a major win early on in my side hustle journey.
Remember, entering contests should be fun. Think of it as a hobby that could pay off with some great surprises. You most likely won’t get rich nor win the lottery doing this.
23. Rewards sites (GPT sites)
Rewards sites, also known as GPT (Get-Paid-To) sites, are platforms where you can earn money by doing simple tasks online.
Tasks you might do include:
Taking surveys
Reading emails
Playing games
Shopping online
Trying new apps and services
Clicking ads
Rewards sites have been around for a while and have proven to be a reliable way to earn some extra cash. Though the payouts are often small, they can add up over time. For instance, Swagbucks has paid out over $80 million to its users.
Using multiple sites can help maximize your earnings. It’s easy to do tasks during your free time, making it a flexible way to earn money without a huge time commitment.
It’s key to choose reputable sites to make sure that you get paid for your efforts, so I recommend that you stick with popular, well-reviewed platforms to avoid scams.
Rewards sites will most likely not replace a full-time income, but they can be a fun way to get some extra spending money.
Here’s a quick list of the best GPT sites:
24. Test websites (User Testing)
Testing websites, also known as user testing, is a popular side hustle. You get paid to visit a website or app and give feedback on your experience.
You will need a computer, a reliable internet connection, and sometimes a microphone.
User testing is flexible. You can do it in your free time from the comfort of your home. This side hustle is great if you like trying new things and providing feedback.
I have personally been paid to do user testing in the past, as well as paid others to do user testing on this very website, Making Sense of Cents. I thought it was an easy side hustle where you just share what you honestly think of a website.
25. College textbook resale
Selling your college textbooks is a great way to make some extra money.
When I was in college, I sold all of my college textbooks once I was done, and I always tried to make the most money (so, that typically meant that I never sold it directly back to my college bookstore, because they usually paid the least amount).
Reselling college textbooks as a side hustle has its ups and downs.
On the plus side, there’s a high demand for cheaper, used textbooks, so you can make good money if you buy low and sell high. It’s easy to start, especially if you begin with your own used books, and it’s a great way to encourage reusing materials.
But the market is seasonal, with most demand at the start of each semester, so your income might be inconsistent. New editions can come out, making older books less valuable, and storing a lot of books can be tough. Plus, shipping heavy textbooks can cut into your profits if you’re not careful.
Recommended reading: 17 Best Places To Sell Used Books For Cash
Frequently Asked Questions
Below are answers to common questions about finding the best side hustle.
What are the top side hustles that can bring in good money?
Top side hustles that can bring in good money include freelancing, blogging, flipping items for resale, and renting out rooms in your home.
How can I find side hustles that pay me every week?
You can find weekly pay side hustles through gig economy platforms like Uber, Lyft, and DoorDash. Freelancing on websites like Upwork or Fiverr might also pay weekly, depending on your agreement with clients. Another option is finding part-time jobs at local businesses that pay weekly wages.
Can you suggest some side hustle ideas I can do from my house?
There are several home-based side hustles. You can start freelancing in areas like writing, graphic design, or social media management. Another idea is to sell virtual assistant services. Teaching online courses or tutoring students in subjects you excel at is also a great way to earn from home.
What side jobs are out there for someone with no experience?
There are many side jobs for beginners. You can try pet sitting or dog walking through apps like Rover. Babysitting is another option if you like spending time with children. Delivery driving for companies like Uber Eats or Instacart doesn’t require much experience and can be started quickly too.
My Favorite Side Hustles – Summary
Now that we have gone over my full list, I want to talk about one of the main deciding factors of a side hustle.
Your time is important. Some side jobs take a lot of time but don’t pay well, while others pay more with less time.
Think about how much free time you have after your main job and how much money you want to make. This balance is very important. Track the hours you work and the money you earn to see if it’s worth it. The best side job fits into your life without stressing you out.
Also, another important deciding factor is choosing a side hustle that aligns with your skills and lifestyle. If you’re good at something, you’re likely to enjoy it more and perform better.
So, I recommend thinking about your current skills and hobbies. Matching your side hustle to your skills makes it easier and more enjoyable. Plus, you’re more likely to find success and earn extra income.
The FHA Streamline Refinance program is a simplified version of a mortgage refinance for borrowers who already have a loan backed by the Federal Housing Administration (FHA). It’s possible for borrowers to refinance without a new property appraisal, credit check, or income verification — but owners do have to be current on their existing FHA mortgage.
The FHA Streamline Refinance does have its limitations. For example, if you need cash out or want to eliminate the mortgage insurance premium, you can’t do it with the FHA Streamline Refinance and you’ll need to find another mortgage type.
We’ll explore exactly what is an FHA Streamline Refinance, how it works, what the requirements are, the process of getting one, and what the benefits are to help you determine if this program is right for you.
What Is an FHA Streamline Refinance?
An FHA Streamline Refinance refinances an existing FHA loan into a new FHA loan with limited credit and underwriting requirements for the borrower. It’s faster and sometimes cheaper to obtain than a full refinance, especially since it doesn’t require a new appraisal.
Typically, the main goal is to lower monthly payments by refinancing to a lower interest rate, but if the mortgage term is reduced or the loan type is changed to a fixed-term loan, that could also be considered a “net tangible benefit” of the refinance by the FHA.
There are two types of FHA Streamline Refinance: credit qualifying and non-credit qualifying.
Credit Qualifying
As the name implies, your credit and income are used to qualify for an FHA Streamline Refinance and for the lowest interest rates. An appraisal isn’t needed for this type of refinance.
Non–Credit Qualifying
A non-credit qualifying mortgage doesn’t require the lender to assess your credit or ability to repay the loan, but all borrowers on the original loan must remain on the new loan. Like the credit-qualifying refinance, a non-credit qualifying one doesn’t require an appraisal, but there are other eligibility requirements.
Recommended: FHA Loan Buyer’s Guide
Eligibility Requirements for FHA Streamline Refinance
To qualify for an FHA Streamline Refinance, the borrower must derive a “net tangible benefit” from the refinance, such as a lower interest rate, a shorter loan term, or a switch from an adjustable-rate mortgage to a fixed-rate mortgage. If you’re considering a refinance, you might want to run your numbers through an FHA loan calculator to see if a refinance will save you money.
Other requirements relate to the loan type, occupancy, credit score, and payment history.
Loan Type
The loan being refinanced must be an existing FHA loan. The refinanced loan will remain an FHA loan, which means you’ll still need to pay mortgage insurance. If you’re current on your payments, it could make sense to take a look at other types of mortgage loans beyond FHA.
Occupancy Status
An FHA Streamline Refinance can be used in the following occupancy scenarios:
• Owner-occupied one- to four-unit properties
• HUD-approved second homes
• Investment properties with existing FHA-insured mortgages
Credit Score and Payment History
There is no credit score requirement for the FHA Streamline Refinance under the non-credit qualifying option. However, FHA Streamline Refinance rates can be better for those who use the credit-qualifying option and supply credit qualifications to the lender.
Borrowers do need to have made at least six payments and wait 210 days before applying for a refinance on their FHA loan. Borrowers must also be current on their mortgage payments with no delinquencies.
Recommended: Minimum Down Payment for an FHA Loan
Benefits of an FHA Streamline Refinance
Here are a few of the ways in which a homeowner may benefit from the FHA Streamline Refinance program:
A Lower Interest Rate
For borrowers who bought a home when their credit was bent out of shape or interest rates were high, FHA Streamline Refinance rates could be lower than the rate they currently have.
A Different Loan Type
If you have an adjustable-rate mortgage, the FHA Streamline program can change it to a fixed-rate mortgage and help stabilize your payments.
Remove or Add a Borrower
If you need to remove a borrower from the loan, such as the case with death, divorce, or separation, you may be able to do it with a streamline refinance. This may be done if the borrower can supply supporting documentation, such as a divorce decree.
Pay Off a Loan Faster
By refinancing to a shorter loan term, you’ll likely pay off the loan faster and save yourself a good amount of money.
Avoid an Appraisal
The FHA Streamline Refinance uses the value of the home from the original FHA mortgage, with a maximum loan amount of the existing loan balance. Because these numbers don’t need to be adjusted upwards, no new appraisal is needed.
Reduce Closing Costs
There are costs involved with an FHA Streamline Refinance, but they may be less due to the reduced requirements. For example, you do not need to pay for an appraisal with an FHA Streamline Refinance.
Close Quickly
With reduced documentation and underwriting requirements, and no appraisal required, it’s possible to close on the loan relatively quickly.
FHA Streamline Refinance Process
The FHA Streamline program reduces the documentation and underwriting requirements for the lender, which usually translates into a quicker refinancing process. Here’s what you’re looking at when it comes to documentation, timeline, and costs.
Documentation Needed
Your lender will be able to see your payment history with a credit check, but there are a few more documentation requirements. If you’re applying as a non-credit qualifying borrower, these include:
• Residency verification, such as a utility bill in the occupant’s name
• Evidence of payment history for the past 12 months
• If a secondary residence, approval from jurisdictional FHA Homeownership Center
If you’re applying with a credit-qualifying mortgage for the lower rate, you’ll likely need to provide the typical documentation required by the lender, such as:
• Credit score and history
• Proof of income and employment history
• Bank statements
• Debt obligations
• Assets
Lenders use this information to determine if you have enough income to qualify for the loan, what rate you qualify for, and to verify funds to close the loan.
Refinancing Timeline
An FHA Streamline Refinance takes less time because there’s no appraisal required. In a general sense, the process looks something like this:
• Find FHA-approved lenders. For an FHA Streamline Refinance, lenders must be approved by the FHA as a direct endorsement lender to qualify.
• Apply. Talk with lenders to see if your situation fits with this type of mortgage. Apply with your top choices, noting the closing costs and interest rates offered by lenders.
• Submit documentation. Since there are fewer forms to find and submit, you may be able to complete your part of the application faster.
• Wait for underwriting. Since the loan isn’t contingent upon an appraisal, income, or credit, your loan will be ready to process more quickly than other types of loans. Alas, it’s still a government-backed loan, so you could be waiting 30 days or more.
• Close on the loan. Once underwriting has approved your loan, you can close and start making your new payment.
Upfront and Closing Costs
When you refinance with an FHA loan, you’ll need to pay an upfront mortgage insurance premium on the new FHA loan. You may be able to get a refund on a part of your mortgage insurance premium that you previously paid.
You also need to pay other closing costs, such as title insurance. Since the loan amount can’t be greater than the existing loan balance, these closing costs cannot be wrapped into the loan. However, you may see lenders offer no-closing-cost loans in exchange for a higher interest rate.
The Takeaway
An FHA Streamline Refinance makes sense in certain situations, but it’s not always the right option. Going through the FHA Streamline process makes sense if you don’t want your credit pulled or you’re looking to save time or money on a refinance. These types of refinances don’t require an appraisal and there are fewer closing costs as a result.
However, you can’t get rid of your monthly mortgage insurance payment and you won’t be able to refinance to a higher loan amount if you need more than $500 cash out. It’s common to see borrowers refinance to conventional mortgages over FHA mortgages to eliminate mortgage insurance and take cash out.
It all comes back to your goals. If you want a mortgage without the mortgage insurance premium or need cash out, you’ll want to look into other types of mortgages. But if you want to keep an FHA mortgage and go through minimal underwriting, then an FHA Streamline may be the right move for you.
SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.
Another perk: FHA loans are assumable mortgages!
FAQ
Can you remove mortgage insurance with an FHA Streamline Refinance?
No, you can’t remove mortgage insurance from an FHA Streamline Refinance. All FHA loans require mortgage insurance, even if you’re replacing one FHA loan with another.
How long does an FHA Streamline Refinance take?
Give it around 30 days. How long it takes to close on an FHA Streamline Refinance depends a lot on your lender, and it can be quicker due to the limited underwriting requirements. When there’s no appraisal, no loan-to-value ratio, and no credit requirement, the loan can be completed faster than when it was originally funded.
Can you get cash out with an FHA Streamline Refinance?
The maximum amount of cash you can take out from an FHA Streamline Refinance is $500. If you need more, you’ll want to look for another mortgage.
Photo credit: iStock/Jacob Wackerhausen
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.