Babies can change a parent’s life in all kinds of wonderful ways. But make no mistake, raising a child doesn’t come cheap. As many new families discover, one of the biggest costs they face is diapers.
Newborns go through as many as 10-12 diaper changes per day, and a typical disposable diaper costs anywhere from $0.20 to $0.30. This means on an average day, a parent may spend $2 to $3 just on diapers.
It’s no wonder some parents are looking into cheaper — and potentially more environmentally friendly — alternatives, such as cloth diapers. Let’s take a closer look at both types of diapers, the cost of cloth diapers vs. disposable diapers, and what the potential savings could mean for a family’s budget.
What Are Disposable Diapers?
Soft and ultra absorbent, disposable diapers are designed to hold waste products of babies and young children. They were invented in the 1940s and widely adopted in the 1980s, when they became more practical and affordable. Today, some 95% of parents in the U.S. use disposable diapers for their infants.
The three layers of this type of diaper include a soft layer against the baby’s skin, an inner layer made of a super absorbent polymer that holds moisture, and a waterproof outer layer so the diaper doesn’t leak.
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How Much Do Disposable Diapers Cost?
As the chart below shows, the cost of disposable diapers can vary widely by brand. Keep in mind that you may pay more or less for your diapers, depending on where you live and shop and whether you decide to buy in bulk.
Diaper brand
Total unit cost
# of diapers
Cost per diaper
The Honest Company
$59.99
160
$0.37
Pampers
$45.99
140
$0.32
Seventh Generation
$28.18
80
$0.35
Huggies
$52.99
198
$0.27
Hello Bello
$34.99
128
$0.27
Mama Bear Gentle Touch from Amazon
$32.70
196
$0.17
Up & Up Diapers from Target
$30.99
192
$0.16
Luvs
$39.97
294
$0.13
Parents Choice from Wal-Mart
$17.48
162
$0.11
Prices as of May 2023
Pros and Cons of Disposable Diapers
As you figure out which type and brand of diaper works best for you and your family, there are some general pros and cons of disposable diapers to keep in mind.
Pros
• Convenient
• Less laundry than cloth diapers
• Highly absorbent
• Caregivers may be more familiar with using a disposable diaper
Cons
• Can be expensive
• Contributes to waste in landfill
• May contain adhesives, dyes, fragrances, or chemicals, which can irritate baby’s skin
Disposable Diaper Factors to Consider
Price is a big factor, yes. But if you’re thinking about starting a family, there are other considerations to think about when it comes to disposable diapers.
Health and Comfort
One of the most important factors in the disposable vs. cloth diaper debate is finding a solution that keeps you and your baby happy and healthy. If you don’t have the time for extra laundry, for instance, disposable diapers may be the way to go.
Convenience
Disposable diapers are convenient, especially when you’re on the move. Just toss the waste away in the nearest garbage can.
Price
Babies go through a lot of diapers. An infant generally requires up to 12 diaper changes a day for the first year, and a toddler needs around eight. This means parents should expect to purchase around 3,000 diapers per year. How much of a dent could that put in the household budget? Let’s do the math: Disposable diapers typically cost between $0.20 to $0.30 each, which means new parents should plan on budgeting around $870 per year.
Environment
According to the EPA, disposable diapers account for more than 4.1 million tons of waste each year. Those diapers tend to end up in landfills, and the materials don’t easily degrade. If you’re uncomfortable with that thought, you may want to consider cloth versions. However, keep in mind that they require energy and water to clean.
Recommended: Common Financial Mistakes First-Time Parents Make
What Are Cloth Diapers?
Cloth diapers are made of cloth that’s absorbent, reusable, and washable. They usually have at least two layers, including a waterproof outer layer to keep the diaper from leaking and an inner absorbent layer. There are several different types:
• Flats: Flat diapers are a flat piece of thick fabric without an absorbent middle that can be folded in a number of ways around the baby. They are secured with safety pins or snaps.
• Prefolds: Prefolds are rectangular-shaped piece of fabric with an absorbent middle. They’re secured with safety pins unless snaps are sewed in.
• Fitted. Fitted diapers are an absorbent cloth diaper that’s fitted with elastic at the legs and waist but does not have a waterproof cover.
• Pockets. Pocket diapers have a pocket on the inside of the diaper for an absorbent insert as well as an outer waterproof layer.
• All-in-ones (AIO). AIO diapers have an outer waterproof layer and inner absorbency, but there is no removable insert. AIOs are the cloth diaper equivalent of a disposable diaper since all of the layers are built in.
• All-in-twos. Like a combination of AIOs and pocket diapers, all-in-two diapers have an insert, but it sits directly on the baby’s skin instead of in a pocket.
• Hybrid. A hybrid diaper has a disposable insert with a reusable cover. They create more waste and are more expensive than other types of cloth diapers.
How Much Do Cloth Diapers Cost?
There’s typically a large upfront investment in cloth diapers and accessories, such as a wet bag, pail liner, or cloth wipes. Depending on the type of cloth diapering system you use and how much you’re planning to buy, you could end up spending between $390 and $1,250. Flat cloth diapers, for instance, cost around $2.50 each. If you’re planning on purchasing a fitted cloth diaper, be prepared to spend more. A typical one costs around $14.24 each.
When you’re creating a family budget, it can help to see how much you’re spending on diapers — and everything else. A spending app can help you keep an eye on your finances.
Pros and Cons of Cloth Diapers
The diaper type you choose ultimately comes down to preference and budget. However, there are some benefits and drawbacks you may want to consider as you make your decision.
Pros
• Reusable
• May have a smaller environmental footprint
• Produces less waste
• Softer fabric and natural fibers that may be more breathable
• Attractive designs
• Can help you decrease diapering costs, especially when going from one child to two
Cons
• Larger upfront cost
• Inconvenient
• Requires more laundry
• Require more electricity and water
• Many daycare center will not accept cloth diapers
Cloth Diaper Factors to Consider
Beyond the cost of disposable diapers vs. cloth, there are other important factors to consider.
Health and Comfort
Cloth diapers are usually made from breathable fabrics, like cotton and hemp, which can feel soft on baby’s skin. Proponents also tout the benefits of the diaper’s natural materials, which generally don’t have artificial materials, such as plastic, absorbent gelling materials, or adhesives.
Convenience
While you can certainly manage a cloth diaper change when you’re on the go, it’s usually not as convenient as a disposable diaper. (You’ll need to carry the soiled diaper in a wet bag until you get home and can drop it in the washing machine.) What’s more, if you’re planning to use daycare, check if the center will accept cloth diapers — many don’t.
Price
Cloth diapers can cost anywhere from $2.50 to $21 each. If you plan on buying 25 diapers for each size your child will need — newborn, small, medium, and large — then you could spend between $700 and $2,100 on 100 diapers.
Recommended: How Much Does it Cost to Raise a Child to 18?
Environment
Cloth diapers have a different environmental impact than disposable diapers. Instead of piling up in a landfill, a cloth diaper is washed and used over and over again. However, they can use up twice as much water to produce as a disposable diaper. Plus, you’ll need to use electricity and water to launder dirty diapers, which could be an issue if you live in a state that experiences droughts or routinely restricts water or energy usage.
Cost of Cloth Diapers vs Disposable Diapers
Cloth diapers can require a significant upfront investment of anywhere from $390 to $1,250 — and that’s not including the cost of extras, such as using a diaper laundering service. However, that initial fee may end up being less than the $870 per year many parents spend on disposable diapers.
Reasons to Choose Cloth Diapers vs Disposable Diapers
As with many other parts of parenting, there’s no one-size-fits-all solution when it comes to diapering. However, if cost is a determining factor — and your caregiver or daycare center is on board — cloth diapers may be the way to go. Plus, since this type of diaper is washable and reusable, it means it’s one less item ending up in a landfill.
The Takeaway
Disposable diapers are incredibly popular among parents and for good reason. They’re convenient, highly absorbent, and, compared to cloth diapers, less expensive. On average, parents spend around $870 per year on diapers. And while it’s true that cloth diapers do require a hefty upfront investment of $390 to $1,250, they may have a smaller environmental footprint. Plus, they’re usually made of fabric that’s softer, breathable, and more natural, which some parents may prefer. All of those factors are important when you’re budgeting for a baby.
That said, diapers are just one line item in the family budget. Whether you’re saving up for their college education or looking for ways to lower monthly bills, using a money tracker app can help you manage your overall spending and saving. The SoFi Insights app connects all of your accounts in one convenient dashboard. From there, you can see all of your balances, spending breakdowns, and credit score monitoring, plus you can get other valuable financial insights.
Stay up to date on your finances by seeing exactly how your money comes and goes.
FAQ
Is it cheaper to use cloth diapers or disposable?
It depends on how much use you get out of your cloth diaper. However, generally speaking, over time, it’s cheaper to use reusable cloth diapers, even when accounting for the cost of electricity and water needed to launder dirty diapers.
What is the average cost of cloth diapers per month?
Cloth diapers have a larger upfront cost but a lower monthly cost. If an initial investment of $500 is spread out over 30 months, for example, the cost comes out to around $17 per month.
How many disposable diapers does one cloth diaper replace?
The average baby uses 8,000 diapers by the time they’re potty trained. And let’s say you invest in 100 cloth diapers, or 25 diapers for each size your child will need until they’re potty trained. This means each cloth diaper could potentially replace up to 80 disposable diapers.
Photo credit: iStock/FotoDuets
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Last week brought little news aside from continued mortgage rate fluctuations as a result of Omicron concerns, Federal Reserve tapering, and more. Let’s cover the latest in this week’s holiday edition of the Mortgage Monday update!
Rates Update
Even with markets closing early in accordance with the shortened week, mortgage rates shifted from high to low and back again in the days leading up to Christmas. Freddie Mac’s PMMS reported an overall rate decrease between December 16 and 23, citing Omicron as a reason for recent market volatility. Still, Freddie’s survey results coming in mid-week leaves room for change – and we saw it last week as rates finished slightly higher, according to experts. Luckily this back and forth has resulted in little change for the average borrower.
Experts and major housing authorities are still expecting rates to climb in 2022. Of course, the rate at which this happens will likely depend on the severity of Omicron and its effects on consumer activity – an ongoing concern and a topic we’ll continue to cover for you as it develops. For now, the movement of mortgage rates remains minimal but will be important to keep an eye on as we begin the New Year.
Our rate forecast? Slight increases in January dependent on Omicron and the market’s response. Contact your Total Mortgage loan officer if you have any questions or concerns.
Still Important – Loan Limit Increases in 2022
In case you missed it, the Federal Housing Finance Agency (FHFA) and Federal Housing Administration (FHA) made big announcements regarding their borrowing limits for 2022. The result: more bang for your buck to help compete with rising market prices. With loan limit increases for both conventional and FHA options, these upcoming changes will benefit a wide range of borrowers and create more flexibility in the market. The start of the New Year will be a great time to lock in a new rate, so be sure to contact your Total Mortgage loan officer now to get the ball rolling.
For now, review the updated loan limits in detail below.
In Closing
The window to take advantage of low mortgage rates will likely close quickly in 2022. Among other things, the Fed doubling its tapering efforts will push rates higher, but this could be countered by Omicron at every turn. The gradual increase will continue, but its speed has yet to be determined – be sure to lock in a rate now while they remain at historic lows. Looking ahead, the remainder of the holidays should bring little change and relative stability to our industry. Enjoy the rest of your week and as always, stay tuned for our next Mortgage Monday update in 2022!
Applying for a life insurance policy often involves multiple steps and can take longer than getting other types of insurance. Let’s take a look at what’s commonly involved in the life insurance application process so you can proceed with confidence.
Term or Whole?
Before applying for life insurance, it’s a good idea to consider such things like how much coverage you need, how much you’re prepared to pay for premiums, and which riders you might like to include. You’ll also need to figure out whether a term life or permanent life policy makes sense for you. Whole life insurance is one type of permanent life insurance.
Term life and whole life insurance have important differences. Term life tends to be simpler and more straightforward. Someone purchases a policy for a certain dollar amount and term, and then has life insurance coverage for the designated time period (10, 20, 25, or 30 years, for example).
If the policyholder keeps up premiums and dies within that term, beneficiaries will receive the appropriate payout. Monthly payments are generally fixed with term life policies.
Reasons people choose term life include:
• Term policies almost always cost less than whole life, sometimes significantly so.
• Policyholders predict they’ll have enough money saved by the time the policy expires.
• Beneficiaries are expected to be financially independent by the time the term expires.
Whole life policies, which also require regular payments, are intended to last the holder’s entire lifetime — there is no expiration date. They can cost up to 10 times as much as a term life policy because part of that money is invested into what’s called the policy’s cash value.
Policyholders can typically borrow against their cash value at an interest rate that’s specified in their policy. They may also be able to cash in their policy to receive money; that action closes out the whole life policy. Whatever is left over after the policyholder dies will be distributed to beneficiaries.
Recommended: 8 Popular Types of Life Insurance for Any Age
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The Application Process
When you’re ready to get the ball rolling on obtaining a policy, the first step is to fill out an application with your carrier of choice. The insurance company will review the application for completeness. If any information is missing, they’ll likely follow up to ensure that the application is completely filled out. Some carriers may conduct a phone interview when someone applies, while others do so only if an application is incomplete.
Recommended: How to Buy Life Insurance in 9 Steps
The Underwriting Phase
Next comes the underwriting phase, which every applicant goes through. There are two tracts of underwriting available: traditional and accelerated. The traditional tract requires a medical exam, and your blood and urine samples may be collected. The accelerated tract typically does not require a medical exam or blood or urine tests.
During this time, the insurance company will review your application for a wide range of factors that may include:
• Your age
• Your gender
• Your current health
• Your personal health history, including prescriptions
• Your family health history
• Your lifestyle and personal habits (for instance, a history of alcohol abuse or tobacco use)
• Your occupation
• How frequently you participate in hobbies that could be considered high risk
• Other factors, including your driving record
The insurance company uses this information along with actuarial tables to determine your risk profile, or how much of a risk you are to insure. Your risk profile can impact how much coverage you qualify for and at what cost.
Medical Exams
A life insurance carrier will sometimes require a medical exam before issuing a policy.
The exam may be similar to a person’s regular annual physical. A medical tech will likely ask questions that are similar to those on the application, and a professional will conduct a physical exam. It can include measuring height and weight, checking blood pressure, and taking blood and urine samples.
In some cases, an EKG may be performed to measure the electrical activity of the heart. Men over age 50 may need to have a prostate-specific antigen test done to check prostate health.
When medical exams are required in applying for life insurance, it’s part of the underwriting process that helps a carrier understand the risk level of insuring the applicant. The tests performed can indicate if a person has high blood pressure and/or high cholesterol, elevated glucose, or other health issues.
Contestability
Some people may be tempted to downplay personal health issues when filling out a life insurance application. That is never a good idea. If someone didn’t fully disclose the truth about their state of health and died within two years of getting a policy, the insurance company can delve into the details. If information is found to be lacking or inaccurate, the carrier could deny beneficiaries the death benefit.
The Takeaway
Applying for life insurance often starts with deciding how much coverage you need, how much you’ll pay in premiums, and whether a term life or permanent life policy is right for you. Once you’ve finished comparison shopping and weighing your options, the first step is to fill out an application with the carrier of your choice and then undergo an underwriting process. During this time, the insurance company will consider a number of factors, including your age, gender, current health, personal health history, family health history, and lifestyle. A medical exam may also be required. The insurer uses this information, along with actuarial tables, to determine your risk profile, which can impact how much coverage you qualify for and at what cost.
If you’re shopping for life insurance, SoFi has partnered with Ladder to offer competitive life insurance policies that are quick to set up and easy to understand. You can apply in just minutes and get an instant decision. As your circumstances change, you can easily change or cancel your policy with no fees and no hassles.
Complete an application and get your quote in just minutes.
FAQ
Are there advantages to applying for life insurance when you’re young?
Yes, because carriers generally base policy price on risk factors, buying a policy when you’re young and healthy typically means lower premiums. Plus, with some term life insurance policies, buyers can lock in pricing when they purchase, and locking in at a low rate can be a financial plus.
Can I change the specifics of a life insurance policy — for example, change the amount of coverage?
Yes, some insurance carriers do allow this kind of flexibility. Current policyholders should check with their carrier. New applicants can check with the carrier to see what kind of flexibility is provided.
Is having employer-sponsored life insurance enough?
Maybe. While having this benefit is good, these policies are generally in the amount of one to two times an employee’s salary. That’s typically not enough to address debt and provide sustained financial help to beneficiaries, which is why it may make sense to purchase a second policy. Plus, employer plans may not be portable: If the employee leaves the company, the policy may be terminated.
What’s the right amount of coverage?
Each person’s situation is unique. Some use the DIME formula to determine the right amount. That acronym stands for Debts, Income, Mortgage, and Education. What will be needed to cover all of those bases? To streamline the process, you might want to calculate your life insurance needs.
Does it make sense to use an agent when buying life insurance?
Possibly. An agent can educate a consumer about what’s involved in getting a life insurance policy. This can be especially helpful if the process seems overwhelming. Many agents work on commission, so using one that does charge a commission can cause the cost of the policy to go up. Higher commissions are typically charged on whole life policies than on term life. However, not all agents charge a commission.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
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If you have been trading for a while, then there is a good chance that you have made some trading mistakes along the way.
Unfortunately, it is part of learning how to trade.
After all, trading is a skill that takes time to learn.
Trading mistakes are part of the learning process. I know that sucks to hear, but it is the truth.
The outcome goal is to learn from those trading mistakes.
Then, you can realize what you did wrong so you do not repeat those same mistakes.
However, more than not, it is more common to repeat the same mistake over and over again.
If you are ready to recognize trading errors and learn how to overcome them, then keep digging in. Take notes and adjust your trading plan accordingly.
We will cover emotional trading mistakes, technical trading errors, and option trading mistakes.
What Are Trading Mistakes?
Trading mistakes are errors made by traders when you enter trades, either to purchase stocks or options.
More than likely, you will see the same type of trading error happening over and over again.
Trading mistakes are very common, but they do not have to lead to complete panic.
In order to minimize the chances of making a costly mistake, traders should adhere to their trading strategy. Additionally, traders should always trade with a clear head and stay disciplined.
There are plenty of trading mistakes you can avoid by being smart and adjusting your trading plan where needed.
Why Understanding Trading Mistakes Is Important for Long-term Success
Trading mistakes are the result of traders taking losing trades, which can result in poor overall performance.
Mistakes that occur during trading often include not paying attention to the market, not understanding risk, not having a well-thought out trading strategy, and being bad at managing the trade.
Whatever the reason, trading errors occur and it is how we react to them that matters.
Long-term success in trading is not a goal that can be accomplished overnight.
Achieving long-term success with active trading requires patience, discipline, and practice.
It is easy to get caught up in day-to-day successes and forget to commit to a long-term plan. As traders, it is important to be able to recognize our mistakes so that we can learn from them and move forward.
Top 5 Trading Mistakes
As you will see, we compiled a long list of trading mistakes. Each trader will see some of those trading errors in themselves. Some are small trading mistakes while others are detrimental.
First, we are going to focus on the top five trading mistakes first. This will make or break your success as a trader.
The following are five common trading mistakes that traders make and how to avoid them.
#1 – No Trading Plan
Trading without a plan means you enter a trade without knowing your next step.
No trading plan means that traders are not able to set clear goals, establish risk-reward ratios, and avoid common pitfalls that can occur during a trade. This makes it difficult for traders to know when they should be buying, selling, or holding.
Trading without a plan is risky because it can lead to losses that are much higher than they need to be.
When starting out in trading, it is important to remember that we can only focus on what we can control. This means that we should not worry about things we cannot change, such as the past or the behavior of other traders. Instead, we should form a trading plan and stick to it so that we can succeed in the long run.
Creating your trading plan will happen with many revisions. The goal of the trading plan is to set your overall strategy for trading.
Also, you need to have a specific trading strategy for each trade you enter.
Avoid by: Spending time to develop a trading plan. Revise as needed. Stick to it.
#2 – Risk Management Plan is Missing
A risk management plan is essential for traders and it should be included in any trading plan.
Without a risk management plan, traders are more likely to make emotional decisions that can lead to costly mistakes. For many traders, this is the hardest thing for them to manage.
It is possible to create a risk management plan as your overall trading plan.
In your risk management plan, you must decide (in advance) how much money you are willing to lose based on the amount of profit you perceive to make. For instance, you are willing to risk $300 in order to make $1000.
Many day traders focus on a 2:1 reward-to-risk ratio. Personally, I look for stronger reward-to-risk ratios greater than 3:1.
Avoid by: Understand how risk is a part of making a profit. Set your risk tolerance and do not deviate from it.
#3 – Not Keeping a Trading Journal
One of the most important aspects of successful trading is keeping a journal.
This not only helps you keep track of your trades and performance, but it can also help you remember what worked and what did not. Journaling is so helpful and such an overlooked task.
Your trading journal is the perfect place to take notes, keep track of your wins and losses, and record market movements so that you can learn from past mistakes.
At the end of every trading session, you should take some time to analyze your trades.
What went well?
What didn’t go well?
Why did you make that particular trade?
What was your entry strategy?
What was your exit strategy?
Where was the overall market momentum?
Did you control your emotions?
What grade would you give yourself?
This analysis is important so that you can learn from your mistakes and improve your trading skills. Stay motivated to continue learning about trading and keep more profit.
Avoid by: Start journaling. Spend time after exiting a trade and the market day to understand what happen and why you did a certain trade.
#4 – Watching Too Many Stocks
Watching too many stocks can lead to a decrease in returns and overall confusion on what is happening with your watchlist.
As a result, it is important to be selective.
The same can be said of stock scanners. If you are watching too many variables and possibilities, you can quickly become overwhelmed.
When you develop your trading plan, you need to decide how you find stocks.
Personally, I prefer to focus on a handful of stocks and a few key metrics. Then, watch them closely and trade accordingly.
As a new trader, I would pick about 5-10 stocks to analyze.
Avoid by: Revise your watchlist to half what you are currently watching.
#5 – Actually Exiting Trade as Planned
Above we talked about creating a trading plan and having a trading strategy for each trade taken.
But, the trading mistake happens when you do not exit the trade as planned.
This could be because of “hopemium” that the stock price will recover and you will get back your loss.
Our “hopemium” is that the stock price keeps rising and you will make more money.
Either one can be damaging to your trading account.
You created a plan. As a disciplined trader, you must follow your plan either to maximize your current profit or protect your risk against further losses.
Avoid by: Exiting at your set targets. Period.
12 Typical Emotional Trading Errors
Trading is 80% mental and 20% execution. Okay, I am not sure that there is an official study to back it up. But, I do know as a trader that emotions play heavily into your overall profit.
The typical emotional trading errors that traders make when they are in a trade are overconfidence, jumping into trades before the proper analysis is completed, and inability to take losses.
This is where most of the trading mistakes are made.
When first starting out in trading, it is easy to get caught up in the prospect of making a lot of money quickly. However, most traders find that trading is not easy to do and make common emotional trading errors.
Let’s dig into these emotional mistakes first and then we will follow up on the technical trading mistakes.
1. Letting emotions impair decision making
Emotions are an important part of decision-making, but it can be dangerous to allow them to influence our decisions. We should also take into account that emotions can often lead us astray.
It is clear that emotional trading can lead to bad decision making and, ultimately, financial losses.
When investors let their emotions take over, they are not thinking logically and may make impulsive decisions. For example, they may sell stocks when the market is down in order to avoid further losses, even though the stock may rebound soon after.
In order to be successful traders, it is important to stay calm and rational when making decisions.
Overcome by: Stick to your trading plan and take emotion out of the equation.
2. Unrealistic Profit Expectations
You go into every single trade expecting a home run! Enough money to achieve your dreams overnight!
These types of profit expectations will have you throwing your risk management plan out of the window and set you up for failure with greed, overconfidence, and impatience.
Be realistic about your expectations with trading activity.
Overcome by: Go for base hits. Small consistent wins.
3. Greed
Greed is a deep-seated need for more profit without regard to the chart or market conditions.
The common rationale is hopefully the stock will go up. Typically, you hold your position too long and end up losing some of your gains.
Greed can manifest in many different ways, and people with greed often neglect their own needs in order to attain more.
Overcome by: Set an OCO bracket to exit the trade at your specified level. Take you out of the equation.
4. Fear of Missing Out (FOMO)
You fear that you missed out on a trade, so you decide to jump in. As a result, you are risking more than you should.
This trading mistake is common, especially with online trading communities.
As a result, you may buy at the high and watch the stock reverse.
Overcome by: Realize that there will be missed opportunities. That is part of the game. There will always be another chance.
5. Fear
In many cases, fear is a reaction to why or why not we enter a trade.
For any trader, they may become frozen unable able to make a decision as their mind is wrapped in fear. At the same time, they are either missing out on potential profits or unable to exit a trade due to mounting losses.
Overcome by: This is a real emotion that you must overcome. Take the time and read resources to help you overcome being paralyzed by fear.
6. Overconfidence after a profitable trade
The overconfidence that comes with success can lead to a loss of profits.
When a trader has a winning position, they may become overconfident and make bad decisions because of the previously profitable trade.
For example, they may not take their profits off the table when there is an opportunity to do so or increase their position size when they should be taking profits. This could lead to them losing all of their winnings and more.
Overcome by: Take a break from trading for a few days or a week after a big win.
7. Entering a Trade Based on Your Gut
The process of entering a trade based on your gut is, essentially, following your “gut feeling” and buying or selling shares after the market opens. This is seen as a more risky and less profitable strategy than following a more traditional market timing approach.
Trading is all about making calculated decisions and sticking to a plan.
Trading based on your gut feeling or emotions will only lead to costly mistakes.
Overcome by: Before entering into any trade, make sure you have a solid strategy in place and know all the rules. Only then should you start trading.
8. Not reviewing trades
Not reviewing trades is a common problem for many traders. Traders who don’t review their trades tend to be more likely to make mistakes in their trading and over-trade, which can result in losses.
You will make the same mistake over and over again until you realize the root of the problem.
This is how you move from a losing average to a winning percentage.
Overcome by: Let your journal be your friend. Document everything including your emotions.
9. Following the Herd
Many people enjoy following the herd with stock trading, especially online platforms on Reddit, Discord, or Twitter.
You may decide to follow a certain group of people in order to be fed stock picks or updates.
This can be risky because there is no sound foundation to base your trade upon.
Overcome by: Trade your style and let that fit you.
10. The Danger of Over-Confidence
The “beginner’s luck” experienced by some novice traders may lead them to believe that trading is the proverbial road to quick riches.
Over-confidence is the belief that one’s abilities, knowledge, or qualities are better than average.
This over-confidence is a risk factor for certain types of mistakes and other negative outcomes as it leads to complacency, a lack of preparation, and an overestimation of one’s abilities.
Overcome by: Realize your limitations and watch for overconfidence to appear.
11. The Importance of Accepting Losses
Losses are always a part of trading life, but they can be overwhelming when they occur.
It is important to recognize that losses are in fact an inevitable part of growth and development as a trader.
Overcome by: Journal all of your losses. Look for patterns to appear. Adjust your trading strategy as appropriate.
12. Quit Your Job Too Fast
Quitting your job too fast is not a good idea, as it will force you to place trades that may not be the best set-ups.
Day trading can be a very risky venture, and it is possible to lose everything you have invested.
It is important to be aware of the risks before getting started. More importantly, do not quit your job too fast. This can lead to losses in your investments and could potentially put you in a worse financial situation than you were before.
Overcome by: Keep trading as a side hustle. Hone your trading skills and build up a reserve fund that will cover your monthly expenses. You will know when you are prepared to leave your 9-5.
Common Mistakes in Stock Trading
According to a study by the U.S. Securities and Exchange Commission, technical trading mistakes are actually fairly common among individual investors.
Mistakes in technical trading can be two-fold, either due to lack of knowledge or poor execution.
The most common mistakes are buying at the top and selling at the bottom, overtrading, and not taking the time to properly understand how trading works.
Now, let’s dig into all of the common trading mistakes I see.
1. Overtrading
Let’s start by talking about overtrading. This is a mistake that I see many people make. It is also a mistake that could have been easily prevented if you had just done your research before placing the trade.
Overtrading or placing more orders than you should do is the most common mistake.
Many new traders will simply open up their platform, look at the market, and place a trade. They are often chasing after the last couple of candles or they see an opportunity to get in “on the cheap”.
The problem with this approach is that you have no idea if this is a good trade or not. You are simply taking a shot in the dark and hoping for the best.
Overcome by: Only place the A+ setups that you like. Once you have traded so many times per day or week, stop trading.
2. Buying High and Selling Low
We all have heard the saying, “buy high and sell low.” However, too many novice traders do the complete opposite.
This trend happens with one of the emotional mistakes of FOMO; we already dived into that concept earlier.
Overcome by: Follow your trading plan on when to enter and exit the trade. Practice your strategy in a simulated account and master it.
3. Lack of Trading Knowledge
The lack of trading knowledge is a problem for many traders who are not familiar with how the stock market works. This can cause them to make mistakes when buying and selling stocks, which could result in losing a lot of money.
Just because you made a profit once on one stock does not mean that is a repeatable action.
In order to be successful in trading, it is important to have a good understanding of the markets and the strategies involved.
Without proper training, you are likely to make costly mistakes that can cost you money. Trading courses and tutorials are available online and through other resources to help you gain this knowledge and become a successful trader.
Overcome by: Take an investing course. Spend money on your education and not your losses. Here is a review of my favorite day trading course.
4. Following Too Many Strategies
Following too many strategies is a common problem in the investing world, which can lead to poor performance and more costly mistakes.
There are a million and one different approaches on how to trade the stock market, which indicators to use, whose advice you should follow, so on and so forth.
And then, many traders try and couple the strategies together only to quickly learn they may cause more losses than profits.
One way to avoid following too many strategies is by using a set of rules to decide which strategies are appropriate for investing.
Overcome by: Develop your trading plan. Outline the investing strategies you will use. Test any new strategies in SIM first.
5. Do Your Research
The solution to this problem is simple: do your research!
Before you enter a trade, take the time to do some analysis on the asset you are looking at. Look at past price action, news events, and any other relevant information that you can find.
Understand why the market might move in your favor and be able to build a case for it. The more data points you have supporting your position, the better off you will be.
If you are able to build a strong case for why the asset will move in your favor, then you can enter with confidence. This is because if the market does not move in your favor, you will know that it isn’t because of a lack of research on your part.
When you enter with confidence, this will make it easier to hold through the inevitable volatility and price swings.
Overcome by: If you enter without knowing why something is likely to move in your favor, then you are setting yourself up for failure. Do your research.
6. Not Using Stop-Loss Orders
Stop orders come in several varieties and can limit losses due to adverse movement in a stock or the market as a whole.
Tight stop losses generally mean that losses are capped before they become sizeable. However, you may have your stop loss too tight and get stopped out before your stock has room to move.
A corollary to this common trading mistake is when a trader cancels a stop order on a losing trade just before it can be triggered because they believe that the price trend will reverse.
Overcome by: Plan your stop loss in advance. Stick to it as it is part of an overall risk management strategy.
7. Letting Losses Grow
Active traders can be harmed by refusing to take quick action to close a losing trade.
It is important to take small losses quickly and limit your risk in order to stay profitable.
Stop losses can help you avoid larger losses.
While the stock may come back to your buy price, you have increased your risk far beyond what you planned. If your planned loss was $300 and now you are down over $500, it will take that much longer to overcome that growing loss.
Cut your losses. Review the chart. See what a better entry point may be.
Overcome by: If the stock moves past your pre-determined stop, then exit the trade. Don’t trade on hope.
8. Chasing After Performance
Many day traders are tempted to chase stocks, which is a bad reputation in the day trading world.
This happens when they see a stock that has had a large price increase and they think that it will continue to go up. In reality, this is not usually the case, and chasing stocks can lead to big losses.
What goes up must come down, right?
Overcome by: Wait for a better time to enter the trade according to your trading plan.
9. Avoiding Your Homework
It is important to do your homework. If you avoid doing your homework, then don’t expect fast results
Many new traders often do not do their homework before making any investment decisions.
This can lead to costly mistakes that can be avoided by doing some basic research. Trading is a complex process and should not be taken lightly – make sure you are fully prepared before risking your hard-earned money.
Overcome by: If you have not enrolled in an investing course, do that. Set daily goals on how to improve your trading performance that is not based on profit or loss.
10. Trading Difficult and Unclear Patterns
It is important to stick with the patterns and indicators that are clear and unmistakable so you don’t get caught up in any ambiguous or unclear trading signals.
With a little bit of research and understanding, these market patterns can become quite clear.
By forcing a chart to fit in what you want, then you are putting your trading capital at risk.
Overcome by: If you cannot read a clear chart or pattern, then quickly move to the next stock.
11. Poor Reward to Risk ratios
The most common mistake made by traders is poor risk management. This usually means taking on too much risk in relation to the potential rewards, which can lead to heavy losses if the trade goes wrong.
It is important to always have a solid plan for how much you are willing to lose on any given trade and never deviate from it.
What is the Reward to Risk ratio you look for:
1:1 Reward to Risk
2:1 Reward to Risk
3:1 Reward to Risk
Many beginner traders do not want to take on as much risk because their appetite for potential rewards may be lower. It is important for beginners to consider their trading strategies and risk management plans so that they can make the most informed decisions possible.
Risk-to-reward ratios are an important part of trading, and experienced traders are typically more open to risk in order to maximize their potential rewards. This means that they may be more likely to make high-risk, high-reward trades.
Overcome by: Stick to Risk to reward ratios that fit your trading plan.
12. Ignoring volatility
Volatility is the fear and unknown in the market.
The most important thing to remember about investing is that the stock market can be volatile.
A measure of volatility is from the VIX.
Overcome by: Decide how you will trade when the VIX is high and the news is negative.
13. Too Many Open Positions
Entering too many positions is one of the most common mistakes investors make. A portfolio should consist of a handful of top-performing investments that have proven to be good bets over time.
It is unwise to open too many positions in a short amount of time because it could lead to confusion.
This can be risky because if one or two of the positions go south, the entire portfolio can suffer. For this reason, it is important to carefully consider each position before opening it and make sure that all positions are contributing positively to the overall goal.
Overcome by: As an active trader, stick to under 5 open positions. As a long-term investor, look to build a portfolio of 25 stocks over time.
14. Buying With Too Much Margin
Most brokers offer 2:1 or 4:1 margin to cash. While this is tempting to use, it can also give you a margin call.
Margin can help you make more money by increasing your position size, but it can also exaggerate your losses.
Exaggerated gains and losses that accompany small movements in price can spell disaster for a new trader using margin excessively.
Overcome by: Use your cash only. Stay away from using margin.
15. Following Meme Stocks
These are the stocks made popular by many Reddit personal finance groups.
You have probably heard of Gamestop, Blackberry, AMC, or Bed Bath and Beyond as a meme stock.
While these stocks have risen to crazy highs, they have also fallen just as fast. Chasing the high may leave you with a big and painful loss.
Overcome by: Stick to your stock watchlist.
16. Buying Stocks With No Volume
Buying stocks with no volume is a risky idea that involves placing an order on a stock without knowing how much interest there will be in the shares. This can result in losing money if there are no buyers for the shares.
It is important to validate the price of a stock by looking at volume. The volume shows how much interest there is in a stock and can be indicative of future price movement.
When volume is low, it’s best to stay away from buying stocks as it could be a sign that the stock price is not stable.
Overcome by: Trade stocks with a volume of at least 500,000 or higher.
17. Ignoring Indicators
Indicators are things that tell us the market is going up or down. Examples of indicators would be the stock market at a particular point in time, a company’s performance with regards to earnings, the price of a product or service.
Every trader has their own set of indicators they use.
If you have outlined indicators you use in your trading, make sure to follow them regardless if it is against the way you want the stock to move.
Overcome by: Stick to your trading plan for each stock individually.
18. Trading Too Large Position Sizes
Trading too large position sizes is a risk that traders may run into when they hold positions in their portfolios for extended periods of time.
Position size is the amount of money placed on a trade, and the risk is that a trader may lose more than their capital on the trade if it does not go well.
Overcome by: Base your position size on the amount you are willing to lose. Not how much you want to make.
19. Inexperienced Day Trading
In order to be successful in trading, it is important to have a good understanding of the markets and the strategies you are using. Without proper training, it is easy to make costly mistakes.
Too many day traders turn trading into an unnecessary risky game.
To be successful, a day trader must have a solid foundation in how to invest in stocks for beginners.
Overcome by: Practice in a simulated account and make all of your mistakes there before moving to live money.
20. Inconsistent trading size
Inconsistent trading size is when traders are unable to predict what their position size should be in order to meet the trader’s desired profit goal.
Trading size is one of the most crucial aspects of a trading strategy and should be considered carefully. Larger trade sizes come with an increased risk, so it’s important to be aware of your position size when making trades.
Overcome by: Don’t risk too much on one trade. Stick to your risk management plan.
21. Trading on numerous markets
Trading on numerous markets is when a trader invests in stocks, bonds, commodities, crypto, and other securities.
Every type of market moves differently and takes time to understand how to be profitable.
Overcome by: Find your niche and stick to it.
22. Over-leveraging
Leverage is a powerful tool that can be used to magnify gains and losses in a trade. It is important to be aware of the amount of leverage being used in order to effectively manage risk.
Brokers play an important role in protecting their customers by providing margin calls and other risk management tools.
Overcome by: If you feel over-leveraged, sell some positions before your broker gets involved.
23. Overexposing a position
Overexposure is a term used in the investment world to describe the risk that comes with exposing your position too much in the market. When you have overexposed your position, you are putting yourself at risk of losing money if the stock or security you are invested in falls in value.
You are taking on too much risk.
Overcome by: Stick to your risk management plan. Always have cash reverse on hand in case the market reverses.
24. Lack of time horizon
There are different time horizons for various types of trading strategies. It is important to think about the time horizon you are comfortable with before investing in any type of investment.
If you are a day trader, you plan to close your trades before the end of the trading session. As a swing trader, you typically hold trades for a couple of days maybe up to a month. As a long-term investor, you plan to hold your stocks for longer than a year.
Overcome by: Match the time horizon of that investment purchase with your investing goals.
25. Over-reliance on software
Although some trading software can be highly beneficial to traders, it is important not to over-rely on it.
Automated trading systems are becoming so advanced that they could revolutionize the markets. As a result, human traders need to be aware of the potential for these systems to make mistakes and use them in conjunction with their own judgment.
Overcome by: Set alerts before you want to enter or exit a trade. Then, review if the move still follows your trading strategy.
Top Options Trading Mistakes Beginner Traders Make
These options trading mistakes are specific to option trading.
Trading options is an advanced strategy. If you have losses trading stocks, wait before you start trading options.
1. Not having a Trading Plan
Every trader needs a trading plan that outlines strategies, game plans, and trade metrics.
When you are trading without a plan, you are essentially gambling and hoping for the best.
This is not a recipe for success in the world of stock trading and is especially true for options traders.
A good trading plan should include chart analysis so that you can make informed decisions about when to buy and sell stocks. If you are using HOPE instead of a trading plan, then you need to find out the right way to interpret the chart because that will give you a better idea of what is happening in the market and how likely it is that your investment will succeed.
Overcome by: Create a specific trading plan based on your option strategy.
2. Not properly Researching Option Contracts
Learning to trade options is like going to school for a whole different trade.
There are way too many technical aspects to discuss in this mistake.
Spend time learning what criteria you want from an options contract to be successful.
Overcome by: Learn how options work and practice trading options in the simulator before going live.
3. Trading without an understanding of the underlying asset
Before you start trading options, trade with stocks.
Every stock moves at its own beat. You need to learn how it moves.
Jumping into options prior to knowing the stock can cause extreme losses. Learn how the underlying asset moves first. Be successful in trading stocks before moving to options.
Overcome by: Learn to trade the stock with shares first. Then, practice in a simulator. Once familiar, then trade live with options.
4. Buying Out-of-the-Money (OTM) Call Options
Options trading is a risk-based strategy. It’s important to know which strategies are right for you and what the risks of each option type are before putting on an option trade.
One common mistake that many traders make when it comes to option trades is buying out-of-the-money (OTM) call options.
This is because OTM call options are inexpensive and have a range of around 100,000 to 1 million. To avoid this mistake, it’s important to know what the risks of buying OTM call options are and which option strategies are appropriate for you.
Overcome by: Focus on trading In-the-money (ITM) call contracts. Know your strategy.
5. Not Knowing What to Do When Assigned
When you enter into an options contract, you are essentially agreeing to buy or sell the underlying asset at a specific price on or before a certain date.
If the market moves in a way that benefits the buyer of the option (the person who contracts to buy the asset), they can choose to exercise their option and purchase the asset at the agreed-upon price. However, if the market moves in a way that benefits the seller of the option (the person who contracts to sell), then they may “assign” their contract to someone else – meaning that they no longer want to buy/sell the asset, but would like someone else to take on that responsibility.
This can be jarring if you haven’t factored it into your decision-making when trading options, so it is important to be aware of the possibility.
This is why traders need a higher trading level to sell options contracts or verticals.
Overcome by: Be okay with buying the shares if you are assigned. That is a part of your trading plan.
6. Legging Into Spreads
It is a common mistake for traders to get legged into spreads by entering positions when the market price has moved away from their position. They may have gotten caught up in the belief that they are being a “smart” trader by trying to profit from the spread.
The problem is that they are not taking into account that their cost basis must go up in order to maintain the position. If the market price of the underlying goes up, their cost basis must go up as well.
Overcome by: If you are not comfortable with this advanced strategy, then exit your options contract and place a new one.
7. Trading Illiquid Options
Trading illiquid options is a mistake because traders are taking on too much risk, with potentially disastrous consequences.
Illiquid means that the option cannot be bought or sold at the given time.
In other words, the option is not tradable. When traders trade illiquid options, they are taking a risk that their trades will not be executed because there is no liquidity in the market at that time. They have to hope that the market will become liquid again, and they can then sell their position or buy back their option at a lower price.
Overcome by: Check option volume and open interest at your strike place. Verify you have interest in moving your contract.
8. No Exit Plan
It is important to have a plan in case your trading strategy doesn’t pan out as planned.
This will give you the peace of mind that you won’t be left high and dry without an exit strategy.
With options is it more difficult to limit your risk to reward. As a result, you must decide your exit plan in advance.
Overcome by: Develop your trading strategy and include how and when you will exit the option contract.
Ready to Avoid these Trading Mistakes?
Investors are often their own worst enemy when it comes to trading.
They make emotional decisions instead of logical ones, and this leads to them making costly mistakes. Plus there are many technical errors new and seasoned traders are still making.
In order to be successful in the markets, investors must first learn to accept their losses and move on. Only then can they put that mistake behind them and focus on making profitable trades in the future.
In this post, I shared some of the more common trading mistakes that people make and how to avoid them.
Now, you have to work to avoid these trading mistakes and be profitable.
Know someone else that needs this, too? Then, please share!!
Put simply, income is the amount you earn whereas net worth is the total value of your assets minus any debt. When it comes to measuring your financial health, income isn’t the metric that matters. Sure, you want to know whether your income will help you reach your goals, but looking at your net worth is a better measure of your overall wealth.
That being said, it’s important to understand how both play into your finances, so let’s take a look at net worth vs income and how they factor into your financial health.
Income vs Net Worth: Two Measurements of Wealth
Both income and net worth can help measure the chances of someone creating wealth. However, the difference is that income is the primary way someone generates wealth, whereas net worth measures your level of wealth. To put it another way, income is how you make money, but it doesn’t necessarily lead to creating wealth.
Instead, looking at your net worth allows you to see the value of all your assets and liabilities at a specific point in time. It gives you a sense of your financial health in terms of whether you own more assets — such as your home, investments and cash — than liabilities (any money you owe, like credit card debt). Your net worth also allows you to see how much of your wealth is held in assets or cash. And it offers a reference point to help you measure your progress toward your financial goals.
Recommended: Should I Sell My House Now or Wait?
Is Net Worth More Important Than Income?
While income is a key aspect of your finances, net worth typically is more important. That’s because even if you have a large income, it doesn’t guarantee that you’ll generate more wealth than someone else who may have a slightly lower one. Sure, having a larger income can help you build wealth faster, but it’s all in how you handle your finances, such as the amount of money you save.
Let’s say your friend makes $100,000 per year but has a lot of debt, leading their net worth to be $15,000. On the other hand, you make $70,000 but have invested over 10 years, to the point where your net worth is $100,000. You have more wealth, and therefore, are more likely to be financially stable than your friend.
Another instance where income doesn’t correlate with wealth is when someone is older and getting ready to retire. Their income may be lower because they’re working part-time, but their wealth could be in the millions because they’ve worked for many years.
All this to say, income is important but only as important as how you use it to reach your financial goals.
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How to Calculate Income
Calculating your income doesn’t simply mean looking at the number on your paycheck. You’ll also want to factor in other sources of income, such as any government benefits, commissions, tips and dividends. Don’t forget to include irregular or occasional income sources like cash gifts, inheritances and even tax refunds.
Make sure that when you add these up, it’s your net income and not gross income, as that will give you a more accurate picture of what you’re bringing in. Gross income is pre-tax money and before deductions are taken out. Net income, on the other hand, is income that has taxes and deductions taken out.
Example of Calculating Income
Let’s say you have a day job that offers bonuses and commissions. You also invest in securities that provide dividends.
Here’s how you would calculate your income:
• Annual net salary: $64,350
• Annual commissions: $3,500
• Annual bonus: $2,000
• Annual dividends: $3,234
TOTAL INCOME: $73,084
You can then use this total to calculate monthly and weekly income — in this case, it’s $6,090.33 per month and $1,405.46 per week.
How to Calculate Net Worth
Calculating your net worth involves creating a net worth statement so you can see a snapshot of your assets and liabilities.
Start by looking at your assets and determining the total amount of all accounts under this category. Assets are items that have some sort of monetary value. These include:
• Checking accounts
• Savings Accounts
• Your home
• Real estate
• Retirement fund
• Personal property (such as your vehicle)
• Pension equity
• Securities (like stocks and bonds)
• Life insurance policy
• Profit-sharing equity
Once you’ve calculated all of your assets, you’ll need to calculate the total amount of your liabilities. Liabilities are any debts or financial obligations you have, including:
• Mortgage
• Credit card balance
• Personal loans
• Auto loans
• Student loans
• Unpaid medical and dental bills
• Home equity loans
• Money you owe to family and friends
• Unpaid taxes
After totaling up your assets and liabilities, subtract the latter from the former. This number will be your net worth. If your liabilities are greater than your assets, you’ll have a negative net worth. The more assets you have than liabilities, the higher your net worth will be.
Example of Calculating Net Worth
As an example, let’s say that Barbara decided to calculate her net worth. First, she’d list out her assets and liabilities:
ASSETS
Checking accounts
$600
Savings accounts
$10,000
Home
$365,000
401(k) balance
$24,399
Vehicle (current value)
$32,590
Brokerage account
$12,000
TOTAL:
$444,589
LIABILITIES
Mortgage
$200,000
Car loan
$29,251
Credit card
$4,126
Student loans
$36,700
Personal loans
$13,857
Unpaid medical bill
$300
TOTAL:
$284,234
Once she’d written that all out, she would be able to calculate her net worth using the following formula:
Total assets – total liabilities = net worth
$444,589 – $284,234 = $160,355
Barbara has a positive net worth of $160,355.
Ways to Improve Your Net Worth
Ideally, you’ll have a positive net worth that keeps growing over time. Here are several ways to improve your net worth.
1. Keep Track of Your Assets and Debt
Tracking your assets and debt will give you an accurate picture of where you stand. That way, you’ll be able to see your progress and what you need to improve or keep doing to grow your net worth. For instance, if you notice that your debt keeps growing, you can use this information to help you figure out why and take steps to rectify the situation.
2. Pay Off Debt
The fewer liabilities you have, the more your net worth will grow. To improve your net worth, you can focus on making sure you’re making on-time payments and avoid taking out new loans if possible. If your budget allows, consider making extra payments toward loans to pay off your debt faster. Some loans, like mortgages, may have prepayment penalties, so check with your lender before sending that extra check.
3. Increase Your Income
Getting a higher salary will help you build wealth by paying off debt or putting money toward investment accounts. Ideally, you want to increase your income and pay off your debts as soon as you can. To increase income, you can consider negotiating for more in your current job, looking for a new one, or starting a side hustle to help you make more.
4. Invest
Sticking your cash in a savings or checking account can only get you so far. To accelerate your wealth-building journey, you’ll need to invest some of your money.
Start investing by contributing to your employer-sponsored account (bonus if they offer a match), and then branch out to other products as you see fit.
The Takeaway
Your net worth is a snapshot of your finances at a specific point in time and will fluctuate. It’s a good measure to see whether you’re on track with your financial goals. The more you track your assets and liabilities, increase your income, and decrease your debt, the more your net worth will grow.
A money tracker tool like SoFi Insights can make it easy to keep track of all of this, with a bird’s-eye view of your account balances and tools to track your spending.
Find out where your finances stand.
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The town of Newton, Massachusetts is working to comply with a new state law that requires the construction of new multifamily housing units in areas served by public transit, according to reporting from the Boston Globe.
The law, which went into effect in early February, requires 177 communities served by the Massachusetts Bay Transportation Authority (MBTA) to eliminate barriers that could restrict the zoning and construction of multifamily housing units.
As of February, just seven of the 175 initial communities that were required to submit preliminary compliance plans had failed to do so by the initial deadline.
“This new law requires that an MBTA community shall have at least one zoning district of reasonable size in which multi-family housing is permitted as of right and meets other criteria set forth in the statute,” according to information posted by the state government.
Other criteria include a minimum density of at least 15 units per acre; that a development be located no more than one-half mile from a transportation hub (such as a commuter rail station, ferry terminal, subway station or ferry terminal); and that the units have no age restrictions and are suitable for families with children.
However, the debate in Newton could be more contentious than in other parts of the state, according to the Globe.
“Newton, one of the region’s wealthiest enclaves, has to zone for more new units under the state rezoning law, MBTA Communities, than almost any other community,” the article states. “Should the rezoning overcome fledgling resident opposition and pass by the end-of-year deadline, it could serve as a model for other communities and represent a major turning point in the city’s attitude toward multifamily housing.”
The median home price for a single-family home in the area is $1.6 million, according to data from Warren Group.
The debate is due in large part to the way Newton is currently zoned, which is primarily for single-family homes. Some apartments have been constructed in recent years, but the construction level has been low.
Between 2010 and 2020, roughly 1,100 new housing units were added in Newton, accounting for just over 3% of the area’s total housing stock. This has led Newton to have some of the highest housing prices in the state.
In addition to the price concerns, most multifamily construction has been concentrated in commercial areas in recent years.
The current proposal would add an estimated 10,000 new units, depending on parking requirements, which is well above the 8,330 units mandated by the new law. The new unit construction would also impact only 3% of Newton’s land and is not expected to impact existing single-family neighborhoods.
This is the latest step being taken at the state level to temper the housing supply shortages occurring nationwide. In New York, Gov. Kathy Hochul is pushing the state’s government to override local zoning laws and mandate more housing construction in the state’s suburban counties.
In Washington state, Gov. Jay Inslee recently signed a series of bills designed to spur more affordable housing construction, including through the elimination of single-family zoning. Similar measures have been introduced in states like Florida and Minnesota, but have ultimately been reversed.
Last Updated: May 25, 2023 BY Michelle Schroeder-Gardner – 64 Comments
Disclosure: This post may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links, at no cost to you. Please read my disclosure for more info.
When we bought our first (and current) house, our whole process went by very quickly and smoothly. Our mortgage company and real estate agent both told us that our mortgage was the quickest process they’ve ever done. We got pre-approved and bought a house less than one month from start to finish.
It took around 2 weeks for us to find the perfect house, and we probably looked at over 20 houses in person. We also looked at hundreds online so the 20 that we looked at we thought were for sure buys. Our agent probably HATED us. Luckily she was a family friend so I hope she got over her hatred quickly 🙂
We are sort of in the home buying process again as you all know. We keep going back and forth with what type of house we want, where we want it located, and how much we want to spend.
Our current house is fine for now. There is definitely nothing wrong with it, I guess we just want something a little nicer that also has a little more room. So we could: a) stay in our current house and save a lot of money; or b) buy a house within the next year and finance the majority of it (probably with a 25% down payment).
If we did stay in our house for longer, we would spend some money on making it perfect. I definitely would want to change some things in our bathroom (such as adding a nice glass shower door), make our front and backyards perfect (possibly add a garden) and finish decorating everything to the way we want it. This is a whole ‘nother post in itself!
Anyways, when we bought our current house, we followed all of the steps below, except for the fact that we didn’t realize that the total monthly cost would be that much higher than what the mortgage company quoted us. That is something that we were naive about. Learn from our mistake!
1. Get pre-approved for a mortgage!
This is definitely one of the first steps you should take. Looking at houses without getting pre-approved can be disastrous because you might just be wasting your time. You might not get approved, get approved for less than you think, etc.
Wouldn’t it really stink if you spent a ton of time looking at houses that turned out to be way more than what you can be pre-approved for? That can be a major letdown.
2. Buy less than what you are approved for.
I think we were approved for around $200,000. We were 20 years old and this seemed like a ton since we made hardly any money then. We were shocked and we looked at one house that was around this price range, but then we realized that this was a bad idea as we wanted to be more comfortable with our bills.
Also, something that our real estate agent told us, is to not show the seller how much you are pre-approved for. We showed our real estate agent our real pre-approval amount of course, and our agent said that when this happens, it can not be good. She said that if some sellers can see what we can actually “afford,” that they know how flexible that you can be with your pricing and negotiating. You can get your mortgage lender to lower the amount on the piece of paper and this is what we did. We asked our lender to say that our pre-approved amount was $150,000 (everyone, please keep in mind that I live in the Midwest and housing is cheaper here).
3. Buy a house that’s a good size for you.
Also think about the future you are planning when you think about the size of the house you might buy. Remember my post on how we Bought Too Much House? Keep that in mind! While before our house seemed way too big for us, we now want something bigger. Eventually of course we would want kids, but it’s mainly that we want a bigger yard.
Do you plan on living in this house for awhile, or just a short amount of time such as 5 years? Do you want a house and neighborhood/city that is good for kids to grow up in? There are many questions to ask yourself.
4. Get a realtor!
This is something that I definitely recommend. Our realtor saved us a lot of money and was a great negotiator. We got the seller to pay all closing costs (which were around $5,000). And she also got them to fix a lot of little things around the house. Realtors do a lot of work and are skilled in buying/selling houses. They know where to begin, what to look for and have tons of tips.
5. Make sure you look around and don’t settle.
The market is great right now for people who are looking. There are a lot of houses out there and most have a great price (all of course depending on your city! Some cities are in a housing bubble). You will be living in this house most likely for a long amount of time, so you don’t want to regret your decision.
6. Hire an inspector.
This is something that is definitely needed as well. An inspector will be able to find things that might sway you from NOT buying the house. If you’re buying a house, then you can most likely shell out another $300 for an inspection. It is a good investment.
7. Figure out the WHOLE cost.
Not just want the mortgage would be. Figure out if there will be any PMI, what the homeowners insurance will be, and property taxes. This all can add up quickly, and it added around $300 to our mortgage.
8. Save!
Now that you know you want a house, try and save as much as you can before you move into your new home. Your new costs will most likely be higher than what you think, and any extra savings will be extremely helpful.
Credit matters when looking to buy a house, car or any other pricey asset. Unless a consumer is flush with cash, the path to home and vehicle ownership may go through a mortgage or a loan. Good credit can provide you with terms and privileges not available to a person with poor credit, including lower interest rates and increased borrowing capacity.
We delve into what constitutes a good credit score and the reasons why it is important to have a good credit score.
Recommended: What Credit Score Is Needed to Buy a Car
What’s Considered Good Credit?
Consumers with standard credit scores of 661 or greater are considered to have good credit, because they rank as prime or super prime in terms of their risk assessment. A bad credit score falls on the lower end of the range and a good credit score falls on the higher end of the range.
Many credit scoring models, including the standard FICO® Scores and VantageScore 4.0, measure an individual’s credit risk on a three-digit scale ranging from 300 to 850. The highest risk group are consumers with deep subprime credit scores from 300 to 500, and the lowest risk group are consumers with super prime credit scores from 781 to 850, according to Experian.
Consumers may build and attain good credit by paying their bills on time, maintaining a mix of accounts and keeping their revolving balances under 30% of credit limits.
Recommended: What Is the Difference Between TransUnion and Equifax?
Check your score with SoFi Insights
Track your credit score for free. Sign up and get $10.*
8 Benefits of Good Credit
Here are the eight core benefits of good credit, which highlight why it is important to have a good credit score:
Benefit #1: Easier Access to Credit
Good credit may provide you with easier access to additional credit. When a consumer applies for a credit card or personal loan, lenders may analyze the consumer’s credit report and credit score to make an informed decision on whether to approve or deny the application. A person with good credit is considered low-risk and therefore has an easier time getting approved for a personal loan compared to high-risk borrowers.
Benefit #2: Lower Interest Rates
Consumers with good credit may qualify for lower interest rates when borrowing money. For example, available financing data for new vehicle purchases in the first quarter of 2022 show consumers in the deep subprime category of bad credit have obtained auto loans with 14.76% interest on average. Meanwhile, consumers in the super prime category of excellent credit secured 2.40% interest rates on average. That amounts to an over 12 percentage point difference in interest rates.
Benefit #3: Lower Car Insurance Premiums
Many auto insurance companies use credit-based insurance scores to help categorize consumers by risk and determine what premiums they may pay. Under this practice, higher-risk consumers may pay higher auto insurance premiums than lower-risk consumers. In some states, having good credit or improving your credit score may lead to lower auto insurance premiums over time.
Benefit #4: Increased Borrowing Capacity
Consumers with good credit may obtain larger credit limits than those with poor credit. This could translate to greater spending power on a credit card and the ability to make larger purchases on credit. Having good credit also puts you in a better position to apply for and obtain new credit.
A bolstered borrowing capacity is not limited to credit cards either — credit unions and banks may offer personal loans to consumers with good credit. Such loans can help you consolidate debt, finance large purchases or obtain fast cash to weather an unforeseen emergency. Personal loans also may command lower interest rates than credit cards.
Recommended: Does Net Worth Include Home Equity?
Benefit #5: Easier to Buy a Home or Car
Good credit can help you buy a house with a good mortgage rate or a car with affordable financing. Borrowing money to own a home or vehicle comes at a price that includes principal and interest. Consumers with good credit may qualify for 0% annual percentage rate loans for a car, where no APR means no interest or finance charges. Establishing good credit may also improve your likelihood of obtaining a low-APR mortgage, which translates to lower debt repayment obligations.
Automotive consumers had an average credit score of 738 for new vehicle purchases and 678 for used vehicle purchases in the fourth quarter of 2022, according to Experian’s quarterly report. This shows the average automotive consumer boasted good credit within the prime category of low risk.
Recommended: Should I Sell My House Now or Wait?
Benefit #6: More Apartment Lease Options
Signing a lease to an apartment may require good credit. Landlords who conduct credit checks might deny lease applications if a prospective tenant has bad credit. Or, those with poor credit may have to provide a higher security deposit for rental housing compared with a prospective tenant who boasts good credit. Tenants with good credit also may have more leverage to negotiate for lower rent.
Jobseekers can benefit from good credit, as some employers may consider a person’s credit score when making hiring decisions. The U.S. Department of Housing and Urban Development says that a low credit score or credit invisibility is a burden that can “limit housing choice and employment opportunity,” whereas “a good credit score is part of the pathway to self-sufficiency and economic opportunity.” The term “credit invisible” refers to consumers who lack a credit score or credit history.
Benefit #8: Ability to Obtain Security Clearances
Law enforcement officers with good credit could gain privileged access to classified national security information and FBI facilities. Any state or local law enforcement officer seeking a security clearance has to first satisfy a comprehensive background check that includes a review of credit history. The FBI shares secret or top secret information with local law enforcement officers who have obtained security clearances.
Poor credit history would not necessarily disqualify an officer from obtaining a security clearance, but significant credit history issues “may prevent a clearance from being approved,” according to information posted on the FBI’s website.
The Takeaway
Good credit is important for anyone who wishes to borrow money to help finance key purchases. Many consumers rely upon mortgages and loans to buy houses and cars, while many cash-strapped individuals turn to credit cards to buy essential goods and services ranging from food and electricity to water and rent for housing.
The eight benefits of good credit highlighted above showcase why it is critical to pay your bills on time and practice good budgeting. SoFi Insights is a money tracker app that allows you to monitor and keep track of your credit score, among other perks that could assist with financial planning and managing your net worth.
Check out the features SoFi Insights offers to help bolster your financial success.
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SoFi’s Insights tool offers users the ability to connect both in-house 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. 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 provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. 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 . SORL0523023
It’s Friday, and you’re looking forward to a relaxing weekend in town with friends. You log into your online banking portal to check your balance, but your account keeps giving you an annoying “account not found” error.
Panic sets in and questions flood your mind. Did I do something wrong? Why was my account suddenly closed? Don’t worry. You’re not alone in your panic. Many banking customers have found themselves in similar situations, left to unravel the mysteries of why the bank closed their account.
In the world of banking, account closures can happen for various reasons, and understanding why can save you a lot of frustration and inconvenience.
Reasons the Bank May Close Your Account
There are many reasons your bank could close your account, from irresponsible behavior to fraudulent activity. No matter the reason, your bank should inform you, so the first step is to look through your unopened mail for notifications about any of these circumstances.
1. Insufficient Funds
If your debit card frequently gets denied, your bank might decide to part ways with you. Some banks require you to keep a minimum amount of cash in your account. If your balance consistently falls below that, the bank will close your account since you’re violating its policies. Understanding how to manage your finances effectively can help you avoid this situation altogether.
To avoid overdrawing your account:
Turn on alerts through your bank’s mobile app.
Create a budget.
Keep a buffer amount in your account as a cushion for unexpected expenses.
Sign up for overdraft protection.
2. Suspicious Activity
In a time of frequent cyberthreats, banks prioritize the security of their customers’ accounts above all else. So if they detect any unusual or suspicious activity on your account, they might close it.
This activity can come in the form of identity theft or fraudulent transactions. Banks have sophisticated systems in place to monitor account activity and identify potentially fraudulent transactions. If they notice any suspicious patterns, such as multiple large transactions in a short period or transactions in unfamiliar locations, they’ll take immediate action to protect your account and other customers.
To safeguard your account and prevent account closure due to suspicious activity:
Regularly check in on your account through your bank’s online portal or mobile app.
Enable transaction alerts that notify you of any activity on your account, good or bad.
Report suspicious transactions to your bank immediately.
3. Violation of Terms & Conditions
Having a bank account requires adhering to the terms and conditions set forth by your bank. They’re all laid out in the ridiculously long document the bank sent you when you first signed up for the account. You likely had to check a box saying you agree to them. Violating these terms and conditions can result in account closure.
A few common violations that can lead to this closure include:
Illegal activities, such as money laundering, fraudulent schemes, or financing illegal ventures.
Policy violations likeusing a personal account for business purposes or failing to maintain a certain minimum balance.
Engaging in fraudulent behavior, such as providing false information, submitting fraudulent documents, or attempting to deceive the bank.
If you have any questions or concerns, reach out before agreeing to your bank’s terms and conditions.
4. Inactivity
Believe it or not, simply leaving your account dormant for an extended period can lead to its closure. Banks close inactive accounts as a means to streamline operations and reduce costs.
After all, having an account with no money in it isn’t making them anything in terms of profits. Additionally, inactive accounts are more vulnerable to fraudulent activities, so banks prefer to close them to minimize risk.
To prevent your account from closing due to inactivity:
Use your account for at least one transaction per month, even a small one like autopaying a streaming service.
Set reminders or alerts on your calendar or phone to use your account.
Automate your recurring payments.
5. Relationship With the Bank
Your relationship with your bank plays a significant role in the overall banking experience, for both you and your bank. In some cases, rude or aggressive behavior or treatment of bank staff influences the bank’s decision to close an account.
Additionally, if you repeatedly fail to comply with reasonable requests, such as providing required documentation, responding to inquiries, or addressing potential issues, it could lead to an account closure.
Maintaining a respectful relationship with your bank’s staff and following the bank’s rules are crucial, so to foster a positive banking experience:
Communicate politely and professionally.
Understand and comply with your bank’s guidelines.
If you have any questions, concerns, or issues, reach out to the bank.
How to Get Your Closed Bank Account Reopened
Experiencing the unexpected closure of your bank account is likely a stressful situation, especially if it was for anything other than inactivity. If you respond promptly and take the necessary steps to address the issue, you should be able to get your account up and running again fairly quickly.
1. Contact the Bank
When you discover your bank has closed your account, don’t wait to contact them. Reach out immediately.
Approach this conversation with a calm and polite demeanor. Clearly explain your situation, provide any relevant details, and ask for specific information regarding the closure of your account. Be prepared to provide identifying information, such as your account number and full name.
It’s beneficial to keep a record of the conversation, noting the date, time, and the name of the representative you spoke with.
2. Seek Alternatives
There are times when an account closure can provide you with an opportunity. If your bank closed your account because you can’t keep up with its requirements or you simply aren’t using the account anymore, maybe it’s time to find another bank.
To find a better option for your financial needs:
Research different banks and credit unions. Take the time to research various banks and credit unions to find one that aligns with your financial goals and preferences. Look at factors such as fees, account features, customer service, accessibility, and the convenience of branch locations or online and mobile platforms.
Compare account options. Look into the different types of accounts offered by the banks you’re considering. Would a checking account work better for you? Or maybe a money market account?
Evaluate customer reviews and ratings. Customer reviews are the best way to get a feel for a company. Online platforms, review websites, and personal recommendations can provide valuable insights into the banking experience you should expect.
Ensure you can meet minimum requirements: Pay attention to the minimum requirements each bank sets for opening and maintaining the account. Ensure you can comfortably meet these requirements, such as minimum deposit amounts or monthly balance thresholds, to avoid potential closure in the future.
3. Resolve Any Outstanding Issues
Having your bank account closed doesn’t necessarily solve the problem. You must proactively address any outstanding issues to minimize the negative impact on your financial history.
Contact the bank quickly. Reach out to your bank to discuss any outstanding fees, overdrafts, or disputes associated with your closed account. Request a detailed breakdown of any outstanding balances or charges.
Negotiate a resolution. Engage in a constructive conversation with the bank representative to negotiate a resolution that is fair and reasonable on both sides. If you’re facing financial hardship, explain your situation and explore possible options for fee waivers, reduced payment plans, or debt settlement arrangements.
Address overdrafts and negative balances. If your closed account had any overdrafts or negative balances, work with the bank to establish a repayment plan, or pay the balance in full.
Retrieve your remaining funds. If there were funds still in your closed account, the bank provides you with a few different options to receive those funds. That can involve issuing a check, transferring the funds to another active account, or utilizing alternative payment methods.
Monitor your credit report. After resolving any outstanding issues, monitor your credit report to ensure that the closure of your account and any related matters are accurately reflected. If you notice any inaccuracies or discrepancies, dispute them with the credit reporting agencies to maintain a clean credit history.
Final Word
Understanding why your bank may close your account is not just about unraveling the mysteries of the banking world; it’s about taking control of your financial well-being.
While the reasons for account closures can sometimes seem arbitrary, there are steps you can take to mitigate the risk and minimize the impact.
If you just can’t make it work with your current bank, it might be time to move on and find one that can meet your needs. Check out our list of the best checking accounts.
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Christopher Murray is a professional personal finance and sustainability writer who enjoys writing about everything from budgeting to unique investing options like SRI and cryptocurrency. He also focuses on how sustainability is the best savings tool around. You can find his work on sites like Bankrate, Money Crashers, FinanceBuzz, Investor Junkie, and Time.
There’s plenty to love about the Land of 10,000 Lakes, from its professional sports teams to its polite residents. For the many people who live and work in Minnesota, though, a strong economy and reasonable cost of living make it a great place to live.
If you’re in the market for a bank account in Minnesota, you’ll have plenty of choices. From national banks with branches in Minnesota to local and community bank options, the state has a little of everything.
12 Best Banks in Minnesota
To help you find the right bank account to fit your needs, here are some of the best banks in Minnesota.
1. Associated Bank
Associated Bank is a regional bank with branches in Minnesota, Wisconsin, and Illinois. You’ll find branches throughout the region, but you’ll also have cash access while traveling at more than 30,000 MoneyPass ATMs nationwide. There are several checking account options, including a fee-free checking account with no minimum balance requirements.
Fees:
No monthly maintenance fees
$32 overdraft fee
Balance requirements:
$25 opening deposit
No minimum balance requirements
ATMs:
Fee-free at Associated Bank ATMs
Fee-free at 30,000+ MoneyPass ATMs nationwide
$3 for each non-Associated Bank ATM transaction
Interest on balance:
Up to 2.50% APY on savings accounts
Up to 4.50% APY on CDs
Up to 1.25% APY on money market accounts
Additional perks:
$50 grace zone on overdrafts
Multiple debit card designs available
2. CIT Bank
CIT Bank provides online banking solutions to consumers and small business owners. Although CIT Bank has no ATMs, you’ll pay no ATM fees, no matter which ATM you use, and CIT Bank reimburses up to $30 of the fees you’ll pay other banks for using their ATMs.
The best thing about CIT’s checking account is that you’ll earn interest. Balances below $25,000 earn 0.10% APY, while balances of $25,000 and over earn 0.25% APY.
Fees:
No monthly maintenance fees
No overdraft fees
Balance requirements:
$100 minimum deposit to open
No minimum balance requirement
ATMs:
Up to $30 in waivable monthly fees for out-of-network ATMs
Interest on balance:
Additional perks:
Competitive rates on financing for small business owners
Competitive rates on no-penalty CDs
3. Wings Financial Credit Union
Credit unions are a great way to get perks and competitive rates, as long as you qualify for membership. Wings Financial Credit Union was originally founded to serve Northwest Airlines employees, but it has recently expanded to include those in certain states and counties.
Wings Financial is headquartered in the Apple Valley area, with branches throughout Minnesota and Wisconsin. Currently, Wings Financial is offering a $300 bonus for opening a new checking account and setting up a recurring direct deposit of at least $600 a month. You’ll also need to make at least five debit card transactions of $25 or more.
Fees:
No monthly maintenance fees
$30 overdraft fee
Balance requirements:
$5 nonrefundable donation required for credit union membership
No minimum balance requirement
ATMs:
Fee-free at Wings Financial ATMs
Fee-free at 80,000+ Co-Op, MoneyPass, and Allpoint ATMs nationwide
Interest on balance:
Up to 3.04% APY on checking accounts
Up to 1.56% APY on savings accounts
Up to 4.59% APY on CDs
Up to .25% APY on money market accounts
Additional perks:
$300 bonus for eligible new checking account
Competitive rates on mortgage, auto, and boat loans
4. GO2bank
Another online banking option is GO2bank, which offers a savings account with 4.50% APY, and a checking account with no fees, as long as you have at least one payroll or government benefits direct deposit each month.
Otherwise, you’ll pay $5 a month for checking. One feature that sets GO2bank apart, though, is its cash access. Not only can you withdraw cash at Allpoint ATMs nationwide, but you can also deposit cash at more than 90,000 retailers.
Fees:
$5 monthly maintenance fee (waived with requirements)
$15 overdraft fee (24-hour grace period)
Balance requirements:
No minimum deposit to open
No minimum balance required
ATMs:
Fee-free at Allpoint ATMs nationwide
$3 out-of-network ATM fee
Interest on balance:
4.50% APY on savings accounts
Additional perks:
5. Wells Fargo
Although Wells Fargo is a national bank, it’s only available in 37 states. This could be a problem if you travel outside those areas, as you’ll pay $2.50 for each out-of-network ATM withdrawal.
Wells Fargo offers a selection of checking and savings accounts, including a checking account that has no monthly fees if you can maintain a $500 balance or have at least $500 monthly in qualifying deposits. Currently, Wells Fargo is offering a $300 bonus for new checking accounts with at least $1,000 in qualifying direct deposits in the first 90 days.
Fees:
$10 monthly fee (waived with requirements)
$35 overdraft fee
Balance requirements:
$25 minimum deposit to open
No minimum balance required
ATMs:
Fee-free at Wells Fargo ATMs nationwide
$2.50 out-of-network ATM fee
Interest on balance:
Up to 2.51% APY on savings accounts
Up to 4.51% APY on CDs
Additional perks:
$300 bonus on new checking accounts
Robust mobile banking services
6. Chime
Chime is an online banking solution that works best for those who rarely need to deposit cash. The mobile banking app comes with everything you need to pay bills, transfer funds, and monitor your checking account.
You’ll get fee-free ATM access at more than 60,000 partner ATMs nationwide. If you have electronic deposits each month, you’ll qualify for SpotMe, which covers you for up to $200 in overdrafts, as well as early access to your paycheck.
Fees:
No monthly maintenance fees
No overdraft fees
Balance requirements:
No minimum deposit to open
No minimum daily balance required
ATMs:
Fee-free at more than 60,000 ATMs nationwide
$2.50 out-of-network transaction fee
Interest on balance:
2.00% APY on savings account balances
Additional perks:
SpotMe covers up to $200 in overdrafts
Access to paycheck up to two days early
7. Home Federal Savings Bank
Those looking for a local bank should consider Home Federal Savings Bank, which has 14 branches and 2 loan production offices in Minnesota, Wisconsin, and Iowa. Home Federal has fee-free checking account options, but those who travel outside the service area may want to take a look at ATM fees.
The checking account comes with four free out-of-network transactions a month. After that, you’ll pay $2 for each withdrawal. In all instances, you’ll pay third-party ATM fees for each transaction.
Fees:
No monthly maintenance fees
Balance requirements:
$25 minimum deposit to open
No minimum balance required
ATMs:
Fee-free use at Home Federal ATMs
$2 per out-of-network ATM transaction (4 free per month)
Interest on balance:
Up to 2.02% APY on checking accounts
Additional perks:
$10 off your first box of checks
Robust business checking account options
8. Huntington Bank
Huntington Bank is another regional bank with branches in 11 states. You’ll get fee-free ATM access at more than 1,400 Huntington ATMs, as well as competitive rates on CDs and money market accounts.
If you receive at least 1,000 in deposits each month and keep a daily balance of $200, your checking account may qualify for Standby Cash. With Standby Cash, you’ll get interest-free access to a line of credit as long as you repay it with automatic payments within three months.
Fees:
No monthly fees
$15 overdraft fee (waived up to $50)
Balance requirements:
No minimum deposit to open
No minimum balance required
ATMs:
Fee-free at more than 1,700 ATMs within service area
$3.50 out-of-network ATM transaction fee
Interest on balance:
Up to .06% APY on savings accounts
Up to 5.13% APY on CDs
Up to 4.18% on money market accounts
Additional perks:
Standby Cash issues no-interest loan as needed
Early Pay gives you two days early access to your paychecks
9. MidWestOne Bank
MidWestOne Bank is a community bank with branches in Minnesota, Iowa, Wisconsin, Florida, and Colorado. You’ll find multiple checking accounts, including one free option with no minimum daily balance requirements. You’ll get fee-free access to cash while traveling at any MoneyPass or Presto! ATM.
Fees:
No monthly maintenance fees
$35 overdraft fee
Balance requirements:
$100 minimum deposit to open
No minimum daily balance required
ATMs:
Fee-free at MidWestOne ATMs
Fee-free at MoneyPass and Presto! ATMs nationwide
$1 out-of-network transaction fee
Interest on balance:
Up to .10% APY on savings account balances
Up to 4.28% APY on CDs
Up to 4.25% APY on money market accounts
Additional perks:
Customized debit cards available
Competitive rates on personal loans and lines of credit
10. TruStone Financial Federal Credit Union
If you live, work, worship, volunteer, or go to school in a qualifying Minnesota or Wisconsin county, you’ll qualify for membership with TruStone Financial Federal Credit Union. You’ll get plenty of perks with your membership, including a debit card that earns you 1 point for every $5 you spend on purchases.
You’ll need a share savings account to qualify for a checking account with TruStone Financial, but new checking accounts currently earn a $150 bonus with qualifying activities.
Fees:
No monthly maintenance fees
$30 overdraft fee
Balance requirements:
$25 minimum deposit to open
No minimum daily balance required
ATMs:
Fee-free at TruStone ATMs
Fee-free at 65,000+ ATMs nationwide
$2 out-of-network transaction fee (5 free per month)
Interest on balance:
.30% APY on savings account balances
Up to 4.75% APY on savings certificates
Up to 2.00% APY on money market accounts
Additional perks:
Rewards on debit card transactions
Up to $150 bonus on new checking accounts
11. BMO Harris Bank
BMO Harris offers banking services in Minnesota, as well as Illinois, Wisconsin, Indiana, Kansas, Missouri, Arizona, Florida, and California. You’ll get all the features you need through the banking app, including mobile check deposit, online bill pay, and the ability to transfer funds back and forth from your savings account to your checking account.
Fees:
No monthly maintenance fees
$15 overdraft fee
Balance requirements:
$25 minimum deposit to open
No minimum daily balance required
ATMs:
Fee-free at BMO Harris ATMs nationwide
Fee-free at 40,000+ ATMs nationwide
$3 out-of-network transaction fee
Interest on balance:
Up to 4.50% APY on savings account balances
Up to .25% APY on CDs
Additional perks:
Wealth management services available to account holders
View all accounts in one dashboard, including those with other banks
12. Bremer Bank
With a service area that includes Minnesota, North Dakota, and Wisconsin, Bremer Bank has one of the best customer service ratings of all the banks in Minnesota. Whether you’re looking for a personal or business checking account, Bremer Bank is worth considering.
The basic checking account is fee-free as long as you enroll in free online statements, maintain a $1,500 average balance, or are under age 21 or over age 64.
Fees:
$3 monthly service fee (waived with requirements)
$35 overdraft fee
Balance requirements:
$100 minimum deposit to open
No minimum daily balance required ($1,500 to waive service fee)
ATMs:
Fee-free at 37,000+ MoneyPass ATMs nationwide
$2.75 out-of-network transaction fee
Interest on balance:
Up to .30% APY on savings account balances
Up to 3.00% APY on CDs
Up to 3.30% APY on money market accounts
Additional perks:
First order of Bremer Bank checks is free
Agriculture and business checking account options available
Frequently Asked Questions
What is the best bank in Minnesota?
Minnesota banks have worked hard to keep up with the latest banking trends. In 2023, customers not only want great rates on savings accounts and plenty of checking account features, but they also want the convenience of managing their accounts using a mobile app.
While the in-person customer service you get with a local bank is valuable, it’s easy to do everything from your phone, so that feature might not be as important.
What is the most financially stable bank in the US?
Stability is an important feature in a bank. This is one area where a national bank will tend to be a better option than a local or regional bank. Wells Fargo is largely considered one of the most financially stable, with more than $1.8 trillion in assets. Traditional banks can tend to be more reliable in general than newer banks simply because they have a long history in the industry.
Do I need good credit to open a Minnesota bank account?
You don’t need good credit to open a savings or checking account. However, when you apply with a national, local, or regional bank, the bank will likely pull something called a ChexSystems report.
This will provide information on any deposit accounts you’ve held before. This includes any joint accounts that used your Social Security number. If you have a history of closed accounts, you may find that your application is denied.
Can I get a bank account if I don’t have a job?
Banks don’t typically factor employment into account approvals. You can even find a bank that will accept your application without any money. Look for a bank that requires no minimum opening deposit. In some cases, you may find you’ll pay monthly fees or that you won’t be eligible for some features without direct deposit.
Can an online-only bank meet all my banking needs?
Online banking has more financial products than ever. In many cases, you’ll be able to do all your banking using only the app. If you like to be able to visit a local branch, online banking might not suffice, but some banks provide live teller access through the app. Also, make sure your online bank offers cash deposit and withdrawal without charging massive fees.
Our Methodology
Although this list certainly doesn’t include all the checking and savings accounts available in Minnesota, it’s a great snapshot of what’s available. We strove to include a combination of online banks, local banks, regional banks, and national banks to help you see the pros and cons of each.
When looking at a bank, we considered a variety of factors. A bank may have no fees on checking accounts but offer few ATM cash withdrawal options, which may mean out-of-network fees each month. We also looked for banks that pay competitive rates on savings accounts or on high-yield checking accounts to help you make the most of your money.
The best banks in Minnesota can vary dramatically from one person to another. By narrowing down the types of financial products that matter most to you, you’ll be able to save money while also getting the features you need.