Spending money is typically fun, while saving money is hard — all that temptation to buy cool new things or try the latest restaurant. Which is why we can all use a little extra motivation to stash away some cash, and a savings club can play a role in that process.
Basically, savings clubs are a type of bank account in which the account holder contributes to the account over time to meet a specific goal. It can be a valuable option vs. breaking out your plastic and running up credit card debt.
What Is a Savings Club?
So, what is a savings club? A basic savings club definition is that it’s a bank account that the account holder uses to hold funds to meet a specific savings goal. For example, some people set up what are known as “Christmas clubs” in which they make regular contributions throughout the year to save for holiday gifts, travel, decor, and parties. By saving gradually in advance, they may be able to avoid the wallop of that major end-of-year credit-card bill.
Usually, savings clubs accounts that can be opened at a bank or credit union. They can be a good idea in terms of where to put short-term savings, as they typically earn interest. Often these savings clubs have other incentives attached to them to encourage account holders to follow through on their savings goals. There can also be penalties associated with savings clubs — such as forfeiting earned interest for withdrawing funds from the account early — to help motivate people to keep saving.
Recommended: How Much Money Should I Save a Month?
How Do Savings Clubs Work?
Usually, savings clubs create a schedule the depositor can follow to make regular deposits of a certain amount. So, say you open a savings club account to gather cash for a vacation next summer. If you want to save $1,200 over one year, the club would guide you through depositing $100 a month to meet that goal. Typically, the end date associated with a savings club aligns with your goal, whether that’s heading to Hawaii, getting married, or celebrating the holidays.
Deposits for savings clubs can be drawn from the account holder’s paycheck, which can make it easier to steadily progress towards meeting a savings goal. Automatic savings transfers can be a real helping hand because you don’t see the money in your checking, as if it’s available to be spent.
Some savings clubs allow multiple people to contribute to it — similar to another type of savings account, the joint account — so they can work together towards a savings goal. While usually only couples share a bank account, friends, or family members can choose to contribute to a savings club together to save up for a group vacation, present, or family reunion. Or some financial institutions will allow parents to help a child open a holiday savings account. In all cases, this can be a good strategy, since savings club accounts may offer higher interest than a typical savings account, though there can be penalties for early withdrawal.
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Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.50% APY on your cash!
Benefits of a Savings Club
There are quite a few benefits attached to savings clubs, including:
• Saving on a schedule towards a specific goal
• Offering saving incentives
• Creating discipline in a savings routine
• Teaching children about financial literacy and the value of saving
• Paying higher interest rates than typical savings accounts
Recommended: How Do You Calculate Interest on a Savings Account?
Drawbacks of a Savings Club
There are also some downsides associated with savings clubs worth being aware of:
• Withdrawing funds early can lead to penalties
• Not contributing on schedule can lead to penalties
• Some savings clubs can be banking scams if not hosted by a financial institution such as a bank or credit union (beware “money board” and “circle game” schemes)
• Investing money elsewhere may lead to more growth
Savings Club vs Savings Account: What’s the Difference?
There are many reasons why you would put money in a savings account, and savings clubs offer a specific financial product to serve a specific goal. Let’s look at some differences between these two account types.
Savings Clubs Can Offer Higher Interest Than a Traditional Savings Account
One of the reasons savings clubs can be so motivating is because they often offer a higher interest rate than traditional savings accounts do. Knowing your money can grow faster can be an exciting prospect.
Savings Clubs Have Penalties for Premature Withdrawal
There are no penalties when someone withdraws money from a standard savings account. Nor is there a set period of time they have to keep their money in the account.
With a savings club, however, there can be penalties (such as losing the interest accrued) for actions such as withdrawing funds before the predetermined end date or for not making a contribution according to the savings club schedule. These penalties can be an incentive to save, but they can also create a challenging savings environment.
Savings Clubs Often Require a Minimum Deposit and Term Lengths
While basic savings accounts don’t usually have strict requirements attached to them, savings clubs often have minimum deposit requirements. These requirements may be as low as $1 or can be much higher. Savings clubs can also come with predetermined term lengths — usually six months to a year — and may require automatic weekly or bi-weekly deposits. Some people don’t like feeling “locked in” in this way.
Recommended: How Do Savings Accounts Work?
Starting a Savings Club
In most cases, you’ll start a savings club that’s hosted at a bank or credit union, review the terms, make an initial deposit, and continue funding the account.
Some people may choose to set up social savings clubs with friends and/or relatives by taking the following steps.
• Define a savings goal for the club
• Find people to join the savings club
• Create savings club rules and structure
• Commit to the planned schedule and follow through
Where the funds are actually kept can be decided by the group; an interest-bearing savings account will offer the nice perk of having your money earn money.
Banking With SoFi
Savings clubs can offer a motivating way to stockpile cash, thanks to their usually higher interest rates (compared to traditional savings accounts) and their structured schedule.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.
FAQ
Why would someone join a savings club?
Savings clubs can help you efficiently save towards a specific short-term goal, like accumulating money for the holidays or for a vacation. Benefits of saving this way include a motivating format and often a higher interest rate vs. traditional savings accounts do. Also, the potential penalties associated with not sticking to the schedule can also motivate people to save.
Should I have a savings club or savings account?
Whether or not you should have a savings club vs. a standard savings account depends on your personal goals and preferences. If you benefit from having a savings schedule and are offered a good interest rate, it may be a great fit. If, on the other hand, you want the ability to withdraw funds from your account penalty-free, it may not be the right move.
Can I use a savings club for long-term savings?
Savings clubs are usually designed to meet short-term goals, not long-term savings goals. They typically last for six months to a year. Those looking for long-term growth may find that investing money elsewhere can lead to more growth than a savings club can offer.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
The TAP Miles&Go American Express Card, also known as the TAP Air Portugal credit card, can help jump-start your next visit to Portugal, or to more than 80 destinations in over 30 countries throughout Europe, Africa, North America and South America. It’s issued by First Electronic Bank and serviced by Cardless, a credit card provider.
In addition to rewards, the card offers travel perks like priority boarding, free checked bag, and two lounge visits per year. But unless you’re flying to Portugal frequently, you’ll get more flexibility and value from a different credit card.
Here’s what you need to know about the TAP Air Portugal credit card.
1. It has a $79 annual fee
The TAP Air Portugal credit card charges an annual fee of $79, which is lower than you might find on some other airline credit cards. And it’s possible to offset that cost with the card’s perks and rewards if you travel at least once per year.
If you prefer a $0 annual fee, it’s worth exploring options like the Wells Fargo Autograph℠ Card. It earns 3 points per dollar spent on restaurants, travel, transit, gas stations, electric vehicle charging stations, popular streaming services and select phone plans. All other purchases earn 1 point per dollar spent. There’s also a sign-up offer: Earn 20,000 bonus points when you spend $1,000 in purchases in the first 3 months – that’s a $200 cash redemption value.
2. Rewards will accumulate slowly
Because the TAP Air Portugal Card earns bonus rewards only on travel-related expenses, and not everyday purchases, it will likely be a while before you can enjoy the fruits of your spending. The card offers:
3x Tap Miles&Go miles on TAP Air Portugal purchases.
2x miles on rideshare purchases, hotel purchases and car rentals.
1x mile on all other spending.
As of this writing, new cardholders are also eligible for a welcome offer: Earn up to 40,000 bonus miles after spending $2,500 with the card within 90 days of account opening. Terms apply. Plus, for every 5 miles earned with the card, you’ll earn 1 status mile, up to 10,000 per annual qualification period.
🤓Nerdy Tip
NerdWallet values TAP Portugal miles at 0.8 cent each. This is a baseline value, drawn from real-world data and not maximized value. Seek reward redemptions that offer at least that much in value from your TAP Portugal miles to get a decent deal.
Those rewards are decent, but a general-purpose rewards credit card — especially one that earns points or miles on everyday purchases — may help you reach your travel goals faster. The $95-annual-fee Chase Sapphire Preferred® Card, for instance, earns 5 points per dollar spent on all travel purchased through Chase; 3 points per dollar spent on dining, select streaming services, and online grocery purchases; 2 points per dollar spent on travel not purchased through Chase; and 1 point per dollar spent on all other purchases. Plus, you’ll be able to redeem your rewards toward a much wider array of travel options. There’s also a sign-up bonus for new cardholders: Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 when you redeem through Chase Travel℠.
3. The travel perks can offset the annual fee
The TAP Air Portugal credit card features perks like preferred boarding, two TAP premium airline lounge passes per year, and two extra checked bags per year.
These kinds of airline-specific benefits aren’t typically offered by general-purpose rewards credit cards. And if they’re features you know you’ll use, then they can make up for the cost of the annual fee.
4. Card acceptance may vary internationally
The TAP Air Portugal credit card runs on the American Express payment network. But unlike cards that run on the Visa or Mastercard networks, American Express isn’t as widely accepted abroad.
As a result, it’s important to have a backup payment method for purchases you might make in another country.
5. You can redeem TAP Miles&Go with Star Alliance partners
Since TAP is a Star Alliance member, you can redeem TAP Miles&Go miles with more than 20 carriers for award flights to more than 1,200 airports worldwide. The alliance includes United Airlines as a domestic partner, as well as several international transfer partners.
Another option for frequent flyers of TAP Air Portugal, though, would be the $95-annual-fee Capital One Venture Rewards Credit Card, which earns 2 miles per dollar on purchases. Capital One miles can be transferred to TAP Air Portugal at a rate of 1:1. But you’ll also have the flexibility to apply those miles toward any airline, hotel or eligible travel expense. It also offers a bonus for new cardholders: Enjoy $250 to use on Capital One Travel in your first cardholder year, plus earn 75,000 bonus miles once you spend $4,000 on purchases within the first 3 months from account opening – that’s equal to $1,000 in travel.
Dave Liniger, chairman of the board at RE/MAX Holdings, expressed confidence in Raffaeli’s ability to contribute to the company’s growth. “[Cathi] has an impressive track record of driving growth and leading organizations. Her diverse experience and strategic insight align perfectly with our goals, and we are excited to welcome her to the team,” Liniger said. … [Read more…]
Kids, it turns out, need their parents even after they’re all grown up.
About 6 in 10 parents say they’ve helped their young adult children financially within the past year, according to a report released earlier this year from the Pew Research Center. The most common forms of assistance? Household expenses, cell phone bills and subscriptions to streaming services.
“Parents have always helped their children, but one of the real questions is, ‘How much is too much?’” says Anne Lester, author of “Your Best Financial Life.” The answer, she explains, depends on how much parents can afford to help, as well as each family’s parenting values.
To navigate the challenge of helping young adults achieve financial independence, money experts suggest these strategies:
Talk about money early
Setting up young adults for self-sufficiency starts when they’re younger and still living at home, says Mindy Oglesby, certified financial planner and founder of Oglesby Wealth Strategies in Watkinsville, Georgia.
To help children become financially independent as adults, she says, “it’s important to help them with the mindset of making small sacrifices for something they want,” she says. For example, kids can earn an allowance by doing chores around the house.
Then, Oglesby adds, once they have their own money to manage, parents can show them how to apply a budgeting strategy and immediately put some of that money into a savings account for the future. They can also use a portion to buy something they want, like a toy. “It teaches them to set goals and work for things,” she says.
Rose Niang, CFP and director of financial planning at Edelman Financial Engines, says it’s also helpful to talk to your children about money steps you’ve taken for yourself, such as paying off credit card debt or saving for retirement. “These are conversations that can be sprinkled in anytime, and it will help them later,” she says.
Consider charging rent
As those kids become adults, living at home with parents is a popular way to delay bigger expenses. About 57% of young adults between ages 18 and 24 live with their parents, according to the Pew report. Most say they contribute financially to the household in some way. That can include paying for groceries, bills or rent.
Charging young adults to live at home is a good way to foster financial independence, Oglesby says, especially if the parent puts those “rent” payments into a savings account for the child to one day use toward their own home.
The ideal amount of “rent” really depends on each individual situation, she says, adding that “not everyone will be able to contribute,” and that’s OK, too. It can be a goal they work toward.
Help with specific purchases
Instead of providing blanket financial support, Lester suggests assisting young adults with specific expenses, such as helping them make a down payment on a first home or covering food and rent while they are looking for a job or in school. “Because if you just have an open checkbook, nobody learns,” she adds.
Niang says it can also be helpful to focus on helping a young adult with their “needs,” such as food and housing, while letting them figure out how to handle “wants,” such as a new car or concert tickets, on their own.
Set realistic deadlines
Niang suggests setting and communicating realistic deadlines so your kids can prepare for when parental support runs out. For example, you could tell your child that as soon as they start their first real job with a steady paycheck, they will be taking over payments for their cell phone bill.
Coinciding with milestones, like a first job, helps greatly, Niang adds.
Elaine King, CFP and founder of the firm Family and Money Matters, says withdrawing financial support is easier on young adults if it’s done slowly. Parents might want to reduce their support of lifestyle costs from 100% to 80%, then 50% before getting to zero. “Don’t do it all at once so they can get an additional job or adjust,” she says.
Help them build their own wealth
Lynnette Khalfani-Cox, a personal finance expert and author of “Bounce Back: The Ultimate Guide to Financial Resilience,” suggests helping young adult children in ways that help them build their own wealth, a technique she calls the “wealth starter kit.”
For some, this approach can include purchasing property for children, which she did for her own kids. When her daughter was in college, she and her husband bought a condo for her to help her establish in-state residency for school. That helped keep tuition costs down while also providing her a place to live and an asset that grew in value over time.
“This investment strategy paid off in spades,” Khalfani-Cox says. It worked so well that she and her husband repeated the strategy with their son. She emphasizes that each child is different and some may need more support than others.
A similar but less expensive way to help adult kids build their wealth could be to help them set up retirement accounts and figure out an ongoing strategy for helping them grow.
Protect your own finances along the way
One of the most important rules for parents is to first make sure their own finances are shored up before offering support to their adult children. According to the Pew report, 36% of parents who helped their young adult children financially in the past year say it has hurt their own personal finance situation at least some amount.
“Try to show them in your own life that you are being financially stable,” Oglesby suggests. “You’re leading by example.”
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn how you could save money by caring less about what other people think and how to weigh the pros and cons of a job offer.
How can you save money by not caring about others’ opinions? How does commute time factor into whether you should take an in-person job? Hosts Sean Pyles and Sara Rathner discuss freeing yourself from the pressures of social validation and adopting smart spending habits to help you understand how these approaches can boost your financial well-being. They begin with a discussion of saving money by “not caring,” with tips and tricks on avoiding unnecessary spending influenced by social media influencers, focusing on purchases that genuinely make you happy, and recognizing the fleeting dopamine rush from new buys. They also delve into strategies such as choosing unique vintage clothing, the benefits of a capsule wardrobe, and making thoughtful car-buying decisions.
Then, hosts Elizabeth Ayoola and Sara Rathner talk to Andrew, a listener in Miami, about his decision to start a new job that would increase both his salary and his commute time. They discuss the trade-offs of job changes, the impact on work-life balance, and questions you can ask yourself to help align your career progression with core values.
Check out this episode on your favorite podcast platform, including:
NerdWallet stories related to this episode:
Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Teddy Roosevelt once said, “Comparison is the thief of joy.” But if you’re not careful, it can also be the thief of your hard-earned money.
Sara Rathner:
In this episode, we’ll help you find ways to save money by simply not giving a hoot about what people think.
Sean Pyles:
Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.
Sara Rathner:
And I’m Sara Rathner. Later in this episode, I am joined by our co-host, Elizabeth Ayoola, to talk with a listener about how they should weigh the pros and cons of accepting a job offer that requires a big lifestyle change. Is a bump in salary necessarily worth it?
Sean Pyles:
But first, we’re going to talk about how you can save money and probably your self-esteem by not caring what people think or comparing yourself to others. If you are a millennial who was bullied into purchasing crew socks because the TikTok youths made you feel bad about your ankle socks, this segment is for you.
So, Sara, I know this idea of not caring what other people think, not basing your self-worth on how you stack up to others, and using it as a way to save money is something that’s been top of mind for you lately, right?
Sara Rathner:
It actually came up in a Slack conversation with a coworker where we joked about having to Google certain Gen Z phrases to find out what they mean. And I remember being 22 in my first full-time job, and coworkers at the time would ask me to define millennial slang, and now I’m the old. It’s kind of freeing not understanding what people are talking about sometimes.
Sean Pyles:
That’s true.
Sara Rathner:
I mean, part of it is the lived experience. You just let time pass, and you become more comfortable just being you. You’ve just been you for a longer period of time, and you accept your flaws. Also, part of it is just buying stuff over the years and then coming to an understanding as to what purchases will bring me greater happiness long-term, and then which won’t. So if something doesn’t matter to me, I don’t follow the trend. A friend of mine who’s a couple of years older than me once told me that the decade of life I’ve just entered is the FU 40s, where you reach this level of peace. You focus on what’s important to you, and the rest just kind of fades away. And you know what? She was right. The second I turned 40, my ability to care just really went down. It might be because I have a toddler and my ability to care is just pretty low.
Sean Pyles:
Yeah. Your priorities have shifted.
Sara Rathner:
Yeah, mostly it’s just about preventing him from falling off of stuff at this point.
Sean Pyles:
That’s a good thing to focus on.
Sara Rathner:
I don’t have time to care about anything else.
Sean Pyles:
Sara Rathner:
So anyway, my point is this: I am going to continue to use the ankle socks I already own and love. Thank you.
Sean Pyles:
And that is your right. Okay. Let’s talk about how people can vanquish the allure of comparison or caring what people think about you and using consumer purchases to prop up the image that you project to the world. I have a few quick tips here.
First, please remember this simple humbling fact: No one thinks about you as much as you think about you. People are not thinking days later about the new outfit that you wore into the office or the vacation pics that you posted on Instagram because they are too busy thinking about their outfits and their photos that they posted on Instagram.
Next, realize that the dopamine bump that you get from a purchase just doesn’t last. It won’t be long before you are hunting for something else to spend money on that makes you feel good. And put those two facts together, and you can begin to see why spending money on something with the hopes of impressing people just isn’t the best investment.
Sara Rathner:
And again, if something you love is, say, fashion, you’re spending money on something that brings you a lot of joy, you enjoy the creativity of putting outfits together, you enjoy hunting for something that you love in stores, then do it. Just put more of your budget into that and maybe avoid purchases that don’t matter as much so you have more money to fund the things that you love and then also fund your savings because that’s important, but you’re not really spending money to impress people in other areas. I’m not knocking people who like buying clothes. I like it too. Just understand that if there’s one thing you love, you can’t have everything.
Sean Pyles:
Yeah, you’re doing it because you want to do it to make yourself happy, not because you’re trying to impress this vague idea of someone else who might think that you look cool.
Sara Rathner:
Right. And if you’re spending a lot of time scrolling on your phone, you kind of develop these parasocial relationships with social media influencers. They’re not your friends. They’re trying to sell you stuff. They get paid when they sell you stuff. This is a very one-sided relationship, and they’re the only ones that benefit.
Let’s talk about a few specific areas where you can easily cut back on just spending money to look cool. And we’ve talked about fashion and your wardrobe. And the thing is, compared to years ago, clothing quality is total crap even for more expensive items. But on the lower-cost side, you buy a T-shirt or a sweater, wear it once, wash it once, and then it becomes a tissue. Chasing trends, you know, this shape of clothing is in style this season, and this detail is in style that season, and then this color, and constantly buying new and going on these clothing hauls, you are going to have a closet full of garbage after a while.
Sean Pyles:
One of my personal and financial goals for this year was to rethink the way that I consume clothes because I am one of those people that likes to have clothes that make me feel good and that are kind of unique and different. So I set out to not buy any new articles of clothing, as in brand new pieces of clothing from a store. Since I do like getting unique vintage pieces, I allowed myself to shop on eBay where I find a lot of cool stuff or at local thrift stores, and I did let myself purchase things from there. So far this year, I found that I’m spending less on clothing, my environmental impact is lower, and I’m also just much less likely to buy something for the sake of updating my wardrobe to get the latest style or cut of jeans or whatever.
Sara Rathner:
And one thing, if you’re trying to minimize how much clothing you buy as some sort of personal challenge, you could try the capsule wardrobe thing, wear the same 20 pieces of clothing in different ways for a month, and force yourself to be creative, and in a way, that can make you fall in love with some of your old clothing again.
Sean Pyles:
Yeah, God, I have so many pieces of clothing that I’ve not worn in over a year, but I will not get rid of them because maybe one day I will wear them again.
All right, well, let’s talk about another area where you can stop trying to impress people — your car. A lot of people buy or lease a flashy car as a status symbol, but that can be one of the riskiest financial decisions that you can make, especially since the average price of a new car was north of $48,000 in July of 2024 according to Cox Automotive. And new vehicles, which often come with loads of computers and sensors, are also more expensive to repair. So you have an expensive car payment, insurance is not going to be cheap, and repairs will also be pricey. There’s nothing wrong with getting an affordable, reliable used car and just driving it until the wheels fall off. So, Sara, I know that your household recently bought a car, right? So how did you approach that?
Sara Rathner:
Yeah, we bought a used 2022 Honda CR-V hybrid a year ago when prices on used cars finally started to come down somewhat. We traded in a 14-year-old compact car that was worth maybe $1,200 at that point because we needed a car that fit the car seat and the stroller and all that stuff, and the compact car didn’t. We had to push the front passenger seat up all the way to fit the car seat. So, not ideal. It wasn’t great for longer-term family use, and we share one car, my husband and I. So we needed something that worked for all of us—both adults, the baby, and the giant dog.
So I have to say, honestly, this is one of the nicest cars I’ve ever driven. It has all of those fancy safety sensors that are standard now. I have a backup camera for the first time in my life. The thing is, this is not a sexy car; it’s a mom-mobile. The trunk always has reusable grocery bags in it. I’m just in that phase of life, and I hope that we drive this thing long enough that the backseat is eventually filled with my future preteen son and his sweaty friends after soccer practice.
Sean Pyles:
Well, that sounds really well thought out. It’s like the kind of car that fits your needs for where you are in life right now.
Sara Rathner:
Yeah, I was saying maybe one day we’ll hand it to him, and it’ll be his car, and it’ll be like, “This car is older than you.” And it’ll still drive well. That would be ideal.
All right, so Sean, you bought a car a couple of years ago. How did you think about that purchase?
Sean Pyles:
Well, here’s the part where I say that buying a car for the right reasons doesn’t mean that you have to buy a total clunker or something that’s completely utilitarian. I drive a lovely 2016 BMW X1, which I named Bette Midnight after the character Bette Porter from the show The L Word. Maybe TMI, but I do really love my car, and having a BMW might sound fancy and obnoxious, but I got an amazing deal on my car back in May 2020, and my payment is a little under $350 monthly. I justify it however I want to, basically, but here’s why I bought this car.
In high school and in college, I drove a severely busted Honda Civic where the muffler was rusted out and literally dragged on the road behind me. When it came time to get my first big-boy car, I wanted something just a little nicer than that. I will admit that as much as I love my car, I do live with a certain amount of cognitive dissonance where whenever I see a BMW driver on the road, I think, “Wow, that guy’s such a jerk.” And then I realize that that’s me, that I’m the jerk now.
Sara Rathner:
Yeah, I think if every one of us took a moment to really think about it, we’re all the jerk sometimes.
Sean Pyles:
Sara Rathner:
Yeah. So when you see your own face reflected in the window of a BMW that you don’t actually drive, you can just live with that emotion.
Sean Pyles:
Yeah. Give yourself some grace for being a jerk every so often, but within reason.
Sara Rathner:
Yeah, and then just try to be better.
Sean Pyles:
Sara Rathner:
Sean Pyles:
Well, I would say go back to what we talked about in the beginning. Get the car that you want for the right reasons because it’ll make you happy and not because you’re trying to look cool. Also, do a lot of research on the kind of car that you want. When I bought my car back in 2020, I had a spreadsheet, of course, and I listed the models that I was considering, their average annual repair cost, their miles per gallon, among other factors. And then also know your personal numbers, as in how much car you can afford. NerdWallet recommends spending no more than 10% of your monthly take-home pay on your auto payment alone. That’s not including insurance, gas, etc. And if you want to see how much car you can really afford, check out NerdWallet’s Auto Loan Calculator. You can find a link in this episode’s show notes post or by just searching “NerdWallet Auto Loan Calculator.”
Sara Rathner:
Yeah. And once you figure out what you could comfortably afford, then you can just stroll into a car dealership with a bit more confidence. And you should do that because car salespeople can smell uncertainty from several miles away, and they will pounce on you, and then you’ll end up buying the car that is not right for you because of pressure. So you don’t want to deal with that situation. So switching gears…
Sean Pyles:
Pun intended.
Sara Rathner:
Hard joke, right? Pun intended. Let’s talk about one more area where you could save money by not trying to impress people. And that is when you go out of your way to do really expensive stuff just for the goal of bragging about it online. I’m talking meals out where you photograph every dish or taking vacations just so you can post photos of the Eiffel Tower or whatever on social media. And the thing is, if expensive vacations or nice dinners bring you joy, that’s great. I love vacations. I take them as often as I can. That can be a priority in your budget, but just doing it to show off and then going into debt to do those sorts of things isn’t a great idea.
Sean Pyles:
Yeah. I was recently having dinner with a group of people, and one of the folks at the table was talking about their recent travels and how they went to X, Y, Z locale just to check the box and say they’ve been there, not because they particularly cared about the place’s historical or cultural significance. And that struck me as a little bit odd. When you’re traveling, you want to see the important destinations, of course, but that should be because you want to do it for yourself, not because you are impressing people in your social media feed who, again, don’t really care that much about whatever you’ve seen.
Sara Rathner:
Yeah. If you want to go to Venice, Venice is beautiful. You should see it. It’s a lovely city, and I recommend it, but not just for the ‘gram.
Sean Pyles:
Sara Rathner:
It should be because you actually want to go and immerse yourself and get to know people there and just really have a wonderful time and not just hop in for a day, check the box, and run out. Cities deserve our attention. They always do. So this gets to a good question that people should ask themselves whenever they’re making any sort of discretionary purchase, which is simply, why? Why are you spending money on this thing or this experience, and what do you expect it to do for you?
Sean Pyles:
Sometimes the answer is just, “It’ll make me happy.” And that’s actually one of the best answers that you can give. And so far as saving money, there are some really easy ways to have great experiences and not break the bank. Travel-wise, we Nerds often recommend traveling in the off-season if your schedule is flexible. You’re likely to find cheaper airfare, plus you won’t have to elbow your way through hordes of strangers to see the sites.
Sara Rathner:
I think that’s enough on how to save money by not giving a… You could fill in that throat-clearing section with any word you’d like. Before we move on to this episode’s money question segment, a reminder, listener, that we are running another book giveaway sweepstakes ahead of our next Nerdy Book Club episode. Our next guest is Jannese Torres, author of Financially Lit!: The Modern Latina’s Guide to Level Up Your Dinero & Become Financially Poderosa. That means powerful, by the way, which offers tips to young people on how to get started with managing their money.
Sean Pyles:
To enter for a chance to win our book giveaway, send an email to [email protected] with the subject “Book Sweepstakes” during the sweepstakes period. Entries must be received by 11:59 PM Pacific Time on August 22nd. Include the following information: your first and last name, email address, zip code, and phone number. For more information, please visit our official sweepstakes rules page.
Sara Rathner:
All right. Now, let’s get into my conversation with our co-host, Elizabeth Ayoola, and a listener about a big job change that listener is considering.
Welcome to NerdWallet’s Smart Money Podcast, where you send us your money questions, and we answer them with the help of our genius Nerds. I’m Sara Rathner.
Elizabeth Ayoola:
And I’m Elizabeth Ayoola. Now, if you have a money question for the Nerds, call or text us on the Nerd hotline at 901-730-6373. Again, that’s 901-730-NERD. You can also email us at [email protected].
Sara Rathner:
Follow us wherever you get your podcasts. And if you like what you hear, leave us a review and tell a friend. We are back, and we’re joined by a listener, Andrew, who has some questions about the trade-offs of leaving a work-from-home job for one that might pay more. Andrew is 37 years old and lives in South Florida. Welcome to Smart Money, Andrew.
Thanks. Thanks for having me. Big fan.
Sara Rathner:
So before we get into the conversation, a quick reminder that we’re not here to give you individualized financial advice. Our goal is to provide the information you need to make the most informed financial decision for your situation. Does that make sense?
Yes, ma’am.
Elizabeth Ayoola:
All right, awesome. So let’s get into it, Andrew. Now, I know you have some really good questions for us about the trade-offs of leaving your work-from-home gig for one that is in the office but pays more. However, before we get into that, can you talk to us about your financial situation generally right now? Tell us, what are your financial goals, and what are some of your pain points?
Currently, I am building up my emergency fund, which I know you guys are well-versed with that. Three to six months of expenses, erring more towards the six. After that, just looking to automate everything—529, Roth contributions, saving for vacations, saving for a new car. Real estate-wise, we’re all set. We own one, are landlords on two others. Not looking to rent, not looking to move anytime soon. So I’d say we’re stable. We only have the mortgages, no other debt.
Sara Rathner:
And tell us a little bit about your home and family situation. Who else lives with you? Who are you supporting? What are you working for basically?
I got the missus and two little ones. One is in grade school now, so that daycare payment stopped, thankfully, but the other one is still in it for another two years. That’s a pain point just because there’s not going to be any tuition or scholarship until she’s four. So we have at least a year or two of these monthly payments. That’d be the biggest pain point right now.
Sara Rathner:
And you mentioned having a spouse. Are they also working?
She’s a props master, which is a super cool job—gets to make things and see them on stage in theater productions—but that doesn’t pay what I would call a living wage, and that’s also part-time. She’s the primary transporter of the children and making sure they’re clothed and shuttled around to all their activities.
Sara Rathner:
So you got a call from a recruiter about a new job that might pay a decent amount more, might be enough of an incentive to leave the job that you have now, but it’s in an office and you live in a really high-traffic city. So you want to tell us a little bit about that and what questions that potential opportunity has brought up for you?
Definitely. As we know, a couple of years ago, we experienced quite the phenomenon worldwide, which shifted everyone to working from home. Honestly, it was kind of a dream for me, even pre-pandemic. 2016, 2017, I thought to myself, “All I need is a laptop, and I can do almost everything from home” at the job that I was at. And I did do that sometimes, even back then. I’d come home and work more; I’d still have to go to work in the morning.
So post-pandemic, it’s been a blessing for a lot of people. I feel, at least me personally, I’ve gotten to get in shape and hang out in a very pivotal time in the kids’ lives, from zero to six. But Miami, in particular, poses its challenges. One, it’s a high-cost-of-living city. The switching costs of moving closer to our central business districts is not easy. The traffic is pretty bad, but what’s worse is likely the road rage, as Miami is the first and third place road rage capital of the country. So that’s where the stress versus money payoff comes into play.
Sara Rathner:
And I will say this, that I loved your question because Elizabeth and I are both intimately acquainted with South Florida traffic. I’m from Miami originally, Elizabeth is living in South Florida. I learned to drive in Miami, so I know that road rage too well. How long would your commute be, and how much more money are we talking?
So commute minimum would be an hour, and this is 20 miles, maybe less.
Sara Rathner:
And this is each way?
Each way. It’s likely closer to 80 minutes, 90 minutes. And if there’s an accident or something, it might even be two hours each way. And I believe the position when I first emailed you guys was four days a week in the office, maybe five days a week in the office. For where that one was located geographically, it just didn’t make sense to basically give up 10, 12, 14 hours a week just in the car. I’d get to listen to a lot of your guys’ podcast for sure, but I’d run out of that pretty quick. The money, anywhere from $60,000 to $70,000 increase. I tried running an analysis—extra gas, extra wear and tear, oil, increased tax. Given where that one was, I think the resounding response and what all the Redditors told me was absolutely not.
Elizabeth Ayoola:
What comes to mind for me, I always find these scenarios a great way to revisit your core values. I think a good way, especially for listeners who may be in this kind of dilemma, to weigh it out is to think about what your values are and think about what your ideal life looks like. I know for me personally in my career, that has been a guiding light for me. I know before this job, I was working at a job that was pretty comfortable, but I had to go to the office every day, and one of my highest values is flexibility and freedom. So being able to have the freedom to work from home and choose my lunchtime or maybe do a quick workout in between meetings is really important to me. So did you find that you weighed your values when you were kind of making this decision as well? I know you just mentioned things like taxes and other kind of quantifiable things, but did you think about your values as well?
I did. And I don’t know if it’s a faux pas to mention another money expert on this show, but I listened to and read Ramit Sethi, which I’m sure you guys are familiar with him, and he talks about the concept of your rich life. And for the majority of the people he talked to, fixed income is way too high. Their income-to-housing cost is way too high. We’re in an okay position there to where I don’t need necessarily to earn $50,000 more, but part of my rich life, as silly as it may sound, is now Brazilian jiu-jitsu, and the gym is 12 minutes away, and I can go every night or as much as my wife would allow.
If I’m working a downtown job, getting home at 6:45, hungry, have to go to the bathroom, then I don’t know that I’m going to have the energy to then go out and fight. And that’s my primary way of keeping in shape. So I just know that if I take a downtown job where I’m there every day, getting my Chipotle every day for lunch, it’s likely going to cause some health implications.
Sara Rathner:
It’s funny because when you sent us this question, it seemed like you hadn’t yet made the decision, and in that time you have, and in this case, you decided not to pursue this opportunity. But in the future, if you were faced with a similar potential opportunity, a similar decision, is there a number or a type of role that would make you say yes? What in your value system might make you make a different decision in the future?
Interesting you should mention that because a mere 90 minutes ago, I was talking to a recruiter who messaged me on LinkedIn, but she presented a pretty interesting opportunity. The increase in base pay would be about $42,000, which is less than the other job, but it’s also closer. And this one’s hybrid—three in, two home. So despite less money, I do get two days back, and it’s about an hour total, less commuting per day. The role itself is non-managerial, which at this stage, that interests me a little more just with the little ones that I’m already managing at home. I don’t necessarily want a team of five or six analysts under me that I need to manage as well. The talk went fine with the recruiter, and she’s going to pass along my info to the in-house recruiter. So that one’s a little bit more compelling, even though it’s less money, which I guess reveals to me that I really do value the time and the travel more than the dollars.
Sara Rathner:
And I asked some questions about your family life because I think when you have a two-partner household and maybe one person brings in more money, it’s very easy to continue chasing even more money because that’s your role. You’re the one that is largely the financial breadwinner. And I like to hear that you’re also thinking about the effect it might have on everybody that’s at home, not just your children but also your wife, because your greater absence would put more on her plate with no additional income on her part, and it might even interrupt her ability to continue earning an income because there’s just more at home to do while you are not physically there. It’s not just about the money; it’s also about the time, and getting to use your own bathroom is the best.
Yeah, that’s true.
Elizabeth Ayoola:
It is. And I will just add, I personally think there are some scenarios where you may sacrifice convenience a little bit if you have a financial goal. I definitely know last year that was the situation for me. I was behind on my retirement savings, and I basically picked up a whole bunch of freelance work to try to boost my retirement savings. So it did mean that I had less free time. But it’s nice to have a timeframe. If someone else, again, another listener, is in this scenario and decides, “Hey, I really need that extra $60,000 or $70,000,” to maybe have a timeframe to it and say, “Maybe I can do this for two or three years just so I can accomplish my goal.” And then I can circle back to whatever lifestyle I was living before, if that is a possibility.
Yeah. And I think from a long-term goal, my experience has been that whenever I’ve switched jobs, I’ve gotten more, and that more has now become my new floor. I’ve never taken a pay decrease, fortunately. That might not be the experience for everyone, but that’s been my experience. It’d be almost preposterous for me to two or three years from now request $175,000 as a base, getting paid what I’m getting paid now. Whereas this most recent opportunity would put me in striking distance, base and bonus, of the 200s. So there’s also the long-term 5-10 year consideration. But what if we have more children? What if we want private school? What if we want to buy a single-family in the city? That’s at least a million dollars to buy a single-family in the city. Those are some other considerations I’m going through.
Sara Rathner:
Yeah, braces and summer camp don’t pay for themselves, unfortunately.
Elizabeth Ayoola:
Sara Rathner:
As your kids get older, your family’s needs get more complicated. Just when you think daycare tuition is off your plate…
Sara Rathner:
…in come the travel sports.
Sara Rathner:
So Andrew, you mentioned that obviously a really great way to boost your salary over time is to switch jobs. You typically get bigger salary bumps when you switch companies than you would if you were to stay put and just accept periodic raises. But in your current job, in your current industry, your current employer, do you see opportunities to bloom where you’re currently planted and perhaps pursue higher salary positions, promotions, or even just make the case for a major salary bump and not have to switch jobs and start going into an office?
I would say yes. I work for a very, very large bank, which means we have a lot of departments. Fortunately, the powers that be are very pro-horizontal mobility, get experience in this department, this specialty area, and then not necessarily, you could always come back, every department has their staffing need, but you still have those relationships, which is a very cool culture and one of the reasons I like where I’m at. I’ve also been promoted once, asked for a decent raise—nothing out of this world, a couple percentage points—but they’ve been granted.
There is some wiggle room within my position, and then if I’m willing to make sort of a not horizontal, not vertical move, sort of a lateral move, diagonal, that could be $10,000 to $15,000. And lastly, my boss has expressed interest in me taking their job and then them getting promoted. Honestly, that’s not something I’m looking to do right now. Again, don’t want to add stress, but again, I might hit a ceiling in my rank, and that’s the next logical step. So I’ve been thinking about that, but not something I’m really wanting to do within the next six months, I would say. So there is some opportunity where I’m at, but I can’t just come out and say, “Hey, I want a 40% raise. Look what they’re trying to pay me.”
Sara Rathner:
Another thing to think about too is as you move up the ranks in your career and you’re approaching your 40s, for a lot of people, it means management or at least a senior-level position that’s not management, but also recognizing what extra hours are you potentially going to have to work in this new role? Are you still going to be able to cut it at a 40, maybe 50 hours a week position, or suddenly there are going to be increased demands on your time?
Yeah, I think company culture is huge. At my former employer a couple of employers ago, they had what I would call a Wall Street culture, which personally, it just wasn’t for me—the 7:00 to 7:00 minimum and then the ambitious people working Saturday and Sunday. Kudos, I hope you have a yacht by now, but that just wasn’t for me. Fortunately, where I’m at has more of a Main Street culture. Obviously, as a manager, I would be subject to more deadlines and responsibilities to those above me and managing the people below me to make sure that we can fulfill all our deadlines. But I wouldn’t see myself working till 6:30 or 7:00. They’re very big on PTO, and when you’re on PTO, they’re very good on work-life balance, which is another reason I like where I’m at.
Sara Rathner:
So one more thing to think about, if you were to take an opportunity in the future that even is a hybrid role, and this is something that people might realize if they transition from work-from-home to hybrid or a fully in-person position: are there any home tasks that you will need to pay to outsource to make up for the fact that you’re not physically present to help with those tasks? And is that something that you would need to work into your budget to make working away from home possible for you?
For the first one, even though it was even more money than the second one, I thought, “Well, I’m just going to have to hire a maid and a chauffeur.” So what’s even the point when I could do those things and it’d be a wash? I’d be working more, and then I guess I’d stimulate the economy by hiring two people. But I’m not really looking to be an economic stimulant other than through spending. As we free up cash flow from what were former debt payments, we could bring someone in to tidy the home. I think that’s the first thing people usually look to do, at least us upwardly mobile Miamians. If I’m meeting all my investment quotas, then why not?
Sara Rathner:
That’s definitely the first thing I outsourced in the home. Using your money to free up your time is, to me, such a tremendous use of money. It can be used to add convenience, not just stuff, but also the absence of something that you have to do is incredibly powerful. So yes, definitely, if you increase your salary and want to increase your quality of life in some ways by outsourcing some tasks, then that is a great use of money. It allows you to be around for your family more often too.
I think a lot of it is how you frame it as well. My friend, who’s in construction, does it quite well. He’s willing to take a pay decrease if he can work a third less hours because he always calculates on a per-hour basis. Which if someone tells me their hourly salary now, I couldn’t tell you if that’s a lot or little because I haven’t been hourly in years. So him being salaried, he always does that exercise, and he’s like, “Oh, I’m getting paid $6 more per hour, but I have to work 30% more. Absolutely not worth it.” Like, what does $6 get you? But I just did the exercise for role two, and I did it on a monthly after-tax, what it would come out to. And it’s enough to cover mortgage and daycare—just the raise after tax.
So when it’s framed like that, that tells a pretty compelling story. Like, “Oh, would you switch jobs and have to drive eight more hours if just the increase would pay for your mortgage and your daycare?” which are most people’s biggest expenses. That sounds pretty good. But when you frame it, do you want to spend 8 to 10 hours a week in Miami traffic and possibly get rear-ended and have people cutting you off? There’s almost no amount of money that you’d want to get paid to do that. So I think the framing is just a very, very interesting concept as well.
Elizabeth Ayoola:
So Andrew, tell us now, we’ve had this conversation, after this conversation, what are you thinking? Do you feel like you have more tools to consider if or when another tantalizing offer comes along for a new job?
I think I do. And shout out to the NerdWallet website, there’s a tax estimator calculator on there where you can put your filing status, your age, your household income. From a strictly math standpoint, I think it’s easy. From a value standpoint, it’s definitely more nuanced. So thank you guys for your time and your input as well.
Sara Rathner:
Yeah, no, we’re happy to be part of your decision-making journey because this is something that I think a lot of people go through as they progress in their careers and as their lives get more full and potentially more complicated in hopefully good ways, but sometimes hard ways too. So if you’re out there listening and you’re weighing a potential job change or you’re itching to change jobs, it’s absolutely not just a financial exercise, but it is also a values exercise.
Elizabeth Ayoola:
It absolutely is. And for me, values usually take the cake. But I say that knowing that I have certain privileges, and I’m able to choose. I know not everyone has that option.
So on that note, that’s all we have for this episode. Now remember, we are here for you and your money decisions. So turn to the Nerds and call or text us your question at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. Visit nerdwallet.com/podcast for more information on this episode. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio. And what happens there is you’re able to automatically download new episodes.
Sara Rathner:
And here’s our brief disclaimer: We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Elizabeth Ayoola:
And with that said, until next time… turn to the Nerds.
I started making extra money and side hustling around 15 years ago, and since then I have done over 20 different side hustles. I started so that I could stop living paycheck to paycheck, and so that I could pay off my student loans quickly (I ended up paying off $40,000 in student loans in…
I started making extra money and side hustling around 15 years ago, and since then I have done over 20 different side hustles.
I started so that I could stop living paycheck to paycheck, and so that I could pay off my student loans quickly (I ended up paying off $40,000 in student loans in just 7 months thanks to side hustling!).
Some were short-lived, while others turned into steady streams of income (and are even my full-time income today). Each side job taught me something valuable about money, time, and effort. I juggled everything from reselling clothes online to being a virtual assistant, mystery shopping, answering online surveys, having roommates, and more.
There isn’t one best way to make extra money; it depends on what you’re good at, what you like, how much time you have, and more.
If you want to start a side job, my experiences can help you decide. I’ll tell you what I learned from each one I tried, so you can see the pros and cons of each.
My Side Hustles Review
Below is my review of the different side hustles I have tried over the years. These are in no particular order.
A picture of me blogging from several years ago 🙂
1. Blogging
Blogging can be a great way to earn money while writing about topics you love. I’ve done it for years and have seen how it can grow from a hobby into a full-time job.
I enjoy blogging for many reasons such as:
It’s flexible – You can blog from anywhere, anytime.
It’s affordable to start – You just need a computer and internet.
It’s a great creative outlet – Share your thoughts and passions with the world. I enjoy blogging and running a website.
While there are a lot of great reasons to start a blog, there are some challenges such as it can be time-consuming and there is no guarantee that you will make money.
When I first started my blog, I was working over 40 hours a week on it and making nothing. It took me 6 months to make my first $100 from it, actually!
But, it was all worth it in the end.
Blogging used to be my side hustle and it is now my full-time job where I have earned over $5,000,000 over the years.
I would definitely say that blogging is my favorite side hustle.
For me, it was a great second job because I could work on my blog before my day job, during lunch, after work, and on weekends. You can make your own schedule, which is a big bonus!
You can learn more about how to begin in my free How To Start a Blog Course here.
2. Paid online surveys
Paid online surveys are a way to make some extra cash when you have spare time. With just a few clicks and some honest answers, you can see money rolling in.
Companies want to know what customers think about their products and services and that is why they pay for surveys. By sharing your opinions, you help them improve and develop better offerings. In turn, they pay you for your time and insights.
You usually can earn anywhere from $0.50 to $5 per survey, depending on the length and how hard the survey is. And, surveys can take anywhere from around 10 minutes to an hour, so they are not high paying.
I’ve taken a lot of surveys over the years, and what I like about them is that you can do them whenever you want – in the morning, during lunch, before bed – whenever it works for you. There’s no strict schedule, and they are really easy to do.
My tips for success:
Sign up for multiple sites: This increases your chances of getting more surveys and making more money.
Complete your profile: Some survey sites match you to surveys based on your profile.
Be honest: Giving truthful answers ensures you stay eligible for more surveys.
Payment methods are typically cash via PayPal, bank transfer, or free gift cards (such as to Amazon, Walmart, Starbucks, and more).
You won’t get rich from these surveys, but it’s a nice way to earn some side cash. I know that some people think that surveys are a waste of time – but I know several people (including myself) who liked doing them because they are so flexible. I think the right mindset to have is that they will definitely not make you rich, and some can take a long(er) time to earn $5.
The survey companies I recommend signing up for include:
American Consumer Opinion
Survey Junkie
Swagbucks
InboxDollars
Branded Surveys
Prime Opinion
Five Surveys
PrizeRebel
Pinecone Research
3. Focus groups and paid research studies
You can make money by participating in focus groups. Companies pay for your opinions to improve their products and services.
This is similar to paid online surveys, but paid research studies and focus groups typically pay more.
User Interviews is a popular site where you can find paid research studies and focus groups.
Big companies like Pinterest, Spotify, Macy’s, Home Depot, Trip Advisor, and Amazon use User Interviews to get feedback on their new products, apps, and websites.
You can make $50 to $100 per hour, or even more, just by sharing your thoughts and feedback.
I did a user interview myself and got paid $400 for just one hour of work. It was easy, and everything was done online through a video call where they asked for my opinion on a new feature for a website.
Please click here to learn more about User Interviews.
Also, if you’re interested in paid medical research studies, then that can be a high-paying option as well. When my husband was younger, he took part in a few medical research studies to help us make extra money. He usually got paid about $1,000 for a week’s worth of time.
4. Dividends
Okay, so this isn’t exactly a side hustle, but it is a way that you can make more money so I wanted to include it here, especially since it’s one of my favorite ways to increase my income.
Dividends are an awesome way to earn passive income. You don’t need to do much work, and the money comes in. Many companies pay dividends to their shareholders regularly.
Here are a few benefits of investing in dividend stocks:
Regular income: You can receive payments quarterly or even monthly.
Low effort: Once you buy the stock, you don’t have to do much else.
A dividend is a portion of a company’s profits given to its eligible shareholders. You can receive dividends in cash, stock, or even options to buy more stock.
If you own shares in a company that pays dividends, you’ll get a dividend for each share you own.
For example, if you have 10 shares in Company XYZ and they pay $5 in cash dividends each year, you’ll get $50 in dividends for the year. Dividends are usually paid out quarterly, which means 4 times a year. So, in the example, the $5 in yearly dividends would likely be paid as $1.25 per quarter for each share you own.
You can learn more at What Are Dividends & How Do They Work? A Beginner’s Guide.
5. Buy and sell flipping
Flipping items is a great side hustle, and this is when you buy items at a low price and sell them for more.
The benefits of buy and sell flipping include:
Flexibility: You can flip items in your free time.
Profitable: Potential to earn anywhere from $50 to $5000 a month.
Fun: The thrill of finding good deals and making a profit.
I have flipped many items for resale over the years, and I even had a small reselling business at one point. It’s a fun way to make extra money.
While flipping items by buying and selling them for profit can be exciting, it has some downsides. One big risk is that you might not always make a profit, especially if the market drops or you overestimate the item’s value. It can also take a lot of time to research products, find good deals, and manage your listings. There’s tough competition too, as many people are trying to flip items, which can lower prices.
You can learn more at How I Made $40,000 In One Year Flipping Items.
6. Sold clothing
Selling used clothing can be a great way to make extra money. You can find clothes to sell in many places: thrift stores, clearance aisles, garage sales, and even your own closet.
For me, I liked to sell clothing on eBay as well as in person to places like Plato’s Closet. There are many more options these days, such as Poshmark and Facebook Marketplace.
Selling used clothes as a side hustle has its ups and downs. On the plus side, it has low start-up costs because you can start with clothes you already own, and it’s eco-friendly, supporting sustainable fashion. You also get to work on your own schedule, and there’s a high demand for secondhand clothes, especially trendy or vintage items. But it can take a lot of time to sort, clean, photograph, and list the clothes. Plus, shipping costs can cut into your profits, especially for heavier items.
I’ve sold a lot of clothing over the years, both online and in person (I also used to work at a secondhand clothing store for many years). I even had a small clothing resale business at one point, so I have plenty of experience in selling used clothes!
You can learn more at 16 Best Places To Sell Clothes For Cash.
7. Social media management
Social media management is a great side hustle if you enjoy creating content and engaging with people online.
Social media managers handle businesses’ social media accounts like Facebook, Instagram, and Twitter. They create posts, reply to comments, and help grow their followers.
Some benefits include:
Flexible hours: Many times, you can work anytime, making it easy to fit around your main job. This is because you can schedule social media posts to go out at the exact time that you want.
You can be creative: You can express your creativity through different types of content.
Work from anywhere: All you need is a laptop and internet.
But, there are some cons too. This wasn’t my favorite side hustle, mainly because it was stressful at times. It is very time-consuming (creating good content and engaging with followers can take a lot of time), there is constant learning (social media trends change quickly, so you need to keep learning new skills), and some clients may have high expectations and tight deadlines.
If you like being creative and spending time online, social media management can be a fun and rewarding side hustle.
8. Virtual assistant
Being a virtual assistant is one of my favorite side hustles. It’s flexible, and you can work from anywhere. You handle tasks for other people or businesses, like managing emails, scheduling appointments, or doing research.
Why I like virtual assisting:
Flexible hours: You set your own schedule.
Work from home: No need to commute.
Variety of tasks: You can decide what virtual assistant tasks you want to provide.
Working as a virtual assistant is a great way to make extra money. It gives you flexibility, a variety of tasks, and you can get started with just a computer and an internet connection.
You can learn more at Best Ways To Find Virtual Assistant Jobs.
9. Freelance writer
As a freelance writer, you get to write for different clients and websites. You can work from home and set your own hours. This side hustle can be very flexible, especially if you enjoy writing.
I’ve been a freelance writer for many years, and I really enjoy it. I’ve written for lots of different websites and companies, and I’ve made good money doing it.
The positives of being a freelance writer include:
Flexible schedule: You can write during your free time.
You get to decide what you want to write about: You get to write about different topics.
Work from home: No need for a commute.
There are some cons, though, such as income can vary, with some months being busy while others are slower. Finding clients requires actively searching to keep work steady. Plus, meeting deadlines can also be stressful, adding pressure to the job.
Freelance writing is a great side hustle if you love to write and want to make extra money. It takes time to build a steady income, but it can be very rewarding.
You can learn more at 14 Places To Find Freelance Writing Jobs – (Start With No Experience!).
10. Receipt scanning apps
Using receipt scanning apps is an easy way to earn some extra money. You just take a picture of your receipts from shopping, and these apps give you points or cash back. Here are some of the best apps to try:
I’ve been using receipt-scanning apps for years, and I love how easy they are to use. You can earn points or cash without spending much time. Plus, since I already have the receipts, it’s great to make some extra money by doing almost nothing.
My favorite receipt-scanning apps are:
I like to use both Fetch Rewards and Ibotta on all of my receipts (yes, at the same time to stack rewards).
Receipt-scanning apps can be handy, but they do have some downsides. One of the main drawbacks is that the rewards are usually small, so it can take a while to earn a significant amount. You also have to remember to scan receipts regularly, which can be time-consuming and easy to forget.
For me, though, I like to use them on all of my receipts as it only takes a quick moment to do.
11. Mystery shopping
When I had student loans to pay off, I turned to mystery shopping to make extra money. It didn’t make me rich, but it helped increase my income and allowed me to enjoy some free meals and free stuff (like free makeup and household goods).
Mystery shopping involves acting like a regular customer and then reporting on your experience. You might review a restaurant, shop at a store, or even evaluate a phone call. Companies use your feedback to improve their service.
What I like about mystery shopping:
Extra cash (typically $10 to $15 per mystery shopping task)
Free items or meals (you’re usually given an amount to spend in the store or restaurant)
Flexible schedule
Mystery shopping helped me make around $100 to $200 a month.
Joining a reliable mystery shopping company is important, though, as there are a lot of scams. I used Bestmark and had a good experience with them.
Mystery shopping won’t replace a full-time job, but it’s a fun way to make some extra money.
You can learn more at How To Become A Mystery Shopper.
12. Babysitter
Being a babysitter is a flexible side hustle. You can choose your own hours and accept jobs that fit your schedule.
Parents often need help on weekends or evenings, which can be perfect if you are busy during the day.
What I liked about babysitting:
Good pay – around $15 to $25 per hour (depending on where you live)
Helps develop responsibility
Flexible hours
Of course, there are downsides to being a babysitter, such as it can be tiring watching kids for long periods, and sometimes this side job means that you’ll be working late nights or weekends.
I was a babysitter when I was younger and I really liked it. The kids I babysat were fun to be around!
13. Coaching
Coaching can be a great side hustle. You get to help people grow and achieve their goals. It also offers flexibility because you get to be your own boss and decide your work hours.
I used to offer blog coaching in the past, and I enjoyed helping people learn how to grow their blogs and make money blogging.
It was also really easy for me to do, as I have been blogging for many years and have learned a lot about what to do and what not to do.
If you have the expertise and enjoy motivating others to improve, then there is probably a topic that you can coach others on.
14. Course creator
Creating an online course can be a game changer for your income. I launched my first course, Making Sense of Affiliate Marketing, in July 2016. Within the first year, it brought in around $434,698. This wasn’t due to any fancy marketing techniques but mainly through word-of-mouth.
Even though the course was successful, it didn’t come easy. I was nervous about it, especially since it was my first. I had worries that no one would be interested. Plus, many people said that your first course usually isn’t great.
Yet, the desire to help others understand affiliate marketing kept me going. By sharing my knowledge, I aimed to help bloggers increase their income. Online courses are beneficial because they can include interactive materials, workbooks, and community support, which go beyond what an ebook offers.
Here are some success stories from my course:
One student increased their monthly income from $272 to $4,400.
A new blogger got their first affiliate sale just two days after taking the course.
Another went from earning $87 a month to over $1,700 the next month.
And I have helped countless bloggers earn well over $100,000 a year from their blog and turn it into a full-time income.
Creating a course is a lot of work, but it can also be very rewarding. It allows you to reach a wider audience and can become a substantial income stream. If you have knowledge to share, you may want to try creating your own online course.
This is a business idea that I recommend more people start! I enjoy taking courses from people and sign up for them all the time. I love learning, and so do others.
You can learn more at How I’ve Made Over $1,000,000 From My First Course Without a Big Launch.
15. Affiliate marketing
Affiliate marketing is one of the most popular side hustles. It’s easy to start and doesn’t need a lot of money up front.
You promote products and earn a commission for every sale made through your referral link. This can be done on social media, a blog, a YouTube channel, and more.
What I like about affiliate marketing:
Low start-up cost: You don’t need much money to start.
Flexible schedule: Work when you want.
Passive income: You can earn money even when you’re not working.
Affiliate marketing can be a fun and profitable side hustle. Just remember to stay patient and persistent!
You can learn more at What You Need To Know About Affiliate Marketing For Beginners.
This small house we owned had 4 bedrooms and we rented out two of them.
16. Rent out a room in your home
Renting out a room in your house can be a simple way to make extra money. If you have unused space, like a spare bedroom or basement, you can turn it into a rental.
I have had several roommates in the past, and I liked this side hustle a lot.
What I liked about making extra money by renting out a spare room:
Extra income to help pay the mortgage
If you have unused space, then this can be a good way to fill it
Of course, there are challenges to having a roommate, and it isn’t always perfect. Sometimes, it can be hard to share common spaces (like the kitchen and bathroom), and it can also take time to adjust to someone else’s lifestyle.
Renting out a room isn’t for everyone, but it can provide steady income with minimal effort.
17. Shop at cash back websites
Shopping at cash back websites is an easy way to earn extra money. These sites give you a percentage of your purchase back as cash. You just have to sign up, shop through their site, app, or browser extension, and earn rewards.
I like cash back sites because they are easy to use and you don’t have to pay anything extra for using them.
Shopping through cash back sites can give you a nice little bonus on things you already planned to buy. It’s like getting paid to shop.
My favorite cash back sites are:
Rakuten (for online shopping like clothing, home goods, etc.)
Upside (for gas)
Honey (for online shopping like clothing, home goods, etc.)
Fetch Rewards (for groceries)
18. Earn credit card rewards
Using credit cards (the smart way) can help you earn rewards like cash, travel points, and more.
I’ve been using rewards credit cards for years, and now they’re the only cards I use. They help me save money on travel, earn cash back, and more.
By choosing the right credit card and using it wisely, you can enjoy great rewards and make the most of your spending.
Remember, carrying a balance on your credit card can lead to interest charges, which can outweigh the benefits of rewards. Always try to pay off your full balance each month to avoid these fees.
You can see my favorite credit card rewards at Best Rewards Credit Cards For This Year | What You Need To Know.
19. Brand ambassador
Being a brand ambassador is one of the more popular side hustles.
You represent a company and help promote its products. Often, you act as a public spokesperson. You can find opportunities on Facebook and many cities have brand ambassador groups where gigs are posted.
Brand ambassadors can earn between $15 to $20 per hour. Some high-end gigs can pay up to $100 per hour.
Benefits of this side hustle include flexible hours and the chance to work for brands you like. You may be able to get free products or swag, too, and this is one thing I really liked about being a brand ambassador in the past.
20. Newspaper delivery
Delivering newspapers can be an easy way to make money. It’s a job you can do before school or work, and it lets you get exercise too. You may drive, ride your bike, or walk to each house and leave the newspaper by the door.
The benefits of newspaper delivery include:
Exercise: If you walk or ride your bike, you can get plenty of fresh air and exercise.
Scheduling: Most routes are in the early morning, so you still have the rest of the day free.
Tips: Some customers might give you tips during holidays or for good service.
But, there are some downsides, with the main one being that you typically have to wake up really early for this job. For newspaper delivery, you usually have to wake up very early in the morning, often around 3:00 to 5:00 AM. The exact time depends on how big your delivery route is and what the newspaper company requires. The goal is to have all the newspapers delivered by the time most people wake up, usually around 6:00 or 7:00 AM, so starting early is really important.
The other main negative is that a big collection of newspapers is, of course, heavy!
When I was younger, I helped a friend’s family with their newspaper run whenever I slept over at their house. They used their van to deliver a bunch of newspapers, and I got to tag along.
21. Help others with their resume
Helping others with their resume can be a rewarding side hustle. You can earn extra money while also making a big difference in someone’s job hunt.
When I was in my last year of college as well as about a year after I graduated, I helped several people with their resumes. I didn’t charge a lot (and many times worked for free or for a free meal), but I liked looking at resumes and finding ways to make everything sound better.
I was also really good at it and it came so easy to me!
Some benefits of this side hustle include:
Flexibility: You can do this from home.
High demand: Many people need help with their resumes.
Work at your own pace: There’s no rush, and you can take on as many clients as you want.
By helping others with their resumes, you can earn money and provide help. It’s a great way to use your skills and make a difference in someone’s life.
22. Enter contests and giveaways
Entering contests and giveaways can be a fun and rewarding side hustle. You will definitely not win every time, but the more you enter, the higher your chances. People have won cash, gift cards, vacations, and electronics through these events.
You can spend a little time each week entering different contests. You can find them online, on social media, and in emails from brands you follow. Some people set aside about an hour each week to enter as many as they can find.
I found success this way. For example, I once won $10,000 from a financial blog’s anniversary contest, and this was a major win early on in my side hustle journey.
Remember, entering contests should be fun. Think of it as a hobby that could pay off with some great surprises. You most likely won’t get rich nor win the lottery doing this.
This is a screenshot from this month. I earned around $300 playing games on my phone.
23. Rewards sites (GPT sites)
Rewards sites, also known as GPT (Get-Paid-To) sites, are platforms where you can earn money by doing simple tasks online.
Tasks you might do include:
Taking surveys
Reading emails
Playing games
Shopping online
Trying new apps and services
Clicking ads
Rewards sites have been around for a while and have proven to be a reliable way to earn some extra cash. Though the payouts are often small, they can add up over time. For instance, Swagbucks has paid out over $80 million to its users.
Using multiple sites can help maximize your earnings. It’s easy to do tasks during your free time, making it a flexible way to earn money without a huge time commitment.
It’s key to choose reputable sites to make sure that you get paid for your efforts, so I recommend that you stick with popular, well-reviewed platforms to avoid scams.
Rewards sites will most likely not replace a full-time income, but they can be a fun way to get some extra spending money.
Here’s a quick list of the best GPT sites:
24. Test websites (User Testing)
Testing websites, also known as user testing, is a popular side hustle. You get paid to visit a website or app and give feedback on your experience.
You will need a computer, a reliable internet connection, and sometimes a microphone.
User testing is flexible. You can do it in your free time from the comfort of your home. This side hustle is great if you like trying new things and providing feedback.
I have personally been paid to do user testing in the past, as well as paid others to do user testing on this very website, Making Sense of Cents. I thought it was an easy side hustle where you just share what you honestly think of a website.
25. College textbook resale
Selling your college textbooks is a great way to make some extra money.
When I was in college, I sold all of my college textbooks once I was done, and I always tried to make the most money (so, that typically meant that I never sold it directly back to my college bookstore, because they usually paid the least amount).
Reselling college textbooks as a side hustle has its ups and downs.
On the plus side, there’s a high demand for cheaper, used textbooks, so you can make good money if you buy low and sell high. It’s easy to start, especially if you begin with your own used books, and it’s a great way to encourage reusing materials.
But the market is seasonal, with most demand at the start of each semester, so your income might be inconsistent. New editions can come out, making older books less valuable, and storing a lot of books can be tough. Plus, shipping heavy textbooks can cut into your profits if you’re not careful.
Recommended reading: 17 Best Places To Sell Used Books For Cash
Frequently Asked Questions
Below are answers to common questions about finding the best side hustle.
What are the top side hustles that can bring in good money?
Top side hustles that can bring in good money include freelancing, blogging, flipping items for resale, and renting out rooms in your home.
How can I find side hustles that pay me every week?
You can find weekly pay side hustles through gig economy platforms like Uber, Lyft, and DoorDash. Freelancing on websites like Upwork or Fiverr might also pay weekly, depending on your agreement with clients. Another option is finding part-time jobs at local businesses that pay weekly wages.
Can you suggest some side hustle ideas I can do from my house?
There are several home-based side hustles. You can start freelancing in areas like writing, graphic design, or social media management. Another idea is to sell virtual assistant services. Teaching online courses or tutoring students in subjects you excel at is also a great way to earn from home.
What side jobs are out there for someone with no experience?
There are many side jobs for beginners. You can try pet sitting or dog walking through apps like Rover. Babysitting is another option if you like spending time with children. Delivery driving for companies like Uber Eats or Instacart doesn’t require much experience and can be started quickly too.
My Favorite Side Hustles – Summary
Now that we have gone over my full list, I want to talk about one of the main deciding factors of a side hustle.
Your time is important. Some side jobs take a lot of time but don’t pay well, while others pay more with less time.
Think about how much free time you have after your main job and how much money you want to make. This balance is very important. Track the hours you work and the money you earn to see if it’s worth it. The best side job fits into your life without stressing you out.
Also, another important deciding factor is choosing a side hustle that aligns with your skills and lifestyle. If you’re good at something, you’re likely to enjoy it more and perform better.
So, I recommend thinking about your current skills and hobbies. Matching your side hustle to your skills makes it easier and more enjoyable. Plus, you’re more likely to find success and earn extra income.
The FHA Streamline Refinance program is a simplified version of a mortgage refinance for borrowers who already have a loan backed by the Federal Housing Administration (FHA). It’s possible for borrowers to refinance without a new property appraisal, credit check, or income verification — but owners do have to be current on their existing FHA mortgage.
The FHA Streamline Refinance does have its limitations. For example, if you need cash out or want to eliminate the mortgage insurance premium, you can’t do it with the FHA Streamline Refinance and you’ll need to find another mortgage type.
We’ll explore exactly what is an FHA Streamline Refinance, how it works, what the requirements are, the process of getting one, and what the benefits are to help you determine if this program is right for you.
What Is an FHA Streamline Refinance?
An FHA Streamline Refinance refinances an existing FHA loan into a new FHA loan with limited credit and underwriting requirements for the borrower. It’s faster and sometimes cheaper to obtain than a full refinance, especially since it doesn’t require a new appraisal.
Typically, the main goal is to lower monthly payments by refinancing to a lower interest rate, but if the mortgage term is reduced or the loan type is changed to a fixed-term loan, that could also be considered a “net tangible benefit” of the refinance by the FHA.
There are two types of FHA Streamline Refinance: credit qualifying and non-credit qualifying.
Credit Qualifying
As the name implies, your credit and income are used to qualify for an FHA Streamline Refinance and for the lowest interest rates. An appraisal isn’t needed for this type of refinance.
Non–Credit Qualifying
A non-credit qualifying mortgage doesn’t require the lender to assess your credit or ability to repay the loan, but all borrowers on the original loan must remain on the new loan. Like the credit-qualifying refinance, a non-credit qualifying one doesn’t require an appraisal, but there are other eligibility requirements.
Recommended: FHA Loan Buyer’s Guide
Eligibility Requirements for FHA Streamline Refinance
To qualify for an FHA Streamline Refinance, the borrower must derive a “net tangible benefit” from the refinance, such as a lower interest rate, a shorter loan term, or a switch from an adjustable-rate mortgage to a fixed-rate mortgage. If you’re considering a refinance, you might want to run your numbers through an FHA loan calculator to see if a refinance will save you money.
Other requirements relate to the loan type, occupancy, credit score, and payment history.
Loan Type
The loan being refinanced must be an existing FHA loan. The refinanced loan will remain an FHA loan, which means you’ll still need to pay mortgage insurance. If you’re current on your payments, it could make sense to take a look at other types of mortgage loans beyond FHA.
Occupancy Status
An FHA Streamline Refinance can be used in the following occupancy scenarios:
• Owner-occupied one- to four-unit properties
• HUD-approved second homes
• Investment properties with existing FHA-insured mortgages
Credit Score and Payment History
There is no credit score requirement for the FHA Streamline Refinance under the non-credit qualifying option. However, FHA Streamline Refinance rates can be better for those who use the credit-qualifying option and supply credit qualifications to the lender.
Borrowers do need to have made at least six payments and wait 210 days before applying for a refinance on their FHA loan. Borrowers must also be current on their mortgage payments with no delinquencies.
Recommended: Minimum Down Payment for an FHA Loan
Benefits of an FHA Streamline Refinance
Here are a few of the ways in which a homeowner may benefit from the FHA Streamline Refinance program:
A Lower Interest Rate
For borrowers who bought a home when their credit was bent out of shape or interest rates were high, FHA Streamline Refinance rates could be lower than the rate they currently have.
A Different Loan Type
If you have an adjustable-rate mortgage, the FHA Streamline program can change it to a fixed-rate mortgage and help stabilize your payments.
Remove or Add a Borrower
If you need to remove a borrower from the loan, such as the case with death, divorce, or separation, you may be able to do it with a streamline refinance. This may be done if the borrower can supply supporting documentation, such as a divorce decree.
Pay Off a Loan Faster
By refinancing to a shorter loan term, you’ll likely pay off the loan faster and save yourself a good amount of money.
Avoid an Appraisal
The FHA Streamline Refinance uses the value of the home from the original FHA mortgage, with a maximum loan amount of the existing loan balance. Because these numbers don’t need to be adjusted upwards, no new appraisal is needed.
Reduce Closing Costs
There are costs involved with an FHA Streamline Refinance, but they may be less due to the reduced requirements. For example, you do not need to pay for an appraisal with an FHA Streamline Refinance.
Close Quickly
With reduced documentation and underwriting requirements, and no appraisal required, it’s possible to close on the loan relatively quickly.
FHA Streamline Refinance Process
The FHA Streamline program reduces the documentation and underwriting requirements for the lender, which usually translates into a quicker refinancing process. Here’s what you’re looking at when it comes to documentation, timeline, and costs.
Documentation Needed
Your lender will be able to see your payment history with a credit check, but there are a few more documentation requirements. If you’re applying as a non-credit qualifying borrower, these include:
• Residency verification, such as a utility bill in the occupant’s name
• Evidence of payment history for the past 12 months
• If a secondary residence, approval from jurisdictional FHA Homeownership Center
If you’re applying with a credit-qualifying mortgage for the lower rate, you’ll likely need to provide the typical documentation required by the lender, such as:
• Credit score and history
• Proof of income and employment history
• Bank statements
• Debt obligations
• Assets
Lenders use this information to determine if you have enough income to qualify for the loan, what rate you qualify for, and to verify funds to close the loan.
Refinancing Timeline
An FHA Streamline Refinance takes less time because there’s no appraisal required. In a general sense, the process looks something like this:
• Find FHA-approved lenders. For an FHA Streamline Refinance, lenders must be approved by the FHA as a direct endorsement lender to qualify.
• Apply. Talk with lenders to see if your situation fits with this type of mortgage. Apply with your top choices, noting the closing costs and interest rates offered by lenders.
• Submit documentation. Since there are fewer forms to find and submit, you may be able to complete your part of the application faster.
• Wait for underwriting. Since the loan isn’t contingent upon an appraisal, income, or credit, your loan will be ready to process more quickly than other types of loans. Alas, it’s still a government-backed loan, so you could be waiting 30 days or more.
• Close on the loan. Once underwriting has approved your loan, you can close and start making your new payment.
Upfront and Closing Costs
When you refinance with an FHA loan, you’ll need to pay an upfront mortgage insurance premium on the new FHA loan. You may be able to get a refund on a part of your mortgage insurance premium that you previously paid.
You also need to pay other closing costs, such as title insurance. Since the loan amount can’t be greater than the existing loan balance, these closing costs cannot be wrapped into the loan. However, you may see lenders offer no-closing-cost loans in exchange for a higher interest rate.
The Takeaway
An FHA Streamline Refinance makes sense in certain situations, but it’s not always the right option. Going through the FHA Streamline process makes sense if you don’t want your credit pulled or you’re looking to save time or money on a refinance. These types of refinances don’t require an appraisal and there are fewer closing costs as a result.
However, you can’t get rid of your monthly mortgage insurance payment and you won’t be able to refinance to a higher loan amount if you need more than $500 cash out. It’s common to see borrowers refinance to conventional mortgages over FHA mortgages to eliminate mortgage insurance and take cash out.
It all comes back to your goals. If you want a mortgage without the mortgage insurance premium or need cash out, you’ll want to look into other types of mortgages. But if you want to keep an FHA mortgage and go through minimal underwriting, then an FHA Streamline may be the right move for you.
SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.
Another perk: FHA loans are assumable mortgages!
FAQ
Can you remove mortgage insurance with an FHA Streamline Refinance?
No, you can’t remove mortgage insurance from an FHA Streamline Refinance. All FHA loans require mortgage insurance, even if you’re replacing one FHA loan with another.
How long does an FHA Streamline Refinance take?
Give it around 30 days. How long it takes to close on an FHA Streamline Refinance depends a lot on your lender, and it can be quicker due to the limited underwriting requirements. When there’s no appraisal, no loan-to-value ratio, and no credit requirement, the loan can be completed faster than when it was originally funded.
Can you get cash out with an FHA Streamline Refinance?
The maximum amount of cash you can take out from an FHA Streamline Refinance is $500. If you need more, you’ll want to look for another mortgage.
Photo credit: iStock/Jacob Wackerhausen
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
If you have military experience, a loan from the U.S. Department of Veterans Affairs could help you take a giant step toward becoming a homeowner. VA loans come with a number of benefits — notably, they require no down payment. But first, you need to understand the VA loan pros and cons to make sure it’s the right choice.
What Is a VA Loan?
A VA loan is a federally guaranteed loan administered by the U.S. Department of Veterans Affairs. Even though the VA sets the basic eligibility requirements and guarantees the loan, borrowers actually apply to private lenders for these loans, after first obtaining a certificate of eligibility from the VA.
Definition of a VA Loan
What is a VA loan? It’s a type of mortgage designed to help improve access to home ownership for veterans, service members, reserve members, National Guard members, and surviving spouses. It comes with several noteworthy characteristics that make it attractive for homebuyers, like having no down payment requirement and limited closing costs.
Eligibility Requirements
In order to get preapproved for a VA loan, you must get a Certificate of Eligibility that ensures you meet the service qualifications. Here are the basic requirements for each type of borrower:
• Veteran: Served at least 90 continuous days of active-duty service.
• National Guard: Served at least 90 days of active duty (there are additional eligibility options if you served before August 2, 1990).
• Reserve members: Served at least 90 days of active duty (there are additional eligibility options if you served before August 2, 1990).
• Spouses: You’re the surviving spouse of a veteran or the spouse of a veteran who is missing in action or being held as a prisoner of war.
Lenders also evaluate your VA loan approval and mortgage amount based on your credit score, income, debt, and assets. The VA does not impose a minimum credit score requirement, although many lenders require a credit score of at least 620.
VA Loan Benefits
Are VA home loans good? They do come with a number of benefits. A big one is that there’s no down payment required. As long as your debt-to-income ratio can handle the mortgage payments, you can borrow up to the full sales price of the home with a minimal amount of cash at closing.
Pros of VA Loans
Here is what to think about as you weigh VA home loan pros and cons:
• No down payment requirement: You don’t have to put down any cash on your home purchase. Conventional loans typically require at least 3% down for first-time homebuyers and FHA loans require 3.5% down for all borrowers.
• No mortgage insurance: Other mortgages require that you pay private mortgage insurance when your down payment is less than 20%. There is no comparable fee with a VA loan.
• Lower interest rate: Not only are VA loan interest rates usually lower than conventional loan rates, you can apply for a VA Interest Rate Reduction if rates drop after closing.
• Flexible credit requirements: Lenders usually require a minimum credit score of 620. But technically, there is no minimum set by the government.
• No use limits: You can get a VA loan multiple times throughout your life; in fact, there are no limits on how many times you can use one to buy a home.
Cons of VA Loans
In addition to these advantages, there are also some potential drawbacks of choosing a VA loan for your mortgage.
• Funding fee: This is a one-time fee that is paid either at closing or rolled into your mortgage balance. The fee varies depending on how many times you’ve used the VA loan and the size of your down payment. For instance, a first-time VA loan borrower with a 0% down payment would pay a 2.15% funding fee.
• Strict appraisal process: All mortgage lenders require an appraisal, but your appraiser must be VA-approved with this type of loan.
• Property eligibility requirements: The home inspection must also meet VA-specific requirements, which means you can’t finance a major fixer-upper. For instance, it needs a working HVAC system, no lead paint, and adequate roofing, among other criteria.
VA Loans vs. Conventional Loans
When comparing a VA loan vs. a conventional loan, there are some significant differences to consider.
Down Payment Requirements
A VA loan has no minimum down payment requirement, while a conventional loan requires at least 3% down for first-time homebuyers. In the first quarter of 2024, the median home sales price was about $420,000. With a conventional loan on that amount, a first-time homebuyer would need a down payment of at least $12,600.
Credit Score Requirements
Although there’s no agency-mandated minimum credit score for VA loans, most lenders set a minimum of 620 — the same you’ll typically find with a conventional mortgage.
Mortgage Insurance
Although you may be required to pay a one-time funding fee with a VA loan, there’s no ongoing mortgage insurance like you may have to pay with a conventional mortgage.
Private mortgage insurance (PMI) is required with a conventional loan if your down payment is less than 20%. You may have a one-time, upfront payment at closing, or your PMI may be split up between up-front and monthly premiums that are rolled into your mortgage payment.
When to Choose a VA Loan
VA loans pros and cons may matter more or less depending on your personal situation. Some examples of when a VA loan may be the best choice include:
• Buyers who don’t have cash for a down payment or want to preserve cash for other goals may want to go with a VA loan after they weigh VA home loan pros and cons.
• Buyers who can’t make a 20% down payment (who would have to pay for private mortgage insurance if they obtained a conventional mortgage loan) might find a VA loan especially appealing.
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
Questions? Call (844)-763-4466.
Alternatives to VA Loans
Even if you’re eligible for a VA loan, it still makes sense to look at other options. Three other common types of mortgages include FHA loans (backed by the Federal Housing Administration), conventional loans, and U.S. Department of Agriculture loans.
FHA Loans
An FHA loan is another federally guaranteed mortgage with flexible credit requirements. To qualify for a minimum down payment of just 3.5%, you need at least a 580. But you can still qualify with a 500 credit score, as long as you pay at least 10% down.
With a lower down payment, you must pay a mortgage insurance premium. There is an upfront fee at closing, as well as a monthly fee. If your down payment is less than 10%, the fee stays on for the life of the loan unless you refinance to a new mortgage.
Conventional Loans
Some conventional mortgages allow for a down payment as low as 3% for first-time homebuyers, though others may require 5%. You must pay private mortgage insurance for down payments under 20%, but that fee usually drops off once you have 20% equity in your home. The credit requirements are usually a little higher with conventional loans.
USDA Loans
A USDA loan is designed for individuals looking to buy a home in a rural area. You can explore eligible properties on the USDA website. However, you also need to meet certain income limits based on your county and family size in order to qualify for this 0% down payment mortgage.
The Takeaway
Weigh VA loan pros and cons to make sure you choose the best mortgage for your personal financial situation. Among the things you’ll want to consider are your credit score and how much, if anything, you have saved for a down payment on a new home.
SoFi offers VA loans with competitive interest rates, no private mortgage insurance, and down payments as low as 0%. Eligible service members, veterans, and survivors may use the benefit multiple times.
Our Mortgage Loan Officers are ready to guide you through the process step by step.
FAQs
How hard is it to get a VA loan?
VA loans have more flexibility with application requirements compared to other types of loans, as long as you meet the military service requirements. There may also be additional restrictions on the type of home you buy, especially if you’re eying a fixer upper.
Are down payments required for a VA loan?
No, you may get a VA loan with no down payment, as long as your debt-to-income ratio suggests that you can make the monthly mortgage payments.
What credit score do I need for a VA loan?
The VA itself does not require a minimum credit score but most lenders look for a minimum credit score of 620 for VA loans.
Photo credit: iStock/sommart
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Coming up with the money you need to buy a house can seem out of reach for many people to do alone. According to a recent survey, about half of Americans are willing to split the cost of buying a home with someone else.
Buying a home with your sibling may help you pool your resources and get into a nicer home than you could afford alone. But there are a few steps you’ll want to take to make sure the experience is a positive one. We’ll explore these below, as well as the pros and cons of co-owning a home with your sibling.
Key takeaways:
Buying a home with your sibling may help you qualify for a more expensive or nicer home than you could on your own.
Each sibling should be open about their financial situation, including their credit score, debt-to-income ratio, and other similar factors.
Disagreements in how you maintain or manage the home could potentially cause strain in your relationship.
Working with a real estate agent who is familiar with helping siblings and co-borrowers buy homes together could simplify the process.
Step 1. Consider financial options
Take a long, hard look at your financial situation as a whole. Each of you brings a certain set of circumstances to the table. Your combined and individual finances can make a difference in the type of home you can afford and the types of loans you may qualify for.
These are the factors you’ll want to consider before you start your search:
Your credit scores: Lenders prefer to work with borrowers with higher credit scores. Be sure to check your credit score as soon as you and your sibling decide to buy a house together.
Your down payment savings: Most lenders require you to pay at least 10% of the home’s purchase price as a down payment on the loan. Consider how much each of you can afford to contribute.
Your debt-to-income ratio (DTI): Most lenders prefer working with borrowers who have a DTI of 36% or less. If your DTIs are higher, you may still qualify for a loan, but you may want to pay off some of your debt before you apply for a mortgage.
Employment history: Having a stable employment history looks better on mortgage applications. If you’ve job-hopped, you may find it harder to qualify for a loan.
The types of home loans you’re interested in: Explore your options and come to an agreement with your sibling about the types of loans you’re interested in.
Be honest with each other as you have this conversation. This way, you’ll know exactly where each of you stands.
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Step 2. Choose the best ownership agreement
When you’re buying a house with a family member, you’ll want to establish a clear ownership agreement. This outlines what happens to the property if one of you passes away. There are two main ownership options to consider:
Joint tenancy: This type of ownership agreement allows each sibling to have an equal share of ownership over the property and guarantees rights of survivorship, meaning the remaining sibling(s) will inherit the deceased sibling’s share in full.
Tenancy in common: This ownership agreement allows siblings to have unequal shares of ownership in the property. It also gives each sibling the right to sell their share at any time. Each sibling can appoint a designated person to inherit their share if they pass away.
Ultimately, the ideal ownership agreement will depend on what works best for you and your sibling.
Step 3. Consult with a real estate attorney
Real estate attorneys can help you protect your interests by making sure ownership agreements and any questions of inheritance are established legally and in a way that works for your needs and goals.
Your attorney can help you and your sibling come up with an agreement that works for both of you. And if there’s ever a dispute, your attorney can help you find a solution while still honoring the contract you and your sibling entered into.
Here are a few questions you’ll want to ask each attorney before you commit to working with them:
How much experience do you have helping siblings purchase a home together?
How will you communicate with us throughout the process?
What are your fees/how do you charge for your services?
The right real estate attorney should have experience working with siblings or at least helping two or more buyers purchase a home together. They should also be willing to communicate with you in a way that works for you, whether that’s via email, phone calls, or text messages. You’ll also want to make sure you can afford their fees and that you’re comfortable with how they bill for their time.
Step 4. Create an ownership contract
To protect both of your interests, you and your sibling will want to create a clear ownership contract. At a minimum, you’ll want it to touch on the following terms:
Your ownership agreement
Your exit strategy if either of you decides to sell in the future
Who is responsible for which payments and in what amounts or percentages
Who can inherit the property
How you’ll handle life changes like moving to a new state, getting married, or having kids
This written agreement will be legally enforceable, giving you both peace of mind. If you enter into a dispute, the contract will provide guidelines for how you can handle those disagreements.
Step 5. Find the perfect home
Before you start touring properties, take some time to discuss what you both want the property to have and what you both need in a home. This will depend on your situation. Take your time and come up with a list of wants and needs that you both agree on.
Using that list, you can start looking at properties that meet your needs. Consider working with an experienced real estate agent who is familiar with helping siblings purchase homes together. Real estate agents can explain the ins and outs of buying a house with a sibling, making the process easier. They can even help you negotiate the best price on your new home.
Remember, you may need to view several properties before finding the perfect home. As you tour each property, be open and honest with your sibling and your real estate agent.
Pros and cons of buying a house with a sibling
Buying a home with a sibling can be a great way to get into a nicer or more expensive home, but it’s not the perfect option for everyone. Here are a few pros and cons of co-owning a home with a sibling that you’ll want to be aware of.
Benefits of co-owning with a sibling
Affordability: Sharing the down payment and mortgage payments can make homeownership more attainable for both siblings.
Shared Responsibility: You can split household chores, maintenance tasks, and decision-making, lightening the load.
Trust and Familiarity: Buying with a trusted sibling can be less risky than co-owning with someone you don’t know well.
Building Equity Together: Both siblings benefit from the property’s value appreciation over time.
Potential Rental Income: If you buy a multi-unit property, you could generate rental income to help offset costs.
Buying a home with a sibling can make homeownership more affordable and less risky since you’ll be buying with someone you already know and trust.
Risks of a sibling co-owner
Financial Disparity: Unequal credit scores or income can cause complications with mortgage applications and create resentment between siblings.
Lifestyle Compatibility Concerns: Living styles, preferences, and guest policies can clash, leading to friction.
Communication Challenges: Open and honest communication is crucial, but disagreements and misunderstandings can arise.
Difficult Decisions: Making decisions about renovations, repairs, or selling the property can be challenging if you disagree.
Relationship Strain: Unexpected financial burdens, disagreements, or life changes could strain your relationship with your sibling.
Sibling co-ownership isn’t the perfect fit for everyone. If you and your sibling aren’t on the same page and confident that you’ll be able to live together harmoniously, you could end up hurting your relationship in the long run.
Buying a house with a sibling FAQ
Here are a few frequently asked questions about buying a home with a sibling so you can make the best decision for your situation.
Can siblings buy a house together?
Siblings can buy a house together. By pooling your resources, you may be able to get into a nicer home than you could on your own.
What is the best way for siblings to buy property?
Every situation is unique, but many siblings buy property together as co-borrowers with a joint loan. Co-borrowers are responsible for making mortgage payments and contributing to the upkeep and maintenance of the home together.
Can siblings get a home loan together?
Siblings can get a home loan together by applying as co-borrowers on a joint mortgage. Each lender will have different requirements, so do your research.
Can 3 people buy a house together if they’re siblings?
Most lenders restrict joint mortgages to four borrowers over the age of 18. However, there is no legal limit in place, and some lenders may allow more siblings to apply.
Does each sibling have to contribute equal amounts of money to the home?
Siblings can contribute equally to the home purchase if they want to or can afford to. However, if one sibling makes significantly more, they can choose to assume a greater portion of the mortgage, upkeep, and other costs.
Prepare to buy a home with help from Credit.com
Buying a house with a sibling can be a great choice for buyers needing help to qualify for a home. But before you start looking at homes, have an honest conversation with your sibling about how much you can afford to spend and what types of loans you may want to apply for. Once you’re on the same page, compare mortgage rates at Credit.com to find the best home loan for your needs.
The average square footage of a house in the United States is 2,430 square feet, according to the National Association of Home Builders. That figure varies significantly from state to state, however, with averages ranging from 1,164 square feet all the way up to 2,800 square feet.
Average home sizes tend to be larger in areas where prices are lower and smaller in more expensive locales, though other factors also come into play. Understanding the average square footage of houses in your area can help you set realistic expectations for your house hunt and determine how much house you can afford.
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
Questions? Call (844)-763-4466.
Home Square Footage Trends in the U.S.
The size of homes in the U.S. has grown significantly over the past several decades. In 1949, the average square footage of a house for one family was 909 square feet. By 2021, it had almost tripled to 2,480 square feet, according to American Home Shield’s American Home Size Index.
One of the reasons behind expanding home sizes was American migration to the suburbs following World War II. During these years, new highways were built, demand for housing grew, and homeownership rose. People moved into bigger houses with more land outside the densely packed cities.
Overcrowding decreased at the same time. In 1950, 15.7% of U.S. homes were considered overcrowded. By 2000, the proportion had dropped to 5.7%. Today, older homes tend to have smaller floor plans, while more recent constructions are more spacious.
That said, home sizes have decreased slightly in the past few years due to rising interest rates and home prices. Home size was larger during the pandemic when interest rates reached historic lows and homebuyers were often looking for a house that could be home, workplace, and school all at once. Home sizes trended downward in 2022 and 2023 as housing became less affordable. (Learn more about how to save money for a house.)
Still, the mean square footage for new single-family homes was 2,430 square feet in the third quarter of 2023, a huge increase from the 909-square foot average of 1949.
States With the Largest Average Homes
The state with the largest homes on average is Utah, with an average home size of 2,800 square feet. Following Utah are other states in the Mountain West, including Colorado, Idaho, and Wyoming. This chart shows the 10 states with the largest average home sizes in the U.S., along with their median price per square foot.
State
Average home square footage
Median price per square foot
Utah
2,800
$259.05
Colorado
2,464
$279.55
Idaho
2,311
$286.85
Wyoming
2,285
$189.87
Delaware
2,277
$223.75
Georgia
2,262
$180.61
Maryland
2,207
$234.53
Montana
2,200
$324.53
North Dakota
2,190
$139.12
Washington
2,185
$335.73
States With the Most Expensive Cost per Square Foot
In states with a high cost per square foot, homes tend to be smaller on average. The smallest homes are in Hawaii, where the median price per square foot is nearly $744. New York has the next-smallest real estate, with a median price per square foot of more than $421. (New York City, however, has a median price of $1,519.57 per square foot.)
That said, home prices and size don’t always have an inverse relationship. California has some of the most expensive real estate in the country, but its home sizes average 1,860 square feet. Along with cost per square foot, some other factors that influence average home size include income levels and age of the homes.
This chart shows states with the highest median price per square foot, along with their average house sizes. If you’re looking to buy in a less pricey locale, consult a list of the best affordable places to live in the U.S.
State
Median price per square foot
Average home square footage
Hawaii
$743.86
1,164
California
$442.70
1,860
New York
$421.49
1,490
Massachusetts
$398.77
1,800
Washington
$335.73
2,185
Montana
$324.53
2,200
Oregon
$307.86
1,946
Idaho
$286.85
2,311
Nevada
$281.85
2,060
Recommended: 12 Tips for First-Time Homebuyers
What to Consider When Buying a Larger Home
Buying a larger home might be appealing if you have a growing family and want space to spread out, but it could have downsides. These are some of the factors to consider before splurging on extra space:
More expensive maintenance costs
Not only may a larger home have a higher initial price tag, but it could also cost you more in maintenance costs. Home repair projects can easily cost thousands of dollars apiece, and prices only go up when you have more house to maintain. Before opting for a big home, consider what shape it’s in and any potential renovation costs. You could also do some research on the cost of services in your area to estimate future expenses.
More time to clean and organize
Larger homes take longer to clean and organize than smaller ones. You’ll have to purchase more furniture and spend more time on general upkeep. If you hire cleaners for your house, the cost of each visit will be higher if you have additional rooms that need cleaning.
Located farther from city center
Homes in and around a city are often smaller, while houses with more square feet and land are typically located outside of the urban center. This may not be ideal if you prefer to live near restaurants, theaters, and other urban activities. It could also be a downside if you work in the city and would have a longer and more expensive daily commute.
A bigger carbon footprint
A larger home will require more heat in the winter and air conditioning in the summer. Not only will your energy bills cost more, but your bigger house will use more resources and have a greater impact on the planet. Some newer constructions may offset this footprint with energy efficient features.
Recommended: Tips to Qualify for a Mortgage
How Much Square Footage Can You Afford?
Before starting the house hunt and the quest for a mortgage loan, it’s worth considering how much square footage you can afford. Even if you get preapproved for a mortgage of a certain amount, you might prefer a smaller loan with lower monthly costs to avoid over-burdening your budget. Many first-time homebuyers opt for a smaller starter home before eventually upsizing. One way to figure out how much house you can afford is with the 28/36 rule.
The 28/36 Rule
The 28/36 rule is a guideline that can help you estimate what price house you can afford. This rule suggests spending no more than 28% of your gross monthly income on housing costs and no more than 36% on all your debt combined, such as housing costs, car payments, and student loans.
Let’s say, for example, that your monthly gross income is $6,000. Using this guideline, you’d want to keep housing costs at $1,680 per month or lower. If you have other debts, you wouldn’t want to spend more than $2,160 on those debts and housing costs combined.
Key Reasons to Purchase a Smaller Home
Purchasing a smaller home can have several benefits, including:
• Smaller mortgage: A smaller home may have a lower cost, so you might be able to put down a lower down payment and take out a smaller mortgage.
• More affordable bills: With less square footage, you’ll have lower monthly bills when it comes to electricity, heating, and cooling. Plus, you won’t have to pay as much in property taxes.
• Easier and cheaper maintenance: Smaller homes can be easier to clean and maintain, and you won’t have to spend as much on furniture and decorations.
• Extra room in your budget for other goals: If you’re saving money on housing, you’ll have more money for other things, such as home renovation projects, travel, investing for the future, and dining out.
The Takeaway
The average home square footage in the U.S. is more than 2,000 square feet, but sizes have slightly decreased recently with rising costs and interest rates. Home sizes also vary greatly by state, with the average square footage in some states more than double that in others.
Before splurging on a big house, consider your budget carefully. Use the 28/36 rule to estimate how much house you can afford, and take your other financial goals into account when considering how much you want to spend on housing each month. With careful planning, you can find a house size that meets your needs without overstretching your budget.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Are basements included in home square foot calculations?
Basements may or may not be included in home square foot calculations, depending on the state where you live and condition of the basement. If the basement is included, it generally must meet certain criteria for living space, such as having an entrance and exit point that leads outside the home.
How much square footage does a family of four need?
While everyone’s needs are different, one guideline for determining the ideal square footage for one’s family size is 600 to 700 square feet per person. For a family of four, that would be a home with 2,400 to 2,800 square feet.
Is the average house size in the U.S. increasing or decreasing?
The average house size in the U.S. increased significantly over the past 75 years from 909 square feet in 1949 to 2,430 square feet in 2023. However, the past couple of years have seen a slight decrease in house sizes due largely to rising interest rates and worsening affordability.
Photo credit: iStock/years
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
