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When looking for funding for your small business, there are plenty of types of loans to consider, including term loans. A term loan provides a borrower with a lump sum of cash they repay on a fixed repayment schedule.
Term loans can be helpful for businesses looking to expand, buy more real estate, update equipment, or purchase more inventory in advance.
So, what are term loans exactly? Read on to learn more about small business term loans, their advantages and disadvantages, and the different types of term loans available.
A business term loan is a type of small business financing that provides a lump sum of money up front you then pay back over a set period of time, called a term. Payments are often monthly but could be weekly, bi-weekly, or even quarterly.
Part of each payment goes toward the principal, lowering the remaining loan balance, and part goes toward interest. Interest rates on business term loans may be fixed or variable. Repayment terms can range anywhere from 12 months to 25 years, depending on the loan amount, lender terms, and the borrower’s creditworthiness.
Term loans aren’t just used for small businesses, though. Mortgage loans, auto loans, and student loans are also all types of term loans.
Common uses of term loans for businesses include:
• Buying real estate or upgrading property you already own (the real estate would likely serve as collateral)
• Buying new equipment or repairing equipment you already own (the equipment could serve as collateral)
• Restocking inventory
• Buying vehicles for work
• Meeting payroll and other expenses
• Covering employee wages
Most small business owners factor in two things when considering term loans — the purpose of the loan and the term length (there are short-, intermediate-, or long-term business loans).
Payments may be higher with short-term loans than long-term loans, though this depends on how much the business borrows. When considering what your business can qualify for and pay back with its available cash flow, remember to factor in how the length of your loan term affects the payment amount.
Short-term loans typically have a length of less than one year but can extend up to 18 months. Businesses that don’t qualify for a line of credit might find short-term loans helpful. Though these loans are typically easier to qualify for, they tend to have higher interest rates.
It’s important to note that short-term loans may come with a balloon payment, meaning the last payment is much larger than the rest. Keep this in mind when deciding whether a short-term loan is right for your business.
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Intermediate loans typically have terms between one and three years. Because of their slightly longer payoff time, they may be an option if you’re hiring a new salesperson, for instance, and know there might be some lag time before they start bringing in revenue.
Like short-term loans, intermediate business term loans may also have a balloon repayment structure.
Long-term loans typically have terms of five to 10 years, but they may extend up to 25 years. They typically require collateral, such as real estate or equipment, and may come with lower interest rates than short- and intermediate-term loans.
Long-term loans are often more difficult to qualify for, requiring proof of revenue and a solid credit history. However, they can provide helpful capital for business investments, making them a valuable option for established businesses planning for growth.
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Once you’ve determined the amount you need to borrow and the purpose, you can approach financial institutions to explore their available programs, interest rates, and loan terms.
You’ll also want to find out what documentation you’ll need to apply, what collateral might be required, and whether they can supply the funds on your timeline. Be sure to check what small business loan fees may apply.
Once you’ve evaluated the above factors, compare multiple lenders and choose the one that suits your needs. The loan application process typically happens online, but you may be able to apply in person if the loan is through a bank.
Rates and terms offered vary based on the lender, your personal and business credit history, your time in business, and your financial health and history. Pay particular attention to whether the loans you research are secured and how the interest rates are structured:
• Secured vs. unsecured loans: Secured loans require collateral or a personal guarantee, meaning that your assets will be used as payment if you can’t pay your loan. Unsecured loans do not require this collateral and are therefore riskier for the lender, so they often have higher costs and shorter terms than secured loans.
• Fixed vs. variable interest rates: A fixed interest rate remains stable over the entirety of the term loan. A variable interest rate fluctuates throughout the life of the loan, depending on the prime rate — the rate that commercial banks charge their most creditworthy borrowers.
If you’re approved for the loan, you are free to use the funds once disbursed. From there, you’d make regular payments based on the loan agreement.
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It can be challenging to decide which kind of loan is the right fit for your business. There’s a lot to consider. Here are a few questions to ask before applying:
• Why do I need funding?
• How does this help me reach my business goals?
• How healthy are my business finances?
And if any of these apply to you, it may not be time to consider term loans just yet:
• Your business is new
• You have poor credit
Like any other loan, business term loans have advantages and disadvantages that are important to consider when deciding whether they’re right for you. Below, we’ve outlined the pros and cons of term borrowing to help you determine whether term loans are a good fit.
Pros of term loans include:
• You may be able to borrow a large amount of money.
• Multiple types of term loan programs may be available when you look at different lenders.
• Interest rates are typically lower than credit cards, payday loans, and other short-term funding options.
• As you pay the term loan back on time, you can boost your business credit score.
Note: Check with your accountant or tax professional to see what tax benefits you may realize. Term loan interest may be tax-deductible.
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As with any financial product, there are downsides to consider, as well. Cons of term loans include:
• You may be able to borrow a large amount of money.
• Multiple types of term loan programs may be available when you look at different lenders.
• Interest rates are typically lower than credit cards, payday loans, and other short-term funding options.
• As you pay the term loan back on time, you can build your business credit score.
Note: Check with your accountant or tax professional to see what tax benefits you may realize. Term loan interest may be tax-deductible.
Recommended: What Are the Tax Benefits of a Limited Liability Company (LLC)?
Cons of term loans include:
• You may be entering into a long-term debt.
• The loan application process may take longer than you’d like.
• Some business term loans come with prepayment penalties, which means you can’t prepay to reduce the amount of interest paid over the loan’s life.
• If your credit isn’t the best, the interest rates you’re offered may not be, either.
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Assess your business goals and lenders’ eligibility requirements as you choose the best option for your company. Here’s how:
Comparing lenders’ terms can help improve your chances of qualifying for a loan. That way, you don’t spend valuable time applying for options for which you’re not eligible. On top of that, it helps keep you from overpaying on rates and fees or endangering your business cash flow with a repayment schedule that’s too aggressive.
It’s helpful to examine these requirements side by side:
• Personal and business credit
• Time in business
• Annual revenue
• Collateral
• Down payment
• Personal guarantee
Also look at the fees side by side:
• Interest rate and APR
• Origination fees
• Late payment fees
• Early payoff penalty
Important questions to ask:
• Are payments made daily, weekly, monthly, or quarterly?
• Are payments automatically deducted from a business bank account?
Many lenders have strict repayment terms for their business term loans, meaning you need to make sure you can meet those standards. That way, you don’t overdraft your accounts, accrue late fees, or damage your credit score.
Recommended: Long-Term Small Business Loans
When applying for a loan, documents often requested by lenders include:
• Bank statements (personal and business)
• Tax returns (personal and business)
• Business legal documents, including licenses and permits
• Personal identification
• Business plan
• Revenue statements
• Accounts receivable reports
• Accounts payable reports
Because the exact documentation required varies by lender and loan type (and whether collateral is involved), you’ll need to clarify what the lender you choose will need.
Also, it can be worthwhile to explore business grants since those do not need to be paid back.
Recommended: What Are Small Business Grants?
When businesses seek funding, term loans are worth considering. With a business term loan, the company borrows a certain amount of money in a lump sum and then pays it back in regular installments at either a fixed or variable interest rate. Terms can range from short (even under a year) to long (perhaps as long as 25 years), with the funds used for a variety of purposes.
If you’re seeking financing for your business, SoFi can help. On SoFi’s marketplace, you can shop top providers today to access the capital you need. Find a personalized business financing option today in minutes.
With SoFi’s marketplace, it’s fast and easy to search for your small business financing options.
Like other term loans, a business term loan provides a borrower with a lump sum of cash they repay on a fixed schedule over the set period of time, or term. The interest rate can be either fixed or variable.
An example of a term loan is a small business loan of $50,000 from a bank that has to be paid over three years in monthly payments, with fixed interest.
There are short-term, intermediate-term, and long-term loans.
Photo credit: iStock/pikselstock
SoFi’s marketplace is owned and operated by SoFi Lending Corp. See SoFi Lending Corp. licensing information below. Advertising Disclosures: SoFi receives compensation in the event you obtain a loan through SoFi’s marketplace. This affects whether a product or service is featured on this site and could affect the order of presentation. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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Source: sofi.com
Earning an MBA, or a Masters of Business Administration, degree can increase your salary, teach you specialized skills, and provide you with new career opportunities. But getting your MBA is expensive, with an average cost of $62,600 for a two-year program vs. $59,684 for a master’s degree in general. A degree from a top-tier school can be considerably more, with tuition and living expenses totaling $200,000 for the program.
Just how big of an MBA pay increase you’ll get in return depends on a number of factors, including the school you attend, the field you’re in, and your previous work experience. Here’s what to know about an MBA salary increase and how much you might expect to receive.
An MBA degree can make you more marketable to employers, which can in turn help you land a better job and a higher salary, research shows. And while earning your degree can come with a hefty price tag, taking out MBA loans is one option to help you pay for it.
The median starting salary of recent MBA graduates in the U.S. is $120,000, according to the 2024 Corporate Recruiters Survey from the Graduate Management Admission Council (GMAC). That’s significantly more than the $69,320 starting salary of grads with a bachelor’s degree. Knowing how much you might earn could help you determine if an MBA is worth it.
An MBA can also help you advance in your career. The majority of employers in the GMAC survey said that MBA grads typically perform better and move up the ladder faster than other employees. That places them in high demand in the workplace. One-third of employers from across the globe reported that they plan to hire more MBA graduates in 2024 than they did in 2023.
Overall, MBA grads reported a median salary increase of 33% after earning their degree, according to the GMAC’s most recent Enrolled Students Report. Full-time MBA students had a 42% increase in salary, while those who worked and studied for their MBA at the same time said their salary increased by 29%.
However, the amount your salary might increase once you have an MBA depends on the field you’re in. Here’s a closer look.
The following industries tend to pay well for those who have earned an MBA, making them some of the best jobs for MBA graduates.
Many MBA grads pursue a career in finance, and it can be lucrative. The average salary for an individual with an MBA in finance is $145,257, but the amount can be as much as $195,000, and that’s not counting possible commissions and bonuses.
Another hot field for those with an MBA is technology, especially as AI becomes more prevalent. The average salary for MBA grads in tech is about $118,000 a year. However, your MBA salary increase could run higher still and may even include a signing bonus.
Those who work as consultants and have their MBA average about $83,797 annually, but the base pay can be as much as $117,000. A consultant’s salary may go up dramatically within a few years, especially if they work at a big firm.
Healthcare management is a popular job for MBA graduates. The average earnings are $88,000 per year, although it’s not uncommon for those in healthcare management to bring home a six-figure salary.
After graduating with an MBA in marketing, your annual earnings will be approximately $130,721 on average, and they could be as much as $165,000. That’s well above the average marketing salary for those without a degree, which is $81,330.
The salary for a business analyst with an MBA is $104,629 a year, although it can be as much as $128,000.
If you earn an MBA in accounting, you could earn an average starting salary of $126,598. Your pay could even be as high as $166,000.
In addition to the field you choose to work in, how much you’ll earn after getting your degree is influenced by such things as the MBA program you choose and your previous work history and salary.
These are the three major factors that can affect MBA salary potential.
Although it’s likely to be pricier, going to a top-rated school to get your MBA can pay off in multiple ways. These schools tend to have robust networking programs and employer recruitment opportunities. Some colleges may help prospective graduates find internships and jobs. Also, grads from top 10 schools tend to earn more than those who attend other programs.
Before applying to an MBA program, do your research to see where recent alumni have ended up and which companies have recruitment relationships with the school. For instance, certain coveted employers might always attend a particular school’s job fairs. If a university has connections to companies you might be interested in working at, you may want to apply to their MBA program.
Every MBA program offers different classes, internships, and hands-on opportunities, and it’s important to look for ones tailored to your goals and career path. Choose a program with specialized concentrations in the field you’re most interested in. For instance, some MBA programs specialize in healthcare while others focus on finance.
If you’re currently in a field that you want to pivot out of — moving from marketing to consulting, say — an MBA could help with career change without going back to an entry-level job.
The more work experience you have, the more likely you are to score a higher salary once you get an MBA. This is especially true if that experience is relevant to the area of study you’re pursuing. Most people going for their MBA have about five years of experience on the job. And some MBA programs require students to have a certain number of years of work experience before they apply.
Your work performance is also a key factor in what you might earn after you obtain your degree. As mentioned above, employers in the GMAC survey found that MBA grads tended to be better performers on the job. High achievers are more likely to command a higher salary.
In addition to choosing the right MBA program, there are other steps you can take to land a good job and a higher salary when you graduate. Here are a few strategies that can help you get ahead.
• Take advantage of networking opportunities. Get to know your fellow classmates and connect with teachers and faculty members. Go to school gatherings, job fairs, and networking events. Find people who are in the field you’re in, and get to know them.Then make a point to stay in touch with the contacts you make. These people can be valuable resources over the course of your career.
• Apply for internships. Many MBA schools offer internship programs, and they typically expect students to take advantage of them if possible. An internship can give you real-world experience and also connect you to key contacts who may be able to help you find a job when the time comes.
• Seek out alumni. Make a list of the companies you’re interested in working for, and then search out any alumni of your school who work there. Ask to meet with them for coffee or an informational interview. Solicit their career advice. If you make a solid connection, they may keep you in mind for future job openings.
It’s important to find an MBA program that fits your interests and goals. Look for programs that offer concentrations in the areas and fields you want to pursue. Then review the curriculum and the courses offered to make sure they appeal to you.
In addition, learn where graduates of the MBA program have ended up. What companies do they work for and what kinds of jobs do they have? You might even reach out to ask how they felt about the program and if they would recommend it.
Where the school is located is also a prime consideration. If you’re working and going to school at the same time, you’ll need to find a program in your area. You could also explore top online MBA programs if you want to take advantage of a particular school’s offerings when you’re unable to attend it in person. These programs tend to cost $10,000 less than in-person ones, but you may miss out on networking opportunities.
If you’re a full-time student and you have the opportunity to move to attend school, you could choose an MBA program near the area where you hope to work. For instance, if you’d like to be employed in Silicon Valley, a school nearby might be a good choice for you. It may be easier to get an internship there as well as a job after graduation.
Of course, the cost of an MBA program is likely to be one of the most important factors in your decision. Beyond the tuition, find out the true cost of getting an MBA at any school you’re interested in. This includes living expenses, books, transportation, and so on.
There are a number of ways to pay for your MBA, such as scholarships, grants, and student loans. You may want to consider both federal and private student loans. Federal loans include Federal Direct PLUS loans for graduate students from the Department of Education. The maximum amount you can borrow with these loans is the cost of attendance, which is determined by the school minus any other financial aid you may have, and the loan’s interest rate is fixed.
Private student loans may have fixed or variable rates, and the MBA loan rates you might qualify for depend on your credit history, among other factors. These loans are offered by banks, credit unions, and online lenders. Be aware, though, that with private student loans, you will not have access to the same federal protections and programs you would with federal loans, including income-driven repayment plans. Also, if you refinance federal student loans with a private loan, you could pay more interest over the life of the loan, depending on its rate and term length.
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Earning an MBA may help you fulfill your career dreams and earn a higher salary. Research shows that the degree can increase your salary by about 33%, depending on such variables as the school you attend and the field you work in. But getting an MBA can be costly, averaging more than $60,000 for a two-year program, up to $200,000 for top-tier schools. So you’ll want to weigh the pros and cons.
If you decide that earning an MBA makes sense for you, there are ways to help cover the costs and develop a solid budget. You can explore all options, including scholarships, grants, and federal and private student loans, as well as refinancing your existing loans.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
The median starting salary with an MBA is $120,000, according to the Graduate Management Admission Council’s 2024 Corporate Recruiters Survey. That’s far higher than the $69,320 starting salary of graduates with a bachelor’s degree.
Whether an online MBA program is worth the investment depends on the program you choose and what you hope to get out of it. Online programs offer greater flexibility and are typically less expensive than in-school programs. According to one estimate, online MBA programs tend to cost about $10,000 less. However, with an online program, you may not have access to all possible networking opportunities or the opportunity to speak with professors face to face. You may also feel less connected to the school and the overall experience.
How long it takes to recoup MBA program costs is different for everyone, depending on the price of the program and the salary increase they enjoy after earning their degree. According to the Graduate Management Admission Council, it takes grads of two-year full-time MBA programs about three and a half years of working to recoup the cost. Those who enroll in online MBA programs recoup the cost in about two and a half years of work.
Photo credit: iStock/Xavier Lorenzo
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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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.
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Source: sofi.com
Are you looking for the best side hustles for moms? Being a mom is a full-time job, but that doesn’t mean you can’t make extra money on the side if you need to. Balancing work and family life can be tough, but finding a side hustle that fits your schedule can make it easier. Whether…
Are you looking for the best side hustles for moms?
Being a mom is a full-time job, but that doesn’t mean you can’t make extra money on the side if you need to. Balancing work and family life can be tough, but finding a side hustle that fits your schedule can make it easier.
Whether you need to make money to pay the bills, if you’re looking to save for a vacation, or if you simply want to save more money, there are many side hustles that may fit what you’re looking for.
I am a mom and I have done many of the side jobs listed below. Some can be part-time, others full-time, so there is probably something on the list below that can work for you.
Below are the best side hustles for moms.
Blogging is a great way for moms to make money from home. It is what I personally do so that I can work from home and spend more time with my daughter.
For me, blogging lets me travel whenever I want, work on my own schedule, make good money, write about topics I enjoy, and I really love having a blogging business.
I started Making Sense of Cents in 2011, and since then, I’ve made over $5,000,000 from my blog. When I began, I had no idea it would turn out to be one of the best jobs for stay-at-home moms. Now, I am extremely grateful for this – and it all started as a side hustle!
One way to earn money with a blog (and this is my favorite way) is through affiliate marketing. This means you recommend products and get paid when someone buys through your link. It’s like earning a commission for sharing products you use and enjoy.
Another way to make money is by placing ads on your blog. As your blog gets more visitors, you can earn money from the ads.
Writing sponsored posts is another option. Companies pay you to write about their products or services (it’s a good idea to choose products that you believe in and that fit your blog’s theme).
Blogging takes time and effort, but it can be very rewarding. You get to be creative, connect with others, and make money doing something you love.
You can learn more about how to begin in my free How To Start a Blog Course here.
Selling printables on Etsy can be a great side hustle for moms. You can make extra money by creating and selling digital items like planners, calendars, and worksheets.
All you need is a computer and some design software, and you can work on it at your own pace and from the comfort of your home.
You don’t have to spend any money to start selling printables either.
This is a great way to make money from home because you only need to create one digital file for each product, and you can sell it as many times as you want. You don’t have to print or ship anything. Instead, you create the digital file, and the customer downloads it and handles the rest after buying it from you.
You can learn more at How I Make Money Selling Printables On Etsy.
Do you want to make money selling printables online? This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
Proofreading is a great way to make some extra money from home. If you have an eye for detail, you can get paid to spot errors in text.
You don’t need a special degree to start proofreading. Many online companies hire beginners and this means you can get started without lots of experience. Plus, you can build up your skills and portfolio as you go.
The pay can vary. Some proofreaders earn $1,000 a month, while others make six-figure incomes. It depends on how much you work and your experience level. You can do this full-time or just as a part-time gig.
I know several proofreaders (who are moms) who started proofreading as a side hustle, and now it’s their full-time job. So, you can spend as little or as much time as you want growing this job.
You can learn more at 20 Best Online Proofreading Jobs For Beginners (Earn $40,000+ A Year).
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This free training teaches you how to start a proofreading side hustle (and how to earn $1,000+ per month!), even if you are brand new and don’t have any previous proofreading experience.
Bookkeeping is a great side hustle for moms. It’s flexible and can be done from home.
Bookkeepers keep track of financial records for businesses. This includes recording transactions and balancing accounts.
Before you pass this by because you think you’re not qualified, you might be surprised to know that you don’t need to be an accountant or have any experience. Becoming a virtual bookkeeper is something you can learn from home.
You can learn more at How To Find Online Bookkeeping Jobs.
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This free training will show you how to start a profitable bookkeeping side-hustle in the next 30 days—even if you have no prior experience!
Print-on-demand is a great side hustle for moms.
You can create your own designs and sell them on items like T-shirts, coffee mugs, and tote bags. Websites like Etsy make it easy to set up your own shop.
There’s no need to buy supplies or handle shipping. The print-on-demand company (like Printify) takes care of that for you. This means you can focus on being creative and taking care of your family.
Many moms find this side hustle to be simple and rewarding. You can work on it during nap times or after the kids go to bed. If you love designing, this can be a perfect fit for you.
You can learn more at How I Make $1,500 Monthly With My Print-On-Demand Business.
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This freebie will teach you about print-on-demand as well as give you a list of 17 hot-selling products you can sell via print on demand.
Starting a dog treat bakery can be a fun and profitable side hustle. You can begin this business right from your kitchen so it’s perfect for moms looking to make some extra money.
This side job can be very flexible. You can choose to keep it small and earn $500 to $1,000 a month. Or, if you have more time, you can scale it up and make even more.
You can learn more at How I Earned Up to $4,000 Per Month Baking Dog Treats (With Zero Baking Experience!).
Plus, you can sign up for this free training workshop that teaches you the small business plan for starting your own pet bakery.
If you’re a mom looking to make some extra money from home, taking online surveys could be a side hustle.
Companies pay for your opinions on their products or services, which helps them improve and stay competitive. This side hustle is flexible, allowing you to fit it around your busy schedule, whether during nap times or after the kids go to bed.
No, you will not get rich taking surveys (this is not a lucrative side hustle, but it is very flexible!), but you may be able to earn around $50 to $100 per month by answering several surveys each week.
Surveys are almost always done online, and you’ll usually be answering multiple-choice questions or typing in quick answers about your daily life, like where you last shopped. To get started, you can sign up for several survey sites.
Some popular survey sites include:
While some surveys pay just a few cents, others can pay up to $20 or more, depending on how detailed and complex they are. This makes it a convenient way for moms to earn a little extra income in their spare time.
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Swagbucks is a site where you can earn points for surveys, shopping online, watching videos, using coupons, and more. You can use your points for gift cards and cash.
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Once you complete five surveys, you’ve earned $5, which you can cash out using the payout options offered by the site (such as PayPal cash and free Amazon gift cards).
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Prime Opinion is a survey website that helps people to earn extra money by sharing their opinions at home. It’s a simple survey site to use: you share your thoughts, and they pay you for them.
A virtual assistant (VA) can do many tasks from home and this is a popular side hustle idea for moms. They may manage emails, set up appointments, create social media posts, handle customer service, and more. Many small businesses need help with these jobs.
Becoming a VA doesn’t require a lot of training. You just need good organizational skills and a reliable internet connection.
A big advantage of being a VA is flexibility. You can set your own hours and work when it’s best for you, so this makes it a perfect side hustle for busy moms.
You can learn more at Best Ways To Find Virtual Assistant Jobs.
Being a social media manager is a great side hustle for moms.
Many businesses need help with their social media accounts because they don’t have the time to keep up with posting and replying to messages, or they simply don’t have the expertise.
Tasks might include creating posts, scheduling them, and interacting with followers. Social media managers might also run ads and analyze their performance.
It’s a flexible job you can do from home, making it perfect for busy moms.
Affiliate marketing is a great way for moms to make extra money.
With this side hustle, you promote products or services online. When someone buys through your link, you earn a commission.
You can get started by choosing products you like and trust. This makes it easier to talk about them. People will feel your enthusiasm and trust your recommendations.
Many moms start with their own blogs. You can write about things you know and enjoy. Topics like parenting, cooking, or fashion are good choices. You can add affiliate links in your blog posts where they fit naturally.
Social media is another place to use affiliate marketing. Sharing links on Instagram, Facebook, or Pinterest can reach a lot of people.
Affiliate marketing is flexible. You can do it at your own pace and schedule, so this is perfect if you have kids and need to work around their needs.
For me, I love affiliate marketing and I think it’s one of the best ways to make money online. I especially like how I can do work up front and make money years down the line from older blog posts. So, it is kind of like a form of semi-passive income.
If you want to learn more about affiliate marketing, I recommend signing up for Affiliate Marketing Tips For Bloggers – Free eBook.
Online tutoring is a great side hustle for moms. You can teach different subjects from your own home and this flexible job allows you to set your own hours.
If you love math, science, or another subject, there are students looking for help. You don’t need to be a certified teacher, but having a good grasp of the subject is important.
Online tutoring also pays well. Average rates can range from $10 to $30 per hour, depending on the subject and your experience.
If you love animals, pet sitting and dog walking could be the perfect side hustle for you.
Pet sitting is when you look after a pet while the owner is away. This could mean feeding, playing with, and sometimes even staying overnight with the pet.
Dog walking is a bit different. You take dogs for walks, making sure they get exercise and fresh air.
Both of these jobs are flexible. You can take on as many or as few clients as you want. This makes it easy to balance with other responsibilities.
My husband’s mother is a dog walker and pet sitter on Rover (the popular dog walking app), and it always seems like she loves this side hustle. She really likes dogs, so it looks like fun to me.
You can learn more at 7 Best Dog Walking Apps To Make Extra Money.
Selling handmade crafts is a fun and creative way to make money as a mom. You can use your skills to create unique items that people love.
There are many types of crafts you can sell. Items like handmade jewelry, painted mason jars, or knit blankets can be very popular. If you’re good at sewing, you can make and sell upcycled clothing or custom pieces.
Selling classes or workshops is another option. If you’re skilled at a particular craft (like knitting), teaching others can be a rewarding side hustle.
You can learn more at 16 Best Things To Sell On Etsy To Make Money.
Transcribing is a great side hustle for moms working from home. This is where you transcribe audio files into text for clients.
To start, you only need a computer and good listening skills. Some companies hire beginners, so you don’t need experience.
The pay can vary. Some jobs pay per audio minute, while others pay per audio hour. Usually, though, you can make around $10 to $20 per hour.
Platforms like Rev, Scribie, and CrowdSurfWork are good places to begin.
Transcribing can be done at any time of day, making it flexible for moms. This makes it easy to fit around your family’s schedule.
You can learn more at 18 Best Online Transcription Jobs For Beginners To Make $2,000 Monthly.
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In this free training, you will learn what transcription is, why it’s a highly in-demand skill, who hires transcriptionists, how to become a transcriptionist, and more.
Photography can be a great side hustle for moms, and I personally know a few photographers who have very successful photography careers and are also mothers!
This is something you can learn, such as by shadowing another photographer or by taking classes in person or online. As you get better, you can sell your services to others. Portrait photography is a popular choice, such as with taking photos of families, kids, or even pets.
Event photography is another option. Birthdays, weddings, and parties usually need a photographer.
You can also sell your photos online. Websites like Shutterstock or Etsy allow you to earn money from your images. This way, you can work from home and on your own time.
You can learn more at 18 Ways To Get Paid To Take Pictures.
Cleaning homes can be a good side hustle if you enjoy tidying up. Many people need help keeping their houses clean but don’t have the time to do it themselves.
You can set your own hours, making it easy to fit into your daily schedule. You can start by selling your cleaning services to friends and family. Once you get some experience, you can expand your client base.
You don’t need much to start. Basic cleaning supplies and a positive attitude can go a long way. You can also charge by the hour or by the job, whichever works best for you and your clients.
I know several mothers who clean homes in their free time, and they like how they can find homes to clean that fit into their schedule (so, it can be flexible!).
Renting out baby equipment can be a great way for moms to make extra cash. Many mothers likely already have a bunch of different baby items at home, so they can make money with them when they are not being used.
Platforms like BabyQuip help connect you with families who need baby gear when they travel. You can rent out items such as strollers, cribs, car seats, and even toys.
You earn money based on how often your items are rented. The more popular the equipment and the busier the travel season, the more you could earn.
Some top providers make over $10,000 a month by renting out baby gear (at this level, they are definitely buying things with the sole purpose of renting them out, though, and not just renting out things they have just laying around their homes).
As a mom, becoming a book author can be a great side hustle. You get to share your stories or knowledge while working from home.
You can write about anything that interests you. Whether it’s a children’s book, a novel, or a guide on something you know a lot about, there’s a place for your work. You could even write romance novels!
Income from book sales can vary. New authors might see $0 to $500 a month, while experienced authors can make between $1,000 and $10,000 per month.
Writing a book does take time and effort. You might need to write during nap times, after the kids go to bed, or when they are in school.
Becoming a real estate agent can be a great side gig for moms. You get to help people buy, sell, or rent properties. You can set your own hours, which is perfect for balancing work and family time. Plus, the more properties you sell, the more money you can make.
You can start part-time and grow your business as you gain experience. Real estate agents usually earn commissions, so your income can vary. It’s possible to earn a lot if you work hard and build good relationships with your clients.
Being a travel agent from home is a great side hustle for moms. You help people plan their trips, find the best deals, and book their vacations.
It’s ideal for moms who love to travel and know how to find great deals. If you have experience planning trips, this can be a rewarding way to earn money.
Freelance writing is a great side hustle for moms, and I think it’s one of the most realistic jobs for stay-at-home moms. It lets you work from home on your own schedule, so if you love to write, this could be a perfect fit.
You can write many things like blog posts, articles, or website content. The pay can start from around $50 per article but can go up to over $1,000. As you gain more experience, you might earn even more.
One big advantage of becoming a freelance writer is the flexibility. You can work when your kids are napping or busy with activities. This makes freelance writing great for busy moms.
You don’t need a lot to start either, which is nice. A computer and internet connection are enough.
I have been a freelance writer for years, and I think it’s a great way to make money as a mom.
You can learn more at 14 Places To Find Freelance Writing Jobs – (Start With No Experience!).
As you may have noticed above, there are a lot of different side hustles for moms.
But, how can you fit them into your already busy schedule?
I get it. Being a mom is hard work, and you may feel scattered already.
Managing time can be tough for moms who have a lot to handle. Here are some simple tips to help you stay organized and use your time wisely.
I recommend that you start by creating a weekly schedule. Write down everything you need to do, like work, family time, and personal tasks. You may want to use a planner or a digital app to keep it all organized.
Then, allocate specific times for your side hustle. It could be during your child’s nap time or after they’ve gone to bed. Consistency helps in sticking to your plan.
Don’t forget to schedule some “me time.” Whether it’s reading a book or going for a walk, taking breaks can help you recharge.
Review your schedule at the end of each week. Adjust what didn’t work and keep improving. This way, you’ll find a rhythm that suits you best.
Balancing work and family is important. I recommend that you set clear boundaries between work time and family time. Let your family know when you’ll be working on your side hustle so they can respect that time.
You may want to find activities for your children that don’t need constant supervision. This can give you pockets of time to focus on your tasks.
Another way is to prioritize tasks based on importance. Use to-do lists to keep track of what needs to get done. Tasks with tight deadlines should come first. For me, I have a constant to-do list on my phone, and I find that helps me remember everything as well as prioritize everything that I have going on.
To balance work and family, you will want to remember to have family activities. Movie nights or game days can strengthen family bonds and make up for the time you are working. Quality time with family is just as important as work.
Time management is about finding balance and being flexible. What works for one mom might not work for another, so keep adjusting until you find what works best for you.
Below are answers to common questions about side hustles for moms.
There are many ways for moms to make money on the side, such as starting a blog, selling handmade crafts, selling printables on Etsy, proofreading, bookkeeping, freelance writing, tutoring, dog walking, photography, and more.
There are many ways for moms to earn money from home. They could start a bookkeeping business, sell online courses, start a blog, transcribe, or even work with print-on-demand services to sell custom-designed items.
Some creative side jobs for moms include blogging, making and selling printables, baking (and selling) dog treats, graphic design, voice-over work, and starting a YouTube channel.
Working moms can find time for side jobs by finding small pockets of time during the day, like when the kids are napping or after they go to bed. Using a planner can help organize your time and set achievable goals to keep on track.
Taking online surveys or becoming a virtual assistant are great options for moms with no prior experience. These jobs are easy to start and require little to no training.
To make $2,000 a month, a mom could sell multiple services like bookkeeping, proofreading, or selling a range of products such as printables and crafts. Combining several side hustles can help you reach this goal. Or, you could focus on a single side job and spend more time on it.
A mom can definitely become financially independent. This is possible by diversifying their income streams. They can sell products online, sell freelance services (like writing or bookkeeping), or even invest some time into building a successful blog or YouTube channel.
I hope you enjoyed this article on the best side hustles for moms.
Finding the right side hustle can make a big difference for moms who want to earn extra money while still focusing on their families.
Many of the side hustles for moms above have a lot of flexibility, the chance to work from home, and the opportunity to do what you love.
Whether you start a blog, sell handmade crafts, or become a virtual assistant, there’s a side hustle that can fit into your busy life.
What do you think are the best side hustles for moms?
Recommended reading:
Source: makingsenseofcents.com
Only One in Three American Millionaires Feel “Wealthy” and Nearly Half Say Their Financial Planning Needs Improvement, According to Northwestern Mutual Planning & Progress Study What’s it like to feel like a million bucks? Millionaires indicate it’s less about believing you’re rich and more about having confidence and clarity about the future. Nearly 80% of … [Read more…]
A spousal IRA gives a non-working spouse a way to build wealth for retirement, even if they don’t have earned income of their own.
Spousal IRAs can be traditional or Roth accounts. What distinguishes a spousal IRA is simply that it’s opened by an income-earning spouse in the name of a non-working or lower-earning spouse.
If you’re married and thinking about your financial plan as a couple, it’s helpful to understand spousal IRA rules and how you can use these accounts to fund your goals.
A spousal IRA is an IRA that’s funded by one spouse on behalf of another. This is a notable exception to the rule that IRAs must be funded with earned income. In this case, the working spouse can make contributions to an IRA for the non-working spouse, even if that person doesn’t have earned income.
The couple must be married, filing jointly, in order for the working spouse to be able to fund a spousal IRA.
For example, say that you’re the primary breadwinner for your family, and perhaps your spouse is a stay-at-home parent or the primary caregiver for their aging parents, and doesn’t have earned income. As long as you have taxable compensation for the year, you could open a spousal IRA and make contributions to it on your spouse’s behalf.
Saving in a spousal IRA doesn’t affect your ability to save in an IRA of your own. You can fund an IRA for yourself and an IRA for your spouse, as long as the total contributions for that year don’t exceed IRA contribution limits (more on that below), or your total earnings for the year.
Recommended: Understanding Individual Retirement Accounts (IRAs): A Beginner’s Guide
Spousal IRAs work much the same as investing in other IRAs, in that they make it possible to save for retirement in a tax-advantaged way. The rules for each type of IRA, traditional and Roth, also apply to spousal IRAs.
What’s different about a spousal IRA is who makes the contributions. If you were to open an IRA for yourself, you’d fund it from your taxable income. When you open an IRA for your spouse, contributions come from you, not them.
It’s also important to note that these are not joint retirement accounts. Your spouse owns the money in their IRA, even if you made contributions to it on their behalf.
Only offers made via ACH are eligible for the match. ACATs, wires, and rollovers are not included.
The IRS sets the rules for IRAs, which also govern spousal IRAs. These rules determine who can contribute to a spousal IRA, how much you can contribute, how long you have to make those contributions, and when you can make withdrawals.
Married couples who file a joint tax return are eligible to open a spousal IRA for the non-working spouse. As long as one spouse has taxable compensation and, in the case of a Roth IRA, they meet income restrictions, they can open an IRA on behalf of the other spouse.
Taxable compensation includes money earned from working, such as wages, salaries, tips, or bonuses. Generally, any amount included in your income is taxable and must be reported on your tax return unless it’s excluded by law.
That said, a traditional IRA does not have income requirements; a Roth IRA does.
One of the most common IRA questions is how much you can contribute each year. Spousal IRAs have the same contribution limits as ordinary traditional or Roth IRAs. These limits include annual contribution limits, income caps for Roth IRAs, and catch-up contributions for savers 50 or older.
For tax-year 2024, you can contribute up to $7,000 to a traditional or Roth IRA; if you’re 50 or older you can add another $1,000 (the catch-up contribution) for a total maximum of $8,000.
Remember, you can fund a spousal contribution as well as your own IRA up to the limit each year, assuming you’re eligible. That means for the 2024 tax year, a 35-year-old couple could save up to $14,000 in an individual and a spousal IRA.
A 50-year-old couple can take advantage of the catch-up provision and save up to $16,000.
There are a couple of rules regarding contribution limits; these apply to ordinary IRAs and spousal IRAs alike.
• First, the total contributions you can make to an individual IRA and/or spousal IRA cannot exceed the total taxable compensation you report on your joint tax return for the year.
• If neither spouse is covered by a workplace retirement account, contributions to a traditional spousal IRA would be deductible. If one spouse is covered by a workplace retirement account, please go to IRS.gov for details on how to calculate the amount of your contribution that would be deductible, if any.
There is an additional restriction when it comes to Roth IRAs. Whether you can make the full contribution to a spousal Roth IRA depends on your modified adjusted gross income (MAGI).
• Married couples filing jointly can contribute the maximum amount to a spousal Roth IRA for tax year 2024 if their MAGI is less than $230,000.
• They can contribute a partial amount if their income is between $230,000 and $240,000.
• If a couple’s income is $240,000 or higher, they are not eligible to contribute to a Roth or spousal Roth IRA.
The annual deadline for making an IRA contribution for yourself or a spouse is the same as the federal tax filing deadline. For example, the federal tax deadline for the 2024 tax year is April 15, 2025. You’d have until then to open and fund a spousal IRA for the 2024 tax year.
Filing a tax extension does not allow you to extend the time frame for making IRA contributions.
Spousal IRAs follow the same withdrawal rules as other IRAs. How withdrawals are taxed depends on the type of IRA and when withdrawals are made.
Here are a few key spousal IRA withdrawal rules to know:
• Qualified withdrawals from a traditional spousal IRA are subject to ordinary income tax.
• Early withdrawals made before age 59 ½ may be subject to a 10% early withdrawal penalty, unless an exception applies (see IRS rules).
• Spouses who have a traditional IRA must begin taking required minimum distributions (RMDs) at age 72, or 73 if they turned 72 after Dec. 31, 2022. Roth IRAs are not subject to RMDs, unless it’s an inherited Roth IRA.
• Roth IRA distributions are tax-free after age 59 ½, as long as the account has been open for five years, and original Roth contributions (i.e., your principal) can always be withdrawn tax free.
• A tax penalty may apply to the earnings portion of Roth IRA withdrawals from accounts that are less than five years old.
Whether it makes more sense to open a traditional or Roth IRA for a spouse can depend on where you are taxwise now, and where you expect to be in retirement.
Deducting contributions may help reduce your taxable income, which is a good reason to consider a traditional IRA. On the other hand, you might prefer a Roth IRA if you anticipate being in a higher tax bracket when you retire, as tax-free withdrawals would be desirable in that instance.
Recommended: Inherited IRA Distribution Rules Explained
Spousal IRAs can help married couples to get ahead with saving for retirement and planning long-term goals, but there are limitations to keep in mind.
• Non-working spouses can save for retirement even if they don’t have income.
• Because they’re filing jointly, couples would mutually benefit from the associated tax breaks of traditional or Roth spousal IRAs.
• Spousal IRAs can add to your total retirement savings if you’re also saving in a 401(k) or similar plan at work.
• The non-working spouse can decide when to withdraw money from their IRA, since they’re the account owner.
• Couples must file a joint return to contribute to a spousal IRA, which could be a drawback if you typically file separately.
• Deductions to a spousal IRA may be limited, depending on your income and whether you’re covered by a retirement plan at work.
• Income restrictions can limit your ability to contribute to a spousal Roth IRA.
• Should you decide to divorce, that may raise questions about who should get to keep spousal IRA assets (although the spousal IRA itself is owned by the non-working spouse).
Because you can open a spousal IRA that’s either a traditional or a Roth style IRA, it helps to see the terms of each. Remember, spouses have some flexibility when it comes to IRAs, because the working spouse can have their own IRA and also open a spousal IRA for their non-working spouse. To recap:
• Each spouse can open a traditional IRA
• If eligible, each spouse can open a Roth IRA
• One spouse can open a Roth IRA while the other opens a traditional IRA.
Bear in mind that the terms detailed below apply to each spouse’s IRA.
| Spousal IRA | Traditional IRA | Roth IRA | |
|---|---|---|---|
| Who Can Contribute |
Spouses may contribute to a traditional or Roth spousal IRA, if eligible. Roth spousal IRA eligibility is determined by filing status and income (see column at right). |
Anyone with taxable compensation. | Eligibility to contribute determined by tax status and income. Married couples filing jointly must earn less than $240,000 to contribute to a Roth. |
| 2024 Annual Contribution Limits | $7,000; $8,000 for those 50 and up (note that each spouse can have an IRA and contribute up to the annual limit) | $7,000; $8,000 for those 50 and up | $7,000; $8,000 for those 50 and up. |
| Tax-Deductible Contributions | Yes, for traditional spousal IRAs* | Yes* | No |
| Withdrawals | Withdrawal rules for both types of spousal IRAs are the same as for ordinary IRAs (see columns at right). |
Qualified distributions are taxed as ordinary income. Taxes and a penalty apply to withdrawals made before age 59 ½ , unless an exception applies, per IRS.gov. |
Original contributions can be withdrawn tax free at any time (but not earnings). Distributions of earnings are tax free at 59 ½ as long as the account has been open for 5 years. |
| Required Minimum Distributions | Yes, for traditional spousal IRAs. RMDs begin at age 72** | Yes, RMDs begin at age 72** | RMD rules don’t apply to Roth IRAs. |
* Deduction may be limited, depending on your income and whether you or your spouse are covered by a workplace retirement plan.
** You must take withdrawals from a traditional IRA once you reach 72 (or 73, if you turn 72 in 2023 or later).
Dive deeper: Roth IRA vs. Traditional IRA: Which IRA is the right choice for you?
Opening a spousal IRA is similar to opening any other type of IRA. Here’s what the process involves:
• Find a brokerage. You’ll first need to find a brokerage that offers IRAs; most will offer spousal IRAs. When comparing brokerages, pay attention to the investment options offered and the fees you’ll pay.
• Open the account. To open a spousal IRA, you’ll need to set it up in the non-working spouse’s name. Some of the information you’ll need to provide includes the non-working spouse’s name, date of birth, and Social Security number. Be sure to check eligibility rules.
• Fund the IRA. If you normally max out your IRA early in the year, you could do the same with a spousal IRA. Or you might prefer to space out contributions with monthly, automated deposits. Be sure to contribute within eligible limits.
• Choose your investments. Once the spousal IRA is open, you’ll need to decide how to invest the money you’re contributing. You may do this with your spouse or allow them complete freedom to decide how they wish to invest.
As long as you file a joint tax return, you can open a spousal IRA and fund it. It doesn’t necessarily matter whether the money comes from your bank account, your spouse’s, or a joint account you share. If you’re setting up a spousal IRA, you can continue contributing to your own account and to your workplace retirement plan if you have one.
Spousal IRAs can make it easier for couples to map out their financial futures even if one spouse doesn’t work. The sooner you get started with retirement saving, the more time your money has to grow through compounding returns.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Help grow your nest egg with a SoFi IRA.
Spousal IRA rules allow a spouse with taxable compensation to make contributions to an IRA on behalf of a non-working spouse. The non-working spouse owns the spousal IRA and can decide how and when to withdraw the money. Spousal IRA withdrawals are subject to the same withdrawal rules as traditional or Roth IRAs, depending on which type of account has been established.
A spousal IRA could be a good idea for married couples who want to ensure that they’re investing as much money as possible for retirement on a tax-advantaged basis. In theory, a working spouse can fund their own IRA as well as a spousal IRA, and contribute up to the maximum amount for each.
Yes, that’s the idea behind the spousal IRA option. When a wife or husband doesn’t have taxable income, the other spouse can make contributions to a spousal traditional IRA or Roth IRA for them. The contributing spouse must have taxable compensation, and the amount they contribute each year can’t exceed their annual income amount or IRA contribution limits.
Photo credit: iStock/andreswd
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Checking accounts are designed for everyday money management and make it easy to pay bills, either online or via debit card or check. Savings accounts, on the other hand, are set up for saving rather than spending. These accounts typically pay a higher interest rate on your balance to incentivize saving, and don’t provide the same ease of access as checking accounts.
That said, it’s possible to pay bills using your savings account. Whether or not you should, however, is another question. Here’s a look at when and how you might use your savings account to cover bills, whether it’s a one-off expense or a recurring payment.
Since savings accounts aren’t set up for covering regular expenses, they don’t come with checks or a debit card. However, there are some other ways to pay bills with a savings account. Here are some to consider:
If you’re able to pay a bill in cash, you can withdraw it from your savings account at an ATM using your ATM card or, if you also have a checking account at that bank, your debit card. To avoid fees, be sure you use an ATM that’s in your bank’s network. Also keep in mind that banks typically allow a maximum of $500 to $1,000 to be withdrawn at an ATM per day. You can withdraw more cash by going to a teller to make the withdrawal.
A simple way to use your savings account to pay a bill is to transfer the needed amount into your checking account, then make the payment from there. You can typically make this kind of transfer by using your banking app, logging into your account online, or visiting a local branch.
If your checking and savings accounts are at the same bank, the transfer is usually immediate. If your savings account is at a different financial institution than your checking account, it may take up to three days to post.
Recommended: How to Transfer Money From One Bank to Another
In some cases. you may be able to set up a direct recurring payment from your savings account to a company or service provider, such as your credit card issuer or utility company. To do this, you’ll need to supply the billing company with the routing and account number for your savings account. Once the account is authorized, that company can then debit funds from your savings account.
Keep in mind, however, that some billing companies do not allow automatic debits to come from savings accounts. Plus, some financial institutions don’t permit this type of transaction.
For a large, one-time bill, you might consider using a cashier’s checks. This type of check looks and works like a typical check, except it’s written by a bank or credit union for withdrawal from the institution’s account, instead of the customer’s personal funds. Because the financial institution guarantees the check, it’s considered a highly secure form of payment.
To use a cashier’s check to pay a bill with a savings account, you’ll need to visit your bank or credit union and purchase the check using funds from your savings account. Financial institutions typically charge a fee for cashier’s checks.
Recommended: Money Order vs Cashier’s Check: What’s the Difference?
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Savings accounts work well for storing and growing funds you don’t need immediately but plan to use some time in the next few months or years.
Since these accounts keep your money safe and accessible, they are ideal for building your emergency fund. A general rule of thumb is to keep at least three to six months’ worth of living expenses parked in a separate savings account that earns a competitive return, such as a high-yield savings account. When an emergency or unexpected expense comes up, you can then easily access those funds and immediately have the cash you need to deal with the problem.
Savings accounts also work well for short-term savings goals, such as paying for a vacation, new car, or home improvement project. For longer-term goals like retirement or a child’s college education, however, you’re likely better off investing your funds in the market, which involves risk but can provide greater returns over the long term.
These strategies can help you maximize the benefits of a savings account.
• Select a high-yield or high-interest savings account. If your money is sitting in an account, earning as much interest on it as you can maximizes your cash.
• Set some specific savings goals. Understanding why you want to save money, whether it’s for a home, a vacation, or an emergency fund, can help you stay motivated to stick to your savings plan.
• Try to minimize withdrawals. To make sure your savings account grows, rather than shrinks, try to limit everyday spending to the money you have available in your checking account.
• Automate savings. To reach your savings goals faster, consider setting up a recurring transfer from checking to savings for a set day each month, ideally right after your paycheck clears.
In the past, the Federal Reserve has limited the number of transfers or withdrawals from a savings account to six per statement period under a rule called Regulation D. In response to the coronavirus pandemic, however, the Federal Reserve Board lifted the six-per-month limit. While some banks and credit unions have since loosened restrictions, many have chosen to continue imposing transaction limits. Exceeding the limit can result in a fee or, if it happens repeatedly, conversion or closure of your account.
Even if your bank doesn’t limit savings account transactions, using a savings account to pay bills generally isn’t as easy or convenient as using a checking account. Moreover, using your savings account for bill payments can reduce your balance, impacting your ability to earn interest and save for future goals.
If you prefer to keep your savings account strictly for saving. Here are some other ways you can pay your bills:
Check
• Direct debit from your checking account
• Online bill payment using your checking account
• Money order
• Cash (paid in person)
• Credit card
While it’s possible to pay bills from your savings account, it’s generally not the most practical or cost-effective. Savings accounts are designed for saving money and earning interest, making them better suited for short-term saving goals rather than daily expenses.
That said, there may be times when you need to tap your savings to make a payment. In those instances, withdrawing cash or transferring money to a checking account are generally the most convenient ways to spend the money in your savings account.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
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You can spend money from your savings account by withdrawing cash at an ATM, transferring funds to your checking account (and spending them from there), getting a cashier’s check, and, if your bank allows it, through direct online payments.
Savings accounts are primarily designed for storing funds and earning interest, not for frequent transactions. As a result, many banks impose restrictions and fees to discourage the use of savings accounts for regular bill payments and everyday spending.
It depends on your bank and who you are trying to pay. In some cases, it’s possible to set up a direct debit from a savings account to a payee. However, some billing companies only permit direct debits from checking accounts, and many banks block this type of transaction.
Even if you are able to set up autopay through your savings account, you’ll also want to keep in mind that banks often limit transactions from savings accounts to six per month. Automatic debits could cause you to exceed your limit, resulting in fees and, in extreme cases, closure of your account.
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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.
SOBK0223014
Source: sofi.com
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Understand how first-gen Americans can achieve financial success with tips for balancing cultural obligations and wealth-building strategies.
How can first-generation Americans grow their wealth and protect their money? How can you set financial boundaries with family and friends while staying committed to your long-term financial goals? Hosts Sean Pyles and Kim Palmer discuss the unique financial challenges faced by first-generation Americans and immigrant families to help you understand strategies for achieving financial independence. They begin with a discussion of tips and tricks on managing dual financial pressures of supporting oneself and one’s parents and breaking cycles of poverty through self-compassion and financial education.
Jannese Torres, host of the personal finance podcast Yo Quiero Dinero, joins Kim to discuss the importance of building a strong financial support network tailored to individual needs. They discuss strategies for identifying trustworthy financial advisors, setting and maintaining financial boundaries with family and friends, and gracefully declining costly invitations in favor of ensuring long-term financial success. This episode is essential listening for anyone navigating cultural and familial obligations while striving for financial independence.
Check out this episode on your favorite podcast platform, including:
NerdWallet stories related to this episode:
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Welcome to NerdWallet’s Smart Money podcast. I’m Sean Pyles.
Kim Palmer:
And I’m Kim Palmer.
Sean Pyles:
On Smart Money, we are all about answering your money questions, and today we’re tackling an important one: How can first-generation Americans grow their wealth and protect their money? Kim, in her role as the host of our regular book club series, is here to guide the conversation. So Kim, who are you talking with?
Kim Palmer:
I am speaking with Jannese Torres, author of the new book, Financially Lit!: The Modern Latina’s Guide to Level Up Your Dinero & Become Financially Poderosa. She is also the host of the personal finance podcast Yo Quiero Dinero, and we are joined by my fellow Nerd Melissa Lambarena, a writer on the credit cards team, who also serves as an English and Spanish language spokesperson here at NerdWallet.
Sean Pyles:
Sounds great. Well, I will let you all take things from here.
Kim Palmer:
Great. Thank you. Jannese, thank you so much for joining Melissa and me today.
Jannese Torres:
Thank you so much for having me. Excited to be here.
Kim Palmer:
Let’s start with what’s unique about money for first-generation Americans and immigrant families. You write about how money is often not talked about, for example. Can you share some of those financial challenges that first-generation Americans often face?
Jannese Torres:
Absolutely. So I think at its core, it can start with something as simple as the language barrier. For many first-gen kids, we could be the family translators, oftentimes in financial situations. And so it’s not uncommon for us to take on the responsibility of helping our parents file their tax returns, navigate balancing a checkbook, or any number of other financial tasks that, for folks who can speak English, it’s just so much easier to do that.
So that’s one thing. But then I think there’s a lot of, maybe I would call them cultural nuances, that make the financial industry and first-gen communities kind of be at odds in a way. And I think some of that comes from the fact that there is this lack of culturally competent education and information oftentimes. It’s really even really hard to find alternate language content from a banking institution or a financial institution.
And also, there’s a lot of trauma associated with finances, especially if your parents have come from another country where maybe the economic situation is not as stable. There’s a big mistrust of financial institutions. So a lot of those things can compound in a way that make us very fearful of money and also the institutions that control it.
Melissa Lambarena:
I can definitely relate to that as a first-generation American, having to help my parents with a lot of these, figuring out different documents and a lot of these financial questions. Another thing that impacts us is that we might have to save for our own future, but also support parents who lack retirement savings in the present. And this is something that you talk about in your book. What do you see or want for people who find themselves in this situation?
Jannese Torres:
Well, I think first off, it requires a lot of self-compassion because what I find is there can be a lot of resentment and frustration amongst first-gen kids who feel like, well, why didn’t mom and dad do better? And it’s like we have to have the context and understand that they couldn’t do what they didn’t know. It’s not like financial literacy information is pervasive regardless of where you’re from, but especially when you’re from an immigrant community.
And so I like to refer to the oxygen mask analogy, for especially first-gen kids, because at the end of the day, the foundation that you are building as a wealth builder is only going to be as stable as you make it. If you overextend yourself or just find yourself continuously helping everybody else, but at the expense of your own future self, then it’s just going to perpetuate this cycle of poverty and struggle and feeling like we keep working towards a goal that we never actually achieve.
So I do recommend that folks prioritize their own financial stability. But then also, if you know that you’re going to be in a position to have to financially take care of someone, start having those conversations early and often so that you can start to understand the scope of what that’s going to look like and then make a plan accordingly.
Kim Palmer:
In the foreword of your book, it notes that a lot of personal finance publishers really have a blind spot, and they’re mainly writing for wealthy, white older readers. When did you realize the need for a podcast and a book like yours, and what kind of questions do you get from listeners that they might not hear anywhere else?
Jannese Torres:
I’ve been consuming personal finance content since 2016. And after about three years, I realized that the voices just didn’t 100% resonate with my lived experience as a first-gen Latina. And so that’s when I decided to stick my foot in and decide to launch the podcast, which inevitably led to my opportunity to write this book.
It’s definitely been inspired by the numerous conversations that I’ve had on the podcast where folks feel a lot of imposter syndrome for wanting wealth, a lot of fear because there is that lack of knowledge and a lack of trustworthy resources that we can go to, to learn more about this information. And I have found that it really moves the needle when people can hear stories from folks that they can resonate with.
And that’s why I think it’s so important to have that cultural context when we’re talking about money. Because for example, I think a lot of the mainstream personal finance content is very individualistic-based, especially here in America. Whereas for a lot of communities of color, it’s not unheard of to have multigenerational households where people are contributing collectively towards financial goals.
And just the idea of the bootstraps narrative and picking yourself up and working hard, but just for yourself, it doesn’t really align with how we operate most often in our communities.
Melissa Lambarena:
And financial trauma is something that you approach in your book that is often not seen across many personal finance books. Is this something that is left out of other personal finance books, and how can people get to the root of their financial trauma to make progress on their financial goals?
Jannese Torres:
I mean, I think the whole conversation around mental health and money is something that it needs to be more prevalent. Because I’ve found time and time again that it doesn’t matter if you tell somebody what they should be doing, whether it’s budgeting, saving, or investing — if they have mental health issues and financial trauma, that is going to prevent them from taking those steps. And so getting to the root of your money beliefs is a critical part of this whole journey.
For me, it was really important to include that information in the book. One of the things that I do is I walk readers through understanding where those narratives that we have internalized come from. If you have a perception that wealth is somehow intrinsically bad or immoral, did you grow up in a household where maybe that was the messaging from a religious aspect? Or did you see your parents fighting over money, and so it makes you afraid to talk about it with your partner? All of those things are subconsciously impacting how we operate with money, and I think it’s important for folks to have that context because oftentimes there’s just this shame and guilt that we feel about us not being able to make progress. But you have to understand why you feel the way you do about money before you can start to change those narratives.
Kim Palmer:
I totally agree. I’m so glad that we’re having those conversations more now. I don’t know if you’ve noticed this too, but I do feel like in the personal finance space, people are willing to talk about the mental health side of things more. It seems like something that’s coming up more often.
Jannese Torres:
Absolutely. I think there is less of a stigma when it comes to just talking about mental health in general, but I think that has not necessarily been at the same pace depending on where you’re from. I think for especially communities of color, there still is a lot of stigma about first talking about mental health and then letting folks know that you might be working with a therapist.
So I think the more that we normalize these conversations, the less they’ll be taboo, and the more open that people can be. Because you often realize once you start talking to other folks, there’s a lot of people that are going through the same exact emotions, and it just helps you feel less alone when you know that there are safe spaces where you can talk about this.
Kim Palmer:
Yes, absolutely. You also write about the importance of making yourself more financially secure with multiple income streams. And I love your personal story with this, how your side hustle started with a blog. So I’d love if you can share how your own side hustle helped you after an unexpected job loss and why it’s so important to have those multiple income streams.
Jannese Torres:
So I consider myself an elder millennial. I graduated about six months before the Great Recession. And so even though I went to school and got a degree in order to “get the stable job,” I did not experience that as soon as I got into the workforce. I found a lot of folks having unexpected layoffs.
And seeing especially people who had dedicated 20, 30 years plus to a company and be walked out the door with nothing more than a thank you and a box to collect their things, I think that for me was a very jarring realization at a young age that maybe it’s just not so stable out here in the corporate world. I always had that in the back of my head that I did want to diversify my income.
And then when I got laid off in January of 2014, it was confirmation of all these feelings that I’d had about just not putting all your eggs in one basket when it comes to your financial stability. I had been dabbling with content creation with the blog in early 2013. And when I got laid off, I took a couple of months. Instead of rushing back to get another job, I decided to double down and really learn on how you could turn an online content-based blog into an actual business.
And so I started learning about things like affiliate marketing and brand partnerships and how do you put ads on your website. And so that led me down a rabbit hole of entrepreneurship, which led me into the personal finance space. It’s been a really interesting experience seeing how you can have the power to create your own income streams just with ideas that you come up with with your head.
I like to encourage folks to really take a look at their skill sets, whether those are personal or professional skills, and see how you can turn them into a side hustle. Because at the bare minimum, you’ll be able to make extra money to pay off debt or save and invest. Best-case scenario is you might be building your new career.
Kim Palmer:
For sure. And then, as you found, if your main job source or source of income disappears, you have that to fall back on.
Jannese Torres:
Absolutely. There’s just a sense of power that comes from knowing that nobody can mess with you financially, especially if you have different ways of making money.
Kim Palmer:
Yes, I love that.
Melissa Lambarena:
I think a lot of our listeners are going to be inspired by that story. It’s important to stay aware and just read up on what other people are doing out there. And on that note, some people might not want to quit their job if they enjoy what they do or they like having that security of a full-time job. In that situation, what are some options that people may have to create multiple income streams, and have you stumbled upon any success stories throughout your work?
Jannese Torres:
Well, I think that at the bare minimum, we should all be using some of our disposable income to invest. Because when it comes to making that sexy passive income that everybody wants to make, that’s the easiest way to do it. Creating an additional income stream through dividend investing and through capital gains, that’s number one. If you don’t have access to an investment account through your job, anybody who has earned income can open a traditional or a Roth IRA.
So just think about what those options are for you. It doesn’t have to be that you’re building a business. There’s folks who decide to purchase real estate, and that’s how they create a secondary income stream. There’s folks who decide not to buy physical real estate, but they can invest in REITs or real estate investment trusts and be getting paid monthly rental income just by being an investor.
There’s other ways to make money versus just starting a business. But I think it’s just, like I said before, not put all your eggs in a basket. And at the bare minimum, I think it’s really important, especially in this uncertain time that we’re living in, to think about bulking up your emergency funds just because it is taking longer for folks to find jobs if they do get laid off. And knowing that you don’t have to take the first offer and you have room to breathe and figure out what your next steps are, I think that’s something everybody should be thinking about.
Kim Palmer:
You also write about the importance of creating a support network for people when it comes to their money. Can you explain what exactly does that look like? How can we create that support network?
Jannese Torres:
Absolutely. So I did find myself at various points of my personal finance journey feeling unqualified to make decisions, whether it was thinking about am I ready to leave my job and take on entrepreneurship full time, or how do I start investing on behalf of my family, knowing that I want to be able to help them financially? And so in those scenarios, I needed a second opinion and I started working with a certified financial professional.
I’ve worked with an accountant now through my business. I have an attorney. So there’s different folks who are experts in their field who are going to be able to help you navigate moments where you just don’t feel like you have all the information that you need. And I think it’s important to know that you don’t have to figure all of this out alone, and oftentimes you probably shouldn’t.
Like in the case where I was thinking about creating an estate plan, I did not feel comfortable taking on some DIY template and hoping that that was going to pass the bar in the event that I needed to use it for legal purposes. And so in that instance, I decided to seek out an estate planning attorney to help me figure that out. So I think it’s just important for you to know there are people out here who can help answer these questions so that you don’t feel this overwhelming pressure to figure it all out yourself.
Kim Palmer:
For sure. One thing you write about, too, though is that it can be hard to know who you could trust, and you talk about the importance of boundaries and what to do when family members ask you for money. And today on social media, when there’s people who call themselves experts talking about all kinds of things, how do you decide who you can trust in this scenario when you’re trying to build your own support network like that?
Jannese Torres:
I think it’s important to trust, but verify. So not just taking all of your information from a single source. There’s so many different places to learn about personal finance that I like to diversify my education the same way that I like to diversify my income. Doing your due diligence, making sure that you are researching somebody just to understand what information is out there about them.
When we’re talking about financial professionals, there are certification boards and different places that you can look for, making sure that they are still in good standing. I like referrals too. There’s something about working with someone who has a direct relationship with someone that you know. That can be a good strategy. Also, going online and searching for reviews.
There’s no such thing as too much research when it comes to figuring out who you can trust. And I like to think that people naturally reveal themselves after a certain amount of time, so be on the lookout for that too.
Kim Palmer:
Yes. I like that phrase that you used about diversifying your education and your sources. That makes a lot of sense.
Melissa Lambarena:
It’s also important to gather support for your financial goals, and that’s something that you talk about in your book. Some family members or friends may not understand what we’re trying to do, and setting boundaries around money can help you fulfill those goals that you might have, whether it’s to save or get out of debt. What are some ways that you’ve had to navigate this and what advice can you share with our listeners?
Jannese Torres:
I think the first thing is to understand that it’s not going to be very productive to ask someone for directions to a place that they’ve never been. When I say that, I mean, if you were the first person to be investing in the stock market, it’s probably not going to be very productive to talk to your family about this if nobody’s doing it. And so just the idea that you can create your own community of support, I think it’s an important thing to consider.
Because most often we look to the people that we already know to validate what we’re trying to do and to understand, and it’s not necessarily their job. It’s your job to understand the mission that you’re on and then to rally the troops, if you will, create community, whether that’s in person or online. I have found an incredible community of entrepreneurs who support me from all over the world online.
And it’s the same thing with being a first-gen wealth builder. When you start talking about this stuff, you’ll naturally find the people who are aligned with where you are and where you’re trying to go. And so I think it’s just important that you don’t necessarily limit your scope for creating that community amongst the people that you already know. It might require you to be in new spaces and have conversations with new people.
Melissa Lambarena:
What about when it comes to setting boundaries around money? When family members say they want to go on vacation or those weddings come up or holidays, how do you navigate that in a culture that sometimes isn’t used to talking about money at times?
Jannese Torres:
Those scenarios are absolutely challenging. I don’t want to make it seem like it’s not going to be difficult to stand up to the people that you love and say, “You know what? I just can’t swing this. I’m working on other goals and this is just not at the top of my list.” You’re going to have to be okay with people not getting it. And unfortunately, sometimes that’s going to mean maybe offending somebody.
But at the end of the day, we have to develop a thick skin when it comes to staying true to what our values are and understanding that this short-term sacrifice is going to then allow you to potentially be in a position in the future where you can splurge, where you can actually be the one that’s treating your family to these awesome experiences because now you’ve put yourself in a financial position to be able to do so.
I think it’s just important to maintain that long-term perspective and to understand that not everybody’s going to get it, but it’s not necessarily for them to get.
Kim Palmer:
Yeah, and that’s really motivating too. I wanted to delve into some of your specific tips and why they matter. So I picked out a few to highlight. First, your practice your salary negotiation script idea. I love this one because it’s something my own dad also told me about. So tell us why that’s so important and why it can be helpful.
Jannese Torres:
Yeah. Well, at the end of the day, negotiation is an art form. It is a skillset that you have to hone in. You have to work it just like a muscle. And so I think oftentimes when folks even start thinking about negotiation, it’s usually in the context of a salary or a promotion. And that can feel very life or death for some people. It’s like, oh my god, if this doesn’t go right, what’s going to happen? And so I like to encourage folks to start with the basics.
Calling up your credit card company and seeing if you can negotiate a lower interest rate, or when your renewal term is coming up for a streaming service and they want to double your rate, give them a call and say, “You know what? I can’t do this. I’m only going to stay on if you guys can match the introductory rate that I already had.” You’d be surprised how often companies want to retain you as a customer and are willing to make those negotiations.
And so the more comfortable that you get with those small things, when there are bigger things at stake, whether that’s negotiating the price of a car or a house or your salary, you’re going to have more practice and you’re going to have more confidence because you’re going to have more of those wins under your belt.
Kim Palmer:
Yes, that is so true. The second one I wanted to highlight is applying the 50/30/20 budgeting rule. At NerdWallet, that’s also something that we talk about a lot. Can you explain why it works so well?
Jannese Torres:
Well, I think it’s a good baseline for a lot of people to understand where they should be with regards to their fixed and their variable expenses, as well as their savings goals. Now, the thing that makes it an eye-roll situation for a lot of people is depending on where you live, those percentages can be wildly different. If you live in a very high-cost-of-living area, it’s not uncommon for you to be spending 60, 70, maybe even 80% of your income on those fixed expenses.
And so I think it’s a good baseline for folks to set up their first budgets, but I don’t think that you should let it discourage you if you have to tweak those parameters. Because at the end of the day, budgeting is just like personal finance. It really is an individual-based journey, and you have to figure out the system that works best for you.
Kim Palmer:
And finally, you say create sinking funds, which I don’t think everyone is familiar with that term. So can you explain how sinking funds work?
Jannese Torres:
Sure. I love a good sinking fund, and I had no idea what they were until I started down the rabbit hole of personal finance. And essentially, you’re just creating buckets of money for specific purposes. I think most folks are familiar with an emergency fund, and an emergency fund is just a type of sinking fund that you’re saving specifically for emergencies. But I encourage people to think about all of those goals that you have, whether that’s buying a home or upgrading your car or taking a luxurious vacation.
We can create sinking funds for all of these different goals that we have, and that way your money is clearly earmarked for that purpose. It’s easier to see when you’re making progress towards those specific goals instead of having all of your savings in one pot and then hoping that you have allocated enough for all of the things that you want to do. There’s something very visual about being able to track your progress for those individual goals that makes it much easier for a lot of people to maintain that momentum versus just having a pot of money with no designated purpose.
Kim Palmer:
For sure. And also helps you stay organized, I think, and just make sure you’re on track.
Jannese Torres:
Absolutely.
Kim Palmer:
Well, thank you so much, Jannese. Do you have any closing thoughts to share with our listeners?
Jannese Torres:
Well, I like to always remind folks that personal finance and getting your money stuff together is a journey. It is a marathon. It is not a sprint. And so the best thing that you can do is just be a perpetual learner, a continuous student, and never be afraid to ask a question because this world is changing so often, so rapidly. So keep learning, keep growing, and keep applying what you learn.
Kim Palmer:
That is the perfect note to end on. Jannese Torres, thank you so much for joining us on Smart Money.
Jannese Torres:
Thanks so much.
Kim Palmer:
And that’s all we have for this episode. To share your thoughts on money, shoot us an email at [email protected].
Sean Pyles:
Visit nerdwallet.com/podcast for more info on this episode. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.
Kim Palmer:
This episode was produced by Sean Pyles, Melissa Lambarena, and myself. Tess Vigeland helped with the editing. And a big thank you to NerdWallet’s editors for all their help.
Sean Pyles:
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.
Kim Palmer:
And with that said, until next time, turn to the Nerds.
Source: nerdwallet.com
Fortunately for retirement savers, the IRS allows some flexibility in funding traditional or Roth IRAs. You have until tax day of the following year to make contributions.
In other words: Your last day to make an IRA contribution for tax year 2024 is April 15, 2025. If you file an extension on your return, your ability to contribute to an IRA is not extended, however.
Knowing how long you have to make an IRA contribution is important, as it can help you save a little more, and potentially reap some tax benefits.
A conventional tax year extends from January 1 of the year through December 31 (corporate tax years can be different). However, the deadline for individuals making the maximum annual IRA contribution doesn’t follow that timeline; generally you have until tax day in April of the following year.
In most years, the deadline for filing your tax return is April 15. However, if the 15th falls on a holiday or weekend, the deadline is generally pushed to the next business day.
The deadline also applies to both annual contributions and catch-up contributions for regular IRAs. A catch-up contribution of $1,000 is allowed for taxpayers aged 50 or older.
Again, if you file an extension on your tax return, that will not give you extra time to contribute to an ordinary IRA. That said, the rules related to contribution deadlines and extensions are somewhat different for other types of IRAs, like SEP and SIMPLE IRAs designed for those who are self-employed or own small businesses. (see below).
Only offers made via ACH are eligible for the match. ACATs, wires, and rollovers are not included.
Contributions limits and deadlines vary, depending on the type of IRA you have.
| IRA Type | 2024 Annual Contribution Limit | Contribution Deadline for the 2024 Tax Year |
|---|---|---|
| Traditional IRA | $7,000, or $8,000 if you’re 50 or older | April 15, 2025 |
| Roth IRA | $7,000, or $8,000 if you’re 50 or older | April 15, 2025 |
| SEP IRA | 25% of compensation or $69,000, whichever is less (SEP plans do not have catch-up provisions) | April 15, 2025, unless the employer filed an extension; the extension deadline is Oct. 15, 2025 |
| SIMPLE IRA | $16,000, or $19,500 if you’re 50 or older | January 30, 2025 for employee contributions; April 15, 2025 for employer contributions (or Oct. 15, 2025, if there’s an extension) |
Contributions refer to the funds you deposit in a retirement account like an IRA (but also a 401(k) or 403(b)). Most retirement accounts have rules that govern the maximum amount you can contribute per year and the tax implications for contributing to one type of account vs. another.
• Generally speaking, traditional IRAs, as well as SEP and SIMPLE IRAs, are considered tax-deferred accounts. That means your contributions are typically tax deductible in the year you make them (though some restrictions apply if you or your spouse is covered by a workplace retirement account). But you will owe taxes on withdrawals.
• The money you contribute to a Roth IRA is an after-tax contribution, and is not tax deductible. Qualified withdrawals after age 59 ½ are tax-free, however.
Roth accounts have more restrictions than other types of IRAs. One important distinction is the income cap: For tax year 2024: Single filers whose modified adjusted gross income (MAGI) is $161,000 or higher, and those who are married, filing jointly with a MAGI of $240,000 or higher, are not eligible to open a Roth IRA.
In addition to the ordinary traditional and Roth IRA options, self-employed people, sole proprietors, and those with small businesses can set up SEP or SIMPLE IRAs.
• A SEP IRA, or Simplified Employee Pension IRA, is a retirement plan that can be set up by employers, sole proprietors, or the self-employed. Employers make contributions for employees (employees don’t contribute). Employers are not required to contribute to a SEP every year.
• A SIMPLE IRA, or Savings Incentive Match Plan for Employees IRA, is similar to a 401(k) but for businesses with 100 or employees or less. Both the employer and the employees can contribute to a SIMPLE IRA.
Both SEP and SIMPLE IRAs are tax-deferred accounts, similar to a traditional IRA. Contributions in most cases are tax deductible, but the account holder must pay ordinary income tax on withdrawals. The rules and restrictions governing withdrawals vary, so you may want to check the details at IRS.gov or consult a tax professional.
Maxing out your IRA, i.e., making the full annual contribution allowed, could help you save more for retirement. And as with any contribution amount, there can be tax benefits depending on the type of IRA you’re funding.
Whether it makes sense to contribute earlier in the year or wait until the contribution deadline depends on your financial situation.
Here are some of the advantages and disadvantages of maxing out an IRA earlier vs. later.
| Maxing Out an IRA Early | Maxing Out an IRA Late | |
|---|---|---|
| Pros |
• Maxing out your plan sooner allows it more time to grow, potentially. Growth depends on the investments you choose for your IRA; there are no guarantees of returns and there is always a risk of loss. • If your financial situation changes you’ll have the reassurance of knowing that your plan is fully funded for the year. |
• Waiting to max out your IRA until tax day could give you more time to max out your 401(k) before the year-end contribution deadline. • If you have a Roth IRA, waiting to make contributions can help you better gauge the maximum amount you can save, based on your income. |
| Cons |
• Fully funding an IRA early in the year could leave you short financially if you need money for other goals. • There’s a risk of contributing too much to a Roth IRA, based on what your income and filing status allows, which could trigger a tax penalty. |
• Delaying contributions might mean missing out on potential growth (but there are no guarantees your money will grow). • Waiting too long could result in missing the annual contribution deadline altogether if you come up short and don’t have enough money to save. |
If you contribute too much money to your IRA, the IRS can treat it as an excess contribution. Excess IRA contributions can happen if you:
• Aren’t keeping track of contributions throughout the year
• Miscalculate the amount you can contribute to a Roth IRA, based on your income and filing status
• Make an improper rollover contribution
If you make excess IRA contributions, the IRS can apply a 6% penalty for each year the excess amounts remain in your account. You can avoid the 6% tax by withdrawing excess contributions and any earnings from those contributions by the tax filing deadline or extension deadline if you filed one.
If you have any type of IRA, it’s important to mark your calendar each year with the contribution deadline so that you can plan the cadence of your contributions in relation to other expenses. Because most types of IRAs allow additional time for contributions, this can help you save more — and possibly reap additional tax benefits.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Help grow your nest egg with a SoFi IRA.
The traditional and Roth IRA contribution deadline for the 2024 tax year is April 15, 2025. If you’re an employer, or self-employed individual contributing to an SEP IRA, you’d have until tax day to contribute, unless you filed a tax extension. In that case, you’d be able to use the extension deadline instead.
Yes, you can contribute to an IRA for the current tax year up until the federal tax deadline, which is typically April 15 of the following year. In years where the federal tax deadline falls on a holiday or weekend, the date is pushed up to the next business day.
If the 2025 tax year is already underway, and the April tax deadline has passed, you cannot open an IRA and make contributions for the 2024 tax year. You could, however, open a traditional or Roth IRA before the April 2025 tax filing deadline and fund it with contributions for the 2024 tax year.
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Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
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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.
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Source: sofi.com
Sticking to a budget can be challenging, but one of the best ways to succeed is to find a system that works for you. Following a method that meets your needs and preferences can go a long way towards getting your spending and saving on track.
One Japanese budgeting method that’s gaining a lot of attention these days is the kakeibo (pronounced kah-keh-boh) method. Essentially, this budgeting method involves keeping a journal of all incoming and outgoing money to encourage a more mindful approach to spending.
Let’s take a closer look at how this unique Japanese money management method works, including:
• What does kakeibo mean?
• How does the kakeibo method work?
• What are the kakeibo categories?
• How can you properly use kakeibo to budget better?
Kakeibo translates to “household financial ledger” and is a very simple budgeting method. All you have to do to embrace the kakeibo method is keep a journal and log all of your incoming earnings and all of your outgoing expenses. By keeping this journal, you, the spender, will become more mindful of each purchase you make. This can help you focus more on your goals than on impulse purchases.
At its most basic, the kakeibo method could be thought of as “slow budgeting,” meaning it slows down the pace of managing your finances. In a world of apps and websites, it may suit those who want to unplug a bit and let the details of a budgeting program really sink in by working with pencil and paper, although there are digital tools that can make kakeibo work for those who love one-click convenience.
The kakeibo method works by creating a kind of detailed line item budget at the beginning of each month based on your projected income and spending, while keeping savings goals in mind. As you spend money throughout the month, you will keep a diary or journal of sorts where you track every single penny you spend.
At the end of the month, you can review your journal to see the progress you’ve made on your savings goals and if you stuck to your original targets. This reflection period can also help you adjust your monthly budget or behaviors as needed in the upcoming month.
Kakeibo was invented in 1904 by Hani Motoko, who is often referred to as Japan’s first female journalist. She designed this system as a way to make a budget for beginners. Specifically, she was creating a budget system for homemakers to keep track of their household spending. The concept she designed is simple and gives people control over their budgets while helping them become more aware of their spending habits.
There are four important questions you can ask yourself in order to use this Japanese budgeting method properly.
First, it’s important to write down how much income you expect to come in. If you are a W2 employee, you can simply look at past paychecks to figure out how much you bring into your bank account after taxes in a month If you are self-employed or work variable hours, you can look at multiple months of past income to get a general idea of how much you earn.
An important part of any budget that’s easy to forget is adding savings goals as a fixed expense. You can ask yourself how much you want to save each month and add it into your budget so you don’t accidentally spend that money.
If you’re wondering how much money to save each month, financial experts typically recommend 20% should go towards funding your savings goals. This is part of the popular 50/30/20 budget rule, which you’ll learn more about below.
While it can be hard to nail down exactly what you spend in a month, you can start with the “needs” in life. What are the basic expenses of living? These include the essentials you need to survive, such as:
• Housing
• Food
• Basic clothing
• Utilities
• Healthcare
• Transportation for work and school
• Debt payments
As you watch your budget, kakeibo encourages you to see how your discretionary spending is evolving. For instance, you may realize that during the pandemic, you signed up for a variety of streaming services which you forgot about. You might opt to unsubscribe for one or more of them.
However, it also (as you will see from how expenses are categorized, below) encourages you to think about how to use your dollars to make your life more enjoyable.
Any budget is a work in progress. A key element of the kakeibo method is journaling spending to encourage mindfulness. At the end of the month, you can look back at your spending to see where you can improve.
In this way, you become more intentional with your money. By getting granular with your understanding of your spending, you will better realize the impact of unplanned, impulsive or compulsive spending. And you will hopefully be better able to rein it in.
The kakeibo method involves tracking spending in four different budget categories. Here’s how they stack up:
This category consists of essentials that you can’t cut from your budget like food, utilities, healthcare, rent, and transportation. Now, while it’s true these expenses can’t be cut entirely because they are necessities, they could be decreased if needed. You could look for ways to decrease your heating bill in winter, or even move to a smaller home or one in a less expensive neighborhood.
Recommended: How Much Should I Spend on Rent?
Wants are purchases someone enjoys like travel, clothing, and dining out, but that aren’t essentials. Sometimes, it’s easy to blur the lines between needs vs. wants and believe that discretionary expenses are musts. A few examples:
• Thinking you need your fancy takeout latte every morning when you really could have made a cup of joe at home for a fraction of the price.
• Saying you “had” to take an Uber when, if you’d woken up a bit earlier, you could have used public transportation.
• Insisting that you “must” buy new clothes every fall, even though you might have a closet full of wearable garments.
It can be helpful to do a little soul-searching as you categorize your spending to make sure you properly identify your purchases.
This unique budgeting method carves out space for cultural activities. These could include:
• Museum admission or membership
• Tickets to a concert, play, or dance performance
• Books
• Admission to a local garden or zoo
Thanks to this category, the kakeibo budgeting method can get you thinking about spending towards quality of life and valuable experiences, rather than just material goods.
This category includes purchases that aren’t recurring and may come as a surprise. Some examples are:
• Birthday or holiday gifts
• Car repairs
• Unexpected medical bills
These kakeibo categories can help you get a clearer understanding of where your money is going. This can, in turn, make it easier to adjust spending habits and meet savings goals. While it can feel a bit tedious to write down every single purchase, doing so can help make spending become much more mindful.
Each budgeting method puts its own spin on money management. The kakeibo method is different from other types of budgets because it focuses more on creating better spending habits than strictly sticking to a budget.
By making you aware of your spending in detail, you become better attuned to your money and more aware of how impulse spending can derail your budget.
Having a budget that illuminates your financial situation and helps you avoid overspending can be a key step in financial self-care. Kakeibo has helped many people with this. Some of the specific benefits associated with this method include:
• Makes spending more mindful
• Simplifies budgeting into four distinct categories
• Encourages realistic savings goals
• Emphasizes making slow but steady progress
• Celebrates small achievements.
There are also some disadvantages associated with kakeibo that some budgeters may find discouraging.
• Can be time-intensive
• Detailed record-keeping is required, which can be tedious to some people
• May not provide enough structure to motivate some
The kakeibo method is best suited for someone who wants a simple budgeting method, who needs to make their spending habits more mindful, and who wants to work towards savings goals.
It may also be best for people who don’t get impatient with record-keeping, as it does involve very detailed tracking of expenses.
If you feel the kakeibo method isn’t the right budgeting system for you, consider one of these budgeting systems instead:
• Envelope budgeting method. This technique relies on budgeting out purchases for the month in cash envelopes labeled with each intended spending category. So you’d distribute your income into envelopes marked with things like food, clothing, etc. When you’ve spent the money allocated in a given envelope, that’s it; no more is available.
• The 50/30/20 rule. With this type of budget (briefly mentioned above), 50% of expenses go toward necessities, 30% goes toward lifestyle spending, and 20% goes toward saving for financial goals. There’s also a similar budgeting principle called the 70/20/10 rule for those who have higher living expenses.
• Zero-based budget. This budgeting method requires budgeting out every single dollar of income that comes in during a month. This doesn’t mean someone has to spend all of that money; it’s possible to allocate money towards a savings goal.
The kakeibo method is a simple budgeting technique that can help consumers break bad spending habits and become more mindful with their money. It may not work for everyone, but it may be worth a try if you’re ready to devote time and energy towards spending less and saving more.
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The kakeibo budgeting method is fairly simple. All you have to do is write down all of the money you have coming in each month (income) and, as you spend it, record where it goes. This method involves tracking spending in four different spending categories: general, wants, culture, and unexpected extras.
While it’s possible to manage a kakeibo budget with good old-fashioned paper and pen, some people might want to record their spending digitally. There are a variety of apps on the market designed to help people manage their kakeibo budget.
All you need to do to create a kakeibo journal is to grab an empty notebook you have on hand or buy an inexpensive one. There’s no need to get fancy here; a blank or lined notebook does the trick.
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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.
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Source: sofi.com