In August 1979, Warren Buffett wrote an article for Forbes attacking the herd instinct of investors. The late 1970s were tough for the American economy, and the stock market reacted harshly.
Buffett wrote,
“…the future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually, is the friend of the buyer of long-term values.”
Warren Buffett
The future is never clear. Let Buffett’s wisdom sink in. Uncertainty surrounds us, like fog on the highway. Risk is omnipresent. Say it with me: risk is omnipresent.
Only our perceptions and feelings change, sure. But feelings do not create or change reality.
Some periods feel optimistic and “cheery” – What risk?! Stocks can’t possibly go down! This is nirvana! Many younger investors have felt this in the past 15 years.
Other periods feel woefully pessimistic. “This is the death of equities,” wrote Business Week in the summer of 1979. If you’ve lived through bear markets or all-out crashes, you might know this type of pessimism.
Both of those perceptions are overly emotional. The optimist underestimates risk, and the pessimist overestimates risk.
We need to be prudent realists.
On the Road Again…
Every time you get in a car, the threat of getting in an accident is real.
According to Esurance, your odds of getting in a car accident are 1-in-366 for every 1000 miles driven. That equates to ~1-in-4 odds for every 100,000 miles driven. Accidents are out there!
Perhaps you’ve never had an accident before. Nevertheless, your future risk of an accident is still very real. I’d bet this person, with their perfect driving record, underestimates how real their future risk actually is.
Or perhaps you’ve gotten in multiple accidents – more than your fair share. I’d wager that person is hyper-aware to their future accident risk. In fact, they’ll likely overestimate their future risk.
Our perceptions of future risk are often shaped by our past experiences. We are pattern-seekers. But many events in this world are entirely decoupled from the past. Other types of events happen too infrequently for patterns to be evident. We get lulled into a false sense of reality. The stock market certainly acts this way.
The perfectly rational driver does the best they can (e.g., drives safely and defensively) yet still understands that future accidents might be waiting for them, regardless of their past driving record.
Back to the Market
Is a market crash coming soon? I don’t know, and neither do you.
Our past 15 years of relative stock market bliss do not necessitate a pending crash. None of this is predetermined.
But I do think the past 15 years have lulled many stock investors into a false sense of security. Many investors are thinking the same way as the accident-free driver. “I’ve never got in an accident. It must be a minuscule risk. Perhaps even zero risk!”
This is dangerous. Just as a driver should always maintain a defensive approach, so should the investor. And going back to Buffett’s inspirational quote:
“…the future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty, actually, is the friend of the buyer of long-term values.”
When our fellow investors get too confident, when they ignore the omnipresent risks, they (incorrectly) believe that further stock ownership is a zero-downside panacea. It’s 10% per year, guaranteed, forever!**
**It’s not.
Their demand for more stock ownership drives prices upward and, ultimately, reduces future expected returns. We all pay a price for a cheery consensus.
While a hard pill to swallow, stock buyers would rather have some tumult. We don’t mind buying at slightly lower prices. Uncertainly, as Buffett wrote, is our friend.
During and After a Crash
My final point, which I hope you’ll agree with…
We should be just as respectful of the omnipresent risks today as we would be during the middle of a stock market correction or even at the bottom of a market crash.
The risk of stock ownership is the same at all points! It doesn’t change. Only our feelings (“making money rocks!” vs. “losing money stinks!”) are changing. The risk itself is not changing.
If you can internalize that investing truth, you’ll become “the invulnerable investor.” Emotions won’t sway you.
That is the “little secret” of all great investors.
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-Jesse
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When you purchase a home, you must pay closing costs, which are the fees the lender charges to recoup loan processing costs. These can add up to a hefty sum, typically 3% to 6% of your mortgage amount.
Typically, you can take out a personal loan to cover those closing costs and help you across the finish line of a property purchase. You can often tap other funding sources as well. Take a closer look at the pros and cons of using a personal loan for closing costs, plus the alternatives, so you can decide what’s best for your needs.
What Are Closing Costs?
Closing costs are processing fees that you pay to your lender, either as the buyer or seller in a real estate transaction:
• Buyers: Buyers typically pay between 3% and 6% of the total loan amount in closing costs. Buyers must pay this amount out of pocket, so it’s important for them to have a plan for how they’ll access the money before they get to the closing table.
• Sellers: If sellers contribute to closing costs (say, to negotiate a home sale), those fees usually get taken out from the sale proceeds.
Here’s an example: If you plan to buy a home with a $300,000 loan, as the buyer, you’ll need to bring between $9,000 and $18,000 to the closing table. If you were the seller, you’d see that amount taken out of the costs you’d pocket from the sale.
Fees Associated with Closing Costs
Closing cost fees may include:
• Application fee: Lenders sometimes charge a one-time fee for borrowers to submit a loan application.
• Credit report fee: A credit report or credit check fee covers the cost to dig into your credit report, which shows your credit history. Your lender uses the information it uncovers to decide whether to approve your loan and how much they’ll lend you.
• Origination fee: You pay this fee to the lender to process the loan application.
• Appraisal fee: A fee paid to a professional to appraise the home based on an evaluation to determine its fair market value.
• Title search: A title search looks into public records to determine who actually owns the property and who has liens on the property (for example, an unpaid contractor’s lien for work done on the home).
• Title insurance: Title insurance protects you from financial loss and legal expenses in case the home has a bad title.
• Underwriting fee: Underwriting is the process of reviewing your finances to determine the risk of offering you a mortgage, and the fees cover this process.
• Property survey fee: Property survey fees cover the cost of checking the boundaries and easements of a property. This process shows exactly where the property’s perimeter is and what the property includes.
• Attorney fee: You will probably need to hire a lawyer to review the terms in your purchase contract and handle your closing.
• Discount points: Discount points are a way to balance your upfront costs and your monthly payment. If you use points to pay more upfront, you’ll likely have a lower interest rate, meaning that you could pay less monthly and over your loan term.
• Homeowners insurance premiums: Homeowners insurance provides financial protection if your home undergoes a disaster or accident. You must typically show your lender that you have paid homeowners insurance.
• Mortgage insurance: If you have a down payment of less than 20%, you will often have to pay mortgage insurance, a fee per month that protects your lender if you were to default. You’ll also have to pay a version of mortgage insurance on Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) loans. You may have to pay these insurance fees with your closing costs in addition to your monthly payments, particularly for the FHA and USDA loans.
• Property tax: Homeowners pay property tax to state, county, and local authorities for schools, roads, and other municipal services. You may have to pay a portion of your property tax at closing.
• Homeowners association (HOA) fees: If you plan to move to a neighborhood that has an HOA, or an organization that makes and enforces rules for a neighborhood, you may owe HOA fees at closing. The seller may pay these on a prorated basis.
• Per-diem interest: Per-diem interest refers to the interest a lender charges for the days between a closing date and the first day of your billing period.
• Transfer tax: State or local governments often charge real estate transfer taxes, meaning that they charge when properties transfer ownership.
• Recording fee: State and local governments charge recording fees to legally record your deed, mortgage, and other home loan documents.
Note that this isn’t an exhaustive list of closing costs — you may be on the hook for other fees as well.
Can You Use a Personal Loan for Closing Costs?
First, it’s important to understand how a personal loan works. It is usually funded by a bank, credit union, or online lender. You can typically use the money however you want — there aren’t as many restrictions on personal loans compared to, say, student loans. After you receive a personal loan, you pay it back with regular, fixed payments (with interest) over a specified term.
As mentioned above, you can use the cash as you see fit. So, yes, you can use a personal loan for closing costs. However, you can’t use it for a down payment, and you must tell your lender that you’ll go this route and borrow to pay the closing costs. The lender will include it in your debt-to-income (DTI) ratio, which is the amount of debt you have relative to your income.
Applying for a personal loan can involve prequalifying with several lenders and comparing them, gathering required documents (ID, proof of address and income, Social Security number, and education history), filling out the loan application, and receiving your funds after approval. You may be able to get a personal loan in one to three days.
As you shop around for funds, you’ll likely want to consider what credit score you need for a personal loan at a given interest rate. Also consider the length of the loan term; this can typically range from one to seven years.
Recommended: Guide to Personal Loans
Pros of Taking Out a Personal Loan for Closing Costs
Here are some of the key benefits of taking out a personal loan for closing costs.
• Collateral not required: Personal loans are often unsecured loans, meaning that you don’t have to put an asset up in order to receive the loan. Therefore, if you fail to repay the loan, your lender will not claim the asset to repay your debts.
• Quick approval: It usually doesn’t take long to get a personal loan once you’ve been approved. After you submit your application and materials, it might take just a day to get the personal loan, though it could take longer.
• Flexible repayment options: You can tap into flexible repayment plans, including no prepayment penalty, meaning that the lender won’t penalize you for paying off the loan early.
Cons of Taking Out a Personal Loan for Closing Costs
Next, consider the downsides of using a personal loan to cover closing costs.
• DTI increase: Lenders will look at your overall debt under a microscope, so taking on a personal loan may factor into your overall debt. It may signal to the lender that you aren’t in a good financial position since an additional loan could raise your DTI ratio. It might keep you from being approved for a mortgage or could result in a higher mortgage interest rate.
• Additional loan payment: You might find it tricky to repay a personal loan in addition to a mortgage payment. Consider whether you can comfortably make both payments every month.
• High interest rates: There is the potential for high interest rates if you have poor credit. This can make it more challenging to afford a personal loan.
Recommended: Personal Loan Requirements
Alternatives to a Personal Loan for Closing Costs
You may have options vs. getting a personal loan for closing costs. Consider how else you might handle those fees.
• Roll them into your mortgage: You may be able to add your closing costs to your mortgage, but this means you’ll increase the principal balance of your loan. This will increase both the principal and the interest you’ll pay over your loan term and also translates to higher monthly payments.
• Ask for a waiver: Your lender may be willing to waive certain fees. For example, they may reduce certain processing fees. There’s no guarantee, but it can be worth asking. That might help you out with your final closing cost amount.
• Ask the seller to pay: As mentioned previously, sellers may pay for some of the closing costs if they’re eager to ensure that the property sale doesn’t fall through.
• Tap into assistance programs: Many state and local governments offer down payment and closing cost assistance programs for moderate- to low-income home buyers. Look into your state’s housing finance agency, your city or county website, the U.S. Department of Housing and Urban Development (HUD), or check with your lender to learn more about your options.
• Use gift money: Do you have a generous grandparent or parent who wants to help you cover your closing costs? Your state may have rules and regulations attached with gift money (especially ensuring that it’s an actual gift). Check with your lender to learn more.
The Takeaway
You can typically use a personal loan to pay for closing costs, the fees that can cost 3% to 6% of your home loan amount when you purchase a property. While this can be a convenient source of funding that is typically unsecured (meaning no collateral is required), it can raise your DTI and add to your monthly financial burden. It’s wise to carefully consider all the pros and cons, as well as alternative funding sources, when deciding whether to use a personal loan for closing costs.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
FAQ
Is it smart to finance closing costs?
Whether it’s smart to finance closing costs depends on your personal situation. For example, for some people who can handle the additional monthly payment, it may be a convenient move. On the other hand, getting a personal loan may increase your DTI, so your mortgage lender might charge you a higher interest rate or deny you the loan altogether.
Can I put closing costs on a credit card?
While you’ll usually use a cashier’s check, certified check, or wire transfer to pay for closing costs, you can put some closing costs on a credit card, such as attorney, appraisal, and survey fees. Check with your lender to learn more about which fees you can put on a credit card. (Also note that using your credit card in this way can raise your credit utilization rate and potentially lower your credit score.)
What is not an acceptable source of funds for closing?
Closing costs are typically paid by a cashier’s or certified check or by wire transfer. Funds for these could be acquired by such sources as a government program or a personal loan. Less frequently, credit cards, debit cards, and personal checks may be accepted for some closing costs.
Photo credit: iStock/jacoblund
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Looking for ways to make money on a consistent monthly basis? Monthly service business ideas might be just what you need. A monthly service-based business is where you sell a service to clients every month, instead of selling products. For example, you might sell cleaning, bookkeeping, or meal prep services that people need regularly. The…
Looking for ways to make money on a consistent monthly basis? Monthly service business ideas might be just what you need.
A monthly service-based business is where you sell a service to clients every month, instead of selling products. For example, you might sell cleaning, bookkeeping, or meal prep services that people need regularly.
The goal is to create a steady income by getting clients who pay you every month for your service. This business model is helpful because it lets you predict your income, build long-term client relationships, and grow your business as you add more regular customers.
The best part? Many of these ideas can be started with a low amount of money and have great potential for a full-time regular monthly income or extra money.
Best Monthly Service Business Ideas To Start
Below are the best monthly service business ideas to start.
1. Virtual bookkeeping
Online bookkeeping is a great way to earn a consistent income each month. Many small businesses need help managing their finances but may not need a full-time bookkeeper.
This is where you come in. By selling your services online, you can help businesses keep track of their books from anywhere.
You can provide monthly services such as tracking income and expenses, reconciling bank statements, and preparing financial reports. This work can all be done remotely, so you can work from the comfort of your own home.
I have a few friends who sell monthly bookkeeping services to small businesses, and they all really like what they do. Plus, you don’t need a college degree to get started – this is something you can learn.
You can learn more at Online Bookkeeping Jobs: Learn How To Get Started Today.
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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!
2. Pet grooming
If you love pets, starting a pet grooming business can be a great monthly service idea. Many pet owners need regular grooming for their animals, making it a steady source of income.
You can sell services like bathing, haircuts, nail trimming, and more.
Mobile pet grooming is also an option. This involves driving to clients’ homes to groom their pets, and many people love this because it is convenient for pet owners.
I have seen many mobile pet grooming businesses at people’s homes over the years and it looks like a really helpful service to get started!
Starting this business can cost around $10,000 to $15,000 for a van and equipment (at the minimum, usually). You may be able to make a profit of $40,000 to $60,000 per year.
3. House cleaning
Starting a house cleaning business can be profitable, and many people need this done on a regular basis, so you may have the same client for years.
Many people don’t have the time or energy to clean their own homes, so they look for professionals to do it. You can sell home cleaning on a weekly, bi-weekly, or monthly basis.
You can charge by the hour, flat rate, or even per room. Many people are happy to pay for regular cleaning to keep their homes tidy. If you do a good job, you’ll likely get repeat business and new clients through referrals.
4. Personal trainer
Starting a personal training business can be a great way to earn a good monthly income. You can sell sessions in person or online, depending on what works best for you and your clients.
By setting up a monthly service, clients get a fixed number of training sessions each month. This gives you a stable income and consistent progress for them.
Think about setting a monthly fee based on the number of sessions. For example, if you charge $50 per session and offer four sessions a month, your monthly service fee would be $200.
5. Lawn care
Starting a lawn care business can be a great way to earn some extra cash with a service business idea. You can sell services like regular lawn mowing, trimming, and garden maintenance. Many homeowners are willing to pay for these services to keep their yards looking nice.
You will need some basic equipment, such as a lawn mower, trimmer, and garden tools. Depending on the size of the lawns you work on, you might also need a leaf blower or other specialized equipment.
Lawn care can be a reliable way to make money, especially when the grass is growing (like in the spring and summer). It’s also rewarding because you get to help people keep their yards looking nice.
I have paid for lawn care many times in the past, anywhere from weekly to bi-weekly landscaping services. It is a very helpful service that many households enjoy paying for (because it can be such hard and sweaty work!).
6. Pool maintenance
Starting a pool maintenance business (pools and hot tubs, actually!) can be a great monthly service business idea. Many people with pools need regular cleaning and upkeep, such as on a weekly or monthly basis. In areas where there are a lot of hot tubs and swimming pools, there is a huge demand for this service.
You can sell services like cleaning, checking the water’s chemical balance, and minor repairs.
You’ll need some basic equipment to get started. This includes a pool skimmer, pool vacuum, water testing kits, and chemicals for balancing the pool water.
Selling monthly service plans can help you earn money consistently. Customers will like the convenience, and you’ll have a set schedule to follow.
7. Tutoring
Tutoring is a great way to earn extra money every month. If you enjoy teaching and helping others, finding online tutoring jobs could be a perfect fit. You can tutor in many subjects like math, science, or even music.
Tutoring can be done online or in person. Online tutoring can many times have flexibility, and tutors teach and reach students all over the world. In-person tutoring lets you connect face-to-face and build local relationships.
You can charge different rates based on your experience and the subject. Rates usually range from $20 to $100 per hour. The harder the subject you teach, the more money you can usually make. For example, college-level subjects tend to pay more than elementary school math.
Many times, tutoring is done on a weekly basis, but there are also options for bi-weekly or even monthly tutoring.
8. Dog walking
Dog walking is a great monthly service business idea, especially for animal lovers who want to earn money while spending time with pets.
Many dog owners have busy schedules and need help making sure that their dogs get the exercise and attention they need.
As a dog walker, you can sell regular walking services (as well as pet sitting!). These services can be set up on a daily, weekly, or monthly subscription basis, which means that you can earn consistent income.
This business requires minimal startup costs – just some comfortable shoes, a leash, and a love for dogs.
You can start by offering your services to friends and neighbors, and as your reputation grows, you can expand your client base through word-of-mouth or online advertising.
My mother-in-law is a dog walker and has many consistent clients. It’s a job that looks like fun, especially if you like spending time with cute dogs.
You can learn more at 7 Best Dog Walking Apps To Make Extra Money.
9. Meal prep services
Meal prep services are an increasingly popular monthly service business, perfect for those who enjoy cooking and want to help others eat healthier and save time. Many people struggle to find the time to prepare nutritious meals during their busy weeks, so selling a meal prep service can be a really helpful solution.
You could sell meals weekly, bi-weekly, or even make frozen meals that your clients could heat up later to eat.
You can customize your services to cater to different dietary preferences, such as vegan, keto, or gluten-free, making your business more appealing to a broader range of clients.
This business can possibly be started from your home kitchen with a few basic tools, and as demand grows, you can scale up by hiring additional staff or renting a commercial kitchen.
10. Laundry services
Starting a laundry service can be a good monthly business idea. People are always in need of clean clothes, and some households don’t have the time to do laundry themselves.
By selling a laundry service, you can pick up, wash, dry, fold, and deliver clean clothes back to your clients on a regular schedule, such as weekly, bi-weekly, or monthly.
This business requires minimal startup costs, mainly involving a reliable washing machine, dryer, and transportation for pickup and delivery. As your business grows, you can expand by adding specialized services like dry cleaning, stain removal, or ironing too, so there is room for more growth.
11. Tech support
Starting a tech support business is a great idea. Many people and small businesses need help with their computers and devices. Selling a monthly tech support subscription can be a steady source of income.
You can help with troubleshooting, fixing issues, and doing regular maintenance. This means that your clients’ technology will stay in good shape, and they won’t have to worry about tech problems.
You can sell services like virus removal, software updates, and data backups. You can even help set up new devices or networks.
By selling your services monthly, your clients will always know who to call when they have a problem. Plus, it can help you build strong, long-term relationships with them.
This is a service business idea that I personally currently pay for on a monthly basis, and I have for many, many years. It’s one of the best monthly expenses I have, and I am so grateful for this service.
12. Subscription boxes
Subscription boxes are a fun and profitable way to start a monthly service-based business. You get to put together a collection of items and send them to your customers every month. These boxes can include all sorts of goodies depending on your chosen niche.
Whether it’s beauty products, snacks, books, or fitness gear, there’s a subscription box for just about every interest and hobby. As a business owner, you can create a subscription box that caters to a specific niche, allowing you to tap into a passionate customer base.
The recurring nature of subscription boxes provides a steady stream of income, with customers signing up for monthly deliveries. You can start small by assembling boxes at home and gradually scale up as demand increases.
You can learn more at How I’ve Made Over $1,000,000 With A Subscription Box Business.
13. Elder care services
Elder care services are a great business idea if you love helping others. You can provide regular check-ins for seniors to make sure that they are safe and well.
Helping with daily tasks like grocery shopping, light housekeeping, and transportation can make a big difference too. Some elderly people may find it hard to get around or complete chores.
Providing companionship is another important part of this job. Spending time with seniors, chatting, or playing games can greatly improve their quality of life.
14. Power washing
Starting a power washing business can be a great idea. You can clean driveways, sidewalks, decks, and more. It’s a service people need regularly to keep their homes looking good.
You’ll need some equipment to get started. A good pressure washer, nozzles, and hoses are important, of course.
With a power washing service, you can sell regular cleanings on a monthly or seasonal basis (sometimes longer, though – maybe every 6 months or even once a year), making sure that clients’ properties stay in top condition.
15. Window cleaning
Window cleaning is a great business idea and many businesses and homes need their windows cleaned once a month.
You can start with just a few supplies. A bucket, squeegee, and some cleaning solution are the basics, so you don’t need a lot of money to begin.
You can sell your services to both homes and businesses. Many people don’t have the time to clean their windows. That’s where you come in.
When I worked at a retail store, we would do light window cleaning. But, about once a week or once a month, we would also have a professional window cleaner come in. They would make the windows look amazing with their better equipment, and they could also do it in a fraction of the time.
Frequently Asked Questions
Starting a monthly service business can be a great way to earn a steady income. Below are commonly asked questions to help you get started and grow your own service-based business.
What are ideas for monthly service business ideas from home?
Some great ideas for monthly services you can run from home include virtual bookkeeping, online personal training, online tutoring, selling subscription boxes, SEO (search engine optimization) help for small business owners (with their blog posts), and more. These businesses don’t need a lot of space and can usually be managed with just a computer and some simple tools.
What are some monthly service business ideas for students?
Students can sell tutoring, lawn maintenance, pet walking, event planning, car washing, carpet cleaning, golf club cleaning (yes, you can even do something that specialized), and other services. These jobs are flexible and can fit around your class schedule.
What services do people always need?
People always need house cleaning, lawn care, and pet grooming. These services help manage everyday tasks and are always in demand.
How can I get more customers for my service-based business?
You can get more customers by having promotions or discounts for new clients. You can also use social media to promote your services and ask your current customers to refer others. Make sure you provide great service so happy clients will tell others about your business, as word-of-mouth is huge in monthly service-based business ideas.
Best Monthly Service Business Ideas – Summary
I hope you enjoyed this article on the best monthly service business ideas to start.
A monthly service business is great because it gives you a steady income. Since customers pay regularly, you can better predict how much money you’ll make. This helps you manage your money and plan ahead.
For example, if you sell cleaning services or meal plans, you’ll know exactly when and how much you’ll get paid. Having a reliable income makes it less stressful and lets you focus on growing your business.
The most profitable service businesses depend on the demand in your area and your expertise/skills (how fast can you do the job?). Luckily, there are probably many on the list above that you can learn (with proper training) and get started with pretty quickly.
Plus, they typically have low overhead costs so you can get started quickly and affordably!
What monthly service business idea are you interested in starting?
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?
What Is the Kakeibo Method?
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.
How Does Kakeibo Work?
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.
History of Kakeibo
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.
Properly Using Kakeibo
There are four important questions you can ask yourself in order to use this Japanese budgeting method properly.
How Much Money Do You Have to Spend?
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.
How Much Would You Like to Save?
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.
How Much Money Are You Spending?
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.
How Can You Improve Next Month?
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.
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Kakeibo’s Category System
The kakeibo method involves tracking spending in four different budget categories. Here’s how they stack up:
1. General
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?
2. Wants
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.
3. Culture
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.
4. Unexpected Extras
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.
How Kakeibo Is Different From Other Budgeting Methods
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.
Benefits of Kakeibo
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.
Disadvantages of Kakeibo
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
Who Is Kakeibo Suited for?
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.
Alternatives to Kakeibo
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.
Banking With SoFi
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.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.
FAQ
How do you do kakeibo?
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.
Is there an app for kakeibo?
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.
How do you make a kakeibo journal?
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.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
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.
Spending money is typically fun, while saving money is hard — all that temptation to buy cool new things or try the latest restaurant. Which is why we can all use a little extra motivation to stash away some cash, and a savings club can play a role in that process.
Basically, savings clubs are a type of bank account in which the account holder contributes to the account over time to meet a specific goal. It can be a valuable option vs. breaking out your plastic and running up credit card debt.
What Is a Savings Club?
So, what is a savings club? A basic savings club definition is that it’s a bank account that the account holder uses to hold funds to meet a specific savings goal. For example, some people set up what are known as “Christmas clubs” in which they make regular contributions throughout the year to save for holiday gifts, travel, decor, and parties. By saving gradually in advance, they may be able to avoid the wallop of that major end-of-year credit-card bill.
Usually, savings clubs accounts that can be opened at a bank or credit union. They can be a good idea in terms of where to put short-term savings, as they typically earn interest. Often these savings clubs have other incentives attached to them to encourage account holders to follow through on their savings goals. There can also be penalties associated with savings clubs — such as forfeiting earned interest for withdrawing funds from the account early — to help motivate people to keep saving.
Recommended: How Much Money Should I Save a Month?
How Do Savings Clubs Work?
Usually, savings clubs create a schedule the depositor can follow to make regular deposits of a certain amount. So, say you open a savings club account to gather cash for a vacation next summer. If you want to save $1,200 over one year, the club would guide you through depositing $100 a month to meet that goal. Typically, the end date associated with a savings club aligns with your goal, whether that’s heading to Hawaii, getting married, or celebrating the holidays.
Deposits for savings clubs can be drawn from the account holder’s paycheck, which can make it easier to steadily progress towards meeting a savings goal. Automatic savings transfers can be a real helping hand because you don’t see the money in your checking, as if it’s available to be spent.
Some savings clubs allow multiple people to contribute to it — similar to another type of savings account, the joint account — so they can work together towards a savings goal. While usually only couples share a bank account, friends, or family members can choose to contribute to a savings club together to save up for a group vacation, present, or family reunion. Or some financial institutions will allow parents to help a child open a holiday savings account. In all cases, this can be a good strategy, since savings club accounts may offer higher interest than a typical savings account, though there can be penalties for early withdrawal.
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Benefits of a Savings Club
There are quite a few benefits attached to savings clubs, including:
• Saving on a schedule towards a specific goal
• Offering saving incentives
• Creating discipline in a savings routine
• Teaching children about financial literacy and the value of saving
• Paying higher interest rates than typical savings accounts
Recommended: How Do You Calculate Interest on a Savings Account?
Drawbacks of a Savings Club
There are also some downsides associated with savings clubs worth being aware of:
• Withdrawing funds early can lead to penalties
• Not contributing on schedule can lead to penalties
• Some savings clubs can be banking scams if not hosted by a financial institution such as a bank or credit union (beware “money board” and “circle game” schemes)
• Investing money elsewhere may lead to more growth
Savings Club vs Savings Account: What’s the Difference?
There are many reasons why you would put money in a savings account, and savings clubs offer a specific financial product to serve a specific goal. Let’s look at some differences between these two account types.
Savings Clubs Can Offer Higher Interest Than a Traditional Savings Account
One of the reasons savings clubs can be so motivating is because they often offer a higher interest rate than traditional savings accounts do. Knowing your money can grow faster can be an exciting prospect.
Savings Clubs Have Penalties for Premature Withdrawal
There are no penalties when someone withdraws money from a standard savings account. Nor is there a set period of time they have to keep their money in the account.
With a savings club, however, there can be penalties (such as losing the interest accrued) for actions such as withdrawing funds before the predetermined end date or for not making a contribution according to the savings club schedule. These penalties can be an incentive to save, but they can also create a challenging savings environment.
Savings Clubs Often Require a Minimum Deposit and Term Lengths
While basic savings accounts don’t usually have strict requirements attached to them, savings clubs often have minimum deposit requirements. These requirements may be as low as $1 or can be much higher. Savings clubs can also come with predetermined term lengths — usually six months to a year — and may require automatic weekly or bi-weekly deposits. Some people don’t like feeling “locked in” in this way.
Recommended: How Do Savings Accounts Work?
Starting a Savings Club
In most cases, you’ll start a savings club that’s hosted at a bank or credit union, review the terms, make an initial deposit, and continue funding the account.
Some people may choose to set up social savings clubs with friends and/or relatives by taking the following steps.
• Define a savings goal for the club
• Find people to join the savings club
• Create savings club rules and structure
• Commit to the planned schedule and follow through
Where the funds are actually kept can be decided by the group; an interest-bearing savings account will offer the nice perk of having your money earn money.
Banking With SoFi
Savings clubs can offer a motivating way to stockpile cash, thanks to their usually higher interest rates (compared to traditional savings accounts) and their structured schedule.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.50% APY on SoFi Checking and Savings.
FAQ
Why would someone join a savings club?
Savings clubs can help you efficiently save towards a specific short-term goal, like accumulating money for the holidays or for a vacation. Benefits of saving this way include a motivating format and often a higher interest rate vs. traditional savings accounts do. Also, the potential penalties associated with not sticking to the schedule can also motivate people to save.
Should I have a savings club or savings account?
Whether or not you should have a savings club vs. a standard savings account depends on your personal goals and preferences. If you benefit from having a savings schedule and are offered a good interest rate, it may be a great fit. If, on the other hand, you want the ability to withdraw funds from your account penalty-free, it may not be the right move.
Can I use a savings club for long-term savings?
Savings clubs are usually designed to meet short-term goals, not long-term savings goals. They typically last for six months to a year. Those looking for long-term growth may find that investing money elsewhere can lead to more growth than a savings club can offer.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Mortgage rates held mostly steady during the week ending Aug. 22, as mortgage lenders rolled with the punches. The biggest hit came from revised employment numbers hinting at a weaker economy, but that was far from a knockout.
The 30-year fixed-rate mortgage rose 10 basis points, averaging 6.38%. A basis point is one one-hundredth of a percentage point. But daily movements have been mostly downward, and for the past two days, the average rate on a 30-year fixed has been more than one percentage point lower than a year prior.
Looking at the bigger picture, we’re finally starting to see the lower mortgage rates that home buyers — and plenty of refi-curious homeowners — have long been waiting for. Will one percentage point (or more) be enough to get the housing market moving?
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The difference 1% makes
Let’s see how much a slightly lower interest rate could help a hypothetical home buyer. Last year at this time, the average 30-year fixed rate was 7.33%, just under a percentage point higher than our current average of 6.38%.
A buyer who borrowed $300,000 for a 30-year fixed loan a year ago, with an interest rate of 7.33%, would be making monthly principal and interest payments of $2,063. A buyer borrowing the same amount at this week’s average of 6.38% would have monthly payments of $1,873, a savings of almost $200 per month.
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Lower rates vs. higher prices
While rates may be going down, home prices in most markets have continued to rise. In July, the median price of an existing home was $422,600, according to data released this morning by the National Association of Realtors. That’s a 4.2% increase compared to one year ago, when the median price was $405,600 — a sum that’s also nothing to sneeze at.
Do lower mortgage rates help to cancel out that cost difference? Let’s take a look. We’ll assume an 8% down payment, which was the typical first-time home buyer down payment in 2023, per NAR data. A home buyer who borrowed $373,152 — last year’s median price minus 8% — at a 7.33% interest rate would be making monthly principal and interest payments of $2,566. This year’s buyer, with an interest rate of 6.38% and a borrowed sum of $388,792 would face monthly principal and interest payments of $2,427.
This week’s lower average rate just manages to give today’s hypothetical buyer an edge, with a savings of $139 per month despite higher home prices. Lower mortgage interest rates don’t help buyers as much as lower home prices would, but every bit helps.
While there are many benefits to being an authorized user on another person’s account, you risk damaging your credit score if the primary cardholder isn’t responsible with the account.
Let’s take a look at the pros and cons of being an authorized user and how to prevent a credit score drop after being added to someone else’s account.
What Does It Mean to Be an Authorized User?
An authorized user means you’ve been added to another person’s credit account and can use it to make purchases. You’ll also receive your own card, though you can’t see the primary cardholder’s charges nor will you receive a bill. The primary cardholder is responsible for any charges made on the card.
The move comes with several benefits. You can have immediate access to credit without the need for a credit inquiry. Plus, it’s an opportunity to establish a credit history or help repair or build your credit.
However, there are limitations worth noting. The biggest one is that the primary cardholder’s behavior reflects on you. If he or she routinely misses payment due dates or uses up most of their available credit, for instance, your credit score (and theirs) can take a hit. What’s more, you can’t make changes to the account or add other authorized users, and you won’t be able to ask for credit limit increases.
If you find yourself stretching your finances every month, consider using a budget. A spending app can help you create a budget and spot upcoming bills.
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How Being an Authorized User Affects Your Credit
When you’re added as an authorized user to an account, your credit could be impacted positively or negatively — or not at all.
For instance, if you’re added to an account with a record of timely payments, your credit score may improve. If you’re an authorized user on an account that’s not in good standing, your credit score could suffer. And if the credit card issuer doesn’t report authorized user activity to any of the three credit bureaus, your score won’t be impacted.
Credit score monitoring services can help you keep tabs on any changes in your credit score and see an overview of your debt balances.
Recommended: Why Did My Credit Score Drop After a Dispute?
Who Should You Ask to Add You as an Authorized User?
Oftentimes, being added as an authorized user on a credit card account can help you establish credit or increase your credit score. But keep in mind that the primary cardholder is responsible for making payments, and the card’s use will be reflected on both of your credit reports.
Trust is key, so only consider asking someone who has a positive payment history, good spending habits, and low credit utilization ratio.
How to Add an Authorized User to Your Account
The process of adding an authorized user to an account varies by credit card. But generally speaking, you should be able to handle it online or by calling the issuer directly.
When adding an authorized user, you will likely need to know their personal information, such as their address, phone number, and Social Security Number. Once you’ve submitted your request, your credit card company should mail a new card to the authorized user.
How to Remove an Authorized User From Your Account
The easiest way to remove an authorized user from your account is to contact your credit card company’s customer service department. However, depending on the card, you may be able to take care of this online. You’ll likely be asked to verify your account information.
Does Removing an Authorized User Hurt Your Credit Score?
Removing an authorized user from an account may not hurt your credit score, but it could impact theirs. If the card has a long record of on-time payments and low credit utilization, that positive history will be removed from the authorized user’s credit report. And if the account has been open for a long time, it could also decrease the average length of their credit history.
However, the authorized user may see a boost in their score if they’re removed from an account with a history of late or missing payments or high credit utilization.
Recommended: How to Check Your Credit Score Without Paying
How Does an Authorized User Build Credit?
Before you’re added as an authorized user, it can be helpful for you and the primary cardholder to understand the factors that affect your credit score. Here’s what goes into your FICO™ Score, which most lenders use.
• Payment history
• Amounts owed
• Length of credit history
• New credit
• Credit mix
Of those five factors, payment history and amounts owed have the biggest impact on your credit score. So ensure the primary cardholder makes on-time payments and avoid carrying a high balance, which can affect your credit utilization ratio.
How Fast Does an Authorized User Build Credit?
How long does it take to build credit? Credit card companies typically report activity to the credit bureaus every 30 to 45 days.
Pro tip: You can often check your credit score for free through certain banks and credit cards. Many financial institutions will give regular credit score updates as a free service to their customers.
If yours doesn’t offer this service, you can sign up for a credit score monitoring service or use a tool like a money tracker app.
Difference Between Authorized User vs. Joint Account Holder on a Credit Card
Though both share an account with another person, there are some important differences between an authorized user and a joint account holder.
Most notably, a joint account holder is equally responsible for making payments on the account, while an authorized user is not. Also, when you apply for a card as a joint account holder, the credit card issuer will perform a hard inquiry, which could cause your credit score to drop temporarily. A hard inquiry is generally not required when adding an authorized user.
Pros and Cons of Being an Authorized User
Becoming an authorized user on an account comes with its share of benefits and drawbacks. Here are a few things to consider:
thumb_upPros:
• Immediate access to credit
• Could help you build or improve your credit
• No responsibility to pay the debt
thumb_downCons:
• May damage your credit score if the primary cardholder fails to make on-time payments or keep balances low
• Risk damaging your relationship with the primary account holder
• No control over account
The Takeaway
Being added as an authorized user can help you build or improve your credit, but in some cases you may notice a drop in your credit score. This often happens when the account is not in good standing, perhaps because of late or missed payments or a high balance. To help protect your (and the account holder’s) credit score, ensure bills are paid on time and keep credit utilization low.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
Will being added as an authorized user hurt my credit?
While becoming an authorized user can help your credit, there are times when it can have the opposite effect. For instance, if you’re added to an account that has a history of missed payments or the credit utilization ratio is too high, your credit score could fall.
How many points does your credit score go up as an authorized user?
There’s no set number of points you receive when you become an authorized user. However, if the account you’re associated with is in good standing, you may see an increase in your credit score.
How long does an authorized user show on a credit report?
Generally speaking, it takes a month or two after you’ve been added as an authorized user for the account to show up on your credit reports.
Photo credit: iStock/Milan Markovic
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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I recently came across a simple game on Freecash that said I could make around $300 for playing, so I decided to give it a try. Since I’ve always been curious about whether making money playing games is truly possible (and have wondered how long it takes), I wanted to fully test it out for…
I recently came across a simple game on Freecash that said I could make around $300 for playing, so I decided to give it a try. Since I’ve always been curious about whether making money playing games is truly possible (and have wondered how long it takes), I wanted to fully test it out for this article.
And guess what? It worked!
I earned $302.80 playing Bingo on Freecash on my phone. It took about a week, and I’ve already received the full payment.
What’s even better is that this opportunity isn’t limited to just one game; there are plenty of other games on the Freecash website that have the same potential.
While I’ve already written a detailed Freecash review, I wanted to share this quick update because I wanted to test the gaming side of Freecash myself.
If you’re someone who already enjoys playing games on your phone or if you’re on the lookout for a new side hustle, this is definitely worth checking out. It was surprisingly easy, though it did take a bit of time to make real money playing games.
Click here to sign up for Freecash.
How I Made $302.80 Playing Games on Freecash in Just One Week
Below you will learn all about how I made money playing a game on my phone and what you need to know.
How to get started making money playing games on Freecash
To start making extra money on Freecash, you need to create an account. I signed up by visiting the Freecash website and clicking the “Sign Up” button. I used my email address, but you can also sign up using Google.
Once you have an account, you need to log in. After logging in, you’ll find a dashboard with many game options. I started by choosing a game that seemed fun and easy.
Here’s how to get started making money playing games on Freecash.
Sign up – Create an account on Freecash by clicking here.
Log in – Access your new dashboard.
Choose games – Pick games that interest you.
Get paid – After you reach a certain level, amount of time played, etc. (the reward you get can vary from game to game), you can get paid.
When you first sign up, you’ll only see a few game offers (these are typically their most popular games or best rewards offers). But as you start using them, more will become available. I talked to Freecash about it, and they explained that the offers you see depend on your device, where you are, and other details. You’ll see 1 to 5 offers at first. After you try one, more offers will open up. These first offers change often, based on which ones pay more and how many people are clicking on them.
For me, the game I played was actually the first game offered on a new account (I tested it by creating a brand new account, and the exact game I played and the same rewards were listed).
I enjoyed making extra cash by playing games on my phone. It was a fun way to spend my free time and earn money.
Recommended reading: 23 Best Game Apps To Win Real Money
Proof that I made money playing games on Freecash. The $0.05 amounts were rewards for playing 2 minutes each day. The larger amounts like $40, $70, and $150 were for reaching certain levels.
How much money can you make playing games on Freecash?
The amount of money will vary. Different games have different rewards amounts. And, whether you are playing on your phone or your desktop will change the rewards amount as well.
For example, the Bingo game I was playing was paying around $174 if I played via desktop but a little over $300 if I played on my phone.
Click here to sign up for Freecash.
How long do you have to play games on Freecash?
I spent around 1 to 2 hours a day for around one week in order to make $302 on Freecash.
I think I probably could have sped this up if I would have read the directions of the game, though, as toward the end I finally learned some little tricks that helped me go through the levels faster.
What games can you play to earn money on Freecash?
The games will vary and so will the reward amounts. There are currently 416 games I can play on Freecash and make money with.
There are many popular games that you may already be playing, such as:
Bingo
The Price Is Right
Pool
Solitaire
Scrabble
Yatzy
Word Crush
Blackjack
Crossword
Monopoly
And more.
Did you have to spend money in order to win money in the game app?
No, many of the games (maybe all? or most?) are free to sign up for and give you free daily credits. For me, this was plenty in order to reach each reward. The game I played (and I’m assuming others) had options to buy things, but I did not have to do that.
At one point, I did get an offer from Freecash to spend money in the app.
The offer was: Spend $3 in the app and get $5 back. That was free money, so I decided, “Why not?” – They sent me the money, so that was easy.
Here’s how some other games work:
Free-to-play options – Many game apps that pay real money are free to download and play.
In-app purchases – Some games offer in-app purchases to speed up progress or get special items. I avoided these and still managed to win cash.
Ads – Some of these apps use ads as a way to keep the game free.
Tournaments and competitions – Some games have tournaments that might have entry fees, but there are also free ones.
Why does Freecash pay you to play games?
They pay you to play games for many reasons:
To test out the game apps
So that you will possibly spend money in the app
To get advertising/marketing toward the games
Here’s more info on this:
Freecash pays users to play games because it benefits both the company and the game developers.
First, game developers want more people to try their games. By paying people to play, developers get more users to download and engage with their games. It helps them get more downloads and better reviews.
Second, Freecash partners with these developers. When I play and complete a task in a game, Freecash gets paid by the developers. Then, Freecash shares a part of that payment with me.
Playing games isn’t just for fun; it’s a big business too. Advertisers and developers are willing to spend money to get more people hooked on their products.
What other ways can you make money with Freecash?
Besides playing games on my phone, Freecash offers several other ways to make money.
Surveys – One of the easiest ways to earn is by taking surveys. These can be on topics like shopping habits or favorite brands. Each completed survey adds money to your account.
Online tasks – You can also make money by completing different online tasks. These tasks can include signing up for new websites, watching videos, or even trying out new apps.
Offers – There are special offers where you can earn by signing up for free trials or services.
Referral program – You can refer friends to join Freecash. When they sign up using your referral link, you earn a percentage of what they make.
Daily rewards – Freecash also has daily rewards and bonuses. For example, they have a leaderboard. A couple of the days, I was actually in the top 100 due to the amount that I earned from playing games. I earned a few extra points this way.
These methods make it easy to earn extra cash on Freecash. Each option provides flexibility, so you can choose what works best for you.
Frequently Asked Questions
Here are some common questions people ask about making money by playing games on Freecash.
Can you really make money on Freecash?
Yes, you can make money playing games on Freecash. I made $302.80 using Freecash. This app has many different tasks and games that pay you for your time.
Does Freecash pay for playing games?
Yes, Freecash pays you to play games. You earn points for completing game tasks, which can be redeemed for cash or gift cards.
Can you make money from free games?
Yes, many free games pay rewards or points that you can turn into money. Always read the terms and conditions to know how payouts work.
What are some real apps that pay you to play games on your phone?
Some real apps I have used include Freecash, KashKick, Swagbucks, and InboxDollars. These apps have legit ways to make extra cash by playing games.
Can you actually make cash by playing games on your iPhone or Android?
Absolutely, you can make money playing games on your iPhone or Android. Both iPhone and Android have many different apps where you can receive money by playing games. Always make sure the app is trustworthy before investing your time, though.
How I Really Made Money Playing Games on Freecash – Summary
I hope you enjoyed this article on how I really made money playing games on Freecash.
Making $302.80 by playing games on my phone on Freecash was both fun and rewarding.
I was very surprised by how easy it was to make money playing games on Freecash, and I still can’t believe I made $302 in just one week of playing such an easy game too – Bingo.
Click here to sign up for Freecash.
Have you ever tried making money playing games on your phone? What was the result?
The Robinhood Gold Card was unveiled in March 2024 by the investment app Robinhood and issuer Coastal Community Bank.
Made of stainless steel and weighing in at 17 grams, the card aims to keep up with fancy premium metal credit cards that offer lucrative benefits — and it can certainly deliver that, earning an industry-leading 3% cash back on most purchases. Historically, a 2% flat rate on everything has been as good as it gets for products in this class, especially among no-annual-fee cards like this one.
Still, there are hurdles to accessing the Robinhood Gold Card. First, you must be a Robinhood Gold member to qualify for it, and that’s not free — although with a 3% rewards rate, it won’t be difficult to offset that cost. Secondly, as of this writing, if you’re interested in applying you must “reserve your spot” online and wait for an invitation “when it’s time.” The card has been slowly shipping to those who joined that waitlist when it debuted, but the rollout has been uneven, and it’s not clear when applicants can expect to receive their cards.
And despite that juicy 3% rate, one thing you won’t get with the card? A lucrative sign-up bonus.
Here’s what you need to know about the Robinhood Gold Card.
1. It offers an uncommonly high rewards rate
As a cardholder, you’ll earn an uncapped 3% cash back on all purchases, aside from travel booking completed through Robinhood’s travel portal, which earns 5% back.
Rewards are issued as points you can redeem at a value of 1 cent apiece for a cash deposit into a Robinhood brokerage account, a statement credit, travel booked through Robinhood’s portal, gift cards purchased through the portal, and shopping with eligible retailers through the portal. To redeem points in these ways, you must have downloaded and installed the latest version of the Robinhood credit card app. (Note that the credit card app is separate from Robinhood’s primary investing app.)
A flat and unlimited 3% rate on most purchases is almost unheard of for cards like this, with the possible exception of some smaller banks and credit unions. That means rewards will accumulate faster if you use the Robinhood Gold Card to cover most purchases — as long as you pay off the card in full each month to avoid interest charges. With an APR that can range as high as nearly 30% (as of August 2024), carrying a balance on this card will be costly.
If you’re looking for cards with even higher rewards rates, you can find them, at least in certain spending categories. The U.S. Bank Cash+® Visa Signature® Card, for instance, gets you 5% cash back on your first $2,000 in combined eligible purchases each quarter in two categories you choose (from a list of 12); 5% back on prepaid air, hotel and car reservations booked directly in U.S. Bank’s Rewards Center; 2% back on an everyday category you choose; and 1% back on all other eligible purchases. It has a $0 annual fee and comes with a sign-up offer for new cardholders: Earn a $200 rewards bonus after spending $1,000 in eligible purchases within the first 90 days of account opening.
2. There’s a waitlist
Getting on the waitlist to reserve the Robinhood Gold Card doesn’t require much effort. You can visit the card’s website to get in line by providing your email address. No other information is required at that stage.
The company has begun rolling out the card to people on the waitlist who are Robinhood Gold members, but it has not yet provided a specific date as to when all applicants can expect their cards to arrive in the mail. It’s also unclear as to whether the waitlist will remain a requirement for all applicants.
If you don’t want to wait for a credit card with good rewards on everyday spending, consider other $0-annual-fee products like the Capital One SavorOne Cash Rewards Credit Card or Wells Fargo Active Cash® Card. The Capital One SavorOne Cash Rewards Credit Card offers 3% back on dining, eligible streaming services, grocery stores and entertainment, as well as 1% back on all other purchases. The Wells Fargo Active Cash® Card offers 2% cash back on all purchases.
3. A Robinhood Gold membership is required
The Robinhood Gold Card doesn’t have an annual fee, but you will have to be a Gold member to qualify for it, and that comes with a $5 monthly fee. If you opt to pay annually, the cost is $50.
The card’s 3% rewards rate alone makes it easy to offset the cost of that fee, and that’s before considering the other perks that Gold membership can offer, such as a 5% APY on uninvested cash, a 3% match on Robinhood retirement IRA contributions, a 1% deposit boost on new eligible deposits, and more. Terms apply.
4. Features increase safety and convenience for shopping
The Robinhood Gold Card offers a variety of helpful features — some not always available on other cards — that make it easier to manage your spending. As a cardholder, you can expect access to these options:
Virtual cards: The card comes equipped with disposable card numbers that may be used as virtual cards that provide an added security option when shopping online.
Options to simplify free trials and subscriptions: The card offers a way to cancel subscription payments, end free trials automatically, and authorize cards for one-time use.
Family-friendly features: You can add up to five family members to the account as cardholders, regardless of their age. Everyone added receives their own card, and you can set spending limits, track their spending and lock lost cards instantly.
An app with helpful visuals: You’ll manage the card in an app that, again, is separate from Robinhood’s main investing app. Through the app you can get a financial overview of your spending patterns, real-time spending insights and more.
5. Travel-friendly features
While the Robinhood Gold card can be an ideal cash-back credit card, it also has elements of a decent travel credit card. In addition to the 5% back on travel through Robinhood’s travel portal, the card offers a lengthy list of travel benefits, and it doesn’t charge foreign transaction fees.
As of August 2024, you’ll get trip interruption reimbursement, an auto rental collision damage waiver, extended warranty protection, return protection, roadside dispatch, travel and emergency assistance, Visa Signature concierge service, and purchase security. As is the case with any credit card, though, these benefits may change over time.
If, however, you want a truly travel-focused card with more perks, consider the $95-annual-fee Chase Sapphire Preferred® Card. It earns 5 points per dollar spent on all travel purchased through Chase; 3 points per dollar spent on dining, select streaming services and online grocery purchases; 2 points per dollar spent on travel not purchased through Chase; and 1 point per dollar spent on all other purchases. The card also comes with a $50 annual credit on hotel stays purchased through Chase, plus points take on more value when you redeem them for travel through Chase. On top of that, you’ll get access to multiple travel partners, which can help your points go further. And unlike the Robinhood card, there’s a generous sign-up bonus: Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 when you redeem through Chase Travel℠.