If you are offered a relatively low mortgage rate, locking it in can secure it and potentially save you a bundle of money over the life of your loan. In other words, it can be a smart move.
That said, when applying for a mortgage, you only have so much control over the mortgage rate, as lenders will consider your credit score, income, and assets to determine your risk as a borrower. What’s more, mortgage rates change daily based on external economic factors like investment activity and inflation.
Read on to learn how a mortgage rate lock works and the benefits and downsides of using this option.
What Is a Mortgage Rate Lock?
A mortgage rate lock is an agreement between a borrower and lender to secure an interest rate on a mortgage for a set period of time. Locking in your mortgage rate safeguards you from market fluctuations while the lender underwrites and processes your loan.
Interest rates can rise and fall significantly between mortgage preapproval and closing on a property.
Remember that in the home-buying process, when you’re pre-approved for a mortgage, you will know exactly how much you most likely can borrow, and then you can shop for a home in that range.
So when can you lock in a mortgage rate? Depending on the lender, you may have the option to lock in the rate any time between preapproval and when underwriting begins.
Before preapproval and locking in, it’s recommended to get multiple offers when shopping for a mortgage to find a competitive rate. 💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.
How a Mortgage Rate Lock Works
Mortgage rate locks are more complicated than simply securing a set rate in perpetuity. How the rate lock works in practice will vary among lenders, loan terms, different types of mortgages, and geographic locations.
Once you lock a mortgage rate, there are three possible scenarios: Interest rates will increase, decrease, or stay the same. The ideal outcome is securing a lower rate than the prevailing market interest rate at the time of closing.
Here are some key points to know if you are considering a rate lock:
• Rate locks are sometimes free but often cost between 0.25% and 0.50% of the loan amount.
• When you choose to lock in your rate, it’s stabilized for a set period of time — usually for 30 to 60 days, but up to 120 days may be available.
• If the rate lock expires before closing on the property, the ability to extend is subject to the lender.
• Time it right. The average mortgage took 44 days to close as of February 2024, according to ICE Mortgage Technology, underscoring the importance of timing a mortgage rate lock with your expected closing date. Otherwise, you could face fees for extending the rate lock or have to settle for a new, potentially higher rate.
• Whether borrowers are charged for a rate lock depends on the lender. It could be baked into the cost of the offer or tacked on as a flat fee or percentage of the loan amount. The longer the lock period, the higher the fees, generally speaking.
• Lenders have the discretion to void the rate lock and change your rate based on your personal financial situation. Say you take out a new line of credit to cover an emergency expense during the mortgage underwriting process. This could affect your credit and debt-to-income ratio, causing the lender to reevaluate your eligibility for the offered rate and financing.
• Lenders also determine the mortgage rate based on the types of houses a borrower is looking at: A primary residence vs. a vacation home or investment property, for example, would influence the interest rate.
Recommended: A Guide to Buying a Duplex
Consequences of Not Locking in Your Mortgage Rate
There are risks to not locking in a mortgage rate before closing.
If you don’t lock in a rate, it can change at any time. An uptick in interest rates would translate to a higher monthly mortgage payment. Granted, a slight bump to your monthly payment may not lead to mortgage relief, but it could cost thousands over time.
Example: The monthly payment on a $300,000 loan at a 30-year fixed rate would go up by $88 if the interest rate increased from 4% to 4.5%. This would add up to an extra $31,611 in interest paid over the life of the loan.
You can use a mortgage calculator tool to see how much a rise in rates could affect your mortgage payment.
Furthermore, a higher monthly payment might potentially disqualify you from financing, depending on the impact on your debt-to-income ratio. After a jump in interest rates, borrowers may need to make a larger down payment or buy mortgage points upfront to obtain financing.
Even if you lock in a mortgage rate early on, you could face these consequences if it expires before closing. Deciding when to lock in a mortgage rate should account for any potential contingencies that could delay the process. If you’re unsure, ask your lender for guidance on when you should lock in. 💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
What to Do if Interest Rates Fall After Your Rate Lock
The main concern with mortgage rate locks is that you could miss out on a lower rate. In most cases, buyers will pay the rate they are locked in at if the prevailing interest rate is less.
A float-down option, however, protects you from rate increases while letting you switch to the lower interest rate at closing.
• Float-down policies vary by lender but generally cost more than a conventional rate lock for the added flexibility and assurance.
• It’s also possible that a float-down option won’t be triggered unless a certain threshold is met for the drop in rates.
• It’s worth noting that borrowers aren’t committed to the mortgage lender until closing, so reapplying elsewhere is an option if rates change considerably.
Pros and Cons of Mortgage Rate Lock
Back to the big question: Should I lock my mortgage rate today? It’s important to weigh the pros and cons to decide when to lock in a mortgage rate.
Pros
Cons
Locking in a rate you can afford can lessen money stress during the closing process
A rate lock might prevent you from getting a better deal if rates fall later on
You could save money on interest if you lock in before rates go up
If a rate lock expires, you may have to pay for an extension or get stuck with a potentially higher rate
Lenders may offer a short-term rate lock for free, providing a window to close the deal if rates spike but an opportunity to wait it out if they drop
Rate locks can involve a fee of 0.25% to 0.50% of the loan amount.
The Takeaway
A favorable interest rate can make a difference in your home-buying budget. If you’re considering a rate lock because you’re concerned that rates will be rising, it’s important to choose a lock period that gives the lender ample time to process the loan to avoid extra fees or a potentially higher rate.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How long does a rate lock period last?
Rate locks usually last 30 to 60 days but can be shorter or longer depending on the agreement. It’s not uncommon for lenders to offer a free rate lock for a designated time frame.
Should you use a mortgage rate “float-down”?
If you’re worried about missing out on low interest rates, a mortgage rate float-down option could let you secure the current rate with the option to take a lower one if rates drop. Take note that these agreements usually outline a specified period and minimum amount the rate must drop to activate the float-down.
How much does a rate lock cost?
Lenders don’t always charge for a rate lock. If they do, you can expect costs to range from 0.25% to 0.50% of the loan amount for a lock period (usually 30 to 60 days). A longer lock period or adding a float-down option typically increases the rate lock cost.
What happens if my rate lock expires?
If your rate lock expires before you’ve finalized the deal, you can choose to extend the lock period (usually for a fee) or take the prevailing rate when you close on the loan.
Photo credit: iStock/Vertigo3d
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
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.
Do you want to learn how to move out at 18 with no credit, little money, or even no money? Here’s what you need to know. There are many reasons for why you may want to move out at a young age – perhaps you have a difficult home life, you want to move somewhere…
Do you want to learn how to move out at 18 with no credit, little money, or even no money? Here’s what you need to know.
There are many reasons for why you may want to move out at a young age – perhaps you have a difficult home life, you want to move somewhere new, or you just want your own space.
I moved out shortly after turning 18 (about a week or so after my 18th birthday) into a rental home, and while I was not prepared at all, I do think being prepared to move out at a young age is extremely helpful. I made many mistakes that led to many, many tears, money wasted, stress, and more.
Today, I want to help you avoid as many problems as you can.
After all, moving out at 18 years old (or any other young age) is already really hard, and there is such a huge learning curve.
Moving out when you turn 18 is a big step into becoming an adult. Even though it can be exciting, moving out for the first time needs to be planned carefully. Before you leave, it’s important to make a plan to make sure you can afford it and stay on your own.
This means finding a job, making a budget you can stick to, and saving money for unexpected costs.
How To Move Out at 18
Below are ways to move out at 18.
Recommended reading: Buying a House at 20 (How I did it)
Make a plan to move out at 18
I highly recommend having a plan if you want to move out at 18 years old.
Moving out at 18 is a big step, and making a plan will help everything go a little more smoothly.
You will want to think about things such as:
Where you will work
How you will pay your bills
If you will live with a roommate or on your own
What your budget will be like
What you’ll do if things get tough, such as if you can’t afford your rent
What you will do for health insurance and medical bills
And so much more.
I will be going further in-depth on many of these below.
Find ways to make money
If you are 18 and want to move out, then you will need to have a stable source of income, of course. There are many options for earning money, from traditional jobs to more flexible side hustles.
A full-time job typically gives you more hours and benefits like health insurance, which are helpful when you’re living on your own. If you have other things going on, a part-time job might be better because it offers more flexibility while still giving you money (but, you may not earn as much money). You can find job openings online, at job fairs, or on community bulletin boards. Jobs like delivering food can be either full-time or part-time, and companies tend to need people.
If you want to make more money, you can side hustle to make extra income – a way to make extra cash that you do alongside your main job. You could freelance by doing things like writing, teaching tutoring lessons, or designing graphics. Or, you could babysit for families nearby, walk dogs, or help people with tasks or errands. These little jobs can add up to a lot of money and give you the flexibility to work when you want.
When I was young and first moved out, I worked full-time at a retail store. I also eventually started a few side hustles (like blogging, freelance writing, and selling stuff online) so that I could pay off my student loans quickly. Living on your own is not easy, especially when you are young and your income is not that high – so side hustles may be needed so that you can make enough money to pay your bills.
Some helpful articles to read include:
Create a budget
When you’re ready to step out into the world at 18, you need a budget. I can’t think of any young adult who would not need a budget.
Budgets are great because they help you keep track of your money coming in and going out. With a monthly budget, you’ll know exactly how much you can spend on different things each month as it helps you see how much money you have and where you might need to cut back on spending.
A budget will help you to figure out if you can afford to live on your own, if you need to have roommates, or if you need to find a cheaper living arrangement.
Making a budget is easy. First, write down how much money you make each month from your job or other places. Then, write down what you need to spend money on each month, like:
monthly rent
food
phone bill
internet
car
fuel
utilities like electrical, water, trash, sewer, gas/propane
car insurance
medical/health
pet care
restaurants
cable, satellite, or any TV monthly subscriptions
household essential items, like toilet paper, trash bags, etc.
and some money for fun stuff too
Knowing your monthly expenses will help you to better manage your money so that you won’t go into credit card debt.
Recommended reading: The Complete Budgeting Guide: How To Create A Budget That Works
Save for the move (and open a bank account)
When you’re getting ready to move out at 18, saving money is obviously very important. If you can help it, I do not recommend moving out with no money saved.
Think about all the costs you’ll face – like rent, your first security deposit, food, and any unexpected things that pop up. You’ll want to tuck away money for this.
How much should you save to move out? A good rule is to save at least three to six months of living expenses. For example, if you spend $1,500 a month, aim to save between $4,500 and $9,000 before you head out on your own.
This will be your emergency fund. An emergency fund is money you save up for unexpected things that might happen. This could be paying bills if you lose your job or if your hours or pay get reduced. It could also cover unexpected expenses like a car repair, medical bill, or fixing a broken window.
An emergency isn’t something like buying a birthday present, a new TV, or going on vacation.
Having an emergency fund is smart because it can stop you from getting into debt you don’t need. Some people rely on their credit cards for emergencies, but that’s not a good plan.
I also recommend getting your own bank account for all of the money you save. It’s a safe place for your money, and it helps you track what you earn and spend. Plus, you’ll need it for things like direct deposit from jobs or paying bills online.
I personally use Marcus by Goldman Sachs for my savings account as they have a very high rate. You can get up to 5.50% at the time of this writing through a referral link bonus. According to this high-yield savings account calculator, if you have $10,000 saved, you could earn $550 with a high-yield savings account in a year. Whereas with normal banks, your earnings would only be $46.
Improve your credit score and history
When you’re moving out of your parents’ home, having a good credit score is super helpful. This is because your credit score and credit history may be used for things like getting approved for an apartment and getting signed up for utility bills.
If your credit score is low, then you may be denied an apartment and even have to pay large deposits to get signed up for utilities (like water and electric).
Here are some important things to know:
Understand credit utilization – This is all about how much credit you’re using compared to how much you have. Try to use less than 30% of your credit limit. Say your card has a $1,000 limit. Aim to spend no more than $300.
Always pay on time – You should pay every bill on time, every time. Even being a little late can hurt your credit score a LOT!
There are other ways to improve your credit, such as by getting a secured credit card or becoming an authorized user on a family member’s credit card.
Here are two really helpful articles I recommend reading:
I also recommend keeping an eye on your credit by checking your score and report. Sites offer free checks, and it’s good to know where you stand. That way, you can fix any mistakes fast.
Think about where you’ll live
When planning to move out at 18, picking where you’ll live is a huge step.
Here are some things to think about:
Think about who you’ll live with. Living by yourself can be expensive so sharing rent and other bills with roommates can save you money, but make sure you choose your roommates wisely. You’ll be sharing your space with them, so it’s important to pick people who are responsible and trustworthy (and will actually pay the bills!).
Try using online tools to compare different areas. You can check things like crime rates, public transportation options, and how close they are to places you need, like grocery stores.
Think about the cost. Can you pay the rent and utility bills every month? Make sure to include these costs in your budget. Sometimes, living a bit farther from popular areas can be cheaper.
For my first home, I rented a very small 400-square-foot home with no real bedroom. But, it was within my budget and next to my college (I lived a few miles away), and surprisingly affordable.
Talk to your parents
When you’re getting ready to move out at 18, it’s important to have a conversation with your parents. This might feel hard or even impossible, but remember that clear communication is important.
I recommend choosing a time to tell them when your parents aren’t too busy or stressed as having this conversation when everyone is relaxed can make it easier for everyone to talk openly.
I think it is also helpful to think about how your parents might feel. If you’re the first to leave the home, they might find it tough. Try to understand their perspective and mention that you’ll stay in touch and visit.
And, be ready to show them your plan. Your parents will want to know you’ve thought things through. If you’ve been saving money, let them know. Talk about your job and how you’re managing to support yourself. It’s good to tell them about the place you’re planning to move into and how you chose it.
How to move out of your parents if it isn’t safe
So, after reading the above, I know that some of you may not have a good home life. You may not feel safe telling your parents that you are moving out.
If that’s the case, then I recommend reading this section.
Sometimes, home isn’t the safe place that it’s supposed to be. If you’re in a tough situation and need to leave at 18 but can’t talk to your parents about it, you’re not alone.
Here’s what you can do:
Find an adult you trust – Look for someone you trust, like a teacher, counselor, or family friend. They can maybe give you support and help you figure out your options.
Plan ahead – Start thinking about where you’ll go and how you’ll support yourself. Look into shelters, transitional housing programs, or staying with a trusted friend or relative.
Know your rights – As you turn 18, you have rights. Learn about your options for housing, education, and employment because there may be resources available to help you.
Stay safe – If you’re in danger at home, prioritize your safety. Contact local authorities or organizations that can help you leave safely.
Take care of yourself – Moving out can be tough, but remember to take care of yourself emotionally and physically, such as by talking to friends, finding support groups, or talking to a counselor if you need to.
Leaving home at 18 without being able to talk to your parents is hard, but it’s not impossible. Reach out for help, make a plan, and remember that you deserve to live in a safe and supportive environment.
Get free stuff for your new home
One of the big challenges of moving out on your own is affording all of the different things that you need.
Luckily, there are ways to get things for free or really cheap.
Some of the top ways include:
Facebook Buy Nothing groups – This is my favorite place to start if you want to get things for free. These groups promote recycling and reusing items instead of throwing them away when you’re done with them. To begin, look for and join a local Buy Nothing group on Facebook. You can search for groups for your city. People list their free stuff all the time, such as furniture, electronics, clothes, and more. You can even make a post asking if anyone has something that you need.
Ask family and friends – Your family and friends might have extra stuff they’re willing to part with. They might even be happy to see it go to a good home – your new home!
Check online platforms – Websites like Craigslist, Freecycle, and Facebook Marketplace can be goldmines for free furniture. People often list items they want to get rid of quickly.
Visit thrift stores and yard sales – Thrift stores and yard sales sometimes offer “free bins” or low-cost items they want to get rid of fast.
Attend college move-out days – If you live near a university, go there on move-out day. Students tend to leave behind perfectly good furniture that’s yours for the taking.
Community centers and churches – These places often have bulletin boards with listings for free items.
Always be safe when arranging pickups, especially with strangers. Always bring a friend or let someone know where you’re going.
Helpful articles:
Handling utilities and bills
Dealing with utilities and bills is a big step in moving out. Utilities are services you need like water, electricity, gas, and the internet.
Before you move, call or visit the websites of local utility companies. You’ll need to set up accounts in your name. This might include a deposit fee, so be ready for that.
I recommend making a list of all your expected bills. Rent, electricity, water, internet, and maybe gas are usually the basics. Add them up to see how much you’ll spend each month.
After you move in, you will want to find out when each bill is due. It’s your job to pay them on time as paying late can lead to extra fees or even getting your services turned off. Some companies let you set up automatic payments, and this means the money comes out of your bank account on its own each month. This can make sure you’re always on time.
You will want to hold onto your bills and receipts. This way, if there’s ever a mistake with a bill, your records will help fix it.
You can save money by being smart about using your services. Turn off lights when you leave a room and unplug electronics that you’re not using. You might also shop around for better deals on services like the internet.
After you get your first set of bills, you will understand why your parents wanted to keep the air conditioning off or why they always asked you to turn the lights off – things can be expensive!
Also, remember that different times of the year will impact your bills. For example, your electric bill will most likely be a lot more expensive in the summer than it will be in the spring or fall.
Maintain your home (housekeeping)
Moving out at 18 means taking on the responsibility of housekeeping. You might be surprised how quickly your new home can become cluttered and get dirty.
Keeping your home nice starts with regular cleaning, and I recommend setting aside some time each day for tasks like washing dishes, making your bed, and tidying up the living area. This way, messes won’t pile up and become overwhelming.
Then, once a week, dedicate your time to deeper cleaning such as vacuuming, mopping floors, cleaning the bathroom, dusting, and doing laundry.
Housekeeping also requires tools and supplies, so you will want to plan your budget to include items like sponges, cleaners, and trash bags.
Make friends in your new community
Moving out at 18 is a big step, and making friends in your new community is important. It can make your new place feel like home. When you move, you might not know many people, but there are fun and simple ways to meet people.
Here are some tips:
Get to know your neighbors – Start with a smile and say hi to your neighbors.
Join local groups or classes – Look for groups that interest you. Love to paint? Find an art class. Enjoy cooking? Maybe there’s a cooking group nearby. Like rock climbing? Go to the local climbing gym. This way, you meet people who like what you like.
Visit community centers – Many towns have a community center. They have activities like sports, games, and events.
Making friends might take time, but it’s totally possible! Just be yourself and be open to talking to new people.
Balancing work and personal life
I’m guessing you will have a lot going on, between trying to work full-time and enjoying your life, and even possibly furthering your education.
I recommend trying to schedule your time so you don’t get too busy. Use a calendar or app to make sure you’ve got time for work, taking care of your place, and doing fun things too.
It’s okay to say no if you’re too busy. If you’re working a full-time job, you might not be able to hang out with your friends all the time. It’s all about finding a healthy balance between earning money and enjoying life. I had to say no to my friends many times because I was simply too busy. If your friends still live at home, it may be hard for them to understand this unless you explain your situation.
Plus, remember to take breaks. When you’re planning your week, set aside some time just for relaxing. Watching a movie, reading, or hanging out in the park are all great ways to unwind and give your mind a break.
Frequently Asked Questions
Below are common questions about how to move out at 18 years old with little money.
How can I move out fast at 18?
To move out quickly, focus on making a steady income and finding affordable housing. Create a budget to manage your expenses and look for immediate job openings or housing options. Saving as much money as you can right now is also super helpful.
How much money should I have saved by 18 to move out?
Aim to save at least 3 to 6 months of living expenses before moving out. This safety net can cover rent, groceries, and unexpected costs, giving you financial stability as you start on your own.
Can you move out at 18 while still in high school?
Yes, you can move out at 18 while in high school, but make sure you have a support system in place. Balancing school responsibilities with living independently can be very hard.
How to move out at 18 with strict parents?
When moving out at 18 with strict parents, communicate your plans clearly and respectfully. Prepare a well-thought-out plan to show them you’re serious and capable of managing your own life.
Can your parents not let you move out at 18?
When you turn 18, you’re legally an adult in most places, and you can decide to move out even if your parents don’t agree. However, it’s important to respect their opinion and explain your reasons. There are some places where you have to be older, so make sure you do your research.
Do I have to tell my parents I’m moving out?
While you’re not legally required to inform your parents in most places, it’s nice to talk about your decision with them, as transparent communication helps maintain a positive relationship after you leave.
Can I move out at 18 without parental consent?
Yes, in most places, at 18 you’re legally permitted to move out without parental consent. You will want to make sure this applies to your local area.
What things do you need when moving out of your parents’ house?
There are many things that you will need to move out of your parents’ house such as a bed, blanket, pillow, kitchen supplies, towels, a place to eat, a dresser, cleaning supplies, groceries, and more.
Is it realistic to move out at 18?
It is realistic to move out at 18 if you have a reliable income, a budget, and a plan for handling responsibilities. You will want to be as prepared as possible to move out at a young age because there will be many hurdles thrown your way, most likely.
How To Move Out At 18 – Summary
I hope you enjoyed this article on how to move out at 18 years old.
It’s really important to have a plan for a successful move when you are just 18 years old.
You’ll need to find ways to earn money regularly, like getting a job and even doing extra work on the side.
Having savings in the bank and an emergency fund will help you handle unexpected expenses without ruining your plans.
There are also many other things to think about, such as the cost of living, utility bills, your credit score, and more.
I moved out when I was just 18 years old, so I completely understand where you are coming from. I had no financial help from my parents and found and did everything on my own – from making money to finding a place to live, making all of my own meals, and more. It was hard, but it was what needed to be done.
Do you plan on moving out soon? Do you have any questions for me on how to move out at 18?
Moving into an apartment with roommates is never a simple task. For starters, space is almost always hard to come by. Then comes the difficult task of keeping that limited space organized. It’s easy for an apartment to devolve into a cluttered mess if you aren’t intentional about keeping it in order.
To prevent this, here are some tips for how to keep your apartment organized while living with roommates. Whether you‘re renting a house in Houston or moving into an apartment in Seattle, these tips from ApartmentGuide and experts will help you and your roommates coexist and stay organized.
1. Utilize versatile furniture
“Don’t underestimate the power of furniture that does double duty,” says Melanie Summers, owner of I Speak Organized. “A coffee table that doubles as a storage ottoman is a game-changer for keeping board games or cozy throws out of sight but close at hand.
Or how about a bookshelf that transforms into a desk? It’s perfect for those days when you need to switch from relaxation mode to work mode in a snap. These clever pieces of furniture are not only practical for saving space but they also add a fun and creative touch to your apartment, making staying organized feel like a breeze.”
2. Organize shared expenses
Manage shared expenses such as rent, utilities, and groceries efficiently to avoid conflicts and financial strain. Consider using apps or platforms designed for splitting bills to track expenses and ensure that everyone pays their fair share on time.
3. Create a shared calendar
Keep track of everyone’s schedules by creating a shared calendar. Whether it’s a physical wall calendar or a digital one accessible to all roommates, noting important dates, events, and responsibilities ensures that everyone stays informed and can plan accordingly.
4. Divide chores fairly
Establish a system for dividing household chores that feels equitable to everyone. Whether you rotate tasks weekly, assign specific duties based on individual preferences or abilities, or use a chore chart, clear expectations help prevent resentment and ensure that responsibilities are evenly divided.
5. Designate personal spaces
While shared living spaces foster camaraderie, it’s essential to respect each other’s need for privacy and personal space. Designate specific areas or shelves for each roommate to store their personal belongings, minimizing clutter and confusion.
“I am a huge believer in cubby systems,” says Beth Blacker, founder of It’s Just Stuff, a Boulder, CO-based home organizer. “They are great for anyone whether living with others or not. But in houseshare situations, I think they are definitely the key to keeping certain things contained and hidden but still readily available for each housemate. Many of the bins that fit into the cubbies have slots to insert a label to identify the owner and what is actually in the bin.”
6. Implement a cleaning schedule
Maintain a clean and tidy living environment by implementing a regular cleaning schedule. Determine how often common areas such as the kitchen, living room, and bathroom should be cleaned, and establish guidelines for keeping them tidy. Rotating cleaning duties among roommates ensures that no one person does all the work.
7. Set boundaries and respect each other’s space
Set clear boundaries regarding noise levels, guests, and personal items. Respect each other’s need for quiet time, privacy, and personal possessions to create a harmonious living environment where everyone feels comfortable and valued.
8. Establish clear communication channels
Communication is the cornerstone of any successful roommate arrangement. Set up regular meetings or establish a group chat where everyone can discuss important issues, such as chores, bills, and house rules. Open and honest communication helps prevent misunderstandings and creates a sense of accountability among roommates.
“To stay organized with a roommate, schedule a regular time to communicate about household issues,” advises Dara Zycherman, owner of Less Equals More. “Address problems before they begin and clarify roles and responsibilities, like who cleans what and who takes out the trash.”
9. Utilize vertical space
Maximize your apartment’s storage potential by utilizing vertical space. Install shelves, hooks, or hanging organizers on walls to store items like coats, bags, and kitchen utensils. This not only frees up floor space but also keeps commonly used items easily accessible.
10. Utilize storage solutions
Maximize space and cut down on clutter with smart storage solutions. Invest in storage bins, shelves, and organizers to keep shared spaces neat and organized. Encourage roommates to label their belongings and maintain a clutter-free environment for peace of mind.
11. Create a cleaning schedule
Develop a rotating cleaning schedule that assigns specific tasks to each roommate on a weekly or monthly basis. This ensures that cleaning duties are evenly distributed and helps prevent conflicts over who’s responsible for what. Be flexible and willing to adjust the schedule as needed.
Living with roommates can be a rewarding experience when approached with patience, respect, and organization. By implementing these 11 tips, you can create a harmonious living environment where everyone feels valued, respected, and organized. Effective communication, clear expectations, and mutual respect are the keys to successful cohabitation with roommates.
If you regularly drive someone else’s car, you might wonder about buying insurance for it. But when it comes to purchasing an auto insurance policy, the car owner is the one in the driver’s seat. Here’s what to know about insuring a car not in your name.
Can I insure a car not in my name?
No, you can’t insure a car not in your name. In most cases, only a person listed on the car’s registration can get insurance for it.
There may be an exception made if you can prove you have “insurable interest” in the vehicle. To have insurable interest in something, you must have a financial stake in it, meaning that the loss of the car would have a financial impact on you. If you’re not the owner, that can be hard to prove. If you believe you have a legitimate need for someone else’s car, you can try to prove you have insurable interest to an insurer to try to get them to cover you.
If you’re unable to prove you have insurable interest in the vehicle you’re driving, you could:
If you and the vehicle owner live at the same address, get an auto insurance policy that covers you both. If you already have auto insurance, add the car’s owner to your existing policy; or have the car’s owner add you to their existing policy, if they have one.
Buy non-owner car insurance so you have liability coverage in case you cause an accident that results in damages to others while driving someone else’s car.
How to handle common scenarios
How to be insured while driving
Drive a parent’s car while living at home
You should be added as a driver on your parent’s policy.
Regularly drive a roommate’s car
You should be added as a driver on your roommate’s policy.
Occasionally borrow the car of a friend or relative who doesn’t live with you
The owner’s policy will likely cover you. A standard auto insurance policy usually covers drivers who occasionally use a car with the owner’s permission.
Drive a parent’s car while away from home at school
A parent should list you on their policy and tell the insurance company where you’re going to school.
Drive a parent’s car once you’ve moved out
You’ll need to buy your own policy. Insuring a car at one address when it’s kept at another is fraud. Car insurance rates are based in part on where a car is kept. Also, insurance companies won’t allow you to stay on someone else’s policy and drive their car when you don’t live with them. Your parent could add you to the car title, or sell or transfer the car to you. Then you could register the car and buy car insurance using your own address.
Regularly drive the car of a friend or relative who does not live with you
If you routinely use somebody else’s car, discuss having your name added to the vehicle title so you can buy coverage for it. This is particularly important if this is a car that is no longer being used by the owner and is therefore not insured by them.
Consider non-owner car insurance
If you frequently drive cars that are not yours, you might consider purchasing non-owner car insurance.
If you occasionally drive somebody’s car with permission, the owner’s policy will typically cover you in an accident, up to the policy’s limits. However, any costs related to the accident that go beyond those limits would fall on you. Plus, if the car owner’s insurer decides you drive the car too often and should have been added to the policy, they might refuse to cover the accident. This is why non-owner insurance can be a smart purchase if you regularly drive someone else’s vehicle.
Non-owner car insurance provides liability insurance for drivers who don’t have a car of their own. A non-owner policy’s liability insurance pays for damage you cause to others and their property in an accident where you’re at fault, if the costs from an accident exceed the car owner’s liability limits. Liability insurance can also protect you financially if you’re sued because of a crash.
Filing for bankruptcy is a popular way to discharge overwhelming debt and start over financially. But just because you file for bankruptcy doesn’t mean that your responsibility for every single type of debt suddenly disappears.
Only certain types of debt qualify for discharge. Perhaps the biggest factor is the type of personal bankruptcy you choose, Chapter 7 or Chapter 13. Continue reading to find out exactly which debts qualify for each type of bankruptcy. We’ll also show you how to determine which route is best for you and your financial situation.
Overview of Debts Dischargeable Through Bankruptcy
Almost any legal debt qualifies for bankruptcy, as long as you can prove your overall financial situation makes it almost impossible for you to repay them.
Financial profiles can include any combination of consumer and non-consumer debts. A bankruptcy can result from unsuccessful investments, bad business decisions, illness, loss of employment, natural disasters, or economic downturn.
Whatever the reason, it’s your overall financial status that will determine if you qualify, not the particular debts themselves. Nevertheless, there are several categories of debts, and which type you have can affect your eligibility for debt relief.
Additionally, certain debts can’t be discharged under Chapter 7, though they can be for Chapter 13. Understanding the debt vocabulary and the different categories of debts surrounding bankruptcy will help you understand the process better. It will allow you to make a smart and informed decision about your financial future.
Identifying Different Types of Debt
The two main types to be aware of are secured debt and unsecured debt.
Secured Debt
Secured debt refers to debt that has collateral, or a physical asset behind it, including homes and cars.
These debts are secured by the value of the object being paid for, which provides security for the debt. If you default on the loan, the creditor can foreclose on your home or repossess your car to regain the amount that was lent.
Unsecured Debt
Unsecured debt is related to purely monetary loans or to debts that do not have physical collateral. This includes unsecured credit card debt and any type of cash advance or loan for a service or item that isn’t an asset.
Included in unsecured debt are medical bills, legal judgments, and credit accounts in collections. Student loan debt can also be unsecured, but often they are “guaranteed” by the government and have special rules that apply to them.
Consumer vs. Non-Consumer Debt
Another common distinction made between types of debt are consumer versus non-consumer. While this language is frequently used to discuss debts, it can be a little vague.
Generally speaking, consumer debt refers to unsecured loans and outstanding bills for things bought with disposable income. On the other hand, non-consumer debt would be debt related to the essential things like taxes, education, and housing. If you’re unsure which is which, a bankruptcy lawyer can help.
Installment Debt vs. Revolving Debt
The third debt distinction is between installment debt and revolving debt. Installment debt refers to any loan where you make regular, fixed payments on.
Revolving debt concerns debt that fluctuates, such as credit card debt, payday loans, and home equity lines of credit. Rather than having a set amount that you pay for a predetermined period of time, your monthly amount changes based on how much of your credit you’ve used.
Which debts qualify for a Chapter 7 discharge?
Chapter 7 quickly discharges most of your debts (though not all of them). However, there are several qualifications you must personally meet to file for this type of bankruptcy.
Most importantly, you must pass a “means test“. You can’t earn over a certain amount of money, which varies depending on the state you live in and how large your family is.
You also can’t have enough disposable income to cover at least part of your monthly debt payments for five years. A Chapter 7 bankruptcy is designed for people facing financial hardships. If you do end up qualifying, there are some restrictions on which of your debts may be discharged.
The debts that qualify for Chapter 7 bankruptcy discharge are mostly consumer and unsecured debts, with various notable exceptions. Debts that are not discharged include most secured and non-consumer debts such as your house, car, and real estate.
What debts cannot be eliminated in bankruptcy?
Other debts that are not discharged include debts for certain taxes, federal student loans, tax debts from the last four years, alimony, and child support. Criminal debts such as debts for death or personal injury caused by a D.U.I. are also not discharged under a Chapter 7 bankruptcy.
Most student loans: Student loan debt is generally not dischargeable in bankruptcy, meaning you’ll still be responsible for paying them back even after filing for bankruptcy.
Recent taxes: If you owe taxes to the IRS, those are typically not dischargeable in bankruptcy.
Child support and alimony: Debts for child support or alimony, or other family obligations, usually cannot be discharged in bankruptcy.
Criminal fines and restitution: If you owe money due to criminal fines, restitution or other criminal penalties, those debts cannot be discharged in bankruptcy.
Debts not listed in your bankruptcy filing: Debts you fail to list in your bankruptcy filing cannot be discharged, so it’s important to make sure you include all of your debts.
Which debts are eligible for a chapter 13 discharge?
Filing for Chapter 13 bankruptcy entails undergoing a payment period that lasts between three and five years. Depending on your income and other financial obligations, you put your remaining discretionary income towards your outstanding debt.
The payments are then distributed by the bankruptcy trustee to the qualifying creditors. At the end of the payment period, those debts are considered settled. However, you typically can’t take on any additional debt, and you must live on a fixed budget.
So, what types of debts qualify? First, your unsecured debts must not exceed $394,725 and your secured debts may not exceed $1,184,200.
Qualifying debts include general unsecured claims, such as credit card debt, personal loans, medical bills, or overdue utilities. You’ll only end up paying a percentage of what you owe these types of creditors. The exact amount depends on how much you owe and how much you earn.
There are certain debts that you must pay in full, even when you file for Chapter 13 bankruptcy. Unsecured priority claims must be paid in full. These include debts such as income tax debts, overdue child or spousal support, and any relevant legal fees.
Secured debts such as a mortgage or car loan don’t have to be paid in full during your repayment plan period. However, you do have to keep up with your monthly payments.
If you are behind on your mortgage and facing foreclosure, you can use the repayment period to catch up on your payments and save your house. If you don’t continue making payments, however, you still run the risk of losing your home through foreclosure.
How to Determine If Your Debts Are Eligible for Bankruptcy Discharge
An interview with a bankruptcy attorney is also very useful. Researching the process is a good way to get started exploring debt discharges. But, it’s always wise to ask a professional to look at your personal financial situation to find out what you actually qualify for.
Take advantage of your own knowledge plus advice from the experts to make an informed decision about filing bankruptcy.
It’s entirely possible to sell a house with a mortgage. In fact, it’s common to sell a property that still has a mortgage, because most people don’t stay in a home long enough to pay off the home loan.
With the help of your lender and real estate agent, you can move ahead and sell a house with a mortgage. Yes, there’s a bit of paperwork involved, but settling your mortgage at the closing table shouldn’t prove too challenging.
Here’s everything you need to know about selling a home with a mortgage.
What Happens to Your Mortgage When You Sell Your Home?
When you sell your home, the amount you contracted with the buyer is put toward your mortgage and settlement costs before any excess funds are wired to you. Here’s how it works for different transaction types.
A Typical Sale
In a typical sale, homeowners will put their current home on the market before buying another one. Assuming the homeowners have more value in their home than what is owed on their mortgage, they can take the proceeds from the sale of the home and apply that money to the purchase of a new home.
A Short Sale
A short sale is one when you cannot sell the home for what you owe on the mortgage and need to ask the lender to cover the difference (or short).
In a short sale transaction, the mortgage lender and servicer must accept the buyer’s offer before an escrow account can be opened for the sale of the property. This type of mortgage relief transaction can be lengthy (up to 120 days) and involves a lot of paperwork. It’s not common in areas where values are falling or at times when the real estate market is dropping.
When You Buy Another House
There are several roads you can take when you buy another house before selling your own. You may have the option of:
• Holding two mortgages. If your lender approves you for a new mortgage without selling your current home, you may be able to use this option when shopping for a mortgage. However, you won’t be able to use funds from the sale of your current home for the purchase of your next home.
• Including a home sale contingency in your real estate contract. The home sale contingency states that the purchase of the new home depends upon the sale of the old home. In other words, the contract is not binding unless you find a buyer to purchase the old home. The two transactions are often tied together. When the sale of the old home closes, it can immediately fund the down payment and closing costs of the new home (depending on how much there is, of course). Keep in mind that a home sale contingency can make your offer less competitive in a hot real estate market where sellers are not willing to wait around for a buyer’s home to sell.
• Getting a bridge loan. A bridge loan is a short-term loan used to fund the costs of obtaining a new home before selling the old home. The interest rates are usually pretty high, but most homebuyers don’t plan to hold the loan for long.
💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.
Selling a House With a Mortgage: Step by Step
Here are the steps to take to sell a home that still has a mortgage.
Get a Payoff Quote
To determine exactly how much of the mortgage you still owe, you’ll need a payoff quote from your mortgage servicer. This is not the same thing as the balance shown on your last mortgage statement. The payoff amount will include any interest still owed until the day your loan is paid off, as well as any fees you may owe.
The payoff quote will have an expiration date. If the outstanding mortgage balance is paid off before that date, the amount on the payoff quote is valid. If it is paid after, sellers will need to obtain a new payoff quote.
Determine Your Home Equity
Equity is the difference between what your property is worth and what you owe on your mortgage (your payoff quote is most accurate). If your home is worth $400,000 and your payoff amount on the existing mortgage is $250,000, your equity is $150,000.
When you sell your home, you gain access to this equity. Your mortgage, any second mortgage like a home equity loan, and closing costs are settled, and then you are wired the excess amount to use how you like. Many homeowners opt to use part or all of the money as a down payment on their next home.
Secure a Real Estate Agent
A real estate agent can walk you through the process of selling a home with a mortgage and clear up questions on other mortgage basics. Your agent will be particularly valuable if you need to buy a new home before selling your current home.
Set a Price
With your agent, you will look at factors that affect property value, such as comparable sales in your area, to help you set a price. There are different price strategies you can review with your agent to bring in more buyers to bid on your home.
Accept a Bid and Open Escrow
After an open house and showings, you may have an offer (or a handful). Consider what you value in accepting an offer. Do you want a fast close? The highest price? A buyer who is flexible with your moving date? A buyer with mortgage preapproval?
You may also choose to continue negotiating with prospective buyers. Once you’ve selected a buyer and have signed the contract, it’s time to go into escrow.
Review Your Settlement Statement
You’ll be in escrow until the day your transaction closes. An escrow or title agent is the intermediary between you and the buyer until the deal is done. While the loan is being processed, title reports are prepared, inspections are held, and other details to close the deal are being worked out.
Three days before, you’ll see a closing disclosure (if you’re buying a house at the same time) and a settlement statement. The settlement statement outlines fees and charges of the real estate transaction and pinpoints how much money you’ll net by selling your home. 💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
Selling a House With a Negative Equity
Negative equity means that the value of an asset (such as a home) is less than the balance due on the loan against it. Say you purchased a property for $400,000 with a $380,000 loan, but then the real estate market took a nosedive. Your property is now worth $350,000, less than the amount of the mortgage.
If you have negative equity in the home and need to sell it, it is possible to sell if you come up with the difference yourself.
In this scenario (an alternative to a short sale), you pay the difference between the amount left on your mortgage note and the purchase offer at closing. So in the example above, if you sold the house for $350,000, at the closing, you would need to pay the loan holder an additional $30,000 to clear the debt.
The Takeaway
Selling a house with a mortgage is common. The buyer pays the sales price, and that money is used to pay off your remaining mortgage, your closing costs, and any second mortgage. The rest is your profit.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Who is responsible for the mortgage on the house during the sale?
The homeowner is responsible for continuing to pay the mortgage until paperwork is signed on closing day.
What happens if you sell a house with a HELOC?
When you sell a home that has a home equity line of credit with a balance, a home equity loan, or any other kind of lien against the house, that will need to be paid off before the remaining equity is paid out to you.
What happens to escrow money when you sell your house?
Your mortgage escrow account will be closed, and any money left will be refunded to you.
Can I make a profit on a house I still owe on?
Yes. You can make a profit if the amount you sell your house for is greater than the amount you owe on it, less closing and settlement costs.
Can I have two mortgages at once?
Yes, you can have two mortgages at once if the lender approves it.
Photo credit: iStock/Beton studio
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
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.
It is possible to get a home loan while on maternity leave. The process may involve your lender verifying your “temporary leave income,” if any; your regular income; and your agreed-upon date of return. Anyone on a standard temporary leave is considered employed, whether the absence is paid or unpaid.
Read on to learn more about buying a home while pregnant and how this will impact your ability to get a mortgage.
Buying a House While Pregnant
Hey, why not take on two of the biggest life stressors at once? Sometimes it just happens this way, with parents preparing for a baby and a new home and mortgage.
First, consider if you can wait a bit to buy a home. It may lead to less stress overall during the pregnancy. Plus, the added pressure of a deadline may lead to hasty decision-making that buyers could regret.
And unless an employer is covering moving expenses, add that sizable cost to all the rest.
But if the move can’t be avoided because of a job relocation or other circumstances, it may be important to find a home before the baby arrives. Which does have a silver lining: Saving for a down payment could interfere with goals like saving for a child’s college tuition.
Another possible benefit to buying a house while pregnant is that the relocation could lead to a better school district or area to raise a child.
Ultimately, the decision to buy a house while pregnant is personal. 💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.
What Is the FMLA?
The Family and Medical Leave Act, or FMLA, gives eligible employees job protection and up to 12 weeks of unpaid leave a year in the event of:
• Childbirth
• Adoption or foster child care
• Care for a spouse, child, or parent with a serious health condition
• A personal serious health condition
• Qualifying exigencies arising from covered active duty or “call to covered active duty status”
The FMLA guarantees that the employee can return to their job or an equivalent one and that they’ll receive health care benefits during their leave.
Employees are eligible if they work for a company that has 50 or more staffers and have completed at least 1,250 hours of work in the previous year.
In addition to the FMLA’s 12 unpaid weeks off, more and more states are enacting paid family leave laws. Currently, 13 states plus the District of Columbia have made this mandatory. And your employer may cover your pregnancy, childbirth, and recovery thanks to short-term disability insurance. Your benefit would be a percentage of your normal earnings.
Recommended: How Much Does it Cost to Adopt a Child?
How Maternity Leave Impacts a Mortgage
Before diving into the nuances of maternity leave and its impact on qualifying for a mortgage, here’s a quick refresher course on the home-buying process.
Mortgage approval from a lender primarily hinges on two factors:
• Creditworthiness. How likely is the borrower to pay back the loan, based on their credit history?
• Ability to pay. Does the borrower generate enough income, and have a certain debt-to-income ratio, to make the monthly mortgage payments?
The lender may contact an employer to verify a borrower’s employment status and income.
Why could getting loans for pregnant women prove a challenge? Income. Consider these points:
• As long as the lender can verify that the borrower is employed — and remember, someone on temporary leave is considered employed — and generates enough income to cover the mortgage, that could be enough.
• Expectant borrowers aren’t legally required to disclose their pregnancy to a lender. However, the employer can tell the lender about impending maternity leave when they call to verify employment status.
• If a borrower is going on unpaid leave, they may need to disclose it to the lender. That’s because the period without pay may qualify as a financial hardship, which a borrower is required to inform a lender of.
• The lender can’t assume the mother-to-be won’t return to work after maternity leave. Lenders consider that the mother will return to work after maternity leave and continue bringing home paychecks.
• Before approval, the lender will ask the borrower for written notice of her intent to return to work, and may ask for an expected return date.
• The mortgage lender may request a tax slip from the last calendar year if the borrower is a salaried employee.
• A lender may approve the mortgage if your employer verifies in writing that you will return to your previous position or a similar one after your maternity leave. The lender will also consider the timing of the first payment.
• If the borrower will have returned to work when the first mortgage payment is due, the lender can consider regular income in qualifying for the mortgage.
• If the borrower will return to work after the first mortgage payment due date, the lender must use the borrower’s temporary leave income (if any) or regular employment income, whichever is less, and then may add available liquid financial reserves.
• VA loans don’t count temporary leave income towards qualifying for a mortgage, however.
💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.
Should I Buy a Home While on Maternity Leave?
For those who qualify for a mortgage while on maternity leave, the question may be, “Should I buy a house while on maternity leave?” not “Can I buy a house while on maternity leave?”
As mentioned, moving can be an incredibly stressful process, pregnancy or no pregnancy. And even if you made a budget for a baby, life has a way of throwing in surprises.
Homeownership can also come with financial surprises. The majority of homeowners reported paying for an unexpected repair within the first year.
Having a child and buying a home both require saving some significant cash. By budgeting, doing the two simultaneously is possible. So it’s your call. Not taking the double plunge could give you time to review what you need to buy a house.
Recommended: First-Time Homebuyers Guide
Home Loans With SoFi
Pregnancy is not a legal limiting factor in a mortgage lender’s eyes, but getting a home loan while on maternity leave will depend on your income, savings, work return date, and credit history.
Whether you’re on a temporary leave or not, it can be worthwhile to take a look at your home loan options.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Does being on maternity leave affect getting a mortgage?
It can, but only in the sense that maternity leave can affect a homebuyer’s reported income. If buyers anticipate an unpaid maternity leave, they may need a sizable savings account.
Should you buy a home on maternity leave?
Buying a home while on maternity leave depends on your family’s needs and finances. But moving can be stressful, and adding infant care can be a lot to handle.
Who does FMLA cover?
The Family and Medical Leave Act provides 12 weeks of unpaid, job-protected leave per year for eligible employees in the case of the birth or adoption of a child or placement of a foster child, and for other reasons.
Photo credit: iStock/FatCamera
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
If you’re running a business, you probably know that managing cash is critical to your success — so let’s share some tips on doing that even better. Solid cash flow is vital to keep a business thriving, whether you’re a sole proprietor or the head of a larger enterprise. Even businesses with strong earnings can struggle with cash flow. That’s why cash flow can be a sure sign of how healthy a business is — or is not.
So let us help you optimize that cash flow. We’ll share some smart insights and helpful tips on:
• What cash management for business is
• Why it’s so important
• Ways you can improve your business cash management
Let’s get started.
What is Business Cash Management?
Simply put, business cash management is basically the way you track and manage the money coming into and going out of your business – usually on a cash flow statement. Positive cash flow means more money is coming in through revenues or borrowing than is being used to pay expenses, such as payroll and rent.
That said, good cash management also means not having too much cash on hand. In that scenario, business owners, while cautious, may be missing out on future earnings growth when they neglect to invest cash back into the business.
Here’s another way to frame this principle: Take a look at your business’s balance sheet and check the ratio of current liquid assets to liabilities. A ratio that’s greater than one indicates good health (you’re not losing money), but if that ratio gets too high, you could be holding onto too much cash or other assets that could better be invested elsewhere.
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
The Importance of Cash Management for Businesses
Cash flow is the essence of all businesses. Without cash, a business will struggle to meet expenses, pay suppliers, repay any investors, and, often most importantly, grow the business through marketing and/or new opportunities.
Strong cash management strategies can help business owners avoid taking on debt. It also gives them more control over everyday activities, decisions, and growth opportunities. What’s more, smart cash management is the best way for owners to fulfill their vision for their enterprise while meeting both their short, intermediate and long-term needs. There’s certainly a lot riding on cash management, so let’s dive into ways to optimize it.
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6 Tips for Managing Cash Flow
Cash management can be especially challenging for entrepreneurs and small business owners. Yet it is one of the most important financial strategies business owners must master. These six tips can help.
1. Learning Your Cash Flow Cycle
A cash flow cycle is the time it takes to purchase your supplies and materials (or prepare the work that goes into providing a service), transform them into a product, sell your offering, and collect payment that can go into your business bank account. Sounds simple but a lot can go haywire during that process.
That’s why it’s important for business owners to constantly update and monitor their balance sheets and profit and loss statements. Ideally, you want to know at any given time what happened in the cash-flow cycle last month. Also important: Knowing your projections for what’s going to happen next month.
Understanding your cash flow cycle can help identify and address inconsistencies such as a late-paying customer or a build-up of inventory. If your business is seasonal or cyclical, you want to be well-prepared for both the intensely busy times…and the lulls.
Recommended: How to Track Your Monthly Expenses: Step-by-Step Guide
2. Getting Payments on Time
Reminding customers to pay on time is one of the easiest but most necessary ways to manage cash flow. Late payments are a fact of life; common, even. Having receivables come in even a day or two past the due date can wreak havoc with your cash flow cycle and your bank account.
Consider setting up email reminders to all customers ten days, seven days, and two days before payment is due. Technology today makes it a snap to pre-schedule email blasts. If the payment is still late or only a partial payment was made, don’t hesitate to follow up with a personal note or phone call.
This simple solution can really work. Customers will pay more attention to timely payments when they know you are paying close attention.
3. Turning Over Inventory Quickly
Having an abundance of inventory on hand at a given time means that a bundle of cash is tied up in that unsold stock. That could be an issue, because those funds might otherwise be working to pay for operations and expenses. What’s more, if all of that inventory bought upfront doesn’t sell as expected, it could mean losses on top of that lack of cash. That could hurt your growth and business valuation.
Many small business owners have learned that, in terms of cash, it’s better to turn inventory more quickly. Of course, this will vary widely depending on your business – perhaps your product is handmade jewelry, perhaps its reconditioned air conditioners. As an example, you might want to boost inventory turn-over from twice a year to five times. More targeted marketing could contribute to this acceleration.
That said, finding the right inventory management to fit with your cash flow cycles takes some time and experience. Recent supply chain issues have shown how challenging inventory management can be. Again, constant monitoring of the cash flow cycle can help guide how you tweak things.
Recommended: How Much Does It Cost to Start a Business?
4. Understand Invoice Financing
Let’s say you hit a cash management hitch. If you do find yourself in a position where you have too much inventory on hand and you need cash to cover expenses, there is a path forward. Invoice financing companies will advance a full or partial amount of your outstanding invoices. You repay that amount plus interest after the invoice is paid.
This generally should only be considered as a stop-gap measure. Like credit cards, interest payments on invoice financing can add up fast and quickly get out of control. Consider the fact that annual percentage rates for invoice financing products can reach as high as a jaw-dropping 64%.
5. Cutting Costs
Monitoring and cutting costs on expenses is another tool for managing cash flow. After all, if less cash goes to pay overhead, more can be invested in the business. A few suggestions: Relying on online marketing efforts that can be less costly than traditional methods, outsourcing tasks that take too much time and money in-house, and reducing energy costs. You might also want to renegotiate outdated contracts and prices with suppliers. These are all areas business owners can consistently monitor to keep costs low.
💡 Quick Tip: Are you paying pointless bank fees? Open a checking account with no account fees and avoid monthly charges (and likely earn a higher rate, too).
6. Comparing Loans
Sometimes, a business could use a helping hand to smooth out its cash flow. Let’s say you have outstanding accounts receivable — in other words, you know money is due but you don’t have it yet — and you need the cash now. In this situation, taking a business loan can be an option to help bridge the gap.
Cash flow loans (like invoice financing explained above) are short-term loans or lines of credit. These are often used to cover expenses or to take advantage of opportunities that can increase revenue.
A working capital loan is another option that can be used to finance everyday business operations such as rent, payroll, or restocking inventory. These loans are not designed to finance long-term assets or investment. Companies with seasonal or cyclical sales often rely on working capital loans to provide relief during slow periods.
One caveat: Working capital loans are often tied to your personal credit, so missed payments or defaults will affect your credit score. Consider that carefully before you sign on.
In addition, there are a variety of small business loans available that are used to finance long-term expenses such as real estate, equipment purchases, or business expansion. These include SBA loans, business lines of credit, and term loans.
Whatever type of loan you choose, be sure to compare your options carefully. Look at terms, APR, and how much lending you qualify for among several lenders before taking on any short or long-term debt. Spending some time and energy on research will help ensure you get the right form of financing.
The Takeaway
Cash flow management is an essential part of running a successful business of any size. Carefully monitoring cash flow, and learning some simple strategies to maximize it can take your small business to the next level.
Whether your business is a full-time job or just a side gig, it’s important to keep your business cash flow separate from your personal cash flow. In both cases, you’ll want to find a bank account that pays a competitive rate, charges no or low fees, and makes it easy to access your money.
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 4.60% APY on SoFi Checking and Savings.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government 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, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
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Your mind and body may be ready for a sunny beachside spring break in Cancun, but if you’re living that broke college kid life, you may imagine your spring break looking more like a week at home, scrolling through Instagram and binging Netflix.
However, it is possible to plan a spring break trip on a limited budget. And yes, even a college student’s budget can be stretched for spring break fun! If you’re wondering how to plan a spring break trip without living off instant noodles for the next month, we have some tips to help you get a well-deserved vacation from those long nights spent studying in your dorm room.
Keep reading for some of our best tips on making your spring break trip dreams happen on a budget.
1. Start Planning Early
Waiting until the last minute to plan a trip could mean missing out on cheaper flights, hotels, and even popular ticketed attractions. If you’re going to a hot destination during a peak travel season, which includes spring break for many destinations, then you could blow your travel budget on the flight alone, leaving you without enough money for food and lodging.
2. Make a Budget & Stick to It
Before you even leave for your destination, it’s smart to create a travel budget. What can you reasonably afford to spend on accommodations, transportation, entertainment, meals, and shopping? Having a budget could help you avoid splurging on expensive dinners or overspending at local shops.
Recommended: How to Save for a Vacation: Creating a Travel Fund
3. Find Off-Season Destinations
If Cancun for spring break is too pricey for your college student budget, don’t stress. There are a number of great destinations that are off-season in the spring, ranging from the more rugged Jackson County, North Carolina to the Big Apple.
4. Only Travel as Far as You Can Drive
It’s about the journey, not the destination, right? You can make that (semi) true by taking a road trip with a few friends. On a road trip, you don’t need to follow any set schedule. Since there’s no flight or train to catch, and often no hurry to reach a destination, you can make spontaneous decisions and discover hidden gems along the way.
5. Avoid Tourist Traps
Doing spring break on a budget generally means skipping touristy destinations like Miami, New Orleans, and Cabo. However, there are plenty of cheaper alternatives to these locations that can save you money and that will probably be far less crowded, too.
6. Reach out to Friends & Family
If you have friends or family in another city, reach out and ask if they’d be willing to host you. If they agree, you could get some free lodging and meals out of it. Plus, you’d be connecting with locals who could guide you through the city and give some tips on cool and free stuff to do that you might not have found otherwise.
Recommended: How to Balance the Urge to Travel and the Need to Save
7. Ditch the Plane Ticket
Planes and cars aren’t the only way to land at your tourist destination. You can do spring break on a budget by hopping on an Amtrak train or a Greyhound bus, both of which have destinations all over the country. The best part? You can catch up on some work, sleep, or relaxation while you enjoy the ride.
8. Don’t Forget about Cruises
You could spend a fortune going to just Miami or Los Angeles. Or, you could check out some cheaper cruise options that could potentially take you all over Alaska, the Caribbean islands, or a slew of other destinations for less. There are even cruise options designed specifically for college students.
9. Consider Pitching a Tent
Do you get motion sickness in cars or boats? With camping, your feet will be firmly planted on the ground, and your budget will also likely stay down to earth. You can camp out in many destinations across the U.S. and even abroad, be it under the stars near a national park or near a great fishing hole in the Carolinas.
10. Look For a Deal
Sites like Groupon and LivingSocial offer a number of travel and hotel deals both for individuals and for group travel. Checking out which hotels are offering promotions could help you save when booking accommodations. You can also find deals on attractions near where you’re vacationing, too.
11. Sign Up for a Spring Break Volunteer Experience
Many colleges offer a program called “alternative break,” which allows students to travel and volunteer during their spring break. If your college doesn’t offer any alternative break trips, you can still find some opportunities through organizations like Habitat for Humanity and United Way .
12. Be a Tourist in Your Own State
If airfare is out of the question for your spring break budget, a budget-friendly alternative could be touring your own state. You can take a spring break road trip around your state or even take multiple day trips, the latter of which could allow you to have most of your meals at home with no hotel needed.
13. Fly on Unpopular Days
No, it’s not just your imagination: There are some days that are cheaper to fly on than others. If you’re not tied to a set departure and/or return date, use the flexible date search on a travel or airline site. This can help you find the cheapest travel dates for your trip.
14. Sign Up for Price Alerts
One helpful way to ensure you’re getting the best possible deal on your trip is to sign up for price alerts, a free service offered by several travel companies, such as Kayak, Skyscanner, and Google Flights. These sites track prices daily and alert you in real-time when the price changes for a flight, hotel, or rental car you want.
15. Ask for Extra Snacks
If you’re flying to your destination, be sure to grab the airplane snacks. And if you like the snacks, ask for seconds! You may be able to snag a free snack to help tide you over between meals when you land. The worst thing that can happen is that they say no.
16. Consider Airbnbs or Hostels
For those looking for the best tips on how to plan a spring break trip, one not-so-obvious one may be skipping hotels altogether. Staying at an Airbnb or hostel could be a cheaper travel hack than even a budget motel, especially if you don’t plan on spending much time in your room anyway.
17. Use Public Transportation
While Uber may be one of the handiest apps to have while traveling, relying on ridesharing and taxis could end up costing you a small fortune, especially if you’re traveling in a big city. Using public transportation could cost you a fraction of the price of an Uber, plus it will allow you to explore more of your destination as you navigate around subway and bus stations.
18. Bring Your Own Food
Grocery costs may be on the rise, but the cost of dining out can really wreak havoc on your spring break budget. If you want to try the local cuisine, you can typically do so much cheaper by going to a local grocery store and buying premade meals there or, better yet, making your own meals using fresh, local ingredients. This option may only be available if you’re staying at an Airbnb or hotel with a kitchenette, though.
19. Eat Out for Lunch, not Dinner
Eating out for dinner will often cost you far more than eating out for breakfast or lunch. And if you decide to eat out for dinner still, skip the drinks and desserts. These items typically have higher markups than other items on the menu. Plus, when it comes to desserts, the quality (and quantity!) may not be worth it — many restaurants don’t even make the desserts they serve.
20. Ask About Complimentary Hotel Meals
Students looking for spring break trips on a budget won’t want to miss out on this tried-and-true travel budget saver: Before booking your hotel, ask if they have any complimentary meals, such as a continental breakfast. It may not be as fancy or Instagram-worthy as the hottest brunch spot in town, but it will likely be a lot better for your budget.
21. Use The Free Hotel Coffee
Most hotels offer free coffee either in the lobby in the mornings or through small coffee makers in your room. It may not be as fancy as your usual Venti Coconutmilk Latte with two pumps of salted caramel, but it won’t cost you anything.
22. Look out for Free Samples
Looking to score some more free snacks? Add local farmers’ markets to your itinerary. Many markets are full of free samples, so you may even be able to scrounge together a free lunch. You may also be able to score free swag, like t-shirts and reusable bags, from local vendors and businesses, your hotel, or the local visitor’s center.
23. Prioritize Free Activities
Sure, you can spend $50 for a museum ticket. Or, you could search online for some free museums nearby. Many hot spring break destinations offer free walking tours, free museum days, and a plethora of other free activities, such as parks and beaches.
24. Find a Travel Buddy (or Four!)
You’ll find that going on a budget-friendly spring break trip can be a lot easier if you team up with friends. Pooling your college budgets together may even help you to afford nicer accommodations or a more far-flung destination.
25. Cash in Credit Card Rewards…
If you have a rewards or cashback credit card, you may want to save up your points to help fund your epic spring break. Having a travel rewards card can be an easy way to save on travel, especially if you’re able to use that card on purchases before heading out on vacation, which could help you build up even more rewards points.
26. …And Earn More Rewards While Traveling!
Using your rewards credit card on vacation may not help you save for your current trip. But if you rack up more rewards during your trip, you’ll already have a new vacation fund started before you even come back from spring break.
27. Research Student Discounts
Catching a movie or eating out during spring break? Ask about a student discount! You may be able to score some sweet savings even before your vacation, as companies like Expedia often offer student-only travel deals. You can also try StudentUniverse , which helps students get discounts on hotels, airfare, and more.
28. Ask About Membership Discounts
A ton of college discounts exist, but don’t rule out membership discounts you could get from family members. For instance, Costco, Sam’s Club, AAA, and AARP all offer travel discounts to their members. It may be worth asking some relatives about their memberships to save big on your spring break trip.
29. Avoid Transaction Fees
Transaction fees can be a real budget-killer if you’re traveling abroad. And even if you’re stateside, ATM fees can also put a dent in your spring break savings. So you may want to ask your card issuer about fees and plan accordingly to make sure you have enough cash on hand to avoid them.
30. Use Hotel Toiletries
TSA-approved toiletries can be overpriced, and buying them when you arrive at your destination may also mean overpaying for toiletries that you have loads of at home. The best alternative? Decant your own shampoo and conditioner into smaller bottles you can snag at The Dollar Store. Or, better yet, just use the hotel toiletries. They may not be what you’re used to, but your budget will thank you.
The Takeaway
Wondering how to plan a spring break trip on a budget? It may not be as hard as you think. If you’re willing to try off-peak destinations and hunt for discounts, you can save a ton of cash. Spring break trips on a budget don’t have to be a drag, either. You can still go to popular destinations if you create (and stick to) a spring break travel budget. Using rewards and cashback cards can also help you save on airfare and other travel expenses.
SoFi Travel has teamed up with Expedia to bring even more to your one-stop finance app, helping you book reservations — for flights, hotels, car rentals, and more — all in one place. SoFi Members also have exclusive access to premium savings, with 10% or more off on select hotels. Plus, earn unlimited 3%** cash back rewards when you book with your SoFi Unlimited 2% Credit Card through SoFi Travel.
Wherever you’re going, get there with SoFi Travel.
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**Terms, and conditions apply: The SoFi Travel Portal is operated by Expedia. To learn more about Expedia, click https://www.expediagroup.com/home/default.aspx.
When you use your SoFi Credit Card to make a purchase on the SoFi Travel Portal, you will earn a number of SoFi Member Rewards points equal to 3% of the total amount you spend on the SoFi Travel Portal. Members can save up to 10% or more on eligible bookings.
Eligibility:
You must be a SoFi registered user. You must agree to SoFi’s privacy consent agreement. You must book the travel on SoFi’s Travel Portal reached directly through a link on the SoFi website or mobile application. Travel booked directly on Expedia’s website or app, or any other site operated or powered by Expedia is not eligible. You must pay using your SoFi Credit Card.
SoFi Member Rewards: All terms applicable to the use of SoFi Member Rewards apply. To learn more please see: https://www.sofi.com/rewards/ and Terms applicable to Member Rewards.
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.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Dog ownership comes with many responsibilities, and keeping your dog clean is one of the most challenging. Some owners tackle the bathing, brushing and trimming themselves, while others pay for a dog grooming service. If you’re one to leave it to the professionals, you may have wondered if you’re supposed to add a gratuity after receiving the bill.
Start with the average cost of dog grooming
Tips are often calculated by taking a percentage of the total bill. A basic grooming service can cost $50 to $75, according to Erin Myers, a grooming expert and project analyst at the American Kennel Club.
According to etiquette experts, the industry standard for tipping service professionals is 15% to 20% of the bill, so for dog groomers that would work out to $7.50 to $15. If you’re unsure, use our tip calculator.
Factors that could affect the size of your bill or tip
While calculating a percentage of the total bill is a good place to begin, there are some other things that may influence your tip.
Dog breed and size: Some breeds require a little extra maintenance, especially if they’re prone to matted fur or shedding (think poodles and bichon frisés). If your dog needs lots of brushing or a special haircut, you might want to consider that in your tip. Bigger dogs also can take longer to groom.
Temperament: If your dog hates getting groomed and is difficult to manage, it might make the appointment last longer and, potentially, endanger the groomer. Consider tipping more if this sounds like your dog.
Salon address: Location influences the prices of most things, including grooming. People going to a shop in an urban area should anticipate a larger bill and expect to pay more in tips than those in suburban or rural areas.
Mobile vs. brick and mortar: A mobile grooming service can be a convenient option for owners who find it difficult to bring their dog to a salon. However, Myers says “people should anticipate that [mobile grooming] is going to be a little bit more expensive” to cover vehicle gas and maintenance, permits, specialized equipment and the fact that mobile groomers can typically care for only one dog at a time. When calculating how much to tip a mobile groomer, take these factors into consideration.
Quality of service: The salon’s cleanliness, groomer’s communication style and your dog’s final appearance will likely influence how much you tip. Myers suggests assessing your dog after a groom to make sure that there are no tangles, cuts or other issues because they could be red flags for subpar work. If you feel like you received poor service, you might tip less than 15% or nothing.
Number of groomers: Some groomers do everything from start to finish while other salons have groomers dedicated to different parts of the process. If there is a division of labor, you might want to spread out the tip.
How to reduce your dog grooming bill
The cost of grooming should be top of mind before you adopt or purchase a dog. If the breed you want needs regular grooming, include those recurring expenses in your budget. Many people consider pets to be family members, which means veterinarian and grooming expenses might fall under the “50% for needs” category within the 50/30/20 budget framework.
Here are some other ideas to help cut costs:
Get a shorter cut to go longer between grooms. This extended timeline can save you money in the long run.
Join a loyalty program and take advantage of seasonal promotions. Some groomers might offer discounts after completing a number of visits or feature holiday specials.
Keep up with at-home grooming between services. Taking over more manageable aspects of your dog’s care, like ear cleaning or toenail clipping, can make your groomer’s job quicker, potentially leading to lower costs.
Switch to a national chain. If you’ve been going to a mom-and-pop groomer, you could save money by taking your dog to a national chain where tipping isn’t expected, according to Myers.
Check to see if your pet insurance offers a wellness plan. Some providers let you add on certain grooming services.
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Should you tip a dog groomer?
A grooming appointment can last two to four hours, according to PetSmart, a national pet retail chain. The average appointment includes brushing, ear cleaning, toenail clipping, bathing, drying and styling. Groomers may be grappling with scared or grumpy dogs who make the job more challenging. If your groomer delivers consistent results and is kind to your dog, tipping is a way to show your appreciation
What if you can’t afford to tip?
If a 15% to 20% tip isn’t feasible, tipping a smaller amount might be an option. You could also reserve your tip for the holiday season, which can be a time to thank the service providers who make your life easier throughout the year. Adding a line in your holiday budget for your groomer will give you time to plan and save for the extra cost.
Myers suggests having an open conversation with your groomer about tipping when you drop off your dog. Asking for the costs upfront and establishing whether a tip is expected can help build an honest relationship.
If a tip isn’t in your budget, there are other ways to show your appreciation. Posting a positive review online could help boost business, and praising your groomer directly to their manager is a kind gesture.