Financial Advisor Archives - Hanover Mortgages

September 22, 2021

How to Verify a Check Before Depositing

Verifying a check can protect consumers from fraud. If you are unsure of a check you’re depositing, it’s wise to verify it ahead of time.

Since fake check scams can come in all shapes and sizes, it’s crucial to take additional precautions when depositing money in your account.

If the check is identified as fake or counterfeit, the recipient will likely be responsible for the money sent to the scammer. So, to avoid counterfeit checks, here’s how to verify a check and avoid future scams.

Recommended: Are Checkbooks Still Useful?

Verifying a Check

Banks must deposit check funds quickly, sometimes as fast as two days by law. The bank may say that a check has cleared and the funds are available for use, but this doesn’t necessarily mean that the check is valid. It can take a few weeks to identify a fake check in some cases, and by that time it might be too late.

To determine if a bank check or cashier’s check is valid, consumers may have to do more than just a physical inspection of the check.

Here are a few ways to identify if a check is fake or valid.

• Ensure a legitimate bank issues the check. Although a valid bank might issue some fake checks, a sure giveaway of a fake check is that a fake bank name is on it. To locate an FDIC insured bank in the US, consumers can use the FDIC BankFind .

• Call the bank the check is from. Look up the bank’s phone number on its website instead of using the phone number listed on the check. The number on the check might be a part of the scam, so it’s essential to call the official direct line to confirm the check’s validity. The bank might need the check number, issuance date, and amount to confirm if the check is real.

• Complete an ABA routing number lookup. Developed by the American Bankers Association in 1910, the ABA routing number identifies the financial institution responsible for the payment. To make sure a check is valid, use a routing number lookup system for verification.

• Take into consideration the origin of the check. If the check came from an unknown source, it’s wise to be skeptical of the payment. Scammers usually communicate via email or text message, which may contain grammatical errors.

• Confirm the address the check was mailed from. If a check has a postmarked address that doesn’t match the issuing bank, it may denote a fake check. Be extra wary of any check that is sent from overseas.

• Look for watermarks, security threads, or other security features printed on the check. If a scammer copies any of these features, the quality is often questionable.

• Compare the check amount to the request. If the check amount is greater than the expected amount, this is a sign of a hoax the scammer may use to get the check receiver to wire funds back to them when the check is deposited.

Check Scams to Look Out For

Although fraudsters are coming up with new scams all the time, there are a few current common scams to be aware of.

Get Rich Quick Scams

In this scam, the scammer contacts a check recipient and says that they won the lottery or are entitled to an inheritance, usually from another country. The scammer says they will send a cashier’s check with the proceeds, but the recipient must pay the fees and taxes. So, they are instructed to deposit the funds and wire money to the scammer for taxes and fees.

Online Auction Scams

Some scammers may visit an online auction site or classified listing site, and bid on an item, pay in advance for a service, or rent an apartment. The scammer will then send a cashier’s check, usually for more than the price agreed upon. Once you bring this to their attention, they will request the recipient to deposit the check and then send the extra funds back to them before you find out the check was fake.

Secret Shopper Scams

With secret shopper scams, scammers pretend to have a job opportunity that allows employees to work from home. The scammer may send a check as a starting bonus and request the employee pay the activation fee. The hope is that the scammer receives the funds from the activation fee before the fake check bounces.

Another way secret shopper scammers take advantage of people is by hiring someone and stating their first assignment is to review retailers that sell gift cards. In this case, the shopper may get a check with instructions to deposit it into their account and then wire the funds to a third party. Unfortunately, once the funds are wired to someone else, the third party vanishes.

Personal Assistant Scams

Scammers sometimes try to hire personal assistants online. Once the scammer hires someone, the scammer may send a check and tell the new employer to use the money to purchase gift cards, supplies, or equipment for the client. After the scammer receives the gift card PIN, they can use the funds right away. This will leave the personal assistant without the money when the bank determines the check is counterfeit.

Taking Action If You’re Scammed

If you have wired funds to a scammer, reach out to the company transferring the money as soon as possible, reporting the fraud, and filing a complaint.

Two commonly used money transfer companies are Western Union™ and MoneyGram®, and both have departments dedicated to fraud awareness. If you think you may have been scammed, you can report suspected fraud to the money issuer by phone.

• Western Union Fraud Hotline at 1-800-448-1492.

• MoneyGram Customer Care Center at 1-800-926-9400.

Both companies also have online forms that can be used to report suspected fraud. You can request a transfer reversal and, while it’s unlikely they will do this, it’s essential to ask at least.

If you used a money order to pay the scammer, reach out to the money order issuing company. Ask if you can request a stop payment or if they can stop the delivery of the money.

If you sent the money order by US mail, try reaching out to the U.S. Postal Inspection Service® or another service carrier you used.

In the event, the scammer requested gift cards, contact the gift card issuing company immediately and explain that the company’s gift cards were used in a scam. If you contact them quickly, they might be able to refund the money. Remember, gift cards are not a form of payment, they are a gift. So, it’s a red flag if someone is trying to pay you using gift cards.

Recommended: Ordering Checks – A Complete Guide

The Takeaway

While you can’t prevent fraudsters from attempting to steal your money, you can take steps to keep your money safe by using a secure bank account. With a SoFi Money® cash management account, you can instantly freeze your account online or via the app if you notice suspicious activity. If unauthorized activity occurs, you can contact SoFi for help resolving the issue.

A SoFi Money cash management account also has other safety measures in place, such as two-factor authentication, chip technology, and suspicious activity monitoring services to protect your cash. And, accounts are fee-free, so you can use your money the way you want to.

Learn more about SoFi Money today.

Photo credit: iStock/andresr

Source: sofi.com

September 21, 2021

Routing Number vs. Account Number: How to Find

They may not be numbers you can rattle off the top of your head, but your routing and account number are the keys to your banking kingdom.

Your account’s routing number identifies your financial institution, while your account number is unique to your checking or savings account. You need both of these numbers for nearly every bank-related financial transaction you make, from paying bills online to signing up for direct deposit at work.

Learn the difference between these numbers, where to find them, and how to use them safely.

Recommended: How to Transfer Money From One Bank to Another

What is a Routing Number?

A routing number is a sequence of nine digits that identifies a bank or credit union, and each banking institution has a unique number.

A routing number is also sometimes referred to as an ABA number, in reference to the American Bankers Association, which assigns them. Routing numbers are only issued to a federal or state-chartered financial institution that is eligible to maintain an account at a Federal Reserve Bank.

A small bank may only have one routing number, while a larger financial institution may have several (they typically vary by region or state).

Routing numbers are generally required when reordering checks, paying bills, establishing a direct deposit, or making tax payments. The routing number required for making a wire transfer is not the same as the routing number that is printed on your checks, however. That number can be found online or by calling your bank.

What is an Account Number?

While the routing number identifies the name of the financial institution, the account number identifies your account. While anyone can find your bank’s routing number, your account number is private.

Typically between 10 and 12 digits, your account number acts as a road map of sorts to the bank, letting them know where to deposit or withdraw money.

If you have two different accounts at the same financial institution, you will have two different account numbers. The routing number for these accounts, however, will be the same.

Because your account number effectively provides access to the funds in your account, it’s critical that you keep it safe.

When Will I Need A Routing Number or Account Number?

You’ll need to know your account number and, in many cases, also your routing number for a variety of everyday financial transactions. These may include:

• Setting up direct deposit of your paycheck

• Setting up autopay

• Making a withdrawal

• Depositing cash or checks into your account

• Filling out a rental application

• Linking external bank accounts

• Filling out a loan application

• Scheduling payments from vendors you do business with

• Sending or receiving a wire transfer

• Paying a bill online

• Sending or receiving money to family and friends

How to Find Your Bank Routing and Account Number

You can find your routing number and account number printed on the bottom of your checks.

You’ll see three groups of numbers. Typically, the first number (usually nine digits) is the routing number. The next group of numbers (usually 10 to 12 digits) is generally the account number. The third is usually the actual check number.

Don’t have any checks? No problem. You can typically find these two important numbers by going online and logging into your account.

Your financial institution’s routing number is public information and should be easy to find. If your account number is encrypted (and you can only see the last four digits), you may be able to get the full number by downloading a recent bank statement. Another way to get your account number is to go into your bank (you’ll likely need to show ID).

When you are ready to input your routing and account numbers for a financial transaction, it’s a good idea to check your numbers at least twice to make sure you get them exactly right. This will ensure a seamless transaction that avoids delays or any associated bank charges stemming from the funds ending up in an incorrect account.

Protecting Your Routing and Account Number

Although anyone can locate your bank’s routing number, your account number is not public information. Just like you are mindful about who sees your Social Security number, the same goes for your bank account number.

To avoid potential fraud, it’s wise not to share your account number with any person or business unless you absolutely need to, and also to keep your checkbook in a safe place. Any old checks should be shredded before they get discarded. Also wise: not sharing pictures of checks you’ve written on social media.

You’ll also want to make sure your bank account password is secure. You can do this by using a mix of numbers, letters, symbols, upper and lower case letters, and not using any personal information someone could find on social media.

The Takeaway

Your account and routing numbers work together to identify your account and ensure that your money gets removed from the right place, or gets put into the right place.

The routing number indicates what bank your account is held, while the account number is your unique ID number at that bank. Both of these numbers are required to complete many everyday financial transactions.

While your financial institution’s routing number is public information, your account number is private and should be kept safe and secure.

Knowing the difference between these numbers and being able to locate them when you need them is key to making your financial transactions, from setting up autopay to sending people money, go off without a hitch.

Another way to make money transfers–and other everyday money moves–go quickly and smoothly is to sign up for a SoFi Money® cash management account.

With SoFi Money, members can quickly transfer money straight from their phones using the mobile app, making everything from paying bills to splitting the dinner bill fast and simple.

Make it easy to manage your finances with SoFi Money.

Photo credit: iStock/SeventyFour

Source: sofi.com

September 21, 2021

NEW Mint Feature Highlight: Budget Widget on iOS

Minters – You asked for it and now the Mint Budget Widget is available on iOS!

With the new budget widget, you can see where you stand with your budget at a glance, without even opening the Mint app. You can choose from 3 different widget layouts to see your overall budget and top spending categories. The new budget widget is designed to be both convenient and secure so it will never show up on your lock screen.

How to Get Started

Step 1: Touch and hold an empty area on your home screen.

Step 2: Tap the plus sign (+) in the top left corner.

Step 3: Search or scroll to find Mint and tap “add widget” when it pops up.

Step 4: Choose the widget format you like best. Now you have a view of your budget without needing to open the app!

Insider tip: A transaction widget is also available. Both widgets have a dark mode version.

The Budgeting Tool You’ve Been Looking For

Mint is here to be your all-in-one finances app, where you can connect your accounts, bills, and more – in just one place. And that’s why we’ve rolled out new features like the Transaction Widget, the This Month tab, and personalized Alerts. You deserve a better holistic view of your financial picture, and we’re here to give that to you!

Whether you’re just starting out, or have been budgeting for a while, the Mint widget empowers you to quickly access your finances any time, any place – within seconds. With the budget and transaction widgets, tracking your spending has never been easier.

Try it out for yourself to stay on top of your finances!

Learn more about security

Source: mint.intuit.com

September 21, 2021

How to Read Crypto Charts: 2021 Complete Guide

Reading crypto charts is an important skill for anyone who wants to trade digital assets. Understanding crypto charts will allow you to perform the technical analysis necessary to make investing decisions.

Here’s what to know:

How to Read Cryptocurrency Charts

There are many potential methods for reading crypto charts.

Some factors aside from the chart itself can be worth considering too, as important events or changes in overall market sentiment can have a heavy-handed impact on charts.

For best results, traders can implement multiple methods of reading crypto charts at the same time. When several different indicators lead to similar conclusions, market observers have more confidence in their predictions. Relying on a single indicator is likely to create an incomplete picture and could be misleading.

Recommended: 6 Things to Know Before Investing in Crypto

1. Support & Resistance Levels

Support and resistance are among the most basic technical analysis concepts used when reading charts. Support refers to a potential bottom in prices, while resistance refers to a potential top. Prices tend to reverse at these points, and if they don’t, it can mean that a new trend has emerged.

When prices breakout beneath support, further declines could be possible. Likewise, when prices breakout above resistance, further increases could be possible.

Pivot points, predictive indicators that average the high, low, and closing price from the previous trading session, provide a more precise way to calculate specific support and resistance levels. Traders who are serious about reading crypto charts could begin by researching topics like pivot points more thoroughly.

2. Moving Averages (MA)

Moving averages plot a line on a chart that indicates the trend of price averages over a certain period. Investors can use MAs for just about any time frame, but many believe that long-term averages carry more weight as they include more data. The same can be said of most technical indicators.

Investors also often use multiple moving averages in conjunction with each other. For example, investors consider a “golden cross” a bullish signal, while a “death cross” is a bearish signal.

A golden cross happens when a short-term moving average rises above a long-term moving average. Often this involves the 50-day MA moving above the 200-day MA. A death cross happens when this trend reverses and the short-term moving average falls beneath the long-term moving average.

3. Volume Weighted Average Price (VWAP)

The Volume Weighted Average Price (VWAP) appears on a single line on a chart. Similar to a moving average, VWAP includes one crucial variable – volume. Including volume into the average price calculation may create a more accurate picture of previous price behavior. A trend based on low volume could be weak and reverse quickly, while a trend based on high volume is thought to be more robust.

4. Relative Strength Index (RSI)

The RSI is another often-used and easy-to-read indicator. It appears as a single line beneath the price chart itself, with a value between 0 and 100, with 50 being neutral. A low RSI reading may signal oversold conditions, meaning prices could rise soon, while a high RSI reading could signal overbought conditions, meaning prices could fall soon.

The closer the RSI is to its extremes of 0 or 100, the more reliable investors consider it. In some cases, the RSI can remain elevated or suppressed for long periods before the foretold price reversal materializes. For this reason, it can be helpful to use other price indicators alongside ones like the RSI.

5. Crypto Fear & Greed Index

The Crypto Fear and Greed Index provides an approximation of overall market emotions. Using a variety of data, the index shows a value between 0 and 100, with 100 being maximum greed and 0 being maximum fear.

This is a contrarian indicator, meaning investors might use it to do the opposite of what everyone else is doing. When the index reads below 20, that signals extreme fear, and could mean buying opportunities. When the index reads above 80, that signals extreme greed, and could mean it’s time to take some profits.

Recommended: How to Use the Fear and Greed Index to Your Advantage

6. Trends Tend to Continue

Figuring out exactly when a trend is about to reverse can be difficult if not impossible much of the time. Many believe it’s better to just identify existing trends and try to ride on that momentum.

But how do you know exactly when a trend has changed? It’s difficult to say, and traders might disagree. In general, it’s when a pattern breaks down or prices close above resistance or below support, for example, the trend may have changed course.

7. Candlestick Charts

Candlesticks are price charts that show the high, low, opening, and closing prices of cryptocurrency during a specific time period. When you set up a candlestick chart, you’ll choose the time period that you want it to cover.

8. Bitcoin Dominance

One last factor worth taking note of when reading crypto charts is Bitcoin dominance . This number, expressed as a percentage, refers to the amount of the crypto market captured by Bitcoin. For many investors, the higher this value rises, the more bullish they are on Bitcoin, while being bearish for many altcoins.

The opposite is also thought to be true. Investors may perceive a decline in Bitcoin dominance as a bearish signal for Bitcoin and bullish for altcoins.

On April 22nd, 2021, Bitcoin dominance fell below 50% for the first time since 2018. Some market observers believe this means that Bitcoin could either fall or trade sideways for a time while many altcoins rally.

Bitcoin forks can also potentially impact Bitcoin dominance, as a new altcoin is created when this happens.

Recommended: How to Invest in Bitcoin

The Takeaway

This has only been an introduction to how to read crypto charts and tips for investing in Bitcoin and crypto. Using one or more of the above listed methods can help traders make informed decisions, but they may also want to do additional research.

If you’re ready to start trading cryptocurrency, consider opening an account on the SoFi Invest brokerage platform. It allows you to trade not only cryptocurrencies, but also stocks and exchange-traded funds.

Photo credit: iStock/SARINYAPINNGAM

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
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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Source: sofi.com

September 20, 2021

What Are Travelerâs Checks and How Do They Work?

Traveler’s checks were once a necessity for keeping your money safe when traveling internationally. But with digital payment options and ATMs located around the world, do we really need traveler’s checks anymore?

While you might not want to travel solely with traveler’s checks these days, having a few as a backup can be useful.

The main advantage of traveler’s checks is that they function like cash–you can use them to pay for goods and services at any business that accepts traveler’s checks. Unlike cash, however, if these checks get lost or stolen, you can get your money back.

You can also use traveler’s checks to get local currency at many banks and hotels while traveling.

However, these days traveler’s checks are somewhat outmoded and have largely been replaced by plastic and electronic payments.

Read on to learn how these checks work, where to get them, as well as their pros and cons.

What Is a Traveler’s Check?

Traveler’s checks are paper documents that can be used as a traditional paper check and also like cash. They are intended to aid tourists and are typically used by people on vacation in foreign countries.

Issuers print checks in varying denominations, such as $10, $20, or $50, and they are available in a range of currencies.

You can use these checks just like cash to pay merchants for goods and services, as long as they accept traveler’s checks. Typically any change due back to you will be given in local currency.

You can also get the checks converted into cash in the local currency at many banks, hotels, and foreign exchange offices.

If traveler’s checks get lost or stolen, the issuer will replace the checks or give you a refund.

Recommended: Where to Cash a Check Without Paying a Fee

How Do Traveler’s Checks Work?

Traveler’s checks are issued by a bank or other financial institution. Right after you purchase your checks, you sign each one. When you are ready to use the check, you fill in the payee and date, and then sign the check again.

For the second signature, the person or business you’re paying must be present to watch you sign. The two signatures should match. This is a deterrent to would-be criminals who for that reason may think twice about stealing them.

Though traveler’s checks function like cash, they also are similar to paper checks in that each check has a unique check number. If that check is lost or stolen, the issuer cancels it and issues you a new one.

Where Can I Get a Traveler’s Check?

You can still buy traveler’s checks in the U.S. and other countries. In the U.S, companies that still issue travel checks include American Express, Visa, and AAA.

You can also purchase traveler’s checks online from the American Express website, but you will need to be registered with an account. In addition, Visa offers traveler’s checks at Citibank locations nationwide, as well as at several other banks.

You may also be able to get traveler’s checks from your local bank. If your bank offers them, you may be able to get them for free. If you are buying them elsewhere, you will likely pay a 1% to 2% purchase fee.

Pros and Cons of Traveler’s Checks

Traveler’s checks are handy for tourists who do not want to risk losing their cash or having it stolen while abroad. But they come with a few disadvantages as well. Here’s a look at the pros and cons.

Pros

They keep your money safe. If something should happen to your traveler’s checks, they can be quickly replaced, typically within 24 hours.

They don’t expire. If you bought them and end up not taking your trip, you can use them, or redeem them, at any time in the future.

They protect your identity. Traveler’s checks are not linked to your bank account or line of credit and do not contain personally identifiable information, thus eliminating risk of identity theft.

Cons

They aren’t as widely accepted as they once were. You could find yourself not able to spend them as freely as you like. Outside of major tourist regions, you may find that few shops or hotels accept traveler’s checks as payment.

They can be hard to get. There are a limited number of issuers today.

You may have to pay a fee. Unless you’re getting them from the financial institution where you have an account, you’ll likely have to pay a fee to purchase a traveler’s check.

Do I Need Traveler’s Checks When Going Abroad?

You certainly don’t need them, but they may come in handy–depending on where you’re traveling.

Before purchasing traveler’s checks, it can be a good idea to research how widely this form of payment is accepted in the city or region you are planning to visit. You can simply Google something like, “Where can I spend traveler’s checks in Paris” to get this information.

As an alternative, you might consider going with a prepaid travel card, which is the modern-day version of a traveler’s check. You can load the card with money from your bank account and then use it like a debit card at an ATM (to get local currency), or a credit card at stores and restaurants.

Like traveler’s checks, prepaid cards are not linked to your bank account, which prevents anybody from draining your checking account if the card gets lost or stolen—and you can’t go into debt.

Another alternative to traveler’s checks is your debit card, which you can use to get local currency at ATMs and also to make purchases. However, you may want to watch out for fees, which may include both an out-of-network ATM fee, as well as an international ATM fee, for every withdrawal you make.

Your credit card is another option. These cards can offer you fraud protection. However, there may be fees involved with using your card overseas, called foreign transaction fees.

And, unless it’s an emergency, you’ll likely want to avoid using your credit card for getting cash at an ATM. When you perform a cash advance from a credit card, you can get hit with a fee (around $10 or more), as well as interest, which can run around 25%.

Recommended: Ways to Be a Frugal Traveler

What Can I Do With Old Traveler’s Checks?

Because traveler’s checks don’t expire, those that you have tucked away in a drawer can be used for your next adventure.

You can also redeem traveler’s checks, no matter how old. Some banks allow account holders to deposit their traveler’s checks (including foreign currency traveler’s checks) into their bank account. It’s a good idea to check with your bank first, and also find out if they will charge a fee for clearing the checks.

You can redeem your unused American Express Travelers Cheques online at the company’s website .

Recommended: Here’s What You Can Do with Leftover Foreign Currency

The Takeaway

Traveler’s checks are a form of payment issued by financial institutions such as American Express. These checks function like cash but are more secure since you can get your money back if the checks are lost or stolen.

While traveler’s checks can be handy for tourists who do not want to risk losing their cash or having it stolen while abroad, they are not as widely issued or accepted as they used to be.

Today’s travelers may prefer to use a prepaid debit card, which functions in a similar way to a traveler’s check, and/or their credit cards to pay for expenses while traveling overseas.

Love to travel? If you open a SoFi Money® cash management account, you’ll be able to withdraw cash free of charge at 55,000+ ATMs worldwide.

Learn how SoFi Money makes it easy (and free) for travelers to access their cash.

Photo credit: iStock/AndreyPopov

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

September 18, 2021

How Does Tuition Reimbursement Work?

If you’re working and want to continue school but aren’t sure how to fund it, your employer may offer assistance.

Tuition reimbursement programs are offered by many companies. While each company has their own specific requirements, tuition reimbursement is when an employer pays for a portion of an employee’s continuing education costs.

Some employers may require employees meet certain requirements, such as working at the company for a specified time or maintaining a minimum GPA before approving their reimbursement.

Oftentimes, as the name suggests, employees will have to pay for the cost of tuition upfront and they will be reimbursed after the course is completed, so long as they continue to meet the program requirements.

What Is Tuition Reimbursement?

As mentioned, tuition reimbursement, or tuition assistance, is an arrangement where an employer pays for part or all of an employee’s continuing education.

Your employment contract may lay out the terms of the tuition reimbursement: how much of your tuition your company will cover, what courses qualify, any minimum GPA requirements, and the minimum time period of employment.

Tuition reimbursement is often offered as an employee benefit on top of a salary package, along with other benefits like health care, a 401(k), or transportation expenses.

This is different from student loan repayment assistance, when your company provides some amount of funding assistance for an employee’s existing student loans.

Not every company offers tuition reimbursement, but it is becoming an increasingly available benefit, as companies continue to compete for and retain skilled workers.

While this perk can help companies attract and retain employees, tuition reimbursement programs also benefit the company, since the courses you take may provide skills or knowledge you can put into practice back at work.

Some companies are upping their educational benefits as a way to stay competitive. SoFi at Work helps companies offer a range of benefits to their employees like student loan refinancing and student loan contributions.

How Does Tuition Reimbursement Work?

The specifics of each company’s education reimbursement policy may vary. The details are likely laid out in the employment contract or employee manual. If you have questions about whether your company offers tuition reimbursement, or the details of their program, head to HR. They’ll likely be able to help, or can connect you with someone who can answer your questions.

What Types of Classes are Covered?

It’s common for a company to offer tuition reimbursement only for courses related to your work. Sometimes they’ll reimburse classes pertaining to your current job description.

Other times, companies will approve courses focused on moving you into a management role or on gaining skills you can put towards other future roles or assignments.

For example, if you work in project management for a large corporation and are interested in learning how to use data visualization, you might be able to take community college courses in data production and visual graphics.

Eligibility Requirements

After understanding what courses qualify for tuition reimbursement, you could then consider looking over the other requirements. Some common requirements for tuition reimbursement programs include:

• Minimum GPA. Some may require a minimum grade point average before they issue a reimbursement. Others may offer reimbursement on a sliding scale, for example, a higher reimbursement percentage for better grades.

• Stipulations around how long you’ve worked or will work for the company. Some programs may require employees to work at a company for a certain amount of time. Others may require you to continue working there for a set amount of time after finishing school, since they’ve invested in your education and don’t want you to take those new skills to a competitor.

Paying for Classes

You’ll probably have to sign up and pay for the courses yourself first, so you’ll want to budget appropriately. In most cases you’ll need to pay for your courses out of pocket and then provide proof of completion and your grades in order to be reimbursed.

Is Tuition Reimbursement Taxable?

While you should always consult with a licensed tax professional regarding the current tax law, and in no way should any of this publicly-available information be considered tax advice, the IRS’ website currently states that employers can deduct the cost of tuition reimbursement (up to $5,250 annually). It’s a business expense for them.

The IRS website also states that the first $5,250 of tuition reimbursement isn’t considered taxable income. However, anything above that counts as part of your taxable wages and salary. Again, talking to a tax professional is always recommended.

The IRS does have some requirements on tax-free educational assistance benefits—which are not necessarily the same requirements your employer has. Typically, for the IRS to count your tuition assistance as tax-free, it should be used to pay for tuition, fees, textbooks, supplies, or equipment.

And typically, it can’t be used for meals, lodging, transportation, or any equipment you keep after the course. It’s also not applicable to sports, games, or hobbies—unless they’re a degree requirement or you can prove they’re related to your employer’s business. Again, consult with an accountant or tax attorney to get the complete picture.

What Are Other Options to Lower Education Costs?

The average cost of attending a four-year public college as an in-state student during the 2020-21 school year was $10,560 and that price tag only goes up for private schools and out-of-state students.

If you can’t get tuition reimbursement from your employer, there are other options that could be worth considering.

Federal Financial Aid

Depending on the type of course or program you are pursuing, federal financial aid may be an option. Federal financial aid, including scholarships, grants, work-study, and federal student loans, may be helpful as you cover the costs of going back to school.

To apply for federal financial aid, students are required to fill out the Free Application for Federal Student Aid (FAFSA®) annually.

Private Student Loans

If you aren’t able to qualify for federal student loans, private student loans are another option to consider. They can fill in the gaps as you pay for tuition and school-related expenses. Private student loans don’t always offer the same benefits available to federal student loans—like income-driven repayment plans or options for deferment or forbearance—so they are generally only considered as a last resort.

Recommended: A Guide to Private Student Loans

SoFi offers no-fee private student loans with four different repayment options. (Again, private student loans don’t offer the same repayment benefits that federal student loans offer, so do your research.)

Refinance Existing Student Loans

If you already have student loans, when it comes time to repay you could consider refinancing those student loans at a lower interest rate. This could lead to cost savings in interest over the life of the loan. Refinancing to a lower monthly payment could help with budgeting in the short term, but may lead to more interest over the life of the loan.

If you choose to refinance your student loans, federal loan benefits will no longer be available to you, such as Public Service Loan Forgiveness (PSLF), income-driven repayment options, or deferment or forbearance options.

The Takeaway

As defined above, when an employer offers to reimburse employees for a portion or all of their continuing education costs, this benefit is called a tuition reimbursement program. Again, even if your employer offers tuition reimbursement, you may still have to pay for the courses upfront. And if the cost of classes is higher than the amount offered, you may still need to pay the additional amount.

If you’re looking to refinance or borrow a private student loan, prequalifying online with SoFi takes just two minutes. SoFi offers student loan refinancing with no application or origination fees and no prepayment penalties. Plus, existing SoFi members may qualify for rate discounts.

Learn more about student loan options available with SoFi.

We’ve Got You Covered

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
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Source: sofi.com

September 18, 2021

What Is Ethereum 2.0 and When Will it Be Released?

It’s hard to imagine the U.S. government announcing the “Dollar 2.0.” But in the wild world of cryptocurrencies, that wouldn’t be an unusual occurrence. When it comes to some cryptocurrencies, like Ethereum, it’s inevitable — Ethereum 2.0 is in the works.

While Ethereum has, in some respects, joined Bitcoin as a fairly mainstream cryptocurrency, it’s overdue for an upgrade. Read on to learn what those upgrades will look like, what they’ll do to your Ethereum holdings, and ultimately, what it means for your portfolio.

Recommended: Guide to Investing in Ethereum

What is Ethereum 2.0?

To understand Ethereum 2.0 and its upgrades, you must have a basic understanding of what Ethereum is. Here’s the short version: Ethereum is an online platform built on blockchain technology (essentially a decentralized ledger) that programmers use to store data on decentralized networks. It has a native currency, “ether,” which powers transactions on the platform. So, using blockchain technology, Ethereum allows developers to build decentralized applications (DApps).

Now, as for Ethereum 2.0, the upgrades will address some core issues with the Ethereum network. It’s like upgrading the software on your phone or computer, in a sense, in that the new version of Ethereum will resolve some existing issues and make it easier for Ethereum 2.0 to gain more widespread adoption.

Limitations of the Current Ethereum

Ethereum 2.0, or Ethw, aims to “make Ethereum more scalable, more secure, and more sustainable,” according to its creators .

Those goals address several of the network’s key limitations: It needs to be faster, less vulnerable to threats, and eat up fewer resources. Of course, there are challenges to put these changes in place. Programmers have spent many years working on Ethereum 2.0, and the changes will take several years to be fully adopted.

When Is the Ethereum 2.0 Release Date?

There is not a hard and fast Ethereum 2.0 launch date. The transition to Ethereum 2.0 has already begun, with the introduction of the Beacon Chain occurring in December 2020. The next phase will be “the merge,” followed by “sharding,” and then, finally, the transition to eWASM.

What Are the Upgrades to Ethereum?

The Beacon Chain

The Beacon Chain upgrade launched in December of 2020. The Beacon Chain introduces a new staking concept to the platform. It launched before many other upgrade components because it’s a cornerstone to Ethereum 2.0’s system. The Beacon Chain needed to be in place for other components to work on top of it.

The Ethereum Mainnet Merge

“The merge,” as some call it, concerns the marriage of the existing Ethereum mainnet ( Ethereum’s main network) with the Beacon Chain’s proof-of-stake protocol. The Ethereum 2.0 team working on these upgrades refers to this as “the docking.”

Developers expect “the docking” to take place sometime during 2021 or 2022. Once it happens, miners will no longer need to mine ETH, and will instead move to a staking system in order to earn additional Ethereum tokens.

These two steps — the launch of the Beacon Chain, and the mainnet merge — pave the way for the final part of the transition: The introduction of shard chains.

Shard Chains

By introducing shard chains, the Ethereum network will have more capacity and speed, giving it the ability to handle more traffic. “Sharding” is a bit technical, but it basically means that a database will split horizontally to spread the load of the transactions on the network.

Sharding reduces congestion and speeds everything up, allowing the network to store and process more data in a shorter amount of time. Plus, more people will be able to participate on the network after it is sharded.

The introduction of sharding will likely occur sometime in 2022.

Launch of eWASM

The final stage of the rollout will include the introduction of eWASM (WebAssembly) code to the renewed platform. eWASM will replace Ethereum Virtual Machine (EVM), the engine on which the platform runs now, and which powers the action on the network. The launch of eWASM should make the network faster and more efficient.

Ethereum 2.0 Staking

Recall that Ethereum 2.0 will represent a full transition to a proof-of-stake protocol from a hybrid system that uses both proof-of-stake and proof-of-work. Staking, in general, is the process of locking up cryptocurrencies to earn rewards. It’s like putting your cash in a savings account and accruing interest. Staking is a process used to validate data and transactions in a blockchain network, which is why and how Ethereum uses it.

Recommended: What is Crypto Staking?

Understanding Proof-of-Stake

With a proof-of-stake system, users validate block transactions based on the number of coins they hold. Basically, the more ether a user has, the more mining power they possess. But mining isn’t necessary under a proof-of-stake algorithm (not the case for proof-of-work).

That means that the process requires less energy and mining power—fewer resources overall—to keep the network running.

The Difference Between Proof-of-Stake and Proof-of-Work

Proof-of-work, conversely, is the original algorithm used by blockchain networks. On this protocol, users “mine” new coins, as they would with Bitcoin, to earn rewards. Mining eats up a lot of resources, which is one reason Ethereum 2.0 is moving to proof-of-stake.

Recommended: Is Crypto Mining Still Profitable in 2021?

A proof-of-stake algorithm will also bring less risk onto the network, has stronger support for sharding, and is more efficient — all upgrades over the proof-of-work system.

Status of the Ethereum 2.0 Project

It’s still early days for Ethereum 2.0. The Beacon Chain has launched, but we’re waiting for the “merge,” or “the docking,” to take place. Developers expect this to occur sometime during 2021, but it could happen during 2022.

The Ethereum 2.0 project is being released in phases, so it’ll be some time before the full transition is in effect. You can visit Ethereum’s website to check on the current status of the project.

What Will Happen to My ETH?

There is no immediate impact to ETH holders from the Ethereum 2.0 project. While the network is getting upgrades, there’s no change to ETH itself. Be suspicious of anyone who says otherwise, as scammers may try to take advantage of the transition.

Some ETH proponents have positive ethereum 2.0 price predictions. They believe that the upgrade will increase the value of ETH making your holdings worth more over time.

The Takeaway

Ethereum 2.0 is an upgrade to one of the largest and most popular cryptocurrencies. While the multi-year rollout of the upgrade has just begun, developers hope it will make the cryptocurrency bigger and safer, while reducing its environmental impact, setting it apart from other types of cryptocurrency.

If you’re interested in trading Ethereum before the Ethereum 2.0 update comes out, a great way to get started is by opening a brokerage account on the SoFi Invest online trading platform. You can use it to trade several types of cryptocurrency, as well as to purchase other investments such as stocks or exchange-traded funds.

Photo credit: iStock/Pekic

Source: sofi.com

September 17, 2021

What is a Bridge Loan and How Does it Work?

Even if you’re an amazing saver, sometimes you just don’t have cash on hand at the exact moment when you really need it. For example, what if your dream home comes on the market at the right price, but your money is tied up in equity in your current home? Or you need to move across the country for a new job. How can you make a down payment before your own home sells?

There are plenty of circumstances where you have to move quickly to secure a deal, and sometimes liquidating assets or securing long-term funding doesn’t happen as quickly as you need it to.

In these instances, interim funding options, like a bridge loan, can help you get the money you need to get things done.

Let’s dig a little deeper into how bridge loans work: what the rates are, the pros and cons, and an alternative source of funding you may have overlooked.

What is a Bridge Loan?

A bridge loan, also known as a swing loan, gap financing, or interim financing, is a temporary loan that bridges the gap between the down payment of a new property and the mortgage balance of your previous home.

Bridge loans tend to have six- to 12-month payoff periods and typically have higher interest rates than other types of loans. Basically, a bridge loan is a short-term loan taken out by a homeowner against their current property in order to finance the purchase of a new property.

One of the most common uses for bridge loans is to put a down payment on a new home before selling a current home. If you don’t have a contract with a home sale contingency clause or aren’t able to pay cash for the down payment on the new house, you may very well need assistance to bridge that gap.

Bridge loans often use an asset such as a current home as collateral. Borrowers generally need to have at least 20% equity in their first home in order to qualify for a bridge loan.

Buying a home? With SoFi there are no
hidden fees, and as little as 10% down.

Benefits of a Bridge Loan

The main benefit of a bridge loan is the ability to quickly secure short-term financing without having to wait until you sell your home. You may be able to delay payments for several months and you have the option of paying off the loan before or after you secure long-term financing.

Bridge loans can be a major benefit in a time crunch: the home seller can immediately put their home on the market and use the funds to move into another house. This can be especially helpful if you’re a homeowner going through a period of sudden transition.

For example, if you have a new job in another city or are trying to time your move with the beginning of your children’s school year, a bridge loan could be helpful. Bridge loans are not a replacement for a mortgage but a temporary solution. They are generally designed to be repaid within six months to three years.

Drawbacks of a Bridge Loan

Bridge loans may help you get fast financing, but they can come with some risks. Because qualifying and being approved for a bridge loan can be a faster process than that of an unsecured personal loan, bridge loan rates and terms can vary widely from lender to lender and are typically higher than market rates for mortgage loans.

Borrowers may also encounter differences in how lenders deal with interest payments. Some require monthly interest payments while others require an upfront or end-of-term lump sum interest payment.

Bridge mortgage loans are secured with the borrower’s current home, which means it can be foreclosed on if the bridge loan is defaulted on. The standards for qualifying for a bridge loan tend to be high, typically requiring a low debt-to-income ratio and excellent credit. After all, you’re trying to prove that you can afford not one, but two homes.The short-term financing of a bridge loan can also be one of the major drawbacks.

Until you are able to sell your previous home, you’ll be carrying two mortgages and paying down the bridge loan. If you are trying to sell a home in a weak real estate market, a bridge loan can create financial strain because you might not have the time you need to let your home sit on the market and wait for a prospective buyer.

Exploring Other Financial Options

Borrowing a bridge loan can be risky. You may be required to start paying off the mortgage on the new home and the bridge loan at the same time. You’re also depending on the sale of your current home in order to pay off the bridge loan, which could take time depending on the state of the real estate market as you are selling your home. Bridge loans can be risky investments for banks, too, which means they can be difficult to get.

Due to the risks and costs that come with a bridge mortgage loan, borrowers may want to consider one of these other options.

HELOC

One alternative to a bridge loan is a home equity line of credit (HELOC) which allows you to draw equity against the value of your current home in a similar way to a bridge loan.

With a HELOC you’ll usually get a better interest rate, pay lower closing costs, and have more time to repay the loan than you would with a bridge loan. It’s important to note that some lenders may not approve a HELOC on a home that is currently on the market for sale.

If you are considering borrowing a HELOC, you may want to look for one without any prepayment penalties or early closure fees, which could significantly cut into your profits in the event that your home sells quickly.

Personal Loan

Another alternative to a bridge loan is taking out an unsecured personal loan. If you have a decent credit history and a steady income, an unsecured personal loan can be a viable option that provides additional flexibility at more competitive rates than those typical of bridge loan interest rates.

In addition, because unsecured personal loan lending is a more diversified market, you can likely find unsecured personal loans without origination fees. Personal loans, including the ones available with SoFi, are often unsecured and therefore require no collateral.

The Takeaway

No matter what, make sure to do your homework. Thorough research is what will help you find the option that works best for your personal situation and get you the home you need at a cost that works for your budget.

And when you borrow an unsecured personal loan with SoFi there are no prepayment penalties, which means if your home sells quickly, you can pay off the loan without losing any of your profits.

Looking to move into a new home? With SoFi Personal Loans, you can bridge the gap so that you can move into your new house now instead of later.

Want to learn whether a SoFi Personal Loan can help you make a down payment on another home before you sell your current home? Checking your rates takes just two minutes.

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Source: sofi.com

September 16, 2021

Understanding the Yield to Maturity (YTM) Formula

When investors evaluate which bonds to buy, they often take a look at yield to maturity (YTM), the total rate of return a bond will earn over its life, assuming it has made all interest payments and repaid the principal.

Calculating YTM can be complicated. Doing so takes into account a bond’s face value, current price, number of years to maturity and coupon, or interest payments. It also assumes that all interest payments are reinvested at a constant rate of return. Not surprisingly, many investors rely on online calculators to help them determine yield to maturity, but with these figures in hand, they will be better equipped to understand the bond market and which bonds will offer the greatest yield if held to maturity.

What Is a Bond’s Yield to Maturity?

The yield to maturity is the estimated rate investors earn when holding a bond until it reaches maturity or full value. The YTM is stated as an annual rate and can differ from the stated coupon rate.

The calculations in the yield to maturity formula include the following factors:

• Coupon rate: Also known as a bond’s interest rate, the coupon rate is the regular payment issuers pay bondholders for the right to borrow their money. The higher the coupon rate, the higher the yield.

• Face value: A bond’s face value, or par value, is the amount paid to a bondholder at its maturity date.

• Market price: A bond’s market price refers to how much an investor would have to pay for a bond on the open market currently. The price buyers pay on the secondary market may be higher or lower than a bond’s face value. The higher the price of the bond, the lower the yield.

• Maturity date: The date when the issuer repays the principal is known as the maturity date.

The YTM formula assumes all coupon payments are made as scheduled, and most calculations assume interest will be reinvested.

How to Calculate the Yield to Maturity Formula

To calculate yield to maturity, investors can use the following YTM formula:

Where:

C = Interest or coupon payment
FV = Face value of the investment
PV = Present value or current price of the investment
t = Years it takes the investment to reach the full value or maturity

Here’s an example: Suppose there’s a bond with a market price of $800, a face value of $1,000, and a coupon value of $150. The bond will reach maturity in 10 years, with a coupon rate of about 14%.

By using this formula, the estimated yield to maturity would calculate as follows:

The Importance of Yield to Maturity

Knowing a bond’s YTM can help investors compare bonds with various maturity and coupon rates. For example, consider two bonds of varying maturity: a five-year bond with a 3% YTM and a 10-year bond with a 2.5% YTM. Investor’s can easily see that the five-year bond is more valuable.

YTM is particularly useful when attempting to compare older bonds sold in a secondary market, which can be priced at a premium or discounted — meaning they cost more or less than the bond’s face value. Understanding the YTM formula also helps investors understand how market conditions can impact their portfolio based on the investment they select. Since yields rise when prices drop (and vice versa), investors can forecast how their investment will perform.

Additionally, YTM can help investors understand how likely they are to be affected by interest rate risk — the danger that the value of a bond may be adversely affected due to the changes in interest rate. Current YTM is inversely proportional to interest rate risk. That means, the higher the YTM, the less bond prices will be affected should interest rates change.

Yield to Maturity vs. Yield to Call

With a callable, or redeemable bond, issuers can choose to repay the principal amount before the maturity date, halting interest payments early. This throws a bit of a wrench into the YTM calculation. Instead, investors may want to use a yield to call (YTC) calculation. To do so, they can use the YTM calculation, substituting the maturity date for the soonest possible call date.

Typically a bond issuer will call a bond only if it will result in a financial gain. For example, if the interest rate drops below a coupon rate, the issuer may decide to recall the bond to borrow funds at a lower rate. This situation is similar to when interest rates drop and homeowners refinance their home loans.

For investors that use callable bonds for income, yield to call is significant. Suppose the issuer decides to call the bond when the interest rates are lower than when the investor purchases it. If an investor decides to reinvest their payout, they may have a tough time finding a comparable bond that offers the yield they need to support their lifestyle. They may feel it necessary to take on more risk, looking to high-yield bonds.

Limitations of Yield to Maturity

It’s important to note that YTM calculations exclude taxes. While some bonds, like municipal bonds and U.S Treasury bonds, may be tax exempt on a federal and state level, most other bonds are taxable. In some cases, a tax-exempt bond may have a lower interest rate but ultimately offer a higher yield once taxes are factored in.

As an investor, it can be especially helpful to consider the after-tax yield rate of return. For example, suppose an investor in the 35% federal tax bracket who doesn’t pay state income taxes is considering investing in either Bond X or Bond Y. Bond X is a tax-exempt bond and pays a 4% interest rate, while Bond Y is taxable and pays 6% interest.

While the 4% yield for Bond X remains the same, the after-tax yield for Bond Y is 3.8%. While it seemed like the less lucrative of the two options up front, Bond X should ultimately yield a higher return after taxes.

Frequently Asked Questions

Q: What is a bond’s yield to maturity (YTM)?
A: A bond’s yield to maturity is the total return an investor can anticipate receiving if the bond is held to its maturity date. YTM calculations assume that all interest payments will be made by the issuer and reinvested by the bondholder at a constant rate of interest.

Q: What is the difference between a bond’s coupon rate and its YTM?
A: A bond’s coupon, or interest, rate is fixed from the moment an investor buys it. However, the same bond’s YTM can fluctuate over time depending on the price paid for it and other interest prices available on the market. If YTM is lower than the coupon rate, it may indicate that the bond is being sold at a premium to its face value. If it’s lower, it may be that the bond is priced at a discount to face value.

Q: Is a higher YTM better?
A: A higher YTM may be better under certain circumstances. For example, since a higher YTM may indicate a bond is being sold for less than its face value, it may represent a valuable opportunity to invest. However, if the bond is discounted because the company that offered it is in trouble or interest rates offered by other investments are more appealing, then a high YTM might not be such a good thing. Investors must research investments carefully and understand the full story before they buy.

The Takeaway

Using the yield to maturity formula can help investors compare bond options with different coupon and maturity rates, market and par values, and determine which one offers the potential for a higher yield. But calculating the YTM is not an exact science, especially when you’re gauging the return on a callable bond, say, or adding the impact of taxes to the mix. YTM is just one tool investors can use to determine which bond may best serve their financial needs and goals.

One alternative to choosing individual bonds is to invest in bond mutual funds or bond exchange-traded funds (ETFs).

SoFi Invest® offers affordable access to a wide range of investment selections, including bond funds. The Active Investing platform lets investors choose from an array of stocks, ETFs, or fractional shares. For a limited time, opening an account gives you the opportunity to win up to $1,000 in the stock of your choice. All you have to do is sign up, play the claw game, and find out how much you won.

Find out how SoFi Invest can help you reach your financial goals.

Claw Promotion: For the full terms and conditions of SoFi’s Claw Promotion, click here. Probability of a customer receiving $1,000 is 0.028%.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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Source: sofi.com

September 16, 2021

10 Signs You’re Living Beyond Your Means

Living beyond your means is an easy trap to fall into. And if you’re not keeping close track of everything that’s coming in and going out of your financial account, you may not even realize you’re doing it.

But if you often run out of money before the month is over — and you don’t know exactly where all the money is going — it could be a sign that you’re living above your means.

Over time, living a lifestyle beyond what you can actually afford can lead to mounting debt and also keep you from reaching your financial goals.

What Does “Living Beyond Your Means” Mean?

Simply put, ”living above your means” means that you are spending more money than you are earning. People are able to do this by relying on credit cards, loans, and pior savings to cover their expenses. However, the process is not sustainable, and eventually overspending is likely to catch up to you.

Living beyond your means can also mean that you’re spending everything you bring in, and, as a result, don’t have anything left over for saving or investing, such as building an emergency fund, saving for a short-term goal like buying a car or a home, or putting money away for retirement.

Here are ten red flags that you’re living a lifestyle you simply can’t afford — and tips for how to get back on track.

1. You Live Paycheck to Paycheck

If most or all of your paycheck is spent immediately on bills, and you don’t have anything left over at the end of the month to put into savings, you are likely living over your means and may need to make some adjustments.

If your current lifestyle has become a habit, you may feel there is no place to cut back. However, if you get out your monthly statements for the past three months and take a close look at where all your money is going each month, you will likely find places where you can cut back on spending. This might be ditching cable, cooking (instead of ordering take-out) a few more times per week, or quitting the gym and working out at home.

2. Your Credit Score Has Dropped

If you’ve been putting a lot of your expenses on your credit card and/or don’t always pay your bills on time, you may see your credit score take a hit.

This number is important because it can be accessed by anyone considering giving you new credit and may be used to determine the interest rate you’ll pay on a home or car loan, and also new credit cards.

If you aren’t sure what your credit score is, you can get a free copy of your reports from all three credit bureaus at www.annualcreditreport.com .

Looking it over can help you understand why your credit score has dropped, and help you take the necessary steps to repair it.

For example, you might set up automatic payments for the minimum amount due on credit card bills and loans, so you never miss a payment.

You may also want to pay down your balances on your credit cards and lines of credit. This can lower your “credit utilization rate” (how much of your credit limit you are using), which is factored into your score.

Recommended: What Is Considered a Bad Credit Score?

3. You’ve Stopped Your Retirement Contributions

If money is feeling a little tight, you may feel that now is not the time to worry about retirement. But you likely won’t be able to work forever, so it can be wise to make saving for retirement a priority and to get started early.

Thanks to compounding interest (which is when the interest you earn also starts earning interest), the earlier you start investing in a retirement fund, the easier it will be to save enough money to retire well.

You don’t have to contribute a lot–even just putting aside a small amount of each paycheck into a 401(k) or IRA each month can help you build wealth over time.

4. A Big Portion of Your Income Goes to Housing

Keeping your rent or mortgage below 30 percent of your monthly pre-tax income is sometimes recommended because it can leave you with enough income left over to save, invest, and build wealth in general.

Staying below 30 percent can be difficult, however, if you live in a region of the country where the cost of housing is high.

Nevertheless, spending a lot more than a third of your income on housing can leave you “house poor,” and put your other financial obligations at risk.

If you find that your housing costs are taking too large a chunk of your monthly paycheck, you might consider downsizing, taking on a roommate, or finding a way to increase your income with a side hustle.

5. Your Savings Account Isn’t Growing

Another sign you may be living beyond your means is that your savings have stagnated.

Making regular deposits into your savings account–in addition to your 401(k) or IRA–allows you to work towards your short- and medium-term financial goals, such as putting a downpayment on a home or a car or going on vacation.

6. You’ve Been Charged an Overdraft Fee More than Once This Year

An overdraft fee — or “non-sufficient funds fee” — is charged when there’s not enough money in your account to cover a check or debit card payment.

Mistakes happen, and a one-off overdraft isn’t necessarily an indicator of overspending. But repeat offenses can be a sign that you are living too close to the edge and don’t have a clear picture of how much money is going into your account and how much is going out.

You may want to start tracking your spending and keeping a closer eye on your spending account to make sure you always have enough to cover your electronic payments.

Recommended: Using a Personal Cash Flow Statement

7. You’ve Never Set a Budget

Many people think making and following a budget will be too complicated. But having a budget can actually simplify your spending decisions by letting you know exactly what you can and can’t afford.

Having a budget also helps to ensure you have enough money to cover essentials, fun, and also sock some away in savings.

If you’ve never set financial parameters for yourself, you may want to consider taking an honest inventory of how much you are bringing in each month and how much is going out each month.

Once you get a sense of your own patterns and habits, you can work toward building a realistic budget that allows you to spend and save more wisely.

8. You’re Leasing a Car You Can’t Afford to Buy

Leasing a vehicle you would not be able to purchase outright or finance can be a major financial red flag. Leasing lets you rent a high-end lifestyle, but many people end up with leases they really can’t afford.

You might be covering your monthly payments, but if you can’t do that while meeting your other expenses and also putting money into savings, then your car is likely too expensive.

You may want to consider downgrading your vehicle or saving up enough money to buy a car — either outright or by making a solid downpayment so your monthly payments are low.

9. You’re Only Making Minimum Payments on Credit Cards

It’s fine to use your credit card to pay for everyday expenses and the occasional big purchase. But if you can’t pay off most of the balance each month, you’re likely living beyond your means.

Rather than give over part of your paycheck just to interest each month, you may want to cut back on nonessential spending and divert that money towards paying off your balances.

10. You Don’t Have an Emergency Fund

Not having a stash of cash you can turn to in a pinch can be a sign that you’re overspending. You may be gambling on the fact that nothing will go wrong. But life is unpredictable, and getting hit with an unexpected expense you can’t pay for can lead to a financial crisis.

Instead, you may want to build an emergency fund that can cover three to six months worth of living expenses. That way, you’ll be covered should something happen, such as an illness or injury, job loss, housing issue, or any other expensive personal matter should come up.

The Takeaway

Unfortunately, living beyond your means is all too easy to do. And while a few weeks or months of spending more than you earn may not be a major problem, overspending on a regular basis will likely catch up to you in the form of high debt and neglected savings.

Creating (and sticking to) a spending budget can help ensure that you can afford your bills and basic expenses, and still have money left over to save for the things you want in the future.

Ready to get better control of your spending? With a SoFi Money® cash management account, you can easily keep track of your weekly expenses right in the dashboard of the SoFi app.

Learn how SoFi Money can help you manage your spending and saving today.

Photo credit: iStock/urbazon

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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Source: sofi.com

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