Has a friend or family member asked you for a loan? This can be a difficult situation. On one hand, you likely want to help them out. On the other hand, you don’t want to be out the money or put a strain on the relationship. The trick is to know how to loan money the right way.
Before you agree to loan any money to a friend or family member, think about how reliable they are. Can you depend on them to repay the money? Secondly, you might want to ask them what they need the money for and why they can’t take out a personal loan. The answers to these questions might provide some clues as to whether you should lend them money or not.
For instance, if they need the money because they’re past due on bills, this could be a sign that they may not have the funds to repay the loan. If they can’t secure a loan due to bad credit, they may not be very reliable. However, if they simply have limited credit due to their age or other factors, it might not be an indicator.
If you decide lending money to your friend or family member is the right option for you, keep reading for tips to make the process as seamless as possible.
How to Loan Money: Lending Money vs. Cosigning a Loan
If you can choose between lending money and cosigning a loan, lending money is probably the best option. When you lend money, you can do so on your terms. You determine the amount of money, payment terms, and interest rates. By cosigning a loan, you’re stuck with the terms and conditions of that loan.
However, that’s not the major problem with cosigning a loan. The biggest issue is that if your friend or family member decides to stop paying on the loan, you’re responsible for paying the balance due. Additionally, your credit could be significantly impacted, especially if your loved one fails to make on-time payments and doesn’t tell you.
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Alternative Lending Option
Before you hand over any money, you might want to encourage your loved one to apply for a personal loan with bad credit. Help them determine what their credit score is so they can decide if applying for this type of loan is a viable solution.
Credit.com’s Free Credit Report Card can be a good source for this information. This report card provides a free credit score, along with notes on what you can do to improve your scores. For example, you can raise a credit score by paying down high credit card balances, disputing credit report errors, and using a starter line of credit, like a secured credit card or credit-builder loan, to establish a solid payment history.
Keep in mind that loans for those with bad credit often come with higher-than-average interest rates. However, making on-time payments can help them start building their credit.
What’s the Smart Way to Loan Money?
If you’re willing to lend money to a loved one, there are a few things you should keep in mind, including getting everything in writing and setting a firm payment schedule. These steps can protect you if you go to court.
Here are three tips to keep in mind when considering how to loan money.
1. Get It in Writing
While you may be dealing with friends or family members, loaning them money is still a business deal. Make sure to get all the terms of the loan in writing. This will prevent any confusion and provide you with the necessary evidence if you need to go to court to collect the money.
If your loved one is borrowing a small amount, you can probably write the details of the loan agreement on a piece of paper that all involved parties sign. Be sure to include the total amount due and any added fees, such as late payment fees or interest.
For larger sums of money, you may want to have your attorney draw up a formal contract for all parties to sign.
2. Set Fair Interest Rates
You might be a little hesitant to charge interest on the loan. However, this may be the only way to protect yourself from paying gift tax. Being able to prove you’re charging interest can help you show the IRS that it’s a loan and not a gift. This factor is especially important when lending larger amounts of money.
When deciding how much interest to charge, you want to be fair to both yourself and your friend or family member. Be sure to set an interest rate that’s higher than the amount you could have earned having the money sit in your bank account. On the other hand, you may not want to charge as much as standard lenders.
The best option is to talk to your friend or family member to negotiate a deal.
3. Create a Clear Payment Schedule
Don’t make the mistake of telling your loved one to pay you back whenever they can. This leaves the payment terms up in the air. Plus, your friend or family member may never feel financially able to repay their debt.
Instead, create a clear payment schedule that states exactly how much is due and at what intervals. For example, you can create a schedule that requires them to pay $100 on the first of each month until the debt is paid in full. You should also detail what forms of payment you can accept, including cash, money order, check, or PayPal.
It’s a good idea to start a journal that tracks the exact date and amount of each payment. It’s important to always list additional fees, such as late payment fees, separately. You should also provide your friend or family member with a receipt for each payment made.
Lending money to your friends or family members can be a viable option if you have the funds to spare and trust the person borrowing the money. But don’t go into this type of agreement without getting everything in writing. Instead, follow the above tips on how to loan money.
If you decide not to lend money to your loved one, encourage them to take steps to improve their credit, such as signing up for Credit.com’s ExtraCredit® credit monitoring subscription to see 28 of their credit scores and what factors are affecting it most. This way, they’ll be able to work on the areas affecting their credit to better be able to secure the funds they need in the future.
A security is any financial instrument with a fungible value (meaning a value that’s essentially equal) that investors can trade. Common securities include stocks, bonds, and index and mutual funds, as well as options and other derivatives that derive their value from other assets. Most securities trade on financial exchanges, and all play a role in aiming to build wealth for individuals, companies, and other investors.
What are securities in finance and how do they work? Here’s a glimpse inside the world of securities in trading.
What is a Security?
A security is a tradable investment vehicle that traders can buy and sell on financial exchanges or other platforms. In general, investors earn money by buying securities at a low price and selling them at a higher one.
Securities in finance have some monetary value; buyers and sellers determine their value when trading them. Securities vary in nature – stocks, for example, represent ownership in a company, while bonds are essentially loan vehicles where borrowers pay lenders interest for their loan money.
Here are some common security categories.
Equity Securities
This type of securities in finance includes stocks and stock funds. Typically traded on exchanges, the price of equity securities rise or fall depending on the economy, the performance of the underlying company that offers the stock (or companies in the fund), and the sector that company or fund operates. Individual stocks may also pay dividends to investors who own them. 💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.
Debt Securities
This group includes bonds and other fixed-income vehicles where lenders borrow money from investors and pay an interest rate (i.e., the price for borrowing) on the investment principal. Bond issuers may include states, local and municipal governments, companies, and banks and other financial institutions. Typically, debt securities pay investors a specific interest rate paid usually twice per year until a maturity date, when the bond expires.
Some common debt securities include:
• Treasury bills. Issued by the U.S. government, T-Bills are considered among the safest securities.
• Corporate bonds. These are bonds issued by companies to raise money without going to the equity markets.
• Bond funds. These allow investors to get exposure to the bond market without buying individual bonds.
Derivatives
This group of securities includes higher-risk investments like options trading and futures which offer investors a higher rate of return but at a higher level of risk.
Derivatives are based on underlying assets, and it’s the performance of those assets that drive derivative security investment returns. For example, an investor can buy a call option based on 100 shares of ABC stock, at a specific price and at a specific time before the option contract expires. If ABC stock declines during that contract period, the call option buyer has the right to buy the stock at a reduced rate, thus locking in gains when the stock price rises again.
Derivatives allow investors to place higher-risk bets on stocks, bonds, and commodities like oil or gold, and currencies. Typically, institutional investors, such as pension funds or hedge funds, are more active in the derivative market than individual investors.
Hybrid Securities
A hybrid security combines two or more distinct investment securities into one security. For example, a convertible bond is a debt security, due to its fixed income component, but also has characteristics of a stock, since it’s convertible.
Hybrid securities sometimes act like debt securities, as when they provide investors with a floating or fixed rate of return, as bonds normally do. Hybrid securities, however, may also pay dividends like stocks and offer unique tax advantages of both stocks and bonds. 💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.
How Security Trading Works
Securities often trade in open financial exchanges where investors can buy or sell securities with the goal of making a financial profit.
Stocks, for example, are listed on global stock exchanges and investors can purchase them during market trading hours. Exchanges are highly regulated and expected to comply with strict fair-trading mandates. For example, U.S.-based stock exchanges like the New York Stock Exchange or Nasdaq must adhere to the rules and regulations laid out by Congress and enforced by the U.S. Securities and Exchange Commission (SEC).
Each country has their own rules and regulations for fair and compliant securities trading, including oversight of stocks, bonds, derivatives, and other investment vehicles. Debt instruments, like bonds, usually trade on secondary markets while stocks and derivatives are traded on stock exchanges.
There are many ways for investors to engage in security trading. A few of the most common ones include:
Brokerage Accounts
Once an investor opens a brokerage account with a credentialed investment firm, they can start trading securities.
All a stock or bond investor has to do is fill out the required forms and deposit money to fund their investments. Investors looking to invest in higher-risk derivatives like options, futures, or currencies may have to fill out additional documentation proving their credentials as educated, experienced investors. They may also have to make larger cash deposits, as trading in derivatives is more complex and has more potential for risk.
Some investors with brokerage accounts can engage in margin trading, meaning that they trade securities using money borrowed from the broker.
Retirement Accounts
By opening a retirement account, through work or a bank or brokerage account, investors can invest in a range of securities, including stocks, mutual and index funds, bonds and bond funds, and annuities.
The type of securities you have access to will depend on the type of retirement account that you have. Workplace plans such as 401(k)s typically have fewer investment choices (but higher limits for tax-advantaged contributions) than Individual Retirement Accounts.
The Takeaway
There are many different types of securities that investors may purchase as part of their portfolio. Choosing which securities to invest in will depend on several factors, including your financial goals, current financial picture, and risk tolerance.
A great way to start building a portfolio of securities is by opening a brokerage account on the SoFi Invest® investment platform. Securities on the platform include stocks and exchange-traded funds.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Invest with as little as $5 with a SoFi Active Investing account.
FAQ
What are the four types of securities?
The four types of securities are: equity securities (such as stocks), debt securities (such as bonds), derivatives (such as higher-risk investments like options trading), and hybrid securities (such as convertible bonds).
What is a securities investment?
A securities investment is an investment in a security such as stocks, bonds, or derivatives. A security is a tradable type of investment that traders can buy and sell.
What’s the difference between securities and shares?
Stocks, also known as equity shares, are a type of security. The term “securities” refers to a range of different investments, one of which is stocks, or shares.
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A guaranteed mortgage loan gives lenders the ability to qualify borrowers with looser eligibility requirements, allowing for lower credit scores, higher debt loads and more.
Many mortgages with less than 20 percent down are made possible by a guarantee.
The funds for guaranteed mortgages come from private-sector lenders, but the loan is backed by a guarantor, typically a government agency, that will pay out money to the lender if the borrower defaults.
Guaranteed loans are a critical part of the mortgage marketplace, offering borrowers more flexible qualifying terms. These loans are backed by a third party, most often the U.S. government, who agrees to cover a portion of the loan if the borrower defaults.
What is a guaranteed mortgage?
Guaranteed loans require a lower down payment percentage or no down payment at all, and can have lower credit score requirements.
A guaranteed loan is any loan that’s backed by a party other than the lender. That third party assumes some of the responsibility for the loan to the benefit of the lender. If the borrower stops repaying the loan, or defaults, the guarantor pays the lender some or all of the outstanding debt.
How guaranteed mortgages work
With a guaranteed mortgage, the third party guarantees, or agrees to be responsible for, some or all of the loan if the borrower defaults. The guarantor might extend the guarantee to all or a portion of the loan. The guarantee protects the lender, not the borrower.
Ultimately, the guarantee allows the lender to more confidently qualify a borrower who isn’t making a substantial down payment or otherwise might present more risk, such as having a lower credit score.
8%
The typical down payment for first-time homebuyers in 2022
Source:
National Association of Realtors
Guaranteed loans are most often backed by the U.S. government, namely the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA), which back FHA loans and VA loans, respectively. The Department of Agriculture also guarantees USDA loans in eligible areas.
One point of distinction: The VA loan program is generally considered a “guarantee,” while the FHA loan program is viewed more as “insurance.” From the borrower and lender’s perspective, however, they each provide third-party backing that helps borrowers qualify for a loan.
Despite the lower down payment, a guaranteed mortgage loan must meet underwriting standards established by the lender and the third party. Lenders often have additional requirements beyond what the guarantor mandates, a practice known as “overlaying.” For instance, the FHA requires a minimum credit score of 580 to allow a borrower to put just 3.5 percent down, but some lenders set the minimum higher, at 620.
Guaranteed vs. non-guaranteed loans
The main difference between guaranteed and non-guaranteed loans comes down to qualifying for the loan. Specifically, a guaranteed mortgage loan means:
Looser eligibility requirements: Because the third party promises to step in if you can’t or don’t repay what you borrow, the lender has a security net. As a result, lenders generally extend looser qualification requirements for a guaranteed mortgage loan — from credit score to income — than with a non-guaranteed loan.
Lower down payment: A guarantee for a home loan often incentivizes lenders to accept a larger loan-to-value (LTV) ratio, allowing for a smaller down payment — or potentially none at all, if you’re eligible for a VA loan.
More favorable rates and terms: Exploring a guaranteed mortgage might help you land a lower interest rate or terms that are otherwise more favorable.
Restrictions on use cases: Depending on the guarantor, you might be limited in how you can use the loan. You can only get a USDA loan, for example, if you purchase a home in a qualifying rural area.
Additional costs: While the guarantee provides protection for the lender, the guarantor might require you to pay into the pot. For example, with an FHA loan, you’ll need to pay for mortgage insurance.
Types of guaranteed home loans
FHA loans
The FHA loan program is popular for several reasons:
Borrowers can purchase with as little as 3.5 percent down, provided they have a credit score of 580 or better. For borrowers with a credit score between 500 and 579, the program requires 10 percent upfront.
Borrowers can qualify with a 43 percent debt-to-income ratio (DTI); however, a large portion actually qualify with a higher DTI ratio, sometimes over 50 percent. This is due to “compensating factors,” such as cash reserves or a higher credit score, that augment a borrower’s creditworthiness.
FHA interest rates are sometimes lower than those of conventional loans, which aren’t guaranteed or insured by the government.
However, if you choose this kind of mortgage guarantee, be ready to pay two insurance premiums: one premium paid upfront that’s equal to 1.75 percent of the loan principal and an annual premium ranging from 0.15 percent to 0.75 percent of the balance, paid monthly. In some cases (depending on the size of your down payment), the mortgage insurance goes away after 11 years. Otherwise, the annual premium can’t be removed unless you refinance to a different type of loan or pay off your FHA loan completely.
VA loans
VA loans are available to eligible active-duty servicemembers, veterans and surviving spouses to help finance or refinance a home with zero down — a benefit that can be used more than once. The VA guarantee for a home loan promises a certain amount to a lender should a VA loan borrower default.
VA loans give borrowers and lenders a lot of leeway. For example, VA guidelines don’t include minimum credit score standards or loan limits. Instead, lenders set their own credit score requirements and loan money to the extent the borrower is financially qualified.
VA loans also have a residual income standard that helps lenders determine how much a borrower needs, after expenses, to qualify for a loan.
When purchasing or refinancing, VA loan borrowers have to pay an upfront funding fee, although the fee can be waived under certain circumstances.
USDA loans
USDA loans are also available to lower- and moderate-income borrowers with no money down, but only in defined rural areas. (The term “rural” can be surprisingly broad, so check your area to find out if it qualifies.)
A USDA loan has both an upfront and annual fee, which are a percentage of the loan principal, in order to sustain the guarantee from the USDA. These fees are charged to the lender but usually passed on as a cost to the borrower.
Is a guaranteed loan right for you?
With guaranteed loans, more borrowers can qualify for mortgages. With that guarantee, a lender might extend looser LTV and DTI ratios, along with lower credit score and income thresholds. The guarantee might also translate to more favorable loan terms, like a lower interest rate — but also means paying additional costs, such as mortgage insurance or fees.
A loan officer can help you determine which option is right for you and what you’re likely to be preapproved for based on your credit and financial situation.
Life is expensive and paying for rent can take up a significant chunk of your paycheck. In an ideal world, 30 percent of your income should go towards rent and housing costs. But life happens and you may come up short on rent due to loss of income or other unexpected expenses, leaving you wondering if you should take out a loan to pay rent. Coming up short on your rent payment is an extremely stressful situation and you’ll be looking for ways to make your rental payment and avoid eviction.
If you find yourself in this situation, what do you do? There are several options to weigh and taking out a loan to pay rent is one of them. Let’s walk through the pros and cons of rent loans and discuss several options you can consider if you’re behind on rent payments.
Is it possible to take out a loan to pay for rent?
If you get behind on rent payments, you’re not alone. In fact, more than 7 million renter-occupied households are behind on just last month’s rent alone. So, what are your options and is it possible to take out a loan to pay for rent? The short answer is yes, you can.
Using a loan to pay rent is an option. You can obtain a personal loan to pay rent and for some people, it’s a good idea. However, before you take out rent loans, you need to consider if it’s the right choice for you.
Pros of using a personal loan for rent
If you’re strapped for cash and need to pay for rent, there are some plus sides to taking out a personal loan for rent.
Pro #1: Provides a window of time for re-assessing your finances
By taking out a personal loan to cover your rent, you buy yourself some time to get your budget back on track. With a personal loan, you can pay for rent (either what you owe from missed payments or for future rent payments). Once you pay your rent, you’ll find yourself less stressed and you’ll think more clearly so you can get your budget back in a place where you can pay your loan back and have enough money for future rent payments.
Pro #2: Gives you flexibility
Personal loans allow you to use the loan money for anything you need. So, taking out a personal loan gives you the flexibility to use the money for rent or any other expense you need to cover. This flexibility is enticing for renters who need some financial help as the loan doesn’t specify what you can and cannot use the money for.
Pro #3: You can shop loan ranges and rates
Before taking out a personal loan, you’ll be able to shop around for loan ranges and rates. Make sure to compare your findings before you make a decision. You can take out a loan for as little as $1,000 or as much as $60,000 if needed. You can also compare interest rates.
It is important to try and find a loan with a low interest rate so you don’t accrue more debt than is absolutely necessary.
Pro #4: Can build a credit score
This is both a pro and con of personal loans, depending on how diligent you are with repayment. If you make your loan repayments in full and on time every single time, you’ll pay the loan off within the limits and build your credit score. If your credit score took a hit or is low, this is one way to rebuild your credit history.
However, it’s essential that you meet the terms of the loan for this to benefit you.
Cons of using a personal loan for rent
As with everything, when there are pros there are cons. Before taking out a loan to pay rent, consider the negative impacts of rent loans.
Con #1: You’ll pay interest
With any type of loan, you’ll pay interest on the amount you borrow. So, if you take out a personal loan toward rent, not only will you pay the rent money, you’ll also be paying money toward the interest.
If you have no other options, then taking out a loan for rent allows you to make your payment, stay in your apartment and come up with a new financial plan. Keep in mind that you’ll pay more with this option because of interest.
Con #2: Adds to debt
When you take out a personal loan to pay rent, you’re adding to the overall amount of debt you have. This may compound your stress and overall debt, causing more problems down the road. Also, when you rent, you aren’t putting money toward eventually owning an asset as with a mortgage toward a house. So, you’re compiling debt without working toward an eventual purchase.
Con #3: Could harm your credit score
If you fail to make your monthly loan payment, you could seriously damage your credit score putting you at risk for further financial hardship.
How to find a personal loan to pay back your rent?
If you’ve come to the conclusion that a personal loan is right for you, then you’ll need to know where to look and find one. Most financial institutions will offer loans and you can shop around for the loan that is right for you. Here are some places you can go to find a personal loan to pay back your rent:
Bank
Credit union
Online banks
Loan comparison websites
Because different places offer different rates on your loan, it’s smart to get several recommendations before taking out a loan.
Other options to pay back your rent
Unsure that a personal loan is right for you? We also have provided several other options to consider when you need money to pay back your rent. Before taking out a loan, you could consider:
1. Talking to your landlord
When you first realize that you may not have the money to pay your rent or if you’ve missed the due date, you’ll want to talk to your landlord immediately. Getting in front of the issue and addressing it openly is always a wise move.
Ask your landlord if he/she is willing to defer rent, offer a payment plan or waive late fees. You never know unless you ask!
2. Borrowing from a friend or family member
Do you have a trusted friend or family member that could loan you money for rent payback? If so, this is a less expensive option compared to getting a personal loan. Sometimes, close family or friends will loan you the money, interest-free, which is always a better option.
3. Call 211
You can the 211 community phone line to get referrals for services, like financial resources. If you’re in a bind, try calling this number and get in touch with local resources that can help with rent relief.
4. Consider a roommate
Imagine your rent payment being cut in half. Would that free up some of your budget? The answer is most likely yes. If you have space, you may consider getting a roommate who can share the cost of rental expenses and save you money, too.
5. Get a side gig
Nowadays, there are several side hustles that you can do from home, after work or at your convenience that pays well and would help your income. If you can get a side hustle that’ll cover the additional money you need for rent, this is a great option because it puts you in control of your money and you don’t need a loan to cover the extra expense of rent paybacks.
6. Reallocate your budget
Sometimes, we spend money on things like coffee, eating out or shopping and don’t realize how much of our budget it’s taking up.
Before you take out a personal loan, take a hard look at your expenses and budget to see where you can trim the fat. If there are areas to cut back on and reallocate expenses to rent payback, do this before taking out a personal loan.
Know your financial options
Now that you understand the pros and cons of loans to pay rent, you can make an informed decision if this is right for you. As always, you may want to consult a financial advisor before making a big decision like this to get professional guidance on what is best for you and your situation.
The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.
Sage Singleton is a freelance writer with a passion for literature and words. She enjoys writing articles that will inspire, educate and influence readers. She loves that words have the power to create change and make a positive impact in the world. Some of her work has been featured on LendingTree, Venture Beat, Architectural Digest, Porch.com and Homes.com. In her free time, she loves traveling, reading and learning French.
Inside: Are you looking for ways to make money quickly and easily? This guide has you covered with tips on how to double your money in 24 hours.
Doubling your money is an aspiration many investors feasibly target, and it’s critical to your future financial stability.
This enticing objective involves transforming a small amount of money and doubling it for tomorrow. You need cash fast, so that is why you are reading this post.
You will quickly learn there are easy ways to double money in 24 hours and others that over time you can be skilled at and easily double your cash.
Given that 58% of borrowers struggle to meet basic monthly expenses and 70% of borrowers are using loan money for rent and other basic expenses. 1
You want to learn how to double your money before you actually need to, so by inevitably secure financial confidence for upcoming expenses.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
How can I double my money quickly?
Doubling your money in less than 24 hours isn’t straightforward, but it is possible if you’re willing to take high risks.
These are popular methods to double your money:
Engagement in day trading. It’s risky but one of the fastest ways to double your investment.
Try your hand at gambling. Remember, the house typically has the upper hand. This is not recommended as you are more likely to lose more money than you prefer.
Consider investing in digital real estate. This is similar to real-life property flipping.
Most importantly, avoid get-rich-quick schemes; they’re mostly scams. So, do your homework before diving in!
20 Easy Ways to Double Money in 24 Hours
As inflation rises and people are struggling with their budgets, the question of how to double money in just 24 hours often comes up.
While it may sound like a lofty goal, there exist strategies that can significantly boost your financial growth in a surprisingly short time.
However, keep in mind these are not risk-free endeavors, and they each require a good understanding and judicious implementation to yield profitable results.
1. Invest in Stocks
If you’re hunting for opportunities to double your money fast – investing in stocks could be your ticket, especially with the current volatility.
Although there’s a risk factor involved, it’s a time-tested strategy for impressive returns. Learn how fast you can make money in stocks.
Honestly, one of the best ways to improve your net worth is learning how to invest in the stock market. Yet, many people shy away from the idea.
By not investing in stocks, you are slowing your pace to financial freedom. So, why not learn how to invest in stocks for beginners?
The choice entirely depends on your risk appetite, investment horizon, and personal preferences. Start by evaluating your risk tolerance. Personally, I can tell you this is one of the ways I double money in 24 hours consistently.
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2. Options Trading
Options trading can double your cash in a mere 24 hours, thanks to its inherent rapid return benefits. However, with the potential for high returns, it also poses significant risks.
Options trading is an advanced strategy for buying stocks with an option contract. Thus, you get the right but not a duty to buy (call options) or sell (put options) a stock at a specific price.
It presents the possibility of doubling, tripling, or quadrupling your money.
This is an avenue to pursue if you want the potential for huge profits, but you must take this investing course to learn the proper way to trade options.
However, you run the high risk of losing the entire investment! So, this is risky for novice investors and you need a brokerage for this type of trading.
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Learn to trade stocks with confidence.
Whether you want to:
Retire in peace without financial anxiety
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Or just make more than your current income….
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It’s been done over and over again, and the 30,000 students that Teri has helped to be financially independent and fulfill their financial dreams are my witnesses…
3. Flip Items for Arbitrage
Retail arbitrage, essentially the practice of buying and reselling goods, is a beneficial way of doubling one’s money in a short time. This can be particularly effective by taking advantage of clearance sales in mainstream stores like Walmart and Kohl’s, and then reselling the products on online marketplaces.
Notable items often flipped include apparel, books, electronics, and toys. You can check a full list of popular items to flip.
According to the Flea Market Flippers, you can use a variety of platforms to sell your flipped items.
4. Rent Out Your Property
Renting out unused property or space can be a lucrative form of passive income. This may include a spare room, or underutilized sections like a garage, with various platforms facilitating such financial transactions like Neighbor or VRBO.
Another example is it is financially beneficial to rent out items, like a lawn mower which costs $500 but brings in $15-20 for each rental. Thus, paying for itself in a short amount of time.
Despite the potential risks associated with property investments, including unpredictability in the real estate market and tenant issues, leveraging a good understanding of the local market can make it quite possible to double your investment over time.
5. Become A Side Hustles Expert
Becoming a side hustle expert requires a clear understanding of your goals and the willingness to trade your time for money. You can identify profitable opportunities which can range from ridesharing to teaching English as a second language (ESL) online.
Honestly, this is best to set up BEFORE you are desperate for cash.
Patience is key as nurturing a side hustle often takes time before it becomes an efficient income-generating endeavor.
To help you out, here are specific side hustles based on your stage of life:
6. Rent Out Your Skills
Renting out your skills is a smart quick-fix to double your money within 24 hours. It’s all about capitalizing on what you can do best and offering it to those who need it.
Start by identifying a skill or knowledge you’re proficient in. Are you a wizard in web design? A maven of SEO?
Select the right platform. Websites like Fiverr, Freelancer.com, and TaskRabbit are excellent for freelancers.
Promote your services. Reach out to your networks or use social media to boost your visibility.
This is a great way to earn $300 fast if you know what you are doing.
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7. Deliver with DoorDah or GrubHub
Double your income in a day by delivering with platforms like DoorDash or GrubHub. As a courier, you get paid for each delivery – so the more you do, the higher your earnings.
With a smartphone and transportation, you can start making extra cash immediately. Some top delivery options:
Working with DoorDash
Serving with GrubHub
Remember, it’s all about completing as many deliveries as possible. Every order increases your day’s earnings, potentially doubling them if you put in enough hours.
8. Invest in Cryptocurrencies
Invest in cryptocurrencies like Bitcoin, Ethereum, and Bitcoin Cash holds the potential to double your money in 24 hours due to their volatile nature.
To start:
Keep tabs on crypto trends through monitoring websites or apps.
Buy popular or promising cryptocurrency during their low-cost phase.
The trick to doubling your funds is selling at peak prices.
Remember, trends can change rapidly, so only invest what you can afford to lose. For newbies, it’s beneficial to seek advice from a financial advisor knowledgeable in the crypto market.
9. Take Surveys
Looking to double your money in a day? Consider taking paid surveys. However, you will have to take quite a few surveys to make a significant amount of cash.
To boost your earnings:
Seek high paying surveys – Survey Junkie could bring in up to $3 per survey.
Use free time efficiently – complete quick tasks on Swagbucks.
Refer friends – earn 10% of their earnings on Swagbucks.
Remember, more effort equals higher rewards!
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10. Lend Money on Peer-to-peer platforms
Lending money on Peer-to-Peer (P2P) platforms can be a profitable strategy, offering a unique method for individuals to loan and borrow money without traditional financial institution interference.
Users can sign up as lenders on recognized P2P platforms like LendingClub, Prosper, and Upstart, and yield high-interest returns based on their borrower’s creditworthiness.
However, this process also poses risks such as potential defaults, making it important for the lenders to do their research and diversify their loans across multiple recipients.
11. Do Odd Jobs
Engaging in odd jobs is a practical approach to earning additional income. Whether it’s mowing neighbors’ lawns or offering handyman services, these simple tasks can often pay upward to $30 per hour.
Digital platforms, like TaskRabbit, even allow you to list your talents locally, extending your reach for potential earnings.
All in all, odd jobs provide an accessible door to financial gain without requiring a significant starting capital.
12. Selling High Demand Printables
Selling printables online is a viable way to generate income. It’s important to create a follower base or an email list to successfully promote and sell your products.
With strategic pricing and high-quality content, you could potentially double your initial investment in a short span of time.
Here are the digital products that sell on Etsy that are in high demand.
By creating high-demand printables, you can buy low, sell high, and double your money all within 24 hours!
13. Max Out you 401(k) Match
Maxing out your 401(k) match can double your money in no time. While this may not happen in 24 hours, it can happen the next time you get paid and greatly increase your retirement savings.
When you contribute to your 401(k) plan, your employer might match it by 50% or 100%. You will have to check your Human Resources department to see what your company offers.
Contribute the maximum amount your employer is willing to match. This is free money for you. For instance, if you’re making $100,000 and your employer’s match is up to 3.5% of your salary, put in at least $3,500.
Are you one of the 5 people making this costly mistake? 2
14. Sell Courses and Subscriptions
Selling courses and memberships online is a highly profitable low-risk venture that requires just a small initial investment of your time and money. Once the course is developed, it can continue to generate passive income every month.
Tools such as Podia or Teachable allow you to easily sell and manage your courses, while also offering additional benefits such as digital downloads, subscription plans, and an opportunity to begin selling directly to your followers.
15. Work for Employers
In case you haven’t heard, time is money. And you can trade your time for money at any point.
Working for employers often ensures a steady income which can be supplemented by various benefits.
One of the greatest advantages is the employer match on a 401(k) account, which allows employees to double their contributions effortlessly. This means that if an employee contributes 5 percent of their salary to the retirement account, the employer adds another 5 percent.
Expert Tip: Continually upgrade your skill set to increase your value to employers. More demanding or specialized tasks often command higher pay, propelling you towards your double-money goal quicker.
16. Sell Your Goods
Selling goods online provides a dynamic platform for entrepreneurs, allowing them to reach a wider audience. This involves identifying high-demand products, purchasing from a reliable supplier, and selling them on popular e-commerce platforms like Amazon, eBay, and Etsy.
Get involved in flea market flipping. Hunt for undervalued items at yard sales or flea markets and resell online. Facebook Marketplace could be a goldmine.
Unload used or vintage items. These platforms can help you earn huge profits, especially from expensive items. Don’t let seller fees deter you; big profits are still achievable.
Books are an easy sell. Buy used ones from local or online stores and sell them in different areas or on different platforms. Diversifying the categories you offer can potentially boost your profits.
Pricing is set considering the purchase cost, overheads, and the competitive market.
17. Invest in Collectibles
Investing in collectibles presents a thrilling opportunity to generate significant profit in a short span. The key is identifying profitable niches, such as vintage comic books, rare coins, or baseball cards.
The rarity and condition of an item directly influence the price it can command.
The strategy involves buying low, often from garage sales or online platforms like eBay or Etsy, and selling high. However, one must perform diligent research and be aware of market trends, as failure to do so can lead to risks.
18. Get Rid of Your Most Valuable Items
Selling your own possessions is an effective way to declutter your home while also generating a potential cash flow.
This is one way to accumulate over $1,000 in cash earnings.
This may not be what you want to do, but your possessions are worth money and it may be necessary.
19. Save Money and Increase It
You’ve heard it said: a penny saved is a penny earned. This principle isn’t just about saving but also growing your money as an effective way to double your income.
Here’s how:
First, begin with saving. The more you can put away, the better. Remember, your coffee can strategy may not earn interest, so consider a deposit into a savings account.
Next, let’s talk about compound interest. Suppose you invest $1000 at a 5% interest rate. After a year, your money grows to $1050. The next year, you earn interest on this increased amount. Over time, the effect snowballs, significantly augmenting your investment.
Lastly, protection against inflation is key. Always aim for an interest rate higher than the rate of inflation. This means, in real terms, your money is consistently growing.
Done right, these steps can effectively increase your savings rapidly.
Raisin
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20. Game or Bet on A Sport
While it’s often overlooked, betting on sports or games could be a fast track to doubling your money in less than a day. This risky Vegas plan may be worth the potentially rewarding pursuit.
Beware – while some have been successful, this method is heavily debated due to the significant risk factors. As such you may be better off becoming a referee for youth sports, which is a popular side hustle for men.
Remember, it’s all fun and games until the cash is lost – don’t stake what you can’t afford to lose.
FAQ
Doubling $1,000 quickly calls for some calculated risks and smart choices.
One way is investing in stocks, potentially high-return yet high-risk assets. Another route could be starting a side hustle, like an online course or freelance work, where initial investment is low but returns could be impressive.
This is a hard ask given many people this month. However, doubling $3000 fast can be achieved through smart investments and income diversification.
Using online platforms and flipping high-demand items may yield quick profits. Additionally, utilizing skills for a freelance portfolio or selling an online course can quickly boost initial capital.
Doubling your $5000 swiftly may seem like a daunting task, but with strategic planning, connection establishment, and careful investments, it’s more achievable than you might think.
Here’s how you can try it:
Start by investing in stocks. Rapid-growth stocks or volatile currency pairs can double your money. Invest wisely based on market analyses.
Try real estate flipping. Buy undervalued properties, renovate, then sell.
Entrepreneurship is another avenue. Turn your skills or ideas into a profitable business.
Peer-to-peer lending platforms yield high return rates with the right borrower.
Playing the lottery or gambling could work, but highly risky.
Remember, to double up money quickly, ensure you are knowledgeable in your chosen method and anticipate potential downsides. Do comprehensive research first.
Is Doubling Money in 24 Hours Possible?
Yes, you, dear reader, can indeed double your money in 24 hours! It won’t be a cakewalk though, requiring specific skills, solid strategies, and of course a pinch – maybe a handful – of luck.
You could tap into high-growth potential fields like day trading, selling high-demand goods online, or capitalizing on your skills as a content creator. Remember, this quick win has its fair share of risks too.
Now, make sure to do proper due diligence and check the integrity of whatever way you choose to make more or dive into the gig economy.
Now, learn how to double 10k quickly.
Source
Federal Reserve Bank of St. Louis. “Fast Cash and Payday Loans.” https://research.stlouisfed.org/publications/page1-econ/2019/04/10/fast-cash-and-payday-loans#:~:text=However%2C%207%20of%2010%20borrowers,difficulty%20meeting%20basic%20monthly%20expenses. Accessed November 7, 2023.
Motley Fool. “1 in 5 Americans Are Making a Terrible 401(k) Mistake.” https://www.fool.com/investing/2018/02/09/1-in-5-americans-are-making-a-terrible-401k-mistak.aspx. Accessed November 7, 2023.
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Generally, the credit bureaus consider anything over 670 a good credit score.
Considering applying for a new line of credit like a mortgage or credit card, but not sure how your credit score stacks up? If your score is 670 or higher, you’re doing fairly well. The best credit score and the highest credit score possible is 850 for both FICO® and VantageScore® models. FICO considers a score between 800 and 850 to be “exceptional,” while VantageScore considers a score above 780 to be “excellent.” It’s possible to get an 850 credit score, but it’s tough to achieve.
In This Piece
What Is a Good Credit Score?
A good credit score will depend on the scoring model, but either 670 or above would be considered good. Credit scores calculated using the FICO or VantageScore 3.0 scoring models range from 300 to 850. Those scores are broken down into five categories, though the breakdowns differ slightly. Since they have somewhat different range calculations, what’s considered good for VantageScore may be considered fair for FICO, and what’s considered very good for FICO may only be good by the VantageScore model.
FICO and VantageScore aren’t the only credit scoring models. However, they are the most commonly used models and the ones used by the three major credit bureaus: Experian®, Equifax® and TransUnion®. Some lenders even have their own scoring models. But most lenders and credit card companies use FICO scores or VantageScores.
What Is a Good FICO Score?
For FICO, a good credit score is 670 or higher. A score over 739 would be considered very good, while a score above 800 is considered exceptional—the highest designation possible aside from a perfect 850.
What Is a Good VantageScore?
In the VantageScore 3.0 model, a good score is 661 or higher. Since this model doesn’t have a designation between good and excellent, the range of good scores is much wider than it is for FICO. Excellent scores start at 781 rather than 800 in this model, with 850 also being considered a perfect score.
Understanding Credit Score Ranges
The credit score ranges vary depending on whether you’re looking at a FICO score or a VantageScore. They line up fairly similarly, but their score designations have different labels — FICO lacks a “very poor” designation, while VantageScore lacks a “very good” range. Here’s how they break down.
FICO Score Range
Poor: 300-579
Fair: 580-669
Good: 670-739
Very Good: 740-799
Exceptional: 800-850
VantageScore Range
Very Poor: 300-499
Poor: 500-600
Fair: 601-660
Good: 661-780
Exceptional: 781-850
Credit Score Range Chart
To give you a clear idea of how FICO and VantageScore’s credit score ranges compare, here’s a comparison credit score range chart.
What Are Credit Scores?
The three-digit figures called credit scores are what scoring institutions use to rate your credit profile based on your credit report. Since these bureaus have their own records, your score might differ from one scoring institution to the next.
Your score suggests to potential creditors how likely you could be to repay a loan, pay off a credit card, make late payments, and default on payments. Basically, it helps them determine whether you’re an acceptable risk and if they should approve your application for a loan or credit card. A low score doesn’t always mean lenders will decline your application. Instead, it might mean they’ll consider approving you with higher interest rates or less favorable loan terms.
How to Get a Good Credit Score
VantageScore and FICO scores are calculated using similar information. Each model may use slightly different terms for these, but here’s what they’re looking for.
Payment History
FICO weight: 35 percent
VantageScore weight: 40 percent
Late and missed payments can have a major impact on your credit score. Both FICO and VantageScore take your history of payments into account when calculating your score and look at your number of late payments, the number of accounts you’ve missed payments on, and the overall number of missed payments. Maintaining a consistent, on-time payment history goes a long way in establishing good credit.
Amounts Owed/Credit Utilization
FICO weight: 30 percent
VantageScore weight: 20 percent
Credit utilization is calculated as a ratio. It divides the amount of credit you’ve used by your total credit limit. If your credit limit is $5,000, for example, and you use $2,000 in credit, your utilization rate is 40 percent. It’s recommended to keep this rate to 30 percent or less and preferably below 10 percent. To help improve your credit score, try to reduce your utilization ratio if you often find yourself going above 30 percent.
Length of Credit History/Credit Age
FICO weight: 15 percent
VantageScore weight: 21 percent
Your credit history refers to the amount of time your credit accounts have been open, averaged across all of your accounts. That means that if your credit history has factored in your oldest account for the last 15 years but you suddenly close that account, your average credit age will drop accordingly, which could also lead to a drop in your credit score.
For that reason, it’s a good idea to maintain your oldest credit accounts. As a rule of thumb, try to make sure you have one account that’s six months old or older open at all times.
Credit Mix
FICO weight: 10 percent
VantageScore weight: N/A
Your credit mix refers to the number of revolving and installment accounts you have open. Here’s how those accounts differ:
Installment accounts: These are essentially defined long-term loans like home mortgages or vehicle financing on which you make payments in specified amounts over a predetermined period.
Revolving accounts: These types of accounts set a specific amount of credit you can use as needed, such as a credit card. You only pay back the amount of credit you borrow against this limit.
Potential lenders will want to know you can manage both of these account types, so it helps to have a history of successfully managing each. While FICO has a category explicitly for this, VantageScore does not—though it still may factor into other elements of your VantageScore. As such, it can be helpful to have multiple types of accounts in good standing regardless of the scoring model.
New Credit/Recent Credit
FICO weight: 10 percent
VantageScore weight: 5 percent
Opening multiple new credit accounts in a short period of time can have a negative impact on your credit score. Since lenders may see it as a red flag for a borrower to have several recent accounts open, it may be helpful to let your current accounts continue aging while paying them off consistently if you want to maintain or improve your score.
Balances and Available Credit
FICO weight: NA
VantageScore weight: 14 percent
Though only VantageScore has categories specifically for balances (11 percent) and available credit (3 percent), they still play a role in your FICO credit score. The amount of money you owe to lenders and your available credit factor into credit history and utilization rate, so keeping your balances low in comparison to your available credit can be a good idea when trying to achieve a good credit score.
A Note on Credit Inquiries
A hard credit inquiry gets pulled when a lender requests your credit report to assess your creditworthiness. This type of inquiry can drop your score by as much as 5 to 10 points and may stay on your credit report for up to two years, but it will impact your score for only 12 months. To get and maintain good credit, it’s best to avoid these as much as possible.
If you need to apply for multiple credit accounts in a short time or want to shop around for loan rates, it can help to keep those applications within a 14-45-day window so they get grouped into one inquiry. FICO and VantageScore differ on this, with FICO using 45 days and VantageScore using only a 14-day span.
Keep in mind this is only for hard inquiries, as soft inquiries shouldn’t affect your score.
How Lenders Use Credit Scores
Credit scores can offer a gauge of creditworthiness for lenders to determine things like whether or not to approve you for a credit line, how much credit to approve you for, and what your interest rate should be. But while your credit score has a big role to play in this, it’s considered alongside your credit report. Lenders may also consider your income, debt, and your ratio of debt to income.
How Can I Get My Credit Scores?
You can request a full credit report from all three credit bureaus from AnnualCreditReports.com, however, your score is not included with your report.
Most online options for viewing your credit score—free or paid—are limited to one or two scores. ExtraCredit from Credit.com takes it twenty-six steps further by offering you 28 of your FICO scores from all three major credit bureaus. When you sign up for an ExtraCredit account, you can also earn money when you get approved for select offers, monitor your accounts with $1 million identity theft insurance, and get exclusive discounts froma leader in credit repair services. All for one low monthly price.
If you’re not ready for ExtraCredit, Credit.com also offers a free Credit Report Card. This comes especially in handy as it offers you your Experian VantageScore 3.0 credit score for free.
FAQs about Good Credit Scores
Want to know more? Here are a few common questions about what good credit scores are and how they’re used.
Do Lenders Prefer a Good VantageScore Score over a Good FICO Score?
Lenders don’t necessarily prefer one score over the other. It’s likely, though, that a given lender uses only one credit-scoring institution. FICO reports that 90% of the top U.S. lenders use FICO scores when deciding whether to loan money to an applicant. On the other hand, VantageScore states that between March 2021 and February 2023, approximately 14.5 billion VantageScore credit scores were used.
Both models are consistent enough that knowing where you stand in one gives you a reliable indication of your credit in general.
What Is a Good Credit Score to Buy a House?
A FICO score of 580 is the minimum credit score required to qualify for maximum financing. , according to the U.S. Department of Housing and Urban Development. Below 580, borrowers will have to make a minimum downpayment of 10 percent. That doesn’t necessarily mean that you’re guaranteed to qualify for a loan with maximum financing with a score of 580 or above, but it’s what you’ll need if you want the flexibility of a lower down payment.
What Is the Highest Credit Score?
850 is the highest credit score possible for both the FICO and VantageScore models.
What Is Credit?
Credit is access to capital provided by a lender with an expectation that it will be repaid within an agreed time frame. This could be a set installment account—such as a mortgage or car loan that gets paid off gradually—or a revolving account like a credit card with a maximum balance that can be borrowed at a given time.
What if I Don’t Have a Good Credit Score?
Now that you know what’s a good credit score, it’s crucial to act on yours. If your credit is fair or poor, find out why. Then you can address the factors and work to improve your score.
Do you need more credit history? Check out our ExtraCredit Build It feature! Use ExtraCredit to report rent and utility bills you’re already paying and add them to your credit profile as tradelines. This allows the credit bureaus to see additional payment information from you, which can help you build your credit profile.
Here’s how this social worker has paid off $28,000 of student loan debt in 15 months.
Today, I have a great debt payoff progress story to share from Taylor. Taylor is a social worker who is working on paying off $277,000 of debt and retiring early. She shares tips on how she is cutting her expenses, the ways they’ve increased their income through various side hustles, house hacking advice, and how she qualified for an $88,000 student loan award.Enjoy!
Now, don’t let the title deceive you into thinking we are debt free; we most certainly are not.
As of this writing, we still have $251,195.39 of debt (all student loans).
This is our story about the debt payoff strategies we used in paying off $28,026.02 of debt and our goals for the future!
Who are we?
My name is Taylor, and I am a 29-year-old medical social worker who finished grad school in 2018. I am also a part-time social media coordinator and with both jobs combined, I make $96,000 (gross).
I live with my husband, Bret, who I have been with for 11 years and married for 3. He is a full-time student and has been in grad school since September 2020 (he has about 2 more years left). We love to travel, try new restaurants, hang out with our friends and family, and just have a good time.
I also have a blog at Social Work to Wealth.
Related articles:
How did we get here?
First, I need to give you some background before we get into the nitty gritty of our debt numbers and payoff strategies.
2012: We met when both of us were in college. I was 18 and Bret was 22. Soon after we met, Bret took a few years off from school while I finished my bachelor’s. I relied entirely on student loans, and don’t remember applying to any scholarships. When Bret returned to school to finish his bachelor’s, he did receive some scholarships and worked a summer job to pay forhousing but still needed to rely on student loans to pay the bulk of his tuition.
I will speak for myself when I say I didn’t take the time to calculate how much loan money I actually needed and blindly accepted the total amount. Looking back, maybe I would have needed it all or maybe not, but I wish I would have at least done the exercise.
We have always been open with talking about our debt and money in general, but I remember us both expressing the thought that we would probably always have our student loans. We would just live our life, pay our minimum payments, and that would be that. There was never any talk about debt payoff strategies, or any money management strategies, really.
We went through many life transitions. Living apart for two years while I went to grad school, him returning to school to finish his bachelor’s, various jobs, and a post-bach program.
2019: Bret was finishing up his post-bach program and got accepted into grad school. We were newly engaged and began planning and saving for our wedding scheduled for July 11th, 2020. Such exciting stuff!
March 2020: We got the news our wedding venue was closing for the foreseeable future due to the COVID-19 pandemic, and we decide to cancel our wedding. We switched gears and used the money we saved for a down payment on a new home. Then, we had a small intimate wedding featuring a hot-air balloon with 18 of our closest family members! We personally saved a ton and also had tremendous help from our family.
September 2020: I start a new job and Bret starts grad school. We are newlyweds and settling into our new home in a new city.
I wish I could talk more about 2020 because it was a HUGE year for us with buying a home, moving, getting married, Bret starting grad school and me starting a new job, but that’s a conversation for another day!
From frugal to spenders
When we were saving for our wedding, we were very frugal. Any extra money we had, we put toward our wedding savings (which again, ended up being used for the down payment on our house and a smaller wedding ceremony).
We went from frugal to swiping our cards left and right to prepare for our wedding and furnish our house. It was sooo nice to finally be able to spend the money we had been saving for so long! But this continued into 2020… and 2021…
We were mostly spending on eating out and experiences. We do like to buy “things” but we definitely value food and experiences a lot more. We even decided to put a trip to Hawaii on our credit card costing us around $5,000, along with other expenses, because why not? We deserved it!
We didn’t have much of a budget, our bills were getting paid, but the credit card bill kept increasing. Since I was the only one bringing in income, we took out some student loans to help with a portion of our living expenses. And the credit card bill continued to increase.
The “wake-up call”
The “wake-up call” is such a theme throughout many debt payoff stories. So, here’s mine.
I went to breakfast with two friends in December 2021, and one of them brought up high-yield savings accounts (HYSA). I had never heard of this type of account before and was shocked to learn that these savings accounts had a way better interest rate than a regular savings account.
How was I just hearing about this at 28 years old? My mind was blown!
I thought, what else don’t I know? So of course, that led me to deep dive into the world of personal finance. I consumed any book, video, blog, or podcast I could get my hands on. I read stories after stories of people paying off thousands of dollars’ worth of debt, leveraging credit card points for free travel, investing, and so much more!
It was so motivating. I was hooked! (And still am.)
Bret was open and willing for me to share with him what I was learning. We started realizing that for the last year and a half, we hadn’t been telling ourselves “No”. We had just been buying whatever we wanted, and we had the credit card bill and no savings to show for it.
We learned that we could pay off all our debt and it didn’t have to stay with us forever. We learned there was a way to use a credit card responsibly (we thought we were). We learned that we could even retire early. That one sounded real nice! We dreamed of having more time doing our hobbies, traveling and being with our friends and family. And if we ever had kids, we dreamed of being able to work part-time so we could be home more with them and available for school activities.
Knowing this, we started reining in our spending, trying to just be more “mindful”, but no major change was made.
We take on more debt
April 2022: People in our neighborhood were getting new fences. We started thinking, “Hey, we need a new fence, too…” In some areas it was broken, it hadn’t been stained so was rotting, and was 15 years old. We were also going to get an updated appraisal to see if we could get our primary mortgage insurance (PMI) removed after just two years of owning our home and thought a new fence might help.
A coworker told me she was using a home equity loan to buy a fence and to do some other home renovations. We investigated options and ended up opening a $20,000 home equity line of credit (HELOC) instead with about a 4% interest rate. We buy our fence which ends up being about ~10,000 and we were set on it…
The second “wake-up call”
When it was all said and done, we loved our fence. We still love our fence, it’s beautiful! (And it better be at that price!) We stained it and we believe it will last us for many years.
But we start talking again about our debt and how we probably didn’t need this fence right now. We know we didn’t need this fence right now. Our PMI was removed, and it could have maybe happened even without the fence. Who knows.
We began thinking we need to make some serious changes in the way we manage our money. We need to do more than just be “mindful” about our spending. We make a real plan. We plan to make an actual budget, stop taking on unnecessary debt, and take a break from using our credit cards for the foreseeable future.
May 2022: Beginning of our debt payoff journey
Since we were serious about our new money management changes, I documented how much debt we had so we could track our progress.
$277,721.41
Here was the breakdown:
$260,390.25 in student loans, Bret & I’s combined – various interest rates
$10,676.24 HELOC – 4% interest rate
$5,430.76 is from credit card spending – 4% interest rate*
$449 for furniture – 0% interest rate
$775.16 for Peloton bike – 0% interest rate
*We moved our credit card debt to our HELOC since our credit card was around a 25% interest rate.
July 2023: Current debt numbers
Our current debt balance is $251,195.39, * which are all student loans.
We have paid off a total of $28,026.02 of debt!
*Our current balance will increase to ~$255,000 once Bret gets his final student loan disbursement (more on that later).
I want to also mention that we do have our mortgage, but we aren’t trying to pay that down as quickly as possible for a few reasons: we have a 3% interest rate, we don’t plan on this being our forever home, and one day we might rent it out or sell it.
Actions that helped us pay off $28,026.02 of debt in 15 months
We found a budgeting method that worked for us
We realized we could live off my income alone and not take on anymore debt, but we would have to have a somewhat rigid budget.
Finding a budgeting method that worked for us took some time. I don’t know how many times over the years I have tried to track my expenses in a budget app or an excel sheet, only to find out it was too overwhelming and that I was still overspending!
I am a visual person and learned about the envelope budgeting method, so we decided to give that a try, but use a digital variation.
So, for our entire money management system we have 4 checking accounts and 2 savings accounts (short-term and emergency fund). Our checking accounts include bills, food and miscellaneous, and two personal spending accounts.
This may seem like a lot of accounts to some, but it has worked tremendously for us. I love having a separate account for each major category in our budget so I can easily see how much money we have left in a certain category without having to add every expense into an app or Excel spreadsheet. We are joint owners on all of these accounts.
We then use the zero-based budget method to determine how much goes into each account.
We do have multiple cards to manage, but the pros VERY MUCH outweigh the cons here.
And with our own spending accounts, we have a certain amount of money allotted to us each month, so we individually have some spending freedom. We don’t have to feel guilty and know this money is set aside specifically for our personal spending.
Cut expenses and increased our income
I know some people are tired of hearing about this recommendation, but it’s something that really did help us! We reined in our spending a bit but mostly we had to increase our income. At a certain point, there wasn’t much more to cut.
We didn’t have many streaming services, started to limit our eating out, we didn’t have car payments, and we meal planned and prepped. We did (and still do) aaalll the things. We had to increase our income somehow.
Ways we increased our income
My income increase
I continued with my second job as a social media manager and then started dog sitting.
I have been dog sitting for about 5 years and have primarily used the Rover platform to list myself as a dog sitter. I like this app because it’s easy to use and I can specify various services to offer (e.g., house sitting, boarding, drop in visits, day care, or dog walking).
It also allows me to mark which days I am available and then people reach out to me if I seem like a good fit and my availability matches with their needs! Setting up my profile took some time, but now that it’s done, everything else is fairly low maintenance.
I now just have to respond to inquiries in a timely manner and set up a meet and greet if it seems like a good fit.
I currently only offer house sitting and on Rover and I charge $65/night. Rover takes a cut, so I end up pocketing $52. I also have private clients who pay me directly, and I have gotten those by referrals from past Rover clients. I charge my private clients $40/night.
I recently increased my rates on Rover and have been slow to increase my price with my private clients because they’re loyal.
I don’t make a ton of money dog sitting, but I am able to make a couple hundred dollars a month. My schedule is very limited, but there are people with better availability who make significantly more than I do!
I love animals and we don’t have any due to our sporadic work schedules, so it’s a great way for me to spend time with pets and get paid, too!
Bret’s income increase
Last year, Bret decided to take a break from grad school and soon after, he was offered a summer job in Alaska.
When we first started dating, he used to spend almost every summer there working for a family who owned a set-netting fishery. His uncle had spent many summers in Alaska working for this family and one summer brought Bret to work with him. They would catch salmon and sell it to a buying station in their area.
He went up there for about 6 summers in a row, until he got too busy with school and couldn’t go anymore.
He hadn’t been to Alaska in over 5 years, but someone who worked for the buying station remembered Bret, called him, and asked if he’d be interested in working at the buying station! Since he was already on a break from school, he said yes and worked up there for 8 weeks.
We were able to put every paycheck he earned towards our debt because we could manage all our expenses on my income alone. It was also a great way for Bret to spend part of his summer and I was finally able to visit as I never gotten the chance in previous years.
House hacking
We also started house hacking! We had a spare bedroom and bathroom I would use for my office and occasionally, for guests. A friend of mine and her husband are really into the real estate space and gave us the idea to rent it out.
We weren’t comfortable with the idea of having a long-term roommate, and with both of us working in healthcare, we knew there was a need for short-term and furnished housing for travelling healthcare professionals.
For us, short-term meant renting for 1-6 months, but we were open to individuals staying longer if it worked well for everyone involved!
Some questions we had to address before renting:
Did we need a permit?
How much should we charge for the deposit, rent and pets?
What furniture and amenities are important for travelers?
Where should we list the room?
How to create a lease agreement?
In our county, we did not need a permit to rent out the room if we were renting for at least 30+ days at a time.
After researching rental prices in our area, I found rooms that were of similar caliber listed for $1,100 per month or more. We wanted to be competitive and so we initially settled on $900 per month and have steadily increased it. We have now landed on $995 per month which includes all utilities and internet.
We set the deposit at $995, with an additional $300 for a pet deposit, and no ongoing pet rent.
We wanted to upgrade the furniture in the room and IKEA was a great place for us to find affordable, durable, and aesthetically pleasing furniture. We made sure the room had a bed, large dresser, bedside table, and we kept my desk in there too.
I read it’s important for travelers to have their own TV available so they can unwind in their room. We were able to find a decently priced smart TV off Facebook Marketplace.
Furnished Finder is where we decided to list our room, which started out as a platform for traveling nurses to find furnished housing. It is now used heavily by many healthcare professionals, students, and professionals in other fields.
Travelers reach out to us through the Furnished Finder website and if the dates work out, we move forward with scheduling a video interview. It’s important for us to be able to talk to the person, even if it’s just over video, and we want them to see our faces and home in real time as well.
For the lease agreement, we used ez Landlord Forms, because they have leases for each state with specific information on what’s required to include.
We don’t ask for anything major from tenants. The most important things to us are that they are respectful of our space, don’t smoke in the house, and pay their rent on time. We also added a page at the end for tenants to add two emergency contacts in case we need to call someone on their behalf.
We have had 4 renters so far with the room being occupied for 13 out of the last 14 months. It has really helped us with our debt payoff goals and we have also met some awesome people through the process! We plan to continue renting it out for the foreseeable future.
Applied for in-state student loan help
My state offered a program called the Oregon Behavioral Health Loan Repayment Program where they help minorities in the behavioral health field, or those who serve them, pay back their student loans.
This program is funded by The Behavioral Health Workforce Initiative which has the goal of recruiting and retaining behavioral health providers who, “Are people of color, tribal members, or residents of rural areas of Oregon, and can provide culturally responsive care for diverse communities.”
To apply, I had to show I was employed and actively providing behavioral health services and give them detailed documentation about my student loans. I also had to answer two essay questions related to being a part of and/or working with communities who are underserved and how my training has equipped me with supporting these communities.
I applied last year and was a recipient of an award!
As a recipient, there is a two-year service commitment which means I have to continue providing some sort of behavioral health service during that time frame (which I planned to). Over the next two years, I will be getting ~$88,000 in quarterly disbursements to put towards my student loans. So far this year, I have received ~$11,000, and it’s been life changing to say the least!
Alongside this support, I am also pursuing Public Service Loan Forgiveness (PSLF) for additional student loan relief.
Managing our mental health while paying off debt
Since I am a social worker, I often think about how money and debt affect individuals’ mental health. It’s one of the reasons why I started my blog in the first place.
I realized managing money is a universal task and many of us don’t know what we are doing because talking about money is taboo. And when you have financial stress, it can really take a toll on your mental health. So, I wanted to share our journey in hopes of helping others.
Bret and I aren’t those individuals who want to avoid eating out and fun experiences until we are debt free. And, we are also privileged to not have to take those extreme measures either. It has been important for us to make this journey sustainable and not deprive ourselves of experiences while we are going through it.
Here’s how we are making our journey sustainable:
Still going out to eat
Budgeting for personal spending money, aka fun
Setting realistic debt payoff goals
Putting aside money for travel
Not comparing and thinking other people are better than us because they’re able to pay off their debt quicker
Tracking our debt payoff progress (we use Excel). With so much debt left to pay off, being able to see our progress is really motivating
Openly talking about our debt. Avoidance is a coping mechanism for many, for us, acknowledging and addressing it has been so freeing (but it wasn’t always this way).
Talking about our dreams and reminding ourselves why we want to do this in the first place
We know that if we eliminated going out to eat, budgeting for fun, or both, we could be paying off our debt much quicker. However, that sounds miserable to us. It’s worth it to still go out to dinner, travel, or buy plants (in my case) than to deprive ourselves of the joy these things bring.
We are making great progress and we know in time, we will be debt free.
Our debt payoff journey is not linear
A few months ago, we decided to take out $6,000 of student loans. Bret currently has a full tuition scholarship, so we are tremendously lucky in that regard, but he just learned about some conferences that would be really helpful to his professional growth. We have gotten $1,500 of this loan money already which is included in our current debt balance, but we haven’t received all of it yet.
We could have pinched and saved to avoid taking on any of this debt, but that would have caused me to work more than I currently am. Again, not in line with our current goal of making this journey sustainable!
We were very intentional about how much to take out. We estimated how much he would need for a few conferences and declined the rest. We even opened a separate savings account for the money to make sure it didn’t get accidentally spent on anything.
I’m SO proud of us for that!
The goal here is progress not perfection. So cliche, I know. But we are learning how to think critically about our money, spend thoughtfully, use our money as a tool to reach our goals, and enjoy our life along the way. And right now, that meant taking on a little more debt.
We are moving in the right direction, and we know when he starts working, that will really accelerate our debt payoff journey since we have proven to ourselves we can live on my income alone.
Our plan going forward
Bret is still in school which means his loans are on deferment, so we currently have his on the back burner.
With the loan payment assistance I am receiving, it’s allowing us to put any extra money we have each month towards our savings. Our priority right now is building up a good emergency fund of about $16,000 (~4 months’ worth of expenses).
This has been difficult because of inflation and just little emergencies that keep popping up, but we are slowly making progress.
I am also prioritizing investing in my employer retirement plan, but only up to the amount that gets me my employer match which is 6% of my income.
Bret will be graduating in 2025, so at that time, we will pivot to incorporating his loans into our budget. Our goal is to be debt free by 2028.
It will take a lot of discipline and persistence, but I think we can do it. I am manifesting it!
We want to continue to learn, implement, and grow. We want to keep having transparent discussions about money and building our money foundations. And I personally want to continue sharing our journey with hopes of inspiring, encouraging and educating others. Here’s to sharing the wealth.
Do you have debt? What are you doing to pay it off?
Taylor is a social worker and personal finance blogger at Social Work to Wealth where she shares tips, resources, and lessons learned on her family’s journey to paying off $277,000 of debt and retiring early. She hopes to inspire and empower social workers with financial education so they can have a better relationship with their money. When she’s not working or blogging, you can find her traveling, gardening, trying a new restaurant, or buying too many plants.
Student loans can help you finance your college education without paying much interest. However, you don’t want to take on more debt than you can comfortably pay back after you graduate. As of June, 2023, student borrowers owe 1.76 trillion in student loan debt, including federal and private student loans, according to the Federal Reserve.
High school can be a great time to start learning about the types of student loans available to you, how interest accrues, and what you can expect when it comes time to repay any student loans you take out. Read on to learn some of the ABCs of student loans, and how to not let them weigh down your financial future.
Student Loan Types
There are two main categories for student loans: federal and private student loans.
Federal Student Loans
Federal student loans are funded by the federal government. Interest rates are fixed (and comparatively fair) and are set annually by Congress every July. Federal student loans also come with protections like income-driven repayment plans and deferment or forbearance options in the case of life changes, such as sudden loss of a job or other roadblocks to repayment.
The following are the federal student loan options offered:
• Direct Subsidized Loans These are available to eligible undergraduates with a proven financial need. The government subsidizes (meaning it pays for) the interest that accrues on these loans while the student borrower is enrolled in school at least half-time and during the loan’s grace period (more on that below), and other qualifying periods of deferment.
• Direct Unsubsidized Loans These are available to eligible undergraduates and graduate students regardless of financial need. Student borrowers are responsible for paying all of the accrued interest on unsubsidized student loans.
• Direct PLUS Loans These are available to eligible parents of undergraduate students and to graduate or professional students. They are not subsidized by the government.
Private Student Loans
Private student loans are issued by non-government institutions, such as banks, credit unions, and online lenders. The requirements for applying for these types of loans may be more stringent.
Lenders will typically look at the student’s or their cosigner’s credit history, income, and other financial information. Some lenders require you to begin making payments while you are in school, while others allow you to wait until six months after you graduate. Either way, interest typically begins to accrue as soon as the funds are disbursed.
How to Apply for a Student Loan
The process for applying for student loans varies based on whether the loan is private or federal.
Applying for a Federal Student Loan
To apply for a federal student loan, you need to fill out and submit the Free Application for Federal Student Aid (FAFSA®) . Even if you don’t think you’ll be approved for financial aid, it can be worth submitting the FAFSA. The application is free and you may qualify despite your circumstances. The FAFSA also gives you access to federal student loans.
Every year, the FAFSA form usually becomes available online as of October 1 for the next school year. (Note that the FAFSA for 2024-25 academic year won’t be available until December 2023 due to the roll out of a new, more simplified form.)
You can easily apply online (see the link above). Completing the FAFSA determines the combination of federal loans, grants, and work-study you’re eligible for. Some colleges and universities also use information from the FAFSA to determine if you qualify for school-specific financial aid.
Applying for a Private Student Loan
It’s important to take the time to do some research and find a lender with a good reputation that offers competitive rates and terms. Ideally, you want a lender that offers flexible repayment options, reasonable (or no) fees, and will provide helpful customer support if you find yourself having any issues with your student loan payments.
If you decide to apply for a private student loan, you will more than likely have to reveal personal financial details, like your credit history. Since students typically don’t have much, or any, credit history, they often need to apply with a cosigner. That’s someone who will share the responsibility with you of paying back the loan.
In many cases, that cosigner would be a parent or an adult with whom you have a close relationship. Getting a cosigner may increase your chances of getting a better interest rate, which could help you spend less in interest over the life of the loan.
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Types of Student Loan Interest Rates
The interest rate on your student loans could have a lasting impact on your future finances. The interest charged is a percentage of your unpaid loan principal — that is, the amount you borrowed. Interest is paid to the lender in exchange for the opportunity to borrow money from them.
You can typically choose from between two types of interest rates: fixed-rate and variable rates.
Fixed-rate student loans: These types of loans offer an interest rate that remains the same throughout the life of the loan. This could give you peace of mind, knowing that the rate won’t change, even if the state of the economy does. Interest rates could fluctuate wildly during the course of your loan, but a fixed-rate won’t be affected. As previously mentioned, federal student loans have a fixed interest rate. Some private lenders also offer student loans with a fixed interest rate.
Variable-rate loans: These types of loans come with an interest rate that can increase or decrease based on market fluctuations. Some private lenders offer student loans with variable interest rates. These are also sometimes called floating-rate loans, because the interest rate can change during the life of the loan.
A variable-rate school loan might start with a lower rate than a fixed-rate loan but keep in mind that your interest rate — and monthly payment — could rise later on. A variable- rate loan can make sense if you plan to pay off your student loan early before rates have a chance to rise too much, expect rates to fall in the future, or you have some wiggle room in your budget in case of rising interest rates.
Student Loan Mistakes to Avoid.
1. Failing to Research Your Loans
With any type of student loan, it’s key to understand what you are agreeing to. You’ll want to make sure you understand what the interest rate will be, what your monthly payment will be, when you’ll need to start repayment, and how you plan to cover that obligation.
2. Borrowing Too Many Loans
It’s nice to be approved and accepted, but too many loans (borrowing more money than you actually need) can lead to a heavy financial burden after graduation. Generally, you’ll want to use any college savings, financial aid, and federal student loans before looking to private student loans (which tend to come with higher interest rates than federal student loans). If you’ll need to take on significant debt to attend a certain school, you might consider choosing a less expensive institution.
3. Not Having a Plan
Life can be unpredictable. The one thing you could have power over is your school loan repayment plan. It’s important that you know exactly when your student loan repayment plan starts (in some cases, that could be before you graduate), and exactly what your monthly payment will be.
It can also be helpful to set up a budget that accounts for all of your college costs, including tuition, books, room and board, food expenses, and anything else related directly to your education. If you budget for it ahead of time, you can help make it easier to use your student loan money wisely.
4. Not Realizing That Interest Continues Accruing
Understanding how and when interest accrues on your student loans is critical. For many student loans, interest will accrue while you are in school and during your grace periods. (A grace period is the period of time after you graduate or drop down below half-time attendance, during which you are not required to make payments.)
With the exception of subsidized federal student loans, interest will continue to accrue even if you are not making payments on your student loan. It will then typically be capitalized. Capitalization occurs when the accrued interest is added to the principal balance of the loan (the original amount borrowed). This new value becomes the balance on which interest is calculated moving forward.
Recommended: Understanding Capitalized Interest on Student Loans
Repaying Your Student Loan
Another important factor is understanding what repayment plans are available to you based on the type of loan you borrowed.
Repaying Federal Loans
For Direct Subsidized and Unsubsidized Federal Loans, students who are enrolled in school at least half-time aren’t required to make payments on their student loans. On these loans, repayments officially begin after the loan’s grace period.
Federal loans typically have a six-month grace period after graduation, which allows you time before you have to start repaying your loans. It’s important to note that even though you may be granted a grace period, depending on the loan you have, you may still be responsible for paying the interest on the loan during the time you are not making payments.
Note that PLUS Loans, which are available to parents of students and graduate or professional students, require repayments as soon as the loan is disbursed (or paid out).
Borrowers with federal loans are able to choose one of the federal repayment plans . These include:
• Standard Repayment Plan On this plan, monthly payments are a fixed amount and repayment is set over a 10-year period.
• Graduated Repayment Plan On this plan, payments start out on the lower end and then gradually increase as repayment continues. Loans are generally paid off over a 10-year period.
• Extended Repayment Plan Payments may be either fixed or may gradually increase over the loan term. Loans are paid off within 25 years.
• Income-Driven Repayment Plans There are four income-driven repayment plans. These tie payments to the borrower’s discretionary income. The percentage and repayment term may vary depending on the type of income-driven repayment plan the borrower is enrolled in.
With private student loans, the repayment terms are determined by the lender. That schedule will tell you exactly when your first payment is due and how much you will owe.
Unlike federal loans, many private loans have to be paid back before you graduate, so be sure to review your agreement closely and know exactly what you are going to need to do. Contact the lender directly if you have any questions.
Recommended: How to Pay Off College Loans
Named a Best Private Student Loans Company by U.S. News & World Report.
If Repaying Loans Becomes a Problem
Nobody plans on not paying back their student loans, but sometimes life can throw a few financial punches that you weren’t expecting. A smart strategy if this were to happen to you: face the problem head-on.
Options for Federal Student Loans
If a borrower is struggling to make payments on their federal student loans, they may consider changing their repayment plan. Federal loans, as mentioned, offer income-driven repayment options which tie the monthly payments to the borrower’s income. This can help make monthly payments more manageable for borrowers.
In cases when even income-driven repayments are too much, borrowers may be able to apply for deferment or forbearance. These allow borrowers to pause their loan payments. Depending on the loan type, you may or may not accrue interest during periods of deferment or forbearance.
Options for Private Student Loans
Private lenders are not required to offer the same repayment plans or borrower protections (like deferment and forbearance, mentioned above) as federal student loans. Some private lenders may be willing to work with you during times of financial difficulty so that you can continue making payments. Check in directly with your lender to see what payment plans or options they may have available to you.
A Note on Student Loan Default
After a certain number of missed payments (which can vary depending on whether you have borrowed a federal or private student loan), your loan may enter default. That can have serious financial consequences, such as impacting your credit score.
Declaring bankruptcy generally won’t rid you of your federal student loan obligations. It is extremely challenging to get student loans (federal or private) discharged in bankruptcy.
What to Do if You Don’t Get Enough Federal Loans
It’s never too early (or too late) to begin researching methods of additional funding if your federal loans aren’t going to cover your tuition costs. Here are just a few to consider.
Scholarships
Scholarships do not typically have to be paid back. If you’re not sure where to begin your scholarship search, you might ask your high school guidance counselor for recommendations. An online scholarship search tool can also be helpful.
In addition, you may want to try local community and civic organizations, as well as businesses and religious groups. You can also ask about scholarships in your college’s financial aid office.
You can also try scouting scholarships based on a certain skill or talent: music, writing, sports, and even academics. Qualifying for multiple small scholarships could add up and go a long way toward helping ease your financial burden.
Grants
Grants work like scholarships in that you typically don’t have to pay them back. They are often offered by the federal government (and would be part of your federal aid package); in some cases, in exchange for a grant, you agree to work in a certain field for a set period of time after graduation.
Work-Study
Through the federal work-study program, you can earn money to put toward school expenses by working jobs around your college’s campus. If you are approved for the work-study program, it will be included as a part of your financial aid award. Then, you may need to apply for jobs that are part of the program. These jobs may be on- or off-campus.
If you can’t find a work-study job to fit your schedule, there may be other part-time job opportunities available off-campus. You could inquire about part-time work at your on-campus career services office.
Private Student Loans
As mentioned, a private student loan may cover the remaining tuition costs not covered by your federal financial aid package. Qualifying for these loans might require a credit check and your credit history can potentially affect your private loan interest rate. For undergraduates with little-to-no credit applying for private student loans, they may benefit from applying with a cosigner in order to qualify for a more competitive rate.
As another reminder, private loans are not required to offer the same benefits or borrower protections afforded to federal student loans. As a result, most students only consider private student loan options after all other sources of aid and funding have been carefully evaluated.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
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SoFi Private Student Loans 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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AA stimulus package is a set of financial measures put together by central bankers or government lawmakers with the aim of improving, or “stimulating,” an economy that’s struggling.
Individuals in the U.S. during the past two decades have witnessed two major periods when government stimulus packages were used to boost the economy: first, after the 2008 financial crisis, and second, following the 2020 outbreak of the Covid-19 pandemic.
While viewed by some as key to reviving growth, economic stimulus packages are not without controversy. Here’s a closer look at how they work, the different types of stimulus packages, and their pros and cons.
Government Stimulus Packages, Explained
What is a stimulus package? The foundational theory behind these economic stimulus packages is one developed by a man named John Maynard Keynes in the 1930s.
Keynes was a British economist who created his theory in response to the global depression of the era. His conclusion was that, when a government lowers taxes and increases its spending, this would stimulate demand and help to get the economy out of its depressed state.
More specifically, when taxes are lowered, this helps to free up more income for people; because more is at their disposal, this is referred to as “disposable income.” People are more likely to spend some of this extra money, which helps to boost a sluggish economy.
When the government boosts its spending, this also puts more money into the economy. The hoped-for results are a decreased unemployment rate that will help to improve the overall economy.
Economic theory, of course, is much more complex than that, and so are government stimulus packages. 💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.
SoFi has built a Recession Help Center that provides resources to help guide you through this uncertain time.
Different Types of Stimulus
Monetary Stimulus
To get a bit more nuanced, monetary stimulus is something that occurs when monetary policy is changed to boost the economy.
Monetary policy is how the supply of money is influenced and interest rates managed through actions taken by a central agency. In the U.S., that agency is the Federal Reserve Bank.
Ways in which the Federal Reserve can use monetary policy to stimulate the economy include cutting policy rates, which in turn allows banks to loan money to consumers at lower rates; reducing the reserve requirement ratio, and buying government securities.
When the reserve requirement ratio is lowered, banks don’t need to keep as much in reserve. That means they have more to lend, at lower interest rates, which makes it more appealing for people to borrow money and get it circulating in the economy.
Fiscal Stimulus
Fiscal stimulus strategies focus on lowering taxes and/or boosting government spending. When taxes are lowered, this increases the amount of money that people have left over from a paycheck, and that money could be spent or invested.
When money is spent on a greater amount of products, this increases demand for those products — which in turn helps to reduce unemployment because companies need more employees to make and sell them.
If this process continues, then employees themselves become more in demand, which makes it more likely that they can get higher wages — which gives them even more funds to spend or invest.
When the government spends more money, this can increase employment, giving workers more money to spend, which can increase demand — and so, it is hoped, the upward cycle continues.
In the U.S., a federal fiscal package needs to be passed by the Senate and the House of Representatives — and then the president can sign it into law.
Quantitative Easing
Quantitative easing (QE) is a strategy used by the Federal Reserve when there is a need for a rapid increase in the money supply in the United States and to boost the economy.
For example, on March 15, 2020, the Federal Reserve announced a $700+ billion program in response to COVID-19. In general, QE involves the Federal Reserve buying longer-term government bonds, among other assets. 💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.
Pros and Cons of Stimulus Packages
There are advantages and disadvantages to economic stimulus packages, including the following:
Benefits
The goal of a stimulus package, based on Keynesian theory, is to revive a lagging economy and to prevent or reverse a recession, where the economy is retracting rather than expanding. This is a more immediate form of relief as the government also uses monetary, fiscal, and QE strategies to boost the overall economy.
This might include the Fed cutting interest rates, which lowers the rate at which banks loan money to consumers. That can encourage individuals to borrow money, which gets it circulating in the economy.
Taxes may also be lowered, which means workers have more money from each paycheck to spend. That spending may, in turn, increase the supply and demand for products, which can help both employees and businesses.
Risks
However, there are also risks to implementing stimulus packages. An economic theory that runs counter to Keynesian theory is the crowding out critique. According to this thinking, when the government participates in a deficit form of spending, labor demands will rise, which leads to higher wages, which leads to lower bottom lines for businesses.
Plus, these deficits are initially funded by debt, which causes an incremental increase in interest rates. This means it would cost more for businesses to obtain financing.
Other criticisms of stimulus spending focus on the timing of when funds are allocated and that central governments can be less efficient at capital allocation, which ultimately leads to waste and a low return on spending.
Another risk is that the central bank or government over-stimulates the economy or prints too much fiat currency, leading to inflation, or rise in prices. While a degree of inflation is normal and healthy for a growing inflation, price increases that are rapid and out of control can be painful for consumers.
Previous Economic Stimulus Legislation
Perhaps the most sweeping stimulus bill ever created in the United States was signed into law by President Franklin Delano Roosevelt on April 8, 1935.
Called the Emergency Relief Appropriation Act and designed to help people struggling under the Great Depression, Roosevelt simply called it the “Big Bill”; it is now often referred to as the “New Deal.” Five billion dollars was provided to create jobs for Americans, who in turn built roads, bridges, parks, and more.
The Works Progress Administration (WPA) came out of the New Deal, ultimately employing 11 million workers to build San Francisco’s Golden Gate Bridge, LaGuardia Airport in New York, Chicago’s Lake Shore Drive, about 100,000 other bridges, 8,000 parks, and half a million miles of roads, including highways.
Another agency, the Tennessee Valley Authority, collaborated with other agencies to build more than 20 dams, which generated electricity for millions of families in the South and West.
More Recent Stimulus Packages
Additionally, there was the American Recovery and Reinvestment Act (ARRA) in 2009. This was passed into law in response to the Great Recession of 2008 and is sometimes called the “Obama stimulus” or the “stimulus package of 2009.” Its goal was to address job losses.
This Act included $787 billion in tax cuts and credits, as well as unemployment benefits for families. Dollars were also provided for infrastructure, health care, and education, and the total funding was later increased to $831 billion.
More recently, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was passed by the United States Senate on March 25, 2020. On March 27, 2020, the House of Representatives passed the legislation and the President signed it into law the same day.
And in March 2021, the American Rescue Plan was passed by the House and the Senate and signed into law by President Biden. This emergency relief plan included payments for individuals, tax credits, and grants to small businesses, among other things.
The Takeaway
Stimulus packages are used to prop up economies when they are struggling or on the brink of a major recession, or even depression. While in recent decades, such stimulus packages have been credited by some for helping the U.S. economy out of the 2008 financial crisis and 2020 Covid-19 pandemic, others worry that the increase in government deficit is unhealthy, and all that spending could lead to inflation.
For individuals, devising a strategy to help save and invest during times when the economy is struggling — and in general — can be important to achieving their financial goals. Chatting with a financial planner about those goals may be helpful for some when it comes to putting together a plan to save for the future.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Invest with as little as $5 with a SoFi Active Investing account.
FAQ
Are there stimulus packages for small businesses?
Yes. For example, as part of the American Rescue Plan, small businesses that closed temporarily or had declining revenues due to COVID were extended a number of tax benefits to help with things like payroll taxes. There were also funds put toward grants for small businesses as part of this economic stimulus package.
How do stimulus packages fight recessions?
Economic stimulus packages are thought to help fight recessions by lowering taxes and increasing spending. The idea is that these measures would boost demand and improve the economy, and thus help avoid or fight recession.
What disqualifies you from getting a stimulus package?
Some reasons that could disqualify you from getting a stimulus package include having an income that’s deemed too high, not having a Social Security number, or not being a U.S. citizen or U.S. national.
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Mike On The Money: Paying off student loans, credit interest, and mortgage rates
Updated: 5:38 PM EDT Aug 9, 2023
THE MONEY. WE WELCOME MIKE GIORDANO, FINANCIAL ADVISOR WITH WILLIAMS WEALTH MANAGEMENT AND A NEW DADDY OF BEAUTIFUL MARGOT. WE SHOWED YOU THE PICTURE LAST WEEK. SHE WAS VERY APPRECIATIVE TO MAKE HER DEBUT. SHE’S LIKE, WOW. JANE KNOWS SHE LOOKS STUNNING. AND YOUR WIFE LOOKED LIKE NOT EVEN 24 HOURS LATER. BUT WE’RE SO EXCITED ABOUT YOUR FAMILY. SO TODAY WE WANT TO TALK ABOUT STAYING A STEP AHEAD BECAUSE YOU’VE GOT THREE LITTLE ONES LIKE MIKE DOES. YOU KNOW HOW TO STAY A STEP AHEAD, PAYING BACK STUDENT LOANS. LET’S START THERE, MIKE, BECAUSE STARTING IN SEPTEMBER, PEOPLE WHO HAD HAD THOSE LOANS DEFERRED BECAUSE OF COVID ARE GOING TO HAVE TO START PAYING IT BACK. HOW DO THEY MAKE PLANS NOW TO HAVE RE BUDGET? YEAH, WELL, THE BEST THING TO DO IS START FOCUSING ON THAT NOW. START THINKING ABOUT HOW CAN I, HOW CAN I SET ASIDE THE MONEY THAT I’M GOING TO NEED? SAY YOU NEED $200 FOR THOSE PAYMENTS, START FIGURING OUT HOW YOU’RE GOING TO GET THAT $200 RIGHT NOW, IF YOU CAN SKIMP OUT ON SOME EXPENSES, THEN THAT’S THE PERFECT WAY TO GO. MAYBE YOU CAN FIND A WAY TO RAISE YOUR INCOME. THAT’S ANOTHER THING. SO THE BEST THING TO DO, THOUGH, IS FIND A WAY TO MAKE UP THE MONEY SO YOU CAN MAKE THE NORMAL PAYMENTS. IF FOR SOME REASON YOU CAN’T MAKE NORMAL PAYMENTS, THERE ARE A WHOLE BUNCH OF INCOME BASED PAYMENT PROGRAMS THAT ARE MORE PEGGED TO YOUR INCOME. SO THE PAYMENTS MAY BE LOWER EARLIER AND THEN THEY GO HIGHER LATER, BUT YOU MAY END UP PAYING MORE INTEREST OVER TIME. SO IT’S A GREAT FALLBACK OPTION, BUT THE BEST THING TO DO IS BE ABLE TO MAKE NORMAL PAYMENTS. GREAT. AND JUST GET IT DONE. ABSOLUTELY. I MEAN, IT’S VERY MUCH LIKE IF YOU HAVE A CAR, YOU PAID OFF YOUR CAR FOR A LITTLE PERIOD OF TIME. YOU DIDN’T HAVE ANY PAYMENTS, BUT THEN ALL OF A SUDDEN YOU WANT A NEW CAR, YOU GOT TO START BUDGETING FOR THAT STUFF. THAT’S GREAT ADVICE TO STAY IN AHEAD OF THE CAR THING. WHAT ABOUT INFLATION? WE’RE TAKING A LOOK AT EVERYTHING HAPPENING WITH INFLATION. EVERYTHING COSTS MORE, INCLUDING WHAT I’M PAYING ON CREDIT CARD. DO I PAY OFF MY CREDIT CARD OR DO I SAVE MONEY? OR IS THERE A WAY TO DO BOTH? THERE’S A WAY TO DO BOTH FOR SURE. THE BEST THING TO DO IS THAT WHEN YOU THINK ABOUT PAYING OFF CREDIT CARDS, ANYTHING THAT’S DOUBLE DIGIT INTEREST OR HIGH SINGLE DIGIT INTEREST, THOSE ARE THE THINGS YOU WANT TO PAY OFF AS QUICKLY AS POSSIBLE. IF YOU’VE GOT ALL THAT, IF YOU DON’T HAVE ANY OF THAT KIND OF DEBT, THEN YOU CAN START LOOKING AT AT PUTTING MORE MONEY INTO SAVINGS. AND WHEN YOU’RE TAKING A LOOK AT TRYING TO COUNTER INFLATION OVER THE LONG TERM, THE BEST WAY TO COUNTER INFLATION ARE GROWTH ASSETS LIKE STOCKS, REAL ESTATE THAT WAY TO A LESSER EXTENT LONG TERM BONDS. BUT IN THE SHORT TERM, IF YOU CAN’T HANDLE ANY PRICE VOLATILITY BECAUSE YOU NEED THE MONEY OVER THE NEXT YEAR OR TWO, THEN YOU WANT TO LOOK AT THOSE HIGH YIELD SAVINGS ACCOUNTS OR MONEY MARKET FUNDS IN A BROKERAGE ACCOUNT BECAUSE THEY’RE PAYING UPPER FOURS 5% INTEREST, WHICH IS BETTER RIGHT NOW THAN THE 3% INFLATION RATE. YEAH, AND THAT’S GREAT TO KNOW, TOO. NOT ALL SAVINGS ACCOUNTS ARE CREATED EQUAL, SO REALLY MAKE SURE THEY AREN’T. SO MAKE SURE YOU’RE LOOKING AT WHAT YOU’RE GETTING PAID. OKAY. SOME PEOPLE WANT TO BUY A HOUSE. MORTGAGE RATES ARE THE HIGHEST THEY’VE BEEN IN A REALLY LONG TIME. HOW DO YOU EVEN BEGIN THIS? LOOK AT THIS 30 RATE, 30 YEAR FIXED RATE, 7.37. WHAT DO WE GO FOR IT? OR DO YOU HOLD OUT AND WAIT TO BUY THE HOUSE? WELL, IT DEPENDS. YOU WANT TO KEEP YOUR YOUR FIXED COSTS UNDER 50% OF WHAT YOU’RE MAKING, RIGHT. AND REALLY DEBTS YOU WANT TO BE UNDER ABOUT A THIRD OF WHAT YOU’RE MAKING. SO THAT’S THE FIRST THING. SO THAT’S HOW YOU MAINTAIN A FINANCIAL RESPONSIBILITY IN TERMS OF THE INTEREST RATES AND ALL THAT STUFF. THE BEST THING TO DO IS IF YOU CAN SOMEHOW SAVE A LITTLE BIT MORE MONEY AND GET A BIGGER DOWN PAYMENT, THEN THERE’S LESS MONEY FOR YOU TO HAVE TO BORROW. IT DEPENDS ON WHAT KIND OF HOUSE YOU’RE LOOKING TO BUY, TOO. IF YOU’RE LOOKING TO BUY A NEW HOME, NEW CONSTRUCTION, THERE’S A LOT OF BUILDERS THAT HAVE PROGRAMS THAT WILL BUY DOWN SOME OF THAT FINANCING COST AND ON THE FRONT END FOR THE FIRST FEW YEARS. AND THEN HOPEFULLY IF RATES FALL BACK DOWN, THEN YOU CAN REFINANCE FOR THE LONGER TERM. IF IT’S AN EXISTING HOME, YOU DON’T REALLY HAVE THAT OPTION. AGAIN, YOU’VE GOT OPTIONS, TAKE A LOOK AT IT AND THEN CREDIT RATINGS, WE ALWAYS KIND OF LOOK AT LIKE, IS IT WHAT IS YOUR CREDIT SCORE? SOMETHING THAT CAN SAVE YOU MONEY AT SOME POINT? WELL, JANE, I MEAN, IT DEFINITELY IT DEFINITELY CAN SAVE YOU MONEY. THINK ABOUT IT. IF YOU WERE LENDING MONEY TO A FRIEND, YOU GOT A RELIABLE FRIEND AND AN UNRELIABLE FRIEND WHO ARE YOU GOING TO MAKE THE WHO ARE YOU GOING TO LOAN THE MONEY TO? RIGHT. AND CERTAINLY AND IF YOU’RE WILLING TO LOAN MONEY TO BOTH BECAUSE YOU’RE SUCH A NICE PERSON. YES. YOU’RE GOING TO LEND MORE MONEY TO THE RELIABLE FRIEND THAN THE UNRELIABLE FRIEND. IT’S THE SAME THING. THAT’S WHAT CREDIT SCORES ARE. THE HIGHER YOUR CREDIT SCORE IS, THE MORE RELIABLE YOU ARE TO PAY BACK THE MONEY THAT YOU BORROWED. AND SO IF YOU’RE MORE RELIABLE, YOU’RE GOING TO TYPICALLY GET A BETTER INTEREST RATE AND YOU’RE GOING TO BE ABLE TO BORROW MORE MONEY AND STAY IN AHEAD OF WHAT YOU MIGHT WANT TO BORROW FOR THE FUTURE. MOST IMPORTANT THING, THERE ARE SO MANY FACTORS CREDIT SCORES. BUT THE MOST IMPORTANT THING IS MAKING THOSE PAYMENTS ON TIME. EXCELLENT. MIKE GIORDANO, IT’S ALWAYS GREAT TO B
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Mike On The Money: Paying off student loans, credit interest, and mortgage rates
Updated: 5:38 PM EDT Aug 9, 2023
Mike Giordano with our Jane Robelot discusses paying off student loans, credit interest, mortgage rates, etc.
GREENVILLE, S.C. —
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Mike Giordano with our Jane Robelot discusses paying off student loans, credit interest, mortgage rates, etc.