Bootstrapping typically means relying on one’s self to reach a goal. In business, bootstrapping is generally used to describe entrepreneurs who use their own personal funds and resources to start a business instead of raising money through small-business loans or investors.
Whether bootstrapping is your personal preference or your best option to start a business, there are pros and cons to this funding method, as well as some alternatives that might be helpful to consider.
How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
What is bootstrapping?
Bootstrapping refers to entrepreneurs starting new businesses by relying on their personal resources instead of securing funds through business loans or raising capital through investors. Or, in the case of an existing business, bootstrapping can be used to describe an entrepreneur using the revenue generated by their company, along with personal resources, to grow the business.
Some personal resources that may be used in bootstrapping include:
Personal savings.
Personal credit cards.
Personal loans, including home equity loans.
Personal spaces such as an extra room or garage.
Personal assets like equipment and supplies.
Pros and cons of bootstrapping
Pros
Owner retains full control of the business.
No business loan debt is taken on by the company.
Accrue time in business and revenue to help qualify for future funding.
Cons
Business growth may be limited due to lack of funds.
Personal assets, such as savings and retirement, could be at risk.
Doesn’t typically build business credit history.
Why do entrepreneurs choose bootstrapping?
For some entrepreneurs, bootstrapping is a personal preference and for others it may be their only option for launching a new business or growing an existing one.
Here are some reasons entrepreneurs may use bootstrapping to start their business:
Can’t qualify for a business loan
One of the top reasons budding entrepreneurs turn to bootstrapping is because they can’t qualify for a startup business loan. They may not be able to meet lender requirements for time in business, credit score and annual revenue, among other things.
Banks and SBA lenders — lenders that offer loans guaranteed by the Small Business Administration — generally have competitive rates and terms. However, to qualify for funding, you’ll typically need multiple years in business, in addition to good credit. For example, a Wells Fargo BusinessLine line of credit requires a credit score of at least 680 and two years in business.
Online business loans are typically easier to qualify for than bank loans; however, approval can still be a challenge for brand-new businesses. For example, Fora Financial offers business loans for bad credit with a minimum credit score requirement of 500 but also a minimum of six months in business.
Don’t want to take on additional debt
Entrepreneurs who could qualify for a business loan may choose bootstrapping because they don’t want to take on business debt and the interest expense and additional fees that come with a loan.
Business loan interest rates vary based on a number of factors. However, according to the most recent data from the Federal Reserve, interest rates on the average small-business bank loan ranged from 6.13% to 12.36% in the fourth quarter of 2023
. Other types of loans, including online loans, can have even higher interest rates.
In addition to interest, borrowers often have to pay fees like a business loan origination fee. Interest and fees may push the total cost of the loan beyond what an entrepreneur is willing to pay.
Don’t want to give up full control of the business
Entrepreneurs who have ruled out debt financing may have the option of raising money through equity financing — selling shares in their business to investors in exchange for funding. While equity financing doesn’t require taking on debt or making loan repayments, some entrepreneurs may still prefer bootstrapping.
When an entrepreneur sells shares in their business, they exchange partial business ownership for the investor’s funding. And, depending on the number of shares sold and the investor’s goals, the entrepreneur may no longer have full independence to run the company their way. They’ll also have to share the profits if the business succeeds.
Want to test the business idea before fully committing
Bootstrapping can allow an entrepreneur to try out their business model, refine their marketing strategy and build a customer base before committing to long-term financing or arranging to offer equity to investors. In addition, a business owner may find it easier to qualify for funding from business lenders after they’ve been in operation for at least six months.
Also, some entrepreneurs may not be comfortable quitting a full-time job in order to start a business. Bootstrapping can be a way to get a business off the ground without losing your main source of income.
Advertisement
Est. APR
20.00-50.00%
Est. APR
27.20-99.90%
Est. APR
15.22-45.00%
Min. credit score
625
Min. credit score
625
Min. credit score
660
Bootstrapping tips
The following tips may help you when bootstrapping your business:
1. Create a business plan.
Regardless of how you choose to fund your startup, you’ll need to write a business plan. The plan provides detailed information on your business, such as an executive summary, product description, market analysis, marketing strategy and financial projections.
Your business plan can be used as a guide to set up your business and help you identify your customer base, establish your marketing plan, lay out the organization of your operation and explain how you plan to generate revenue. You’ll typically update your business plan as your company grows.
In addition, if you decide to look for additional funding in the future, you can share your business plan with lenders and investors to show them that you have a profitable operation.
2. Officially launch your business
Bootstrapping may involve starting a scaled-down version of your business where, for example, you operate out of a spare room or use personal funds to buy supplies. However, no matter the size of your operation, you still want to take steps that will make your business official in order to best set it up for future growth.
Some common steps to take when launching a business:
3. Lay the groundwork for a future business loan
Bootstrapping is often used to get a business up and running; however, it’s not always the best option for business growth. For some entrepreneurs, bootstrapping may be a short-term option that will help them secure business financing in the future.
Bootstrapping can give you the opportunity to accrue time in business, generate revenue and build a customer base — all things that will make your business more attractive to lenders and investors down the road.
4. Take advantage of free resources
There are organizations that offer free or low-cost training, counseling and other resources to help you start and grow your business.
SBA resource partners are located throughout the U.S. and include Small Business Development Centers, SCORE business mentors, Veterans Business Outreach Centers and Women’s Business Centers, among others.
U.S. Chamber of Commerce chapters provide resources for entrepreneurs including virtual events and networking opportunities within your local community, though a membership fee may be required in some cases.
Industry and trade associations within your local community can provide opportunities to advance your industry knowledge and network through conferences and member events.
Public libraries can also be a resource to small-business entrepreneurs, with some offering online courses, demographic information, business planning tools and suggested reading lists.
Alternatives to bootstrapping
Here are some alternatives you may want to consider before deciding to fund your business on your own:
Business loans. There are many different types of business loans — term loans, lines of credit and equipment loans. Because the qualification requirements for business loans vary by type and lender, exploring a variety of options may allow you to find a loan that works for you and your new business.
Family and friends loans. Asking family members and friends to loan you funds or invest in your startup business is another way to raise money. Although these arrangements are often informal, it’s important to put the details of the funding in writing so there are no misunderstandings in the future.
Small-business grants. Grants can be a source of funding for small businesses, although competition for this “free” money can be fierce and the application process can be time-consuming. However, there are startup business grants offered by government agencies, corporations and nonprofit organizations that may be worth looking into.
Crowdfunding for business. Crowdfunding can be used to create online campaigns to raise money for a business startup, as well as other causes. A unique business idea and a wide network of supporters can help an entrepreneur launch a successful campaign.
Looking for a business loan?
See our overall favorites, or narrow it down by category to find the best options for you.
National mortgage rates moved higher for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans moved higher.
Some forecasters are rethinking the expectation that mortgage rates come down this year. Lenders price mortgages based on many variables, but overall, fixed mortgage rates follow the 10-year Treasury yield, which moves as investor appetite fluctuates with the state of the economy, inflation and Federal Reserve decisions.
“The issue of inflation remains unsettled,” says Ken Johnson of Florida State University. “This is putting upward pressure on mortgage rates through the yield on 10-year Treasurys.”
The Fed indicated it’d cut rates in 2024, but policymakers held off at its latest meeting, citing the need for more promising economic data. The Fed has been working to bring inflation back to its 2 percent target since 2022.
The Fed meets next on May 1 — the start of one of the busiest homebuying months.
Whether mortgage rates move up or down, though, it’s difficult to time the market. Often, the decision to buy a home comes down to what you need. Depending on your situation, it might make sense to take a higher rate now and refinance later. This way you can start building equity, rather than chancing that buying a home will become more affordable.
Rates accurate as of April 23, 2024.
These rates are marketplace averages based on the assumptions here. Actual rates available on-site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Tuesday, April 23rd, 2024 at 7:30 a.m. ET.
Current 30 year mortgage rate moves upward, +0.17%
Today’s average 30-year fixed-mortgage rate is 7.30 percent, up 17 basis points over the last week. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 6.91 percent.
At the current average rate, you’ll pay principal and interest of $685.57 for every $100,000 you borrow. That’s an additional $11.51 per $100,000 compared to last week.
Most mortgage lenders defer to the 30-year, fixed-rate mortgage as the go-to for most borrowers because it allows the borrower to scatter mortgage payments out over 30 years, keeping their monthly payment lower.
15-year mortgage rate trends upward, +0.12%
The average rate for the benchmark 15-year fixed mortgage is 6.76 percent, up 12 basis points over the last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $885 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more rapidly.
5/1 adjustable rate mortgage advances, +0.10%
The average rate on a 5/1 adjustable rate mortgage is 6.89 percent, up 10 basis points from a week ago.
Adjustable-rate mortgages, or ARMs, are home loans that come with a floating interest rate. In other words, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These loan types are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.89 percent would cost about $658 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.
Jumbo mortgage trends higher, +0.04%
The average jumbo mortgage rate is 7.44 percent, up 4 basis points over the last week. Last month on the 23rd, the average rate on a jumbo mortgage was lower at 7.02 percent.
At today’s average jumbo rate, you’ll pay $695.11 per month in principal and interest for every $100,000 you borrow. That’s up $2.73 from what it would have been last week.
Refinance rates
Current 30 year mortgage refinance rate rises, +0.20%
The average 30-year fixed-refinance rate is 7.31 percent, up 20 basis points since the same time last week. A month ago, the average rate on a 30-year fixed refinance was lower at 6.92 percent.
At the current average rate, you’ll pay $686.25 per month in principal and interest for every $100,000 you borrow. That’s an increase of $13.54 over what you would have paid last week.
Where are mortgage rates going?
If and when the Fed cuts interest rates depends on incoming economic data, such as the rate of inflation and the jobs market.
“While the majority of Fed members still expect three rate cuts this year, Atlanta Fed President Bostic is now predicting just one rate cut in the fourth quarter,” says Melissa Cohn of William Raveis Mortgage. “Not the news we want for the spring market.”
Keep in mind: The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves.
These broader factors influence overall rate movement. As a borrower, you could be quoted a higher or lower rate than the trend based on your own financial profile.
What current rates mean for your mortgage
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
To help you uncover the best deal, get at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
More on current mortgage rates
Methodology
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Despite the obvious appeal of side hustles — more money! — they’re not for everyone. If your side hustle makes you stress out, neglect relationships, or miss opportunities at your day job, then consider it a bad idea. Side hustles are only beneficial when they help you accomplish goals without sacrificing what matters most.
Side hustles are often promoted as a simple way to generate extra cash or fulfill your passions. However, the often-ignored price tag is physical and mental strain. Not to mention the time requirement and potential financial commitment necessary to get a gig going.
Read on to find out how to evaluate your options and goals before taking on a side hustle.
Check your score with SoFi
Track your credit score for free. Sign up and get $10.*
What Is a Side Hustle?
A side hustle refers to a second job or source of income that people pursue outside their primary employment. The purpose may be to earn extra money, pursue a pet project, or develop skills in a different area.
A side hustle can take various forms, from freelance work or consulting to selling handmade crafts or driving for a rideshare service. Renting out property and offering tutoring services also qualify. The point is leveraging your time and skills to pad your budget or explore a wider field than your day job allows. 💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. A free budget app can give you the same insight into your budgeting and spending at a glance, without the extra effort.
Pros and Cons of a Side Hustle
Browse the pros and cons below, and make a mental note of how many of each apply to your situation. If one side of the scales is considerably heavier, your decision may be obvious.
Pros of a Side Hustle
Here’s a breakdown of the benefits of a side hustle:
• Develop Your Career: Side hustles can provide a valuable opportunity to develop skills, gain experience, and broaden your professional horizons. By taking on projects or roles outside your main job, you may acquire new competencies to help advance your career or get a promotion. Additionally, side hustles can demonstrate initiative, entrepreneurial spirit, and versatility to potential employers, enhancing your marketability and opening up new opportunities.
• Switch Up the Norm: A side hustle allows you to break away from the routine of your primary job. This variety can be refreshing and stimulating, helping to prevent boredom and burnout. Whether you’re pursuing a different passion, exploring a new industry, or experimenting with creative projects, having a side hustle can inject excitement and fulfillment into your life outside work.
• Build Your Network: Side hustles often involve interacting with different people and communities, which can expand your professional network. Whether you’re collaborating with clients, partners, or fellow freelancers, each connection presents an opportunity to exchange ideas, learn from others, and potentially uncover new career prospects. Building a diverse network through your side hustle can provide valuable support, mentorship, and referrals in your professional journey.
• Channel Creativity: Side hustles offer a platform for expressing your creativity, passions, and interests outside your primary job. Whether it’s writing, photography, crafting, or any other form of expression, a side hustle can bring more meaning and fulfillment than your 9-to-5. This outlet can serve as a source of inspiration, relaxation, and personal growth, enriching your life beyond the confines of your main occupation.
• Increase Income: One of the most practical benefits of a side hustle is the extra money. Whether saving for a major purchase, paying off debt, or simply seeking financial security, the income from your side hustle can provide greater financial flexibility and stability. Likewise, having multiple streams of income can be a buffer against economic uncertainty and provide a safety net in case of job loss or another hardship.
Cons of a Side Hustle
On the other hand, these are the potential drawbacks of a side hustle:
• Less Time to Relax: Side hustles require time and effort, eroding your leisure time. Working 60+ hour weeks can lead to fatigue and even burnout. When juggling your day job, side hustle, and personal commitments causes you to lose sleep, your quality of life can become unsustainably low.
• Distraction from Work: A side hustle can encroach on your attention and focus during work hours. Constantly thinking about your other gig, responding to email, or taking calls while at your main job can detract from your performance. If colleagues or supervisors perceive your divided attention, this can also strain your professional relationships and undermine your credibility.
• Managing the Stress of Two Jobs: Managing the demands of a side hustle on top of your primary job and personal responsibilities can significantly increase stress. Deadlines, client expectations, financial pressures, and the need to constantly switch between different roles and tasks can elevate anxiety. Chronic stress associated with balancing multiple commitments can affect your mental and physical health over time.
• Sustainable Prices Can Be Elusive: Setting prices or negotiating rates for your side hustle services can be challenging, especially if you’re just getting started or dealing with imposter syndrome. Striking the right balance between competitiveness and fair compensation can be tricky, and you may encounter situations where clients or customers undervalue your work. Plus, breaking into a competitive market may require setting prices so low that you work at a loss for the first few months or even years. As a result, your side hustle may ding your budget instead of adding to it.
💡 Quick Tip: An online money tracker makes monitoring your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.
When Does a Side Hustle Make Sense?
Several ingredients are key for a side hustle to make sense for your situation. First, it’s essential to have a clearly defined reason for pursuing a side hustle. For example, you may want to generate income, follow a creative impulse, or pave a path to a new career. This clarity of purpose will guide your efforts and motivate you throughout your side hustle journey.
Second thorough research is crucial to understanding the market, demand, competition, and potential challenges associated with your chosen side hustle. This is significant even if you don’t have financial aspirations for your other gig.
For example, if you’re interested in fitness, is your specific angle better suited for a blog or a YouTube channel? Will you create a social media presence to drive more traffic? What kind of value are you delivering to your audience?
In a different vein, if you want to become a rideshare driver, which company offers the best pay? Do you have a presentable vehicle that you’re willing to put miles on? Answering these kinds of questions will help you make informed decisions and set realistic expectations. Not doing your homework will likely bring a lack of results, monetary loss, and frustration.
Next, understand the time commitment your side hustle will require. For instance, a few hours of woodworking on the weekend is less demanding than taking a constant flow of orders on Etsy. If your schedule is already full to the brim from your primary job, family responsibilities, and personal pursuits, incorporating a side hustle can do more harm than good. Even if you work a side gig with your significant other, it’s not the same as spending quality time together.
Finally, your side hustle should fit into the larger picture of your goals and values. For instance, you might start a side hustle in order to build a $5,000 emergency fund. Or you could take a software engineering course in the evenings that will help you eventually switch careers. In any case, your side hustle should have specific benefits and point toward a defined objective. Otherwise, you’ll burn time without accomplishing much.
The Opportunity Cost of a Side Hustle
The “opportunity cost” of a side hustle depends upon the resources you invest. When you dedicate yourself to anything, you lose opportunities to engage in leisure activities, spend time with family and friends, and take vacations. In essence, the opportunity cost of a side hustle equals the value you place on other aspects of life that matter most.
Also ask yourself what is the financial cost of your side hustle? You might have to invest money to purchase materials or pay for marketing. You might also give up overtime at your primary job. That’s cash that could go into savings, investments, or paying off debt.
Likewise, your time could be going into skill development for your day job, leading to promotions or raises. Plus, your employer might sponsor specific types of professional development, resulting in free training that moves your career forward and increases your salary.
Ultimately, the opportunity cost of a side hustle varies depending on individual circumstances, goals, and priorities. It’s essential to carefully consider these factors and assess how the benefits of the side hustle compare to the time and money.
Examples of Side Hustles
While there are unusual ways to make money, side hustles are typically more accessible. Here are some side hustles that match with a range of backgrounds and skill sets:
• Freelancing: Offer services such as writing, graphic design, programming, bookkeeping, and more. You’ll take projects on a contract basis with multiple clients.
• Dog Walking: Providing exercise and companionship for dogs by taking them on walks on a regular or as-needed basis.
• Blogging: Creating and maintaining a consistent feed of valuable written content on a topic you love or have expertise in. Find out how much it costs to start and run a blog.
• Non-Medical Senior Care: Assisting elderly individuals with daily tasks (shopping, bathing, housework, etc.) and providing companionship to support their wellbeing.
• Babysitting: The tried-and-true income-generator for teenagers and adults alike. You’ll care for children in the evenings and on weekends when parents are busy or need a break.
• Personal Assistant: Providing administrative support and assistance to individuals or businesses. You’ll manage schedules, run errands, and handle correspondence. You can also be a virtual assistant and provide numerous essential services (bookkeeping, arranging travel, etc.), therefore creating a side hustle from home.
• Handyman: Offering services to repair, maintain, and improve residences. You can specialize in one or more areas: plumbing, electrical work, carpentry, or general home tasks.
• Crafting: Creating handmade goods and artwork, such as jewelry, clothing, and home décor, to sell online or at craft fairs.
• Cooking/Baking: Crafting you can eat! Get to work in the kitchen to make treats, desserts, or meal kits for sale.
• Private Tutor: Providing personalized academic instruction to students in a particular subject or skill, often on a one-on-one basis.
• Self-Publishing: Writing and publishing books or other written works independently, without the involvement of traditional publishing companies. Self-publishing is inexpensive because your work will be accessible as an ebook.
• Teaching Online Courses: Creating and delivering educational courses or tutorials on a specific topic via online platforms is another side hustle from home.
• Product Tester: Testing and reviewing products or services for companies or brands, often providing feedback and insights based on personal experience.
• E-Commerce: Selling products or services online through a website or online marketplace, which may involve sourcing or creating products, managing inventory, and handling customer inquiries and orders.
When Is a Side Hustle Not Worth It?
A side hustle may not be worthwhile because of the toll on your physical, mental, and financial wellbeing. Here are more specific ways that a side hustle can negatively impact your life:
• Burnout: Working an 8-hour job and dedicating 2 to 4 additional hours per day to your side hustle leaves little room for anything else. The demands of a side hustle can result in excessive stress, fatigue, and burnout.
• Missed Career Advancements: Devoting significant time and energy to a side hustle may detract from opportunities for advancement in your primary job. They can also keep you from visualizing a sustaining career. So if you’re in a job you don’t like, a side hustle can act as a bandage instead of a cure. It’s advisable to focus on switching vocations instead of supplementing your income through another unsatisfying side job.
• Unhealthy Lifestyle Habits: A demanding side hustle may lead to poor eating choices due to lack of time for meal prep, insufficient exercise, and disrupted sleep. Over time, these habits damage physical health and overall quality of life.
• Strained Relationships: Spending excessive time on a side hustle can strain relationships with family, friends, and romantic partners. Missing significant events or quality time with loved ones due to work commitments can lead to feelings of resentment and isolation.
• Financial Costs: Some side hustles require upfront investments of time and money, for purchasing inventory or equipment, marketing expenses, or training courses. If the return on investment does not justify these costs, the side hustle may not be financially sustainable in the long run.
• Not-So-Passive Income: Many side hustles require active participation and ongoing effort to generate income, which can limit scalability and long-term earning potential. Without the ability to create passive income streams, you’ll constantly trade time for money without achieving financial freedom.
• Neglecting Personal Growth: A side hustle that consumes all available time and energy may leave little room for hobbies or other interests. Over time, this can lead to stagnation and dissatisfaction with your lifestyle.
Side Hustle Tips
A side hustle can quickly get out of hand or detract from your life if you’re not careful. Here’s how to create a practical side hustle that serves your needs:
• Start Small: When beginning a side hustle, starting with manageable tasks or projects that don’t require a significant investment of time or resources is wise. Starting small allows you to test the waters, gain experience, and assess the viability of your chosen side hustle without taking on too much risk. As you gain confidence and experience, you can gradually expand and scale your side hustle over time.
• Play to Your Strengths: Identify your special skills, interests, and areas of expertise, and leverage them in your side hustle. By focusing on activities that align with your strengths, you’re more likely to enjoy the work, excel at it, and differentiate yourself from competitors. This approach also allows you to maximize your earning potential by offering high-value services or products that cater to a specific niche or market. Remember, this doesn’t mean you must stick to your current skill set. Your interests and abilities can also lead you to pick up new skills.
• Maintain Your Performance at Work: Balancing a side hustle with a full-time job means prioritizing high performance and professionalism in your primary job while pursuing your side hustle. To that end, it’s recommended to set boundaries for the time you dedicate to your side hustle and to manage your schedule efficiently. By maintaining your performance at work, you can preserve your job security and opportunities for advancement.
• Aim at a Goal Instead of a Job: Instead of treating your side hustle as just another job, set out to achieve specific goals or milestones that align with your long-term aspirations. Whether your goal is to generate additional income, pursue a passion project, or transition to full-time entrepreneurship, having a clear vision and purpose for your side hustle will keep you motivated and focused on what truly matters to you. By focusing on goals rather than simply exchanging time for money, you can create a more fulfilling and meaningful side hustle.
The Takeaway
Side hustles can be a bad idea when they damage your quality of life. While picking up a side gig can create more income, this result must be weighed against other priorities, including advancement in your day job, time dedicated to relationships, and alternatives that slowly but surely create passive income.
Asking yourself whether a side hustle is a good move might not be the most relevant question. Instead, you can ask yourself if a second job makes sense after developing a clear vision of the future.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
Are side hustles risky?
Side hustles can be risky because of the opportunity cost of picking up extra work. Specifically, a side hustle can drain time and financial resources, add unmanageable stress to your life, and lead to worse quality of life because of the sacrifices required to work a second job. As a result, it’s essential to evaluate your circumstances and identify your goals before starting a side hustle.
Are side hustles a waste of time?
Side hustles can be an excellent way to generate more income, develop yourself professionally, or transition to a different career. However, they can also be a waste of time if you don’t set goals and create a realistic plan when starting. So a carefully planned side hustle that fits into the larger picture of your life can provide massive benefits, while picking up more work to simply stay busy can lead to missed opportunities in your professional and personal life.
Is starting a side hustle really worth it?
Starting a side hustle can be worth it for additional income, pursuing passions, or expanding your skill set. However, it requires careful consideration of the potential drawbacks, such as time constraints, increased stress, and the risk of hindering career advancement. Ultimately, the value of a side hustle depends on your aligning it with personal goals, managing resources effectively, and maintaining a healthy work-life balance.
Photo credit: iStock/JLco – Julia Amaral
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Frankly, however, the biggest surprise at the moment might be that sales volumes have held up pretty well over the past few weeks even as mortgage rates have climbed into the mid-7s. We’ve been talking about sales growth over the past year. More home sales are happening, but we can also see — once adjusted for seasonal patterns — that sales should be much higher now if a real market recovery were underway.
It feels like the latest macro trends will keep mortgage rates in the mid-7% range for the near term. And we’d expect that to slow home sales further. That’s why Altos Research tracks every home for sale in the country each week. The data so often defies expectations or changes very quickly. Let’s dig further into the details of the U.S. housing market for the week of April 22.
Housing inventory
When we look at the active inventory of unsold homes on the market, we can definitely see the impact of higher mortgage rates in the past month. There are 543,000 single-family homes on the market now. That’s a 3% jump from last week and 31% above year-ago levels.
The available inventory of unsold homes on the market is building quickly due to the most recent mortgage rate jumps. There are 130,000 more homes on the market now than last year at this time.
Normally, inventory is climbing at this point in the second quarter. We’re rapidly approaching the peak of the market in terms of seller listings, and as inventory builds, the sales rate will peak by the end of June. So, it’s normal that inventory is growing now.
But when you add a spike in mortgage rates that makes homebuying less affordable, that leads to fewer buyers and inventory grows. Altos data currently shows an inflection point in April. With the most recent mortgage rate jump, inventory growth has also accelerated.
This is what is meant when we say that higher rates leads to higher inventory. We are on the path back to the formerly normal levels of unsold homes on the market. A couple more years with elevated rates will get us there.
But it’s also noteworthy to point out that falling rates reverse this trend. Lower rates mean that people snap up the existing inventory.
New listings
Growing inventory is not just about slowing demand. We are also consistently measuring more sellers coming back into the market. At 69,000 new listings unsold today, that’s 3% more than a week ago and 14% more than this time last year.
In fact, there are more new sellers this week than in any week of 2023. This selling season still has two more months of growth potential. Industry professionals would love to see 70,000 or 80,000 new listings per week in May. More sellers means more sales can happen. There’s a limit, of course, as we could eventually reach an imbalance if too many sellers flood the market and too few buyers follow suit. But we’re not close to that yet.
In the years before the COVID-19 pandemic, the latter half of April would normally see 80,000 to 100,000 new listings in a week. Now we’re at 69,000. Obviously, elevated mortgage rates slows both buyer and seller activity. There are a lot of people who will never sell their house with a 3% mortgage.
There’s unlikely to be a flood of sellers in the next few years, but we can see steady growth. Each year with higher rates will create more inventory growth and have fewer people locked into low rates. That growth is good for the market.
The available inventory of homes to buy and the new ones being listed for sale each week are what consumers care about. If I’m buying a house, do I have any houses to buy? For homebuyers, the selection they have now is the most they’ve had in years.
Real estate professionals, on the other hand, have to care about transaction volume. How many home sales are happening? Because there were so few sellers last year, the number of sales was quite constricted. That’s starting to change. The 14% increase in new listings over the past year is a really good sign that sales can grow.
Pending sales
When we look at the sales rate, we can indeed see that home sales are growing. There were 71,000 new contracts started for single-family homes this week. That’s 3% more than last week and 7% more than a year ago.
There are still 8% fewer sales happening each week than in 2022. At that time two years ago, there were frantic last-minute deals getting done as mortgage rates were rising quickly. So, even though rates were up back then, sales were still strong.
But the hectic pandemic-era pace of sales had slowed, so inventory was building quickly. In 2022, the new sales rates really cratered after the Fourth of July holiday.
There are now 385,000 single-family homes under contract. That’s 5% growth compared to this time last year but is still 14% less than two years ago. New sales started this week saw 7% growth while the total number of homes under contract saw 5% growth.
It takes 30 to 40 days for the typical sale to close. The homes under contract now will mostly close in April and May. The 5% annualized growth rate is less than we’d hoped for at the start of the year, but it’s creeping up even with higher mortgage rates.
Altos Research uses direct measurement rather than seasonally adjusting its numbers. There are 385,000 single-family homes in escrow to complete a sale as of today. If you were to approximate a seasonal adjustment on this number, you would see a yearly sales pace of about 4.4 million units for April 2024. That pace is up from April 2023, but it is still running slower than the typical April. The seasonal pace is where one can observe the slowdown due higher mortgage rates.
The takeaway from the weekly new pending sales data is that even though sales continue to outpace last year, that growth has definitely slowed.
Home prices
The median price of single-family homes under contract is now $398,000. That jumped by 2.4% jump this week and is, in fact, a new all-time-high, surpassing the sale prices of two years ago.
These spring weeks are indeed the time when home prices climb, so it’s not too surprising that this trend is occurring now. But we’ve also been keeping a close eye on home prices in the face of these rising mortgage rates.
The prices of the homes going under contract are 6% more expensive than one year ago. Last year at this time, home prices were lower than in April 2022. But we’re now back at all-time highs. The previous peak was $395,000 two years ago.
One thing of interest in the price data is how slow this climb has been. Compared to Jan. 1, 2024, prices are up 6.6%. In most years, the increase is closer to 10% by this time in April. So, as a leading indicator for how the year ends up, this price signal is much softer than usual.
We can also see this in asking prices. The median price for all homes currently on the market is $449,000. That’s up a fraction from last week and only 1% above last year at this time.
Asking prices can be thought of as a leading indicator for future sales prices. Homes that are on the market now will get offers in May, close in June and will be reported on in July. So, the future signals for home prices aren’t falling because of higher mortgage rates, but it certainly looks like price appreciation has slowed.
Price reductions
Another strong leading indicator for future home sale prices is the share of homes on the market with price reductions. If more sellers have to cut their prices now, that’s a real signal for sales that will happen in the future.
Surprisingly, given the mortgage rate changes, there is no jump yet in the share of price reductions. We’ve been watching this stat closely.
This week, 32% of the homes on the market have taken a price cut. That’s actually down a fraction from last week, given a relatively strong set of new listings that hit the market and the fact that home sales are at their highest point of the year. Fresh inventory doesn’t take a price cut until after it sits for a while without an offer.
There are 3% more homes with price reductions today than a year ago. Last year at this time, price cuts were still decreasing with very tight volumes of new listings. There are more homes on the market now with price cuts than in any April on record. That shows weakness in prices, but it’s not a super high number and it’s not skyrocketing, so that implies we won’t see prices tanking anytime soon.
The takeaway here is that with the 30-year fixed mortgage at 7.4%, there is still just enough sales volume to keep home prices from dropping like they did in late 2022. The current market is not changing nearly that quickly. We’ll continue to watch data on price cuts. As mortgage rates make homes less affordable, fewer offers will be made and some sellers will cut their prices. That could accelerate in the next few weeks.
Even homeowners who have paid off their mortgage may be finding that their available equity is not enough to downsize, according to a story published Saturday by The New York Times. The article also notes that reverse mortgages are a potentially valuable tool for seniors in the current housing environment.
Roughly 80% of older adults live in the homes they own, but housing costs and interest rates have combined to create a challenging scenario for some older people seeking to downsize into a more manageable home. The prices for smaller townhouses or condominiums can, in some cases, outweigh the prices for larger single-family homes.
“[T]he traditional notion that a house with a paid-off mortgage can serve as an A.T.M. to help fund retirement living is shifting, economists report. Homeownership no longer is an unqualified benefit for some seniors,” the story explained.
Urban Institute research economist Linna Zhu rhetorically asked if seniors were “aging in place, or stuck in place.”
According to data from Harvard University’s Joint Center for Housing Studies (JCHS), the share of older adults carrying mortgage debt rose significantly between 1989 and 2022, going from 24% to 41%. During that same period, the typical amount owed on these mortgages rose from $21,000 to $110,000.
These larger mortgage balances, combined with elevated interest rates, have made impacted seniors “cost-burdened,” according to 2023 data from the JCHS, meaning they spend at least 30% of their income on housing costs.
But with rising home prices have also come higher levels of home equity, which recently led Boston College’s Center for Retirement Research (CRR) to reduce “its estimate of the proportion of American households at risk of being unable to maintain their standard of living after retirement,” the Times reported.
The CRR’s so-called “retirement risk index” fell to 39% in 2022, down from 47% in 2019. The organization “bases its calculations on older homeowners tapping their home equity with reverse mortgages,” the Times explained.
A profiled couple obtained a Home Equity Conversion Mortgage (HECM) sponsored by the Federal Housing Administration (FHA) in 2020, which allowed them to “pay off their existing mortgage, afford cataract surgery and complicated dentistry (neither one was covered by Medicare, in this instance), replace a 22-year-old car and upgrade their plumbing, all while keeping their retirement savings intact,” the Times stated.
Zhu of the Urban Institute told the Times that reverse mortgages are “a very effective way to tap home equity,” but product adoption by seniors — as is true with many equity-tapping options — remains low.
Housing researcher Jennifer Molinsky noted that home equity is seen as “a nest egg” for those in later life, but many seniors are hesitant to tap it as a financial resource. Instead, many seniors see it as more of an emergency resource, only to be tapped when no other options exist.
“Besides, accessing home equity isn’t always simple or possible,” the Times stated. “With federally insured reverse mortgages — officially [HECMs] — the upfront costs are high […] and the paperwork substantial. In 2022, only 64,500 older applicants received reverse mortgages through the federal program.”
One researcher said that the situations of older adults could be bettered by “improving and streamlining the federal HECM program, broadening the criteria for refinancing and [home equity line of credit (HELOC)] loans, and encouraging the development of more housing, including homes and apartments suitable for older buyers and tenants.”
WASHINGTON — Inflation and uncertainty surrounding the direction of federal policy on trade, spending and other issues are banks’ top financial stability concerns, the Federal Reserve Board said in a report released Friday.
For its semiannual report on financial stability, the Fed surveyed a range of financial professionals — including broker-dealers, investment fund managers, research and advisory professionals as well as academics — about the top issues facing the financial system. Policy uncertainty emerged as a major new source of anxiety for industry experts — it was cited by 60% of respondents, up from the just 24% of respondents who cited it as a top concern in the Fed’s last survey in October 2023.
Since 2019, the Fed has issued two reports on financial stability per year, usually releasing one in the spring and another in the fall.
Persistent inflation and high interest rates remained the top concern across the board, with 72% of respondents listing it as their primary concern — the same percentage as in the October report. The report indicated that interest rates may remain elevated above current market expectations for an extended period and that persistent inflation could prompt a more stringent monetary policy, causing increased volatility in financial markets and adjustments in asset valuations.
But the rise of policy uncertainty — including unpredictability stemming from fluctuating trade policies, influenced by geopolitical tensions such as the conflict in the Middle East and Russia’s war against Ukraine that has lasted more than two years — was an unexpected source of market disruption for many survey respondents. Respondents also flagged the upcoming U.S. elections in November as a source of stress.
“Further escalation of geopolitical tensions or policy uncertainty could reduce economic activity, boost inflation, and heighten volatility in financial markets,” the report said. “The global financial system could be affected by a pullback from risk-taking, declines in asset prices, and losses for exposed U.S. and foreign businesses and investors.”
Concerns about the credit quality of commercial real estate — which was the No. 2 concern cited in the October report — was cited as a top concern among 56% of the survey’s respondents. But that fell from 72% in the October report. The Fed noted that prices across all sectors of CRE continued to decline in the second half of 2023, and the report makes clear the full impact of CRE price drops have yet to be reflected in the data.
“These transaction-based price measures likely do not yet fully reflect the deterioration in CRE market prices because, rather than realizing losses, many owners wait for more favorable conditions to put their properties on the market,” noted the report. “Capitalization rates at the time of property purchase, which measure the annual income of commercial properties relative to their prices, moved modestly higher but remained at historically low levels, suggesting that prices remain high relative to fundamentals.”
Banking sector instability continued to feature prominently despite the report noting high levels of liquidity and low funding risks in the sector since the October report.
While the Fed’s emergency lending facility, the Bank Term Funding Program, ceased operations on March 11, the report noted the BTFP continues to reduce liquidity pressures for depositories. The report said mostly small institutions with under $10 billion of assets — representing 95% of beneficiaries — benefited from the program.
Inside: Learn how to save money quickly, even on a tight budget. Get practical tips for how to save money fast on a low income. Simple savings ideas to implement today.
Saving money on a tight budget can feel like a high mountain to conquer, especially when you’re trying to do it fast.
Many people earn just enough to cover their essential costs, leaving little room for savings. However, with the right strategies, saving money fast on a low income doesn’t have to be a pipe dream.
This is something I started when we decided to pay off debt. Then, we choose to continue saving that money and investing it.
By understanding the flow of your money – where it’s coming from and where it’s going – you can make informed decisions that maximize your savings potential.
By prioritizing your spending and forecasting future expenses, budgeting can reduce the stress of financial uncertainty and introduce a sense of control and confidence in your money management skills. Thus, leading to you starting to save.
What is the best way to save money on a low income?
On a low income, the best way to save money is to thoroughly understand your expenses and prioritize your needs over wants.
In addition, by planning and tracking your finances meticulously, you can identify where each penny is going. Thus, allowing you to analyze your expenses. Once you have a clear picture of these, start looking for areas to trim down.
Remember, saving money is about being proactive and consistent. These small but steady steps can build up over time to help you save money fast, even on a low income.
How to Save Money on A Fast Income
1. Start with Clear Priorities
Before you can decide where to cut costs or how to allocate your funds, you need to know what’s most important to you.
What is your why for doing what you need to do? Is it building an emergency fund, saving for a down payment on a home, or maybe preparing for retirement?
Whatever your goals, outline them clearly. This is how you will save money.
2. Budgeting effectively to manage finances
To budget effectively on a low income, it all starts with a cold, hard look at your numbers.
Begin by listing all sources of income – that’s your foundation.
From each paycheck or income stream, subtract your non-negotiable expenses such as rent, utilities, transportation, and debt payments. What you have left is your discretionary income.
Then, it’s time to categorize and prioritize. Group your expenses into necessities and nice-to-haves. If your essentials consume most of your income, you’ll need to scrutinize the nice-to-haves list.
Every dollar saved from unnecessary splurges is a dollar that can be put towards your savings.
Use budgeting apps or tools to keep a real-time record of your spending. These can help you stay disciplined and provide a visual reminder of your progress.
3. Track and Slash Unnecessary Expenses
Now, you must meticulously and ruthlessly cut out the non-essentials.
Identify patterns and spot the recurrent, unnecessary expenses that are draining your funds.
Do you subscribe to multiple streaming platforms?
Are you forking out cash for a gym membership you barely use?
Are those daily specialty coffee drinks adding up?
It’s time to slash these expenditures.
Cutting these expenses is like giving yourself a raise.
4. Lower Housing Expenses Without Compromising Comfort
Living in smaller, more affordable housing to decrease rent or mortgage might be exactly what you need.
Opting for a smaller, more affordable space is a practical approach to significantly lower your rent or mortgage payments. When you choose to live in a compact setting, not only do you reduce the square footage costs, but often, utility and maintenance expenses decrease as well due to the reduced size of the living area.
If you are renting, try to negotiate your rent or lease terms with your landlord – they might be willing to offer a discount to keep a reliable tenant, or you may be able to agree on lower rent for a longer lease commitment.
If you’re a homeowner, explore the possibility of refinancing your mortgage to take advantage of lower interest rates. Alternatively, consider renting out a room or a portion of your living space, as the additional income can offset your mortgage or maintenance costs.
5. Save Money on Utilities with Simple Home Adjustments
Saving money on utilities might sound challenging, but you can often achieve substantial savings with a few strategic home adjustments. Let’s explore some cost-effective strategies and modifications you can make to your living space that could help reduce your bills.
Energy Efficient Appliances: Swapping out older appliances for Energy Star-rated ones leads to significant reductions in electricity use and water consumption.
Smart Thermostats: Installing a smart thermostat allows you to programmatically control your heating and cooling based on your schedule and preferences, potentially saving you a bundle on your energy bills.
LED Lighting: Switch to LED bulbs, which are more energy-efficient than traditional incandescent ones and have a longer lifespan, saving you on replacement costs as well as your electric bill.
Insulation Upgrades: Proper insulation keeps your home warm in the winter and cool in the summer, reducing the need for excessive heating or air conditioning.
Water-Saving Fixtures: Low-flow showerheads and faucet aerators reduce water usage, preserving this precious resource and lowering your water bill.
Not only do these simple home adjustments lead to savings on your utility bills, but they also contribute to a more environmentally friendly lifestyle.
6. Cooking at home instead of eating out
Cooking at home instead of dining out is an excellent way to save money, especially on a low income. When you eat at a restaurant, you’re not just paying for the food; you’re also covering the cost of service, ambiance, and the establishment’s overhead.
Plan a balance between meal prepped home-cooked meals and the occasional dinner out to keep your budget in check while still enjoying life’s little pleasures. Here are some frugal meals to get you started.
Remember, you don’t have to eliminate eating out entirely.
7. Canceling unused subscriptions and memberships
Stop draining money on services you don’t actively use. It’s surprisingly easy to forget about these auto-renewing expenses, so taking the time to audit your subscriptions can reveal opportunities for savings.
Recently, we tracked over $100 a month in my mother-in-law’s unused subscriptions and membership!
As such, it’s important to periodically evaluate your subscriptions and memberships to ensure they are still serving your interests and goals. If not, give yourself permission to cancel and save that money for something that offers tangible benefits in return.
8. Buying quality items that last longer
Investing in quality items that last longer is a strategic way to save money over time. While the initial cost may be higher, durable products can prevent the cycle of frequent replacements, ultimately contributing to long-term savings and less waste.
Remember, not every purchase necessitates the highest quality option. Examine which items you frequently use and can benefit from in the long run. For instance, driving a Toyota or buying higher quality shoes.
Once you’ve identified these, invest in quality for those and enjoy the satisfaction of a purchase that lasts.
9. Optimize Grocery Shopping
To optimize grocery shopping and manage your food budget effectively, start by thoroughly checking your current pantry supplies and making a precise shopping list to deter impulse purchases.
Utilize coupons and enroll in local store loyalty programs for exclusive discounts.
Embrace meal planning to avoid unnecessary spending.
Consider incorporating meatless meals, as this can contribute to consistent savings over time due to the typically higher cost of meat compared to vegetables and other plant-based options.
Plan meals around these cheap foods when you are broke.
By shopping smartly, you have the power to drastically lower your monthly food bill. Just remember, the key is preparation and discipline.
10. Repairing items instead of replacing them
Repairing items instead of replacing them can be a significant money-saving tactic, especially when budgets are tight. It’s often more cost-effective to fix a piece of furniture, mend a garment, or troubleshoot an appliance than it is to buy new one.
Consider the condition and value of each item before deciding to repair it. If the cost of repair approaches the price of a new item, or if it’s beyond your skill set, researching community resources or seeking professional help may be a wise choice.
11. Practicing the 30-day rule for non-essential purchases
Putting the brakes on impulsive buying can significantly boost your savings, and practicing the 30-day rule is a tried-and-true method to control those urges.
Before you make any non-essential purchase, wait 30 days.
If after a month you still feel the purchase is necessary or meaningful, then consider buying it.
Remember that the goal isn’t to deny yourself enjoyment but to ensure that each purchase is considered and valued. This conscious approach can lead to more satisfaction with the items you do choose to buy and a healthier bank balance.
12. Skip the Car Loan
Opting out of a car loan and finding alternative modes of transportation, such as cycling, walking, or using public transportation, can lead to significant financial savings.
Without a car payment, individuals can redirect the funds that would have gone towards monthly installments, insurance, and maintenance into their savings account.
This strategy can be particularly impactful for those with a goal in mind or working with a low income, as every dollar saved moves them closer to financial stability. Furthermore, the elimination of auto loan interest charges and potential debt can provide a more secure financial footing and peace of mind.
13. Using public transportation or carpooling to reduce fuel costs
Utilizing public transportation or carpooling can be significant in reducing fuel costs, particularly when you’re committed to saving money on a low income. These alternatives to solo driving not only save on fuel but also on parking fees, and wear and tear on your vehicle.
Another option is embracing car-sharing services, especially if you find that you don’t require a car on a daily basis. Services like Turo and Getaround offer the flexibility of having a car when you need one without the constant financial responsibility associated with ownership.
Remember, it’s all about what suits your lifestyle and frequency of need. By assessing how often you need a vehicle and comparing it with the total costs of ownership, car-sharing could be an excellent way to save money.
14. Selling unused or unwanted items for extra cash
Selling unused or unwanted items is a fantastic way to declutter your space and earn extra cash. You might be surprised how much money you can make by letting go of things you no longer use or need. From clothes you’ve outgrown to homeware that’s gathering dust, each item sold can inch you closer to your savings goal.
Take advantage of this opportunity; a thorough home audit could reveal a treasure trove of sellable items right under your nose. Not only does this increase your income, but it also helps you consider future purchases more carefully.
15. Taking advantage of free entertainment and community events
Leveraging free entertainment and community events is a delightfully frugal way to enjoy yourself without breaking the bank. From concerts and exhibitions to workshops and meet-ups, there’s often a wealth of activities that won’t cost you a penny.
In fact, here at Money Bliss, I have the most popular list of things to do with no money.
With a little creativity and resourcefulness, you can uncover a variety of enjoyable and inexpensive things to do.
16. Automating savings to ensure consistent contributions
Automating your savings is a hassle-free way to ensure you consistently contribute to your financial goals.
By setting up an automatic transfer from your checking account to a savings account, you’re essentially paying your future self first.
This ‘set and forget’ approach helps grow your wealth with minimal effort.
17. Negotiating bills and asking for better rates
Many service providers are open to negotiating prices if it means retaining a customer. Whether it’s your cable package, insurance, or even a credit card interest rate, it’s worth having the conversation.
Remember, the worst they can say is no. But often, companies will offer helpful options when they realize you are considering alternatives due to cost concerns.
One phone call could save you $1000 a year – just like when I decreased my cable bill!
18. Evaluating insurance policies for potential savings
When evaluating insurance policies, it’s critical to regularly assess your coverage needs and shop around for the best rates. Comparing policies from different providers annually can reveal opportunities for lowering premiums or finding more suitable coverage.
Utilize online tools and independent insurance agents to ensure a comprehensive review of available options.
Remember to inquire about bundling policies, as this can often lead to significant savings while consolidating your insurance needs effectively.
19. Meal Planning and Prep: Strategies to Reduce Food Waste
By allocating some time each week to plan your meals, you can ensure that you only buy what you need, thereby minimizing waste and cost.
Learning to meal plan starts with looking at a calendar and a local sales flyer to find the low cost deals.
By creating a weekly plan and incorporating budget-friendly recipes, you can not only eat healthier but also avoid the costlier option of dining out.
20. Forgo single use items
By choosing reusable items over single-use ones, you cut down on waste and habitual spending on disposables. This is also known as frugal green.
For instance, investing in a reusable water bottle, rather than buying single use water bottles.
By integrating sustainable products into your life, you also promote a culture of conservation and mindfulness, inspiring others to make eco-friendly choices.
21. Shopping for groceries with a list to avoid impulse buys
This is key! Especially when shopping with kids or a significant other!
Shopping for groceries with a list is a golden rule to avoid impulse buys, which can quickly derail your budget. By planning your purchases beforehand, you stick to the essentials and resist the temptation of sale items that aren’t on your list or don’t fit your meal plan.
Bonus Tip: Remember to always shop on a full stomach – hitting the grocery store hungry is a surefire way to end up with impulse purchases that aren’t on your list!
22. Buying generic brands instead of name brands
Opting for generic brands rather than name brands is a straightforward and effective way to save money on everything from groceries to over-the-counter medications. These products are often of similar quality and effectiveness but come at a significantly lower cost.
By making the switch to generics, especially for regularly used items, the aggregate savings can be substantial over time.
23. Making bulk purchases for commonly used items to save on cost-per-unit
When you buy in larger quantities, the cost per unit typically decreases, leading to savings that add up over time. Bulk buying works best for non-perishable goods or products you use consistently.
Make a point of buying non-perishable items or products with a long shelf life in bulk to avoid waste and ensure that you truly save money with each bulk purchase.
Just make sure you are going to use it!
24. Cutting costs on personal care by DIY methods
DIY methods for personal care are not just a trend – they’re a practical and often healthier alternative to store-bought products. By creating your own beauty and personal care items, you can significantly trim costs and take control of what goes on and into your body.
Even if you’re not the crafty type, consider starting small with something like a DIY sugar scrub or homemade toothpaste. This is something I did over ten years ago. You might discover a new hobby that enhances both your well-being and your budget.
25. Regular maintenance of vehicles and appliances to prevent costly repairs
Keeping on top of maintenance schedules helps prevent major breakdowns that can lead to expensive repairs down the line.
By making regular maintenance a non-negotiable part of your routine, you protect your investments and save yourself from future financial headaches.
I keep a list in my digital to do list, so I never lose track.
26. Shopping at thrift stores, garage sales, or second-hand websites
Shopping at thrift stores, garage sales, or second-hand websites is an excellent way to acquire items at a fraction of the retail cost. Not only are you being financially savvy, but you’re also participating in the circular economy, reducing waste, and often supporting charitable causes.
Shopping second-hand first is not just about saving money—it’s a lifestyle choice. With patience and persistence, it’s amazing what quality items you can find without impacting your wallet heavily.
27. Learning basic sewing to repair clothes
Mastering the basics of sewing to mend your clothes is a skill that pays off in multiple ways. You save money by extending the life of your garments, reducing waste, and developing a practical capability that can come in handy in various situations.
Honestly, sewing a piece of clothes is a very simple thing. Something that must be learned by the younger generations.
Consider setting aside some time to learn sewing basics via online tutorials, community classes, or even from a friend or family member—it’s a practical step toward financial savings and sustainable living.
28. Utilizing coupons and discounts for shopping
Using coupons and discounts strategically can lead to significant savings on your shopping bills. With a little planning and some savvy shopping techniques, you can ensure you never pay full price for essentials and other purchases.
Remember to only use coupons for items you were already planning to purchase; otherwise, you’re not saving money, you’re just spending less on something extra.
29. Consolidating debt to reduce interest rates
Debt consolidation can be a strategic financial move to lower your overall interest rates and simplify your monthly payments. By combining your debts into one loan with a lower interest rate, you can streamline your bills and potentially save significant amounts of money over time.
Make sure to shop around for the best debt consolidation options and read the fine print. The goal is to find a consolidation plan that truly puts you on a faster track to being debt-free without any hidden costs.
30. Tackle High-Interest Debts First to Free Up More Cash
Addressing high-interest debts is paramount in optimizing your financial strategy. Such debts, often from credit cards or payday loans, can spiral out of control if not managed promptly due to their compound interest rates, which can quickly exceed the original amounts borrowed.
This is known as the debt avalanche.
By zeroing in on high-cost debts, you ensure your income is spent more effectively and not wasted on steep interest fees, accelerating your path to financial freedom.
31. Choose the Right High-Yield Savings Account for Your Emergency Fund
Selecting the right high-yield savings account for your emergency fund is an essential move for growing your savings. High-yield accounts offer interest rates significantly higher than standard accounts, ensuring your emergency fund doesn’t stagnate and keeps pace with inflation as much as possible.
This is one of the bank accounts you need.
32. Implement The Envelope System
The Envelope System is a budgeting method that involves physically dividing your cash into envelopes for different spending categories.
Utilizing the cash envelope system promotes disciplined spending by providing a tangible limit on various expense categories, ensuring you stay within your pre-determined budget and facilitating more intentional money management.
This method also offers immediate visual feedback on spending patterns, which can lead to better financial habits and incremental savings as any leftover cash from each envelope can be added directly to a savings fund, making the act of saving more rewarding and motivating.
33. Using cash -back envelopes to track spending
The use of cash-back envelopes takes the traditional envelope budgeting system a step further by rewarding yourself with savings.
Whenever you spend less than the allocated amount in a budget category, you place the cash difference into a “cash-back” envelope, which can be used for saving or investing.
Adopting the cash-back envelope strategy can provide a rewarding twist to budgeting, making it a fun challenge to spend less and save more.
Boost Your Income: Creative Side Hustles and Opportunities
Boosting your income can provide substantial financial relief, particularly when you’ve maximized your ability to cut costs and still find your expenses stretching your budget thin.
Generating extra income, be it through a side hustle or achieving a raise enhances your ability to save and invest.
With additional streams of revenue, you gain more financial flexibility to achieve goals like paying off debt faster, saving for a significant purchase, or building an emergency fund.
Finding a side hustle or part-time job for additional income
Exploring a side hustle or part-time job is a proven way to supplement your income. In today’s gig economy, there are numerous opportunities for flexible work that can be customized to fit your skills and schedule.
A side hustle can not only pad your wallet but also provide an outlet for creativity and passion, possibly even offering a new career trajectory down the line.
Explore Gig Work and Passive Income Streams
Exploring gig work and passive income streams can accelerate your savings efforts, especially when your regular income isn’t enough to reach your financial goals. These alternative income ideas often provide the flexibility to work on your terms and build up earnings over time.
These revenue channels provide a proactive approach to increasing your disposable income. Researching and choosing the best options for your skills and financial situation can help you build a sound extra income strategy.
Take Advantage of Bank Bonuses and Credit Card Bonuses
Banks often offer attractive incentives to new customers, and high-interest savings accounts can grow your deposits at a faster rate than traditional accounts. The same is true for credit card issuers offering big bonuses.
Taking time to research the best offers and account terms can net you a nice bonus and put your money to work earning more money.
Learn How to Invest Your Money
Learning how to invest your money is paramount to building wealth over time. While it can seem intimidating at first, understanding the basics of investing can enable you to take advantage of compounding interest and market growth to increase your savings exponentially.
Start small, stay disciplined, and continually educate yourself as you grow your investment portfolio. Over time, your investments can become a significant source of wealth and financial security.
Learn how to invest in stocks for beginners.
FAQs: Navigating the Path to Low-Income Savings Success
Saving money when your income barely covers your fixed expenses requires a strategic approach. Begin by scrutinizing your budget to cut any non-essential costs.
Look for ways to reduce your fixed monthly expenses, like negotiating bills or refinancing loans.
Every small change can contribute to your savings, so focus on making incremental adjustments that together can enhance your financial situation.
Even when funds are tight, saving money is possible by making small but impactful changes.
Prioritize reviewing your expenses and identifying areas to cut back, such as non-essential subscriptions or eating out.
Round up loose change or small amounts from your daily transactions into savings.
Seek free entertainment options and consider generating additional income through side hustles or selling items you no longer need.
Each penny saved is a step towards your financial cushion.
Setting Realistic Savings Goals and Celebrating Milestones
Setting realistic savings goals is a key to financial success, particularly when managing a low income.
Determine what you can feasibly save without overstretching your budget. Whether it’s $5 or $50 per week, every bit helps.
Celebrating your achievements, no matter how small, can inspire continued discipline and dedication towards your financial objectives.
Being realistic and flexible with your budget will help you manage your finances more efficiently, ensuring that you set aside money for future growth, even when funds are tight.
This is a great step towards habits of financially stable people!
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Want to learn how to make $5,000 fast? Whether you’re in a rush to meet a financial goal this week or aiming for a steady income of $5,000 per month, there are several ways to make it happen. You’ll find different options, from short-term jobs that pay a lot at once to long-term ideas that…
Want to learn how to make $5,000 fast?
Whether you’re in a rush to meet a financial goal this week or aiming for a steady income of $5,000 per month, there are several ways to make it happen.
You’ll find different options, from short-term jobs that pay a lot at once to long-term ideas that bring in money regularly. And, sometimes, combining a few methods can help you reach $5,000 faster.
If you’re looking to make $5,000 fast, you’re not alone. Many people need a big amount of money quickly – for unexpected costs, important purchases, just to save up, or simply to make a stable amount of money regularly.
Best Ways To Make $5,000 Fast
Below is how you can make $5,000 fast.
1. Flip items for resale
If you want to learn how to make $5,000 without a job, then one way may be to flip items for resale.
Flipping items for resale means you buy things at a low price and sell them for more. This could be handmade goods, vintage items (like old games, cameras, clothing, etc.), furniture, sports equipment, appliances, and more.
Look for undervalued items at flea markets, garage sales, yard sales, and thrift stores, and then sell them for a profit. This job involves having an eye to spot valuable items that you think can be resold at a higher price.
You can resell items on eBay, Craigslist, Facebook Marketplace, and more.
I have flipped many, many items for resale over the years, and I think it’s a great way to work from home and make money on your own schedule.
Recommended reading: How Melissa Made $40,000 In One Year Flipping Items
2. Freelance online work
Making $5,000 a month from home is possible by becoming a freelancer.
Freelancers are people who run their own businesses and provide services to other businesses or clients on a contract basis. As a freelancer, you might be hired for onetime projects by businesses or you could secure long-term contract work with a company.
Online freelancing jobs include:
And more.
You can find freelance gigs through networking, reaching out to possible clients through email or phone, creating a freelance listing on Fiverr, searching for gigs on Upwork, and more.
I have personally been a freelancer for years (mainly freelance writing, and, in the past, I have also done freelance social media management), and it’s a great way to earn income while still being your own boss with a flexible schedule.
Recommended reading: 16 Best Freelance Jobs & How To Get Started
10
This free 76-minute workshop answers all of the most common questions about how to become a proofreader, and even talks about the 5 signs that proofreading could be a perfect fit for you.
3. Pet sit and dog walk
Rover is a website that connects pet owners with pet sitters and dog walkers. You can work this job on weekends all year round or choose to be available only during the summer months – it’s flexible and up to you.
Getting started on Rover is simple. You create a profile highlighting your experience with pets and the services you offer, such as dog walking, pet sitting, and house sitting.
After setting up your profile, customers will send you requests, and you can discuss pricing with them. Rover handles payment processing, and you’ll receive payments directly into your account.
I have two close family members who are professional dog walkers, and they both love this side hustle.
Recommended reading: 7 Best Dog Walking Apps To Make Extra Money
4. Short-term rental your home
If you have a spare room in your home that you’re not using, you may want to try renting it out either on a short-term basis through Airbnb or Vrbo or by finding a long-term roommate to make extra cash.
I’ve rented out rooms multiple times before to roommates, and it’s a great way to earn extra income from unused space.
Recommended reading: What You Need To Know About Renting A Room In Your House
5. Deliver food
If you’re looking to make $5,000, finding a food delivery driving gig is a good option.
With companies like DoorDash, Uber Eats, and Instacart, you can start earning money by bringing people their favorite food. It’s flexible too, so you decide when you work and for how long.
Delivery services like Instacart hire personal grocery shoppers, and the average shopper earns $15 to $20 per hour delivering groceries. Drivers are paid per order, and you keep 100% of your tips. You can also pick your own schedule, which means teachers can work in the evenings or weekends, or only during the summer if they prefer.
6. Sell high-value items
If you’re looking to make a quick $5,000, selling high-value items can be a smart move. Take a look around your home; you might have things you don’t need that others are willing to buy for a good price.
You could sell an old cell phone, laptop, camera, designer clothes, your car, and more.
There are many different buyers for high-value items – from people like you and me on Facebook, to pawn shops, eBay, and more.
7. Tutor
Tutors who specialize in subjects such as math, language, science, graphic design, and more help students improve in those areas.
And, some tutors can make money rather quickly, such as one who specializes in college courses or high-level exams.
Becoming an online tutor depends on the subject you want to teach. Experience in the field is usually required, but there are opportunities for beginners as well. Tutors who teach advanced subjects like calculus or college entrance exams generally earn more than those teaching simpler topics.
Tutoring rates can range from $15 to over $100 per hour, depending on the subject and where you sell your tutoring services.
8. Stock photo photography
Stock image websites are popular platforms where photographers can sell their pictures. Customers can buy royalty-free photos for personal or business use, and these images are commonly used in websites, TV shows, books, social media, and more.
One advantage of using stock photo sites is that they can generate passive income. You can take pictures, upload them, and potentially earn money from them for months or even years. You’ll earn a commission every time someone downloads your photos.
Some well-known stock photo websites include Shutterstock, iStock by Getty Images, Adobe Stock, and Dreamstime.
In the world of stock photography, quality is important, but quantity matters too. The more pictures you have in your stock photo portfolio, the more potential you have to earn money.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
9. Sell an online course
Creating and selling an online course can be a great way to make money quickly, especially if you have knowledge or skills in a high-demand area.
If you have expertise in a certain subject, you can create and sell an online course. Platforms like Teachable and Udemy allow you to develop, host, and sell your course to students. While you may not earn $1,000 immediately, having students enroll over time can generate a substantial income.
I have an online course that I personally sell, Making Sense of Affiliate Marketing. I have also taken many online courses, such as on helping my toddler get better sleep, speech therapy for parents, business courses, blogging courses, and so much more.
There are many different subjects you can teach in an online course, including:
Painting
Music lessons
Exercise
Parenting
Languages
Photography and photo editing
Plants and gardening
Baking and cooking
Arts and crafts
10. Rent out your unused storage space
Just like Airbnb transformed the way you can earn money from your spare room, peer-to-peer storage platforms are doing the same for your unused spaces.
If you have extra space at home, consider renting it out to local people for storage. This could be a garage, driveway, closet, basement, or attic.
While making $1,000 in a single day from this may be challenging, renting out your space can provide a steady, long-term income when combined with other income sources.
You can use a website like Neighbor to list your available space for rent, potentially earning up to $15,000 per year.
11. Sell your jewelry
If you need to learn how to make $5,000 dollars in a day, then one option is to sell any expensive jewelry that you may have.
If you’ve got jewelry you no longer wear, selling it can be a quick way to earn some cash. You might have pieces like engagement rings, necklaces, or bracelets tucked away.
Recommended reading: Where To Sell Jewelry: 12 Best Places For Extra Money
12. Flip real estate
Flipping real estate means buying homes that need fixing, making improvements, and selling them for a profit. This can be a way to make $5,000 (and well over that if you are smart and careful!).
To do this type of real estate investment successfully, you may start by focusing on making cost-effective improvements, especially in areas like the kitchen and bathrooms, and address any major structural or safety issues.
Recommended reading: 23 Best Real Estate Side Hustles To Make Extra Money
14. Sell printables
If you’re looking to make $5,000 online, selling printables is an option.
Printables are digital files that customers can download and print at home, such as grocery shopping checklists, monthly budget planners, wedding invitations, wall art, and more.
I buy printables all the time, and actively search them out at least a few times a month. And, I’m not alone – many people buy printables frequently as well!
I recommend signing up for the Free Workshop: How To Earn Money Selling Printables. This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
Do you want to make money selling printables online? This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
15. Help businesses with their Facebook ads
Managing Facebook ads for local businesses is an online job where you can earn at least $1,000 per month per client.
Local businesses want to expand their audience through Facebook ads, but many don’t have the expertise to do it effectively. That’s where you come in. By learning this skill, you can sell your services to small businesses and help them reach more customers online.
Plus, this can be a part-time job that you do in your spare time or even a full-time job.
16. Write an ebook
Creating your own ebook can be a way to earn money online, and you likely have knowledge to share (even if you don’t realize it!) or a good story to write about.
Platforms like Amazon KDP (Kindle Direct Publishing) allow you to reach a wide audience without a traditional publisher.
Examples of genres you can write in include romance, travel, self-help, sci-fi, and more.
17. Blog
If you want to learn how to make $5,000 from home, then one of my favorite ways is to start a blog.
Now, starting a blog doesn’t instantly make you $5,000 because it takes time to set it up. However, with time and effort, some bloggers can make $5,000 a month in the future.
A blog is a website filled with articles, similar to what you’re reading now. You can start a blog on various topics like personal finance, recipes, travel, pet care, family life, and more.
You can earn money from a blog by partnering with companies for sponsorships, displaying ads, engaging in affiliate marketing (like promoting products on Amazon), and selling items such as ebooks, candles, T-shirts, and other products directly through your blog.
Blogging is my primary source of income, and I make well over $5,000 a month online. It took about six months to earn my first $100 from my blog, so getting started requires some patience. It then took me about a year to reach a monthly income of around $5,000 from blogging.
You can learn how to start a blog with my free How To Start a Blog Course (sign up by clicking here).
10
Want to see how I built a $5,000,000 blog?
In this free course, I show you how to create a blog, from the technical side to earning your first income and attracting readers.
18. Affiliate marketing
Affiliate marketing is a way to earn money by promoting products or services online, and it’s one of my favorite ways to make $5,000 (or more) fast online.
Affiliate marketing is when someone buys a product through a referral link you share, and you earn a commission.
To start, you will want to find products you genuinely like and believe others will benefit from. Then, sign up for their affiliate program, which will provide you with a unique affiliate link. This link tracks the clicks and purchases made from your recommendation.
Recommended reading: Affiliate Marketing Tips For Bloggers – Free eBook
19. Sell on Amazon
Starting your own Amazon FBA (Fulfillment by Amazon) business can be a great way to make $5,000 fast.
You can sell items from household goods to clothes, games, electronics, and more.
Selling on Amazon FBA works by you sending the items you want to sell to an Amazon fulfillment warehouse. Amazon stores these items for you until they sell on their platform.
When an item sells, Amazon handles the shipping and sends it directly to the customer. This means you don’t have to worry about packing and shipping the sold items yourself.
Recommended reading: How To Sell Items On Amazon FBA
20. Start a YouTube channel
Creating content for your own YouTube channel can be a fun way to work toward making $5,000 fast.
You can create a YouTube channel about topics such as finance, home improvement, travel, toys, pets, and more. There’s a YouTube channel for almost every interest these days.
Like blogging, this isn’t a guarantee that you’ll make money, and it will definitely take time to reach $5,000. But, it can be a lot of fun, and you get to be your own boss.
21. Buy a business that already makes income
Buying a business that’s already bringing in money is a way to possibly skip the tough start-up phase and have a business that is making over $5,000.
Now, existing businesses are typically expensive – someone has done a lot of hard work building a business over years and years, after all. They can cost anywhere from a few thousand to millions or even billions of dollars.
You can start by looking at online marketplaces like BizBuySell or Flippa. They list all kinds of businesses for sale, and you’ll see lots of options from online sites (like retail stores and blogs) to local shops (like bike shops, clothing stores, toy stores, and laundromats).
An example – I was recently in a small local bike shop, and they told me that it was for sale. They earned around $20,000 a month (I’m not sure if that was before or after expenses or anything else), and their shop was for sale for around $500,000. You got all the bikes, parts, customers, etc. with the sale. The building wasn’t owned by them, they had monthly rent and other bills to pay. I’m not going to say if this was a good or bad deal – it’s just an example of a real business that is for sale that I recently came across.
22. Consulting
Consulting is when you provide expert advice to individuals or businesses facing challenges. Consultants use their knowledge to understand problems, give advice, and help clients make better decisions from an outside perspective.
Consultants work in fields like management, finance, technology, or marketing. They focus on areas like strategy, process improvement, or restructuring to help clients achieve their goals effectively.
Here’s an example of how a consulting gig works: A company is struggling with managing its products and deliveries. They bring in a consultant who knows a lot about solving these issues. First, the consultant looks at how things are currently done. Then, they suggest better ways to store and ship items. The consultant helps put these ideas into action and teaches the company’s team how to use the new methods. Even after the changes, the consultant keeps an eye on things to make sure everything works well. This helps the company save money and makes sure that customers get what they need on time.
23. Detail cars
Starting a mobile car detailing business can be a way to earn money quickly. After all, you don’t need a lot to get started, and people are always wanting a good detailer to clean their car.
You’ll want to start by getting quality cleaning supplies like car shampoo, wax, and microfiber towels. You can then set fair prices based on what others charge nearby and promote your services on social media and with local businesses.
24. Rideshare driving gigs
Driving for a ride-sharing service like Uber or Lyft can be a way to reach your $5,000 goal quickly.
Here’s how you can work toward earning $5,000 with Uber or Lyft:
Drive during peak hours when demand is high, such as weekend nights, rush hours, or during busy events in your city.
Maximize your earnings by strategically positioning yourself in high-demand areas where there are plenty of potential riders, like near popular restaurants, bars, or events.
Take advantage of Uber’s driver bonuses, which may include incentives for completing a certain number of rides or driving during specific times. For example, you might earn an extra $10 for completing three rides in a row during rush hour.
While you won’t make $5,000 in one day, driving for a ride-sharing service can be a flexible way to earn money and work toward reaching your financial goal over time.
Frequently Asked Questions
Below are answers to common questions about how to make $5,000 fast.
What are some ways to earn an extra $5,000 quickly?
If you need to make an extra $5,000 quickly, then selling expensive items that you already own is usually the fastest thing that I recommend doing. This is because you may have expensive things in your home already – like jewelry or electronics – that you can sell and get paid for within just a few days.
Can I make $5,000 in a single day and how?
Making $5,000 in a single day is hard but not impossible. It may require a combination of having high-value items to sell or landing a big client for your freelance business. It’s about making the right move at the right time with the resources you have.
How can I double $5,000 dollars?
There are many ways to double $5,000 dollars, but it will depend on how much time you have to double your money, as well as how much risk you want to take on. Some ways will be much more risky than others, such as by investing in stocks or real estate. Due to this, it’s important to research and consider your risk tolerance before investing your money.
How can I make $5,000 in a month?
Ways to make $5,000 in a month can include freelance writing, blogging, proofreading, bookkeeping, and more.
How to make $5,000 fast without a job?
If you want to make $5,000 fast but not get a job, then the fastest thing to do is typically to sell items around your home that you already have, such as jewelry or electronics. You can also combine a bunch of different side hustles, such as freelancing, selling stuff, running a business, flipping real estate, and even small things like taking online surveys (like Survey Junkie for free gift cards).
How to make $5,000 a day online?
Some ways to make $5,000 a day online may include selling courses or other digital products. Now, this will not be an easy thing to do, and it will require a lot of hard work (as well as some luck).
How To Make $5,000 Fast – Summary
I hope you enjoyed this article on how to make $5,000 fast.
As you read above, there are many different ways to make $5,000. Some are faster than others (such as selling expensive items that you already own), and others may be more of a full-time career (such as freelance proofreading).
The number of people living paycheck to paycheck is rising, and not just among low-income workers. One-third of Americans with an annual income of $150,000 or more are struggling to pay their bills and have no money left over for savings. Reasons for this include high housing costs, a lack of financial literacy, and lifestyle creep.
So how do high earners end up living paycheck to paycheck, and what can you do to break the cycle?
What Does Living Paycheck to Paycheck Mean?
Most people expect to earn a “living wage.” The term refers to an income sufficient to afford life’s necessities, including housing, food, healthcare, and child care. That level of income should also allow you to save for an emergency, retirement and other goals to some degree.
When a person lives paycheck to paycheck, they can barely pay basic bills and have nothing left over to save for a rainy day. In the event of a pricey emergency — like a big medical bill or major car repairs — low-income families are financially wiped out.
High earners have more wiggle room. They have the ability to downsize their home or car and find other ways to cut back on expenses.
Check your score with SoFi
Track your credit score for free. Sign up and get $10.*
Understanding the Paycheck-to-Paycheck Situation
According to a 2023 survey conducted by Payroll.org, 72% of Americans are living paycheck to paycheck, with Baby Boomers the hardest hit. When you are living paycheck to paycheck, as noted above, you have no ability to save. If you go into debt, you may not be able to afford to pay down the debt in a meaningful way.
According to research from MIT, the average living wage for a family of four (two working adults with two children) in the U.S. in 2022 was $25.02 per hour before taxes, or $104,077.70 per year. Compare that to the federal minimum wage of $7.25. Even in Washington, D.C., which has the highest minimum wage at $17, families make well below what is considered an adequate income.
But even households bringing in $200,000 or more say they feel the crunch. According to a Forbes study, 39% of those earning at least $200K described themselves as running out of money and not having anything left over after covering expenses. While they have the freedom to downsize their lifestyle, many people may not realize the precariousness of their financial situation until they’re locked into a mortgage and car payments they cannot afford.
Why Do Some Americans Live Paycheck to Paycheck?
The reasons why Americans live paycheck to paycheck vary. For lower-income workers, you can point to a higher cost of living and wages that have not kept up with inflation. For those with higher incomes, the issue is more about a lack of financial literacy and living beyond one’s means.
Rising Cost of Living
According to the Federal Reserve, 40% of adults spent more in 2022 than they did in 2021. They spent more because monthly expenses, such as rent, mortgage payments, food, and utilities had all increased.
Low Income
Low incomes are another reason some people live paycheck to paycheck. This is particularly the case for people who earn minimum wage or live in areas with a high cost of living.
Poor Budgeting
Another reason some people are living paycheck to paycheck is that they lack basic financial knowledge and budgeting skills. It’s easy to overspend and accumulate credit card debt, but difficult to pay down the principal and interest. 💡 Quick Tip: When you have questions about what you can and can’t afford, a free budget app can show you the answer. With no guilt trip or hourly fee.
Lifestyle Creep
Also known as lifestyle inflation, lifestyle creep happens when discretionary expenses increase as disposable income increases. In plain English: You get a raise and treat yourself to a new ’fit. And a fancy haircut. And a weekend at a charming B&B in the countryside.
Whether you can afford it is debatable. On one hand, you may be paying your credit card bill in full each month. On the other, you’re not saving or investing that money.
Factors Driving Financial Insecurity for Six-Figure Earners
Because of inflation, it is increasingly hard to buy a home, car, and other nice-to-haves. However, people may still expect and try to afford these things once they earn a certain amount. And if they have a taste for luxury items, they may struggle to maintain that standard of living and pay their bills.
It’s common for people to buy things on credit and then find that they cannot make the payments. Soon, they find themselves mired in high-interest debt.
How to Stop Living Paycheck to Paycheck
You can stop living paycheck to paycheck by living below your means rather than beyond your means. That requires earning more than you spend and saving the difference. The obvious steps to take are to increase your income and to live more frugally.
Once you have downsized your lifestyle, you can find relief quicker than you might think. And some changes may only be temporary. For example, you might have to work a part-time job for a short time until your debt is paid off.
Tips for Those Living Paycheck to Paycheck
Here are some changes you can make to get on the path to living below your means.
1. Create a Budget
You have to know where your money is going before you can cut back. By tracking your expenses, you can see what you are spending where. There are lots of ways to automate your finances and make it much easier to stay on top of things.
Then, create a budget where you subtract your non-negotiable expenses, or needs, from your net income. Non-negotiables are your housing costs, utilities, food, and transportation. Hopefully, you have some money left over to allocate to savings. If not, it’s time to look at how you can make your life more affordable.
Here are a few budget strategies to try:
• Line-item budget
• 50/30/20 method
• Envelope method
2. Cut Back on Nonessentials
Budgeting will help you find expenses that you can eliminate or reduce. For example, look closely at things that might seem insignificant. You are not necessarily bad with money just because you lose track of subscription services that you have forgotten about.
Be aware that a large cold brew on your way to work every morning can add up, and eating out or spending $30 on takeout each week adds up to over $1,500 annually. More consequential changes are downsizing your home, accepting a roommate temporarily, or finding a part-time gig to supplement your income.
3. Pay Off Your Debt
Debt is expensive. High-interest credit card debt and buy-now-pay-later (BNPL) schemes can eat up your income as you struggle to pay the minimum while the interest mounts up. Consider using a personal loan to consolidate debt and reduce the interest you’re paying.
4. Save for Emergencies
If you are living paycheck to paycheck, just one unexpected expense can cause you to spiral into debt. It’s important to have enough cash on hand. Once you have paid off your debt, start an emergency fund so that you don’t have to rely on credit if you experience an unexpected financial emergency. A rule of thumb is to have three to six months’ worth of expenses saved up. 💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
5. Hold Off on Big Purchases
While you are trying to reduce expenses and pay off debt, hold off on buying big ticket items. For example, forgo an expensive vacation for a year and start saving toward next year instead. As much as you might like new furniture or a new car, try to economize for a while until you are in a better place financially.
6. Ask for a Raise
Asking for a raise is not an easy thing to do when money is tight. However, it could be well worth it. According to Payscale.com, 70% of survey respondents who asked for a raise got one. You are in a particularly strong position if your skills are in demand and your employer values you.
The Takeaway
Many Americans are living paycheck to paycheck, even high earners. The reasons why are linked to inflation, lifestyle expectations, and the ease with which people fall into debt. The remedy is to live below your means, and that often means making sacrifices.
If debt is a concern, temporary steps such as downsizing while you pay off your debt or finding additional sources of income are options. Identify where your money goes and stick to a budget to reduce unnecessary spending. Also, getting rid of high-interest debt and cutting back on eating out and other nonessentials can free up a significant amount of cash each month.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
Does living paycheck to paycheck mean you’re poor?
Living paycheck to paycheck does not necessarily mean that you are poor, but it does mean that you are living beyond your means. Even high earners can find themselves in a position where they are living paycheck to paycheck, often due to mounting debt and lifestyle creep.
Lifestyle creep is when people spend more whenever their income increases. According to a Forbes study, 39% of those earning $200,000 or more described themselves as running out of money and not having enough leftover to save after covering expenses.
Is living paycheck to paycheck stressful?
Yes. When you live paycheck to paycheck, you may constantly worry how you will afford to pay for an emergency. It’s important to have an emergency fund, so that you do not have to use a loan or high-interest credit card to pay for something unexpected.
How many americans are living paycheck to paycheck?
Close to 80% of Americans are living paycheck to paycheck and are struggling to meet their monthly bills, according to a 2023 survey by Payroll.org. That’s an increase of 6% from the previous year.
Photo credit: iStock/Jacob Wackerhausen
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Buying your first home can be tedious and overwhelming.
While it’s exciting to visit properties and daydream about your dream home, getting over the financing hurdles is another story. But don’t fret.
This comprehensive guide for first-time homebuyers will walk you through the entire process from start to finish.
Benefits of Being a First-Time Homebuyer
As a first-time homebuyer, you may feel a mix of excitement and apprehension. While the home buying process can seem overwhelming, it’s important to recognize the numerous benefits that come with this milestone.
Financial Assistance
First-time homebuyers have access to several financial assistance programs that can make homeownership more affordable. These include down payment assistance programs, low-interest mortgage loans, and grants specifically designed for first-time buyers. Some of these programs are offered by state and local governments, while others are provided by non-profit organizations or private lenders.
Lower Down Payments
Several loan programs offer lower down payment requirements for first-time homebuyers. The FHA loan, for example, requires as little as 3.5% down if your credit score is 580 or higher. The USDA and VA loans even offer zero down payment options in some cases.
Access to Educational Resources
There’s a lot to learn when you’re buying a home for the first time, but fortunately, there are plenty of resources available. Many organizations offer homebuyer education courses that can help you understand the process and make informed decisions. Some lenders and assistance programs require you to take one of these courses, but even if it’s not mandatory, it can still be a valuable resource.
Before Starting Your Home Search
Check Your Credit
Not only will your credit score play a considerable factor in whether you’re approved for a mortgage, but it will also determine your interest rate.
A small increase or decrease in interest rates may not seem like a big deal. However, mortgage loans are for a hefty sum and for an extended period of time. So, a slight increase or decrease equates to thousands of dollars more spent or saved over the life of the loan.
To have the best chance of being approved for a home loan, you should aim for a credit score of at least 620. It’s possible to get approved for select home loan programs with a score as low as 580, but you may have fewer lenders to choose from.
Run the Numbers
It’s tempting for first-time homebuyers to start searching for homes when they know their credit score is up to par. But that’s probably not a good move until you determine how much home you can afford. Yes, the loan officer will give you a figure when you obtain a preapproval, but that amount isn’t always indicative of what you can afford.
Why so? Well, they focus on the debt-to-income (DTI) ratio to get an idea of a loan amount you qualify for. According to the Consumer Financial Protection Bureau, lenders prefer a DTI ratio of 43% or lower with your new mortgage payment. To illustrate:
CURRENT MONTHLY DEBT
GROSS INCOME
DEBT-TO-INCOME RATIO
MAXIMUM MORTGAGE PAYMENT (USING 43% RECOMMENDATION)
$1,000
$4,000
25%
$720
$2,000
$6,000
33%
$580
$3,000
$10,000
30%
$1,300
Note: Debt-to-Income Ratio = Aggregate Amount of Monthly Debt / Gross Income
The problem is that it fails to consider any expenses unrelated to debt. And if you have hefty insurance, childcare, or even grocery bills, that could be a major concern.
So, your best bet is to look at your current budget and come up with a realistic figure for your new mortgage payment. But don’t forget to keep the recommended DTI ratio in mind.
Explore Mortgage Options
There are several mortgage options on the market for first-time homebuyers, but the most prevalent are:
Conventional Loans
A conventional mortgage is a type of home loan that is not insured or guaranteed by the government. It’s typically offered by a private lender, such as a bank or credit union, and is the most common type of mortgage used to purchase a home.
Conventional mortgages typically require a down payment of at least 3% of the purchase price of the home. Borrowers typically must have a credit score of 620 or higher and a DTI ratio of 36% or lower to qualify. If you have bad credit or are unable to make a large down payment may have a harder time qualifying for a conventional mortgage.
If the loan amount is over $726,200, it becomes a jumbo loan and requires a higher down payment.
FHA Loans
An FHA loan is a type of home loan insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD).
FHA loans are designed to make it easier for people to buy homes, especially for first-time homebuyers. They offer lower down payment requirements and more flexible credit guidelines than conventional mortgages.
The minimum credit score required for an FHA loan is 500. If your credit score is between 500 -579, the down payment is 10%. However, if you have a credit score of 580 or above, the down payment is 3.5% of the purchase price.
VA Loans
VA Loans are insured by the Department of Veterans Affairs. They don’t require a down payment and are easier to qualify for than conventional loan products. However, you must be an active-duty member of the armed forces. Surviving spouses also qualify.
USDA Loans
A USDA loan is a type of mortgage offered by the U.S. Department of Agriculture (USDA) to low- and moderate-income borrowers who are looking to buy a home in a rural or suburban area.
See also: 14 First-Time Home Buyer Grants and Programs
Check Out Our Top Picks for 2024:
Best Mortgage Lenders
Most mortgages have a 30 or 15-year term. The latter will cost you more per month, but you’ll save a load of cash on interest.
You can also choose from a fixed or adjustable-rate mortgage (ARM). Fixed-rate mortgages have the same interest rate for the duration of the loan. But ARMs typically start with a lower interest rate for a set amount of time. In fact, they usually span from five to ten years and then adjust depending on the housing market.
Some first-time homebuyers choose ARMs over fixed-rate mortgages because it gives them the option to make a smaller monthly payment in the first few years. It could also mean that you can qualify for a more expensive home. But, be careful not to get too overextended, as erratic market behavior could cause the rate to skyrocket.
Get Preapproved
This is one of the more time-consuming parts of the entire mortgage process for a first-time home buyer. The good news is you don’t have to settle for the first offer that comes your way out of fear that your credit score will take a hit.
“FICO Scores ignore [mortgage] inquiries made in the 30 days prior to scoring,” according to myFICO. So, you won’t be penalized for multiple inquiries.
So, start by researching mortgage lenders that you may be interested in working with. You could also solicit the help of a mortgage broker if you’re strapped for time or want someone to do the legwork for you.
Once you’ve settled on a few lenders, be prepared to provide the following to get preapproved:
Financial statements to confirm your assets, including retirement accounts and real estate
Recent bank statements
Last two pay stubs
W-2s from the last two years
They will also pull your credit report and credit scores. If you qualify, the mortgage lender will then provide you with a preapproval letter, valid for a certain time period, that specifies how much you’re eligible for.
Save Up for a Down Payment and Closing Costs
During the preapproval process, the lender should have discussed loan options that could be a good fit for you. They should also have communicated how much you will need for a down payment and closing costs.
While some sellers may be willing to cover closing costs, be prepared to provide earnest money to secure your offer. And you may need a large down payment if you’re taking out a jumbo loan, or don’t qualify for the FHA or VA loan program. If that’s the case, now’s the time to figure out a plan for it.
If the seller is not paying closing costs, expect to pay between 2% and 5% of the sales price. And if a hefty down payment isn’t required, it’s not a bad idea to bring money to the table. Doing so allows you to reduce the Loan-to-Value, which positions you as less risky to the lender.
You may also be able to avoid private mortgage insurance (PMI), which is required until you reach 20% in equity, and possibly qualify for a reduced interest rate.
How to Find the Perfect Home
Go Home Shopping
All squared away with a preapproval and planned to save up the cash you need? Now, it’s time to go home shopping. But before you go, you have to decide if you want to enlist the assistance of a real estate agent.
It’s possible to find a slew of listings within your price range on the web with minimal effort. However, real estate agents have access to a system that could expand your reach. Even better, they could be integral in helping you choose a home that’s a good buy and negotiating the final purchase price.
And the seller’s agent pays their commission, so no need to worry about forking over extra cash. Just be sure to hire a real estate professional that is seasoned and reputable.
Now for the fun part: home shopping. Be careful not to judge a home solely by its appearance. Some other important factors to keep in mind:
Taxes: are the property taxes affordable or beyond what you can comfortably afford? (You can roll property taxes and homeowners insurance into an escrow account, but they can easily make or break your budget if the figures are steep).
Location: is the home in an area that has historically held its value? Is the location optimal for your commute to and from work?
Crime: is it a high crime area or is it relatively safe?
Condition: how old is the property? Does it need tons of repairs, or is it close to being move in ready?
Floor plan: is the floor plan feasible or ideal for your situation? Would it be appealing to other buyers if you had to sell?
School district: how are the schools? Have they received a good rating, or do they struggle to stay afloat?
All of these factors can have an effect on the value of the property over time.
Submit an Offer
You’ve found the perfect home, and you’re ready to sign on the dotted. Before you can finalize the paperwork and move in, there’s one more important step. And that’s making the offer. Even if the sales price seems fair, you may need to make an offer that’s higher or lower to snag the home.
Why so? Well, there could be a slight or drastic bidding war going on, and the only way for you to win is to beat out the competition. Or maybe your real estate agent did some research and determined the asking price was a bit high based on similar properties in the area or the home’s current condition.
Either way, you want to submit an offer that stands out and gets accepted. Your real estate agent will be able to do so on your behalf. But if you don’t have a real estate agent, check out these letters from Trulia to get you started.
The Mortgage Process
Even after your offer is accepted, there’s still more work to do. You’re not done just yet! It’s time to move on to the mortgage process.
Remember that preapproval letter? The lender will make sure all the information you initially provided is accurate through a process called underwriting.
Depending on how long it’s been since you were preapproved, you may be asked to provide updated bank statements or pay stubs.
The faster you submit the requested information, the quicker you’ll get a response. So, don’t drag your feet if you want a closing date that’s sooner than later.
Home Inspections and Appraisals
Before you close on the home, you will need to have a home inspection and appraisal complete.
The home inspection shouldn’t cost you more than $500. It will give you an overall assessment of the property and identify any potential issues.
The appraisal also plays an integral role as it will give you a solid idea of the home’s fair market value. The lender will mandate it, but it’s not a bad idea to get an independent appraisal done to serve as a second opinion.
An inspection and appraisal may help you decide if you should lower your offer or walk away from the property.
Purchase Homeowners Insurance
Your mortgage lender will require that you take out homeowners insurance. So, you want to start shopping around for quotes and select a policy prior to closing.
Close on Your Loan
At last! You’ve reached the finish line, and it’s time to close on your loan. During the closing, expect to:
Sign a load of paperwork.
Provide any amounts owed for the down payment.
Pay closing costs, which could include property tax obligations, premiums for homeowner’s insurance and association dues, title insurance, and any other costs associated with finalizing the loan.
Pay discount points or prepaid interest that can reduce the interest rate.
But before you show up at closing, it’s a good idea to speak with the lender, so you’ll know what to expect. You can also request a copy of the final closing document, or Closing Disclosure, to see a detailed breakdown of expenses.
A Few More Tips
Here are a few more suggestions for first time home buyers to help you get approved for your first loan:
Refrain from applying for new credit before you close. This could throw off your DTI ratio, lower your credit score, and ultimately prevent you from closing on the loan.
State and local programs may be available to assist with down payments. If you’re low on funds, be sure to explore options that may be available to you.
Several builders offer buyer incentives, like allowances for upgrades and closing costs. So if you haven’t considered new construction, it may not be such a bad idea to take a look if the price points are within your budget.
Should You Rent, Instead?
Perhaps you’ve done a little legwork, ran the numbers, and are on the fence about home buying. You will typically find that it’s cheaper to make monthly mortgage payments than to pay rent.
You can also take advantage of tax deductions and build up equity as you’re making monthly payments. The equity can be borrowed against for a loan or put some extra money in your pocket should you decide to sell before the repayment period ends.
However, renting a home gives you the flexibility to move to a new location if the home isn’t quite what you expected, don’t like the neighborhood, or want something more affordable.
Furthermore, renting allows you to pass the costs of maintaining the home on to the owner. But as a homeowner, you’ll be responsible for costs associated with maintenance and repairs.
Another reason why some choose to rent over buying is the upfront costs. Most landlords require a security deposit. However, it could be substantially lower than the money you may have to bring to the table for the down payment and closing costs.
Ultimately, you have to decide which is the better fit: investing in an asset that could build wealth or continuing to pay rent until you feel the time is right. There is no right or wrong answer; it just depends on your personal preference and financial situation.
Bottom Line
By taking the time to learn about the home buying process, you’ll be well-prepared and save yourself time and headaches. Best of all, you’ll increase your chances of landing your dream home with the most competitive mortgage product on the market.
Frequently Asked Questions
What is the process for buying a home?
The process for buying a home typically involves the following steps:
Determine your budget and get preapproved for a mortgage.
Find a real estate agent and start looking for homes.
Make an offer on a home and negotiate the terms.
Get a home inspection and address any issues that are found.
Get a mortgage and close on the home.
How much house can I afford?
When determining how much house you can afford, there are several factors to take into account. You should consider your income, expenses, down payment, credit score, and mortgage type before making a decision.
A larger down payment can help you get a lower mortgage rate, and a higher credit score can qualify you for better rates and loan terms. Shopping around for mortgage rates and considering different types of mortgages, such as fixed-rate or adjustable-rate, can also help you find the best deal.
Keep in mind that owning a home involves more than just the monthly payments. You will also need to factor in property taxes, insurance, and maintenance costs. You should create a budget that includes all of these costs and leaves room for unexpected expenses.
How much money do I need for a down payment?
The amount of money you need for a down payment will depend on the type of mortgage you get and the price of the home you are buying.
Some mortgage programs, such as FHA loans, allow for down payments as low as 3.5%, while others may require a higher down payment. It’s a good idea to speak with a mortgage lender to determine how much you will need.
Can I buy a house if I have a low credit score?
It’s possible to buy a house with a low credit score. However, it may be more difficult to get approved for a mortgage, and you may have to pay a higher interest rate. Before applying for a mortgage, work on improving your credit scores, as this will help you qualify for a better loan and save you money over time.
How much will closing costs be?
Closing costs are fees that are paid at the closing of a real estate transaction. These costs can vary widely and may include things like mortgage origination fees, title insurance, and appraisal fees. On average, closing costs can range from 2% to 5% of the purchase price of the home.
What is a mortgage preapproval?
A mortgage preapproval is a letter from a lender that indicates how much you are qualified to borrow for a mortgage. The preapproval letter is based on a review of your financial information, including your credit score, monthly income, and debts. A mortgage preapproval can help you understand how much you can afford to borrow and can make you a more competitive buyer in the real estate market.
What is a mortgage rate?
A mortgage rate is the interest rate that you will pay on your mortgage. The mortgage rate will determine the amount of your monthly payments and the overall cost of your loan. Interest rates can vary depending on the type of mortgage you get and your credit scores.
What is PMI?
PMI, or private mortgage insurance, is insurance that is required by lenders for certain types of mortgages when the borrower has less than a 20% down payment. PMI protects the lender in the event that the borrower defaults on the mortgage. The cost of PMI is typically added to the borrower’s monthly mortgage payment.