Determining your retirement goals requires an assessment of your current financial situation, calculating how much you think you’ll need post-retirement, and then figuring out what you’ll need to do to reach those goals. It’s not an exact science, and everyone’s retirement goals will be different.
However, there are some common things to consider, and a general set of steps that you can take to try and figure out your goals and calculations.
Putting Retirement Goals Into Perspective
Before you dive into figuring out your retirement goals, it may be worthwhile to recap the tools that can help you reach retirement. There are different types of retirement accounts, for instance, such as individual retirement accounts (IRAs) or employer-sponsored retirement plans, like 401(k)s. IRAs and 401(k)s have their similarities and differences, but both are designed to help people save and invest for retirement.
Using one or either of those vehicles may or may not help you reach your retirement goals. It may be best to seek the advice of a financial professional to help you sort it all out.
You should also know that retirement goals are personal. As mentioned, not everyone will have the same end-goals in mind. There are things to think about: How much risk are you willing to take when you invest your money for the future? How much time do you think you have before you actually want to retire? What do you want your day-to-day lifestyle to look like once you retire?
Again, only you will be able to answer these questions. But they’re important to help you gain clarity and perspective on your post-retirement life, and can help you calcify your retirement goals.
With all of that in mind, here are some steps you can take to help you determine your retirement goals, starting with getting a grasp on your current financial situation.
Step 1: Assess Your Current Financial Situation
One step you can take to determine your future goals is to get a solid picture of your present — somewhat like a personal audit. A careful inventory of your current expenses, income, taxes, and savings — more or less a look at your personal budget — can give you an honest picture of where you are, as well as a realistic look at where your money is going each month.
Once you’ve determined your day-to-day financial picture, you can create a list of any current retirement savings you already have, such as in aforementioned 401(k) accounts, IRAs, or high-yield savings accounts. Total up that number, because you’ll be able to subtract it from your goal.
Step 2. Use a Retirement Calculator
A retirement calculator can help you figure out your overall 20-year lump sum goal by working with variables such as your current age, salary, and savings, your desired retirement age, and how much you save per year.
Here’s where you can change up the numbers and consider several scenarios. If you were to retire at 67, for example, how much money would you need? What would happen if you were able to up your yearly savings by just 3%? You might even calculate the amount of money you’d need to save to retire early.
Step 3. Digest Your Enormous Number
The number may be larger than you anticipated, and that’s okay. It’s probably better to be honest about what you need to reach to retire. So, calculate your number, digest it, and move on.
Step 4. Break Down Your Number
It may be helpful to break things down into easier-to-tackle chunks, and make annual or monthly goals to hit. To do this, you could subtract your current age from your intended retirement age, then divide that number by the total. That’s your yearly goal. If it’s still overwhelming, you might divide that number by 12 for your monthly goal. Go as far as you need to make it palatable.
For example, if your total number is $800,000 and you’re 30 years from retirement, that breaks down to around $75 a day. But that doesn’t mean you have to put that much into the bank by yourself. A next step you could take is finding the retirement savings plans that will do the most to grow your money.
Step 5. Choose the Right Retirement Plan(s) For You
Most workers these days don’t have pension plans, but there are other options. If your employer offers a 401(k) matching plan, one of the easiest ways to grow your retirement nest egg is to contribute the max amount of money each paycheck that your employer is willing to match.
The contributions are automatically deducted from your paycheck pre-tax, and since you never see the money, it can be much easier to just pretend like it was never there to begin with. For the self-employed, or for diversification, traditional or Roth IRAs are also specifically designed to help your savings grow.
The biggest advantages of 401(k) and IRA plans are their potential tax savings. However, they can come with yearly contribution limits that may not mesh with your retirement objectives. In this case, a general investment account is another possible consideration for growing your wealth. While it likely doesn’t come with tax advantages, it doesn’t come with contribution limits, either.
If investing in the market leaves you feeling wary, or you don’t like the idea of not having access to your money until you reach a certain age, another option to consider is a high-yield savings account.
Step 6. Stick To Your Goals
You’ve calculated your retirement goal. You’ve determined a plan to reach it. And now it’s time for arguably the hardest part: Sticking to the plan.
For as many investment or retirement accounts as possible, you might consider setting up automatic contributions to withdraw every payday. The more you can automate, the less you’ll be tempted to move things around.
One move you may want to consider, however, is rolling over funds from an old 401(k) to a rollover IRA, so you can better manage your retirement savings overall.
The Takeaway
Determining your retirement goals isn’t an exact science, as everyone will have different goals, risk tolerances, and time horizons to take into consideration. With that in mind, though, there are some general steps you can take to determine your goals, and to create a plan that will help you reach them.
You can also use a variety or combination of different investment accounts, like IRAs or 401(k)s, to help you reach your goals. It’s likely going to be a multi-pronged approach, but with a proper plan, you can maximize your chances of success.
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A new tech company called LemonBrew has launched its so-called “custom matching platform” to link up home buyers (and sellers) with local, expert real estate agents.
The team behind the operation consists of “experienced entrepreneurs and operators” who work in the real estate and mortgage industry.
Their goal is to create a frictionless home buying process and improve efficiencies in what is often a daunting and stressful endeavor.
Initially rolled out via pilot in local markets across North Carolina and Florida last fall, LemonBrew plans to launch nationwide throughout 2020. It appears they are currently live in 15 states.
The platform has a “couple thousand” Partner Agents in its database, but expects that number to climb above 50,000 by the end of the year.
How LemonBrew’s Matchmaker Service Works
Answer basic questions to get matched up with local real estate agents
Questions include property type, budget, number of bedrooms and bathrooms
If you already have a home picked out or are still looking, when you want to buy, etc.
Then get top 3 matches in your area to choose from
It can be difficult to choose a real estate agent. Do you go with someone a friend or family used, someone you saw in an ad, or do you respond to a flyer or freebie you received in the mail?
All of those methods are pretty old school, yet still effective for agents for the time being. But are they the best approach for home buyers and home sellers? Possibly not.
LemonBrew feels it’s super important to go with a high-quality agent, and that’s exactly what they set out to do.
After you answer a series of questions, you’ll be matched up with a local expert based on factors beyond just location.
Your match also considers things like personal budget, down payment, property type, and various sales history metrics such as how fast an agent can help you find your dream home.
The company’s proprietary algorithm then presents prospective home buyers with the profiles of the top 3 matches and lets them choose who to work with.
Ostensibly, this will lead to greater success if/when you purchase or sell a property, as opposed to just going with someone random or referred to you.
Your LemonBrew BrewScore
Prospective home buyers are assigned a BrewScore
Which is based on thousands of analyzed data points
The more complete your profile, the higher your score
Those with higher BrewScores qualify for larger rebates at closing
The company comes up with a custom score known as a your “BrewScore,” which is based on thousands of data points analyzed by their proprietary algorithm.
The more information you provide and securely verify, the higher your BrewScore.
This includes verifying your credit, income, assets, and employment to ensure you’re a qualified buyer, similar to getting a mortgage pre-approval.
And the higher the BrewScore, the more money you can receive at closing to offset closing costs.
BrewScores range from 0 to 100, with a score north of 70 considered “good,” and high enough to qualify for a rebate back at closing.
It’s not totally clear what you can do to ensure your BrewScore is as high as possible other than providing all information that is asked of you.
But the general idea is someone with a higher BrewScore is more motivated (and likely) to buy/sell soon, and thus can qualify for a higher rebate because it’s closer to a sure thing for the real estate agent.
LemonBrew Provides a Rebate to Home Buyers and Sellers
To sweeten the deal, LemonBrew provides rebates to both home buyers and sellers who use a LemonBrew Partner Agent.
These real estate commission rebates back to the buyer are allowed in 42 of 50 states, along with DC.
If you’re selling, you can save up to 2% off the listing fee, which instead of 3% might be just 1%. On a $500,000 home sale, we’re talking $5,000 versus $15,000. Those are big savings.
And this is for a full-service agent, which might differ from other discount real estate brokerages.
If buying a home, you get a rebate that can be used to offset your closing costs.
It’s unclear what percentage or amount this is as LemonBrew does not disclose it. But as noted, it’s based on your BrewScore.
Rebates aside, LemonBrew is 100% free to both home buyers and home sellers.
If and when you buy/sell with a LemonBrew Partner Agent, that individual pays LemonBrew a referral fee, which is 25% of the gross commission.
While agents may receive less than they would if prospecting clients on their own, greater volume may lead to higher overall income.
LemonBrew Lending
A mortgage brokerage formerly operating as SD Capital Funding
Headquartered in New Jersey with loan origination contact center in Charlotte, NC
Currently operational in 19 states nationwide and DC
Expect to roll out to all 50 states by the end of 2019
The company also operates an affiliated mortgage brokerage called “LemonBrew Lending,” which used to go by the name SD Capital Funding (and still does in New Jersey).
They were apparently ranked #1 with Quicken Loans Mortgage Services (QLMS), receiving the wholesale lender’s Top Partner Award for 2019.
LemonBrew Lending complements the real estate side of their business, allowing homeowners and home buyers to enjoy one seamless transaction from start to finish.
They currently operate in 19 states nationwide, along with the District of Columbia. The company expects to expand to all 50 states by the end of 2019.
How much do you need to retire? The usual suggestion provided by financial planners and retirement calculators is 75% to 85% (roughly 80%) of your pre-retirement income. But is that really enough money to retire with security? Does the 80% rule-of-thumb work under all circumstances, or is it merely a rough approximation to simplify the retirement planning process? Let’s examine these issues more closely…
Is 80% Of Pre-Retirement Spending A Realistic Budget?
The basis for the 80% spending rule is that your living expenses are expected to decline once you retire thus your spending should decrease without forcing you to lower your lifestyle. For example, you’ll no longer need to purchase expensive professional clothing and your transportation costs will drop without a daily commute to work. Additionally, your children will probably be grown and out of the house, and you will no longer have to fund your retirement savings. You may even have your home paid in full thus eliminating your mortgage payment and you may be in a lower tax bracket. All these factors indicate your spending should drop during retirement.
Unfortunately, the issue is not as clear as it might appear on the surface. The analysis above assumes certain types of spending will decrease while all other spending remains the same. That is not realistic. For example, many new retirees like to hit the open road and see the world thus increasing their travel budgets. Similarly, it is the rare retiree who does not face rising health care costs.
In short, the 80% rule of thumb is a generalization designed to simplify the retirement planning process at the expense of accuracy. It makes many assumptions about your future that may not be true for you. It is no substitute for making a real budget based on your actual plans for retirement, and it could actually jeopardize your financial security. To make this point clear we will examine five reasons why your expenses may actually increase during retirement instead of decrease…
Longer And More Active Retirements
People are living longer and more active retirement lifestyles than ever before. Increasing longevity has made 60 the new 40. If you plan an early retirement so you can sail around the world or take frequent wine-tasting trips to France and Italy, the cost of those leisure activities and travel can easily offset any decrease in work-related expenses. Alternatively, if you are planning an early retirement it will mean you need more money to support a longer life of leisure. A longer retirement means you can’t spend as much investment principal each month, and a more active retirement means you need more savings and income to support a more expensive lifestyle.
Health Care In Retirement
Health care costs have risen steadily and there is every reason to believe that trend will continue. Additionally, your chances of serious illness or need for expensive medications increases with age. A single medical event can be devastating to your retirement savings if you are not prepared, and if you don’t have long term care insurance then assisted living or nursing home expenses can deplete your retirement savings.
Other Ways Expenses Could Rise
Maybe you haven’t paid off your house, or possibly you took out a home equity loan to remodel. The 80% rule-of-thumb assumes you no longer support dependents, but you may still be paying a child’s college expenses. Alternatively, you might be caring for an aging parent who is living in your home. These expenses certainly won’t go away just because you retire.
Lower Taxes May Be Wrong
The assumption that your taxes will drop during retirement could be totally incorrect. After all, if your retirement income level is similar to pre-retirement income then where will the tax relief come from? In addition, growing budget deficits at all levels of government combined with entitlement program problems indicates a greater likelihood of rising tax rates rather than falling tax rates. In short, the idea that your tax rate will decrease during retirement may turn out to be just the opposite.
Spending Statistics Misrepresent Real Spending
Many research studies have been conducted on the spending patterns of the elderly. One of the more famous studies comes from Ty Bernicke in the Journal of Financial Planning where he cites numbers from the U.S. Department of Labor’s Consumer Expenditure Survey indicating that retirees spend less as they age. A typical 75-year-old spends about half as much as the average 45-to-54-year-old. Overall, spending declines about 25% each decade from age 55 to 75.
This appears to be conclusive evidence that spending does in fact decline with age during retirement; however, there are a couple of major flaws in the research. The first problem results from these figures failing to include long term care costs. You can solve that problem with insurance but there is no solution to the next problem…
Bernicke’s analysis was based on a snapshot in time thus it only compares nominal dollar spending and does not adjust for inflation. In other words, it compares the spending habits of a 75 year old today to the spending habits of a 45 year old on the same day. It does not track a 45 year old over a period of 30 years to determine if their spending decreases with time as the study would imply. Instead, it compares the two different groups at a single point in time.
The problem with this approach is it fails to adjust spending for inflation. A mere 3% inflation will double spending in just 25 years which will more than offset the expected reduction claimed by Bernicke’s research. In fact, it could potentially cause an increase in spending – contrary to what his research would imply.
A More Accurate Approach For Determining How Much Money You Need To Retire
In summary, you would be wise to forget the oversimplified rules of thumb when trying to figure out how much money to retire. Your financial security is at stake and you deserve better. Instead, it is far more prudent to develop a realistic budget for your retirement spending based on your actual retirement plans. You don’t have to make it perfect because nobody can predict the future, but you do want to make it as accurate as you can.
A personal budget for retirement is necessary because your life situation is unique. Only you know the financial situation facing your maturing children and aging parents that might affect your budget. Only you know about your globetrotting plans to travel the world for a decade or two before slowing down. That means you will need to add that expense into your budget for a decade or two before removing it. If you have long term care insurance then add the premiums as an expense into your budget, and if you don’t then build a cushion into your savings for self-insurance. In short, develop a plan for retirement and then develop a budget to reflect your plan.
When you complete the budgeting process you may be happily surprised to learn you only need 60% of pre-retirement income making you better off than expected – or your dreams could require 140% of pre-retirement income causing a challenge. This is key to your financial security because the difference between these two numbers can either break the back of your retirement savings or make a meager nest egg look plentiful. Because the range of outcomes is so wide and the stakes are so high, the only realistic solution is to replace the rule of thumb with a carefully developed retirement budget based on your unique needs to figure out how much you really need for retirement.
It is the only prudent thing to do.
About The Author
Todd R. Tresidder is a financial coach who blogs about retirement planning, wealth building and investment strategy. He wrote the book How Much Money Do I Need To Retire teaching you how to overcome the hidden problems behind retirement calculators that threaten your financial security.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Do you want to create a personal financial statement, but aren’t sure where to start?
According to Mint.com, over 65% of people have no clue how they spent money last month. So, you can probably be pretty sure even less know how their personal finance situation.
With rising costs for essentials like housing and education due to inflation, there is no better time to get an accurate picture of your current situation today.
If you’re wondering how your finances measure up, a Personal Financial Statement can be an invaluable tool in helping you understand where you stand financially and prepare for changes ahead.
This article will walk through creating a sample personal financial statement template with examples of what this document might look like based on your situation.
A personal financial statement isn’t just for your loan applications anymore, it’s an opportunity for transparency in your finances too!
What is a personal financial statement?
A personal financial statement is a document that summarizes your assets, liabilities, and net worth. A PFS can help you understand your financial health so you can make informed decisions about your money.
A personal financial statement template will typically include three sections:
Assets: This section will list all of the money and property you own.
Liabilities: This section will list all of the money you owe.
Net Worth: This section will calculate your net worth by subtracting your total liabilities from your total assets.
Your personal financial statement should be updated on a regular basis, typically once a year. This will help you track your progress and make sure you’re on track to reach your financial goals.
What are the benefits of creating a personal financial statement?
There are many great benefits of a personal financial statement.
By creating a personal financial statement, you can see at a glance how much money you have coming in, going out, and what your net worth is. This information can be extremely helpful in making financial decisions and setting goals.
Benefit #1 – Understand Your Financial Situation
This is why you must spend the extra couple of minutes to create a personal financial statement form.
Most importantly, you get a better understanding of your financial situation. This includes seeing where your money is going each month and how much debt you have.
What we call around here at Money Bliss – the 1000-foot look from above. The outsider’s perspective of what is going on with your finances.
Benefit #2 – Helps you track your progress
When it comes to personal finance, one of the best things you can do is keep track of your progress.
Tracking your progress should be important to you! By seeing everything laid out in front of you, it becomes much easier to make informed financial decisions that will help improve your overall financial picture.
Benefit # 3- Find some areas of improvement
Since a personal financial statement is a document that summarizes your income, expenses, assets, and liabilities in one place it helps you see the financial big picture. Thus, spotting areas for improvement are easier.
For example, if you see that you are spending too much money on non-essential items, you can make changes to improve your financial health.
Benefit #4 – Useful Tool to Set Goals
Next, it can help you set goals. Once you see where you stand financially, you can set goals for paying off debt or saving more money each month.
This aids you to make better financial decisions by providing a clear picture of your financial situation.
Benefit #5 – Snapshot to help you stay motivated
Creating a personal financial statement can be incredibly helpful in staying motivated to save money and achieve your financial goals. Seeing your progress in black and white (or, more accurately, green and red) can be a strong motivator to keep going.
Using a personal finance statement is especially helpful if you’re working towards paying off debt or saving for a specific goal. It can be difficult to stay motivated when you’re not seeing progress, but seeing the numbers going down (or up) can give you the boost you need to keep going.
Benefit #6 – Monitor your financial health
Creating a personal financial statement can help you monitor your financial health and make informed decisions about your spending and saving habits.
If you see that your expenses are consistently exceeding your income, for example, you may need to make some changes to ensure that you are able to meet your long-term financial goals.
Easier to spot opportunities to save money or invest in assets that will grow in value over time.
Monitoring your financial health on a regular basis can help you avoid debt problems and keep track of your progress toward financial goals.
What are the types of personal financial statements?
A personal financial statement is a form or spreadsheet detailing a person’s overall financial health. This statement is typically used to apply for business loans or other forms of financing. There are two types of personal financial statements:
The first type is the balance sheet, which lists a person’s assets and liabilities.
The second type is the income statement, which details a person’s income and expenses.
The balance sheet provides an overview of a person’s financial situation at a particular point in time, while the income statement shows how much money a person has coming in and going out over a period of time.
Both types of statements are important in helping lenders evaluate a borrower’s ability to repay a loan. As well as for you to monitor your personal situation.
What are the components of a personal financial statement?
A personal financial statement is not just a document that shows how much money you have in your bank account. It also includes other important components to show a well-rounded picture.
Most people know that a personal finance statement includes income, assets, and liabilities. But did you know there are actually four main components of a personal financial statement?
A personal financial statement varies from a traditional balance sheet that is used for a company.
Income
Your income is everything you earn in a year from all sources, including your job, investments, alimony, and more.
You should list all of your sources of income on your personal financial statement so you have a clear picture of what you’re bringing in each month.
Include all sources of income, even if they are irregular or one-time payments.
List after-tax income.
If you are married or have a partner, include their income as well.
Update your income regularly to reflect any changes (e.g., new job, raise, bonus).
This will help you make informed decisions about your spending and saving.
Expenses
This is the money you spend each month on things like your mortgage or rent, car payments, groceries, and other necessary expenses.
Here are over 100 personal budget categories for various expenses.
Assets
Assets are everything you own like your home equity or the value of your car and can use to pay your debts. This includes cash, savings, investments, property, and possessions.
Calculate your total assets by adding up the value of all your cash, savings, investments, property, and possessions.
So, is a car an asset? Well it depends if there is a loan against it.
Liabilities
Your liabilities are everything you owe money on. This includes, but is not limited to:
Mortgage
Car loan
Student loans
Credit card debt
Any other personal loans
Your liabilities also include any money you may owe in taxes.
How to create a personal financial statement – Part 1
There are a few key things you need to know in order to create a personal financial statement.
The first part includes what is needed for your net worth – assets and liabilities. The second part includes your current income, expenditures, and savings.
We will show you next how to collect all of this information, then you can start to work on creating a personal financial statement.
Step #1 – Determine your current assets and business profit
The first is your current assets. Your assets are everything you own and can use to pay your debts. This includes your savings, your home equity, and any investments you have. You will need to know the value of all of these things in order to create an accurate personal finance statement.
To determine the value of your assets, start by looking at your savings. This can be any money you have in the bank, including checking, savings, and money market accounts. Add up the total balance of all these accounts to get your total savings.
Next, determine the value of your home equity. This is the difference between what your home is worth and how much you still owe on it. To calculate this, look up the current value of your home and subtract any outstanding mortgage or other loan balances from it. This will give you an estimate of how much equity you have in your home.
Finally, add up the values of any investments you have. These can include stocks, bonds, mutual funds, and other types of investment accounts. Once you have all these values totaled up, this will give you an estimate of your current assets.
Step #2 – Determine your current liabilities
Your current liabilities are all of the debts and financial obligations that you currently have.
This can include things like credit card debt, car loans, student loans, and any other type of loan that you are currently paying off.
To get an accurate picture of your current liabilities, you will need to gather up all of your bills and statements so that you can see exactly how much you owe.
Step #3 – Determine your net worth
Your net worth is your assets – your savings, your home equity, and your stocks and investments – minus your liabilities. To calculate it, simply subtract your total liabilities from your total assets. This will give you your net worth.
Your net worth is a good indicator of your financial health.
It can help you make decisions about saving and investing, and it can also be a useful tool for budgeting. If you want to improve your financial health, focus on increasing your net worth by saving more money and investing in assets that will grow in value over time.
Your goal is to double your liquid net worth quickly.
How to create a personal financial statement – Part 2
Now, you have developed your next worth statement. The next step in creating a personal financial statement is to determine your monthly cash flow of money or annual cash flow.
This second part includes your current income, expenditures, and savings.
Step #1 – Determine your monthly income
Firstly, you will need your income flow section. This could come from your pay stubs, or if you are self-employed, your profit and loss statements.
Your monthly income includes all money that you earn in a month, including salary, wages, tips, commissions, child support, alimony, and any other regular payments that you receive.
Step #2 – Determine your monthly expenses
The next piece is to determine your monthly expenses. This includes things like your mortgage or rent, car payments, credit card bills, and any other regular expenses. You’ll also want to factor in occasional expenses, like doctor’s appointments or annual membership fees.
Your expenses can be divided into two categories: fixed and variable.
Fixed expenses are those that remain the same each month, such as rent or mortgage payments, car insurance, and minimum credit card payments. Variable expenses change from month to month and can include items such as groceries, utility bills, entertainment, and clothing.
Step #3 – Determine your monthly savings
Typically, most advice will leave out monthly savings. However, this. is a critical piece to learning how to FI – financial independence.
Once you have both your income and expense information, you can begin to calculate your monthly savings. To do this, simply take your total income and subtract your total expenses. The remaining amount is what you have available to save each month.
Maybe you just calculated this and realize you have a negative number (meaning you spend more than you earn each month), then you will need to make some changes in order to improve your financial situation.
It is important to note that a personal financial statement is not static.
Your income and expenses can change from month-to-month, so it is important to recalculate your statement on a regular basis. Additionally, as you begin to save more money each month, the amount available for savings will increase as well.
How to use a personal finance statement template
A personal financial statement is a snapshot of your financial health at a given point in time. It lists your assets, liabilities, and net worth so you can see the big picture of your finances.
You can use a personal finance statement template to track your progress over time and make changes to improve your financial health.
Here’s how to use a personal finance statement template:
Enter your information into the template. This includes details about your income, expenses, debts, and assets.
Review your numbers and calculate your net worth. This is the difference between your total assets and total liabilities.
Watch for comparisons. Compare your net worth from one period to another to track your progress over time.
Make tweaks. Make changes in areas where you want to improve, such as increasing savings or paying down debt.
Repeat steps 1-4 periodically. Then you can see how well you’re doing and make necessary changes
How to interpret a personal finance statement
A personal financial statement is a document that shows your current financial health. It lists your assets and liabilities, giving you a clear picture of your net worth.
Positive net worth means you have more assets than debt.
Negative net worth means you have more debt than assets.
Your personal financial statement will help you to set financial goals and track your progress over time. For example, if you want to become debt-free within five years, you can use your statement to create a budget and track your progress each year.
If you have a negative net worth, don’t panic! You can improve your financial health by paying off debts and building up your savings.
Creating a budget will help you make the most of your income and make headway on your financial goals.
How to use a personal financial statement to make financial decisions?
This is the important piece of becoming a millionaire.
A personal financial statement can help you see where your money is going each month and make changes to ensure that you are saving enough for your future goals.
Way #1 – Look at your current financial situation
Your personal financial statement is a record of your income and expenses over a period of time. This information can be used to make financial decisions, such as whether to save money or invest in a new business venture.
If you are looking to save money, you will want to compare your total income to your total expenses. If your expenses are greater than your income, you will need to find ways to reduce your spending. You may also want to consider investing in a savings account or retirement fund.
If you are looking to invest in a new business venture, you will want to assess your current financial situation. You will need to determine how much money you can afford to invest and whether or not the venture is likely to be successful.
Doing this analysis before making any decisions can help you avoid making costly mistakes.
Way #2 – Determine your financial goals
There are a few key things to keep in mind when you’re determining your financial goals.
First, you need to think about your short-term and long-term goals.
Your short-term goals might include things like saving up for a down payment on a house or car or paying off high-interest debt.
Your long-term goals might include things like saving for retirement or sending your kids to college.
Once you’ve determined your goals, you need to think about how much money you’ll need to reach them. This is where a personal financial statement can come in handy.
This information can help you figure out how much money you have available to put towards your financial goals.
Once you have an idea of how much money you need to reach your financial goals, the next step is to develop a plan for how you’re going to save that money. This might involve setting up a budget and sticking to it, investing in a specific savings account or investment account, or taking advantage of employer matching programs if they’re available.
Making smart financial decisions is important for achieving both your short-term and long-term goals. A personal financial statement can help you determine how much money you need to reach your goals, and develop a plan for saving that money.
Way #3 – Make a budget
Your personal financial statement can be a helpful tool when you’re trying to make a budget. This document lists your income and expenses and can give you a clear picture of your financial situation.
To use your personal financial statement to make a budget:
Look at your overall income and expenses. This will give you an idea of where your money is going each month.
What are Necessary Expenses? Determine which expenses are necessary and which ones you can cut back on.
Prioritize your List. Make a list of your monthly income and expenses, with the necessary expenses first. And drop the expenses at the bottom of the list.
How Much is Left? Determine how much money you have left over each month after paying for necessities. This is the money you can use for savings or other goals.
Adjust your budget as needed based on changes in your income or expenses.
Way #4 – Invest in yourself
There are a lot of things you can do to invest in yourself, but one of the smartest things you can do is to invest in your personal finance education.
In fact, one of the popular millionaire quotes from Warren Buffet is:
Invest in yourself as much as possible.
Warren Buffet
Investing in yourself is one of the smartest things you can do.
Way #5 – Stay disciplined
Making financial decisions can be difficult, but if you have a personal financial statement, it can help you stay disciplined.
A personal financial statement is a document that shows your income, expenses, and assets. It can help you track your spending and see where you can save money. That my friend is black and white information.
Making financial decisions can be difficult, but if you have a personal financial statement, it can help you stay disciplined and on track.
What are some common mistakes to avoid when creating a personal finance statement?
There are many common mistakes people make when creating a personal financial statement. This can lead to an inaccurate picture of your financial situation and make it difficult to make informed decisions about your finances.
Any of these common mistakes can also lead to problems down the road because you will be unable to meet your financial obligations.
Not including all sources of income
Not including all debts and expenses
Forgetting to track new sources of income
Overstating or understating expenses
Not properly categorizing expenses
Forgetting to update (or review) the statement regularly
Not tracking progress over time
Too scared to seek professional help if needed.
By avoiding these common mistakes, you can create a personal financial statement that accurately reflects your financial situation and helps you make better decisions about your money.
How often should a personal finance statement be updated?
You should update your personal finance statement at least once a year.
However, you may want to update it more frequently if you have significant changes in your income or expenses. For example, you may want to update your personal finance statement after you get a raise or buy a new car.
A Personal Financial Statement Template Example
A personal financial statement is a document that summarizes your financial health.
It includes information about your income, expenses, debts, and assets. This information can be used to make informed decisions about your finances.
There are many personal finance statement templates available online. Some banks and financial institutions offer their own templates. You can also find templates in our free resource library. Once you find a template you like, you can download it and fill it out with your own information.
When filling out a personal financial statement template, be sure to include accurate and up-to-date information.
This will give you the most accurate picture of your financial health. Review your statements regularly to track your progress and make changes as needed.
Time to Create A Sample Personal Financial Statement
When creating a personal financial statement, it is important to include all sources of income, not just your salary. This includes any freelance work, investments, or other forms of passive income. Additionally, make sure to include any government benefits or assistance you receive.
Excluding all sources of income will give you an inaccurate picture of your financial situation and make it difficult to create a realistic budget.
This is something you need to spend dedicated time doing to create a personal financial statement worksheet.
Over time, this wealth management tool will help you to become the next millionaire.
Know someone else that needs this, too? Then, please share!!
America is more than a little dog crazy: The percentage of households with a canine rose from 38.4% in 2016 to 44.5% in 2022. Owning a dog can be one of life’s great pleasures, whether you choose a tiny toy Poodle or a mega Great Dane as your new best friend.
But amid imagining all the cuddles and sloppy kisses, many prospective pooch parents aren’t fully prepared for the expense of owning a pet. You might wonder: “How much should I budget for a dog?”
This can be an important question because not only can dog ownership be a huge personal commitment, it can also be a considerable financial investment too. The initial first-year investment has been estimated at between $1,135 and $5,155.
If you’re contemplating bringing home a new pooch, here’s the information you need to know about budgeting for a dog and how much it really costs.
Adoption Costs
The initial cost of adopting a dog can vary greatly depending on if the dog comes from a shelter or purchased from a breeder. As a range, however, Animal Humane Society sets its standard dog and puppy adoption fees between $215 to $414.
The fee cost varies, as some dogs (such as purebreds) are in higher demand and the organization needs to cover the cost of caring for animals who may take longer to adopt out (such as older dogs).
At many pet rescues, adoption fees also cover the cost of extra services, like a pet physical exam, deworming, spaying or neutering, or common vaccinations.
Meanwhile, buying a Goldendoodle from a breeder costs an average of $2,200. Purchasing a pet from private breeders, often, does not come with the extra services that some non-profit rescues cover. So, if an owner is considering the breeder route, the out-of-pocket cost of future medical visits, may be one more dollar sign to add to the eventual pet budget. This can help you know how much to allocate towards your new companion so you can avoid ending up with credit card debt.
Recommended: Tips to Save Money on Pets
Food and Treats
Some of the tiniest puppies can morph, in just a few months or years, into heftier eating machines. Young puppies can grow quickly. And, all that fast growth can mean they’ll eat…A lot.
So, food and treats can also play a significant role in your personal budget when you bring home a furbaby. Individual dog budgets can vary based on the size of the pooch and type of food each owner opts to feed their pet. Food choices might include dry kibble, wet food, a raw food diet, or some mix of each.
What to feed a dog is all a personal choice between the owner and their veterinarian. However, if someone is looking to estimate the potential cost of feeding a new dog, a recent survey estimates that pet parents can expect to spend about $287 a year on dog food and $87 on treats.
Recommended: Ways to Save Money on Food
Toys
Toys may seem like a silly little add-on, but they can play an important role in puppy development and adult dogs’ mental stimulation.
Toys can help dogs fight boredom when they are left at home alone and comfort them if they’re agitated. (With toys to gnaw on, dogs may be less likely to turn to shoes for a midday distraction.) Rather than investing in pricey toys, a simple tennis ball will satisfy many dogs. And, a dog owner can grab a can of three tennis balls on Amazon for about $4.
However, the cost here can also depend on just how quickly an individual dog chews through the balls. Some doggos do a great job of tearing them apart. So, a pet owner may want to budget a small amount, say $50 a year or so, to buy their pooch some toys.
Ready for a Better Banking Experience?
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Pet Sitters or Walkers
Taking a vacation with a pet? Then pet sitting isn’t an expense. But for many people who work outside the home or travel without Fido, it may be a good idea to consider a dog walker or pet sitter. This person can be a trusted friend or family member, a neighbor, a kid down the street, or a professional service.
Even if it’s a friend, a new pet owner may want to budget in some dollars to pay this person. Doggie daycare can run $30 or more per day, so it can be helpful for owners to know how many days each month they might need a dog sitter. A typical pet sitter will charge at least $30 a day to attend to your pup.
Recommended: Tips to Cut Costs When Traveling with Pets
Incidentals
A lot of smaller expenses can come with owning a dog. Incidentals to budget for include things like, collars, leashes, dog beds, cleaning supplies, crates, pet bath products, and the all-important groomer.
Some may want to build in another cushion in a pet budget to cover the above-mentioned items, too. Pet I.D. tags and registering a pet with the city are extra costs to bear in mind. (For reference, it can cost between $8.50 and $34 a year to obtain a dog license in New York City.)
Routine Medical Visits
Dogs, like humans, need regular medical check-ups, so “How much will it cost?” is a wise question to ask when budgeting. Just like a human exam, dogs need blood drawn to check for diseases, routine vaccinations to prevent disease, and a general physical exam once a year to make sure their health is in working order.
Some pet organizations estimate this visit can run a pet owner between $210 and $260, but it can vary greatly depending on where the person and the pup live (and the age or breed of the dog). Given that variation, it can be helpful to budget at the higher end of that range (just in case).
Beyond the vet visit, pet parents may also want to add in a budget for preventative medicine. Depending on where an owner lives, a veterinarian could recommend a monthly flea and tick medication, along with regular heartworm medication, to prevent the dog from becoming afflicted. Flea and tick meds can range from $40 to $200 a year while heartworm medication averages $80 a year, and treatment, if your pet is diagnosed, can cost $400 to $1,000.
Pet Insurance
While pet insurance won’t cover routine veterinary visits, it could come in handy if an emergency occurs with the pup.
For example, a new dog could eat something that causes it to get sick — like, ingesting pieces of a chew-toy or snatching food with bones in it off an owner’s plate (or street).
Many pet insurance plans will cover a portion of medicines, treatments (including surgeries), and medical interventions that aren’t tied to a pre-existing condition.
Paying monthly for pet insurance, while the dog is young, could save an owner hundreds or thousands of dollars as a dog continues to age as well. (Generally, pet insurance costs less when a dog is younger). This kind of policy typically costs between $38 and $56 per month.
Pet insurance may cover things like ingesting harmful items or food, accidents, urgent care, and — in some cases — preventative medicine. The cost of pet insurance can vary by breed, age, and any other health history.
Emergency Fund
It can be wise to save up an emergency fund for pet-related expenses. Things just tend to happen with dogs around. They can accidentally knock things over with their tales, swallow objects. and need an emergency vet visit. Dogs can do a lot of damage in a short amount of time (ahem, chewed up leather shoes, ahem).
But, guess what? Having some financial discipline and going to that trouble can be worth it for a lick on the face, a little playtime, and coming home to a happy dog. Planning ahead for a pet budget can help new owners focus on those tail-wagging moments with Fido instead of stressing over canine costs.
The Takeaway
Saving in advance can make adopting and then caring for a dog easier. A SoFi Checking and Savings Account can be a great place to stash your money. It includes budget tracker tools, charges no account fees, and offers a competitive annual percentage yield (APY).
Ready to adopt a pup? Track your spending (and establish a dog budget based on your habits) with SoFi Checking and Savings.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. 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. SOBK0423060
Shopping can be a fun activity, no doubt. There’s so much to look at, so many items that promise to make life a little better…it can be hard to stay focused on what we need vs. what we want and on what we can afford.
But those impulse buys, even a new conditioner here and a spiffy new phone case there, have a way of adding up. That can leave you wondering why your credit card bill is so high and can derail your bigger-picture financial goals.
It’s OK to give in now and then and splurge on small treats, but it’s also wise to develop better buying habits so you don’t get in the groove of overspending.
Here, you’ll learn just how to do that. Read on for advice on fine-tuning your routine; you’ll see how to make smarter buying choices without feeling deprived.
9 Tips for Building Better Buying Habits
Here are nine tips for building better buying habits that can help those interested in becoming more mindful consumers.
1. Having a Financial Goal in Mind
Motivation is a wonderful tool. To kick off new buying habits people may want to think about what their financial aim is and what they want to save money for in the first place.
This could be as small as wanting to save money for a handbag they really want or to save up to go to a fancy restaurant instead of their usual haunt.
Or, it could be something much larger like saving for a vacation, a wedding, a home, or even for retirement somewhere down the line.
Having a financial goal might make it easier for consumers to prevent an impulse purchase or spend money on something they don’t actually need.
To double-down on this habit try writing down any and all financial goals in a notes app, diary, or even on a piece of paper. Then, stick it in a wallet so it’s with you wherever you go.
2. Giving Every Purchase — Big or Small — a Little Time
Sometimes all it takes to reverse a buying decision is to just sit and think about it for a second. Is this magazine really worth the read, or can the articles be found online? Is this new dress really all that great, and will it be worn more than once?
For larger purchases try to employ the “take a walk” method, which is to literally leave a store, go for a walk, and think about the item a bit more. This way, the initial adrenaline rush and excitement wear off just a bit so a consumer can clearly consider the purchase with fewer emotions attached.
Then, come back, look at the item again. If it still elicits butterflies then it could be worth the purchase. If not, that’s great. Confidently walk away.
If anyone is looking to take this habit to the next level, try employing the 30-day rule. Just as the name implies, those looking to purchase anything nonessential must put the product back on the shelf and step away for a full 30 days.
If at the end of that time he or she still wants the product badly enough they can then return and purchase knowing full well it will bring them a little more joy.
Here’s one more trick to try when using the 30-day rule. Over the 30 days, try saving little by little to purchase the item. At the end of the month, if you decide that product is no longer needed, that cash could be put right into savings.
Recommended: Different Types of Budgeting Methods
3. Coming Up With a Personal Spending Mantra
If taking a walk just isn’t an option, it may be time to come up with a personal spending mantra. Think things like “Keep the memory, get rid of the object,” or Marie Kondo’s, “Does this spark joy?”
Use Kondo’s phrases, or come up with a unique one to use before making any purchase. By repeating the phrase over and over again it will help determine if that object really deserves to take up space in your life and in your monthly budget.
4. Learning to be a Comparative Shopper
There’s so much information just a click away, you never have to settle for the first price tag you see. Finding a better deal could require just a quick online search.
To become a great comparative shopper, you can start small by investigating prices on everyday purchases like groceries. Try looking up a price comparison for milk between high-end grocery stores versus the neighborhood grocer. Then, think about monthly expenses like the internet, cable, telephone bills, and even things like gym memberships or subscriptions.
Can you find a better price for any of these items or negotiate the price down? Go for it and save along the way.
5. Falling in Love With Coupons and Discount Codes Again
Another better buying habit to adopt: Take a minute when shopping to find a few coupons to use in physical stores and discount codes to use online.
There are a number of coupon websites such as RetailMeNot and The Krazy Coupon Lady that can help shoppers hunt down a few discounts when they need them.
There are also services like Honey, which is a plugin you can add to your dashboard that will automatically scour the web for discount codes and plug them right in at checkout.
Long story short, don’t settle for the first price.
Recommended: Ways to Save Money on Clothes
6. Maintaining the Things You Already Have
A hole in a sweater, a scratched coffee table, and a tiny crack in a dish can be enough for some people to run out and purchase an entirely new item to replace the old.
However, rather than tossing something just because it’s a little faded it’s time to learn how to give things a new life. Or, find an expert who can.
For example, rather than buying all new shoes just because the tread is a little worn down, try bringing them to the local cobbler (aka shoe repair). They may be able to replace the thread for a fraction of the price of new shoes. This same idea goes for big-ticket items too.
Consider keeping a maintenance calendar for things like a car’s oil changes, a home’s roof inspections, and more. That way, things will always stay in tip-top shape for longer, and you may, say, save money on your car or home repair costs.
7. Understanding Shopping Triggers
To create better spending habits, it can be worthwhile to take a bit of time to self-reflect and discover why you like to spend money in the first place.
Do you suffer from FOMO (fear of missing out), spending and buying things because friends, family, or a favorite influencer is sporting it on social media?
Do you shop when bored, or are you triggered by something else? It can be important to delve into why you shop so you can avoid triggers that could lead to overspending.
Doing so could also help you reconcile any tendencies to be a compulsive or impulsive shopper.
8. Getting in on the Financial Buddy System
Everything’s better with friends — including creating better spending habits. Just look to working out for inspiration.
According to one landmark study by researchers at the University of Aberdeen, people who work out with a friend are more likely to hit the gym more often than those who choose to work out alone. That lesson can easily be applied to finances too.
Find a trusted friend or family member who can offer real advice when it comes to creating better buying habits.
Make a pact to call one another every time either of you needs a second opinion when it comes to making big purchases, or when you need someone to talk you out of making a silly purchase.
Don’t worry, odds are you’ll return the favor for your financial buddy in no time.
9. Knowing Where Money Is and Where It’s Going
A major part of creating better buying habits is understanding where your money is right now and where it’s going at all times. Don’t shy away from making a personal budget to see how much money is coming in and where it all goes. Budget tracking apps (perhaps provided by your financial institution) can help in this effort too.
Monitoring your checking account will also help you get in touch with your spending habits. Some people find checking in every couple of days a good move.
These moves can reveal patterns that you might be unaware of and also help you see where you might cut back on expenses. That, in turn, can free up some funds so you feel better about splurging when the opportunity arises.
The Takeaway
SoFi Checking and Savings, a high interest bank account, can help you manage your cash better.
With our app, you can transfer money to pay bills directly online and track weekly spending right on the integrated dashboard. You can work towards savings goals with Vaults and Roundups. Plus, you’ll pay no account fees and earn a competitive annual percentage yield, which can help grow your money faster.
Want to create better buying habits? SoFi Checking and Savings could be a first step to help you get there.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. 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. SOBK0423063
Digital wallets, also called electronic wallets or e-wallets, offer consumers a convenient way to make payments from their financial accounts using devices such as smartphones, laptops, tablets, and even wearables. Digital wallets store payment information securely, typically allowing for safe, efficient, and fast transactions in person and online.
Read on to learn more, including:
• What is a digital wallet?
• How do digital wallets work?
• What are examples of digital wallets?
• What are the pros and cons of digital wallets?
What Is a Digital Wallet?
A digital wallet is typically a safe and convenient way to store your payment information electronically. Here are some key points to know:
• While often used interchangeably with the term “mobile wallet,” a mobile wallet is actually a form of a digital wallet — on a mobile phone. You can also use digital wallets on a desktop computer, tablet, and even internet-connected devices like a smartwatch or a smart fridge.
• If you’re shopping at a store that accepts digital wallets, you can pay using your smartphone, with no physical credit cards, debit cards, or cash necessary. You can also keep payment information online on sites like Amazon or Walmart and quickly pay using that stored information the next time you shop.
• Some digital wallets also enable peer-to-peer transfers (P2P transfers). You can send money to friends and family and receive money when they send it to you. Some popular P2P services are Venmo and PayPal.
Digital wallets can store more than just your payment information. Consumers often use digital wallets to store:
• Airline tickets
• Events tickets
• Loyalty cards
• Gift cards
• Membership cards
• Coupons
• Hotel reservations
• Digital car keys
• Driver’s licenses or state IDs
• Health information, such as COVID-19 vaccination cards
How Do Digital Wallets Work?
To use a digital wallet, you’ll need to follow a couple of relatively simple steps:
• First, download an app to your phone or access a digital wallet online. You’ll then enter in any payment information you’d like to link to the digital wallet to make it easy to spend and send your money.
• When shopping in person with a digital wallet, your mobile device will interact with a point of sale reader or terminal, using technologies like QR codes, near field communication (NFC), and magnetic secure transmission (MSC).
• You’ll have to hold your device close to the terminal, where indicated. During this contactless payment, the merchant receives your encrypted payment information to process the transaction.
• You can also use digital wallets to send money to peers. For this to work, you usually need to know their account name. You can often “friend” them or connect with them before sending funds, which can help make sure the money will go to the right person.
Recommended: How to Send Money to Someone Without a Bank Account
Ready for a Better Banking Experience?
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What Are the Different Types of Digital Wallets?
There are a few different types of digital wallets. Understanding the options can impact what you decide to use since it informs how and when you can use them.
Closed Wallet
Retailers and restaurant chains can develop their own digital wallets that allow you to store payment information, loyalty cards, and rewards program information for use at that specific merchant.
For example, Target, Walmart, Amazon, and Starbucks all have their own proprietary digital wallets. These make the checkout experience faster and easier online and in the store. Such wallets also make it easier to track refunds and returns.
Semi-Closed Wallet
A semi-closed wallet enables users to make payments at select merchants and retailers. To be compatible with such wallets, merchants must sign an agreement with the wallet issuer.
Open Wallet
Open wallets are the most common because they’re the most widely accepted. Think Apple Wallet, Google Wallet, Venmo, and PayPal. Consumers can use these wallets at a wide range of merchants and even withdraw money at banks and ATMs, as well as transfer money between bank accounts.
Different Types of Mobile Wallets
Other types of online digital wallets include IoT wallets. (IoT stands for internet of things.) IoT wallets allow you to make payments from wearables like smart watches and even smart appliances.
Recommended: 15 Causes of Overspending
Digital Wallet Examples
Here are some examples of the digital wallets you might use in your day-to-day finances:
• Apple Wallet
• Google Wallet
• Samsung Pay
• PayPal
• Venmo
• Cash App
• Zelle
• Amazon Pay
• Walmart Pay
Pros and Cons of Digital Wallets
Are digital wallets worth using? Let’s break down the pros and cons.
Pros
Here are the upsides of using a digital wallet:
• Safety: Digital wallets use encryption and tokenization to protect your data, which makes it harder for hackers to access your financial information. If you lose your physical wallet, a criminal immediately has access to your cash and cards; with a digital wallet, your money can be further protected by passwords, multi-factor authentication, and biometric screening — and card numbers aren’t actually stored on your phone.
• Convenience: When shopping online, having your information already stored via digital wallet can make the checkout process much easier. And when you have your information stored in a mobile wallet, paying for groceries or a cup of coffee is as easy as tapping with your phone.
• Flexibility: When you have a digital wallet, you have an additional payment method at your disposal. No more panicking in the checkout aisle if you realize you left your physical wallet at home.
• Budgeting: Some digital wallets make it easy to track your spending, even across various payment methods. This can make it simpler to monitor your personal budget and ensure you aren’t overspending. You may even be able to set spending limits within the wallet, which can help if you have trouble talking yourself out of unnecessary purchases.
Quick Money Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.
Cons
Next, consider the potential downsides of digital wallets:
• Security: While digital wallets are largely safer than physical wallets, there are some security concerns. For example, it’s not a good idea to use public WiFi when accessing your digital wallet. In addition, keeping your phone and digital wallet safe entails setting good passwords and enabling fingerprint or facial recognition; if you don’t take these safety precautions on your phone, your wallet won’t be as safe as it could be.
• Charging your device: If you rely on your phone for your wallet, you’ll have to keep it charged throughout the day. If your phone dies — or you lose it, break it, or leave it at home — you’ll still need a physical wallet for any transactions.
• Acceptance: Though acceptance of digital wallets is growing, you probably still can’t use digital wallets for payments everywhere you go.
• Overspending: Though digital wallets may have cool budgeting features built in, they might also encourage poor spending habits. Why? Because it’s so easy to pay for things online and in person, you may be tempted to buy things more often than you would otherwise. The barriers to purchase may be lower.
Here’s a look at how these upsides and downsides stack up in chart form:
Pros of Digital Wallets
Cons of Digital Wallets
Safety
Some security vulnerabilities
Convenience
Must keep your device charged
An additional payment option
Not yet accepted everywhere
Can help with budgeting
May allow overspending to happen more easily
Recommended: Why Do People Feel Guilty About Spending Money?
Using a Digital Wallet
Ready to start using a digital wallet? Here are a few tips to keep in mind:
• Using smart safety precautions: Having a strong password and enabling facial recognition on your smartphone are good ways to increase the security of digital wallets. It’s also a good idea to avoid public WiFi when accessing your payment methods.
• Adding additional information: Digital wallets can store more than just payment info. For improved convenience, consider adding things like boarding passes for flights, loyalty cards, and even your driver’s license.
• Carrying a backup payment method: Things happen. A merchant may not accept your digital wallet, or your phone could run out of juice (or fall and break!). It’s always smart to have a backup payment method available, just in case.
• Updating payment methods: Credit cards expire. If you get a new card in the mail, don’t forget to update it in your digital wallet.
• Monitoring your spending: If you’re on a tight budget, you’ll want to monitor your digital wallet spending the same way you would any other payment method.
The Takeaway
Digital wallets offer consumers a safe, convenient way of making payments electronically. Your payment information is securely stored so you can use your mobile device, tablet, and smart watch, among other options, to shop. As long as you practice good smartphone safety, you’ll likely find digital wallets to be more secure than a physical wallet.
Better banking is here with up to 4.20% APY on SoFi Checking and Savings.
FAQ
What is the best digital wallet?
The best digital wallet depends on your needs from such a technology. For example, Apple Wallet is one of the more popular options, but if you’re not an iPhone user, it’s not available to you. Think about your needs from a digital wallet — and where each wallet is accepted — to determine the best digital wallet for your lifestyle.
And remember: You can always have more than one digital wallet!
Are digital wallets safer than traditional wallets?
Digital wallets can be safer than a traditional wallet because they encrypt your data and can be password-protected. If a criminal steals your physical wallet, they just have to reach inside to grab your cards and cash, but with a digital wallet, you can keep them locked out of the phone with passwords and biometric screening, like facial recognition. Some digital wallets even require fingerprint scans or facial recognition to complete a contactless transaction.
What is the most common type of digital wallet?
Open wallets are the most common type of digital wallet simply because they have the widest use case. You can use open wallets like Apple Wallet and Google Wallet at a wide variety of merchants.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
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. SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. 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. SOBK1222079
Should You Become an Authorized User? – MintLife Blog
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establish credit history, consider becoming an authorized user and building your credit in other ways, like getting a secured credit card.
What Is an Authorized User?
An authorized user is someone who can make purchases on your credit card but isn’t legally obligated to pay the balance. It’s easy to sign someone up as an authorized user online or over the phone with a few pieces of information like their address, name, and birth date. You can order a separate card or have them use your credit card. You can have several authorized users on a single credit card, usually up to five. If the person is under 18, they can still usually be an authorized user on a parent or guardian’s account.
You get some privileges as an authorized user, but not the same ones as the cardholder. You can make purchases, find the available balance, and make payments. You can also report a missing card and dispute a fraudulent charge. Authorized users aren’t able to make changes to the account, though. For instance, they can’t close the account, add another user, or change the address.
Authorized Users and Credit
Becoming an authorized user could improve your credit score, but not always, and typically not in a drastic way. Check to see if the creditor sends authorized users’ activity to the major credit bureaus. Most do, but not all. If you’re trying to build your credit, you want to make sure being an authorized user will count toward your history.
When you’re a user on someone’s account who has a solid history of on-time payments and low credit utilization, it can help your credit. On the flip side, if you’re connected to someone with a lower credit score or a spotty payment history, your credit might suffer. For instance, if the cardholder misses a payment, your score could be affected, because it will also be reported on your history. That’s why it’s important to select someone you trust. Choose someone who you know will pay on time and not let their balance lapse. You can even have an upfront conversation about credit history and payments before being added as an authorized user to their credit card.
Just because you won’t be legally responsible for your charges, you may have a different arrangement with family. For example, Asher is an authorized user on his mom’s credit card. She pays for his groceries and utilities, but he is responsible for discretionary spending like going to the movies. Still, if the authorized user like Asher refuses to pay their portion, the cardholder remains responsible for covering it. If the cardholder doesn’t pay or can’t pay the balance, it could harm you more than help you.
Ways to Build Credit
Besides becoming an authorized user, there are other ways to build your credit. Try a combination of different approaches to build your history and show that you’re a responsible borrower.
Try a rent reporting service: Put your monthly payments toward your credit history by signing up for a rent reporting service. Proof of your payments is sent to the major credit bureaus. You’ll have to pay a small fee for the service, but it’s a low-risk way to create a credit history for payments you already make.
Apply for a secured credit card: Most credit cards are unsecured but require an established credit history. Secured credit cards allow you to put down collateral, such as a $500 cash deposit, in case you don’t pay your bills. These cards are for those without much credit history because the deposit guarantees payment to the lender if you don’t make payments. In most cases, secured credit cards carry higher fees and interest rates than normal unsecured cards.
Have someone cosign on a loan: Whether you’re purchasing a vehicle or need more funds for college, having someone cosign on a loan can help build your credit. Banks and lenders will often give out small loans to those without much credit history, as long as they have a solid cosigner backing them.
Choose a student credit card: If you’re in college, build credit with a student card. You may be approved even with no credit history. You might have a lower credit limit, such as $500 or $1,000, but the card allows you to spend on credit and build trust with creditors.
Practicing smart financial habits, like building your credit or having a personal budget, reaps rewards both now and in the future. Being an authorized user is one practical way to go about improving your overall financial health when done correctly. With a higher credit score and stronger finances, you can achieve bigger goals, like buying a home or saving for early retirement.
Nearly a third of us bestow gifts on graduates during a typical commencement season, according to the National Retail Federation, averaging just under $90 per gift. The most popular item, favored by a sizable majority of givers, is the simple, practical and always-appropriate envelope stuffed with cash. If you weary of feeling like a bagman
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With smart money management, retiring at 55 years old with $6 million could be a breeze. But a lot of work has to go into the strategies you make and the actions that you take. That also includes how you ⦠Continue reading â
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