Financial Secrets and Money Mistakes Within A Relationship

One mistake we often see overlooked by individuals is the discussion of money with their partner. We know that money conversations with your partner, whether new or old, can get messy and feel uncomfortable; however, having those discussions is so incredibly important to the wellbeing of your financial life.  It has become so common that people let secrecy and financial infidelity get in the way of their relationships that they ultimately derail their financial future as a whole. We have long been discussing the intersection of love and money and how to incorporate communication into your relationship to avoid some of these mistakes. 

Let’s take a look at how common financial secrets within a relationship actually are.  TD Stories’ seventh annual Love and Money Survey released a survey that noted despite what couples may share about their relationship and comfortability with money, money secrets are at an all time high. This year’s survey polled over 1,400 U.S. individuals who were either married, divorced, or in a serious relationship. The survey found that “In fact, nearly one-third of Americans (32%) are keeping a financial secret from their partner, an 11% increase from 2021. With individuals keeping secrets from their partners, we have seen scenarios in which individuals have pulled loans from their 401(k)’s and unraveled their retirement plan, lived in a house they truly cannot afford, and built up unnecessary and hidden debt. As you can see, these secrets are not worth the financial consequences and sacrificing your financial security and future. 

In a previous podcast episode with Music City Pysch’s David Pearl, we discussed how to have transparent, honest, judgment-free, conversations with your partner. These conversations are crucial in establishing a strong and honest foundation for the relationship as a whole. It’s very fascinating that even though most of these respondents answered that they feel comfortable discussing finances with their partner, many of them have no intention of sharing their money secret(s). The survey also found that respondents are prone to “letting things slide” and pushing off these financial conversations instead of having these tensioned conversations. 

Given the somewhat shocking data listed above, it seems obvious to state the importance of communication and honesty within a relationship. Whether it’s a big purchase you may be hiding, old student debt you’re embarrassed about, or a secret bank account you are keeping, take a step back to uncover why you feel you need to be secretive about your finances and attempt to find a way to bring it up to your partner. If you find yourself in this position, start small and work towards establishing an open and truthful line of communication with the person you are sharing your life with. For more resources and tips on how to facilitate these conversations, check out our podcast episodes with David Pearl or email us at info@shermanwealth.com with more questions. If you would like to discuss your personal or family financial situation, schedule a complimentary intro-meeting here.

 

What Are Your Financial Resolutions for 2023?

Happy Holiday Season! We hope you all have a wonderful holiday season and New Years celebration. It’s certainly been a rollercoaster of a year, with inflation at a 40-year high and the Federal Reserve rising interest rates. When a new year rolls around, we often think about the year just behind us and set financial resolutions and goals for the year to come. So, let’s discuss a few great 2023 financial resolutions we’ve seen and recommend to ensure you are starting your new year off on the right foot. 

Prior to setting your financial resolutions, it’s a good idea to think about goal setting and how to set challenging, yet realistic and attainable objectives for the coming year. We often talk about the framework of goal-setting, distinguishing between short and long-term financial goals, and sticking to your strategy in order to reach those goals. So, now that we discussed how to set those goals, what are some good resolutions to put in place?

Pay Off Debt 

Paying off debt seems to be a common financial resolution as we head into 2023. If you have loans or credit card debt, think about making a plan to pay it off and sticking to it. In this rising interest rate environment, if you have variable interest rate debt, make sure you know your rates and are setting a plan to attack your debt. If you need assistance in setting up a strategy to tackle your debt, we are here to help! 

Set a Realistic Budget 

When it comes to finances, we see that individuals oftentimes are stressed or concerned about their budgeting and spending. We’ve seen many articles discussing how American’s are changing their budgets and re-thinking their spending this holiday season. Think about your cash flows, wants vs. your needs, along with long and short-term goals to reach a reasonable and realistic budget that works for you and your family.

Automate & Track Your Finances

If you aren’t already doing so, automating your finances is a crucial way to get organized. Aggregating all your accounts into one place that is accessible at the click of a few buttons on your smartphone can drastically change how you view your situation as a whole. If you are interested in utilizing our data aggregation software, let us know and we are happy to help you get started! 

Saving For Big Purchase/Goal

Whether it’s a new home, college, or a kitchen renovation, we know saving for a big purchase can be stressful. In our podcast episode with David Pearl, we discussed intentional and smart spending, and how there can sometimes be a psychological disconnect when saving for and actually spending money on a large goal. This disconnect and sense of stress is very common when saving for a big purchase, which is why it’s crucial to set up a savings plan and budget that works for you. 

Increase Your Retirement Savings

The contribution limits for 2023 have recently increased. If you are unaware of the retirement inflation-adjustments, check out our blog for a breakdown of those changes. This increase in contribution limits is a great opportunity to ramp up your retirement savings in 2023. Also, as we are only a few days into the New Year, make sure to review your company 401(k) match to ensure you are taking full advantage of your situation. 

While these are only a few financial resolutions that may help you improve your financial stability and situation in 2023, there are endless moves that can be made to better your overall financial outlook. If you have any questions about setting attainable goals and resolutions for 2023, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here. 

Ep. 117 Launch Financial- November Inflation Report Comes In Lighter Than Expected

Overview: Join us on our inflation episode of Launch Financial as we discuss November’s CPI report that came in lighter than expected with energy prices declining but shelter and food costs increasing. All eyes are on the Federal Reserve tomorrow to see what the future is for interest rate hikes. Email info@shermanwealth.com with questions or inquiries. 

 

Show Notes:

https://twitter.com/LizAnnSonders/status/1602658533190893568 

Check out this episode!

Do You Know What Interest Rates You Are Paying On Your Credit Cards?

As inflation continues to rise and be top of mind for the average household, we want to continue discussing how it is affecting our daily life and how to navigate this adjustment. Prices of nearly everything have been skyrocketing over the last few months, and the most recent November CPI report announced a 7.1% year over year increase. This year we have seen inflation levels the highest they’ve been in four decades, so it’s certainly making an impact on the wallets of individuals. In fact, according to Moody’s Analytics analysis, inflation is costing the average American household an additional $327 per month. 

So, as Americans face new and higher costs that impact their monthly and yearly budget, it is likely many will begin to cut back on their typical spending habits. The following tweet from Liz Ann Sonders shows that ~84% of Americans are expecting to slash their spending to account for inflation. Have you adjusted your budget for inflation? Many retailers have been reporting surpluses of inventory and less holiday shopping as well, so if you have changed some aspects of your spending, you are certainly not alone.

While we are discussing the strains inflation is inflicting on the households of many, we want to touch on another interesting point that many individuals may overlook. Are you aware of the interest rates you are paying on your variable interest rate debt? With the Federal Reserve raising interest rates and set to announce their next hike this afternoon, it’s important that you know what the current rates are on your credit cards and lines of credit? So many individuals are carrying credit card debt and do not make it their number one priority to pay it down. According to Bankrate, on 12/07, variable credit interest rates were as high at 19.40%, which may only rise more as the Fed plans to continually hike rates in order to combat inflation.

If you are carrying credit card debt, make sure you are aware of the interest rates each of these debts incur. You should be attempting to pay your debt with the highest interest rates down first so that you aren’t continuing to pay an excess amount in interest each month. Start thinking more about the interest rates you are currently tied to and your finances as a whole. If you happen to carry a balance or want to protect against future rate increases if you have an unforeseen big purchase, take advantage of those 0% interest rate credit cards offers if you can. However, only spend what you can afford within your budget.’

Additionally, as we just saw November’s inflation data come in lighter than expected, maybe that’s a sign that the Fed’s hikes have been effective and future interest rate hikes may begin to slow, in which case you can re-evaluate your rates as they begin to go back down. So, an important lesson is to pay attention to what debt you have, the interest rates you are paying, and how the economy applies to your financial situation. Setting up a plan to pay off your debts in a timely manner will be extremely advantageous to you and your finances in the long run. If you would like to discuss budgeting strategies or have questions about your interest rates, email us at info@shermanwealth.com or schedule a complimentary intro call here. 

Why You Need To Understand Your Tax Implications 

As we approach the end of the year and wrap up our end of the year planning for 2022, we are working with many on tax planning for 2023. As we worked with and helped many clients this year, a large area we saw many gaps and holes in was the tax planning area. Many individuals we worked with did not and do not fully comprehend their tax liabilities, including implications of capital gains and how to maximize losses. We want to take this opportunity where we saw lack of knowledge to discuss not only the importance of timely tax planning, but the importance of understanding your tax liability and implications.

First, in recent years with the influx of DIY traders, we’ve found that many individuals are unaware of the tax implications of capital gains and trading in the stock market. We know that it’s common to lack tax knowledge as many of these DIY platforms do not educate on capital gains and wash sale rules. In years prior during the short squeeze stocks and bitcoin craze, people were seeing enormous gains in the market, yet did not know what to do with the gains once they made them, resulting in large tax hits.

Fast forward to this year, an extremely volatile and uncertain year in the economy and stock market, many have seen great losses in their investment accounts, and are unaware of the ways they can actually use their losses to their advantage. Capital losses that exceed capital gains in a tax year can be utilized to offset ordinary taxable income up to $3,000 in any one tax year. Additionally, net capital losses in excess of that $3,000 can be carried forward indefinitely until the amount is used up, which is great for many to know in a years of volatility, such as the current.

Another tax mistake we see many make is not planning early or efficiently, causing them to file late and take on a penalty. Many individuals ignore their quarterly tax bills or file late and incur penalties and fines that are easily avoidable. We know taxes can seem daunting and overwhelming, which is why it can be a great idea to work with a CPA on your personal situation, as well as a financial advisor to work in conjunction tax professional. 

As you can see, there is such a large gap in financial literacy in this country, especially surrounding the implications of taxes. At Sherman Wealth, we emphasize tax efficiency and think that after-tax return is so important. If you have any questions about how to make smart tax-efficient moves or what your tax implications are, let us know and we are happy to help. It’s important to fully understand the implications of your decisions and how they will affect all aspects of your portfolio. If you have any questions, please reach out to us at info@shermanwealth.com or schedule a 30-minute complimentary appointment here.

Why To Start Early When Saving and Investing

You always hear people talking about saving for the future and for retirement. But you may be wondering why is it so important? Well, saving for your future and building your wealth can be quite simple if you go about it in the right way. One of these “right ways” includes STARTING EARLY. 

Starting early is a great savings philosophy and strategy when it comes to building your wealth. When you’re just starting your career, it’s very important to save as much as you can as early as you can. When you’re young, you might not have as many expenses or financial burdens than you will later on as your life becomes more complicated.

However, with sky-high inflation data and the Federal Reserve continually rising interest rates to combat this inflation, many individuals, especially millennials and Gen Zers are finding it more difficult to save money given the high cost of living. In fact, The Deloitte Global 2022 Gen Z & Millennial Survey found that over 23,000 millennials and Gen Zers internationally are living paycheck to paycheck and that cost of living is listed as one of their top concerns. This statistic reinforces the urgency of financial planning as a whole, utilizing financial strategies such as budgeting to save more, and the importance of saving early. Despite inflation and a higher cost of living, starting to save sooner will allow your money more time to grow, which brings us to the importance of compound interest.

As mentioned above, another reason to start saving early is because of the power of compound interest. Compound interest is when you earn interest on both the money you’ve saved and the interest you earn. Increasing the compounding frequency or your interest rate, or adding to your principal, can all help your money grow faster. Also, money invested earlier in time will grow faster than money invested later in time. So if you save as much as you can as early as you can, you will be better off as you near retirement.

 

The graph above from JP Morgan shows account growth of $200 invested/saved monthly among 4 individuals starting at different times. As you can see, with the same rate of return of 5.75%, Consistent Chloe, who consistently invested her money starting at age 25 to age 65, ended up with the greatest ending portfolio.

Finding a balance between saving, investing, and also enjoying your life is not an easy task, but it tends to be easiest when you start early. Starting when your career is jumpstarting is a great way to get yourself consistently saving and investing and will benefit you in the long run. If you have any questions on how to work this strategy into your financial plan and life, email us at info@shermanwealth.com or schedule a 30-minute complimentary consultation here.