Overview: Tune into this week’s episode of Launch Financial as we discuss the markets as they continue to digest inflation data and Fed outlook on whether they will be another interest rate hike this fall. As consumer sentiment numbers finalize, how are you feeling about your spending? Gas prices are spiking up to highs for the year, are you feeling the impact? Let us know!
Show Notes:
How are you feeling now that summer is winding down, and fall is right around the corner? Are back to school activities starting back up for the kids? Has your spending picked up as well? There is certainly a lot to reflect on about the last year and a half. One thing that we are hearing a lot about from clients, families, and friends is that they wish they had a greater emergency fund. Do you wish you had a greater emergency fund? Does having an emergency fund make you feel more secure as you make your way thru life?
If the uncertainty of the last few years showed us anything, it is the great impact that such an unprecedented event can have on our world, its economy, and health. As we head into the fall, think about your expenses, your cash flow, and your priorities moving forwards. For those whose spending has picked up since the pandemic, now is a great time to revisit your budget and set up an automated cadence to allocate additional savings each month to replenish your emergency fund. Given that back to school is approaching and your schedules might be picking up, now is a great time to not only revisit your cash flows and bank account balances, but your overall financial plan. With student loan payments resuming next month and inflation staying course, you may want to map out your spending for the rest of the year and implement a savings goal as well. Take the next few weeks to think about your wants versus your needs and how to allocate your budget across all your costs.
If you dipped into your emergency fund since the pandemic, this is also a good time to start thinking about your strategy to replenish those accounts back to where they were prior to the pandemic. It is also important to think about how much money makes you and your family feel comfortable in case of emergencies that arise or come up. We’ve been getting lots of questions about how much one should have in their emergency fund. This answer is specific to every individual which is why we recommend re-visiting your financial situation with a financial professional. On the contrary, it is important that your portfolio is diversified and you are not sitting on too much cash that is not earning any interest. With inflation constantly rising, it’s important that as you grow older, your money is growing with you. The earlier you start, the better.
As we have discussed on our podcast Launch Financial with David Pearl, communicating with your partner is extremely important when it comes to your finances. Take this opportunity to think about your financial priorities, what amount of emergency savings makes sense for you as a family, and make a proactive strategy that is best for you and your family.
At Sherman Wealth, we help individuals simplify their financial life and build comprehensive financial plans that are customized to each individual. If you have any questions about how to approach your financial priorities, set up an emergency fund, and how to set goals for you and your family, reach out to us at info@shermanwealth.com or schedule a 30-minute consultation here.
Overview: Tune into this week’s episode of Launch Financial as we discuss spiking interest rates with the 2-Year Treasury yield and 30-Year Fixed hitting highs not seen in 20+ years. This week the market will continue to digest earnings reports from retailers to indicate the state of the consumer and thier senitment.
Show Notes:
Now that we are halfway through the year and approaching fall and open enrollment season, we want to talk about an important topic that is oftentimes overlooked or misunderstood, retirement savings. If you were looking to increase your retirement savings last year, there is an opportunity for you in 2023. As we mentioned in a prior blog, the IRS increased retirement contribution limits for 2023, up $2000 from last year, from $20,500 to $22,500 and to $30,000 for individuals 50 years of age and older. So, another $2,000 you can save this year! We’ve found that many individuals who maxed out their 401(K) last year still have not raised their contribution to max out for this year. If you received a raise in salary from last year and want to save more for retirement, you will need to adjust your contribution as well!
Whether you are taking advantage of the entire contribution limit or just want to increase your contribution by a percent or two, this is a great opportunity to save more before the end of the year. If you have yet to increase your retirement contribution, work with a financial advisor or financial professional to calculate the amount you will need to increase in order to reach your retirement goal for the year.
So, let’s take a look at how individuals saved last year for their retirement. According to 2022 estimates from Vanguard, “in 2021, roughly 14% of investors maxed out employee deferrals”, based on 1,700 plans and nearly 5 million participants. We find that many individuals actually intended to max out their retirement contributions or save more than they did, but either forgot to adjust their contributions or were clouded with other goals. So, if you plan on saving more this year, log on to your 401(k) platform and make your appropriate adjustments.
Contributing to your workplace retirement plan and taking advantage of the company match is a great way to build your wealth and save for your future. When deciding how much you want to contribute to your retirement plan each payroll period, it’s important to think about your entire financial picture and your goals. Make sure you are being intentional about your saving, and accounting for all the goals you want to achieve and save for. Find a balance that works for you so you can save for both your short and long-term goals. No matter where you start with your retirement contribution, you can always change it throughout the year on your retirement platform if you feel necessary. If you have extra room in the budget from the first half of the year, now might be a great time to adjust your contributions!
While retirement is only one piece of your financial puzzle, we want to make sure you are taking advantages of the benefits it provides to you for your future. There is no clear or right answer when it comes to your retirement and goals, which is why we suggest working with a financial professional to prioritize your goals. If you have any questions about adjusting your retirement contributions or about your 401(K) in general, please email us at info@shermanwealth.com and we are happy to help answer all and any questions. You can also schedule a 30-minute complimentary consultation here.
Despite the current housing market and higher interest rates, many of you are still in the market to purchase a new home. Whether you’re a first time home buyer or you are upgrading from your “starter” home, there are many tips you can implement and mistakes to avoid to improve your financial situation and ensure the process is more seamless. So let’s dive in.
As you know, buying a home is a major purchase, maybe even the largest purchase you will make in your lifetime. So, it’s key that your financial house is in order prior to applying for a mortgage and taking on a large loan. So, first and foremost, ensure that your credit score and report are in good shape. Why? Because your credit is the lifeline of your financial life, and when it comes to purchasing a home, lenders will check out your credit to determine what interest rates you will be able to capture. If your credit is not so great, it may be possible you have a higher and more costly interest rate, making your home purchase more expensive than it needs to be. So, make sure you are paying your bills on time, always pay at least the minimum, pay down existing debt, and open multiple lines of credit, taking on “good debt”, that you can pay back responsibility. Check out our other blogs for more information on your credit score.
Another tip to keep in mind when preparing to purchase a home is to ensure your emergency fund is sufficient and you have saved enough for the downpayment and fees. So what does this mean? Well, buying a home comes with tons of unexpected expenses. Especially if it’s your first time, having only enough cash for the down payment and fees most likely won’t be enough to cover all the expenses coming your way. So, have an emergency fund, remember about items such as furniture, wifi, utilities, and more. You don’t want to tie up all your cash in non liquid investment vehicles when you might need it for something else in the near future. So, consider opening a high yield savings account that you can park your cash reserve in, while also earning additional interest.
Along with saving enough cash for your big purchase, having a realistic and achievable budget is extremely important as well. We oftentimes see individuals stretch themselves too thin with their home purchase, making it more financially stressful to reach their other financial goals. Especially given where the economy is with inflation, we’ve been recommending individuals to re-visit and tweak their budgets. So, separating your wants versus your needs and really breaking down your financial goals is a great way to determine what your budget should be. We also recommend working with a financial advisor to dive deeper into this budget and build a strategy to hit all your goals in life. Purchasing a home is such an exciting and fulfilling achievement, so we want to make sure you go about it in the best way possible. We will continue to track the housing industry and mortgage rates as the Federal Reserve continues to raise interest rates and report back how this will impact you. If you have any questions, email info@shermanwealth.com.
Overview: Join us on this week’s episode of Launch Financial as we discuss retail sales increasing 0.7%, greater than expected, following last week’s cooling consumer sentiment. With a big week ahead of retail earnings, the consumer may be cutting back on big ticket items, but still are spending money. How is your sentiment on the economy? Let us know!
Show Notes:
As summer winds down and we gear up for the fall season, there’s one important task that should be on your radar: tax planning. While thoughts of fall pumpkin spice lattes and sweaters are tempting, it’s also a prime time to start getting your tax matters in order. In this blog, we’ll discuss some practical steps to make your tax planning process this fall efficient and effective. Connect with your financial advisor and tax professional to plan your fall tax planning meeting now!
Assessing Your Situation: Before delving into any specific strategies, it’s important to assess your current financial situation. Have there been any significant changes in your life this year, such as marriage, a new job, or the birth of a child? These changes can impact your tax status and determine which deductions or credits you may be eligible for. By understanding your unique circumstances, you can tailor your tax planning approach accordingly.
Organize Your Financial Documents: While this step always applies to taxes, get your financial documents organized. Collect your income statements, receipts for deductible expenses, investment reports, and any other pertinent records. This preparation will save you headaches when tax time rolls around.
Review Your Financial Goals: Take a moment to consider your financial goals. Are you looking to reduce your tax burden, maximize deductions, or make strategic investments? Your goals will shape your approach to tax planning.
Maximizing Retirement Contributions: One effective way to reduce your taxable income is by maximizing contributions to your retirement accounts. Whether it’s a 401(k), IRA, or another retirement plan, contributing the maximum allowed can help lower your tax liability while also building a secure financial future. The end of the year is a prime time to make any additional contributions, so take advantage of this opportunity.
Estimate Your Tax Liability: Whether you work with a CPA or advisor, or do it yourself, estimate your tax liability for the year to come. Use online tax calculators or seek advice from a tax professional to estimate your potential tax liability for the year. This estimate will guide your decisions as you explore tax-saving strategies.
Harvest Tax Losses: Tax loss harvesting involves selling investments with losses to offset capital gains and potentially lower your tax bill. Approach this tactic thoughtfully, and work with your professional financial advisor to help execute capturing these losses.
Charitable Giving: Fall is a great time to engage in charitable activities. Not only can you make a positive charitable impact, but you can also claim tax deductions for your donations. Keep track of your charitable contributions and ensure you have the necessary documentation for deductions.
We know that taxes can be quite overwhelming and while there’s plenty you can handle independently, consulting a tax professional can provide personalized insights based on your financial situation. They can guide you through complex tax regulations, uncover potential opportunities, and ensure your tax planning is on point. Working with both a financial advisor and tax professional collaboratively can help maximize your financial future and success. So, as fall rolls around, take the opportunity to proactively engage in tax planning. By organizing your financial records, accounting for life changes, and tactically implementing tax-saving strategies, you’ll set the stage for a successful tax season. Remember, a little preparation now can avoid tax headaches months from now. If you have any questions or are interested in utilizing a tax efficient financial strategy, email us at info@shermanwealth.com or schedule a complimentary intro call here.
Overview: Tune into this week’s episode of Launch Financial as we discuss the July CPI report, which showed inflation gauge rose 3.2%, less than expected. Are you feeling the weight of inflation and increased prices? If so, on what? Email info@shermanwealth.com and let us know!
Show Notes:
We know that it can be difficult or overwhelming to stay on top of your finances. At Sherman Wealth, we focus on helping young professionals and families get their finances on the right track, and curate strategies to help simplify their life as it becomes more complicated. So whether you are working with a financial advisor or not, let’s take a look at some costly financial mistakes we see young professionals and millennials oftentimes make.
One of the first commonly made mistakes we see with our clients is purchasing the wrong insurance products or not having the proper insurances in place. We see tons of people in their 20’s purchasing whole life and non-level term policies from large insurance companies that are truly not right for them and that they truly do not understand. Oftentimes, it is not until these individuals are starting their families and progressing their careers that they realize they have been losing money with the wrong policy for them. It is very important to discuss with a professional or research what policies are best for you and your family before blindly purchasing the wrong insurance.
Budgeting and saving is always a priority when it comes to building your financial portfolio and especially starting a family. In previous blogs, we have talked about the importance of starting and saving from an early age and the power that compounding interest and “time” in the market has on your money. Whether you are starting your first job or graduating college, it is never too early to start saving, even if it’s only a few dollars per month. On the topic of spending, many young professionals inflate their lifestyle way too quickly and are subject to lifestyle creep. Make sure you are aware of your cash inflows and outflows, and are not spending more than you make. Creating a budget and using the “bucket strategy” can allow you to effectively keep track of your spending.
Another commonly made mistake we see among this demographic is not signing up for your company 401(k) and taking advantage of the match. We have seen tons of cases where individuals are not signing up for their company’s retirement plan and matches until five to ten years later, which is giving away a large chunk of your salary benefits and essentially, “free money”. It is always the right move to sign up for your company 401(k) and contribute the full match if your situation allows you too in order to build a strong retirement account.
Lastly, another mistake we see individuals making is not contributing to their health savings accounts (HSAs). A health savings account (HSA) can help you lower your taxes as they are triple tax free. Our advice is to always take advantage of these types of accounts if you are eligible, that can help you make the most of your current situation and future.
By avoiding these four commonly made financial mistakes in your early years, you and your family will be in a much better situation as you embark on the next chapter in your life. If you made financial resolutions earlier this year, make sure you are checking them off as you make way through the year and let us know if you need any help. As always, speak with your financial professional to ensure you are making the right decision for your particular situation. If you have any questions, please email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here.
