Navigating Life’s Milestones With Financial Planning

Life is a journey marked by various milestones, each accompanied by its own unique set of challenges and opportunities. As humans, we all have goals and milestones that look different, but may involve similar finanicial strategies to achieve them. Whether you’re saving for a down payment on your first home, planning for your children’s education, or looking ahead to retirement, financial planning is essential for achieving your goals and preparing for these milestones. In this consolidated guide, we’ll explore the key aspects of financial planning for life’s different milestones and goals.

A great way to get organized and start planning and strategizing for your life milestones is to begin by identifying your short-term, medium-term, and long-term financial goals. Prioritize your goals based on their importance and urgency, and ensure that your goals are specific, measurable, achievable, relevant, and time-bound (SMART).

Next, work on your budgeting and saving. Develop a budget that aligns with your income, expenses, and financial goals. Track your spending habits and identify areas where you can cut back or save more. Build an emergency fund to cover unexpected expenses or financial setbacks. While you’re working on building up your savings, take a look at your debt and create a strategy for paying off high-interest debt, such as credit card balances or personal loans. Avoid taking on new debt you cannot afford, and prioritize debt repayment in your budget.

When creating a financial plan to achieve your different goals, it’s important to take into account your time horizon for your various goals, and your overall risk tolerance and investment objectives when choosing investment vehicles. Regularly review and rebalance your portfolio to ensure it remains aligned with your goals and risk profile. Regardless of the goal you are striving for, start saving as early as possible to take advantage of compounding interest and maximize your savings.

Financial planning is a dynamic process that evolves over time as you progress through life’s milestones and goals. Consider working with a financial advisor to develop a comprehensive retirement plan and savings/investment strategy. By setting clear objectives, budgeting effectively, managing debt responsibly, investing wisely, and protecting your assets, you can achieve financial security and build a solid foundation for the future. Remember to regularly review and adjust your financial plan to adapt to changes in your circumstances and priorities. If you have any questions on how you can better improve your strategizing for your goals and milestones, email info@shermanwealth.com. 

The Financial Goals Of Americans Are Changing

It’s been quite an interesting start to the year for the US economy as we are now living in a rising interest rate and inflationary environment after a few years of historically low interest rates during the COVID-19 pandemic. So, as the US consumer is adjusting to this new economic climate, their preferences and goals may be changing, including spending habits and financial goals. Have your financial goals shifted this past year? Does your budget look different ? Are you focusing more on short-or-longer term goals? 

Well, if your goals and preferences have changed, you are not alone! We saw an interesting study that found as we are headed into 2023, many Americans are now focusing on shorter-term financial goals instead of long-term ones. In fact, according to Fidelity’s New Year Financial Resolutions study, surveying 3020 Americans, “more than half ‘53%’ say it’s more important to pay down credit card debt and set aside emergency savings over long-term objectives like retirement and college savings, and roughly half say they’re ready to ‘live sensibly’ or ‘plan ahead’. According to the data from this survey, there is a larger sense of financial pessimism than last year and many reported they feel they are in a worse financial situation than the prior year. 

While we know the start of this year as well as last year has been uncertain and a large adjustment for many with the banking crisis, rising interest rates and a higher cost of living, we found this statistic surprising. In a time where individuals are feeling financial doubt, it’s extremely important to seek financial education. Often times, individuals make financial decisions that are not beneficial purely because they are uneducated on the matter. Given this economic uncertainty we are facing and may continue to face in this new year, it’s important to not prioritize short over long-term goals or vice versa, but to make a well diversified plan that includes a way to save for both short and longer-term goals so that you are not derailing one piece of your financial plan. If you are feeling financially unsure or are uncertain how to separate your financial goals and make an achievable plan to reach them, we are here to help you! Email us at info@shermanwealth.com if you are interested or schedule a complimentary 30-minute call to discuss your financial needs and questions here! 

How Much Cash To Have in Savings: An Art & Science

In today’s ever-changing financial landscape, determining how much savings you should have is not a one-size-fits-all answer. It’s both an art and a science, and is highly specific to your personal financial situation and influenced by various factors in your life, such as job security, interest rates, financial goals, economic conditions, and more. We want to discuss this question we get from tons of clients and prospects: How much cash should I have in my savings account? So, let’s take a look at some considerations to think about when answering this question and determining your savings strategy.   

Personalized Approach:

Your financial goals, obligations, and risk tolerance all play a crucial role in determining the ideal amount to keep in savings your savings account. As mentioned above, the security of your job and consistency/variability of your income plays a large role in this answer. For example, if your income is variable and inconsistent, you might think about keeping more liquid cash on hand due to the variability of your payments. Additionally, if you have other financial goals you are working towards, you may or may not be allocating more funds to your savings account, and rather other places or goals. So, remember that your savings approach should be personalized and unique to your situation- do not look to others for their strategy, and rather work with a financial professional to help sift thru your personal situation and goals to establish your approach.

Consider & Maximize Interest Rates:

As we have been discussing for quite some time, interest rates on savings account have spiked over the last year or so, with high-yield savings accounts and certificates of deposits (CDs) now paying close to the 5% range or higher on cash. This higher interest rate environment is impacting the way consumers are thinking about cash within their overall investment portfolio. While keeping cash in a savings account or checking account, ensure that you’re maximizing the interest you earn. Shop around for the best interest rates and consider high-yield savings accounts or CDs that offer better returns on your money.

Take Your Budget Into Account:

As the consumer is continuing to adjust to this inflationary environment and a higher cost of living, many are tweaking their budgets. With student loan payments returning this month after a three year pause, you may be feeling a bit tighter on your monthly spending to accommodate this financial obligation. Revisit your budget frequently and ensure you are allocating some of your income to your cash savings so you aren’t sacrificing your savings goal.

Include Your Emergency Fund:

Among your cash savings should be your emergency fund, which serves as your cash reserve in the event of an emergency and is essential for unforeseen expenses or financial crises. A common rule of thumb is to have at least three to six months’ worth of living expenses in this fund. However, similarly to what we have described above, the exact amount should be tailored to your individual circumstances and comfort level. Your financial well-being is not just about numbers; it’s also about peace of mind. Consider what makes you feel comfortable. If you’re uneasy about having too much cash on hand, explore alternative options like investments or paying down debt to optimize your financial situation. Conversely, if you feel that you are too short on cash, consider hunkering down and building up your cash reserve.

So, in conclusion, there’s no one-size-fits-all answer to the question of how much savings you should have. Your personal financial situation, risk tolerance, and goals will guide your savings strategy. Work with a financial professional to determine the right balance of cash savings, investments, and debt management. Continue to keep up with economic conditions and interest rates to ensure that your money is working for you. Most importantly, find a strategy that provides you and your famliy financial security and peace of mind. If you are seeking help determining the right amount for your savings reserve, email info@shermanwealth.com or schedule a complimentary intro call here.

February: Financial Fitness Month – Your Checklist for a Healthier Financial Household

As February rolls in, it brings with it not just the season of love but also an opportunity to focus on another crucial aspect of our lives: our financial well-being. February is recognized as Financial Fitness Month, a time that can be allotted to assessing, improving, and fortifying our financial health. Just as we prioritize our physical fitness, nurturing our financial fitness is equally essential for a secure financial plan. So, let’s dive into how you can leverage this month to enhance your financial household with a comprehensive checklist:

1. Set Clear Financial Goals: Start by defining your short-term and long-term financial goals. Whether it’s saving for a vacation, buying a home, or planning for retirement, having specific, measurable objectives provides direction and motivation for your financial journey.

2. Review Your Budget: Take a close look at your income and expenses. Create or update your budget to ensure that your spending aligns with your financial goals. Identify areas where you can cut back or reallocate funds towards your priorities.

3. Track Your Spending: Monitor your expenses diligently throughout the month. Use apps or spreadsheets to track every purchase and analyze your spending patterns. This awareness will help you identify unnecessary expenses and make informed decisions about where to trim your budget.

4. Assess Your Debt Situation: Evaluate your outstanding debts, including credit cards, loans, and mortgages. Develop a strategy to pay off high-interest debt more aggressively while making timely payments on all accounts. Consider consolidating or refinancing debt to lower interest rates if feasible.

5. Build an Emergency Fund: Aim to set aside funds equivalent of living expenses in an emergency savings account. Having a robust emergency fund provides a financial safety net during unexpected setbacks like job loss, medical emergencies, or car/house repairs.

6. Review Your Insurance Coverage: Assess your insurance policies, including health, life, auto, and home insurance. Ensure that you have adequate coverage to protect yourself and your loved ones from unforeseen events. Compare quotes and consider adjusting your coverage if necessary.

7. Maximize Retirement Contributions: If you have a retirement savings plan, such as a 401(k) or IRA, maximize your contributions to take advantage of employer matches or tax benefits. Review your investment allocations and adjust them based on your risk tolerance and retirement timeline.

8. Invest Wisely: Educate yourself about investment options and strategies that align with your financial goals and risk tolerance. Consider diversifying your portfolio across different asset classes to mitigate risk and maximize returns over the long term.

9. Plan for Major Expenses: Anticipate upcoming major expenses, such as home repairs, education costs, or weddings, and start setting aside funds accordingly. Establish sinking funds or dedicated savings accounts to earmark money for specific purposes.

10. Seek Professional Guidance: If you’re unsure about certain financial matters or need personalized advice, don’t hesitate to consult a financial advisor. A professional can provide guidance tailored to your unique circumstances and help you navigate complex financial decisions.

As you embark on your journey to improve your financial household this February, remember that small, consistent steps can lead to significant progress over time. By following this checklist and prioritizing your financial well-being, you’ll be better equipped to achieve your goals, weather financial storms, and enjoy greater peace of mind. Let us know if you have any questions on accountability this month and how you can improve your personal financial situation. Email info@shermanwealth.com or schedule a complimentary intro call here.

Ep. 174 Launch Financial- Consumers Face High Interest Rates On Credit Cards Amid February Financial Fitness Month

Overview: Tune into this week’s episode of Launch Financial as we discuss a slew of economic data including the Federal Reserve deciding to hold interest rates steady and signaling there may not be enough data to cut rates at the next meeting. However, amidst this economic data, the consumer is continuing the spend as interest rates on credit cards hit 21.5% and consumer sentiment remains high. 

 

Show Notes:

Check out this episode!

The IRS Increased Retirement Contribution Limits for 2024

The IRS announced the new 2024 retirement contribution limits for 401(k) plans, IRAs and other accounts last year, which include increases. This is a great opportunity for retirement savers to increase their savings rate this year. So, let’s take a look.

The employee contribution limit for 401(k)s will be increasing this year by $500, to $23,000, up from $22,500 in 2023, and catch-up contributions for those age 50 and older will remain unchanged at $7,500, so $30,500. These new limits apply to 403(b) plans as well and some TSP and 457 plans. Solo 401(k)s limit for 2024 is $69,000 and $76,500 for those over 50 years old.

The IRS also increased contribution limits for IRAs, increasing the limit for savers to $7,000 in 2024, up from $6,500 in 2023 for traditional and Roth savers. Catch-up contributions will remain unchanged at $1,000, so $8,000 for those over 50 years old. Simple IRA contribution limit will be $16,000.

Another feature to take a look at is the income phaseout range for Roth IRAs in 2024. The IRS increased the adjusted gross income phaseout range rising to between $146,000 and $161,000 for single individuals and heads of households, up from between $138,000 and $153,000 in 2023, leaving more opportunity for individuals to qualify for a Roth IRA. For those married filing jointly, the phaseout range is between $230,000 – $240,000.

If you have any further questions on the retirement contribution limits for this year, adjusting your contribution, or jus on your personal financial situation, email info@shermanwealth.com or schedule a complimentary intro call here. Check out the IRS website for more information on the contribution limits.