How To Get Your Financial House In Order Before Buying a Home

There is definitely a great deal to discuss on the current housing market. Despite the volatility 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. Given where current interest rates stand, your home affordability due to higher rates may look different than if you did the same exercise back in 2020, for example. 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, understand the all in costs, run an analysis on whether that fits into your financial budget and picture, and decide if you have an emergency fund sufficient to cover not only the home purchase itself, but 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. We also recorded a great podcast episode with senior mortgage consultant, Jody Eichenblatt of PHM Loans, on his thoughts on the spring housing market and some best practices for those of you shopping. 

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 hopes to be able ot cut interest rates in the back half of this year and report back how this will impact you. If you have any questions, email info@shermanwealth.com. 

It’s Time to Re-Visit Your Protection

As we are now approaching the back half of the year, we’ve been working on mid-year reviews with lots of clients and families to benchmark and tweak their financial plans. While many are getting their finances in order for the second half of the year and benchmarking where they are in reaching their financial goals, I want to bring light to a topic that many individuals often miss during their annual check-ins: Protection.

In our busy everyday lives, we often get caught up in the excitement of pursuing our dreams and goals. While it’s essential to focus on our ambitions, it’s equally important to take proactive steps to protect ourselves and our loved ones. From unexpected medical emergencies to securing our assets, this blog highlights the critical significance of having a comprehensive protection plan in place, including adequate insurance, whether its life, disability, homeowners, umbrella, auto or more, and an estate plan, including a will, medical directive, and power of attorney. If you haven’t already, now is the time to reach out to a trusted professional to find out what your options are when it comes to life insurance and re-visiting your estate plan . 

Each year, you should get an annual health checkup with your doctor to make sure you’re in good shape physically. The same thinking applies to your life insurance policies. You may find that you have adequate coverage, but it’s always important to revisit it each year. Your financial advisor or insurance provider can help you decide what type of strategy you should pursue when it comes to your life insurance policy.

We find that many individuals have a “set it and forget it” mindset when it comes to insurance and estate planning, but that mindset is not in your families best interest. You may have purchased an old life insurance policy years ago that no longer meets your needs or you haven’t updated your will since the recent tax code changes. There are tons of reasons why you should re-visit your protection plans annually. 

Keep in mind the importance of protection for your family and remember to check in with your agent, lawyer or other trusted professional at least once a year to see if you can benefit from a reassessment. In some instances, you may be able to pay less for a similar policy or obtain a policy with a higher value for the same cost or less based on the current rates. If you have any questions, please let us know and we are happy to help. Reach out to us at info@shermanwealth.com or sign up for a complimentary 30-minute consultation here.

Implementing and Revisiting Your Summer Savings Plan

Frequent financial check ins throughout the year are prudent to a solid and evolving financial plan. As your life gets more complicated, your financial plan and advice may change. So, periodically revisiting your savings plan is a great way to benchmark your financial progress, and ensure it remains aligned with your financial goals and life changes.

If you have yet to implement a savings strategy, there is no time like the present! The first step in creating a savings plan is to establish clear, achievable financial goals. These goals could be short-term (emergency fund, vacation), medium-term (buying a car, home renovation), or long-term (retirement, children’s education). Having specific goals provides direction, motivation, and allows room to create a strategy to achieve them.

Understanding your current financial status is crucial before setting up a savings plan. This involves calculating your net income, tracking your expenses, and analyzing your spending habits. Review your budget closely, identifying if your budget allows you to allocate a portion of your income toward your savings goals. If not, attempt cutting back areas of oyur budget to allow for a savings strategy. A realistic and strong budget balances your income with your expenses while prioritizing savings.

Different savings goals may require different types of accounts. For instance, an emergency fund should be easily accessible, while retirement savings might benefit from longer term, diversified tax-advantaged accounts. Next, automating your savings ensures consistency and reduces the temptation to spend. Set up automatic transfers from your checking account to your savings accounts for that “out of sight, out of mind” mentality.

Life changes and financial circumstances can shift, so it’s important to revisit your savings plan regularly. Reviewing your plan helps you stay on track and make necessary adjustments. Financial setbacks or unexpected expenses are inevitable. What matters is how you respond to them. Whether it’s an unexpected expense or a change in income, having an emergency fund or strategizing with a financial advisor can help you stay on course.

Implementing and revisiting your savings plan is an ongoing process that requires diligence and adaptability. By setting clear goals, understanding your financial situation, budgeting wisely, automating your savings, and regularly reviewing your plan, you can achieve financial stability and work towards your long-term goals. Remember, the key to a successful savings plan is consistency and the willingness to adjust as your circumstances change. If you are looking for an accountability partner in building and revisiting your financial plan, email info@shermanwealth.com or schedule a complimentary intro call here.

Navigating the Economic Landscape of Higher Interest Rates

Interest rates play a pivotal role in our financial lives, influencing everything from mortgages and car loans to savings accounts and credit card debt. The financial landscape is constantly evolving, so it’s important to continually digest how the current landscape is impacting the consumer. A year ago in May, the Federal Reserve set their target interest rate above 5%, and have been raising interest rates through various interest rate hikes over the course of the year. In turn, the consumer has had to adapt to not only a higher cost of living due to rising inflation, but also a higher interest rate environment. Now, as we look to the Federal Reserve for upcoming interest rate cuts, let’s take a look at how higher interest rates have impacted the consumer over the past year, and strategies to keep in mind.

  1. Borrowing Costs

When interest rates rise, borrowing becomes more expensive. For those considering big-ticket purchases like homes or cars, this means higher monthly payments. Existing adjustable-rate mortgage holders may also experience increased payments as their interest rates adjust upwards. It’s crucial to factor in these potential costs when planning major financial decisions.

  1. Savings and Investments

While higher interest rates might make borrowing more costly, they can also benefit savers and investors. High Yield Savings accounts, certificates of deposit (CDs), Treasury notes and bills, and other fixed-income investments often yield higher returns in a rising rate environment. This is great news for those with substantial savings, as they can expect better returns on their cash.

  1. Credit Card Debt

On the flip side, if you carry credit card debt, a higher interest rate environment can be detrimental. Credit card interest rates are often variable and tend to rise alongside broader interest rate trends. This means that paying off credit card balances promptly becomes even more important, as carrying a balance will result in more significant interest charges.

4. Refinancing Opportunities

For those with existing loans, a higher interest rate environment can reduce the incentive to refinance. However, it’s essential to analyze the situation carefully. If you have a fixed-rate mortgage, you’re shielded from rate hikes. But if you have an adjustable-rate mortgage, it might still be worthwhile to explore refinancing options if rates remain relatively low. We have also seen clients explore 0% interest rate credit cards that are still available as a financing option on for upcoming goals and expenses.

5. Flexibility and Planning

The key to thriving in a higher interest rate environment is adaptability and thoughtful financial planning. Create or update your budget to account for potential increased expenses, save more diligently, and consider refinancing or consolidating high-interest debt to lower your interest costs. We’ve seen interesting articles from consumers stating that they are finally feeling the sting of inflation and higher cost of living. If you too are feeling the impact of inflation and higher interest rates, it may be time to revisit your budget and spending.

A higher interest rate environment is a financial landscape that impacts us all, whether we’re borrowers, savers, or investors. Understanding how it affects your wallet and taking proactive steps to adjust your financial strategy can help you navigate these changes successfully. Stay informed, make prudent financial decisions, and seek advice from financial experts if needed to ensure that your wallet remains resilient in the face of rising interest rates. If you have any questions about the current economic environment or are seeking tips to enhance your financial plan and routine, email info@shermanwealth.com  or schedule a complimentary intro call here.

Your July Financial Checklist: Keeping Your Financial Plan on Track

Happy July everyone.  As summer is well underway and we have surpassed the mid-way mark in the year, it’s a great time to take a step back and evaluate your financial health. With vacations, barbecues, and outdoor activities in full swing, it’s easy to lose track of your financial goals. Here’s a consolidated checklist to help you stay on top of your finances this July.

Mid-year is a perfect time to revisit your budget and see how you’re doing compared to your financial goals set at the beginning of the year. Here’s how to effectively benchmark your budget:

  • Track Summer Spending: Summer often brings unique expenses, such as vacations, outdoor events, and even often times higher utility bills. Review your spending in these categories and compare them to your currently monthly budget
  • Adjust for Seasonal Expenses: If you find that your summer spending is higher than anticipated, consider adjusting other areas of your budget to accommodate these seasonal expenses.
  • Evaluate Monthly Trends: Now that you have had several months under your belt to review cash flow and spending, look at your spending over the past six months to identify any trends or areas where you might need to cut back.

Whether you’re saving for a new car, a house, or simply building an emergency fund, July is a great time to assess your progress:

  • Emergency Fund: Do you feel comfortable with the level of your emergency fund? If not, prioritize building this fund.
  • Short-Term Savings: If you have specific savings goals (e.g., a holiday fund or home project), ensure you’re on track to meet them.
  • Automate Savings: Consider setting up automatic transfers to your savings accounts to ensure consistent progress.

Retirement might seem far off, but consistent contributions are key to a successful retirement plan. July is a great month to check in on where your contribution is at for the year and decide if you’d like to increase your monthly contribution or are on pace to max out your contribution if you intend to.

  • 401(k) and IRA Contributions: Check if you’re on track to maximize your contributions for the year. The 2024 contribution limit for 401(k) plans is $23,000 (or $30,500 if you’re 50 or older), and for IRAs, it’s $7000 (or $8,000 if you’re 50 or older).
  • Employer Match: If your employer offers a matching contribution, ensure you’re contributing enough to get the full match—this is essentially free money.
  • Rebalance Investments: Review your retirement account’s investment allocation and rebalance if necessary to align with your risk tolerance and retirement goals.

Summer is the time for fun, but fall and winter bring their own financial demands. Plan ahead to avoid stress:

  • Back-to-School Costs: If you have children, start budgeting for school supplies, clothing, and extracurricular activities.
  • Holiday Spending: Utilize the “bucket strategy” and begin setting aside money for holiday gifts, travel, and events to avoid last-minute financial strain.
  • End-of-Year Goals: Think about any other financial goals you’d like to achieve by the end of the year and start planning accordingly.

Lastly, despite busy summer plans and travel, it’s important to revisit and update your financial plan, particularly halfway thru the year. Your financial plan should be a living document that evolves with your life circumstances. If you are interested in re-visiting or even creating a financial plan, email info@shermanwealth.com or schedule a complimentary intro call here and we are happy to help. Remember, financial planning is a continuous process, and regular check-ins are key to staying on track.

Are These Psychological Biases Holding you Back from Building Wealth?

Our emotions are powerful and often influence the decisions we make in life, sometimes without us even realizing it. This is especially true in the realm of financial decision-making. At Sherman Wealth, we frequently discuss behavioral finance with our clients, emphasizing how our behaviors can oftentimes significantly impact the financial choices we make. As you build out your financial plan, it’s important to acknowledge your emotions and discuss how they impact your financial thought process.

Investment biases can get in the way of making objective financial decisions. By recognizing and understanding these biases, you can learn to avoid them and in turn, unpack your emotions to help build out your financial plan.  Here are some key behavioral biases to be aware of:

Loss Aversion

Loss aversion occurs when individuals fear an imminent negative outcome, such as a market downturn. This fear can prompt investors to sell their stocks prematurely when the market starts to decline. At Sherman Wealth, we stress the importance of long-term strategies and the value of “time in the market.” When you feel anxious about market fluctuations, your asset allocation may not be appropriate with your risk tolerance.

Bandwagon Effect

The bandwagon effect refers to the tendency to follow the investment decisions of the crowd simply because they are popular. It’s important to do your own research and feel confident in an investment decision rather than jumping on the latest trend.

Sunk Cost Fallacy

The sunk cost fallacy is the difficulty in moving on from a poor investment due to the time and money already invested in it. If an investment is continually underperforming, it might be best to stop investing further resources into it and consider moving on. Holding onto a bad investment just because of past commitments can prevent you from making better financial decisions.

Confirmation Bias

Confirmation bias is the tendency to seek out information that confirms our previous decisions, often clouding our judgment. Before making significant investment decisions, it’s essential to conduct thorough research to ensure you are making informed choices. Avoid relying solely on information that supports your initial views and be open to different perspectives.

Confronting these behavioral biases can help you make clearer, more rational financial decisions in the future. If you have any questions or would like to learn more about confronting and even avoiding negative behavioral biases, email info@shermanwealth.com or schedule a complimentary 30-minute meeting with us to revisit and create your financial plan. 

Your Mid-Year June Financial Checklist

As we reach the midpoint of the year, June offers a perfect opportunity to take stock of your financial situation. It’s a time to reflect on the progress you’ve made and adjust your strategies to ensure you stay on track with your financial goals. Here’s a comprehensive checklist to help you conduct a thorough mid-year financial review:

A good place to start when reviewing your finances is to take a look at your budget and expenses. Compare your actual spending against your budget for the first half of the year and identify areas where you overspent or underspent. Consider how your budget may shift from the winter/spring months into the summer months and adjust your budget categories as needed to reflect any changes in your lifestyle or financial priorities. Next, start to analyze your expenses. Look for patterns in your spending and identify any recurring expenses that can be reduced or eliminated. Consider using budgeting apps or tools to streamline this process and help identify blind spots.

An important mid-year financial exercise we like to work on with our clients is reviewing your financial goals. In the beginning of the year, you may have set some financial resolutions for 2024 or financial goals, for example, saving for a vacation, paying off debt, building an emergency fund. Think about this as a progress check- benchmark your goals and adjust timelines and strategies if necessary to stay on track. Also, it’s important to think about new goals as your life is constantly evolving. If you’ve achieved any of your initial goals, set new ones to keep moving forward. Consider long-term goals like retirement planning or saving for a significant purchase.

Next, taking stock of your savings balances and savings contribution rates is an important piece of your mid-year review. Ask yourself, “Do I have enough in my Emergency Fund?”. If the answer is no, it may be time to recreate a savings plan to build it up. Review your savings accounts and their interest rates. Consider if you need to open new accounts for specific goals or move your money to accounts with better interest rates. Prepare for upcoming expenses by anticipating major expenses in the second half of the year, such as holidays, vacations, or tuition. Start setting aside money now to avoid financial stress later. Build a financial buffer for unexpected expenses that may arise.

An important summer financial checklist item is revisiting your protection. It might be time to do an insurance needs analysis and estate planning review. Update your insurance coverage by reviewing your insurance policies, including health, life, auto, and home insurance. Ensure you have adequate coverage and that your policies are up-to-date as well as update your estate plan to ensure proper protection.

Taking the time to review and adjust your financial plan in June can set you up for success in the second half of the year. By working with a financial professional to constantly tweak your financial plan or work through some of the items on this checklist, you’ll better understand how to achieve your financial goals and maintain a healthy financial outlook. Remember, regular financial check-ups are key to long-term financial stability and success. If you have any further questions on the financial checklist items mentioned, email info@shermanwealth.com or schedule a complimentary intro call here.

Do Men and Women Have The Same Financial Biases?

In the world of finance, behavioral biases play a significant role in shaping how individuals make decisions about their money. These biases can manifest differently between men and women, influencing financial confidence, strengths, and overall financial behavior. Understanding these differences is crucial for individuals to identify as they are looking to improve their financial well-being.

Behavioral biases can impact investment behavior and oftentimes lead to suboptimal investment decisions. Here are some common behavioral biases:

  1. Overconfidence Bias: This bias occurs when individuals overestimate their knowledge or ability to predict market movements. Overconfidence can lead to excessive trading and risk-taking.
  2. Loss Aversion: People tend to prefer avoiding losses over acquiring equivalent gains. This can result in holding onto losing investments too long and selling winning investments too quickly.
  3. Anchoring: This involves relying too heavily on the first piece of information encountered (the “anchor”) when making decisions. In finance, this can influence how investors value stocks or set financial goals.
  4. Herding: The tendency to follow and copy what other investors are doing. This can lead to asset bubbles or market crashes as investors collectively make irrational decisions.

Men and women often exhibit different financial behaviors, risk tolerances, strengths, and levels of confidence due to a combination of societal norms, psychological factors, and practical experiences. Generally, men tend to display higher financial confidence. Women typically exhibit lower financial confidence compared to men.

To bridge the financial confidence gap and address behavioral biases, both men and women can take several steps:

  1. Education and Awareness: Understanding common behavioral biases can help individuals recognize and mitigate their effects. Financial literacy programs should be tailored to address the specific needs and behaviors of both genders.
  2. Professional Advice: Seeking advice from financial advisors can help individuals make more informed decisions. Advisors can provide strategies that combine both partners risk tolerances and relationship to money to make both parties feel confident and comfortable.
  3. Diversification: Diversifying investments can help manage risk and improve long-term financial stability. A well-balanced portfolio considers an individual’s risk tolerance and financial goals, reducing the impact of market volatility.

While men and women exhibit different financial behaviors and strengths, both can benefit from understanding their unique biases and leveraging their strengths. By increasing financial literacy, seeking professional advice, and adopting mindful financial practices, individuals can make more informed decisions and achieve greater financial success. If you and your partner feel your financial mindsets do not align, do not stress! Email info@shermanwealth.com if you are looking to embark on your financial roadmap or schedule a complimentary intro call here.

Are You A HENRY? Here’s How HENRYs Can Save and Grow Their Wealth

In today’s dynamic economic landscape, an emerging demographic has emerged: HENRYs, or High Earners Not Rich Yet. These individuals, typically professionals in their prime earning and accumulating years, are not yet High Net Worth individuals. HENRYs possess a unique opportunity to not only save but also grow their wealth substantially. Let’s explore how HENRYs can leverage their financial situation to secure a promising financial future.

HENRYs are characterized by their robust incomes, often exceeding national averages, yet their wealth accumulation is not where they might want it to be. These individuals, typically in their 20s to 40s often times despite the high income, face obstacles such as student debt, lifestyle inflation, and delayed financial planning, hindering their wealth-building efforts. So it’s extremely important that they implement smart financial habits early on, build a financial plan, and automate the process to accumulate their wealth and make smart financial decisions.

So, let’s take a look at some places where HENRYs can improve their financial habits. First, budgeting. HENRYs can harness their considerable incomes by implementing strategic budgeting and expense management techniques. By setting up an accountable and accurate budget, they can redirect resources towards savings and investment. For those with student loan debt or other debt, creating a strategic debt repayment strategy is prudent. Given the higher interest rate environment we have been living in, there are tactical moves debt goers can make to keep their financial plan in line.

Next, let’s discuss investing. HENRYs have the perfect opportunity to leverage their wealth by investing wisely and early. By allocating funds to diversified portfolios, including retirement accounts, taxable accounts, and other diversified assets, they can grow their wealth overtime to achieve their short, medium, and long-term goals.

If you’re a HENRY, but are not quite sure where to get started on your financial journey, consider seeking advice from a financial advisors or professional who can provide you with customized strategies to optimize your financial situation. Here at Sherman Wealth, we build out personalized solutions and financial plans to help all clients, including HENRYs make smarter financial decisions and strategically grow their wealth. Professional guidance helps navigate complex investment decisions, minimize tax liabilities, and plan for future milestones.

As discussed in this blog, HENRYs have a vast opportunity to maximize and optimize their financial future. Building a solid foundation early in their careers lays the groundwork for long-term growth and financial security. If you are a HENRY and are seeking financial guidance, email info@shermanwealth.com or schedule a complimentary intro call here.

How We Can Help Navigate the 401(K) Landscape For Your Firm 

The recent announcement of Ascensus acquiring Vanguard’s individual 401(k) retirement plan business has sparked questions among plan participants and small business owners on the future of the retirement plans. At Sherman Wealth, we understand the importance of ensuring that your retirement savings are in the best possible hands, which is why we want to discuss the prudency of revisiting your 401(K) plan, re-assessing the fees you are paying, your user interface and integration solutions, and assuring your plan matches your firm’s intended goals. 

Whether you’re currently enrolled in a Vanguard or other 401(K) plan or considering setting one up for your small business, we’re here to help. Our team can help you review your existing plan to identify any potential areas of improvement. From high administrative fees to open architecture investment options and working with the right 401(K) provider, we conduct a thorough analysis to ensure that your plan is optimized for your financial goals.

One of the key factors to consider when evaluating your 401(k) plan is the administrative fees involved. It’s important to carefully analyze these fees to ensure that you’re getting the most value out of your plan and there are no hidden or unknown fees that are unnoticed. Along the line of fees, you also want to ensure you are with the right retirement provider, exploring all the options available within the industry, and carefully selecting the best choice. Next, the user interface of your 401(k) plan plays a crucial role in encouraging employee participation and engagement. A review of your plan includes evaluating the usability and accessibility of the platform to ensure ease of use for your employees and firm in general. Additionally, it’s important to develop strategies or plans to boost employee participation and promote retirement savings awareness among your staff. 

An informed staff also plays an important role within a retirement plan. At Sherman Wealth, we work with many plan participants to provide education and training sessions to empower  employees to make more informed decisions about their retirement savings. From understanding investment options to maximizing employer matching contributions, we can help equip your staff with the knowledge they need surrounding overall retirement planning, answering any questions they may have specifically or generally. Lastly, even beyond the 401(K) plan, we work to support our clients with their overall small business planning needs, helping craft financial strategies to enhance the overall business. 

Within the ever changing retirement plan space, it’s important to periodically review your workplace 401(K) plan and ensure it still aligns with your firm’s needs and goals. Whether it’s setting up a new plan, reviewing your current one, or providing ongoing support and education, Sherman Wealth is here to help quarterback the process, guiding you throughout the way.  Email info@shermanwealth.com or schedule a complimentary 30-minute call here to learn more about how we can assist you in maximizing and reviewing your 401(k) potential.