Are You Having Trouble Saving Money In This Environment?

As the economy continues to adjust to this higher interest rate environment with future uncertainty on what the Federal Reserve will continue to do with hiking interest rates to combat high inflation, many individuals are too feeling an adjustment. We have been finding that many clients and prospects are needing to adjust and revisit their budgets in this environment, and pay closer attention to the amount of cash they have on hand. Do you feel this way too? Are you keeping a closer eye on your spending?  Have your spending habits changed or are you feeling the impact of higher prices? Let’s take a look at how Americans are feeling about their costs and spending. 

According to a survey from the Certified Financial Planner Board of Standards, “63 percent of Americans are concerned with purchasing necessities such as food, their job security (56 percent), paying their rent or mortgage (55 percent), saving money (82 percent), and the national economy (82 percent).” It’s clear that this higher cost of living is having an impact on the consumer. In fact, credit card balances are at an all time high while American’s emergency savings accounts are dwindling. According to a survey by MagnifyMoney, “Nearly 1 in 5 Americans admit they saved no money at all in 2021. While these stats are not meant to cause anxiety or stress, noting where the economy is a great reason to discuss intentional spending. 

Intentional spending and frequent check-ins on your financial plan and budget is crucial, especially in this environment. Whether you had a financial plan created for you years ago or just a few months ago, it’s extremely important to check in with your plan and budget often to ensure it still works for you. 

When you are intentional about your spending, you separate your wants versus your needs as well as your short and long term goals, creating buckets to achieve your different wishes. We find that many individuals don’t sit down to create a realistic budget and end up spending more than they bring in, resulting in negative cash flows and added financial stress. Along with intentional spending, finding an amount that you are comfortable with to sock away each month is a great way to stay responsible and build up your emergency fund. We just wrote a blog about the importance of a mid-year financial check-in which is a great opportunity to re-visit your spending, budget, cash flows, and savings strategy. 

The survey also found that “younger Americans were also more likely to make decisions that could impact them negatively long term, as investors under 45 were more likely to delay credit card payments (29 percent versus 17 percent) and delay loan payments (25 percent versus 16 percent).” We know that financial planning might not always be top of mind for you, especially if you are a young professional just starting out, but setting up a financial plan from a young age and making these financial tasks a priority can be extremely beneficial to your financial future. Delaying loan and credit card payments can be a very slippery slope and get far away from you quickly if not handled appropriately, so make sure you create a plan and budget that works for you to avoid getting yourself into a sticky situation. 

We know that financial planning can seem scary or overwhelming which is why here at Sherman Wealth make financial planning simplified. We take overwhelming topics and make them easily understandable for our clients to ensure we educate and help them every step of the way on their financial journey. If you have any questions and want to revisit your financial plan or spending habits, email us at info@shermanwealth.com or schedule a complimentary 30-minute call here. 

Building Smart and Positive Financial Habits

Financial habits play a pivotal role in shaping our financial future. Whether you’re striving for financial stability, planning for retirement, or aiming for financial freedom, cultivating smart and positive financial habits is essential. In this blog, we’ll explore practical steps to help you develop these habits and set yourself on a path to financial success.

  1. Create a Budget

The cornerstone of any solid financial plan is a well-defined budget. Start by tracking your income and expenses. Knowing exactly where your money goes allows you to make informed decisions. Allocate a portion of your income for essentials like housing, groceries, and bills, and set aside some for savings and discretionary spending. Stick to your budget to avoid overspending and accumulate savings over time.

  1. Build an Emergency Fund

Life is unpredictable, and unexpected expenses can throw your finances off balance. To prepare for such situations, establish an emergency fund that is comfortable in the event of an emergency. Having this cushion ensures you won’t need to rely on credit cards or loans when emergencies arise.

  1. Set Financial Goals

Setting clear financial goals gives you a sense of direction. Whether it’s buying a home, paying off debt, or saving for a dream vacation, having specific goals helps you stay motivated and focused. Break these goals into smaller, manageable milestones, and celebrate your achievements along the way.

  1. Automate Savings and Investments

Make saving and investing a habit by automating the process. Set up automatic transfers from your checking account to your savings or investment accounts. This “pay yourself first” approach ensures that you prioritize saving before spending, making it easier to stick to your financial goals.

  1. Pay Off Debt Strategically

High-interest debt can be a significant drain on your finances. Develop a plan to pay off your debts strategically. Start by paying down debts with the highest interest rates while making minimum payments on others. As you eliminate each debt, redirect those payments to the next one.

6. Educate Yourself

Financial literacy is a powerful tool for making informed decisions. Take the time to educate yourself about personal finance. Read books, follow reputable financial blogs, and consider taking courses or seeking advice from financial professionals. The more you know, the better equipped you’ll be to manage your money wisely.

7. Review and Adjust Regularly

Your financial situation is likely to change over time. Make it a habit to review your budget, goals, and financial plans regularly. Adjust your strategies as needed to accommodate life changes, such as a new job, marriage, or the birth of a child.

Developing smart and positive financial habits is a journey that can lead to financial security and peace of mind. By creating a budget, building an emergency fund, setting clear goals, automating savings, paying off debt, educating yourself, and regularly reviewing your finances, you can take control of your financial future. If you have any questions or are seeking an accountability partner, email info@shermanwealth.com or schedule a complimentary introductory call here.

Are You Being Smart with Your Debt?

Do you know the difference between good and bad debt? Are you able to maintain and afford the debt you take on? Many individuals are not. In fact, we’ve been reading tons of articles and studies that are finding that Americans, in particular millennials, are piling on debt during this time. Given the inflationary and high interest rate environment we are living in, talking about debt is more prudent than ever.

Are higher interest rates and prices changing your spending habits? If you are feeling the heat of inflation, re-evaluate your budget and cash flows, ensuring you are only purchasing what you can truly afford. Spending more than you make can slowly pile up your bills overtime, making it hard to pay your debt each month.

While taking on “good debt”, such as opening lines of credit to prove to creditors you are responsible with your money, is a great way to build your personal credit, taking on too much debt can eventually harm your credit score. So, obviously there is a happy medium when it comes to taking on debt and building your credit.

As we’ve discussed before, your credit score is oftentimes considered the lifeline of your financial life. Having a strong credit score allows you to not only take on more debt, but lets you do it a better price. For example, with a high credit score, lenders are more willing to approve your application and provide you with a lower interest rate. Given the high interest rate environment we are in with the Federal Reserve hiking interest rates to combat inflation, receiving a competitive and lower interest rate is huge to your financial situation.

Furthermore, with interest rates still going up, you want to make sure you are aware of the type of debt you have and are taking on, whether it’s tied to a variable interest rate or its fixed. Many individuals aren’t aware they have variable interest rate debt and understand their finaical obligation to it as rates rise. We know the difference between good and bad debt can be overwhelming to understand, which is why we recommend working with a financial professional to ensure you know everything you have, what your financial obligations actually are, and how to make the best decisions surrounding them. If you have any questions on your personal financial situation or debt, email us at info@shermanwealth.com.

How To Prepare For The Student Loan Re-Payment in October

After a long three-year pause, student loan payments are officially back. That’s right, interest has resumed on your student loans as of September 1st, and they are set to resume payment in October. The US Department Of Education’s recent announcement on its website indicates that individuals with student loans will need to start making payments once again starting in October. Since borrowers have become so comfortable with the omitted payment for the last three years, it’s crucial for individuals with student loans to prepare themselves for the transition. So, let’s discuss some practical tips to help borrowers prepare for the resumption of payments and ways to fit the payment back in the budget.

So, you might be thinking to yourself, “How Do I Prepare for the Loan Payment to Resume?” Well, especially now that interest has begun accruing on your loans, a great starting point is to review and familiarize yourself with your loan terms and conditions. Maybe you have received an email or statement in the mail recently, or take a look at your old payment sheet to understand the interest rates, repayment plans, and any changes that may have occurred during the payment pause. Take note of the exact amount you owe and any upcoming changes that might impact your monthly payments so you can ensure that your existing repayment plan still fits within your financial capabilities.

Next you want to revisit your budget and re-assess your current financial situation. Take a close look at your current financial circumstances. Evaluate your income, expenses, and other financial obligations. Assessing your budget will help you determine how much additional savings you have each month that you can allocate towards your student loan payments without compromising your overall financial stability. If you find that currently there is no room in the budget for your student loan payment, then it’s time to make some adjustments where you can.

We know it’s hard to make theses adjustments on your own, which is why we work with individuals to tweak and set a realistic budget. With the upcoming student loan payments, it’s essential to create or update your budget to accommodate this new expense. Analyze your income and expenses, identifying areas where you can cut back or make adjustments to accommodate the loan payments. Write down your wants versus your needs to determine discretionary expenses that can be reduced temporarily.

While you’re trying prepping to begin re-payment, think about your emergency fund as well. In addition to your student loan payment bucket, try setting aside an extra portion of your income this month to build up your emergency bucket should the budget be tight once your payment resumes.

If you find yourself overwhelmed or unsure about how to proceed, seek guidance from a financial advisor or student loan counselor. We are working with borrowers to analyze their situation and provide personalized advice based on their specific circumstances. As the resumption of student loan payments approaches, it’s crucial for borrowers to proactively prepare. By reviewing loan terms, assessing your overall finances, and creating a realistic budget, you can effectively prepare and manage the transition. Remember, a financial plan and preparation are key to ensuring a smooth adjustment to the student loan repayment phase and maintaining overall financial well-being. If you have any questions, email us at info@shermanwealth.com or schedule a complimentary intro call here.

The Importance of Financial Planning and Goal Setting As A Young Professional

As individuals enter their golden years, it becomes crucial to have a financial plan already set in place and planned out. Prioritizing financial planning and goal setting from an early age will ensure a secure and fulfilling future. Older adults often face unique financial challenges, including rising costs, potential long-term care needs, and economic insecurity. This blog post emphasizes the significance of creating a solid financial plan while you’re building your family and career, setting clear goals, and highlights the role of financial planning in securing a stable financial future for aging Americans.

So, lets discuss the power of financial planning. Financial planning serves as a roadmap to navigate the complexities of life and provides a sense of control over one’s financial well-being. It involves evaluating current financial circumstances, creating a plan to achieve both your short-and long-term goals, estimating future expenses, and developing strategies to maximize savings and investments. By engaging in financial planning and creating a holistic plan as you kickstart your life path, older adults can proactively address their financial needs and aspirations, and ensure the ability to weather unexpected financial shocks.

According to the NCOA survey, a staggering “80% of households with adults over 60, equivalent to 47 million households, are at risk of falling into economic insecurity due to high inflation and rising costs”. This poses a significant challenge for older individuals, with 45% of them having household incomes below the threshold required to afford basic living needs. In fact, many of these individuals feel unprepared to whether a financial shock that may come their way. This shows the importance of having a plan in place and setting up a strategy to achieve both your short and long term goals.

Goal setting is an integral part of effective financial planning. It involves identifying specific objectives that align with your personal values and dreams. Whether it is retiring comfortably, purchasing a vacation home, covering long-term care healthcare expenses, or leaving a legacy for loved ones, goals are specific to you and your family. Setting achievable and measurable goals helps individuals stay motivated and track their progress towards financial security.

Financial planning and goal setting will play a vital role in preparing for your future and any unexpected financial shocks that come your way.  By creating a robust financial plan, individuals can navigate economic uncertainties, rising costs, and life goals effectively. If you have any questions about creating a financial plan and preparing for the future, email us at info@shermanwealth.com.

Your Financial Checklist for September

September is here, which means it’s time to start thinking about your financial goals and ensuring your money matters are in order. As the summer months wind down, it’s the perfect opportunity to revisit your financial plan, set new goals, and make sure you’re on track to achieve them. Here’s a financial checklist to help you navigate the financial waters this September:

1. Check Your Student Loan Portal: If you have student loans, you may have enjoyed a few years of reprieve thanks to the pandemic-related pause. However, as of this month, interest has resumed on federal student loans. It’s crucial to check your student loan portal to confirm and understand your liability beginning next month. This change could impact your monthly payments and the overall cost of your loans.

2. Benchmark Your 2023 Goals: At the beginning of the year, you likely set financial goals for yourself. Now is the time to revisit those goals and assess your progress. Take a moment to reflect on what you wanted to achieve in 2023, whether it was saving for a major purchase, paying down debt, or investing for the future. Evaluate where you stand in relation to those objectives and make any necessary adjustments. If you’ve met some of your goals, celebrate your accomplishments, and if you’re falling short, identify the steps needed to get back on track.

3. Review Your Retirement Contributions: Your retirement savings are a critical part of your financial future. September is an excellent time to review your retirement accounts and contributions. Are you on track to max out your contributions for the year? If not, consider increasing your contributions to take full advantage of tax-advantaged retirement account. Did you increase your contribution from last year to account for the increase in contribution limit, which is $22,500 and $30,000 for those 50 and older. Ensure your investment allocations align with your long-term goals, and if necessary, consult with a financial advisor to fine-tune your retirement strategy.

4. Revisit Your Cash Flows and Budget: As we transition from summer to fall, your expenses and financial priorities may change. Take a closer look at your cash flows and budget to ensure they reflect your current situation. Are there any upcoming expenses you need to plan for, such as back-to-school costs, holiday expenses, or home maintenance? Adjust your budget accordingly to accommodate these changes. Reevaluating your budget can help you stay in control of your finances and avoid any unexpected financial stress.

Bonus Tip: Consider Tax Planning Though tax season is still a few months away, proactive tax planning can save you money in the long run. Review your tax situation and look for opportunities to optimize your tax strategy. This might include taking advantage of tax deductions, tax credits, or making smart investment decisions with tax implications in mind. Consult with a tax professional or financial advisor to explore potential tax-saving strategies.

In conclusion, September is a prime time to get your finances back on track after the summer months. By following this financial checklist, you’ll be better prepared to tackle the rest of the year with confidence and ensure that you’re making the most of your financial resources. Remember that financial planning is an ongoing process, and regular check-ins like this one can help you achieve your short-term and long-term financial goals. If you have any questions or are seeking financial advice in your fall financial check-up, email us at info@shermanwealth.com or schedule a complimentary intro call here.

Fall Into Financial Health: Why It’s Crucial for the Season Ahead

As the leaves begin to change color and the temperature starts to drop, we often find ourselves embracing the cozy comforts of fall. It’s a season of pumpkin spice lattes, warm sweaters, and scenic walks through nature’s vibrant transformation. However, amidst all the autumnal pleasures, it’s essential not to overlook a different kind of health and fitness – your financial health.

Fall serves as an excellent reminder of the importance of financial health, especially as we approach the end of the year. Post summer travel and the last few months of the year mark a fitting time to assess your financial situation, prune unnecessary expenses, and ensure your financial foundation is strong.

Here are some compelling reasons why financial health and fitness are crucial as we head into fall:

  1. Budgeting for the Holidays: Fall marks the beginning of the holiday season, which often comes with increased spending on gifts, travel, and festivities. To avoid financial stress and overspending, it’s essential to have a budget in place. Review your finances now and allocate funds for the upcoming celebrations.
  2. Emergency Preparedness: It’s essential to have financial reserves in place for unexpected expenses that life can throw at us. Just as leaves fall from the trees, unforeseen medical bills, car repairs, or other emergencies can quickly impact your finances. Having an emergency fund serves as your financial safety net during such times of need. Ensure you have enough savings to cover these unexpected expenses, offering you peace of mind in an ever-changing world.
  3. Year-End Financial Goals: As the year draws to a close, it’s an ideal time to assess your progress toward your financial goals. Whether it’s saving for retirement, paying off debt, or building an investment portfolio, fall is an excellent time to make adjustments and finish the year strong.
  4. Tax Planning: Fall is the perfect time to start thinking about your tax situation for the year. By reviewing your income, deductions, and potential tax credits now, you can make strategic financial decisions to optimize your tax liability before the end of the year.
  5. Healthcare Open Enrollment: Many employers offer open enrollment for health insurance and other benefits in the fall. Take the opportunity to review your coverage options and make any necessary changes to ensure you have adequate protection for you and your family.
  6. Year-End Financial Checkup: Just as you visit your doctor for a health checkup, consider scheduling a year-end financial checkup. Review your credit report, assess your investments, and ensure your financial accounts are in good order.
  7. Setting Financial Resolutions: Fall is a time of change and renewal, making it an excellent moment to set financial resolutions for the coming year. Whether it’s saving more, investing wisely, or paying down debt, having clear financial objectives will keep you on track.

In conclusion, just as we prepare our homes and wardrobes for fall, it’s equally important to prepare our finances. The changing season reminds us to reevaluate our financial health and make any necessary adjustments to ensure a secure and prosperous future. By taking proactive steps now, you can enjoy the beauty of autumn with peace of mind, knowing that your financial foundation is strong and ready for whatever challenges and opportunities lie ahead. If you have any questions or are seeking financial accountability and help this fall, email us at info@shermanwealth.com or schedule a complimentary intro call here.

Why A Roth IRA and 401(K) Are Smart Retirement Vehicles For You

While saving for retirement is a great way to build your financial wealth and pile away money for the future, many individuals are unclear on the best vehicles to use when saving for retirement. Furthermore, we have been reading articles and hearing remarks from individuals, especially those of younger generations, that they do not want to tuck away money now for retirement, funds that they can’t touch for many, many years. So, for those of you who resonate with this feeling, but still want to optimize your retirement savings, let’s explore why a Roth IRA might be the right savings vehicle for you.

So, for starters, let’s explore what a Roth IRA (individual retirement account) is. For those who don’t know, a Roth IRA is a retirement vehicle that allows individuals who fall under a certain AGI limit to contribute after-tax dollars to a retirement account, meaning you pay taxes on the money upon contribution so your future withdrawals are tax free. Some benefits of a Roth IRA are that your earnings can grow tax free, there are no mandatory withdrawals, unlike a Traditional IRA, and that withdrawals can be taken out tax-free and penalty free, given you’re age 59½ or older and you have met the minimum account holding period, which is 5 years.
Another benefit of a Roth IRA that many young savers find attractive and comforting is the fact that they you can always access the money you contributed without penalty, no matter your age, unlike a traditional IRA. Of course, any gains in the account may be subject to taxes and penalties is withdrawn before age 59½, unless you qualify for an exception. So, while we don’t recommend withdrawing from your account, for those worried about totally locking up their money until retirement, a Roth IRA provides piece of mind that you do have access to those funds in case of an emergency. In fact, studies show that many young individuals don’t end up withdrawing from their accounts, but feel comfort knowing that they can. So if you get weary about your retirement savings, a Roth IRA and its flexibility might be right for you.
While there are many benefits of contributing to a Roth IRA, if you or your combined household has too high of a AGI, you may not be able to contribute. However, if you still want to take advantage of the Roth option within part of your retirement picture, see if your workplace 401(K) has a Roth component. Unlike a Roth IRA, the Roth 401(K) has no income limit and follows the same contribution limit as the traditional 401(K). If you are a small business owner or self-employed, but make too much to contribute to a Roth IRA, consider setting up a 401(K) for your business and adding a Roth component. This is a great way to take advantage of the benefits a Roth account offers, and also save for retirement. If you are looking to implement a 401(K) for your small business or the Roth component to your existing retirement plan, email us at info@shermanwealth.com and we are happy to help!
Given all the market volatility and economic uncertainty we’ve seen over the last few years, having a good grasp on your financial picture is important. While saving for retirement is a key piece of your financial plan, its only one piece of many, which is why we encourage working with an advisor on a holistic financial plan to analyze the larger scope. If you have any questions about your particular financial situation or a Roth IRA, email us at info@shermanwealth.com or schedule a complimentary intro-call here.

The Importance of an Emergency Fund

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. 

Do You Want to Save More For Retirement This Year? Open Enrollment Is Near So Here’s How

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.