How to Talk Money In A Relationship : Valentines Day Edition

Money conversations with your partner aren’t always the easiest or the most fun. With today being Valentine’s Day, a day in which we show love and affection for those around us, we thought we would discuss how to better your relationship with strong communication skills surrounding money. 

Financial wellness and empowerment is extremely important on an individual level, but is also equally as important within a partnership and relationship. Let’s discuss some tips to help you get those money conversations started with not only your partner, but your friends and family too! 

First and foremost, communication within any type of relationship is key. Creating a safe, honest, and trustworthy foundation and space for your partner to speak freely is a great starting place to kickstart uncomfortable money conversations. It is only natural that two people within a relationship have a different experience and upbringing with money and what it means to them. However, in order to overcome this difference and disparity, you must be willing to break down your communicative barriers to reach a common ground and understanding of what money means to your new relationship instead of just individually. 

Another tip when it comes to finances within a relationship is realizing that the assistance and advice of an unbiased party is welcomed and normal! If you and your partner find yourselves having a difficult time agreeing on what money means to you both as a couple, consider seeking advice from a financial professional who can view the situation on a macro level and provide insight. Accepting guidance and potentially allowing a third party to facilitate these conversations is another good way to cover some ground during these money discussions. 

Keep in mind that if you and your partner don’t automatically agree on your relationship to money, that you are not alone- it’s normal! According to a survey conducted by Morning Consult on behalf of Personal Capital, “Data from the online interviews reveal that about 57% of U.S. adults say the pandemic has increased the financial stress in their current relationships.” We know that money stress can put weight on a relationship, which is why we are here to help! We recorded several podcast episodes with psychotherapist David Pearl discussing more on how to get these uncomfortable money conversations started and how to work through them. If you would like to talk with us about your relationship finances, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here

Should You Contribute To a Pre-Tax or Roth 401(K)?

We often get many questions around this time of year regarding the key differences between a Roth and Pre-Tax (Traditional) 401(k). This is such a great question and an important concept to understand so you can fully maximize your financial and retirement goals. And, there is no better time than the beginning of the year to review your retirement portfolio. So, let’s get started. 

The main difference between the traditional and Roth 401(k) is that with the pre-tax option, you pay the tax on your contributions and the earnings when you withdraw them at retirement at that current tax bracket, whereas with the Roth, you pay the tax on your contributions upfront, but the earnings can be withdrawn tax free. Roth options are becoming more and more common in company 401(k) plans, so don’t be shocked if you see the option during open enrollment season. What’s really great about this option is that the Roth 401(k) has no income limits unlike the Roth IRA, so if your employer offers it, you are good to contribute. As found in a CNBC article and depicted in the chart below, “roughly 86% of 401(k) plans offered a Roth account in 2020, up from 75% in 2019, according to the Plan Sponsor Council of America.”

As this option is becoming more popular and if your employer’s 401(k) includes a Roth option, how do you decide between the two? Typically when deciding between whether to contribute to a Roth and Pre-tax 401(k), you will compare your current tax bracket with what you think it will be in retirement, which will depend on your taxable income and tax rates in retirement. So, if you plan on making more money in retirement or think you will fall in a higher tax bracket than you are currently in now, you should highly consider contributing to a Roth to take advantage of that often sizable tax break. However, if the opposite is true, and your tax bracket will likely be lower in retirement, consider contributing to a traditional 401(k). Keep in mind that if you are unsure or are interested in both, you can contribute to both the Roth and the Pre-Tax. 

Considering Roth options when deciding on your 401(k) and IRA contributions can often be confusing or stressful, yet very important. However, for those wanting to contribute to an Roth, but don’t have the option within their 401(k)s, keep in mind that Roth IRA’s have income limits which can limit your eligibility when you are past a certain income level. Check out this article from the IRS to see if your income qualifies you to contribute to a Roth IRA. For a mathematical breakdown and example between the two, check out our other blog we wrote a few months back. To discuss which route makes the most sense for your retirement savings, send us an email at info@shermanwealth.com or schedule a complimentary 30-minute consultation here. Also, make sure you check with your CPA or tax professional when making this decision to ensure you are fully protected. 

Mistakes To Avoid As A First-Time Home Buyer

Purchasing your first home is an amazing accomplishment and a big milestone in your life. That being said, oftentimes, most first-time home buyers face many difficulties and even make mistakes. We want to discuss common mistakes that these first-time homebuyers make and how you can learn from them. 

  1. Not Thinking About Home Ownership Costs

While you probably saved up a large chunk of money to use towards the down-payment of your house, you may not have been thinking about the costs of these other pieces of owning a house. 

  • Repairs
  • Home maintenance (homeownership issues)
  • Furniture
  • Lawn equipment
  • Misc. Items

2. Only Paying the Minimum 

While some people try to avoid putting more money down for their down payment, they often regret it after-the-fact. Mortgage payments and daily life expenses can add up, so its good idea to pay as much off as quickly as you can. 

3. Not Having An Emergency Fund 

Another mistake home-buyers make is not having an emergency fund. We know buying a house can be daunting, but it’s important to always be prepared for an emergency regardless. At Sherman Wealth we recommend building an emergency fund that can cover your monthly expenses in case of an emergency or termination of income.

4. Not Understanding How Refinancing Works

As the market volatility continues and interest rates fall, it’s important to understand and consider refinancing. Especially given the current environment, you should think about refinancing in order to save some money and to get you one step closer to becoming debt free. 

We know purchasing your first home can be an overwhelming and intimidating process, which is why you should not have to do it alone. Discuss with mortgage and financial professionals to help map out your situation prior to making the big purchase. If you have any questions, email us at info@shermanwealth.com.

Does Your Financial Advisor Provide These Services?

In our last blog we wrote about questions to ask when evaluating and searching for a financial advisor. Finding the right financial advisor is extremely important, as you want to trust the individual who will be handling your money and providing you with financial advice. We want to continue the conversation and make you aware of the services that your financial professional should be providing and assisting you with.

For starters, when choosing your financial professional, make sure they take a holistic approach to your financial life, encompassing all aspects of your life while making sound recommendations. We believe that in order for your financial advisor to make decisions or give you options that are in your best interest, they should be collecting and analyzing each of these documents. 

  • Employee Benefit Packages 
  • Tax Returns 
  • Bank Accounts 
  • Investment Accounts (401(k), Taxable, IRAs, Annuities, Pension, 529’s, HSA)
  • Real Estate Assets 
  • Estate Documents (Wills, Trusts, Powers Of Attorney, Medical Directives, Beneficiary Designations)
  • Income Statements (Paystubs, W2, Social Security Statements)
  • Expenses (Credit Card Statements, Annual Budgets)
  • Liability Statements (Loans-Car, Mortgage, Student Loans, Etc..)
  • Insurance (Health, Long Term, Life, Disability, Etc..)

Though all seemingly different, each of the bulleted items above work hand in hand with each other to complete your financial picture. When interviewing potential financial advisors, ask questions about their exact services and if they will utilize all the specified documents above when building your financial plan. At Sherman Wealth, we use a holistic and customized approach when creating our clients financial plans, analyzing and unpacking all the listed documents and our customized pre-meeting checklist.  If you have any questions about the specific services Sherman Wealth provides and how to work to build our financial plans, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here

Questions to Ask When Interviewing A Financial Advisor

Whether it’s your first time working with a financial advisor or you are searching for a new one, it’s important to make sure you ask the right questions to ensure the advisor you choose will be a good fit and will help you reach your financial goals. Comfortability and the potential for a long-lasting relationship are just a few things to look for when seeking out and interviewing potential advisors. 

You should feel a sense of assurance, trust and transparency when working with a financial professional who will be advising you about your money and future investment goals.  So, in order to ease the selection process for you, we want to point out some good questions to ask when searching for the right financial advisor. 

  • Are you a fiduciary? Is your advice conflict free? Fee only?
  • What services does your company provide?
  • What is your compensation and revenue structure? 
  • What exactly am I paying for in terms of services and advice rendered? 
  • Do you receive commissions on any particular advice or recommendations? 
  • What are the core values of your firm and investment philosophy?
  • Can you give me a background of your firm and its evolution? 
  • Do you take a holistic financial approach to investments and financial planning?

Finding the right financial advisor may take some time and can be an overwhelming process. At Sherman Wealth, we believe that life is complicated, but your finances shouldn’t be. We provide our clients with fee-only, customized solutions that not only improve their financial education, but help them reach their life and financial goals.

Choosing the right advisor should be simple, feel natural and put you at ease. If you are seeking unbiased, conflict-free advice, the financial professional you choose should be a legal fiduciary and fee-only, meaning they always act in your best interest, do not receive commissions on recommendations, and eliminate as much conflict as possible. If you have any questions about evaluating financial professionals or are curious about our approach to any of the questions listed above, email us at info@shermanwealth.com or schedule a complimentary intro call here. 

Has This Market Correction Changed Your Thoughts On Investing?

As you probably already know, it’s been quite a ride in the markets recently. When a stock index falls more than 10% from a recent high, it is often said to have entered “correction” territory. Has this recent market correction taught you anything about investing? As a young investor, this correction has been quite a learning experience, to say the least. From a sideline perspective and as an investor myself, watching the reactions of clients and peers around me has given me insight into behavioral discoveries behind investing. I’ve also seen how individuals deem their own comfortability with risk, especially within their equity. 

Charlie Bilello posted an interesting blog discussing the difference between investing and merely speculating, whether people are “excited or nervous” when their favorite asset falls in price. He suggested that despite our natural panic response to the market crashing, when the market declines, it serves as an opportunity to reinvest in the market and add capital to your portfolio for the long term. 

This is such a crucial mindset to have when approaching your investments, especially if you are investing for your future, with a long time horizon. If you were having trouble sleeping over the weekend and panicking Monday morning as the market opened, is it possible that you have too much equity risk and are investing money you may need in the short term? At Sherman Wealth, we consistently discuss the importance of time in the market versus timing the market, which should ease some of the panic during these market corrections.

 Another point to keep in mind is how quickly these fluctuations occur. We re-posted an interesting Stocktwits instagram story on Monday afternoon depicting how the equity markets started just after 9:30 in the morning and how they were going when the bell struck 4pm. You can see the clear fluctuations that often occur in a day of trading, and why you shouldn’t always assume the worst at the beginning of the day.

Furthermore, as we have seen time and time again, history repeats itself with corrections that happen constantly throughout the year. However, if you are a new or nervous investor, check out the data in the tweet below. 

As the tweet describes, this is normal. Market corrections happen and will continue to occur for years to come. If you were excited or nervous this week during the market decline, that may be a good tell of your comfortability with your risk and overall portfolio. What also becomes apparent during these volatile times is the importance of having a sound financial plan. If you have any questions about your risk tolerance, fund line up, or the markets in general, we are here and happy to help you in any way we can. Send us an email at info@shermanwealth.com or schedule a complimentary 30-minute intro call here

 

Interest Rates Are Rising, Did You Know?

One common theme we see with many clients, friends and prospects is the lack of knowledge surrounding interest rates. Many Americans have debt, whether that be credit cards, student loans, mortgages or other financial obligations. However, while taking on debt can be beneficial to your credit score and financial health, it can be detrimental for those who are unaware of their interest rate and how to interpret it. 

Interestingly enough, a Bankrate survey  reported that “Of those who carry a balance, 40% don’t know the interest rate they’re being charged on their primary card”. Not knowing your interest rate and its terms can be very dangerous and potentially very costly to the borrower. When reviewing your financial picture, be sure to pinpoint certain debts that have higher interest rates and make sure you are staying on top of your payments and reducing that liability. 

As we’ve been discussing for quite some time now, interest rates are beginning to rise and, according to Federal Reserve’s Jerome Powell’s announcement last week, rates will continue to rise throughout the year. This is a great and timely warning to educate yourself on your interest rates as you prepare financially for 2022 and beyond.

Moving forward, make sure you know your interest rates, especially as you evaluate whether you want to take on more debt and what it may cost you. With pandemic-related economic support the past two years, interest rates may not have been on the forefront of your financial planning list, but now it’s time to take control and see how your current rates and rising rates will impact your portfolio, credit cards, mortgages, and overall financial life. 

If you need help analyzing and understanding how your interest rates will affect you, email us at info@shermanwealth.com or schedule a complimentary intro meeting here. 

What To Do With Money You Need In The Short Term

There are always lots of money management questions when it comes to investing and saving. Both of these actions are crucial in building your wealth and are stepping stones to reaching your financial goals. One common question we typically get asked by prospects and clients is, “What should I do with money that I will need in the near future?”. This is a great question, because while there is no one right answer due to the fact that everyone’s financial situation differs, there are a few financial tips we can discuss.

Typically, money you will need in the near future is for a large purchase or goal, or an emergency fund you like to keep at arm’s length. Regardless of the reason, for dollars you don’t want to invest for the long-term, think about opening a high-yield savings account. 

High-yield saving accounts differ from traditional saving accounts as they provide significantly higher interest rates, allowing you to earn more money and keep pace with inflation. Your traditional savings account is probably earning you close to zero each month, whereas some high-yield savings accounts are offering rates close to 1%.

The process of opening this type of account is extremely simple, and will only require a few clicks on your computer. So why not make this easy change and take advantage of this great opportunity? While there are other options available when thinking about investing your money for the short-term, high-yield savings accounts are a great start. Click here for CNBC’s top pick’s for high-yield savings accounts and let us know if you have any questions about your particular financial situation. As mentioned earlier, since everyone’s financial goals, priorities, and backgrounds are different, it’s always a good idea to speak with a financial professional about how to make the best decisions for you and your family. If you have any questions for us or want to schedule a complimentary 30-minute consultation, book some time now

Inflation Rose 7% in The Past Year, the Highest in 40 Years!

Have you been feeling the impacts of inflation? I’m sure you have. The Labor Department reported on Wednesday that inflation rose 7% over the past year, the highest in 40 years! And on a monthly basis, they reported that CPI rose 0.5%. “The annual move was the fastest increase since June 1982 and comes amid a shortage of goods and workers and on the heels of unprecedented cash flowing through the U.S. economy from Congress and the Federal Reserve,” according to CNBC. Not only will this data continue to affect the prices of things we buy and purchase everyday, but it will also have a dramatic impact on interest rates and as we talked about last week, the 10-year treasury as well.

 

These inflation numbers are quite notable as they will affect aspects of life and personal finance dramatically, in contrast to the declining rate environment we have been in the past few years. Make sure you are understanding the impacts of the Federal Reserve increases and rising rates on your life and portfolio. If you have any questions about how these increases and economic data will affect your personal financial situation and smart financial moves to make, reach out to us at info@shermanwealth.com or schedule a 30-minute complimentary meeting here. 

 

What Are Your Short and Long-Term Goals?

Do you have financial goals? If so, are they short-term or long-term, or both? Maybe you don’t know the difference. That’s okay because we are going to discuss the difference between short and long-term goals and how to strategize for them. 

So, what is the difference between a short and long-term goal? We like to think a short term goal is something that you need liquid cash for in the foreseeable future, maybe within around 12-18 months. A longer term goal is something that you want to save for over a duration of time, maybe achievable within 3+ years or so. 

Now that you know the differences between the two, you may ask yourself, how do I create these goals I have for myself? First and foremost, you want to think about your priorities in life. Do you have upcoming expenses, do you need to save for retirement, do you have enough money in your emergency fund and checking account for your monthly expenses? 

When thinking about your goals, it’s also important to think about your risk tolerance. For example, are you willing to risk your money on investments? Or do you want it to be safe in a FDIC insured account? These are all questions you should ask yourself when designing your goals and thinking about how you want to use your money.

Setting goals can oftentimes get tricky because it’s hard to find a balance between wants vs. needs. Is your goal a necessity? Or a Want? Ask yourself some questions about the importance of your goals and think about how reasonable each one is given your financial situation and lifestyle. Deciphering wants vs. needs is a great starting point when creating goals.  When creating shorter-term goals, be sure to ask yourself when you will need the money you are reaching for so you know exactly how to strategize and save. 

Once you’ve clearly identified a realistic goal and determined the amount, timeline, and urgency of the goal, it’s time to start working towards it. Be slow and steady and stick to your plan once you make it. Goals and the methods of savings will be different for every individual, so it’s important to drown out the noise and do what is best for your personal situation. With the help of a financial advisor, you can easily put your priorities and strategies in place to reach your goals.  If you find yourself needing clarity on goal-setting and achieving your milestones, email us at info@shermanwealth.com or schedule a 30-minute consultation here.