Your End Of The Year Financial Checklist

As we approach the end of the year, it’s time to take stock of our financial well-being and ensure that we’re on the right track for the year’s end and beyond. As we head into December, it’s a good time assess our priorities and ensure we’ve covered all the essential tasks. In this blog post, we’ll discuss your End of The Year Financial Checklist, which includes some “do not pass go” items to check off before the end of the year. So, let’s dive in.

  1. Take Your RMD (Required Minimum Distribution):

For those who have reached the age of 72, taking your RMD from retirement accounts is a crucial financial task. The deadline for RMDs is December 31st, so now is the time to calculate the amount you’re required to withdraw from your IRA or 401(k) accounts to avoid penalties. Consult with your financial advisor to ensure you’re taking the right RMD amount.

  1. Check Your Contributions:

Before the end of the year, it’s essential to review and maximize your contributions to various financial accounts. This includes your retirement accounts, such as a 401(k) or IRA, but also other accounts like Health Savings Accounts (HSAs) or 529 Plans for college savings. Making the most of these contributions can help reduce your taxable income and grow your nest egg for the future. Confirm with your HR department or financial professional about your allowable contributions and deadlines.

  1. Manage Cash Flows and Holiday Spending:

Your fall season spending can quickly build up before your eyes, with holiday spending and end of the year bills. To lighten the burden and ultimately avoid financial stress, create a comprehensive budget that accounts for holiday gifts, travel expenses, and entertaining costs. It’s important to strike a balance between enjoying the season and staying within your means, but planning ahead can help avoid any unforeseen surprises.

  1. Tax Planning for the Spring:

Spring might seem far off, but it’s never too early to begin thinking about your tax situation. Take some time to assess your financial portfolio and plan accordingly so again, there are no surprise come tax season. Consider speaking with a tax professional or financial advisor who can provide guidance on effective tax planning strategies. You might also explore opportunities for charitable donations, such as a donor advised fund and explore tax-efficient investment strategies.

In this season of change and preparation, December 1st reminds us to prioritize our financial well-being. Your Year End Financial Checklist is a helpful guide to ensure you’re on the right track as we approach the year’s end. Similar to everything finance, building your personal financial checklist is unique to you and your family’s personal financial situation, so some of the items above may or may not apply to you. However, as we approach the end of the year, these are good concepts and ideas to think about to ensure you are maximizing your opportunities before year end. If you have questions, or are seeking help executing the tasks mentioned above, email us at info@shermanwealth.com or schedule a complimentary intro call here.

Are Your Finances Negatively Impacting Your Mental Health?

Does money and financial conversations stress you out? Do you feel uncomfortable when having money discussions with your partner? If so, you’re not alone. Money conversations can bring up underlying insecurities and cause anxiety amongst individuals. Given the current market environment and economic uncertainty, extreme volatility, and newly reported record high inflation data, it’s extremely important to discuss mental health as it relates to money.

According to a survey from Bankrate, “some 42% of U.S. adults said that money has a negative impact on their mental health” (The study included nearly 2,500 American adults and took place between April 6 and 8.). We found this statistic alarming, as they also reported  “that 28% of those who said money has a negative impact on their mental health worry about it on a daily basis.” This data reinforces not only the importance of mental health awareness, but the importance of utilizing financial strategies to lessen this overwhelmed feeling individuals have when doing daily financial tasks such as checking their bank statements and paying bills.  

Establishing a financial plan is a great place to start when trying to organize your financial life. If you are feeling anxious, maybe it’s a good time to revisit your budget, risk tolerance, and asset allocation. As mentioned in a previous blog, many Americans actually do not have a financial plan, which means they have no road map to follow. At Sherman Wealth, we always say that life is complicated, but your finances don’t have to be. Consider working with a financial professional to lessen the burden and anxiety you feel when tackling your financial life on your own. With customized solutions and behavioral finance strategies, we can provide you with a plan that will seamlessly lead you in the right direction. 

As mentioned prior, we know money topics can be uncomfortable and scary for some, but it’s very prudent to recognize it and utlilize financial strategies so it does not negatively impact your mental health. We recorded a podcast episode with Music City Pysch’s David Pearl and he provided us with tips on having transparent, honest, judgment-free, conversations with your partner. If you have any questions about your financial situation or are feeling like money is negatively impacting you, please reach out to a mental health professional to  discuss or schedule some time here and we are happy to help. 

Why To Think About Donor Advised Funds This Time Of Year

As we approach the end of the year, many individuals are considering their charitable giving strategies. One powerful and flexible tool gaining popularity is the Donor Advised Fund (DAF). This innovative approach to philanthropy not only simplifies the giving process but also offers substantial tax incentives and benefits for those who are charitably inclined.

What is a Donor Advised Fund (DAF)? A Donor Advised Fund is a philanthropic vehicle that allows donors to make contributions to a fund, receive a tax deduction, and then donate stock from the fund to their favorite charities over time. Essentially, it’s like having a charitable savings account that can be strategically managed to giveback to causes near and dear to the donor.

As tax planning season is winding down, you want to ensure you are thinking about all your options to mitigate and strategize your tax liability. With a donor advised fund, you are typically eligible to take an income tax deduction of the full fair-market value of the asset, up to 30% of your AGI. Furthermore, there are several strategies to mitigate or eliminate capital gains tax on long-term appreciated stock, if they’ve been held for more than a year. This is a strategy that many charitably inclined individuals with long-term appreciated stock like to implement into their tax and charitable giving strategy.

Some other benefits DAF’s provide is flexibility, because donors can take their time in recommending grants from the DAF to qualified charitable organizations, meaning they do not have to donate the grants right away or at any particular time. This flexibility allows for strategic, thoughtful giving, especially during times of urgent need or for long-term projects. DAFs provide an opportunity for family involvement in philanthropy, it is a great way to continue generational contributions and get your children involved in charities they want to support. For those who prefer anonymity, donors have the options to remain anonymous when making grants from their fund as well.

Donors can invest the funds within the DAF, potentially allowing them to grow over time, allowing the potential donation to grow in size as well. Lastly, donor advised funds are a great way to streamline the record-keeping process of charitable giving, allowing them all to stream through the DAF and simplifying tax records and documentation. While these are only a few of the many advantages donor advised funds provide, discuss with a financial professional on the account opening process and if it makes sense for you.

Given the time of year and holiday season, we like to discuss financial strategies as it relates to charitable giving. As the end of the year approaches, contributing to a DAF becomes a particularly prudent strategy for those looking to maximize their charitable impact while optimizing tax benefits for the current year. If you have any questions on donor advised fund and their process, email info@shermanwealth.com.

When Should You Give Inheritance Money to Your Kids?

When it comes to gifting and giving money, especially to family members, people are oftentimes confused on when is the right time to pass over their inheritance. Should an inheritance be strictly given after one’s death? Should it be used while one is still alive?  Let’s take a look at some of these questions.

Of course, every family is different, in terms of how they want to be remembered, but there are some things that every family should think about when passing on wealth. Many articles recently have been stating that individuals believe they will need an inheritance to maintain their level of wealth and living when they grow older. A Merrill Edge survey revealed that “a third of “mass affluent” Americans from Gen Z to baby boomers with investible assets of at most $250,000 are waiting on inheritances to achieve financial stability.” It’s interesting to see that so many individuals are relying on such wealth as part of their financial future. With our ever changing economy and sky-rocketing inflation, It will be interesting to see how the current market conditions impact the ability for individuals to continue to pass down wealth. Next, let’s take a look at when family members should think about passing down their inheritance to their heirs. 

Give Now or Later?

Giving now rather than later is the preferred approach for many financially comfortable people these days. According to a 2019 Merrill study, Leaving a Legacy: A Lasting Gift to Loved Ones, 65% of Americans 55 and older say it’s better to pass on at least part of their estate while they are still alive.

While every family person has a different financial situation and circumstance, if deciding whether to gift your money earlier or later, here are some questions to ask yourself. 

Are You Over-Giving?

Before you give to your children or family members, make sure you are not sacrificing your own personal financial situation. Oftentimes, family members give too much to their children and don’t save enough for their own lifetime. 

Some of your children may prefer to wait for their inheritance, while others could benefit greatly from having the assets today. Before making that decision, make sure to communicate with your family members to make sure everyone is comfortable with the situation at hand. Check out our podcast episode with David Pearl discussing money and financial traditions, explaining how to pass down money values and concepts. 

Where the U.S Tax Code Comes In

For those who are interested in contributing to the education of heir children or grandchildren, 529 plans may be a great place to start. 529 plans allows you to slowly contribute and save for your children’s education that they can use later in life. For the 2023 tax year, remember you can give up to $17,000 as a single filer and $34,000 as a married couple tax-free without it going against your gift exemption, 

While this situation varies from person to person, it’s important to plan out your inheritance and set a will in place so that your hard-earned money is shared amongst your loved ones. Planning early and asking yourself these questions is a great strategy to help you make the right decisions when it comes to your inheritance. If you have any questions about your personal financial situation and what makes the most sense for you and your family, please email us at info@shermanwealth.com. 

Are You HSA Eligible? If So, Check This Out

Are You HSA eligible? If so, here’s how to take advantage of it during this time of year. While open enrollment season is still here, now is a great time to review and analyze all the options available to you, including an HSA (health savings plan).  Many individuals have questions about what benefits they are eligible for, and what those benefits truly mean. Retirement savings and medical coverage are typically a large part of your workplace benefits, which is why it’s so important to take advantage of what’s available to you, such as an HSA.

So, what are HSA’s? An HSA is a tax-advantaged health savings account that allows you to save money specifically to pay medical and health care expenses. If you get your insurance coverage through high-deductible health plans, you can qualify for an HSA. Your contributions within the account will grow on a tax-free basis, and any untouched dollars can be rolled over year to year. One of the key benefits of an HSA is the triple tax advantage it offers: contributions are tax-deductible, earnings are tax-free, and withdrawals for qualified medical expenses are also tax-free. By using untaxed dollars in a Health Savings Account to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. This flexibility and tax advantage make HSAs a valuable tool for individuals seeking to manage healthcare costs and build long-term financial security

Due to inflation, the IRS increased the contribution limits for HSAs in 2024.  So, next year individuals with a HDHP will have a HSA contribution limit of $4,150, up from $3,850 this year. The HSA contribution limit for family coverage will be $8,300 up from $7,750 this year. This is a 7% increase over what you can contribute this year for 2023. These adjustments are quite large, so be sure to take advantage if you are eligible to do so!

Be sure to contribute by the end-of-the-year December 31st deadline, so that you can make the most of your yearly contribution. Keep in mind that HSAs are just one of the many benefits that you can take advantage of. Check out our open-enrollment blog to see what else you may have been eligible for and our retirement contribution limits blog to see the increases in retirement contribution limits ! For other end of the year tips, check out our financial checklist blog here. If you have any questions about funding your various accounts, email us at info@shermanwealth.com or schedule a complimentary 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 in the last quarter of the year and approaching 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. As we approach open enrollment season, use this opportunity to review your benefits guide and familiarize yourself with all the benefits available to you so you can maximize your particular financial life. 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. 

October Is Financial Planning Month: Here’s What To Know

With October being financial planning month, it gives us a prime opportunity to refocus our attention on our financial well-being. This month serves as a reminder to take a step back, evaluate our financial goals, and make necessary adjustments to secure and realign our financial plan and journey. In this blog, we’ll explore why Financial Planning Month is a great time to revisit your plan and what financial planning items to focus on.

  1. Setting Clear Financial Goals

October presents an excellent chance to set or refine your financial goals. Whether you’re looking to build an emergency fund, pay off debt, save for retirement, or invest in your dream home, setting specific, measurable, achievable, relevant, and time-bound (SMART) goals is essential.

  1. Reviewing Your Current Financial Situation

To effectively plan for your financial future, it’s crucial to have a clear understanding of your current financial situation. Review your income, expenses, debts, and investments. Take the time to create or update your budget, assess your net worth, and review the bigger picture. Understanding where you stand financially is the first step toward making informed decisions. Remember that open enrollment season is right around the corner, so evaluate your blin spots or wrk with an advisor to help spot what’s missing and where you can improve.

  1. Budgeting

With the holiday season just around the corner, October is the ideal time to start budgeting for holiday expenses. By planning ahead and setting a budget for gifts, travel, and entertainment, you can avoid overspending and prevent post-holiday financial stress.

  1. Tax Planning

As the year draws to a close, October is an excellent time to start thinking about tax planning. Work with your financial advisor in conjunction with your CPA t run tax projections and consider ideas to minimize your tax liability. Being proactive in your tax planning can lead to substantial savings when tax season arrives.

  1. Retirement Planning

Retirement planning is a critical aspect of financial planning. October serves as a reminder to assess your retirement savings goals and contributions. Whether you’re just starting your retirement savings journey or nearing retirement age, use this time to evaluate where your contributions are for the year and make the applicable changes.

Financial Planning Month serves as a timely reminder to take control of your financial future. By setting clear financial goals, reviewing your current financial situation, budgeting for the holidays, and addressing tax and retirement planning, you can make meaningful strides in your financial life. Consider working with a financial professional to help seamlessly approach this financial reset and evaluation. If you have any questions on how to get started, email info@shermanwealth.com.

Launch Financial- How To Work Through Money Conversations With Your Significant Other, with David Pearl

Check out our podcast episode, “How To Work Through Money Conversations With Your Significant Other, with David Pearl” (You can find the direct download here). In this episode, we are joined by David Pearl, a LCSW a psychotherapist and consultant who specializes in treating professionals, couples, performing artists and athletes. Together we explore tips and advice on the money conversations you should be having with your significant other and when entering a new relationship. When two people with different backgrounds, risk tolerances, and views on money begin to merge their lives, things can get messy. David walks us through how to make those situations lighter and easier on your relationships.

A little about David, he aims to provide a safe and supportive environment to strengthen self-esteem and facilitate more meaningful connections with family, friends, professional colleagues, or teammates.

David obtained his Master’s degree from The Silver School of Social Work at NYU and his Bachelor’s degree in Human Development and Family Studies from the University of Wisconsin-Madison. He is formally trained in Acceptance & Commitment Therapy (ACT), and has certifications in Imago Relationship Therapy and Prepare/Enrich Premarital and Marital Counseling. David is dual licensed in New York and Tennessee, and works with clients on an ongoing basis in both locations.

Prior to founding Music City Psych in Nashville, TN, David provided psychotherapy and performance coaching at Union Square Practice in NYC, counseling to individuals, couples, and families struggling with hematologic cancers at Mount Sinai Hospital, as well as psychodynamically oriented individual and couples counseling at The National Institute for the Psychotherapies (NIP).

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. Following consecutive interest rate hikes from the Federal Reserve, they decided to hold rates steady at their September meeting, while still indicating that future rate hikes are still in the picture.  In this blog, we’ll explore what a higher interest rate environment means for you and your wallet, and how you can adapt to these changes.

  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.

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.

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.