Given the events of the last year, with the Federal reserve raising interest rates to combat high inflation, the consumer has had to shift the way they think about their money, especially their cash. With higher interest rates, comes the opportunity to earn more interest on your cash, but also makes it more expensive to take on debt and loans, leaving you with some decisions to make. So, let’s discuss a few smart money management tips you can adopt during financial literacy month.

First and foremost, it’s important to create a well-diversified portfolio, maximizing retirement, short-term goals, and your cash. As it relates to your cash, make sure you are taking advantage of higher yield FDIC insured savings accounts, instead of large money center banks earning close to 0%. Shop around different high yield savings accounts and see where you can get the highest rate. Next, if you are willing to take on some more time risk, we’ve been seeing individuals purchase CDs and Treasury bills for one to two percent higher than the high yield savings rates. So make sure you are maximizing your cash and taking advantage of this high interest rate environment.

Next, as it relates to your investable assets, as we always say, avoid timing the market and focus on time in the market with your portfolio. Over the last few years, we have seen many individuals pull their money in and out of the market due to market volatility and anxiety, but as studies, time in the market always proves itself positively.

As it relates to your debt, stay on top of your variable interest rate debt, especially as the Federal Reserve continues to raise interest rates. Furthermore, re-visiting your budget to make sure that it works for you and your financial situation is extremely important during this time. With this changing economic environment, it’s super important to stay on top of your financial plan and make sure you are updating/altering it accordingly.

As we are halfway through financial literacy month, we want to ensure you are taking advantage of all that you can. It’s important you are capturing all of the interest you can earn and that your money is in the right places. If you are interested in re-visiting your financial plan or have questions about your cash management needs, email us at info@shermanwealth.com or schedule a complimentary intro call here.

As we kick off financial literacy month, we want to share some frequently asked questions we’ve received from clients and friends and provide actionable answers. As we embark on a new quarter and the spring season, it’s a perfect time for some “spring cleaning” and financial organization. Throughout the month of April, we want to stress the importance of financial literacy and spread the word about financial education and empowerment. We will be sharing questions, answers, and advice we receive in hope to help you all organize and prepare your finances for the rest of the year.  

Below you will find some frequently asked questions:

Q: How do I adjust my budget for inflation, and this higher cost of living?

A: With inflation sky-rocketing over the last year, and the Federal Reserve raising interest rates to bring it down, many individuals are needing to adjust their budgets, as the cost of their previous budget is now more expensive. So, let’s start by taking a look at your wants versus your needs…Are you spending money on items you really don’t need? Are there areas of the old budget you can omit? Make sure you are canceling old subscriptions and making sure your cash outflows are not exceeding your inflows.

Q: Is there anything I need to think about with higher interest rates?

A: This is a great question. Given the high interest rate environment we are currently in, there is lots to think about. First and foremost, make sure you are maximizing the interest you are earning on your cash. Don’t park your cash in 0% large money center banks, when you can make close to 4% in FDIC insured high yield savings account. Consider high interest paying vehicles, such as CDs and Treasury Bills/Notes. On the flip side, as it relates to your debt, make sure you know what rates you are paying on your variable rate debt, so that as it increases, you are not letting it get out of hand.

Q: As a new college graduate, where/how do I get started in terms of investing?

A: First and foremost, it’s important to take a step back and establish what your financial goals are. If you are saving up for a new apartment or expenses in the near future, maybe consider building up your emergency fund/savings account. If you want to set yourself up for a solid financial future, you should think about contributing to your retirement, in a 401(k) through your workplace, or a Traditional/Roth IRA if you don’t have a 401k at work.  But most importantly, don’t forget about that emergency fund.  If the last few years taught us anything, it’s to prepare for the unexpected.  

Q: How do I decide which credit card to apply for?

A: Before applying for a credit card and opening lines of credit, make sure you understand the responsibilities involved. When opening a new credit card, you must remember to pay your balances and statements on time in order to keep your credit score in tip top shape. That being said, opening lines of credits are crucial in establishing your credit score, so it’s important to do so. When deciding which credit card to choose, think about your expenses and where most of your dollars go. For example, if you spend most of your money at Amazon, consider purchasing an Amazon credit card that may provide you with cash back or points offers. Or, if you love to travel and dine at restaurants, consider a card that provides you with double points for those activities. Making the most of your credit cards is a great financial literacy tip to start the month. 

Implementing these small tips into your everyday financial routine is a great way to get organized and start off on the right foot. For more financial literacy advice and questions, stay tuned for our content and join us for our very special financial literacy event this month, Women, Wine, & Financial Fitness, where we will provide a open and informal space to empower women on their finances, accompanied by guest speaker, Estates and Trusts Attorney, Sarah Broder. Reserve your spot now: https://www.eventbrite.com/e/women-wine-financial-fitness-tickets-608759424827. If you have other questions similar to the ones above, please feel free to send them to us to answer at info@shermanwealth.com. If you would like to directly discuss your questions with us, please book a complimentary meeting here. 

In a widely anticipated move, the Federal Reserve has hiked interest rates by 25 basis points or 0.25%. Fed Chair Jerome Powell said the extent of future rate hikes is uncertain, indicating that they will take a wait and see approach. Remember, this is the eighth increase since the first one in March 2022 to combat inflation.

So, in light of these rising interest rates, we want to discuss the impact that these rising rates may have on your wallet. Of course, anything that has an adjustable interest rate is set to go up, for example, home equity lines, credit cards, auto loans, and some student loans if they are attached to either the prime rate or a variable rate index. Also, of course many people are speaking about mortgage rates which are actually following the 10-year treasury yield and have seen a significant decline in rates since the fall. So, given this data, if you’ve bought a home in the last four to six months, make sure you re-visit the rates currently and your rates. If you need help assessing your situation, we are here and happy to help you!

So, given the anticipation of future rate hikes, think about your savings rates and make sure you are earning higher rates on your savings. If you are still earning zero or close to zero in your FDIC insured savings or checking account, seek a high-yields savings account to earn more interest on your dollars. We know that the current economic environment is constantly changing and you are adjusting to this inflationary and higher-interest rate climate, it’s important to stay on top of your interest rates and know what you have. If you need us to re-evaluate your personal financial situation, email us at info@shermanwealth.com or schedule a complimentary 30-minute call here.

The last few years have certainly changed the cadence in which many of us operate on a day to day basis. This is especially true with the emergence of technology and transition to remote work, telehealth, and curbside shopping. Another area that has shown significant change is in the use of robo-advisors. While robo-advisors can virtually help you with your finances on a daily basis, a Vanguard survey of 1,500 investors with at least $100,000 in investable assets found that “nearly 90% of robo-advised clients would switch to humans”. Given the current economic environment we are in, adjusting to a higher cost of living and rising interest rates, many individuals have more thoughts and feelings about their finances than ever. In these instances, having a human to vent to and talk through ideas with is so helpful and improves financial confidence. 

The survey also found that “more than 90% of human-advised clients say they would not consider switching to a digital advisor, while 88% of robo-advised clients would consider switching to a human advisor in the future.” While digital advice can get the job done, there is something to be said about the human connection that develops between an advisor and their client.

I would say it’s quite difficult to establish trust, loyalty, and a relationship with a digital robot, which is what differentiates the robo-advisor from working with a human advisor.  In fact, the survey discovered that loyalty within those who work with a human advisor is unmatched to those who are currently utilizing a robo-one. It is interesting to see that even though our society has transitioned a huge chunk of our lives online, human interaction within the financial industry is still the trusted and preferred method. 

At Sherman Wealth, we specialize in behavioral finance, which goes beyond just the quantitative aspect of investing that a robot can properly assist with. We customize each and every financial plan to fit the needs of each client. No one client is the same so their advice should not be generalized, rather tailored to fit their specific needs. In a world where the economy is ever-changing, having a pro-active and trusted professional to hold you accountable and constantly update your financial roadmap far outweighs an online robot. Studying the behavioral aspects of our clients allows us to build connections with them, uncover hidden complexities, and truly understand their biases and relationship with money and investing. We take pride in our 24/7 accessibility and being a “financial concierge”.

Given the rollercoaster we saw in the markets last year and the extreme volatility we’ve experienced, personalized advice is more prudent now than ever. With rising interest rates and this inflationary economy, having a financial roadmap and guidance can help you navigate this climate. If you haven’t done so, think about re-visiting your financial plan, whether its adjusting your budget for inflation, checking in with your asset and risk allocation, or just an overall check-in. If you haven’t done so already and we head into February, set some financial goals for yourself to achieve before the end of the year. If you need help or even just a sounding board to bounce ideas off of, we’re here to help! If you have any questions about your financial situation or current method of advice, email us at info@shermanwealth.com or schedule a complimentary intro call here.