There are several key components that make up a comprehensive financial plan. One topic we’ve been helping many clients navigate within this economic environment is budgeting. Your budget is a crucial and everyday tool in your financial toolkit. It’s the tool that can help you get and stay organized, enabling you to reach your goals and reduce the stress often associated with money. We always say, crafting the perfect budget is both an art and a science, one that requires refining and ongoing effort. In this blog, we will explore some tips and a few vital steps involved in creating a budget that’s not only effective but also adaptable to your personal financial journey.

1. Research: Track Your Spending for a Few Months To Confirm Accuracy  

One of the most common issues we see with individuals budget’s is accuracy. While putting together a budget is great in any circumstance, making sure that it actually reflects your spending is extremely important. So, understanding your financial habits and spending is the first step in creating a budget that works. Over a few months, meticulously track every expenditure, categorizing them into necessities and discretionary spending. This process reveals where your money is going and provides the foundation for your budget

2. Calculate Your Income and Cash Inflows/Outflows

Once your spending is successfully tracked, it’s time to create your financial baseline by calculating your total monthly income, incorporating all sources of cash inflow, whether from your regular job, side hustles, or investments. Create a detailed list of your monthly expenses, encompassing both fixed costs (e.g., rent/mortgage, utilities, insurance) and variable expenses (e.g., groceries, dining out, entertainment). This step should allow you to see everything in one page and help you pinpoint where your budget needs help.

3. Set Realistic Goals 

As part of any financial plan, establish clear financial goals so you can utilize your budget as a roadmap to achieve them. Whether you’re saving for a major life event, paying down debt, or building an emergency fund, your goals will drive your budget. Allocate a specific percentage of your income to each spending category in a way that prioritizes your goals but also most importantly comfortably provides for your essential needs.

4. Adjust Your Spending to Stay on Budget

As time goes on, make sure you’re regularly assessing your spending patterns and referring back to your budget. Adjust your spending to align with your cash inflows and income. If you pinpoint an area that is not working in the budget and leaving you with no money at the end of each month, be proactive and make a plan to eliminate or tweak costs within the budget. Ensure that your needs take precedence over your wants to maintain financial stability.

5. Review Your Budget Regularly for Continuous Improvement

A budget is a living spreadsheet that should evolve and grow with your life’s changing circumstances. Consistently review your budget to ensure its current and most importantly, accurate. Track your expenses, compare them to your budget, and make conscious spending decisions. Accountability is the key to achieving the financial goals you are setting out to achieve.

We know that creating a budget can be overwhelming, time consuming, and maybe even stressful. It’s not a one-time task but an ongoing process that can significantly improve your financial well-being. By tracking your spending, calculating your income, setting achievable goals, and regularly reviewing your budget, you’ll build a financial roadmap that will allow you to live your life comfortable, get organized, and reduce some stress that often is related to finances.

As we said, given the current economic environment with higher interest rates, inflation, and a rising cost of living, now more than ever it’s crucial to work on your budget. If you need help tweaking and making adjustments to your budget, we are here and happy to help. Email info@shermanwealth.com or schedule a complimentary intro call here.

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.

2. 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.

3. 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.

4. 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.

5. 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.

As inflation continues to rise and be top of mind for the average household, we want to continue discussing how it is affecting our daily life and how to navigate this adjustment. Prices of nearly everything have been skyrocketing over the last few months, and the most recent November CPI report announced a 7.1% year over year increase. This year we have seen inflation levels the highest they’ve been in four decades, so it’s certainly making an impact on the wallets of individuals. In fact, according to Moody’s Analytics analysis, inflation is costing the average American household an additional $327 per month. 

So, as Americans face new and higher costs that impact their monthly and yearly budget, it is likely many will begin to cut back on their typical spending habits. The following tweet from Liz Ann Sonders shows that ~84% of Americans are expecting to slash their spending to account for inflation. Have you adjusted your budget for inflation? Many retailers have been reporting surpluses of inventory and less holiday shopping as well, so if you have changed some aspects of your spending, you are certainly not alone.

While we are discussing the strains inflation is inflicting on the households of many, we want to touch on another interesting point that many individuals may overlook. Are you aware of the interest rates you are paying on your variable interest rate debt? With the Federal Reserve raising interest rates and set to announce their next hike this afternoon, it’s important that you know what the current rates are on your credit cards and lines of credit? So many individuals are carrying credit card debt and do not make it their number one priority to pay it down. According to Bankrate, on 12/07, variable credit interest rates were as high at 19.40%, which may only rise more as the Fed plans to continually hike rates in order to combat inflation.

If you are carrying credit card debt, make sure you are aware of the interest rates each of these debts incur. You should be attempting to pay your debt with the highest interest rates down first so that you aren’t continuing to pay an excess amount in interest each month. Start thinking more about the interest rates you are currently tied to and your finances as a whole. If you happen to carry a balance or want to protect against future rate increases if you have an unforeseen big purchase, take advantage of those 0% interest rate credit cards offers if you can. However, only spend what you can afford within your budget.’

Additionally, as we just saw November’s inflation data come in lighter than expected, maybe that’s a sign that the Fed’s hikes have been effective and future interest rate hikes may begin to slow, in which case you can re-evaluate your rates as they begin to go back down. So, an important lesson is to pay attention to what debt you have, the interest rates you are paying, and how the economy applies to your financial situation. Setting up a plan to pay off your debts in a timely manner will be extremely advantageous to you and your finances in the long run. If you would like to discuss budgeting strategies or have questions about your interest rates, email us at info@shermanwealth.com or schedule a complimentary intro call here. 

As we’ve been adjusting to this new economic environment with not only rising prices but also interest rates, are you feeling the impacts of inflation and a higher cost of living? If so, what has become more expensive within your daily life and budget? Groceries? Gas? Dinner dates? Over the last few months we’ve been following consumer sentiment and speaking with many clients and individuals who feel that their confidence about the economy and spending money is rapidly decreasing. 

As you can see in the YChart above, look at how much consumer sentiment has dropped in just 5 years, noting that where they are right now is even below the lows in March of 2020 when the COVID-19 pandemic began. If you are feeling anxious about your spending habits during this time, you are not alone. “In fact, 22% of millennials (ages 26 to 41) and 19% of Gen Zers (ages 18 to 25) have gone into debt from what they’ve spent on dating, according to a September Lendingtree survey.” LendingTree Chief Credit Analyst Matt Schulz said in the report that all costs are rising and “everything is getting more expensive. It’s not just the new clothes, roses, ride-share, fancy dinner, concerts or the after-show coffee — it’s all of it.” We found this statistic very interesting, not only due to inflation making everything more expensive, but also an opportunity to discuss money within a relationship.

At Sherman Wealth, we are constantly talking about transparency and open communication as it relates to money in a relationship. If you are feeling the extra weight of more expensive date nights, communicate with your partner to let them know and be honest about your budget and means. Additionally, most importantly, now is a great time to revisit your budget, especially with a higher-cost-of-living, to make sure that it still works for you and you are not compromising your other goals such as retirement or saving for a big purchase.

We know that what you can and cannot afford may look a bit different now as we adjust to this rising interest rate and inflationary environment, but it’s important to put your finances first. Create or revisit your financial plan to ensure that you can still achieve your financial goals and dreams.  If you have any questions about your financial plan or budgeting, email us at info@shermanwealth.com or schedule a complimentary 30-minute call here. 

 

New inflation data was released that reported a CPI increase of 8.6%, marking a 4-decade high. According to the WSJ, prices for energy jumped 34.6% from a year earlier and groceries increased 11.9% on the year. This rise was largely attributed to rising energy and food prices, which we have been tracking for a few months now. So are you feeling the impacts of inflation and rising prices? We certainly are. Have you altered your spending and summer plans? Restaurants have even begun adding additional fees on the bottom of bills for a “non-cash adjustment,” “fuel surcharge,” or “kitchen appreciation”. Have you noticed this?

As you can see from the tweets above, CPI numbers are skyrocketing. We will continue to watch inflation data and its impact on the economy and markets. If you are feeling the impacts of rising prices, now might be a good time to revisit your budget and financial plan as a whole. If you have any questions for us, email at info@shermanawealth.com or schedule a complimentary intro call here.

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!