Financial Literacy Scores In The U.S Are Declining

Financial literacy and empowerment stands as a core value of Sherman Wealth. We have long been strong advocates of improving financial education in our country and within the school system to educate our youth on financial concepts throughout their development. Understanding personal finance and feeling confident enough to make your own financial decisions is crucial in the society we live in and a predecessor to financial success. 

Despite thought leaders efforts to improve financial literacy in our country, it has still steadily decreased over the last 12 years. A FINRA Foundation National Financial Capability Study found that of 30,000 U.S. adults surveyed, the average respondent of the study only answered 2.6/5 financial literacy questions correctly, down from 3 of 5 questions in 2009. These findings are quite alarming and pose a warning that financial education and literacy needs to improve.

In the world we live in today, with constant change and unprecedented events such as the COVID-19 pandemic, it’s important to know the full scope of your finances, from the location of your various accounts, to your risk tolerance and asset allocation, your planning opportunities and tax consequences, your workplace benefits and more. Many individuals who lack financial knowledge are missing out on prudent opportunities in their young careers and life that could lead to long-term financial success. 

If you are feeling discouraged about your financial knowledge and confidence, now is a great time to think about working with a financial advisor such as Sherman Wealth, that will not only help you create a customized financial plan, but teach you everything you need to know in the process. If you have a child or grandchild in high school or college and want them to learn more personal financial tools before they embark in the real world, email us at info@shermanwealth.com to learn more about what financial literacy courses and tools we provide.  For more financial literacy content, check out our Q&A blog. To sign up for a complimentary introductory call, click here

Robo VS. Human Financial Advisors

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”. 

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. 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 accessibility and being a “financial concierge”.

Given the wild start to the year in the markets and the extreme volatility we’ve experienced, personalized advice is more prudent now than ever.  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. With the first half of the year underway, 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

Understanding The True Value Of A Financial Plan

We’ve been talking a lot about the importance of having a financial plan in place, especially given the current market climate with hot inflation and rising interest rates. Establishing financial goals and creating a roadmap to achieve them is extremely important to your financial life.  It’s often hard to see the whole scope of your financial picture on your own, which is why we want to discuss the value of establishing a financial plan. So, for those of you who have never utilized a financial place, let’s discuss some services you can expect.

Whether you work with a financial professional or build a financial plan on your own, having all your finances in one place with a strategic plan and goals in mind is crucial. Financial literacy in this country is lacking, so it’s extremely important to educate individuals on the true value of financial planning. Financial planning isn’t as daunting and scary as you might think – it’s actually quite a seamless process that allows you to organize yourself and set you and your family up for financial success in the future. 

At Sherman Wealth, we take a holistic, micro and macro approach when attacking your financial plan, beginning with a qualitative risk tolerance questionnaire to gauge your comfortability with your current asset allocation risk and risk for future investments. We then take a look at everything you have, aggregating your whole financial into our financial software in order to analyze it and see the bigger picture.

As you can see in the document above, we offer many services and can help you in all assets of your financial life, whether its getting organized and automating, establishing a budget and goals, discussing your cash flows and tax efficient strategies, reviewing your insurance and estate planning needs, or preparing for college. While these are only a few of the services we offer, having a financial concierge to talk these topics through with can simplify your life.

For example, as mentioned in a previous blog, many people sit on too much cash that is not growing as inflation rises, while others find themselves with too little cash when an emergency pops up. It’s okay not to know what to do with your money, but it’s important to seek advice or ask for help. A solid financial plan can help you separate your needs from your wants and create a budget that allows you to put your money into “buckets” – one for saving, one for investing and one for spending. 

Many people think they are in a good financial situation if they can simply pay their monthly bills and have some money in a savings account; however, oftentimes, this mindset won’t allow you to reach your financial dreams. While this isn’t necessarily a bad position to be in, creating a financial plan can help you learn some different ways to grow your money and how to save for retirement. 

At Sherman Wealth, we say that life is complicated, but your finances don’t have to be. We have designed a customized and comprehensive financial plan system that helps you see your whole financial picture and makes sure you don’t forget about things such as investing, employee benefits, and more. Encourage your friends and family to start thinking about their personal finance and empower them to seek help to better their financial future. If you have any questions or would like to demo our financial planning software, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here

 

A Note To Women Out There Who Are Feeling Financially Stressed-You Are NOT Alone

Did you lose your job in the last year because of the coronavirus pandemic? Did you quit your job to care for your children who were virtually learning at home and needed care? Are you divorced or widowed and feeling financially strapped? Do any of these scenarios hit home? Well you should be reassured to know that you are not alone. Women all over the globe are feeling the same way you are. Just know that there is help out there waiting for you.  

As you can see in the chart above from the Washington Post, women along with non-white Americans feel less financially fit since the pandemic has started. Although you may feel like you are in too deep or too far beyond repair, that’s not the case. At Sherman Wealth, we help  women in the same situation as you. No matter your situation, positive or negative, we can help educate you, repair your financial situation, and get you back on track for financial success. 

As a young independent woman now approaching the second year of my first job post-college, I can say first hand how far financial education has brought me and how empowered I now feel about my financial future. Whether you are starting with a large lump sum or just getting started, taking control of your finances and educating yourself on the “smart” things to do at each stage in your life can progress you towards financial independence. Sherman Wealth is here to teach you those important steps to take in order to reach your financial goals faster and more efficiently. We all make financial mistakes, but it’s important to learn from them and move on proactively and effectively. 

So, to all you women out there who don’t know what direction to go in next, reach out to us and let us help you make smarter decisions so you can be financially independent and one step closer to making your financial dreams come true. If you are interested in attending a women’s financial fitness seminar or local event to learn some of these great tips, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here

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

End of Summer Reflection & The Importance of an Emergency Fund

How are you feeling now that summer is officially over, your kids are back in the physical classroom, and you may be heading back into the office? 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 entered the pandemic with a greater emergency fund. Do you wish you had a greater emergency fund during the pandemic? Did having an emergency fund make you feel more secure over the course of the last year and a half? 

If the pandemic 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 and life returns to somewhat of a sense of normalcy, we want to discuss how your finances are going to begin to change and how your priorities may shift moving forward. For many of us working from home, there has been a substantial decrease in daily costs such as transportation, child care, extra curricular activities and more. Now that these activities are beginning to resume, are you thinking about how to incorporate those costs back into your daily and monthly budget? 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 during 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. 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, how they may be changing as we head into the fall, 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 fall financial priorities 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

Your COVID-19 Relief May Be Coming to An End

As summer is passing by quickly and September is just around the corner, people are starting to prepare financially for the fall. However, this fall might look a bit different than others in the past as loan repayments are restarting. Although Biden stated that there will not be another eviction moratorium, yesterday evening, the CDC issued a new federal eviction ban effective across most of the country, a yearlong nationwide halt on rental evictions, through October 3rd, 2021.

According to the CDC, this new eviction ban is being extended for areas of the country that are still facing high levels of the coronavirus. So, for those who have been unable to pay their housing payments for the last year, the CDC has granted you another 60 days. Be sure to do some research on whether this extension applies to your state and also do further investigating on whether your state is providing supplemental local or state assistance if you still need further financial help. 

While there was some back and forth on the eviction moratorium, many people are speculating that this might also hint at the end of the Federal Student Loan Relief, which is set to expire September 30, 2021. So, for those with federal student loan payments, take this next month to save and financially prepare for this new payment that you may have taken a break from over the last year or so. 

Check out some of our other blogs that will help discuss topics such as budgeting, refinancing, spending and savings tips to help prepare you to pay back some of these loans during such a hard time. If you have any questions for us and want help looking at your financial picture, email us at info@shermanwealth.com or schedule a complimentary 30-minute appointment here.

10 Financial Milestones & Goals To Pursue In Yours 20s and 30s 

Establishing goals in your early years is a great way to reach financial milestones and better your financial future. As part of financial literacy month, we have been discussing different techniques to establish smart and achievable goals along with ways to achieve those goals. We know that managing your finances, especially for the first time, can be overwhelming, but the sooner you start making financial goals and plans for yourself, the brighter your future will. Building these habits, especially in your twenties and thirties, is so important for long-term and future success. Here are ten financial milestones to consider pursuing in your twenties and thirties. 

  1. Automate Everything 
  2. Create a Monthly/Quarterly/Yearly Budget Plan
  3. Pay off All of your debt 
  4. Pay your bills on time and establish a good credit score
  5. Start and regularly fund an emergency account 
  6. Contribute to your company 401(K) and take advantage of your match 
  7. Open a Roth or Traditional IRA 
  8. Save for a big purchase such as a car or first home 
  9. Invest outside of a retirement plan 
  10. Protect your life with insurance and a will 

While it is not mandatory to achieve these goals to succeed, hitting these goals in your early years is a great way to set yourself up for success. Savings, budgeting, investing, and protecting your life are essential steps in building a solid foundation and growing your money. Also, starting to education yourself about personal finance will take you much farther than you think. The sooner you start and realize these goals are important and achievable, the better position you will be in in your forties and fifties. If you have any questions about achieving your financial goals or establishing SMART goals personalized to your financial situation, send us an email at info@shermanwealth.com or schedule a complimentary 30-minute consultation here. 

How COVID-19 Has Impacted Women

As the coronavirus continues to sweep our country, we are seeing more and more data on how this past year has impacted certain demographics. One demographic in particular, women, have found this pandemic to be quite strenuous for various reasons. 

Women are really seeing a big impact from the coronavirus pandemic, especially when it comes to their jobs.

Not only have they lost the most jobs from the beginning of the pandemic, but they are exhausted from the demands of child care and housework — and many are now seeing no path ahead but to quit working. A large portion of job losses during the pandemic has come in businesses such as restaurants and hotels, both sectors with high female employment

In a recent survey by Daily Capital and Empower Retirement, women revealed that this pandemic has altered their confidence in their financial future. Below are some findings they discovered:

  • A majority (62%) of single working moms do not feel confident in their ability to plan for retirement. Conversely, less than half of the general population (40%) lacks confidence in their retirement plans.
  • More than two-thirds (64%) of single moms no longer feel confident in their ability to retire when they want. That’s in contrast to 43% of the general population.
  • More than half (52%) of single moms do not feel confident in their ability to build emergency savings. Again, this stands in contrast to 39% of the general population and 36% of single dads.

While this data is quite astounding, this brings light to discuss the importance of financial literacy and continuing to educate women on their finances. While the coronavirus pandemic has surely set back some women in their careers, they need to remain driven and determined to reach their financial goals, even if that might mean switching up their financial plan. It’s important to discuss these topics with a financial advisor who can help you alter your plan when life throws you curveballs or setbacks. If you have any questions, please feel free to reach out to us at info@shermanwealth.com or schedule a complimentary 30-minute appointment here

These are your 2021 401(k) and IRA Contribution Limits

The IRS released annual inflation adjustments for 2021 for many tax provisions on Monday, including new income tax brackets and an increased standard deduction. It also announced that contribution limits for 401(k)s and IRAs will not increase next year. 

What Changed?

The following limits are going up for 2021:

  • The annual additions limit for defined contribution plans increases to $58,000
  • The annual compensation limit increases to $290,000
  • The Social Security Wage Base increases to $142,800

The following limits will remain the same next year: 

  • The salary deferral limit for 401(k), 403(b) and 457 plans remains at $19,500
  • The SIMPLE deferral limit remains at $13,500
  • The catch-up contribution limits for 401(k) plans and SIMPLE IRAs remain the same $6,500 and $3,000 respectively
  • The annual additions limit for defined benefit plans remains at $230,000
  • The compensation limit for determining who is a highly compensated employee will remain the same at $130,000

For more 2021 cost-of-living adjustments and 401(k) limits, visit the IRS’s bulletin. If you have any questions, please reach out to us at info@shermanwealth.com or check out our other blogs for more information on 401(k)’s.