Understanding The True Value and Need For 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, given where interest rates are, many people have questions on what the best vehicles are to park cash. 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

 

Did You Know These Money Management Tips?

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.

How To Teach Your Children About Finances

In honor of financial literacy month, we want to talk about financial empowerment and education, but not just amongst adults, children too. So, as we are well underway with 2023 and think about financial goals for the year, many clients and prospects have been asking us how to think about finances for their kids and the best ways to teach their children about money from an early age. While there are many different routes to save money for children and teach them about personal finance, we wanted share a few with you. 

First and foremost, we want to stress the importance of teaching children personal finance topics and smart financial decisions from an early age. Knowing what money means to you is an important concept whether you’re a child or an adult. One savings vehicle we always recommend to parents when saving for their children is 529s plans. For further details on 529 plans, you can check out our blog, but this savings vehicle is a great way to get ahead of college and education savings for your kids. 

For those who want to educate their children about money and finances, setting up a donor-advised fund is a great way to get the kids involved in not only charitable giving, but the importance of budgeting and setting money aside for different buckets and priorities. Another question we’ve been getting from clients is where to save “birthday” or “gift” money for their kids? Parents can open a minor high yield savings account for their children to earn maximum interest while still being FDIC insured. As their money grows overtime, you can explain to them how interest works and how money can grow overtime. 

Some other ways to teach your young children about money is to talk about it. Make sure you are having conversations with your children about money, for example, how much things cost and how people earn money so that they can spend it. Teach them the difference between wants and needs. Exposing them to concepts such as these will help them learn about personal finance topics as they mature and enter adulthood. 

It is never too late to start learning personal finance concepts. If you have children that are approaching college and you want them to learn and prepare how to manage and budget their finances on their own, let us know and we are happy to help. We offer financial literacy meetings to children and young adults to educate them on personal finance and answer any questions that they have. If you are interested in educating your children, email us at info@shermanwealth.com and we are happy to set up some time to connect and share our resources. 

Financial Literacy Month Q&A

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

How Rising Interest Rates Impact Your Wallet

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.

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”. 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

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

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