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. 

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. 

 

Financial Advice For Parents

Raising a child in today’s world can cost hundreds of thousands of dollars. As a parent of four children ranging from ages 5 to 16, I can attest to just how expensive kids can be. Besides just the essentials like food and clothes, there are club teams, tutors, dance lessons and so much more. With each additional family member comes new financial considerations and expenses. The importance of planning for these costs before they arise is a key reason why many financial advisors are targeting young families and helping them successfully navigate how to cover their children’s expenses without compromising their own financial security. Here are a few top takeaways from some of these advisors:

SAVING FOR COLLEGE

With a high school junior in our house, it won’t be long before we are paying that dreaded college tuition bill. And, due to the ballooning costs of higher education, this bill is not likely to be a small one! If possible, new parents should try to start saving as soon as they can for their child’s college tuition.The earlier you start saving, the better prepared you’ll be. If you save $500 a month at birth, you should have around $190,000 saved by the time that child reaches 18 (assuming an annual return of 6%). However, if you don’t start until your son or daughter is 10, you’ll only have around $60,000 by the time they graduate high school. Setting up a state-sponsored 529 college savings plan, allows parents to invest money and then withdraw it tax-free, so long as the funds are used for certain education expenses. However, as you prepare for your children’s future, make sure that you remain focused on your retirement saving as well. There are lots of ways to pay for college, but you can only use the resources you’ve accumulated for your own retirement.   

CHILDCARE AND HEALTH CARE

When our first child was born, my husband and I were both working, and trying to find affordable childcare was not easy. Childcare is one of the biggest expenses new parents will face, especially if both parents work. In some cases, one parent will decide to leave their job and take care of the child themselves, especially if the cost of childcare is more than one parent is making. This is exactly what happened when our second child was born, since it was no longer cost effective to pay for childcare for two children with my salary.   

Meanwhile, childbirth and adoption count as qualifying events that allow parents to make changes to their employee benefits outside of the open enrollment period at work. For example, new parents can expect to see their medical expenses rise and those who have access to a flexible savings account and health savings account at work should use them since the money put into an FSA or HSA avoids federal taxation. In some cases, employers offer a Dependent Care FSA, which can be used for costs picked up from a nanny, babysitter or childcare center.

When it comes to health insurance, if both parents work, you should examine which plan will cost less to add the child to. Most doctor visits in the first couple of years are considered wellness visits, which are typically free or very low-cost in most health-care plans today. But, you should look into which plan is most cost-effective in the event of a trip to the emergency room or having to see a specialist – even with good insurance, the price tag of a broken bone is a lot more than you might think!

LIFE INSURANCE

Even though it’s not something most people like to think about, preparing for death is of utmost importance when becoming a parent. Your financial advisor should be able to run various calculations to figure out the amount of protection you would need. Many families make the mistake of only getting life insurance for the main earner, experts say, but both parents should be covered. Many people think that since stay-at-home parent isn’t actually earning anything, they don’t need insurance. However, when it comes to life insurance, you need to evaluate what it would cost to have someone else take care of your children if something were to happen to that parent.  

It is also extremely important to put together estate planning documents, including a will and health-care directives, as well as discussing appointing a guardian in the event of an unexpected life event. When we found out we were expecting our first child, it forced us to have some difficult conversations about who we would want to take of our child and how our assets would be distributed if something happened to us. It’s also important to revisit those questions each time you add another child to your family or if there is another major change to your assets. The guardians you might have written in your will when you were 25 might not be the same guardians you would choose when you are 45. None of these decisions are easy ones, but they are vital to preparing for your life as a parent.

EMERGENCY SAVINGS

With all the additional expenses new parents can face, from diapers to a larger home and mortgage, it’s more important than ever to have a safety net for those unexpected costs. Having children is a good reason to have a bigger emergency fund, simply because there are now more people who are dependent on you financially. Aside from the random home and car repairs that always seem to pop up when you least expect them, now add braces, sports equipment and teenage social lives to the mix. Having some money from each paycheck deposited directly into an account that you don’t touch is an easy way to make sure you are creating an ample emergency fund should you need it.  

There are so many wonderful aspects of being a parent, but it is definitely a costly undertaking. Seeking some financial guidance before you become a parent is always a good idea, but it’s never too late to start planning for your future with a family. If you have any questions about saving for college, choosing the right health plan, putting together your estate documents or anything else related to your financial goals or plans, please contact us.  We offer a free 30-minute introductory consultation and would love to hear from you!  Check out our other blogs for more financial advice and tips.

 

Top 5 Pieces of Financial Advice

As we are all adjusting to the new norm that the coronavirus pandemic has created in our world, we are also learning pieces of advice that we could share from this experience. When going through an economic crisis, it’s important to keep some tips at top-of-mind to help you navigate the bumpy waters. In a CNBC Select Article, we found 5 great pieces of financial advice that we want to share with you to put in your financial repertoire.

First and foremost, try not to accumulate credit card debt. Racking up credit card debt can have very negative long term consequences, so it’s important that you pay the full balance on time. When you do not pay the full balance on time, your card will quickly accumulate interest, which often can get so high that it’s hard to pay off. 

According to recent Federal Reserve data released in September, the average interest rate for all credit card accounts is 14.87%. Among accounts assessed interest, or accounts with outstanding finance charges, the average interest rate rises to 16.88%. But for consumers with credit scores below 670, interest rates can near 30%, CNBC Select reports.

Next, make sure you don’t buy things you can’t afford. Although this one seems obvious, it’s much more common than you think. Avoid overspending and spending on things you can live without. Start putting that extra money into savings accounts where you can be accruing interest and earning money. 

Third, invest the year’s expenses or anything saved after you have the year’s expenses saved? Before the pandemic, many people were saying how you should have several months of rent and expenses in a savings account for a rainy day, but as we have seen the economic hardships the coronavirus has inflicted upon our society, we are suggesting to save about a year’s worth of expenses before investing it elsewhere. 

Fourth, start to think like a savvy businessman or woman. Learn to negotiate. Especially in the world we are living in today, make sure you are constantly looking for deals and inquiring about credit card versus cash options. Oftentimes, places will charge you less if you pay in cash. So, before swiping that card, make sure you think about all your options. 

Lastly, buy in bulk. With Amazon becoming increasingly popular and making it possible to get what you need in a matter of hours, take advantage of deals and places you can buy in bulk. If you can save a few dollars here and there, take advantage of it. It’s important to be a smart shopper, especially when buying something pricey, such as groceries for a large family. 

By implementing some of these basic money management tips into your daily routine, you will find yourself becoming a more savvy shopper and saving more money. It is especially important during an economic recession to take these concepts into consideration and make the most of your finances. If you have any questions on other ways you can maximize your financial portfolio and find places in your budget where you can save money, please reach out to us at info@shermanwealth.com or visit our site at www.shermanwealth.com. Check out our other blog posts for more financial advice and tips! 

 

Here’s The Importance of Financial Literacy

Sherman Wealth has long been advocates of promoting financial literacy and empowering our world to become more educated on how to manage all aspects of their financial lives. We want to highlight an interesting article we saw on www.evidenceinvestor.com, discussing several reasons why “high flying professionals fail at investing”. This piece highlights the lack of financial literacy in our country, regardless of occupation or socio-economic upbringing. According to the article, “the best investors often times aren’t those with the highest IQs or who’ve read the most books, it isn’t knowledge, but SELF-knowledge, that really sets them apart.” 

Often, high-earning professionals think they are saving enough but countless financial complexities exist within a professional services career track. Biases or mental errors are some of the biggest things standing in the way of financial success, mainly because they’re not easy to recognize in ourselves. Additionally, people are naturally resistant to change and most people are hesitant to pay small costs even for big gains. 

Failure to rebalance is also something that many people struggle with and contributes to financial literacy. People are reluctant to take action to rebalance a portfolio. It’s too much fun to let winners run. It’s also psychologically difficult to sell winners to buy losers. But failure to rebalance quickly causes the client to be dangerously exposed to a downward turn in the markets. 

People also tend to overestimate the significance of recent events and irrationally discount longer-term trends. Those of us over a certain age remember Black Monday on October 19th, 1987. The stock market lost a quarter of its value in a single day. That spooked a lot of people – and many got out of the market right after. Looking back at it now, Black Monday barely registers as a blip on the graph. This is an example of recency bias. Recent losses play havoc on our emotions and cause us to lose perspective. The long-term trend of the stock market makes any single day’s volatility look insignificant in comparison, so when we look back at a single day like Black Monday on a chart, we wonder how we could have panicked. Furthermore, given the current climate with COVID-19, it’s important to consider this idea, as people may have panicked back in March, selling assets in their portfolio, instead of holding onto them as the economy recovers. While it often seems natural to panic during an economic downturn, it’s important to remember that these dips recover naturally over time. 

These are just a few examples of how society and perception can lead us to make poor financial decisions. Given the current climate we are living in today, it is crucial to make sure you fully understand the decisions you make within your portfolio and that they are long-term, strategic moves. With a lack of financial literacy amongst all career fields and economic classes in our society, we realize the importance of being financially educated and would love to help you to make smarter decisions. If you have any questions or would like to set up a time to talk about your finances, please feel free to reach out at info@shermanwealth.com. Check out more of our blogs that discuss the importance of financial literacy.

Financial Literacy More Important to Americans Than Health and Wellness

As we’ve mentioned previously, financial literacy is a skill that is lacking in our education system and amongst individuals across the country. A recent survey by Charles Schwab discusses the importance of financial literacy to Americans and how it should take precedence over health and wellness. 

According to the survey, the COVID-19 pandemic has underscored the need for basic personal finance and money management skills. Nearly 63% of U.S. adults said financial education was the most important supplementary graduation requirement to Math, English, and Science. That’s comparable with 43% of individuals who said health and wellness was more important. 

History shows that everytime our country faces a detrimental crisis, “the need for greater financial literacy becomes more apparent,” said Carrie Schwab-Pomerantz, president of Charles Schwab Foundation.

The following data was collected to support the need for financial education within our schooling system and within our country. 

Nearly nine in 10 Americans (89%) said a lack of financial education contributes to some of the country’s social issues, including poverty (58%), lack of job opportunities (53%), unemployment (53%) and wealth inequality (52%).

They survey found half of respondents would be hard-pressed to cover a $1,000 or less emergency expense in the next month if they had to. Financial education stresses the importance of saving and building up an emergency fund. 

Many respondents indicated that they wished they had been taught financial skills when they were younger, including the value of saving money (59%), basic money management (52%) and how to set financial goals and work toward them (51%). Due to this lack of financial education, so many individuals are lost when it comes to how much they should be saving, where they should save, where they should invest and more. 

Sherman Wealth has long been a strong advocate of increasing financial literacy in our country and encouraging our youth to educate themselves early on in their lives. A thorough financial education is now more important than ever. Learning the proper way to manage money and set yourself up for financial success will ensure you are prepared at all times, even during an economic crisis, such as a pandemic. 

Many schools across the country are realizing the importance of beginning a financial education at an early age. Studies show that having state-required classes can have a significant impact on students’ money moves in the future. Forty-five states now include personal finance education in their curriculum standards for kindergarten through 12 grades. In addition to programs in schools, Wall Street Bound is an organization that provides urban youth with financial, educational, and technical resources to get them closer to Wall Street. If you are passionate about spreading awareness about financial literacy, you can support Wall Street Bound with a donation.  As always, Sherman Wealth is here to answer any questions you may have and most importantly, happy to help educate you and those around you on what money means and how you should make financial literacy a priority.