Financial Planning Archives

How To Get Your Financial House In Order Before Buying a Home

There is definitely a great deal to discuss on the current housing market. Despite the volatility and higher interest rates, many of you are still in the market to purchase a new home. Whether you’re a first time home buyer or you are upgrading from your “starter” home, there are many tips you can implement and mistakes to avoid to improve your financial situation and ensure the process is more seamless. So let’s dive in.

As you know, buying a home is a major purchase, maybe even the largest purchase you will make in your lifetime. So, it’s key that your financial house is in order prior to applying for a mortgage and taking on a large loan. So, first and foremost, ensure that your credit score and report are in good shape. Why? Because your credit is the lifeline of your financial life, and when it comes to purchasing a home, lenders will check out your credit to determine what interest rates you will be able to capture. If your credit is not so great, it may be possible you have a higher and more costly interest rate, making your home purchase more expensive than it needs to be. So, make sure you are paying your bills on time, always pay at least the minimum, pay down existing debt, and open multiple lines of credit, taking on “good debt”, that you can pay back responsibility. Check out our other blogs for more information on your credit score.

Another tip to keep in mind when preparing to purchase a home is to ensure your emergency fund is sufficient and you have saved enough for the downpayment and fees. Given where current interest rates stand, your home affordability due to higher rates may look different than if you did the same exercise back in 2020, for example. So what does this mean? Well, buying a home comes with tons of unexpected expenses. Especially if it’s your first time, having only enough cash for the down payment and fees most likely won’t be enough to cover all the expenses coming your way. So, understand the all in costs, run an analysis on whether that fits into your financial budget and picture, and decide if you have an emergency fund sufficient to cover not only the home purchase itself, but remember about items such as furniture, wifi, utilities, and more. You don’t want to tie up all your cash in non liquid investment vehicles when you might need it for something else in the near future. So, consider opening a high yield savings account that you can park your cash reserve in, while also earning additional interest. We also recorded a great podcast episode with senior mortgage consultant, Jody Eichenblatt of PHM Loans, on his thoughts on the spring housing market and some best practices for those of you shopping.

Along with saving enough cash for your big purchase, having a realistic and achievable budget is extremely important as well. We oftentimes see individuals stretch themselves too thin with their home purchase, making it more financially stressful to reach their other financial goals. Especially given where the economy is with inflation, we’ve been recommending individuals to re-visit and tweak their budgets. So, separating your wants versus your needs and really breaking down your financial goals is a great way to determine what your budget should be. We also recommend working with a financial advisor to dive deeper into this budget and build a strategy to hit all your goals in life. Purchasing a home is such an exciting and fulfilling achievement, so we want to make sure you go about it in the best way possible. We will continue to track the housing industry and mortgage rates as the Federal Reserve hopes to be able ot cut interest rates in the back half of this year and report back how this will impact you. If you have any questions, email info@shermanwealth.com.

Your July Financial Checklist: Keeping Your Financial Plan on Track

Happy July everyone. As summer is well underway and we have surpassed the mid-way mark in the year, it’s a great time to take a step back and evaluate your financial health. With vacations, barbecues, and outdoor activities in full swing, it’s easy to lose track of your financial goals. Here’s a consolidated checklist to help you stay on top of your finances this July.

Mid-year is a perfect time to revisit your budget and see how you’re doing compared to your financial goals set at the beginning of the year. Here’s how to effectively benchmark your budget:

Track Summer Spending: Summer often brings unique expenses, such as vacations, outdoor events, and even often times higher utility bills. Review your spending in these categories and compare them to your currently monthly budget
Adjust for Seasonal Expenses: If you find that your summer spending is higher than anticipated, consider adjusting other areas of your budget to accommodate these seasonal expenses.
Evaluate Monthly Trends: Now that you have had several months under your belt to review cash flow and spending, look at your spending over the past six months to identify any trends or areas where you might need to cut back.

Whether you’re saving for a new car, a house, or simply building an emergency fund, July is a great time to assess your progress:

Emergency Fund: Do you feel comfortable with the level of your emergency fund? If not, prioritize building this fund.
Short-Term Savings: If you have specific savings goals (e.g., a holiday fund or home project), ensure you’re on track to meet them.
Automate Savings: Consider setting up automatic transfers to your savings accounts to ensure consistent progress.

Retirement might seem far off, but consistent contributions are key to a successful retirement plan. July is a great month to check in on where your contribution is at for the year and decide if you’d like to increase your monthly contribution or are on pace to max out your contribution if you intend to.

401(k) and IRA Contributions: Check if you’re on track to maximize your contributions for the year. The 2024 contribution limit for 401(k) plans is $23,000 (or $30,500 if you’re 50 or older), and for IRAs, it’s $7000 (or $8,000 if you’re 50 or older).
Employer Match: If your employer offers a matching contribution, ensure you’re contributing enough to get the full match—this is essentially free money.
Rebalance Investments: Review your retirement account’s investment allocation and rebalance if necessary to align with your risk tolerance and retirement goals.

Summer is the time for fun, but fall and winter bring their own financial demands. Plan ahead to avoid stress:

Back-to-School Costs: If you have children, start budgeting for school supplies, clothing, and extracurricular activities.
Holiday Spending: Utilize the “bucket strategy” and begin setting aside money for holiday gifts, travel, and events to avoid last-minute financial strain.
End-of-Year Goals: Think about any other financial goals you’d like to achieve by the end of the year and start planning accordingly.

Lastly, despite busy summer plans and travel, it’s important to revisit and update your financial plan, particularly halfway thru the year. Your financial plan should be a living document that evolves with your life circumstances. If you are interested in re-visiting or even creating a financial plan, email info@shermanwealth.com or schedule a complimentary intro call here and we are happy to help. Remember, financial planning is a continuous process, and regular check-ins are key to staying on track.

Your Mid-Year June Financial Checklist

As we reach the midpoint of the year, June offers a perfect opportunity to take stock of your financial situation. It’s a time to reflect on the progress you’ve made and adjust your strategies to ensure you stay on track with your financial goals. Here’s a comprehensive checklist to help you conduct a thorough mid-year financial review:

A good place to start when reviewing your finances is to take a look at your budget and expenses. Compare your actual spending against your budget for the first half of the year and identify areas where you overspent or underspent. Consider how your budget may shift from the winter/spring months into the summer months and adjust your budget categories as needed to reflect any changes in your lifestyle or financial priorities. Next, start to analyze your expenses. Look for patterns in your spending and identify any recurring expenses that can be reduced or eliminated. Consider using budgeting apps or tools to streamline this process and help identify blind spots.

An important mid-year financial exercise we like to work on with our clients is reviewing your financial goals. In the beginning of the year, you may have set some financial resolutions for 2024 or financial goals, for example, saving for a vacation, paying off debt, building an emergency fund. Think about this as a progress check- benchmark your goals and adjust timelines and strategies if necessary to stay on track. Also, it’s important to think about new goals as your life is constantly evolving. If you’ve achieved any of your initial goals, set new ones to keep moving forward. Consider long-term goals like retirement planning or saving for a significant purchase.

Next, taking stock of your savings balances and savings contribution rates is an important piece of your mid-year review. Ask yourself, “Do I have enough in my Emergency Fund?”. If the answer is no, it may be time to recreate a savings plan to build it up. Review your savings accounts and their interest rates. Consider if you need to open new accounts for specific goals or move your money to accounts with better interest rates. Prepare for upcoming expenses by anticipating major expenses in the second half of the year, such as holidays, vacations, or tuition. Start setting aside money now to avoid financial stress later. Build a financial buffer for unexpected expenses that may arise.

An important summer financial checklist item is revisiting your protection. It might be time to do an insurance needs analysis and estate planning review. Update your insurance coverage by reviewing your insurance policies, including health, life, auto, and home insurance. Ensure you have adequate coverage and that your policies are up-to-date as well as update your estate plan to ensure proper protection.

Taking the time to review and adjust your financial plan in June can set you up for success in the second half of the year. By working with a financial professional to constantly tweak your financial plan or work through some of the items on this checklist, you’ll better understand how to achieve your financial goals and maintain a healthy financial outlook. Remember, regular financial check-ups are key to long-term financial stability and success. If you have any further questions on the financial checklist items mentioned, email info@shermanwealth.com or schedule a complimentary intro call here.

Are You A HENRY? Here’s How HENRYs Can Save and Grow Their Wealth

In today’s dynamic economic landscape, an emerging demographic has emerged: HENRYs, or High Earners Not Rich Yet. These individuals, typically professionals in their prime earning and accumulating years, are not yet High Net Worth individuals. HENRYs possess a unique opportunity to not only save but also grow their wealth substantially. Let’s explore how HENRYs can leverage their financial situation to secure a promising financial future.

HENRYs are characterized by their robust incomes, often exceeding national averages, yet their wealth accumulation is not where they might want it to be. These individuals, typically in their 20s to 40s often times despite the high income, face obstacles such as student debt, lifestyle inflation, and delayed financial planning, hindering their wealth-building efforts. So it’s extremely important that they implement smart financial habits early on, build a financial plan, and automate the process to accumulate their wealth and make smart financial decisions.

So, let’s take a look at some places where HENRYs can improve their financial habits. First, budgeting. HENRYs can harness their considerable incomes by implementing strategic budgeting and expense management techniques. By setting up an accountable and accurate budget, they can redirect resources towards savings and investment. For those with student loan debt or other debt, creating a strategic debt repayment strategy is prudent. Given the higher interest rate environment we have been living in, there are tactical moves debt goers can make to keep their financial plan in line.

Next, let’s discuss investing. HENRYs have the perfect opportunity to leverage their wealth by investing wisely and early. By allocating funds to diversified portfolios, including retirement accounts, taxable accounts, and other diversified assets, they can grow their wealth overtime to achieve their short, medium, and long-term goals.

If you’re a HENRY, but are not quite sure where to get started on your financial journey, consider seeking advice from a financial advisors or professional who can provide you with customized strategies to optimize your financial situation. Here at Sherman Wealth, we build out personalized solutions and financial plans to help all clients, including HENRYs make smarter financial decisions and strategically grow their wealth. Professional guidance helps navigate complex investment decisions, minimize tax liabilities, and plan for future milestones.

As discussed in this blog, HENRYs have a vast opportunity to maximize and optimize their financial future. Building a solid foundation early in their careers lays the groundwork for long-term growth and financial security. If you are a HENRY and are seeking financial guidance, email info@shermanwealth.com or schedule a complimentary intro call here.

Are Your Finances Negatively Impacting Your Mental Health?

Does money and financial conversations stress you out? Do you feel uncomfortable when having money discussions with your partner? If so, you’re not alone. Money conversations can bring up underlying insecurities and cause anxiety amongst individuals. Given the current market environment and economic uncertainty, extreme volatility, and newly reported record high inflation data, it’s extremely important to discuss mental health as it relates to money.

According to a survey from Bankrate, “some 42% of U.S. adults said that money has a negative impact on their mental health” (The study included nearly 2,500 American adults and took place between April 6 and 8.). We found this statistic alarming, as they also reported “that 28% of those who said money has a negative impact on their mental health worry about it on a daily basis.” This data reinforces not only the importance of mental health awareness, but the importance of utilizing financial strategies to lessen this overwhelmed feeling individuals have when doing daily financial tasks such as checking their bank statements and paying bills.

Establishing a financial plan is a great place to start when trying to organize your financial life. If you are feeling anxious, maybe it’s a good time to revisit your budget, risk tolerance, and asset allocation. As mentioned in a previous blog, many Americans actually do not have a financial plan, which means they have no road map to follow. At Sherman Wealth, we always say that life is complicated, but your finances don’t have to be. Consider working with a financial professional to lessen the burden and anxiety you feel when tackling your financial life on your own. With customized solutions and behavioral finance strategies, we can provide you with a plan that will seamlessly lead you in the right direction.

As mentioned prior, we know money topics can be uncomfortable and scary for some, but it’s very prudent to recognize it and utlilize financial strategies so it does not negatively impact your mental health. We recorded a podcast episode with Music City Pysch’s David Pearl and he provided us with tips on having transparent, honest, judgment-free, conversations with your partner. If you have any questions about your financial situation or are feeling like money is negatively impacting you, please reach out to a mental health professional to discuss or schedule some time here and we are happy to help.

The Ultimate May Financial Planning Checklist

May is a perfect time of year to reassess your financial goals and ensure you’re on track to get to where you want to go. Whether you’re planning for retirement, saving for a big purchase, or just looking to improve your financial health, this consolidated financial planning checklist for May will provide you with some ideas and tasks you can work on this spring.

Review Your Budget: Start by reviewing your current budget or creating one if you haven’t already. Take a close look at your income and expenses, and identify areas where you can cut back or reallocate funds. Adjust your budget as needed to align with your financial goals.
Check Your Credit Score: Your credit score plays a crucial role in your financial well-being. Use an app such as Credit Karma to review your score for any errors or discrepancies. Take steps to improve your credit score if necessary, such as paying down debt and making payments on time.
Evaluate Your Investments: Review your investment portfolio to ensure it’s properly diversified and aligned with your risk tolerance and financial goals. If your circumstances have changed or you feel that your allocation has drifted from your target portfolio, revisit or work with a financial professional to adjust.
Assess Your Insurance Coverage: Evaluate your insurance coverage, including health, life, home, umbrella and auto insurance. Make sure you have adequate coverage to protect yourself and your assets in the event of an emergency.
Set Savings Goals: Set specific savings goals for the remainder of the year, whether it’s building an emergency fund, saving for a vacation, or contributing to a retirement account. Break down your goals into manageable steps and track your progress regularly.
Plan for Taxes: If you have filed your tax return, use your 2023 return to plan for 2024. Review your tax situation and make any necessary adjustments to minimize your tax liability.
Create or Update Your Estate Plan: Estate planning is essential for ensuring your legacy is left as you wish and you are protected. Review or create essential documents such as wills, trusts, medical directive, and powers of attorney, and make sure they reflect your current circumstances and wishes.
Assess Your Financial Health: Take stock of your overall financial health, including your net worth, debt-to-income ratio, and emergency savings. Identify areas for improvement and take proactive steps to strengthen your financial position.
Plan for Major Expenses: Anticipate any significant expenses coming up, such as home repairs, tuition payments, or vehicle purchases. Start setting aside funds into various buckets to avoid financial strain when these expenses arise.
Seek Professional Advice: If you’re unsure about any aspect of your financial situation or need help achieving your goals, consider seeking guidance from a financial advisor or other professional.

If you have already set financial goals for the year, now is a great time to benchmark your progress and use this financial planning checklist to make significant strides toward achieving your financial goals. Remember that financial planning is an ongoing process, so continue to monitor your progress and make adjustments as needed to stay on track for success. If you have any questions, email info@shermanwealth.com or schedule a complimentary intro call here.

Do You And Your Partner Have The Same Money Values?

We all know that being a part of a couple takes work and that open, honest communications is key! We read an interesting article that spoke about how individuals choose their partners and that often times, we match with those who have similar interests and values as ourselves. However, while this may be true, Jenny Olson, an assistant professor of marketing at Indiana University who studies couples’ financial decision-making, found that “when it comes to money-management styles, opposites do attract.” As financial advisors, we have seen many cases where two partners have different backgrounds and relationships with money. It is very common for partners to have different approaches to their finances, but it’s important in how they to approach the merge them.

In order to have a relationship that is strong financially, as well as emotionally, remember to regularly discuss and review your finances and goals to help make sure that you and your partner are not only on the same track, but on the right one for you as a couple. When you become serious with your partner or even get married, many couples have to sit down to talk about both their relationship with money and how the merging of finances will work. While we know its not easy, its important in order to avoid financial lies. In fact, we read an interesting article that said financial lies between partners are way more common than you’d think. The study from Forbes Advisor found that the top three financial lies American’s tell each other are relating to debt, spending and large purchases, and spending patterns. While you and your partner may not have the same spending habits or relationship with money, but finding a happy medium or compromise to allow honesty is extremely crucial.

At Sherman Wealth, we work with many newly weds, young professionals and couples on the merging of their finances and how to find a medium that works for both parties. As we have said time and time again, communication, transparency, and honesty is key to a healthy relationship, especially as it relates to finances. We know money conversations can be awkward and uncomfortable, but they really are necessary for couples wanting to build a financial roadmap.

So, let’s take a look at some important topics couples should regularly review and discuss.

Retirement Plans – If you’re a young couple, retirement may not be your top priority, but remember – through compounded interest – a small amount invested now may go a long way in the future. Be sure to reexamine your goals and your portfolio to make sure that you’re both saving enough for retirement and your asset allocation is appropriate given market fluctuations and volatility.
Life Insurance – While not a pleasant topic, it’s important to discuss with your partner what will happen in the event that one of you passes prematurely.
Wills and Trusts – Like life insurance, wills and trusts also are important for protecting your loved ones. They’re especially critical if you have children, or a significant amount of assets.
College Funds – If you have children, or are considering having children, you definitely want to discuss your thoughts on college and how much you as parents want to fund it, if any. Discuss a saving strategy to help pay for college tuition.
Health Insurance – Make sure that you and your partner are both covered, and that you understand the differences – and overlaps – in your plans. Is there any unnecessary overlap? Should you purchase more coverage to protect yourself?
Major Purchases – If you are planning to make a major purchase such as a home, or a new car, you’ve probably already talked with your partner about it. You may not have talked about how you’ll pay for it though! Talk through these goals together and set realistic strategies to achieve them.
Monthly Expenses – Review your expenses each month to see where you can make changes and cut back. Consider making a budget together to make sure that you are allocating your income in the best possible way for both of you.

While financial topics can be difficult to discuss, they’re an important part of a happy and successful relationship. As mentioned prior, here at Sherman Wealth we help couples facilitate these conversations, especially when it comes to merging finances and creating combined goals. Make sure that both you and your partner are on the same page when it comes to finances, and set short and long term goals together to help keep you both on track.

If you need help going over your finances or coming up with a plan, you may want to seek working with a financial advisor to help point you in the right direction, based on your own goals, and help facilitate difficult, but important, discussions. If you have any questions, email us at info@shermanwealth.com or schedule a complimentary intro call here.

The Importance Of Goals Based Financial Planning

In the realm of personal finance, goals-based financial planning is a strategy that helps shape your financial future and roadmap by aligning your short, medium, and long-term goals. Given the time of year, you may be thinking about establishing a “top to bottom” full financial tune up. By aligning one’s financial strategy with specific objectives, such as retirement, education, or homeownership, goals-based planning provides a structured framework that not only shapes financial plans but also helps align other factors of your financial life such as asset allocation, risk tolerance, and overall wealth management.

The foundation of goals-based planning lies in identifying and prioritizing personal and financial achievements and aspirations. Whether short-term, medium or long-term, these goals serve as the compass, directing individuals towards better informed decision-making. A goals-based approach prompts reflection on your wants versus your needs, allowing you to create buckets and strategies to reach all your different goals.

One of the primary advantages of goals-based planning is to create a strategic asset allocation that aligns comfortably with your goals. Rather than adopting a one-size-fits-all investment strategy, individuals can tailor their portfolios to align with their own specific goals. Goals-based planning also encourages a strong understanding of risk tolerance. Different goals may call for different risk levels and comfortability during times of volatility and investor behavior during times such as recent, with all time highs in the stock market. By utilizing goals based planning and working with a financial advisor to sift thru your priorities and portfolio, you can strike a delicate balance that aligns with both your comfort level and financial goals.

Life is dynamic, and circumstances evolve. So, it’s important to remember that as your life evolves and your priorities shift, your financial plan can be revisited and tweaked to accommodate new goals, unexpected challenges, or changes in risk tolerance. This adaptability is crucial in ensuring that the financial roadmap remains relevant and effective throughout life’s different stages.

So in conclusion, when thinking about where to get started on your financial plan, goals based planning can help you define and prioritize your objectives, shape your financial plan, optimize asset allocation, and navigate your personal financial roadmap with greater precision. If you are seeking a spring cleaning financial tune-up or are interested in learning more about how we incorporate goals-based and and top to bottom planning in our process, email info@shermanwealth.com or schedule a complimentary 30-minute call here.

Spring Financial Planning and Clean-Up: March Madness Edition

As the air warms up and spring is arriving, it’s the perfect time to shake off the winter weather and give your finances a thorough cleaning. From revisiting your financial goals to tidying up your budget, here’s a consolidated guide to March financial planning and spring financial clean-up.

Spring is an excellent time to reassess your financial goals. Whether you’re saving for a vacation, planning for retirement, or aiming to pay off debt, take a moment to review your objectives. Are they still relevant and achievable? Have your priorities shifted? Adjust your goals accordingly to ensure they align with your current cash flows, timeline, and financial situation.

Spring cleaning your finances begins with a thorough evaluation of your budget. Review your income and expenses over the past few months to identify any trends or areas for improvement. Are there any unnecessary expenses you can cut back on? Can you reallocate funds to prioritize your financial goals? Adjust your budget accordingly and periodically.

March presents an excellent opportunity to review your investment portfolio. Evaluate the performance of your investments and assess whether they still align with your risk tolerance and long-term objectives from when they were set. While we don’t recommend jumping in and out of the market, it’s important to find a proper asset allocation you can stick to for the long term so you might consider rebalancing your portfolio if necessary, or having a financial professional take a second look. Additionally, take advantage of any tax-efficient strategies, such as maximizing contributions to retirement accounts or harvesting tax losses.

Your credit report plays a crucial role in your financial health. Check out your credit score and look for any errors or discrepancies that could negatively impact your credit score and take steps to address them promptly. Monitoring your credit report regularly is an essential part of maintaining good financial health. Conversely, ensuring you make the right decisions daily to keep your credit on the right path to improvement is key.

Given the time of year and tax filing season in full swing, spring is the perfect time to declutter and organize your financial documents. Gather all your important paperwork, such as bank statements, tax documents, insurance policies, and investment statements, and create a system for storing and organizing them. Consider digitizing your documents for easy access and backup. Having your financial documents organized will make it easier to track your finances and help you during tax time. Tax season is also a great opportunity to review your whole financial plan as your documents are gathered and you may be identifying tax advantageous strategies to improve on.

Next, automating your savings is one of the most effective ways to build wealth over time. Take advantage of automatic transfers to your savings or investment accounts to ensure consistent contributions. Set specific savings goals, whether it’s an emergency fund, a down payment on a home, or a college fund for your children, and automate your contributions accordingly. By making saving a habit, you’ll steadily progress towards your financial goals without even thinking about it.

March is not only a time for spring cleaning your home but also an opportunity to refresh and revitalize your finances. By revisiting your financial goals, evaluating your budget, reviewing your investments, checking and improving your credit, organizing your financial documents, planning for taxes, and setting up automatic savings, you can set yourself up for financial success in the months and years ahead. So why wait? If you have any questions on the topics discussed in this blog or are looking for your spring financial clean up, email info@shermanwealth.com or schedule a complimentary 30-minute call here.

Navigating Life’s Milestones With Financial Planning

Life is a journey marked by various milestones, each accompanied by its own unique set of challenges and opportunities. As humans, we all have goals and milestones that look different, but may involve similar finanicial strategies to achieve them. Whether you’re saving for a down payment on your first home, planning for your children’s education, or looking ahead to retirement, financial planning is essential for achieving your goals and preparing for these milestones. In this consolidated guide, we’ll explore the key aspects of financial planning for life’s different milestones and goals.

A great way to get organized and start planning and strategizing for your life milestones is to begin by identifying your short-term, medium-term, and long-term financial goals. Prioritize your goals based on their importance and urgency, and ensure that your goals are specific, measurable, achievable, relevant, and time-bound (SMART).

Next, work on your budgeting and saving. Develop a budget that aligns with your income, expenses, and financial goals. Track your spending habits and identify areas where you can cut back or save more. Build an emergency fund to cover unexpected expenses or financial setbacks. While you’re working on building up your savings, take a look at your debt and create a strategy for paying off high-interest debt, such as credit card balances or personal loans. Avoid taking on new debt you cannot afford, and prioritize debt repayment in your budget.

When creating a financial plan to achieve your different goals, it’s important to take into account your time horizon for your various goals, and your overall risk tolerance and investment objectives when choosing investment vehicles. Regularly review and rebalance your portfolio to ensure it remains aligned with your goals and risk profile. Regardless of the goal you are striving for, start saving as early as possible to take advantage of compounding interest and maximize your savings.

Financial planning is a dynamic process that evolves over time as you progress through life’s milestones and goals. Consider working with a financial advisor to develop a comprehensive retirement plan and savings/investment strategy. By setting clear objectives, budgeting effectively, managing debt responsibly, investing wisely, and protecting your assets, you can achieve financial security and build a solid foundation for the future. Remember to regularly review and adjust your financial plan to adapt to changes in your circumstances and priorities. If you have any questions on how you can better improve your strategizing for your goals and milestones, email info@shermanwealth.com.