7 Ways to Maximize A Bonus or a Raise

Pre Retiree

Just got a bonus or a raise? Read these tips before you start Googling airfares to Thailand…

Using a bonus or a raise to catch up in financial areas where you’ve fallen behind is a great way to jump start 2015. From paying off high interest debt to setting up a college savings plan, there are plenty of smart ways to put that chunk of change to good use.

Pay off High Interest Loans

It may feel impossible to escape the credit card damage you did in college or mounting loans. But you actually can make a dent in your debt by using your bonus for a large payment. This lowers your balance and minimizes some of those high interest charges moving forward. Get a snapshot of where you stand with the Debt Repayment Calculator from Credit Karma.

Rebalance Your Investment Portfolio

Those extra funds are a great reason to take a closer look at your assets and determine what’s working and what’s not. We can help you adjust to create the right balance between return and risk, ensuring you’re pursing both long and short-term financial goals.

Start a College Savings Plan 

Even if your kids are in diapers, it’s never too early to start saving for their college education. By starting early and using the variety of college savings programs available today, you can get a good head start on a college savings account.  There are a couple of different types of college savings savings plans and each has different features and potential tax benefits.    A financial advisor can help you determine the plan that suits your situation.  The College Savings Plan Network also offers great resources and tips for getting started.

Think About Retiring

Unless you received a really enormous bonus, we don’t mean retire now. But if you haven’t reached your company’s 401(k) contribution limits, use your bonus to max out those weekly or monthly contributions. If your employer matches… consider that bonus doubled.

Open an Investment Account

Planning for the future can be daunting, especially when you have large expenses to deal with now. But the earlier you start investing (even low monthly contributions), the longer your money has to grow.  Rather than let it sit in your checking account, create an investment account with your bonus to kick-start a financial safety net.

Prep for an Emergency

Fun? No. Smart? Yes. Unexpected issues pop up and can throw your monthly budget off track. Get prepared by setting up a fund for irregular expenses and circumstances like job loss, repairs, or costly medical bills for people and pets. A good rule of thumb is to have three to six months of expenses saved up for those worst-case scenarios.

Save for a Rainy Day

It may be tempting to book a trip somewhere warm or buy a TV that covers every square inch of your wall space. While it’s best to take care of outstanding debt and invest wisely, you deserve to have a little fun for burning the midnight oil at the office all year. Be sure to put a small portion of your bonus aside to treat yourself or your family to something special when the time is right.




5 Big Picture Things Many Investors Don’t Do

5 Big Picture Things

These simple strategies can make a big impact on your long term portfolio.

Investing and finances can be overwhelming and confusing. Having so many options available, how is an investor to choose which direction to go. For those who seek to understand, it can become paralysis by analysis, where the more you study, the more you realize you need to know. With all of its complexity, simple investment strategies can be very effective, if the right choices are made.

Here are 5 Strategies most average investors don’t focus on, but should.

  • Have a thought out strategy with a purpose. A common mistake of investors is to put money in an account without a lot of thought as to the goals you want to achieve. Starting an investment fund without goals is like driving in a car with no destination in mind. Without a purpose for the money, it is impossible to measure the success or failure of the investment.
  • Start Early with a Time Horizon. Starting early gives your money more time to grow. The longer the money is invested, the better it can weather market fluctuations and the more likely you are to successfully reach your goals. Along these same lines, set specific goals around a time horizon. How long will each bucket of money be invested? This is a very important piece to your overall strategy because it will help evaluate the specific investments that will be most beneficial. If you are 15 years away from your goal, investment choices will be much different than if you are 5. The closer you get to the destination, the less able you are weather market fluctuations. This should be considered in your overall strategy.
  • Increase The Amount Invested Each Year. When looking over your investment strategy, separate the performance and the contributions. The performance is how much your money has grown through your investment strategies. Contributions are the dollar amount that you have added to your investment accounts. These two factors make up the total growth of your portfolio. Both of these numbers are important to your overall strategy. The account performance should be reviewed independent of contributions to help you stay on track with the right investment choices for your risk tolerance and time horizon. The amount you have added in contributions is what you have built into your budget for long term financial goals. When you increase those contributions each year, your account should grow significantly faster. Small increases are often not felt in the monthly budget.Let’s say you currently contribute 6% from your paycheck into your 401k. In addition to that you are putting $50 a month into your IRA and $50 a month into a  college fund. At the beginning of the year, increase your 401k contribution by 1%. Now you are putting away 7% in pretax dollars for retirement. Then the next quarter increase your IRA contribution to $75 a month and the quarter after that, increase your college fund contributions by $25 a month. These small increments will barely be noticed in your monthly budget. The $25 a month increase is less than $1 a day. If you are earning $50,000 a year, the 1% increase with your 401k is only around $21 a paycheck if you get paid bi-monthly, in pretax dollars. Meaning your paycheck will be reduced by less than $20 a paycheck due to the pretax allocation. If you increase the contribution at the time of your annual raise, it will only be noticed in the form of larger investment accounts.
  • Review your asset allocation as a whole picture. When you have separate investments for different financial goals, it is more of a challenge to see your portfolio in a complete picture. Having investments with different companies can increase these challenges. When you have a 401k at a current job, and maybe one or two from previous jobs, they are more difficult to keep up with. Then you might have current investments for retirement, college and savings for your first home. Taking a holistic view of all your investments will help to ensure you have the best asset allocation possible. When your allocation gets out of whack, you might end up taking on more risk than you are comfortable with, without realizing it. It is not always possible to have all your investments under one roof, especially with a current 401k. However, including these investments in all financial reviews will help you stay on track for your overall investment goals as well as ensuring your asset allocation and risk profile are appropriate.
  • Understanding what you can control. In life we like to have control over our current and future destinations. Happiness and success often come from recognizing what we can control and focusing on that. Investing is no different. We cannot control the markets and we cannot control the economy. There is a host of circumstances and events that are outside of our control. Stressing and worrying about those things is not beneficial. You can control spending and investment rate. You can control which investments you choose and the amount of risk in your portfolio. Staying focused on these elements will lead to higher comfort levels which will encourage staying the course.

Financial investing success has more to do with implementing sound strategies, rather than luck or great market timing. It is more about staying the course, than picking the “hot” stock that will make you a millionaire.

Learn more about our Investment Management services.

Related Reading:

Tips for Millennials to Understanding the Stock Market

What is Dollar Cost Averaging?

5 Things Investors Get Wrong

Why and How to Get Started Investing Today

Mitigating Your Investment Volatility

The Psychology of Investing

Rebalance Your Portfolio to Stay on Track With Investments

Behavioral Investing: Men are from Mars and Women are from Venus!


YOLO (You Only Live Once) So You Need A Retirement Goal

Yolo Retirement Goal

When you read through blogs or scroll through hashtags and memes on social media, there is a recurrent theme among millennials regarding the live-for-today sentiment. Whether it’s the acronym, #YOLO (You only live once) or the older, maybe not-so-cool phrase, ‘Carpe Diem,’ we are constantly reminded that we should stop worrying about the future and focus on today. But when it comes to your finances, is society sending us a detrimental message?

When addressing one’s plans for retirement, it is sometimes difficult to find a happy medium between the avoidance of financial responsibilities and the overwhelming, anxiety-inducing worry over one’s financial future. Below are two very common thought processes that I see often.

1) I am not worried about the future now, I’ll deal with it later

Unfortunately, our day-to-day pressing needs and our live-for-today goals become the priority and we cannot focus on or visualize what is not right in front of us. We tell ourselves, ‘I’ll do it tomorrow.’ Whether it’s not participating in a 401K because the extra monthly money is needed for utility bills or prolonging the start of a college savings fund for your child because you have mortgage payments to make, you are setting yourself up for a worrisome retirement.

It is important that you stop and visualize, in vivid detail, a big retirement goal. Are you visualizing being able to enjoy the finer things in life or are you just hoping to maintain the lifestyle that you are living today? What details do you see when you make this visualization?

Consider these important factors while you are visualizing:

If I continue at today’s rate-of-saving, what will my savings be at retirement?

Do I have children? Do I plan to have more children?

Do I plan to send my children to college?/Can I afford college tuition?

Do I own a home? Do I have a mortgage?

Have I planned for rising health concerns as I get older?

If something should happen to me, will my family be taken care of?/What kind of debt will they incur?

2.) I worry so much about my future financial position, that I sacrifice my daily happiness

Studies have shown that intense worrying about money or financial situations can affect many aspects of your life from mental health, to relationships, to career. When consumed with worry over your finances, it can inflict on your ability to focus thus creating a distraction and inability to enjoy the present.

While it is important to plan for the future, it should not be so overwhelming that it interferes with one’s day-to-day abilities. Ask yourself:

What am I really worried about?

Is it something in my control? If so, am I taking the necessary steps?

If it is not in my control, what steps can I take to ease my anxiety?

Do I have a financial advisor that can help to address financial concerns and alleviate unnecessary worry?

Whether you identify more with the first or second way of approaching your finances, or possibly somewhere in the middle, it is important to address your financial concerns with a trusted financial advisor. Unnecessary worry can cause you to feel paralyzed, out of control, and unable to make the right financial decisions concerning your retirement. However, failing to address future financial responsibilities, and avoidance altogether, can prove to be counterintuitive, creating anxiety and worry at a later date. Suddenly financial responsibilities show up at your door and you no longer have the option to ignore or put off. In taking small steps along the way, you can gain control of both your finances and your worry.

Call Brad Sherman at Sherman Wealth Management today and set up a no-cost financial consultation.

Learn more about our Retirement Planning services.

Related Reading:

Four Things Entrepreneurs Can do Now to Save for Retirement 

Finding Financial Independence

Your 401K Program: A Little Savings Now Goes a Long Way

How Much Money do you Need for Retirement These Days?

The Benefits of Saving Early for Retirement

Advantages of Participating in Your Workplace Retirement Plan


Your 401K Program: A Little Savings Now Goes a Long Way


Though it may seem daunting, investing in your future is a positive choice. Your experience doesn’t have to be intimidating; I will be happy to serve as your financial planner to help guide you through the process. There is no better time to begin than now. The earlier you can begin to save, the greater earning potential you have at retirement.

Why a 401k program is essential

Assuming an average annual return of 8 percent, setting aside only $4,000 per year starting in your 20s could make you a millionaire by age 62, according to an article by Hitha Prabhakar in U.S. News and World Report. The article further explains that the Employee Benefit Research Institute reported in January 2014, that 30 years of 401(k) savings, combined with Social Security benefits, should generate an income that replaces at least 60 percent of per-retirement salaries.

In addition to putting away money on your own, many companies offer a “matching” program for retirement savings. Some companies may have avesting schedule, which means that the match is earned over time. However, if you don’t take advantage of a 401k program, you are passing up the opportunity for “free money” contributed to your retirement account by your employer.

We started this company with a goal to help educate investors, and guide them through an otherwise daunting experience. Sherman Wealth is happy to look at your 401(k) plan and give you ideas on how to best manage your money. Give us a call at (240) 462-5273 if you would like more information in creating a retirement savings fund. Your retirement may seem far away, but developing a savings plan early you can help ensure confidence in your financial future.

Find an accessible path to your financial future at Sherman Wealth Management.

Learn more about our Retirement Planning services.

Related Reading:

Four Things Entrepreneurs Can do Now to Save for Retirement 

Finding Financial Independence

YOLO (You Only Live Once) so you Need a Retirement Goal

How Much Money do you Need for Retirement These Days?

The Benefits of Saving Early for Retirement

Advantages of Participating in Your Workplace Retirement Plan


How much money do you need for retirement these days?

Pre Retiree

Although retirement may seem distant, it is important to start a strategic plan now so you are prepared when that day arrives. Timing is very important, and the sooner you start saving and investing, the sooner you can begin to focus on a life that will not require you to work.

How much money do you need for retirement?

Well it depends on three factors:

(a) when you retire

(b) where you retire


(c) what you plan to do in retirement.

Not all of these questions need to be answered right away, but saving now in a retirement fund that has time to grow is invaluable. Fidelity says to try to have saved at least as much as your current salary by the time you are 35, have three times your salary saved by the time you’re 45, and at least five times your salary by your 55th birthday. When it’s time to retire, your goal should be to have saved at least eight times your ending salary. These numbers aren’t set in stone, but are good benchmarks to follow when starting your retirement savings and investment plan.

Dependable advice in a fluctuating market.

Learn more about our Retirement Planning services.

Related Reading:

Four Things Entrepreneurs Can do Now to Save for Retirement 

Finding Financial Independence

YOLO (You Only Live Once) so you Need a Retirement Goal

Your 401K Program: A Little Savings Now Goes a Long Way

The Benefits of Saving Early for Retirement

Advantages of Participating in Your Workplace Retirement Plan

Sherman Wealth Management


Dimensional Funds Advisors


Early this year, Barron’s posted an article by Beverly Goodman on a program orchestrated by financial firm Dimensional Fund Advisors, led by University of Chicago economist Professor Eugene Fama. Dimensional Fund Advisors’ investment strategy is based on Fama’s early and ongoing research, and the students at this program were the financial advisors who sell its products. Fama is a recent Nobel Prize Winner and the two day, biannual program, held in Austin, Texas allowed the students to hear about new research and new strategies from Fama himself.

Strategies like Dimensional Funds Advisors

It may seem like an exclusive strategy and that the information that Professor Fama spoke about during the two-day program is only available to a select number of people. In truth, this is a strategy that is available to everyone and we are very excited that Sherman Wealth Management can now offer services like this to you. We will determine if any of these strategies are right for your unique financial plan.

We believe everyone deserves sophisticated financial advice. Our mission is to provide the same kind of high-quality investment services offered by the finest financial institutions and private Wealth Managers, without the high account minimums or costs. Please give me a call at (240) 462-5273 or e-mail me at bsherman@shermanwealth.com so we can discuss how to help you meet your financial goals.

Dependable advice in a fluctuating market.
Sherman Wealth Management


Which Generation has a Better Handle on their Long Term Financial Goals

better handle on finances

Long term financial goals for Millennials vs. Gen X

There is a common perception among our society that Millennials have the ‘You Only Live Once (YOLO)” attitude and are risk takers in all aspects of their life. However, Millennials are anything but when it comes to their finances. According to Financial Finesse 2013 Generational Research Report, the tech savvy Millennials “continue to be stronger than their older Generation X counterparts in many areas of day to day money management.”

Those under 30, commonly labeled the Millennial Generation, are doing a relatively good job managing their current cash flow on a day to day basis. In the age of the internet and now social media, technology is the leg up for Millennials. Accustomed to budget friendly websites, comparison shopping, and peer comparison, Millennials use what they have at their fingertips to do their own research and ensure they are getting the best deals. So when it comes to short term cash flow, Millennials’ top priority is making sure they have more money coming in than going out.

Additionally, the availability of parental support from the baby boomers (ages 45-65) has steadily increased in recent years, as 30% of young adults (ages 18 to 34) that are employed full time live with their parents or have moved back home temporarily. Thus giving Millennials extra time to build savings.

Financial Strengths

73% have a handle on cash flow
88% are paying their bills on time each month
62% are regularly paying off their credit card balances in full
52% check their credit rating on an annual basis.

However, although Millennials may not be sitting on the same amount of debt as their older counterparts, they tend to overlook a long term perspective that makes planning for retirement a top priority. According to the same Financial Finesse study, Millennials “suffer from a relative lack of investment knowledge” making long term financial goals their biggest challenge.

Financial Weaknesses

Only 67% say they have a general knowledge about investments
Only 37% have taken a risk tolerance assessment
Only 29% rebalance their investments
Only 83% are contributing to their retirement plan at work
Only 29% have run a retirement projection
Only 17% say they are on track to replace 80% of their income in retirement
Only 26% contribute to a traditional or Roth IRA
Only 29% are confident their investments are allocated appropriately

To get Millennials on track, they need to bring their long‐term goals into focus. This generation favors the opinions and advice of peers and first‐hand users over those of traditional experts. Seventy‐five percent have created a profile on a social network and are more likely than any other generation to visit the website several times a day. Finding a way to incorporate a social platform with an educational platform allowing Millennials to share their experiences, with hands‐on applications, as well as testimonials and peer recommendations, will resonate well with this generation as they believe the classroom is a thing of the past. Thirty-nine percent of Millennials see the future of education as more virtual.

Gen X

Generation X, ages 30-44, is considered the more self-reliant generation. They are the first generation to grow up with both parents working outside the home and have had independence and freedom at a young age compared to other generations. That, coupled with being the first generation to grow up with computers, has given Gen X the ability, as well as the need, to control their own lives, including their financial goals.

Gen Xers, on average, have a higher income than their younger counterparts and tend to be homeowners and/or married with a dual household income. However, this generation was hit the hardest by the Great Recession, losing quite a bit of their savings, most significantly when the housing market collapsed. This creates a struggle for Gen X in prioritizing their financial responsibilities. This group is paying down debt from their self-reliant 20’s but with more immediate obligations, such as mortgage payments and young children, it becomes difficult to balance. Those more immediate expenses tend to seek priority over their day to day cash flow.

What holds Gen X back is not their desire to save, but rather their debt that hangs on them like a noose around their necks. Forty-nine percent have debt that keeps them from saving for emergencies, children’s college tuition and ultimately retirement.

During the financial crisis: *

15% of Generation X made early withdrawals from their retirement accounts
23% stopped contributing to those retirement accounts
22% stopped contributing to college accounts

* 2012 report by the Insured Retirement Institute.

It may help Generation X to be aware of the vast number of available college financing options. Those options make saving for college a lower priority than saving for their own goals like retirement, an emergency fund, and of course, paying off debt. It is important they learn to balance competing demands and meet long term goals while faced with immediate growing priorities.

Gen X’ers rely heavily on education and take advantage of tools that are made available to them. One tool this age group has taken advantage of, and had a high level of confidence in, is the stock market, which may be why they are struggling to meet their long term goals. Many Gen X’ers largely missed the huge run up in stock prices in the 80’s and 90’s, and may need more aggressive retirement investment strategies or alternatives to compensate. They understand the importance of investing and are not afraid to do so aggressively.

Both generations need to be realistic about their finances

Both generations view “old age” at somewhere around 78 or 80 and the life expectancy of a current 60 year old, according to government statistics, has reached a record 84 years. But with both Gen Xers and Millennials facing the impending shortfalls of Medicare and Social Security, how will either generation prepare accordingly? This, combined with the reduction in employer‐sponsored retirement benefits, makes both groups subject to suffer shortfalls in their own savings unless drastic measures are taken.

Both generations have had some help from the Baby Boomers along the way—whether through life insurance, college savings or financial support post college. But are either the Millennials or Gen X’ers going to have the ability to do the same for their own children?

Although Gen X may not have as much time as Millennials for their savings to compound and grow, the silver lining is both generations have time on their side. But time is money, right? Start planning your financial success today.

Informative data at your fingertips
Sherman Wealth


Advantages of Participating in Your Workplace Retirement Plan

Our Clients

As young adults, 20 and 30-year-old’s tend to procrastinate when it comes to saving for retirement, thinking they have all the time in the world.But the key is to start now. When it comes to saving for retirement, there are few better ways than a workplace plan such as a 401(K). Yet, there are a few common excuses for not opting into an employer compensation plan.

● There will always be Social Security
● I can’t afford it right now. I’m not making enough money to save yet.
● Fear of losing money in bad investments.
● I’m so young, I have all the time in the world.

The 411 about the 401(K)
A 401K allows employees to withdraw money from their paycheck prior to taxes and invest it in a retirement savings plan. Many employers then match the contributions proportionately, sometimes even dollar for dollar. The contributions are not taxed until the money is withdrawn. As of 2014, you can contribute up to $17,500 per year.

Funds withdrawn prior to age 59 ½ are subject to a 10% penalty and are taxed as current income in the year withdrawn.

A Mini History Lesson about Pensions and Employer Compensation Plans
It was during the American Revolution, that what we know as a pension, came about. The Continental Congress offered soldiers a monthly lifetime income as an incentive to join General Washington’s army.The income they’d receive when the war was over would be a payment for their service.This lifetime income was called a pension.The offer was repeated by the federal government the during the Civil War and has continued ever since.

The first private company to offer a pension plan was American Express in 1875. They gave an income to each retired employee. The amount was equal to half of the worker’s annual pay, based on an average of the worker’s final ten years of employment (up to $500 annually). Over the next 50 years, hundreds of other companies created similar plans. (However, now it’s based on the average of the worker’s highest paid income of 35 years!)

The end of 1929 brought the Great Depression. Millions of people became unemployed which created fierce competition for jobs.The nation’s economy at the time was agricultural and industrial— both very physically demanding— placing older Americans at a distinct disadvantage. So when older employees lost their jobs, they were unlikely to find new ones and found themselves involuntarily retired.

Thus, in 1935 came the Social Security Act which was signed by President Roosevelt,establishing the first public retirement plan and a national retirement age of 65.Similar to the private plan created by American Express, Social Security was to pay monthly benefits based on each worker’s length of service and average annual salary.

Addressing the Excuses

There will always be Social Security
When the Social Security Act was established, the average American lifespan was 61.7 years, however, today it is 78 years. Now, one must plan income for retirement to get you to age 100 or beyond. You can no longer solely rely on Social Security alone to maintain you through your retirement years. It should only provide you with one-third of your retirement income.

Few companies still maintain traditional pensions (paid for by employers). In this day and age, people are no longer staying at one place of employment for their entire career which is usually the case in which a pension would still exist. The vast majority of today’s retirement plans fall under “defined contribution plans” such as the 401(K).

I can’t afford it right now. I’m not making enough money to save yet.
You do not have to make a lot of money to participate in this program. Typically an employer only requires 1-2% of the participant’s salary. On a $50K salary, that is only $42 to $84 per month. And remember, your employer may contribute proportionately every time you do. How much do you spend on your cable bill? Or phone bill? Or your gym?

Your employer automatically deducts your contributions every time you are paid. If you don’t see the money, it won’t be so hard to part with it! Most of the legwork to provide investment options is done by your employer and the professional advisers they hire to assist them. An increasing number of plans offer “auto enroll” and “auto escalate” features. The first automatically signs you up for your retirement plan; the second automatically boosts contributions as your salary increases.

Another perk: You get two tax advantages when you save in a 401(K) plan. First, your contributions are tax-deductible. Second, the money you contribute doesn’t count toward your gross income for the year, lowering your taxable income. There are also no taxes on interest or dividends at the end of the year like in a non qualified investment or savings. Say you put 10% of your $50,000 salary into your account each month. That’s $416 you don’t have to pay tax on. If you’re single, that translates to about $104 in monthly tax savings, or $1,245 a year and tax deferred until its withdrawn.

Fear of losing money in bad investments.
Sometimes taking your hard earned money and putting it where you can’t see it is scary. People who have fear of going to the doctor but have to go anyway. Think of it the same way. Most 401(k)s let the employee choose where to invest their savings from a variety of options ranging from aggressive choices as to less volatile choices.

I’m so young, I have all the time in the world.
The key to success of a 401(K) is to start as early as possible and to try and contribute the maximum allowed. According to FinancialSamurai.com, in 2014, if a 22 year old started participating in a 401(K) by the time they are 65, they will have saved $743K to $3.5 million, depending on the percentage of contributions to the plan. But if someone does not start contributing until age 40, by the time they are 65, they will have saved $305.5K to $550K, depending on the percentage of contributions to the plan. Wouldn’t you prefer to be the former?

Don’t leave money on the table. If your company offers a 401(K), find out the details of the plan and consider taking advantage today.

Learn more about our Retirement Planning services.

Related Reading:

Four Things Entrepreneurs Can do Now to Save for Retirement 

Finding Financial Independence

YOLO (You Only Live Once) so you Need a Retirement Goal

Your 401K Program: A Little Savings Now Goes a Long Way

How Much Money do you Need for Retirement These Days?

The Benefits of Saving Early for Retirement