7 Tips to Maximize the Value of a Bonus or Raise

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Expecting a bonus or a raise? Read these tips before you start Googling timeshares in Cancun

If you’ve got an end-of-year bonus or a well-deserved raise coming, it’s easy to think of it as “extra money” you can use to splurge on a trip to Mexico, a new phone, or a serious visit to the outlet stores. It’s particularly easy if you’ve been sticking to your budget and feel you deserve a little fun after behaving so responsibly all year!

Before you blow that bonus on a phone upgrade or a cruise, though, consider these smart ways to really reward yourself with the extra infusion of resources.

1. Upgrade Your Budget Instead of Your Phone

Still rocking a flip phone from the 90s? If so, yes, maybe you should invest in something smarter. But for most of us, it’s smarter to spread the extra cash across several budget items. Go ahead and add a little to your entertainment or entertaining budget, but consider allocating the rest of it to these smart ideas!

2. Make a Bigger Dent in your Debt

Are you feeling the weight of college loans, a mortgage, or, even worse, high interest credit card debt? You can lighten that load by using your bonus to make a larger payment than usual. It lowers your balance so it reduces some of those high interest charges moving forward. Increasing this budget category when you get that raise can also add up to a significant reduction of interest in the long run.

3. Invest to Watch it Grow

Setting aside money when you have large expenses to deal with now can be daunting. But the earlier you start investing the more time your money has to grow. If you haven’t already, create an investment account and put that bonus money to work for you, instead of leaving it in a checking account.

4. Kickstart Retiring

If you’ve kicked your tires and they need to be replaced, by all means, safety first! Use some of the rest of the money, though, to max out your company’s 401(k) contribution limits. If you qualify for an employer match, your bonus just got bigger!

5. Recalibrate Your Portfolios

If you’re already an investor, consider adding some of those extra funds to your investment portfolios. While you’re at it, take a look and see what’s working and what’s not. Your financial advisor can help you evaluate whether your allocations should be adjusted based on your risk tolerance and your long and short-term financial goals.

6. Start a College Savings Plan 

It’s never too early to start saving for a child’s college education. By starting early, you can get a good head start and maximize compounded interest. Your financial advisor can help you choose a plan that works with your life, you goals your timeline, and, most importantly, your bonus!

7. Save for a Rainy Day

Those emergency funds may seem like low priority, until you suddenly need them. If you haven’t already, create an account with funds for unexepected expenses like job loss, emergency repairs, medical bills for you, your family, or your pets, and even weather emergencies (remember Hurricane Sandy?) A good rule of thumb is to have three to six months of expenses saved up just in case.

There’s nothing wrong with treating yourself a little. You worked hard and you deserve it! Remember though, that by keeping the splurging and celebrating to a minimum, and letting that bonus or raise work for you, chances are you’ll have much more to celebrate when next year’s bonus comes around!

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The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.

If you have any questions regarding this Blog Post, please Contact Us.

Are You Making These Two Critical Investment Mistakes?

Are You Making These 2 Mistakes

It’s no secret: getting an early start on saving and investing is one of the most important things you can do for your future! Putting money into the market when you’re young – even small amounts – gives your investments time to grow and compound over time.

Unfortunately, too many millennials haven’t gotten started yet. A recent survey by Bankrate found that only 26% of Americans under 30 were invested in the stock market, compared to 58% between the ages of 58 and 64. (1)

While the stock market has historically seen positive returns over the long run, it’s not hard to understand why many millennials are wary of it. Millennials under 30 have seen two major market crashes: the tech bubble of the late 1990’s as well as the 2008 economic crisis. Many saw how family members and friends lost years worth of savings and were often financially devastated by what happened.

The result: a deep distrust of Wall Street and a desire to avoid the market altogether.

While it is understandable that millennials are wary about putting their earnings into the market, it’s also unfortunate.

In spite of the two crises of 1990 and 2008, if you had invested in the S&P 500 at the beginning of 1985, and kept that money in until the end of 2014, you would have earned over 25 times what you had initially invested. (2) (3)

Even saving just a small amount each week or month would have made a tremendous difference in your retirement savings.

The Second Mistake

While many millennials make the mistake of investing too little in the market, others make another critical mistake. While they may be making regular contributions, they may not be invested in a wide enough variety of securities.

The youngest generations have grown up with access to the internet, social media, online financial media, and the tools to invest in any publicly traded security that they choose and they feel empowered to make investment decisions on their own, without consulting a professional. They’re also able to trade information with friends and make changes to their portfolio in a matter of seconds using their smartphone or computer.

Because of this, millennials are often invested in individual hot stocks, companies they believe in, or companies that sell products they use and like. This can (and will) work for some investors sometimes as a result of sheer luck and the law of large numbers, but it is not a consistent – or wise – strategy to rely on.

Buying What’s in the News

In 2007 researchers at UC Berkeley and UC Davis published a paper where they showed that individual investors have a tendency to buy stocks that had recently been in the news, or that had share prices that had recently gone up (4). By buying these “hot” stocks, new investors were forced to bid up the price to a higher level than they were before the news story came out. The study showed that, because these investors were buying at an artificially higher price, their portfolios ended up performing poorly as a result of having bought these ‘hot stocks’.

Additionally many millennials choose to engage in “socially responsible” investing, avoiding stocks in companies that sell products they don’t believe in, or that engage in business practices they feel are undesirable, and putting their money in companies that they believe in and feel good about.

Unfortunately, this too can have a negative impact on their returns over the long run. By focusing so narrowly, their portfolios are missing a major piece of the market, which limits their diversification. Additionally social responsible investments can have higher fees than their non-SRI counterparts, because they have the added cost of screening out stocks based on certain criteria.

Along with the added costs, and the decrease in diversification that result in focusing only on SRIs, researchers from Princeton and New York University published a paper in 2009 that showed that ‘sin stocks’ have historically outperformed their non-sin counterparts. (5)

Whether you are choosing to invest your money in a single stock, or several stocks, or you choose to invest in a SRI investment, you are limiting your investment choices, which in turn limits your level of diversification and possibly your returns over the long run.

Bottom line: if you avoid these two critical mistakes by starting to save – and invest – early, and by making sure your portfolio is diversified, you’ll be setting yourself up to watch your money grow over time.

 

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Broad-based investment vehicles with low fees and high levels of diversification, if appropriate to their specific circumstances, is one strategy to help clients toward their goals.

 

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Four Things Entrepreneurs Can do Now to Save for Retirement

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While retirement may seem a long way off when you’re young and just starting to build a business – or older and rebooting – it’s important to have a retirement savings plan and stick to it to create the future you want.

Retirement planning can be difficult for anyone, but entrepreneurs and small business owners can face unique challenges. According to a 2013 American Express survey, 60 percent of small business owners said they weren’t saving enough for retirement, and over 73 percent said they were worried about not being able to afford the lifestyle they want in retirement.

While many employees can choose to make automatic deductions from their paycheck towards a 401k, for instance, entrepreneurs have to make a conscious decision to sock away money for retirement, as well as find plans that work for them.

Fortunately there are several things that you can begin doing now to contributing to your long-term financial future. As always, please review these and other options with your financial planner to see what strategy may be most suitable for your individual situation.

1) Open an IRA

If you haven’t already, now may be as good a time as any to open an Individual Retirement Account (IRA). IRAs are long term investments that allow you to save money for the future in a tax efficient way. They also offer catch up contributions if you’re over 50.

Traditional vs. Roth

Traditional IRAs allow you to deduct contributions the year in which they are made, then pay taxes when you withdraw the money. A Roth IRA allows you to pay taxes on your contributions now, rather than upon withdrawal and earnings and distributions may not be taxable if held in the Roth IRA for up to 5 years.

For older investors who are approaching retirement, traditional IRAs probably make more sense, as their tax rate may likely be lower in retirement than it is currently. Younger investors, however, may want to consider a Roth IRA if they believe their tax rate could be higher in the future than when they make their contributions.

Contribution Limitations

Regardless of whether you elect to contribute to a Roth or Traditional IRA the IRS sets annual limits each year stating the maximum individuals can contribute to their IRA based on their annual earnings. For instance, in 2015 you are limited to a maximum of $5,500 annually (or $6,500 if you are 50 or over).

Finally, with either type of IRA, there are penalties and taxes for early withdrawals prior to 59 ½ years old!

Please consult your tax professional regarding your specific situation and the specific rules that apply to you.

 

2) Consider alternative forms of IRAs to increase your contribution limits

If you are your company’s only employee, or you only have a couple of other employees, you may want to look into setting up either an SEP-IRA or a SIMPLE-IRA.

SEP-IRA

SEP-IRAs allow you to contribute up to 25% of your salary, or $53,000 (as of 2015) whichever is smaller. This is significantly more than what non-SEP-IRAs allow for.

Setting up a SEP-IRA may be an easy choice if you and your spouse are your only employees, but there can be other costs associated if you have other people working for you.

SIMPLE-IRAs

SIMPLE-IRAs provide an alternative that is cheaper for companies with several employees.

With the SIMPLE-IRA, the employer creates an IRA for each employee. Employees have the option to contribute a certain percentage of their income to their IRA. Employers are then required to match that percentage up to a maximum of three percent of the person’s salary, or contribute two percent of each person’s salary into the IRA.

By creating a SIMPLE-IRA the owner is then able to contribute an additional $12,500 ($15,500 for those 50 and over) to his or her own IRA.

If you have only a few employees working for you and you expect to contribute either the full $12,500 or a large portion of it, there is a good chance that your tax savings may more than pay for the cost of contributing to your employee’s IRAs. Please consult your tax professional for more specific information about how this could affect you and your employees.

 

3) Setup Automatic Deductions

Unfortunately, we all have a tendency to procrastinate, and thinking about retirement is often not at the top of our priorities! It’s easy for entrepreneurs and small business owners in particular to become distracted and forget to contribute to your retirement account(s). Automatic deductions solve this problem.

By setting up your IRA and other retirement accounts to take money directly out of your bank account or paycheck each week (or month,) you can ensure that you contribute as much money as you feel you can, up to the full tax deductible amount, each year. You no longer have to worry about forgetting to, or putting off, contributing.

With any IRA, think carefully about how much you can realistically contribute. They are considered long term investments and you cannot access the money prior to a specific age without incurring taxes and significant penalties for making early withdrawals. Please make sure you are carefully considering your short and medium term goals. And remember: starting to save early is a good way to get on the road to achieving your goals.

 

4) Speak with as Experienced Financial Planner to Help You Create a Plan

Taking care of long-term financial goals can be a challenge but fortunately you don’t have to go it alone. Financial planning professionals can help you create an individualized plan focused on your specific goals. Whether they are:

  • Saving for retirement
  • Saving for your children’s education
  • Buying a home
  • Having a baby

Financial planners are here to help you plan for the future you envision for yourself and your family.

 

 

With over a decade’s worth of experience in financial services, Brad Sherman is committed to helping his clients pursue their financial goals. Contact Brad today to learn more about how you can better prepare for retirement.

Learn more about our Retirement Planning services.

Related Reading:

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

Advantages of Participating in Your Workplace Retirement Plan

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Having the Money Conversation

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Millennials have a tremendous advantage over their Baby Boomer parents because they are comfortable talking about money. Having grown up with social media and the internet, this generation is not as private as their parents and grandparents are, especially about subjects like money and finance. The advantage is that open conversations can reduce fears and increase understanding, which can result in better decision making.

Yet, with all this comfort in discussing financial matters, many Millennials are hesitant to meet with a financial advisor. It’s one thing to gather information from family and friends or read articles about investing, it’s another to discuss your personal information with a financial advisor. That’s when it moves from theoretical to personal and that can create a great deal of fear and discomfort.

Why Fear Gets the Best of Us

How Much Do You Really Know About Finances? As educated professionals, it’s common to feel like you should know everything. After all, if you don’t understand it, a few internet searches should provide the answers!

When it comes to money matters, though, many Millennials feel like a fish out of water. Internet searches can provide information that’s both confusing and conflicting, and that doesn’t answer individual questions about strategy and direction.

Then there is the question of what information can be trusted. Is the site legitimate and can the writer’s – and site’s – motivation be trusted? While financial information is plentiful, much of it’s either very general or coming from a sales site that promises a secret formula that will turn you into a millionaire.

Financial decisions by nature are very individual and personal. Because there’s no one-size-fits-all investing strategy, personal consultations are invaluable.

Advisor motivations. Can the advisor be trusted? A trusted advisor needs to understand your circumstances, goals, dreams, and aspirations. Once they do, they can help to create a long term strategy that will help to make those dreams a reality. But you must be able to trust that your advisor will make recommendations that are most beneficial to you, the client, not the best for them, the advisor.

Addressing these concerns in an open conversation will go a long way. No one wants to be sold a product. We all want to invest money in a sound strategy. Understanding the reasons for the recommendation will help you understand how it may benefit you and help you pursue your long term goals.

Fear of not being understood. As complicated individuals we want to appear like we have everything in order. In reality, sometimes we’re confident, other times not so much.

Financial advisors have seen nearly every level of financial preparedness. They have seen financial messes and worked with clients to get things corrected. They have seen strong portfolios, weak portfolios, no portfolio, and everything in between.

Even if you don’t feel you have all your ducks in a row, an advisor can help. If you’ve made bad decisions in the past, they can make recommendations for corrective action. If you’ve been unable to get things in order on your own, working with a professional can be the fastest way to get on track.

Markets not doing as expected. This can go two ways. If you invest conservatively and the market takes off you might end up kicking yourself for not being more aggressive. If the markets are slow and you invest aggressively you can end up wishing you’d been more conservative.

When you meet with an advisor, you’re meeting with a professional who understands the investment business and who can make recommendations that are consistent with your financial goals. An advisor does not have a crystal ball; remember that long term investing is not about beating the markets, it’s about making strong financial decisions that over time will lead to increased confidence in financial matters.

Pulling the Trigger

The first step is always the hardest. This is true whether you’re trying to establish a workout routine, learn a new language, start a new job, or change your investing strategy. Resisting change is natural and we are creatures of habit. However, there comes a point when, in order to grow and progress, we have to stop making excuses and get started by meeting with a financial advisor.

Make the appointment. Even if you don’t think you know enough, have enough money to invest, have a good enough paying job, or whatever the excuses for delays have been.

Before you meet with the advisor, write down questions you have. What things have you heard and what things do you want to understand. This can guide the conversation as you begin to develop a relationship with an advisor.

A financial advisor at Sherman Wealth is someone you’ll want to get to know! You’ll want them to know everything about you and your family’s needs. As your advisor learns more about you, they’ll be able to make the appropriate recommendations as opportunities arise.

Learn more about our Financial Advisor services.

Related Reading:

The Top 10 Questions to Ask a Financial Advisor
Transparency on Both Sides

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7 Things Married Couples Should Discuss Today

Financial Planning for Married Couples

We all know that being a part of a couple takes work and that open, honest communications is key!  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.

Here are 7 of the most important things that couples should regularly review:

  1. Retirement Plans – If you’re a young couple, retirement may seem far off, but it’s important to 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 that you maintain a proper asset allocation.
  2. 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. If one, or both of you, are dependent on the other person’s income, you may want to consider purchasing a term-life insurance policy.
  3. 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. Make sure that your assets are directed in a way that’s consistent with your wishes.
  4. College Funds – If you have children, or are considering having children, you definitely want to discuss a saving strategy to help pay for college tuition. Like retirement savings, a little bit now can go a long way.
  5. 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? Or should you switch to a high-deductible plan to save money? These are questions that should be reviewed at least once annually!
  6. 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! Some questions to consider: whether or not you’ll pay cash for the purchase;  if you finance it, what type of down payment you will make, and over what period of time; and if you need to cut down on expenses elsewhere to save up for the purchase.
  7. 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. 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, it may be wise to contact a financial planner. Financial planners can help point you in the right direction, based on your own goals, and help facilitate difficult, but important, discussions.

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The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.

If you have any questions regarding this Blog Post, please Contact Us.

What is Dollar Cost Averaging?

Dollar Cost Averaging

The concept of dollar cost averaging is investing a set amount of money at regular intervals. This might mean a percentage of every paycheck that is used for investing or a specific dollar amount. You might start with as little as $50 a month or $50 a pay period and that will begin to create a portfolio that pays for future needs.

Advantages of Dollar Cost Averaging

1) Establishes a habit of investing. One of the largest benefits is you begin to pay yourself first and take care of future needs today. Establishing a habit of setting aside a little money for tomorrow will help you live within your means, have more thoughtful budgeting, and be better prepared.

2) The investment is built into your budget, and you learn to live on what remains. The interesting thing about money and finances is that you tend to spend what you have. If there is a little less in the account each month you will adjust spending to accommodate for what you have. Even if it does not appear that there is money for investing you might be surprised how easy it is to “find” a small amount that can be earmarked for investments. A simple thing like bringing lunch twice a week instead of eating out can result in saving over $50 a month to use for investing.

3) Dollar cost averaging purchases shares at a set time each month regardless of where the investment price is. This means if the price is lower you purchase more shares. If the market is higher less shares are bought. The result is a greater tolerance for market fluctuations because you gain a better understanding that the markets move every day.

4) No Large Sums Required to Begin. Dollar cost averaging can be started with small amounts of money. One possible strategy is to increase monthly contributions at least annually. The more you raise the contribution amount the larger and faster your investments may grow over time.

5) Flexibility. Monthly contribution amounts can be changed at any time. The amounts can be raised or lowered depending on life events that impact your budget. In a perfect world the contributions would always increase, but sometimes that does not match real life events. The ability to adjust contributions reduces risk and allows for greater flexibility to meet current demands.

6) Great long-term strategy. Building a portfolio from the ground up can be accomplished through dollar cost averaging and regular contributions. Your investment should grow over time through both additional contributions and portfolio growth. As you receive bonuses or other financial windfalls you can make additional one time contributions as your finances allow.

When it comes to investing there are no short cuts. Starting early and making regular investments will help to provide financial security and accounts that will build over time. When you start early you are less tempted to take on more portfolio risk and are better able to reach long term financial goals.

The future is uncertain and setting aside a little each month to pay for long term financial needs is one of the soundest ways to pursue financial security.

“Dollar cost averaging does not protect against a loss in declining markets. Since such a plan involves continuous investments in securities regardless of the fluctuating price levels, the investor should consider his or her financial ability to continue such purchases through period of low price levels.”

Learn more about our Investment Management services.

Related Reading:

Tips for Millennials to Understanding the Stock Market

5 Things Investors Get Wrong

5 Big Picture Things Many Investors Don’t Do

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!

 

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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!

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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

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Millennials: The Fiscally Conservative Generation

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As the Millennial Generation continues to get more work experience under their belt, statistics from a UBS Wealth Management survey show that this generation is the most fiscally conservative generation since the Great Depression. With most recent generations, the advice that has served them best is to invest their money. With this generation, more and more people are listening to the advice that tells them to save their money in CDs or bank accounts.

Because interest rates are at nearly rock-bottom, investors who play it too safe will very likely lose money due to the effects of inflation. According to Judy Martel in her recent blog “Cash is King for Millennials”, Millennials allocate an average of 52 percent of their portfolio to cash, compared with 23 percent for investors of other generations.
Many companies are promoting the merits of starting a 401(k) program and giving their clients tips on 401(k).

Tips for the fiscally conservative

• Don’t opt out, opt in

• Don’t reduce your company match, find out how to potentially maximize it

• Adjust your investment allocations as you age• Do not borrow or withdraw money from your 401(k) until you are retired

and, most importantly…

• Start saving and investing now

Informative data at your fingertips.
Sherman Wealth Management

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

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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

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