Financial Literacy Month Q&A

As we kick off financial literacy month, we want to share some frequently asked questions we’ve received from clients and friends and provide actionable answers. As we embark on a new quarter and the spring season, it’s a perfect time for some “spring cleaning” and financial organization. Throughout the month of April, we want to stress the importance of financial literacy and spread the word about financial education and empowerment. We will be sharing questions, answers, and advice we receive in hope to help you all organize and prepare your finances for the rest of the year.  

Below you will find some frequently asked questions:

Q: As a new college graduate, where/how do I get started in terms of investing?

A: First and foremost, it’s important to take a step back and establish what your financial goals are. If you are saving up for a new apartment or expenses in the near future, maybe consider building up your emergency fund/savings account. If you want to set yourself up for a solid financial future, you should think about contributing to your retirement, in a 401(k) through your workplace, or a Traditional/Roth IRA if you don’t have a 401k at work.  But most importantly, don’t forget about that emergency fund.  If 2020 taught us anything it’s to prepare for the unexpected.  

Q: How do I decide which credit card to apply for?

A: Before applying for a credit card and opening lines of credit, make sure you understand the responsibilities involved. When opening a new credit card, you must remember to pay your balances and statements on time in order to keep your credit score in tip top shape. That being said, opening lines of credits are crucial in establishing your credit score, so it’s important to do so. When deciding which credit card to choose, think about your expenses and where most of your dollars go. For example, if you spend most of your money at Amazon, consider purchasing an Amazon credit card that may provide you with cash back or points offers. Or, if you love to travel and dine at restaurants, consider a card that provides you with double points for those activities. Making the most of your credit cards is a great financial literacy tip to start the month. 

Implementing these small tips into your everyday financial routine is a great way to get organized and start off on the right foot. For more financial literacy advice and questions, check out our most recent podcast. If you have other questions similar to the ones above, please feel free to send them to us to answer at info@shermanwealth.com. If you would like to directly discuss your questions with us, please book a complimentary meeting here

Here are the Benefits of Sherman Wealth Financial Tools

If you budget your money, analyze your investments, and save for retirement, you’d likely benefit from being able to track your finances in one place. With financial literacy month around the corner, it’s a great time to discuss tools that you can utilize to simplify your financial life. Additionally, given the technological shifts due to the coronavirus pandemic and as we are all learning how to operate our lives from the confines of our smartphones and laptops, it’s crucial to continue to automate our lives, especially our finances. 

This is where we can help. Our state-of-the-art technology at Sherman Wealth allows you to track and stay on top of your finances, on your own time, and without charge. Life is complicated, your finances shouldn’t be. We know financial planning may seem like an overwhelming process, but by utilizing these tools, you can do everything in one place, at the tip of your fingers. 

With our comprehensive financial software, all of your financial accounts will be aggregated into one place, and you can use the tools to budget your money for short-term goals and prepare for the long run.  Additionally, through this holistic software, you can utilize the following tools: investment check up, fee analyzer, savings planner, net worth tracker, long-term goal planner, retirement planner, cash-flow planner, running balance sheet planner, and more.

If you have not utilized a financial software yet, we encourage you to consider a trial run of our software. Within minutes, you will be able to see your assets and liabilities in one tab. If you have any questions or would like to trial the software, please reach out to us at info@shermanwealth.com or schedule a complimentary 30-minute meeting here.

The Benefits of “Time” In The Market

As we hit mid-March of 2021, we think about the rollercoaster we’ve been on this past year. A year ago today, the stock market bottomed out. Given this wild ride and great volatility, it’s important to discuss the value of “time” in the market. We saw a very interesting tweet by Peter Mallouk, CEO of Creative Planning, which is a great depiction of what you should save incrementally at each stage of life to become a millionaire by 65 years-old with a 7% return.

As Peter Mallouk states above, “time” in the market truly does matter. It’s crucial to understand consistency, dollar-cost averaging, avoiding the noise, and understanding that there will be drawdowns in the market. Despite these drawdowns; however, stick with your long-term plan because the market will recover, as we have seen a year since the catastrophic lows. Starting early is an essential key to building your long-term wealth, as you can see in the figure below by JP Morgan.

For Brad’s deep dive on a year in the market and the true benefits of “time” in the market, check out the video below. If you have any questions about how to capitalize your financial situation or plan, reach out to us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here

https://youtu.be/_0-eEe76bgg 

MCPS Business Pitch Challenge on March 19th

Brad Sherman is very honored to be asked to judge the MCPS Business Pitch Challenge on March 19th. Students from nine high schools will be participating in this year’s event. As an entrepreneur, Brad Sherman is thrilled to support such a wonderful event promoting leadership, financial literacy and empowerment, and creativity. With the lack of financial literacy around the world, this event is a great opportunity for students to start thinking financially and as an entrepreneur from a young age. 

The event will run from 9 a.m.–noon. Participating high schools are: Montgomery Blair, James Hubert Blake, Winston Churchill, Albert Einstein, Gaithersburg, Northwest, Northwood, Paint Branch and Sherwood. Students will pitch their business ideas for a solution to an existing problem, improvement of an existing product, or create a need for a product/service to a panel of local entrepreneur judges.

The Challenge will be aired via the MCPS homepage, the MCPS YouTube channel and MCPS-TV (Comcast 34, Verizon 36 and RCN 89).

Brad, along with representatives from the MCPS Business, Management and Finance Program Advisory Committee will serve as judges, mentors or supporters. The three top winning teams will receive cash prizes.

Please tune in on Friday, March 19th at 9 a.m. as these bright students pitch their business ideas. Check out our blog from the 2019 MCPS Business Pitch Challenge on ways we helped coach the students in preparation for the big event. Support student growth and empowerment by attending this wonderful event. If you have any questions about the event, email ASKMCPS@mcpsmd.org or let us know at info@shermanwealth.com and we are happy to connect you with the right contacts. 

 

Here Are The Impacts Of The Skyrocketing 10-Year Treasury Yield

Due to tremendous economic aid, interest rates, particularly the 10-year treasury yield, has skyrocketed back up towards where it was a year ago around 1.2%, prior to the coronavirus pandemic.

We have been following this rate quite closely on our instagram handle, @shermanwealth, as we recorded it last week hitting 1.6%. Of course this spike has created tremendous volatility in the housing market in terms of interest rates as well as the stock market in terms of how equities have been priced.

We will continue to follow the 10-year treasury yield closely for you all. Check out the video below for Brad’s take on these interest rates and the effects they are having countrywide. As always, if you have any questions for us, please reach out with questions at info@shermanwealth.com or schedule a complimentary 30-minute consultation here

 

Tax Filing Season Is Here

Tax filing season officially begins February 12th, so make sure to get your documents and files in order! We know tax season can be daunting; however, submitting your tax return to the IRS as soon as you are able may be extra crucial this year. 

That’s because the coronavirus pandemic has led to changes in the tax code that will impact individual returns and refunds.

The season is also shorter than usual this year. The IRS will start accepting and processing tax returns on Friday, Feb. 12, and so far, has made no indication that it will also delay the April 15 filing deadline — an additional incentive to be on top of filing taxes, especially if you’re going to work with a tax preparer. Keep in mind that prior to filing your tax return, you should contribute to your retirement accounts, IRA, and Roth IRA’s depending on your income and if you qualify. For more details on whether you qualify, check out the link here

That’s because the coronavirus pandemic has led to changes in the tax code that will impact individual returns and refunds. The season is also shorter than usual this year. The IRS will start accepting and processing tax returns on Friday, Feb. 12, and so far, has made no indication that it will also delay the April 15 filing deadline — an additional incentive to be on top of filing taxes, especially if you’re going to work with a tax preparer. 

There’s no benefit to waiting on getting your tax return this year. Make sure to get organized and file your documents as soon as you are ready to. If you have any questions or need help finding a tax professional please reach out to us at info@shermanwealth.com or schedule a 30-minute consultation on our site here.

 

Launch Financial- How To Work Through Money Conversations With Your Significant Other, with David Pearl

Check out our new podcast episode, “How To Work Through Money Conversations With Your Significant Other, with David Pearl” (You can find the direct download here). In this episode, we are joined by David Pearl, a LCSW a psychotherapist and consultant who specializes in treating professionals, couples, performing artists and athletes. Together we explore tips and advice on the money conversations you should be having with your significant other and when entering a new relationship. When two people with different backgrounds, risk tolerances, and views on money begin to merge their lives, things can get messy. David walks us through how to make those situations lighter and easier on your relationships.

A little about David, he aims to provide a safe and supportive environment to strengthen self-esteem and facilitate more meaningful connections with family, friends, professional colleagues, or teammates.

David obtained his Master’s degree from The Silver School of Social Work at NYU and his Bachelor’s degree in Human Development and Family Studies from the University of Wisconsin-Madison. He is formally trained in Acceptance & Commitment Therapy (ACT), and has certifications in Imago Relationship Therapy and Prepare/Enrich Premarital and Marital Counseling. David is dual licensed in New York and Tennessee, and works with clients on an ongoing basis in both locations.

Prior to founding Music City Psych in Nashville, TN, David provided psychotherapy and performance coaching at Union Square Practice in NYC, counseling to individuals, couples, and families struggling with hematologic cancers at Mount Sinai Hospital, as well as psychodynamically oriented individual and couples counseling at The National Institute for the Psychotherapies (NIP).

The American Consumer Is Flush With Cash After Paying Down Debt

Eight months into the pandemic, many Americans’ household finances are in the best shape in decades.  This may seem like a surprising statistic given the current climate and after the widespread business lockdowns earlier in the year which coincided with a surge in unemployment. While this certainly doesn’t apply to all families equally and we know this has been an economic low point for many, it points to just how strong the U.S. economy was going into the virus outbreak, and how powerful the combined monetary and fiscal response was from the Federal Reserve, Congress and the Trump administration.

During this time we saw record-low mortgage rates, reflecting the ultra-easy Fed policy that has prompted a steady wave of refinancing and allowed homeowners to reduce monthly payments or tap equity. Americans are also holding more cash, helped in part by stimulus from the government.

Households’ debt service burdens have eased considerably, too, a complete departure from the 2007-2009 financial crisis that required years to mend. That in turn bodes well for consumer spending and its ability to power the economic recovery through a period marred by a violent spike in virus cases.

Despite the surge in Covid-19 cases, economists project a 4% annualized rate of U.S. economic growth this quarter, unchanged from the October forecast — though down from the prior period’s record gain, according to a Bloomberg survey. While the pandemic has financially been harder on working-class families than the wealthy ones who have been stockpiling much of the cash, data shows that they too have more money in the bank now. That’s important because they are much more likely to spend that money — and give the economy an added jolt — than the rich are.

Checkable deposits were also improving for several quarters leading up to the pandemic and even before the government actions to provide financial assistance for the unemployed. However, the virus resurgence means “people can’t spend until it’s safe to go back out again.”

To be sure, another reason savings remain elevated is that people are uneasy about their jobs and the outlook, particularly in industries such as travel, food services and leisure, where business activity is more at risk.

While “cash buffers” of those who benefited from fiscal stimulus are starting to weaken, their financial positions remain elevated compared with pre-pandemic levels, JPMorgan’s Lake said. “I think there’s enough juice to get people to year-end.”

For its part, residential real estate has played a huge role in driving both the recovery and improvement in household finances. Cheaper borrowing costs have not only sparked a flurry of demand for homes, mortgage refinancing has strengthened. While cash-out refinancing only makes up a little more than a third of all activity, a larger share of rate-term refinancing means lower monthly mortgage payments. With these lower payments due to refinancing, it assumes us to believe people will continue to spend more money relatively. 

In conclusion, it seems as though a great deal of consumers entered this pandemic in a strong position, with a great deal of cash, which helped some who were hit hard by the virus. Its interesting to see how even after 8 months of lock-downs and regulations, the household finances are still stronger than they have been in a long time. It’s important to take advantage of situations listed above, especially refinancing, to help lower payments and in turn pile up your cash account. If you have any questions or want to discuss your portfolio or finances, please reach out to us at info@shermanwealth.com or schedule a complimentary 30-minute meeting here.

How to Recognize Behavioral Finance Biases

Over the last few months, we’ve faced a great deal of economic turmoil and uncertainty, which has a great impact on the finances and mindsets of many all across the world.  Through these hardships, we’ve seen individuals face and struggle with a great deal of biases in respect to their portfolios and investments. We want to bring light to these behavioral finance biases that are only natural in human behavior and stress the importance of maintaining long term goals.

This past week has been stuffed with an overwhelming amount of news – the drawn out 2020 presidential election, the Pfizer vaccine announcing 90% accuracy and the coronavirus pandemic making a second wave with over 10 million cases.  As Americans are grappling with all this news, so is the market.

 Prior to the presidential election, we saw people selling out of their 401(k)’s or loading it up depending on which side of the political aisle they stood. Additionally, we spoke with individuals who were waiting to buy back in the market when the coronavirus cases diminished, even though the cases are the highest they’ve been since March and we are seeing the strongest market in a long time. Those who said “we won’t invest until the news settles down” back in April are still waiting as we still see a great abundance of news and a raving market. These biases prove the importance of sticking with a long-term goal and not being persuaded by beliefs and expectations.

 As we proceed into what seems like could be another coronavirus pandemic lockdown alongside a strong market, it’s interesting to look back at the data and hindsight biases and see how individuals may alter their investment approach a second time around.  These last nine months have been a wild ride and crazy for the market to digest. However, the market has proven many wrong these last few months, showing the power of its resilience and strength. If you have any questions specific to your portfolio and investment decisions, please reach out to us at info@shermanwealth.com and schedule a free 30-minute consultation here.   

 

Americans Were Given the Coronavirus Option to Raid Their 401(k). Most Didn’t.

Despite the financial toll of the coronavirus pandemic, few American households have raided their 401(k) retirement accounts to make ends meet. Faced with the prospect of surging unemployment and a declining economy, Congress in March passed a law that temporarily allows Americans to use their retirement money today. However, unlike expectations, so far, there hasn’t been a rush of funds out of accounts. 

Research reported by the Wall Street Journal revealed that of those eligible to take money out of their accounts, many did not proceed to pull funds from their 401(k)s for various reasons. The withdrawal rates were much lower than anticipated back in April which raises an interesting topic regarding the state of the market over the last few months. 

Given the wild ride we’ve had the last 6 months with the coronavirus pandemic, the election, and now positive vaccine news, the markets have seen a great deal of volatility. It’s been interesting to see how these events have either helped or hurt people as they’ve been trying to gauge the market and in turn buy or sell off parts of their portfolio. While the coronavirus began to surge as the election played out, many may have panicked and sold off a great deal of their stocks even though after-the-fact stocks are the highest they’ve been following a presidential election in many years.   

Although this new law passed by Congress has allowed for the potential to pull funds from 401(k)’s, it’s been interesting to see the result and the fact that many have refrained, which could mean that some have had sufficient emergency funds to help them navigate these bumpy waters. It’s important to note that building an emergency fund is very crucial and comes in handy during unprecedented times. As explained above, it’s also incredibly difficult to measure the projection of the markets, which is why it’s important to stay calm and see your investments through the long term. If you have any questions regarding your 401(k) or other concerns about your finances, please reach out to us at info@shermanwealth.com or schedule a free 30-minute consultation here.