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.

How A Presidential Election Affects the Stock Market

During every major election period, there is always talk about the impact that the person winning the White House will have on the stock market. As Americans prepare to elect a president in the coming week, many investors attempt to figure out what the outcome will mean for your portfolio. However, it’s not just as simple as which party wins.  

A look back at history shows that presidential election cycles do correlate with stock market returns, but there are a few things to consider in election years. Bear markets, recessions and wars tend to start in the first two years of a president’s term, says The Stock Trader’s Almanac; bull markets and prosperous times mark the latter half. But over the past century, the stock market has mostly run briskly across most of the presidential cycle before losing momentum during election years.

Democrat or Republican?

Even though you might feel strongly about one party or the other when it comes to your politics, when it relates to your portfolio, it doesn’t matter much which party wins the White House.

According to Bespoke Research, the Dow Jones Industrial Average has gained 4.8% annually since 1900. There are many who would suggest that Republicans, who are supposedly more business-friendly than the Democrats, would be more beneficial for your stock holdings, but that’s not entirely the case. In actuality, the average Republican administration saw gains of 3.5% per year, while the Democrats saw gains of almost twice as much, at 6.7% per year.

Divided vs. United Government:

Another myth is that markets do better when the government is divided. This theory derives from the idea that divided power saves both parties from their worst instincts. With neither party in control, government is somewhat neutral, leaving markets free to flourish. However, this hasn’t always been the case either.  

Y Charts has looked at stock returns going back to 1930 under three separate scenarios. When one party controls the White House and both houses of Congress, the Dow averages 10.7% annual returns. When there’s a split Congress, stocks average 9.1% returns. But when the president is in the party opposite of both the House and Senate, stocks deliver a mere 7% average annual return. Consider this breakdown of scenario by party, using S&P 500 data from RBC CapitalMarkets data going back to 1933:

It is important to remember that all of this information is looking at the performance of the broader stock market. Presidential elections can and will continue to have more specific consequences for the market, depending on each party’s agenda and how much of Washington they control.

Predicting the Future:

It turns out that the stock market has a remarkable ability to predict who will likely win the White House. If the stock market is up in the three months leading up to the election, the incumbent party is more often the winner. Losses over those three months tend to elect the opposing party.

With the final stretch of the election upon us, it’s still nearly impossible to guess how the stock market will react to next week’s vote. Our firm recommends that no one should make investment decisions based on the outcome of an election. Regardless of who wins the election, expect a continued economic rebound that will support future equity gains. In similarly polarizing elections in 2008 and 2016, investors who maintained their stock allocations were rewarded with future gains, so it’s best to avoid making any major moves with your portfolio over the next few months. If you have any questions relating to the stock market and your financial goals, please contact us and we would be happy to help you set up your portfolio respectively. 

 

When Saving for College, Don’t Just Look at 529s

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Saving for college tuition can always be a scary and overwhelming process. Oftentimes it seems as though when it comes to college-saving vehicles, 529s are the only game in town. However, that’s not the case.  

When thinking about saving for college tuition, it’s important to consider other options as well. Coverdell Education Savings Accounts (ESAs) are similar to 529s in the sense that they are a tax-favored way to save for education expenses. Both types of accounts allow assets to grow tax-free when distributions are used to cover qualifying expenses. 

But ESAs have a nice additional feature that 529s lack: They offer more flexibility in investment choices than 529s. ESAs can be invested in stocks, bonds and mutual funds, while 529s are limited to mutual funds.

Accounts are typically set up at mutual-fund companies, brokerage firms or banks by parents and grandparents, who then make nondeductible cash contributions to the accounts.

There is an overall $2,000 annual limit on contributions to all ESAs for the benefit of a particular child. A beneficiary may owe a 6% excise tax every year that excess contributions are in his or her ESA.

There are limits that can discourage investors with large incomes from setting up an ESA. Those filing joint returns must have less than $190,000 in modified adjusted gross income ($95,000 for single filers) to make the $2,000 maximum contribution. The maximum is phased out for joint filers with a modified adjusted gross income falling between $190,000 and $220,000 (between $95,000 and $110,000 for single filers). Once set up and properly funded, however, the assets grow tax-free, just as they do in a 529, and offer tax-free distributions as long as the money is used for qualified educational expenses.

As a result of the pandemic, both 529s and ESAs have benefited from a broadened interpretation of what constitutes qualified expenses. In this era of increased remote-learning, costs for such items as computers and peripheral equipment, software and internet access are now typically allowed in addition to tuition, books and fees.

“Coverdell is a way to cover these costs,” says Mark Kantrowitz, publisher of www.Savingforcollege.com , a website that provides information on college savings plans. “As long as the costs are reasonable.”

An additional benefit of an ESA: If a person received a military death benefit from Servicemembers’ Group Life Insurance, all or part of the payment can be rolled over to an ESA for a member of the beneficiary’s family. These distributions are an exception to the $2,000 annual limit rule, meaning any amount can be rolled over to an ESA. The military death benefit can also be rolled over to a Roth IRA.So, as you can see there are other attractive options when it comes to saving money for your children’s tuition. Both 529 plans and ESA’s are great ways to put money aside and save for college tuitions. Keep in mind the importance of saving often as well as saving early when starting to plan out your future. If you have any questions, please reach out to use at info@shermanwealth.com or schedule a free 30-minute consultation on our website. For more information and tips, check out our other blogs as well.

Top 5 Pieces of Financial Advice

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

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

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

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

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

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

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

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

 

Why Choose A Financial Advisor With A Big Tech Stack

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In the times of the coronavirus pandemic and with working-from-home becoming our new norm, we are all learning how to conduct our daily lives from the confines of our laptops and smartphones. Furthermore, while adjusting to this new way of life, it is crucial that the platforms and technology we use to connect with other professionals is as high-tech as possible. This is why having a financial advisor with the most current and state-of-the-art technology is crucial. 

In an article written by the Financial Advisor Magazine, they said that advisors with inadequate technology  weren’t able to conduct all aspects of their business during the pandemic. The article further states that more than three quarters of U.S. and Canadian advisors in a recent survey reported losing business due to inadequate technology as the coronavirus pandemic took hold. 

As mentioned previously, the ability to meet with your clients virtually and interact with them as if you were face to face is the only way to make these unprecedented times feel somewhat normal and keep your clients happy. According to the survey, eighty-nine percent of the respondents said their desktop software and firm-provided technology had become more essential during stay-at-home mandates; and 74% wished their firm had access to better technology tools.

Sherman Wealth has always utilized the most high-tech and innovative technology to serve our clients with. From staying in touch virtually via zoom meetings, texting, digital forms, screen sharing, or conference calls, to allowing our clients to constantly check their portfolio with the simple click of a button that takes them to our client app, this technology keeps our clients on top of their portfolio at all times. It also allows them to add in held away accounts that are not managed here or any bank accounts and debts to get a full financial picture. Our online scheduler allows our clients to book appointments at the tip of their fingers in order to stay connected at their leisure. Furthermore, our firm offers a risk tolerance questionnaire, where our clients can check their risk number at any time, to see how much risk you are actually taking within your portfolio. When choosing your financial advisor, make sure to think about choosing a firm that can reach you and give you the best service, especially during times like these when face-to-face communication is not possible. If you would like to inquire more about any of the technological services we offer to our clients, please reach out and we would be happy to share more information with you.

We Stand In Support Of Racial Equality And All Those Who Search For It

The senseless killing of George Floyd at the hands of law enforcement has shaken this nation at its core. His death, along with countless others’ has once again brought these injustices to the forefront of our society. For far too long, Black Americans have suffered under systems of racism and oppression.

This time, there are no excuses – we have had enough.

We will no longer stand silent as these issues continue to plague our citizens, neighbors and friends. We stand in solidarity with the black community and equal rights for all. We stand in support of racial equality, and all those who search for it.

There are many ways you can help:

Sign a petition;

Donate to one of these causes (www.naacpldf.org; www.policingequity.org/donate; www.wallstreetbound.org; www.eji.org) or another organization of your choice;

Watch this with your children – www.cnn.com/2020/06/06/app-news-section/cnn-sesame-street-race-town-hall-app-june-6-2020-app/index.html.

Should You Take Social Security Early in Light of a COVID-19 Related Layoff?

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Whether you are just entering the workforce or winding down toward retirement, COVID-19 has likely affected both your professional and financial life. For those between the ages of 62 and 70, you have the opportunity to begin claiming your Social Security benefits, whether you were planning to or not. While this “safety net” of sorts could be an appealing opportunity to replace the income you may have lost due to the current pandemic, it is a decision that requires much thought and analysis. Here are a few things to consider before deciding whether or not taking your Social Security benefits earlier than expected is right for you during these uncertain times.

Considerations to Make Before Taking Social Security During COVID-19

If you weren’t already planning on claiming your Social Security benefits soon, then take the time to review your other options first. Even though you are eligible to begin receiving benefits at age 62, your benefits will increase with every year you wait until age 70. While it’s tempting to take the money now, you could be missing out on thousands of dollars in future Social Security benefits.

Is There Other Income I Can Use?

If you’ve been saving diligently for retirement, you may already have the funds tucked away to get you through the foreseeable future. Review your 401(k) and IRA accounts, and remember to account for income through any pension plans you may have through work. After taking stock of these accounts and any emergency funds you have saved away, you may determine that claiming Social Security benefits early is not necessary. Even putting off claiming your benefits by six months or a year could make a considerable difference in your future benefits.

It’s also important to consider that if you’re earning less now than you were in previous years, you’ll likely be in a lower tax bracket come tax season 2020. This would make now an advantageous time to tap into your retirement savings accounts, as your tax obligation on this income may be lower than if you had worked full-time in a normal year otherwise.

Have I Applied for Unemployment?

The CARES Act was passed at the end of March in response to the detrimental financial impact COVID-19 has had on Americans. As a part of this legislation, the government boosted unemployment benefits, offering eligible unemployed individuals an additional $600 per week for four months on top of their normal benefit amounts. In addition, this bill allows unemployed individuals to receive benefits for an extended period of 13 weeks.

If you were laid off or furloughed as a result of COVID-19 and have yet to look into receiving unemployment benefits, you may want to do so immediately. This income may be sufficient in covering your expenses until you’re able to work again.

What if My Other Options Are Limited?

It may be necessary to begin claiming Social Security benefits early if you’ve exhausted other resources, or you don’t have much savings to begin with. For example, your primary alternative may be to remove funds from your portfolio. But with the onset of COVID-19, markets are volatile and values have dropped significantly. If at all possible, it may be better to leave your assets where they are as long as possible in an effort to recoup recent losses. Either way, this is a decision you’ll want to make with your financial advisor first.

However, if your only other alternative is to rack up high-interest debt, taking the Social Security benefits early is almost always going to be the preferred choice. Falling into a deep hole of debt is not an easy position to overcome, and certainly not an ideal way to start your retirement.

Important Notes About Taking Social Security Early

If you do choose to take Social Security early to help ease the financial burden of losing your job, there are a few important things to remember.

The Impact of Working While Receiving Social Security

What happens if you begin claiming Social Security, but you get your job back? If you begin working again or find a new job, you may be subject to having a portion of your benefits withheld. This would be based on how much you are making above the SSA’s exempt limit. The SSA uses a retirement earnings test to help determine this amount.2

Withdrawing Your Application to Receive Social Security Benefits

You could choose to withdraw your application for benefits within 12 months of becoming entitled to retirement benefits. For example, say you’ve chosen to take benefits now in the midst of COVID-19 because you were furloughed or laid off. In a few months from now, if your financial situation has turned around and you’re earning again, you might choose to withdraw your application.

This would mean you’d stop receiving Social Security payments, and would essentially “reset” them. When you choose to receive them again later, that future date would be the date that determines how much you receive. If you choose this route, however, it’s important to note that you would be required to pay back any benefits you had already received.3

Even though claiming Social Security benefits now to address your sudden loss of income may be tempting, it’s important to take some time and consider all of your options. It may be the best move for some, but others could be robbing their future retirement unnecessarily. If you find yourself in this position or have any questions about taking your Social Security benefits earlier than expected, please contact us.  We are here to help!

  1.        https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
  2.        https://www.ssa.gov/OACT/COLA/rtea.html
  3.        https://www.ssa.gov/planners/retire/withdrawal.html