Do you Need Financial Therapy to Deal with Money Stress and Budget Fights with a Spouse?

Do you fight about money with your spouse or significant other? Do you have trouble following a budget – assuming you even have one? If so, you might want to consider seeking financial therapy, coaching, or a financial advisor.  

What is financial therapy?

Think of it like psychotherapy. But instead of improving your state of mind it seeks to improve the state of your money. In essence, it’s supposed to help you behave differently, and for the better, when it comes to how you handle your money.

Do you need coaching, not therapy?

Given the year we’ve had with the coronavirus pandemic, which has led to massive layoffs and economic turmoil, it’s not a surprise that money issues may have caused fights between you and your significant other. In some of these scenarios, financial coaching is the way to go. In times that are economically tough, it’s important to tighten up your budget and learn ways to strategically stabilize your financial life. 

Consider meeting with a financial advisor. Here at Sherman Wealth, we challenge our clients to think differently about their money and coach them towards positive financial outcomes. We help our clients avoid making decisions persuaded by behavioral and investment biases, such as selling and buying mutual funds and stocks at the wrong times. Financial coaching will help you learn bucket strategies for savings, the importance of budgeting and ways to strategically build your wealth. If your finances are having a negative impact on your health and relationships, it is key to seek help from a professional in the field. Talking with a financial advisor can help you work through some of those miscommunications and misconceptions towards a positive outcome. 

Where to find help

If you believe a financial coach is best for your situation, please reach out to us at info@shermanwealth.com or sign up for a free 30-minute consultation on our site. Our team is happy to help you get your finances on track and get you to a place where you are feeling positive about your financial life. 

Introducing Beers with Brad

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We have hosted two very successful Beers with Brad financial literacy seminars in Gaithersburg, Maryland at Launch Workplaces.  We’ve had terrific beer from great local breweries around Maryland. I think when you’re able to relax and have a beer, hear what everyone else is thinking about financially and truly see that you are not alone and other people have the same fears around money it enables the conversation to expand and for questions to surface that you may not have asked before.

I created the idea of Beers with Brad because people are so hesitant to speak up about their financial anxieties and worries about how to save for retirement.  Many questions surround saving for kids college education and how to valuate the interest rate on your student loan debt versus what you could be potentially making in the diversified portfolio of stocks, bonds, cash, real estate, and other asset classes.  There is so much information available that it can be overwhelming and many people I’ve talked to are searching for clear answers.

As Morgan explains:

That’s because investing is not the study of finance. It’s the study of how people behave with money. And behavior is hard to teach, even to really smart people. You can’t sum up behavior with formulas to memorize or spreadsheet models to follow. Behavior is inborn, varies by person, is hard to measure, changes over time, and people are prone to deny its existence, especially when describing themselves. –Morgan Housel

Young families have so much going on in their lives that they don’t have the time to discuss personal finances and one of the greatest stresses in a marriage is finance.  We created this video to show exactly what Beers with Brad is, how relaxed it is and how engaging the conversations are.

Plus, who doesn’t like a good local craft beer?

https://youtu.be/msM_rkQYkpc

 

If you have any questions about the event contact us at info@shermanwealth.com we hope to see you there!

If you are unable to join this month, please let us know if you want to be added to the email list for the future events below:

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Sinking

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Imagine this: you are in a car and it is sinking.

You try pulling on the door handles but they won’t open because the pressure on the outside of the car is much greater than the pressure inside the car.  What do you do?  More likely than not, you are now panicking and you can’t think clearly.  If you were thinking clearly, you might remember the driver’s education 101 tip that says stay calm.  If you have patience and wait for the car to fully submerge, the pressure on the inside and outside of the car will be equal and you should be able to open the door.

A similar thing happens in the world of investing.  During times of crisis, our instincts cause us to panic and forget everything we have learned.  When a crisis arises, we tend to take the first action we can think of, even if it is not the best one.  It takes a lot of patience and mental discipline to be able to watch a market dropping without pulling out your cash, but there is a huge difference in your returns if you remain calm.  From November 1, 2015, through February 11, 2016, the global stock market fell about 15% before rallying 31% to today’s level.  If you had sold at this time out of fear, though, you would be up only 4% compared to the 20% cumulative you’d be up if you had remained steady.  

Source: data from Xignite, total returns data for ACWI ETF representing global stock markets, chart from Betterment

 

The best advice you can be given is: understand the level of risk that you are taking in your current portfolio and make sure that you are comfortable taking on that level of risk.  Your risk level is closely tied to your financial plan.  You should ask yourself if you are taking too much or too little risk to accomplish your goals.  Are you saving enough to achieve your goals?  Are you using unreasonable future growth assumptions to accomplish your goals?  If you are honest with yourself and realize you are taking on more risk than you are comfortable with, you should adjust your risk level and financial plan as soon as possible, not as a reactionary measure to a market downturn.  Additionally, regardless of your risk tolerance, everyone should have an emergency fund that is invested conservatively as a fallback.  

If you feel that you are taking a level of risk that you are comfortable with, but are still worried about your own panic getting in the way of your plans – draft a plan now for how you will deal with it.  If you can’t handle seeing the color red, logging into your portfolio every day is probably not recommended. Ask yourself where there is wiggle room in your financial plan.  Prioritizing your goals and figuring out what you would do differently if the need arose is a good way to feel more secure if things are not going well.  

If you think making changes to your portfolio is the right move, make sure get a second opinion from someone with a level-head.  At Sherman Wealth Management, we are committed to answering all of your questions, addressing your concerns and helping you to avoid common behavioral mistakes.  When you imagine yourself in a sinking car, rest assured that we are right there to coach you through it.

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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.

7 Fun Money Lessons to Teach Your Kids this Summer

Money Lessons for Kids

Summer is a great time for kids to catch fireflies, perfect their backstrokes, daydream, and learn some great lessons about money and financial literacy. Sound like a hard idea to sell to kids in vacation mode? Not if you make it a rewarding part of summer fun. Here are some tips to incorporate smart money lessons for kids from K-12 that will add to their summer fun and set a great foundation for making smart money choices later on.

SAVING

Ask your kids to set aside part their allowance for a special summer savings goal then sweeten the pot by telling them you’ll match whatever they save. For the little ones it could be as simple as setting up 2 jars, one for their summer goal (like a super-soaker, hula hoop, or the ingredients for s’mores) and one for the rest of their allowance. They’ll love seeing the jars fill up with coins and counting and re-counting their money. For older kids who are saving for a concert ticket or a tattoo (just kidding!), an app or a website that keeps track of their savings and your matching funds is a great way of getting them interested.

EARNING

Nothing like learning the satisfaction of having your “own” money! Even if your older children have an actual summer job, consider “hiring” them for extra chores like organizing your photo files, digitizing old cassettes and CDs, or washing the windows. For the little ones, watering plants, pulling up 20 weeds (counting skills!) or helping you rinse the car can help add their allowance jars.

INVESTING

There are fun games to teach kids of all ages about the stock market, investing, and the power of compound interest (like InvestQuest from the FTC.) The best way of course, though, is to follow the real stock market. Why not have every family member invest a virtual $1000 in 2 companies whose products they know at the beginning of the summer (Lego and Disney for the younger kids, for instance) and see who ends up with the most virtual profit by the end of the summer. Or, if you have the resources, open accounts for the kids with real investments, however small, so they can watch them go up and down, while earning interest, over the months and years ahead. The SEC’s site Investor.gov has a great compound interest generator to show kids how their money could grow.

SPENDING

Summer is also a great time to teach kids about comparison shopping, supply and demand, and the power of buying things when they are on sale. Keeping track of what you save each time you buy a sale-priced item this summer can be an eye-opening for your kids. As you enjoy vacation trips, or even day trips to waterparks, let your kids know about the value you are getting (rather than complaining about high prices.) Give the kids a choice when possible, telling them how much you have to spend for the day and ask their input about how to spend it. When they know that buying cotton candy means they are giving up two rides they learn a valuable lesson about resource allocation!

READING

Find great books to read or listen to in the car about entrepreneurs’ success stories. Young children will enjoy books about Thomas Edison, for instance, or Alexander Who Used to Be Rich Last Sunday. Try a biography of Steve Jobs for the teens, or check out finance videos from Khan Academy.

PAYING

Take a moment to explain what you’re paying for when you’re paying bills: show your kids how the electric bills soar in the summer if you’re use air conditioning or your water bill if you’re watering the lawn. Calculate – or Google – how much it costs when they leave lights on. Not exactly entertaining but an empowering eye-opener for kids.

PLAYING

Nothing like a great game of Monopoly to while away summer nights while teaching kids about saving up for those houses and hotels (including our favorite trick: hiding money under the board so no one sees how much you are accumulating!)

In short, if you treat money matter-of-factly – and build in some challenges, competition, and entertainment – summer can be a great time to sneak in a little fun “schooling” that will help prepare kids for an empowered future.

 

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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.

5 More Financial Mistakes to Avoid in Your 20s and 30s

Young Father Building Financial Foundation

You’ve made the commitment to start “adult-ing,” a very important first step. Don’t start to build from the roof down, though: make sure that you’re laying a strong financial foundation.

In our last post we talked about 8 Financial Mistakes to Avoid in Your 20s and 30s. Here are five more money mistakes to watch out for:

1. Going on a Financial Blind Date With Your Significant Other: Not Having the Money Talk First

Talking about money isn’t romantic and can be downright uncomfortable. That’s why many couples go into marriage—a financial partnership—without knowing exactly who they are partnering with. Discussing personal finances, debt, goals, spending patterns and how you make financial decisions with your partner before marriage, or soon thereafter, is critical to your short- and long-term financial health. (For related reading, see: Don’t Let Financial Differences Lead to Divorce.)

2. Living la Vida Loca: Splurging on the Wedding or a Baby

Important milestones like a wedding, a first child or even your first house are exciting and make precious memories that last a lifetime. But be careful not to let them put you in debt or divert you from a financial plan that allows you to make other great memories down the road. Know what you can afford, get creative within your budget, and make sure you’re investing in your partner’s and children’s future as well. The kids won’t mind—or even remember—that you didn’t buy them that top-of-the-line stroller. What they’ll remember is your smile and their favorite red ball. #Priceless

3. Not Buckling Your Seat Belt: Neglecting Insurance

It’s tempting to skimp on insurance once you’ve covered your basic health and homeowner’s policies, but that’s a big mistake many young adults make. Insurance is an uncomfortable topic—and the options can be very confusing—so covering yourself with health, life, car, home, disability and long-term disability insurance often gets put on the back burner. Cover yourself adequately now so that when the unexpected happens, it’s not a financial disaster. (For related reading, see: Introduction to Insurance.)

4. Going for the Gold: Taking a Job for the Pay

While a great offer is always tempting, make sure that any job you take is something that will advance you in the direction you want to go. Don’t take a job just because the money is great, although that’s important too. If you do, you could get stuck in a job you don’t love with nowhere to go. Take a job that is going to move you closer to the job you want—and the even-higher salary you want—in a couple of years.

5. Putting Too Many Eggs in the Wrong Basket: Not Prioritizing Savings

Maxing out your 401(k) or IRA is smart, but don’t forget to save for other major purchases that may be coming up sooner than you think, like buying a new home, having children, or continuing your education. Multiple savings accounts can be a great way to keep your eye on multiple baskets! Be careful, too, not to prioritize your children’s education over saving for your own retirement. Student loans are less expensive than the kind of loans your kids would have to take out to support you if you haven’t set enough savings aside to support your own retirement.

Enjoy this special time, living your life to the fullest. If you make sure you’re also making smart financial choices, you’ll really enjoy your 20s and 30s, knowing that you’re building a solid future.

 

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, please Contact Us.

 

8 Financial Mistakes to Avoid in Your 20s and 30s

8 financial mistakes to avoid in your 20s and 30s

Your 20s and 30s are an exciting time. You’re starting to build the life you envision for yourself, or perhaps you’re still seeking out new experiences to learn more about yourself and your goals.

These are years when we expect to learn and grow by exploring jobs and careers, cultural experiences, social experiences and other educational opportunities. But too many of us forget to explore and master one of the most critical parts of building the future we want: financial literacy and financial planning.

The result is that many people enjoy their 20s and make important life changes in their 30s (or vice versa) without understanding how best to support their career and personal goals with a rock-solid financial plan. You could end up flying high, but forget to build a safety net!

Here are some key mistakes to avoid as you’re getting started:

1. Letting the Chips Fall Where They May: No Budget

A first job—or second, or third—is a great feeling. You’re earning money and it’s yours to spend. And too often, we spend it until it’s gone. While a budget may sound restrictive, it actually gives you more freedom because it keeps you from overspending in areas you don’t care about so you have the money you need for what’s important. A budget helps you understand where to splurge—on quality that lasts longer, for instance—and where it’s best to economize, such as buying a used car instead of a new one.

2. Keeping Too Low of a Profile: No Credit Rating

Many people just starting out have low credit ratings, or worse, no credit rating at all (if you’ve always used your parents credit cards, for instance). With a low credit score, your costs will be higher for things like insurance, car financing and mortgage rates. Building good credit now, by getting your own credit card and paying it diligently, or even getting a credit-building loan, will establish a good rating that will help you down the road.

3. Putting It off Until Tomorrow: Living on Credit Cards

Credit cards can be a godsend, particularly the ones with loyalty points. But those points pale in value beside the damage that finance charges can do. Do treat your credit cards like a smart way to keep track of your spending, but don’t spend more than you actually have. Paying credit cards off in full each month not only keeps you within your budget and keeps you from accruing finance charges, it also helps you build a great credit rating for when you do need to borrow money. (For related reading, see: 10 Reasons to Use Your Credit Card.)

4. Living on Perks Instead of Salary: Not Paying Yourself First

We’ve all been to that job interview where they say that the salary is low but they have a great exercise room, volleyball team and popcorn machine. That popcorn won’t pay the rent and it won’t pay a down payment when you find that great condo. Create a savings plan and pay yourself first before you splurge on lifestyle perks like vacations and expensive shoes. That plan should include saving for short-term goals, saving for an emergency fund, and starting to save for retirement. While retirement may seem a long way off, the earlier you start, the more you harness the power of compound interest. Make sure your budget includes saving and contributing, on a regular basis no matter how small the amount, to an IRA or 401(k) before you start spending.

5. Living on the Edge: No Emergency Fund

While it’s hard to imagine needing emergency funds when you’re young and just starting out, you never know what the future can bring. Crises like Hurricane Sandy and the 2008 crash left a lot of people struggling without a safety net, but even something as simple as a pet’s sudden illness can present a huge challenge when you’re on a tight budget. Try to start contributing to an emergency fund that you keep in highly liquid funds for when the unexpected happens. (For related reading, see: Building an Emergency Fund.)

6. Playing the Odds: No Health Insurance

Many young people who are in peak health think that they can skip—or skimp—on health insurance. While you may indeed be fit and healthy, that doesn’t protect you from potential sports injuries, appendicitis, bouts with the flu or—perish the thought—a car accident. High medical bills are the biggest cause of personal bankruptcy. Get the best coverage you can afford: you’ll be amazed how quickly it pays for itself.

7. Going With the Flow: Not Setting Financial Goals

“If you do not change direction, you may end up where you’re heading,” goes the famous quote attributed to Lao Tzu. That means it’s a good idea to think about where you’d like to be—in a year, in five years, in 20 years—and make sure that’s the path you’re on. Simple goals like “I want to save $20.00 a week,” or more elaborate ones, like “I’d like to work for myself from a house on the beach,” all begin with awareness and taking the first small steps. Set a few goals; you can always change them later, but if you don’t, you’re drifting without being mindful of where the currents are taking you.

8. Taking Your Eye off the Ball: Using a Non-Fiduciary Advisor or Commission-Based Investment Site

It’s never too late to become financially literate. The internet is full of great tips (like these) and sites that can help you organize your finances, and it provides access to a range of advisories. Having a financial advisor guide you is an excellent idea but blindly trusting just anyone can be dangerous. Many non-fiduciary advisors are compensated by the financial products they recommend, products that may not be the best ones for you. Make sure the advisor you consult is a fiduciary, i.e. someone who is legally obligated to only recommend options that are in your best interest.

Be sure to check out our next post: 5 More Financial Mistakes to Avoid. You’ll enjoy your 20s and 30s even more knowing that you’re also building a solid future.

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, please Contact Us.

Don’t let Financial Differences Lead to Divorce

Divorce

Financial differences rank among the leading causes of divorce among couples, both young and old. The statistics are alarming, but perhaps not surprising. How we handle money is not usually a topic of that comes up while we are dating. As a result most couples don’t discuss financial compatibility before saying “I do”. When the honeymoon is over, though, and the bills start rolling in, couples often experience a reality check. While love is grand, it can’t pay the bills so it may not take long before fights erupt over different money habits.

Part of the problem is that it is simply uncomfortable to talk about money. Whether we like it or not, we tend to tie our own feelings of self-worth to money matters. It’s not uncommon to see how much money we make as a direct reflection of how much we are contributing to the relationship. These feelings can become further complicated if there have been financial missteps along the way. While avoiding conversations about money can allow us live in a blissful state of denial for a while, the long-term consequences can be life-altering.

The good news is that it is never too late to make meaningful changes and save a marriage that is threatened by financial discord.

According to financial planners who work with couples, money conflicts fall under five main categories:

  • Differences in spending and saving habits
  • Disagreements about who should control the money
  • Differences in priorities
  • Dishonesty about debt and habits
  • Differences in risk profiles

Whether you are experiencing frustration around one of these issues or all five, there are ways to build better financial health as a couple and avoid relationship problems.

Effective Communication Leads to Greater Financial Success

Effective communication can make a world of difference when it comes to financial matters. Establishing trust, which is cultivated through honest communication, is key. Trust is built when each partner commits to openly expressing their feelings about money and listening to what the other partner has to say. This includes being willing to reveal financial failures, knowing that your partner will be forgiving and withhold judgment.

Be Willing to Compromise

Although it is easier said than done, another key to resolving money issues is compromise. The first step is for both partners to sit down and agree on a common set of financial goals and what steps they will take to meet those mutual goals. Establishing a family budget – and committing to it – is critical. That budget should include some freedom for spending on things that are important to both partners, regardless of who is earning more money.

Be Patient

As you begin the process of rehabilitating your financial health and establishing clear lines of communication with your partner, remember to be patient. Keep in mind that spending habits are deeply ingrained in each of us. Both you and your partner have been influenced by your parents’ habits and your approach to money has been formed over a lifetime of experiences.

Enlist the Help of a Financial Planner

Whether you need help mediating tough conversations or you want expert advice on how to establish a budget that will help you meet your financial goals, don’t try to go it alone. Work with a financial advisor who can offer helpful insights and steer you in the right direction. With the right help, you can get back on track financially and strengthen your relationship. If you are to the point where money issues are creating such a strain on your marriage that you are considering divorce, outside intervention from an experienced financial advisor can be critically important in finding solutions that work for both of you.

Avoid Conflict

Often couples will argue about whether they should give or loan money to family members. While each case is different, and very personal, it is generally a good idea to try to avoid making these kinds of loans. Once that first loan is made, you have set a precedent and you are more than likely to receive follow-up request for additional money. While it can be difficult to say no to friends and family, it is always in your financial best interest to avoid these types of transactions.

A Happy Ending

Even in the best marriages, there are bound to be differences over finances, but those disagreements don’t have to drive a wedge between you and your partner, or worse, lead to divorce. If you actively work to establish trust through open and honest communication and recognize when it is time to seek outside help from a fee-only fiduciary financial advisor, you are taking important steps to letting your financial life be a solid foundation for your marriage – and not the wall between you.

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This post originally appeared on Investopedia.
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, please Contact Us.

Your Financial Plan Depends on More Than Your Age

financial plan

Your Financial Plan

We live in a time of great personal freedom when we have the opportunity to choose our own life goals and paths.

While it’s true that very few 26-year-olds are likely to be retiring, you might be that lucky one who just sold an app to Facebook and is considering philanthropy. While most people start families in their 20s or 30s, you might be that 40-year-old who’s just about to adopt a first child. And while most 60-year-olds have hopefully accumulated some retirement savings, you might be that entrepreneurial baby boomer who is moving to Detroit to launch a startup or open a coffee bar.

In spite of this brave, and exciting, new world of personal choices, what’s the first question a financial advisor or online financial site generally asks you? Chances are it’s your age. Then that answer determines the next question, and the next.

Too many financial planners and investment sites, unfortunately, use age to make assumptions that then dictate investment recommendations.

The internet, too, is filled with articles like “Financial Planning Tips Every 30-year-old should know” and “The best financial goals for every age.” There are books and studies that break your life down into age-based phases like “early career phase” and “peak accumulation phase” then make generalization based on those neat buckets.

What’s more important than age?

We’re all individuals, with different dreams, goals, and life situations and when it comes to financial planning, age is not as important as it used to be.

Your goals and your risk tolerance should be the factors to consider first in devising a personalized financial plan or investment plan that works for you.

Is your primary goal buying a house, is it wealth creation for early retirement, is it having income so you can bike around the world for a year? Those answers are more important than the fact that you are 32.

Does a volatile stock market make you anxious? Do you prefer slow and steady to winner takes all? While it’s generally assumed that young people can afford greater risk and volatility because they have time on their side, you may be that 24 year old that wants or needs to preserve savings first and foremost.

Goals differ and investment always involves a certain amount of risk. That’s why a fee-only fiduciary financial advisor works with each client individually to manage goals and risk in a way that works for them. It is vital for success to determine the level of risk each client can afford to take, how much risk is necessary to help them achieve their personal goals, and how much risk and volatility they can comfortably live with emotionally.

You Are Unique

Each of us is unique and that means that no two people will have the exact same goals + risk profile, in spite of being the same age. Yes, living off retirement savings is different than living off a first salary, but the amount may be the same. And paying off student loans is really not all that different from paying off a mortgage.

What’s important is that you find a good fee-only fiduciary financial advisor who looks beyond pre-programmed, one-size-fits all recommendations for 20-30 year-olds or 60+ year-olds and focuses to your goals, your risk preferences, and your uniqueness to create a personalized plan that works for you and evolves as you evolve, not one designed for an entire generation.

 

This article was originally published on Investopedia.com

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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.

 

 

 

 

Should you “Inaugurate” a New Financial Plan on January 20th?

new financial plan

Time for a New Financial Plan?

The market’s wild ride after the presidential election might have you wondering if a change in leadership should mean a change in your financial strategy.

While no one can ever predict with certainty what will happen to the market – or even on Twitter these days – there are two important points to remember.

It Matters Less than We Think

The first is that there has been a long-term upward movement in the market through many changes of administration.

Ironically, who’s in the White House makes less difference than we think it will in terms of overall market performance: markets are driven by market conditions more than by the policies individual Presidents advocate. As Barry Ritholz noted in an excellent piece in the Washington Post last week, during President Grover Cleveland’s first term stocks rose 53 percent while in his second term they fell 2 percent. That wasn’t because President Cleveland forgot how to make stocks go up – it was overall market drivers that made a difference. So for medium and long-term goals – like saving for retirement or your children’s education – taking the long view with your investments is critical.

How Much Risk is Too Much?

The second point is that everyone has a different level of risk tolerance.

That is why it’s critical that you have access to a sophisticated risk tolerance tool that really drills down to who you are, instead of only generic questions about age, income and whether or not you call yourself “aggressive” or “cautious.”

If you’re risk adverse and you’re anxious about a crash or a downward trend that may affect your short term plans, you can always use January to re-balance your portfolio and lock in profits. As a wise investor once said: “no one ever lost money taking a profit.” If your risk tolerance is higher, you can view the volatility as an opportunity to maximize the possible potential for your investments. By continuing to contribute regularly to a savings or investment plan, you take advantage of the power of dollar-cost averaging and compounded interest to make your money work for you. If you had sold in the sharp downturn last January, for instance, instead of sticking to your plan, you would have lost out on the dramatic returns afterwards.

Of course every January is a good time to meet with your advisor to rebalance your portfolio based on your own changing circumstances, tax needs, and risk tolerance. But, fundamentally, your plan is still your plan, no matter who wins the presidential election. Your goals are still your goals and compound interest still compounds. If you have worked with a good – fiduciary, fee only – financial advisor to create a workable plan based on your life goals and your circumstances, then staying the course – with minor adjustments – is very often the smartest plan. Data overwhelmingly shows that it’s “slow and steady” investing – not playing a guessing game by jumping in and out of investments – that ultimately wins the race.

Other Sources:
What is a Financial Plan?
The Importance of Personal Finance Knowledge
Financial Planning for Millennials: Overcoming the Fear Factor

 

This article was originally published on Investopedia.com

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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.

 

 

Personal Finance – Why Didn’t I Learn That?

I recently returned from a reunion weekend with some of my college buddies. We caught up on wives, kids, work and all the other important parts of our lives. One thing struck me about the conversations, no matter whether I was speaking with liberal arts majors or those who studied corporate finance: While we all know that E=MC2 and maybe even know a fair amount about Einstein’s theory, most of them graduated without having a real clue about personal finance.

In other words, the financial skills we learn in school are not necessarily the ones we need in the real world — at least when it comes to our personal lives.

Personal finance is not typically part of a college curriculum. And while some of us have parents or family members who can guide us along the way, those individuals may not be financial experts, and there is a limit to the help they can provide.

From my experience, most people are interested in financial literacy but don’t know where to go to get started. We all face similar issues, and the less familiar we are with the mechanics of approaching them, the more anxiety-provoking they become.

The younger you learn, the better off you are. When I was in the first grade, I wanted to be Alex P. Keaton, the money-savvy teenager played by Michael J. Fox on the television sitcom “Family Ties.” It was clear early on that I had an affinity for sound saving, investing and growing money. When I was 7, my grandmother gave me a dollar; I turned it into $5, then $50. I am thrilled by the challenge of helping people reach their financial goals at all stages of their lives.

For example, take buying that first home. Your career is on track, and becoming a homeowner seems like an appropriate goal. So with some excitement and anticipation, you decide to start looking.

Then the questions begin flooding in. How much home can I afford? How much should I be saving? When is the ideal time to buy? How does a mortgage work? Will I qualify? What’s my credit score? Do I need insurance? How do property taxes work?

Imagine if there were a course in college (let’s not get crazy and imagine they would teach this in high school) called Personal Finance 101. In addition to the homebuying lessons above, the curriculum could look something like this:

Cash flow and budgeting

Topics covered: What is a budget? How do I create one? How do I know what I can afford?

Building credit and understanding credit cards

Topics covered: What are the advantages and disadvantages of owning a credit card? How should I decide which one to get?

Intro to the stock market and investing

Topics covered: What are the differences in the various investment vehicles — exchange-traded funds, mutual funds, stocks, bonds, certificates of deposit?

Taxes

Topics covered: How do I pay taxes? What do I need to pay attention to in my tax planning?

Future workplace retirement plan options

Topics covered: What is a 401(k), IRA, Roth IRA? When should I start saving? How much should I save?

My guess is that a course like this would be incredibly valuable to many. It’s complicated stuff. It’s important stuff. It’s the kind of stuff that you actually need to know.

This is the main reason I chose to get in this line of work. Younger people have no idea where or how to start, and they have no idea where to find help. Traditional financial management institutions have investment minimums that most of us won’t be able to meet for over a decade, if ever. These minimums can range from $250,000 to $500,000, and sometimes are higher. Even if you were fortunate enough to be accepted by a big institutional investment manager, you’re kidding yourself if you think a large institution is going to take the time to explain to you the difference between a traditional IRA and a Roth IRA.

That’s why I chose to create a wealth management model where we would provide the same customized service to all of our clients, without consideration of a minimum initial investment and irrespective of the size of their accounts. We hope that by investing in you early, you’ll see our value for the long term.

If you are reading this and can relate to some of these thoughts, know that it’s not just you. It doesn’t matter whether you majored in art or corporate finance, you almost certainly did not take a class in Personal Finance 101. The good news is, you don’t have to go at it alone. Seek the help that is out there, and learn what you may have missed in college.

This article was originally published on NerdWallet.com

This article also appears on Nasdaq.

 

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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.