Restoring Financial Wellness during COVID-19

It can be difficult to make decisions when the future is uncertain. Shelter-in-place orders and business shutdowns halted economic activity here and overseas. Some Americans are unsure about investing their 401(k)s or have considered tapping their reserves. However, we’re in the process of re-emerging, learning to live with COVID-19 and adapting to a new normal. It’s time to get back on track with your financial plan and I’ll share four areas to consider and discuss with your family and advisors.

Increase Cash Reserves

Hold cash for two reasons: planned expenses and emergencies. The rest is invested for its purpose such as a house down payment, education funding or retirement. Have at least three months’ living expenses parked in an interest-bearing Federal Deposit Insurance Corporation (FDIC) insured account. Consider holding more if you’ve got a seasonal or sales job or retired. Life’s less stressful when you have cash available for the unexpected medical bill or car repair versus charging it.

When Should I Start Investing?

We recently had two historical events – the fastest stock market decline followed by one of the quickest rebounds. Both of these make some investors hesitant to invest. Some investors question an apparent disconnect of a rising stock market compared to a struggling economy and high unemployment. However, they’re comparing a lagging indicator (economy) to a leading indicator (stock market). And others identify other uncertainties including the 2020 U.S. elections, trade wars and more. These are reasons given why some investors are sitting on a bunch of cash. If fear has paralyzed you, consider two things. First, if you wait for all uncertainty to go away, then often so goes the opportunity. Second, use a page from many retirees’ playbook. Retirees gradually sell investments to fund their retirement paychecks – they don’t typically need all their money at once. Consider investing your cash over time such as a third over each of the next three months or a quarter over the next four – and if the market sells off then accelerate the investing. This strategy is called dollar cost averaging.

Reduce the Number of Accounts

Would your life be simpler if you had less accounts to track or debts to repay? Debt reduction is a high priority for most households. But instead of focusing on the total amount of debt, concentrate on eliminating one at a time (smallest balance first). This is called the “debt snowball” strategy. Some couples have an excess number of bank accounts. There may be my, your and our accounts with multiple checking and savings accounts. What can be consolidated? Look at your budget – can line items for electricity, water and phone be consolidated to “utilities” or groceries and dining out be labeled as “food?” Sometimes, less is more.

Roll with the Punches

Who could have predicted this pandemic? Household earnings may have declined, the budget shifted and the kids moved back home. Perhaps the debt reduction and retirement funding goals are temporarily delayed. You make adjustments and move on.

What differentiates the financially successful and those that aren’t? Did some plan to fail or fail to plan? Warren Buffett once said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” Don’t put things off too long. Secure your future wisely.

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Sudden Wealth Syndrome – Can It Be Cured?

If having more money solved financial woes, then younger generations should be secure, right? In the next 30 years, $36 trillion is expected to pass from one generation to the next. However, squandered money has become so common that a term has been coined – sudden wealth syndrome (SWS) by psychologist Stephen Goldbart. The symptoms include persistent thoughts about money, anxiety and depression resulting from stock market volatility, feelings of extreme guilt and poor decision making when you feel undeserving of wealth and identity confusion.

The challenges are three-fold. One is that money can be emotional, and emotions can drive decision making. Second is financial literacy and complexity, and third is communication. Parents wrestle with telling their children about family wealth – the desire to prepare them versus concern of ruining them. Warren Buffett addresses balance when he says his children will inherit enough so they can do anything, but not so much they can do nothing. Yet a Charles Schwab survey says 69 percent of parents feel more prepared to talk to teens about sex than investing.

Will you break the money silence? Consider using your financial advisor to help you initiate and nurture the conversation. We’ll share some strategies to help save you money when inheriting retirement accounts.

Covid-19 and Retirement and Finances Survey

A TD Ameritrade, a financial services company, survey shows some positive trends as Americans adjust their finances and spending habits amid the pandemic.

  • 70 percent of Americans regularly contributed to their savings and had an emergency fund.
  • Boomers lead the emergency fund accumulation with 49 percent having more than six months socked away, Millennials and Gen X tied for four to six months’ worth at 16 percent, but 45 percent of all Americans had three months or less.
  • 40 percent said their household budget was negatively impacted, while 20 percent of Millennials report positive impact (found a new side-hustle and spent less money – major purchases and trips, childcare, meals at home, shopping, hair and nails, and commuting).
  • New obstacles for parents – Homeschooling children and working are too much to manage (57 percent), some saved money for childcare ($366 average) and others spent more on educational resources ($147) and entertainment ($104).
  • Life got simpler with low or no budget activities – walks, games and puzzles, working out, learning new skills, and virtual events (happy hour and yoga).
  • More financial levers being pulled – Track spending (66 percent), increase retirement savings (47 percent), open new accounts (29 percent), delay retirement (39 percent), and 23 percent of Boomers are considering early retirement.

Strategies for Inherited Retirement Accounts

Are you inheriting an individual retirement account (IRA) or 401(k) from your family? Certain non-spouse beneficiaries are now subject to a “10-year rule.” The main impact is potentially less after-tax proceeds from a shorter period (not “stretching” withdrawals over your lifetime). This applies to adult children, nieces and nephews, grandkids, etc. Old stretch rules continue to apply to spouses, minor children, disabled, and others. Refer to your tax expert for the specifics.

Here are some strategies to consider if you’re the beneficiary:

  • Defer the withdraw as long as possible and take a single distribution. Disadvantage – could be more expensive and push you into higher tax brackets. Advantage – possibly for smaller pre-tax balances, Roths or you’re the highest tax brackets.
  • Spread the distributions (and tax bill) over 10 or 11 years. How 11 years? You’re required to take full distribution by the tenth year following the account holder’s death. If you hustle and establish the inherited IRA, then the year of death might be Year 0 for distribution.
  • “Chunk” the distributions. Strategically time and amount of distributions to lower tax years – job change, new business start-up, retirement, major tax deduction, etc. – student aid, or other planning opportunities.

Life can be complicated. However, communication, knowing your options and planning are key. Talk to your advisors as good decisions make for a good life. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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How You Can Adjust Your Thrift Savings Plan During COVID-19

COVID-19’s disruptions offer both challenges and opportunities – business shifts, where we work, how we spend our time and money, among others. Some of these are temporary but others are longer term. This article’s focus is on the planning opportunities for federal employees and military members who participate in the Thrift Savings Plan (TSP). It also includes key information on other retirement plans such as an individual retirement account (IRA) and a 401(k).

According to, TSP is the largest defined contribution plan in the world with around $621 billion for 5.8 million participants. Retirement benefits from defined contribution plans (including IRAs, 401(k) plans, deferred compensation, etc.) are based on how much you saved, investment returns and your longevity.

TSP Saving and Investing Opportunities 

The contribution limits are similar to 401(k) plans. The 2020 limit is $19,500 plus $6,500 catch-up for individuals 50-years-old and older. Elective deferral limit might not apply to military members on active duty in combat zones. Your savings goal is driven by your retirement goals. The greater the need, then generally the greater the wealth required – the earlier you start saving the better. Also, you may need to save outside of retirement accounts because of plan limits, diversify retirement taxation and flexibility.

Choice in tax treatments are traditional (tax-deferred) or Roth (after-tax contributions). If you expect to be in a lower tax bracket in retirement, then consider traditional tax-deductible contributions. If vice versa, then consider Roth. Remember you’re making bets over long periods of time with the uncertainty of future tax laws and consult with your tax advisor.

There are six funds on the menu: Government securities (G Fund), fixed income (I Fund), common stock (C Fund), small-cap stock (S Fund), international stock (I Fund) and Life Cycle Funds (broadly diversified). Life Cycle Funds are gaining in popularity due to convenience and diversification. Investment allocation should be driven by your financial plan and not the market or your work buddy.

How to Generate Cash in a Down Market

Down markets tend to give retirees grief – the fear of running out of money or selling at a loss. Accumulators should be leaping for joy to buy things on sale; however, they too may hesitate. Here are some strategies to generate cash:

Cash Reserves

Have enough saved equal to three to six months of living expenses, more if your income fluctuates, and a year or two if you’re retired. Some of those “reserves” might be in the form of short-term CDs or bonds.

Rebalance Your Portfolio

Say your portfolio was $500,000, it declined in value, you need $10,000 in cash, and your portfolio allocation was 60 percent stocks, 30 percent bonds and 10 percent cash. Furthermore, assume the stocks fell 20 percent and bonds and cash were unchanged – the portfolio fell 12 percent to $440,000. Reduce the account by the cash needed ($10,000) then apply the 60/30/10 allocation. It tells you to sell $21,000 of bonds, buy $18,000 of stocks and add $3,000 into cash. This is buying low and selling high.

The CARES Act created special rules to allow for a new classification of hardship withdrawals. The rules are specific, read them and consult with your tax expert. Nevertheless, you still need to generate cash and think twice about accessing retirement monies. You’ll have to save more in the future and once you’ve early accessed retirement funds, it’s easier to do the second time.

We can’t always control what happens to us in life. However, we control our response. COVID-19, like other life changing events, forces us to revisit and refresh our financial and life plans. Often, it’s prudent to seek expert and objective advice for a second opinion for the sake of your future and peace of mind. Secure both wisely.

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Planning Tips for Parents of the Class of 2020

We are taught to expect the best, plan for the worst and prepared to be surprised. And we learn that success and sanity often depend on how we react, respond and adjust to those surprises. Many are facing new challenges as they navigate through a pandemic, social distancing and loss in various ways.

Households may be experiencing some upheaval – two incomes shifting to less, single parents shuffling for time off or additional daycare, helping your child think through college or career choices and more. Here are some thoughts to stimulate discussion in your home and with your advisors for greater financial stability, less stress, and a brighter future for your children.

At-Home Learning – Remote learning has its ups and downs, and we’re uncertain of its future.

  • Educators are advising parents to lean into school resources for help with at-home learning as well as considering tutors and academies.
  • Routines and schedules help. These include scheduling time to connect with their friends and outdoor activities.
  • Appeal financial aid. Your financial situation may have changed. Financial aid may have been based on dated Federal tax returns filed with Free Application for Federal Student Aid (FAFSA) and doesn’t represent your current ability to pay for college.
  • Seek refunds. Some schools are offering tuition discounts due to the switch to online learning and others are competing for students. Some are rethinking college and career choices and choosing in-state colleges and trade schools. And maybe this will be a record “gap year.”

Protect and Build Your Retirement – People are facing difficult situations. Businesses have closed permanently, and individuals have been laid off or furloughed. Nevertheless, we’ve got to take care of ourselves.

  • 401(k) account values took a hit, but many have recovered with rebounding equity markets. Control what you can control – allocations and savings rates. Re-align your allocations with your goals as needed. If you couldn’t sleep well in March, then now’s the time to shift. Some may temporarily have lower savings (tighter household budgets) so save more in the future. It’s a marathon, not a sprint.
  • Build your emergency reserves. We’ve witnessed why we should have money in the bank to cover our household for at least three to six months.
  • Retirees should view and revise their withdrawal rates – amounts pulled from retirement accounts. Your savings must last your lifetime.

Improve Cash Flow – This may take creativity and redefining priorities.

  • What can you do to improve your marketability or shift your business for the new world? Can you take on a side gig?
  • What expenses can you cut or defer? Tax filing is deferred to July 15, however, what if you have a refund due? Work proactively on bill deferment. Lenders, credit cards, landlords and vendors may offer deferment or accommodation for COVID hardship. What aid is available through the government, health clinics and more?

Tapping Savings – Use caution.

  • Life’s rich with trade-offs. However, you’re a greater asset when you’re financially and physically fit. Use caution with unexpected expenses from college education to maintaining your lifestyle – can you survive this temporary downturn by making a few sacrifices?

Thankfully, more businesses are reopening, people are getting back to work, children will get back to school and proper medicine will be developed. Meanwhile, we have some adjustments to make – some temporary and others long-term. Secure your future wisely.

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Class of 2020 – Tips for Success Despite COVID-19 Hurdles

Students attending the Pittsburg Institute of Aeronautics (PIA) typify the opportunities of advanced education and the challenges of our times. Forbes ranked PIA as the nation’s top two-year trade school in 2018, and the median salary ten years after school was about $57,200. However, graduating students are stuck in a holding pattern until the campuses reopen. Not all courses can transition to online lessons – rebuilding aircraft engines in the “Advanced Powerplant” course require hands-on lab work. There’s been a massive shortage of aircraft technicians and hopefully, the industry isn’t cursed long-term. Meanwhile the students are on a bumpy flight – they have jobs on hold and are sweating to pay rent.

This column – the second in a series of three – focuses on planning challenges and opportunities for students. As Mark Twain once said, “The two most important days in your life are the day you are born and the day you find out why.” And if figuring out your purpose in life isn’t difficult enough, COVID-19 has thrown a curve ball. The Class of 2020 has had some major challenges this year. Nevertheless, there is a light at the end of the tunnel.

Much is in flux with the coming academic year including when your campus will reopen and what to do about housing. New and returning college students should consider the following:

  • Understand refund policies – Most colleges refunded a portion of room and board fees when they closed their doors. According to a survey of 100 colleges by, 70 issued cash refunds, 20 offered credits or vouchers and the rest didn’t disclose. Few offered refunds on tuition deposits despite no in-person classes.
  • Financial aid appeal – Contact your school to review. Professional judgement requests consider new information for award adjustments. Your financial situation (or that of your folks) may have changed – your FAFSA may have been based on your financial situation in 2018 or 2019.
  • Ask about emergency grants – Your college may offer funds. The CARES Act, a recently enacted relief program, gave $12 billion to colleges to give back to students.
  • Be prepared to pivot – Is it time to consider plan B or C? Some object to $50,000 for an online college experience (closures are likely temporary). However, financial situations may have changed, and some may prefer to be closer to home. Thus, consider less expensive in-state schools or two-year colleges. This may be a popular gap year.
  • Be cautious about borrowing – Around 10 percent of student debt is past due or in default per a 2018 Federal Reserve study. If debt’s a must, consider Federally backed loans with fixed rates and more flexible repayment terms (versus private loans).

You’re entering a tough job market. The U.S. economy and employment have taken sharp hits from efforts to contain the spread of COVID-19. The worst of our economic decline is expected this quarter, then gradually recover as Americans get back to school and work, and medicines, mass testing and ultimately immunity are achieved.

  • Be flexible and open-minded. You might not get your dream job right out of college and one opportunity might be used as a stepstone to another. Sacrificing today can lead to more options in the future. You might also want to consider going back to school.
  • Better you fall on your face now, then five years later when responsibilities may be greater (e.g. family or career) or five years prior to retirement. If you can, take this time to build emergency reserves, try spending less than you make, and join professional networks.

It’s also important to know how to manage stress in your life. School is important but don’t forget to take care of yourself.

  • Maintain a routine balanced with organization, study, activity and virtual social gatherings.
  • Rewire your brain to learn or manage a new grading structure with online discussions and assignments.
  • Use resources available at school, health professionals, mentors and networks.
  • Embrace the imperfections. You can plan but you cannot control everything.

Suzanne Markle, President and CEO of PIA expects her trade school and students to survive and rebound. “The key to America bouncing back is us digging our heels in, being brave and staying the course.” May your future be bright, and you secure it wisely. Congratulations Class of 2020!

This article can also be viewed in the Reno Gazette Journal.

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Class of 2020 – Planning Opportunities for Students and Parents

Life has many major milestones and one of those is graduation. Usually during this time of year, families are preparing for the celebrations to come. They’re ready to sit in hard-bottom chairs under the hot sun, to scream war hoops when they hear their grad’s name and to snap as many photos as possible. This should be the happiest of times. However, traditional senior year activities are marred by COVID-19.

This is the first of a series of articles of the unique challenges and opportunities facing the students and parents of the Class of 2020.

Young Americans are entering adulthood in scary and uncertain times. A recent Junior Achievement Teens Survey asked 1,000 teens about their concerns and future plans as a result of the pandemic. The top four included:

  • 35 percent changed their future living situation
  • 30 percent delayed their college start date
  • 27 percent decided to work to accumulate money
  • 18 percent changed the career path they wished to pursue

The concerns of these Junior Achievement teens mirror some of the major challenges or questions facing high school or college graduates:

  • Gap years – Students may take a semester or year off after graduation for various development or educational pursuits such as travel, study abroad, internships, etc., for personal growth and exploration. However, some parents worry they may get off course.
  • Academic implications – Popularity of remote learning has been on the rise. However, some argue they didn’t pay for online learning. Some courses cannot be taken online such as labs, music and art, and many technical programs (automotive, welding, dental hygiene, etc.). Others struggle with it versus other methods of learning. Will you get the credits needed to graduate, and perhaps to qualify for graduate school?
  • A shorter college experience – What are the housing and dining options this coming fall? What flexibility can you build should if a resurgence requires another closure?
  • Financial implications – What budget adjustments are necessary? Mom or Dad might have been furloughed and they may worry about their ability to retire. Is it time to revisit in-state, community or junior college?
  • Job market – Seniors may face unprecedented job anxiety with record unemployment and some industries upended by COVID-19 such as airline, hospitality or leisure. However, the American economy is entering a restart phase. People will travel and recovery will happen. And it may look different with rising trends from this disruption including telecommuting, e-commerce and digital payment, new global supply changes, telemedicine and digital media, etc.

It’s okay to feel upset about the current state of the world. You’ve had a rough go of it – born in the shadow of 9/11 and graduating in the year of coronavirus is no small task. Don’t let roadblocks stop you from reaching your goals. Coronavirus solutions will come. And you’ve got your whole life ahead of you. Find your way to celebrate your graduation with your biggest fans – your family and close circle of friends.

Congratulations and may you secure your future wisely.

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Your Business in a Post-Coronavirus World

Along with economic recovery plans, there comes some relief. However, every business owner can be confident in one thing – we live, work and manage uncertainty. As a “new normal” emerges, developing a post-pandemic business plan is paramount. We’ve seen the disruptive impacts of the pandemic as governments globally face the trade-off between public and economic health. It’s changed the way we live, work and conduct business and more challenges are expected. The second quarter Gross Domestic Product (GDP) is expected to shrink a phenomenal 30 to 35 percent annualized rate followed by growth in the last half of the year.

Below you will find some emergent trends and outlooks by small business Chief Executive Officers (CEOs) and a technique called “future-back” which can help us reposition as we emerge on the other side.

The Wall Street Journal (WSJ)/Vistage Small Business CEO Confidence Index dropped more than 50 percent in April reflecting the U.S. economic shutdown. The index had hovered in the 90 to 105 range since last October but fell to 41.7 percent. Nevertheless, the survey reflected a dichotomy of impacts, reactions and expectations.

Small and Midsize Business Statistics You Need to Know

Top Business Impacts

One third changed the products or services they offer

  • Cancellation of travel and events (81 percent)
  • Declining revenue (76 percent) – Majority (44 percent) reported declines of under 25 percent and a quarter reported no declines at all
  • Market impact (60 percent) and employee productivity (57 percent)
  • Delays in servicing customers (50 percent)
  • Disruptions in supply chain (39 percent) and factories or offices in affected areas (35 percent)
  • Increase in business and new opportunities (29 percent)

Concern of Inadequate Liquidity

One third of small/midsize businesses estimated having less than two months of reserves, 36 percent have three to five months, 17 percent have six to 12 months, and nine percent had over one year. As a result, financial assistance included:

  • Payroll Protection Program (PPP) (90 percent)
  • Line of credit via local bank (46 percent)
  • Small Business Administration’s Economic Injury Disaster Loan (EIDL) (38 percent)
  • Restructure/defer payments to creditors (29 percent)

Desire for a Stable Work Force

Sixty percent increased or maintained the same workforce, 17 percent of small/midsize businesses decreased by 10 percent and seven percent of small/midsize businesses decreased by 50 percent or more. Expectations over the next 30 days:

  • Remote working (62 percent)
  • Reduced hours or staff (30 percent)
  • Layoffs or furloughs (22 percent)
  • None of the above (17 percent)

Economic Outlooks

More than half (52 percent) expect the economy to stabilize in six months, a third say six to 12 months, and 11 percent more than a year. Expectations about their business:

  • Back to normal or stronger (38 percent)
  • Moderately weakened by gaining momentum (48 percent)
  • Significantly weakened and fighting to rebuild (14 percent)

One of the greatest surprises has been the speed of change. Major trends have steepened.

  • Remote work/ telecommuting/ video conferencing – Remote work has increased 91 percent over the past decade allowing teams to work in the office, from home or across the globe
  • E-commerce and digital payment
  • Global supply chains need repair or new construction
  • Healthcare delivery likely to change with telemedicine, wearable health monitors and more
  • Digital media

The environment emerging post-pandemic may be very different. Some may see changes in their fundamental business model including services, assumptions, and how we care for customers. Now may be the time to prepare. Think about how Apple started its transition from the computer with the iPod and iPhone during the dotcom bubble.

Refreshing your business

Mark Johnson and Josh Suskewicz detail a process to help business leaders review and redesign their business in their book Lead from the Future. The major steps include:

  • Envisioning your future – Where do you want to be after the crisis passes? What will be your core business? How will things change about customers, markets and operations? What won’t change?
  • Reverse engineer – Their term is “future-back.” A benefit of working backwards from the future to today and developing business benchmarks and milestones is having a clear slate.
  • Be prepared to learn and pivot – Anticipating and adapting to a changing world.
  • Rally your team around your vision – Missions and margins are highly correlated.

In closing, we had two recent boosts. One was the announcement by Gilead Sciences about early positive results from a new coronavirus drug. The second was Federal Reserve Chairman Powell’s press conference which emphasized their commitment to deploying tools at their disposal in putting out the fires. May you too be successful in managing your challenges and emerging stronger on the other side.

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Three Actions to Take in Your 401(k) Plan for COVID-19

In the last weeks, millions of Americans have lost their jobs and there are growing concerns of a recession. Although we need to stay vigilant of our physical and financial health, we need to focus on what we can control. This article provides three key areas related to your 401(k) that I encourage you to review with your advisors.

Should You Withdraw Money Early from a Retirement Account?

Normally, retirement accounts are designed to encourage people to save for retirement. However, the CARES Act may enable access for individuals to coronavirus-related withdrawals of up to $100,000 (or vested account balance if less) from their 401(k) or IRA without the 10 percent penalty (under age 59-1/2). Income tax liability can be spread over three years with opportunity to “re-contribute” the withdrawn funds within three years. Also, some 401(k) plans permit borrowing. The CARES Act upped the loan limit to $100,000 (or 100 percent of your vested balance).

However, I advise you to use your retirement account as a last resort for a variety of reasons:

  • This is a time to prioritize survival and not maintaining one’s lifestyle.
  • It’s hard to save for retirement and even harder to put the toothpaste back in the tube.
  • Market declines become bad news if you have to sell.
  • Not all 401(k) plans permit withdrawals or loans.

Employers Might Suspend 401(k) Matching Contributions

Many plans provide a boost to retirement savings in the form of a match or safe harbor contribution. For example, the employer might match 50 percent of your contributions up to six percent. If you contribute six percent, the employer kicks an additional three percent. That’s a 50 percent return on your contributions.

Unfortunately, some employers are cutting back in this economy as they have in prior downturns. Willis Towers Watson estimates almost 20 percent of companies with at least 1,000 employees cut back or suspended matching contributions following the 2008 Crisis.

It may be disheartening, but don’t despair. You’re responsible for your future. Perhaps you’re going to inherit funds or can survive on Social Security benefits alone. And if those aren’t enough, keep saving. Think about how our budgets have improved – less dining out, travel, shopping and more. You might even have a 15 to 25 percent rebate from your auto insurance company. Remember the power of compounding – the earlier you save on a regular basis, the better.

Review Your Investment Strategy

It’s ill-advised to switch horses midstream. If this market sell-off got your attention, then work with your advisor and possibly ride out this financial storm. Make any big adjustments after the rebound because getting out often means missing out.

Other investors see this as an opportunity to rebalance their portfolios and buy things on sale. It might also be time to get projects done, your car repaired or even replaced.

The markets are likely to continue to be challenging. Earnings releases and guidance are coming. There may be efforts to reopen parts of the economy – which may trigger additional COVID-19 cases, or medical advancements may be better than expected and economic stimulus may reignite inflation and higher interest rates, and U.S. elections may lead to higher taxes. Meanwhile, the equity market (the S&P 500) has recovered about half its 34 percent decline from the February 19 high.

Life’s rich with uncertainty. If you wait for all uncertainty to go away, so do the opportunities. Have a plan and stick to it – and the second part is often the hardest. Secure your future wisely and stay healthy.

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A Guide to Small Business Relief and Stimulus Programs

When is the coronavirus pandemic going to end? No one knows for certain. Meanwhile, each of us has the job of staying healthy–not only physically and emotionally–but financially as well. COVID-19 continues to have an economic and financial impact on small businesses. Small business owners are struggling to keep their doors open while others have had to close their doors temporarily and some, indefinitely. Thankfully, not all hope is lost. This article is focused on recent economic relief and stimulus packages, and what they mean for small businesses.

The Multiplier Effect

The goals are to keep people and businesses afloat during unprecedented times–keep people employed and jump start a weakened economy. How does an additional $100 to a person stimulate the economy? Imagine that person spends $70 and saves the remainder, and that ratio continues. The next person receives $70, spends $49 and saves $21, and the next person spends $34 and saves $15. The $100 turned into $153 of spending (or consumption)–the multiplier effect. That in turn increases demand, business expands, unemployment drops, 401(k) balances grow, and the skies are blue again.

Coronavirus Preparedness and Response Supplemental Appropriations Act

The Act provided $8.3 billion in emergency funding for federal agencies to respond to the outbreak–75 percent went to research and development of vaccines and diagnostics, and state and local response. It also allowed $1 billion in loan subsides that could enable the Small Business Administration (SBA) to provide up to $7 billion in loans to help small businesses at 3.75 percent and nonprofit organizations at 2.75 percent. They offered long repayment terms of up to 30 years.

Families First Coronavirus Response Act (FFCRA)

The FFCRA is to assist covered employees and families through the end of the year with free coronavirus testing and food assistance. Areas affecting businesses include requiring some employers to provide paid sick and up to 10 weeks of family leave. It provides refundable employer payroll tax credits for the paid sick leave and Family and Medical Leave Act (FMLA), and health insurance costs. Those with fewer than 50 employees may be exempt if offering the leave would risk them going out of business.

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

The CARES Act is $2.1 trillion and intended to relieve the hardship from putting commerce on ice to help “flatten the curve” and public health. The law benefits seven main groups including big business, hospitals and public health, federal safety net, state safety net, state and local governments and education. I’ll focus on two other groups–small business and individuals–with selected highlights.

  • Paycheck Protection Plan ($350 billion) – Allows businesses to borrow enough to cover monthly payroll costs for up to 2.5 months. Portions used to maintain payroll, rent and existing debt could be forgiven as long as employees stayed employed through June.
  • Emergency Grants ($10 billion) – Provides for grants up to $10,000 to provide emergency funds to cover operating needs.
  • Extra Unemployment Benefits ($260 billion) – Increases benefits and broadens who is eligible. Adds $600 per week on top of state benefits and may last for four months.
  • Cash Payments to Individuals ($300 billion) – Income tax credit for up to $2,400 for couples filing joint, $1,200 for individuals, and $500 for children under 17. Adjusted Gross Income threshold amounts are Married Joint $150,000, Head of Household $125,000, and Singles $75,000. Rebate reduced $5 for every $100 over the threshold. Note: Intended benefits may be off target. Say your income in 2018 (or 2019) was high, but 2020 was low due to layoff. Your immediate credit may be small (due to prior year’s high income), and you must wait to file 2020 return for this year’s credit.

If you’re worried about your 401(k) plan balance–hang in there. Getting out means missing out and a reasonable investment strategy will likely mean recovery and then some. If you’re unemployed or a business owner, I hope this article gives you ideas to discuss with your trusted advisors who better know your situation, the laws’ specifics and can explore opportunities. Finally, if you’re considering one of the loan programs, run–don’t walk to your friendly banker. And more government plans are in the works as I write this.

It’s a grind. You may have a bad day today. It may be bad or worse tomorrow. But hang in there. We’ll get through this. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Common Financial Questions Amid Coronavirus

Life’s a roller coaster and periodically, events occur that disrupt everyday life, business and markets – and it’s advisable to get help in navigating them. COVID-19 (Coronavirus) continues to spread and its impacts are significant. Aggressive efforts are underway to “flatten the curve” – to reduce its spread and not overwhelm the frontline healthcare professionals and emergency responders – and each of us has the responsibility of self-reliance and taking care of ourselves and family.

We don’t know how deep the impacts and how long they will run. However, at some point they will eventually end. Thus, we position first to survive, and second to prepare for the rebound. Below you will find answers to several common questions among our clients to help you navigate the challenges that exist and those that will develop. Hopefully, these questions will help trigger discussions you should have with your family, colleagues and trusted advisors regarding your specific situation.

Are We Going to Be Okay?

Anxiety is high and it’s okay to be scared. Fight or flee is part of our DNA and there is an urge to “do something” in times of stress. “Being okay” is different for everyone. Yes, it’s scary when wealth temporarily goes into hiding as markets correct, or when your employment may be at risk. Now is a good time to focus on why you’re investing. Your goals might include to retire and stay retired, have choices and options, spend more time doing the things you love, or being financially independent and not being a burden to anyone. Often the discussion then shifts from a stressful financial or investment concern to become one about getting more comfortable again, that eventually things are going to be okay, and the action plan is relevant to those goals.

Should I Move to Cash?

Distinguish between the need for liquidity and the urge to bail out to stop the pain. If it’s because your job is in jeopardy or there’s a buy opportunity because your item goes on sale, then that’s why you have emergency reserves safely socked away in a Federal Deposit Insurance Corporation (FDIC) insured account. On the other hand, if it’s the fear that the markets will go to zero then take a moment and reflect. Assuming your goals haven’t changed, why toss out a well thought out investment plan? History tends to repeat itself – bull runs last longer than bear markets and getting out often means missing out. And despite the pain, the U.S. equities market still stands some 3-1/2 times higher than the low coming out of the 2008 Crisis (S&P 500). However, if you had the wrong investment plan to achieve your goals or to allow you to sleep at night, then consider waiting until we hit dry land again – may be bad timing to abandon the life raft (hopefully of diversification) and to jump into the water.

Is It Time to Buy?

The cable news was on one screen showing the world on fire. The other computer screen had analysts excited with exceptional companies selling at cheap prices. Aristotle’s concept of the golden mean says that the truth may lie somewhere in the middle. While there are plenty of uncertainties including the coronavirus, economic recovery, U.S. presidential election, and more – low prices may offer a good entry point for investable cash. Less than a month ago, the equity markets were selling at all-time highs and the economy was relatively solid. Banking cures are in place following the ’08 Crisis, households are less leveraged, and unemployment was low.

Other Issues? We Are All In this Together

These include business adjustments (supply shifts, cancellations, postponements, or other demand shifts), working remotely, and job security to name a few. Self-isolation and social distancing also generate other issues. Stay connected socially (healthy dosage of phone conversation); it’s okay to turn off the news, and take walks in the sunshine.

Most importantly, don’t forget to wash your hands, often and thoroughly. If you spread anything, spread help, compassion and humor. Don’t panic. Like all outbreaks, this too will eventually end. Wishing you safety and shields. Secure a healthy future both personally and financially.


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