Independent, Fee-Only Financial Advisor

Independent, Fee-Only Financial Advisor

Thursday, March 26, 2020

The Ultimate Work From Home Resource

New Perspectives has been working from home for two weeks now! For our own safety, our clients and society at large, we are working from home and minimizing contact with other people.

I work almost exclusively on my tiny laptop anyway, and have taken my "office" to Hong Kong and Atlanta for stretches in the past, so setting up in my home office is a breeze. From anywhere in my house (or the back yard if the mosquitos would stop biting!) I have full and secure access to everything that I have in the office. Many of our partners are also working from home - on service calls with TD Ameritrade this week I have heard babies, cats and Mozart in the background as the work flows on!

Don't forget to take care of yourself first. My gym has been posting at home workouts that I still wake up at 5:45 AM for. Every evening, Blair makes a different single serving, chocolate chip cookie (this was our favorite)!

We've been conducting remote video meetings via Zoom for a some time, but these are more of a necessity now! While it is easy to get started with Zoom, there are a lot of features you can make use of, so check out their tutorials here. During a Zoom hangout with friends and family the other day, one friend learned that she could change her background as often as she wanted... so have fun with it!

Personally I found this the best article for adjusting to working from home. Particularly useful to me was the reminder to Communicate Fully and Frequently: Nancy and I are used to being able to yell at each other down the hall, now we keep a constant flow of text messages and the intercom feature of our landline phones. If you just want to kill some time reading other tips and tricks, here are 30 more, with links to other articles as well.

The McLaughlin Law Firm has compiled great resources for individuals and small business owners in Mississippi and surrounding states. Their blog also breaks down some of the latest stimulus bill and how it meets the needs of individuals and small businesses.

Do you have K-12 students in the house? The Parents Campaign has an excellent set of resources for all ages of student and their parents. They also have a good compilation of announcements from the State Department of Education and other State Agencies.

The National Alliance for Mental Illness has a wonderful list of resources for those who are too stressed or anxious about being cooped up or stepping foot outside. This is a resource that any of us may need at some point, so it is best to be comfortable with it now.

Tough day at the home office? Put on some Dolly Parton and look forward to a better day tomorrow:

What resources have you found useful in these times?

Wednesday, March 25, 2020

The Fiscal Stimulus Bill is in Process

The latest and biggest fiscal stimulus bill is not official, but we are close. Senator Chuck Grassley’s office has released a 6 page document containing synopses for each section. Below is what I gleaned:

I. Direct Payments

This is the part everyone is interested in. Each single person making $75,000 or less will receive a payment of $1200. This will gradually phase out up to a maximum of $99,000. Each married household making $150,000 or less will receive $2400. This will phase out up to a maximum of $198,000.

You qualify for these payments based only on your income level, not the source of the income. Self-employed? You qualify. Retired? You qualify. On disability? You qualify. No income at all? You qualify. Making a lot of money? No, you don’t qualify.

What do you have to do to get this money? Nothing. The IRS will be using our information on tax filings to send out the money. Watch your bank account and your mailbox. When will you get it? I don’t know, but April 6th is the date that’s been touted.

II. Expanded Unemployment Benefits

Those who have been laid off will file through the state for state benefits. IN ADDITION to the state amount, they will receive $600 per week from the federal government, and the one week waiting period is waived. An additional 13 weeks is added to the draw period up to 12/31/2020.

Self-employed people can apply for benefits. Independent contractors can file. People with limited work history can file. Even if you are only facing reduced hours or a reduced paycheck, you can file for a pro-rated benefit. EVERYBODY file!

Note these benefits apply to railroad people. If you’re not a railroad person, don’t ask. It’s a whole different system.

III. Required Minimum Distributions
NO RMDs this year. They’ve been waived. If you’ve already done this within the last 60 days, think about putting that money back.

IV. Retirement Accounts
You can take up to $100,000 out of your IRAs if you’re under 59 ½ and not have a 10% penalty. In addition, the tax due can be paid over the next 3 years. AND you have the option to put the money back in over the next 3 years. Note this withdrawal must be related to COV-19, but this is a broad definition.

V. Charity
Up to $300 in cash donations may be deducted from your 2020 income even if you don’t itemize. The limit on donations in relation to your income has been waived for now, so give away!

VI. Student Loans
Sorry, no debt relief in here, but there is still something for you. Employers can now pay $5250 of your student loans, and it will NOT be counted as income.

VII. Business Relief
A. A refundable payroll tax credit is available to employers for 50% of wages. This includes health benefits and is for March 13 through December 31. This is for companies whose operations have been fully or partially suspended or who have experienced more than a 50% drop in revenue compared to the same quarter last year.
B. Employers can defer their portion of the SS payment (6.2%) for 2 ½ years.
C. Net Operating Losses can now be carried back 5 years and can fully offset income.
D. Interest expense can be deducted for up to 50% of income for years 2019 and 2020.
E. Immediate write-off of any improvement to facilities.

Now, that’s the high points, and things are still in flux. We will update as we get more information and as the proposed bill becomes law. This is a great help to a lot of people. We expect more to be forthcoming.

Wednesday, March 18, 2020

Imagining the Worst

I got a call from a client nervous about the stock market. She had a list of questions for me. The one that stopped me was, “What is the worst that could happen?”

On the medical side, the answer was obvious. More sick people. More deaths. People I know and love suffering and dying. A healthcare system overwhelmed. As awful as those things are, I know there is an arc to the virus’ progression. At some point, one way or another, this will play out. The infection will run its course. The healthcare system will recover. New treatments will be used. Finally, a vaccine will be produced.

But she was asking about her financial situation. She is retired and dependent on a portfolio. The world is grinding to a halt. What happens economically? Will we recover? If so, how long will it take?

What is the worst that could happen economically?

If government officials don’t take this seriously; if there is a dearth of leadership; if there is no quick and drastic fiscal policy, then the worst happens. We are hearing about those drastic ideas now. Talk of cash appearing in our accounts to help plug the hole from lost earnings. Surprisingly, no one is objecting to this idea. The only debate is how much. It is good news that policymakers are getting bold and innovative.

Concerning this “instant cash,” some have asked, “But what if people spend it on dumb stuff?” Economically, it doesn’t matter! They just need to spend it to help spur the economy back to life. The quickest approach is to give people money regardless of their income. So get the word out. When the money fairy shows up, spend it!

When it comes to this virus, the best approach is to pull in and avoid contact. When it comes to the economy, the best approach is to throw the money around. Combining the two will require ingenious thinking, but we’re Americans!

Stay well!

Friday, March 06, 2020

Dispatches From Our North Carolina Office

When the pandemic arrives on your doorstep, the best defense is not to walk out the door. That’s what some health professionals are recommending. Stay at home. But how do you do that when work, school, and life keep rolling?

Amazon, Microsoft, and Twitter are among the companies encouraging employees to work from home. For many, remote working has been part of the landscape for some time. Many work remotely a few days a week, then travel to the office for the remaining portion of the week. Moving to a full remote operation is not that big of a stretch.

For a finance professional, work happens wherever there is a computer, a phone, and internet access. It’s the reason I can set up shop at our second home in North Carolina. My phone is an extension of the office line located in Mississippi. Our web-based brokerage and client information program allow me to have all the same information at my fingertips.

The only thing I can’t do is a personal meeting. That’s why it’s important to have competent staff manning the office. I’ve also found many clients prefer the convenience of a video conference, and, yes, I can even do those meetings remotely.

For me, working remotely means I’m often more productive. First, I’m up early, and I’m on eastern time. Long before my staff hit the Ridgeland office, I’m cranking! There’s no need for a shower and makeup when you’re operating alone. And my hair? Forget about it!

I didn’t come to the mountains to escape the coronavirus. I came to get some R&R while still taking care of business. But it’s nice to know I’ll be doing my part to put the brakes on its spread!

Thursday, March 05, 2020

What is the impact of coronavirus?

In the last week of February alone, the S&P 500 dropped almost 13% from all time highs. On March 3rd, the Federal Reserve lowered rates 0.5% to support economic activity. All of this was in response to the Coronavirus, or Covid-19, a potentially fast spreading virus that is hard to detect and for which we have no vaccine. With few cases in the United States, and precious little information about the virus, what really is the economic impact of Covid-19?

Let's start with what the impact is not. The biggest threat to the economy isn't risk of death. We have come a long way from when a few rats and a lack of sanitation could wipe out a third of Europe's population. We currently don't have great data on Covid-19, and currently reported mortality rates cannot take into account the slow onset of symptoms and lack of testing that belie much higher infection rates. In short, publicly reported mortality rates may be unrealistically high.

One real risk to the economy is through missed work. Missed work means Americans are less productive. Lower productivity means less money available for payroll and business owners. For many Americans, missed work simply means no pay. No pay means no spending, and our economy runs on spending. Even the fear of exposure to the virus may keep people out of stores, and keep their hands out of their wallets.

The impact of a productivity slowdown can be seen in China, where heightened containment measures coincided with factory slow downs for the Lunar New Year holiday. Many of those factories still sit idle as workers either cannot return or employers do not want to run the risk of infection. If China isn't producing goods, we can't buy them. In our complex economy, supply chains of all sorts cross through China at some point, affecting a broader swath than the presence of a Made in China sticker might imply.

Coal consumption as a proxy for productivity in China. The big annual dip is around the Lunar New Year.

Whenever a large amount of our effort and attention is directed away from productive activities, the economy can suffer. While stockpiling food and spending more on hand sanitizer and face masks may seem like good economic activity, not all spending is created equal. Higher value activities, such as entertainment and dining out or large, financed expenses like buying houses or cars may be curtailed by people's hesitation to venture out of the house. These have a multiplier effect that will be felt more broadly.

What can you do about Covid-19? The most important thing is to take precautions to protect yourself from infection. Keep your hands washed and away from your face. It is said that face masks do little, but avoiding areas where large numbers of people congregate may be a good idea. Be particularly mindful of your older or already compromised family, friends and neighbors. Know who might need help and who can help you if needs be. Community is always important, but you have to build it before you need it.

Prepare yourself for a time when either you are sick and cannot leave the house, or you find it a good idea to stay inside for two to four weeks. You don't need a large stockpile, but someone recommended to me just to keep an extra $50 of shelf stable groceries on hand. While rice and beans are cheap and keep well, remember, we aren't prepping for the end times, just a boring house stay. In addition to some rice and beans, I bought extra onions, garlic, spices, chocolates, tea and fruit (the man at the Chinese Grocery told me the kumquats are good for your respiratory health - I'll take that).

When the coronavirus keeps me homebound, I'll have to subsist
on rice, beans, greens and perfectly cooked medium-rare steak.

Is your portfolio ok? The initial selling was unusually sharp and short, and that can be frightening. If you are still working, earning and saving money, most equity investments are cheaper today than they were two weeks ago. Stick with the plan and keep buying as you go. If you are living out of your account, you should already have a large portion of bonds and cash to support your withdrawals despite the volatility of the market. It may be a good time to reassess your portfolio if you have not recently, but we still expect stocks to rise over long time periods. We craft portfolios to take advantage of the growth of equities, but manage for the risk that they decline.

As always, keep cash on hand for your next few months expenses. Make sure you have appropriate life insurance for the primary breadwinners in your house. Invest in stocks for the long run, but keep bonds on hand for stability over the next few years of income support.

If you stick with the plan, you'll be prepared for Covid-19.

Wednesday, March 04, 2020

Sick Minds

The word “pandemic” instills fear in the heart of the most stalwart. A tiny organism that can infiltrate unnoticed. A disease for which there is no cure, one that fells the most vulnerable. Of course, we’re all running scared. Rational minds are few and far between in the face of such a challenge.

But I found one. Dr. S is a client who depends on me for financial advice. This particular morning, I looked to him for medical advice. He was objective and clear-eyed. Yes, this will get worse. The natural progression of the disease combined with a mobile society will result in many more cases. For many, the illness will be experienced as flu-like, with a full recovery in a matter of weeks.

But there have been deaths. The mortality rate for the who contract coronavirus has yet to be fully measured. In China, it looks like that rate may be 2%. In a large population, that is significant. In the US, we don't know the rate is - but that is because we are not yet accurately recording all cases. As the disease spreads and our data collection improves, we will probably find the rate to be about 1%. That is a small number, but it is higher than the flu.

Any deaths are not trivial, but Dr. S points out those particularly at risk. First, our children don’t seem to be affected greatly by the illness. Younger people appear to be able to combat the virus effectively. The people most at risk are elderly and/or those with other health risks. While the flu hits the old and very young alike, the coronavirus takes its toll on the oldest in our population. That’s why the spread of this disease in a nursing home is so scary.

How long will this last? Dr. S told me about “herd immunity.” It is a common concept in microbiology. At some point, people will stop getting sick. It happened with SARS and others. Do we develop a collective immunity? Or has the virus just run its course? We don’t know.

Dr. S points to other contagious illnesses. The typical time for the disease to run its course is 3-6 months. That was a great relief to me. After all, we have been hearing a vaccine may be a year or more away.

Rational minds among us are not taking this lightly. They are doing what all scientists do. They are tracking the progression of the disease. They are collecting data on those who succumbed. They are sharing information on effective treatments. But they are not panicking. Instead, they are offering us solid information on how to stay well.

So when I find fear rising in my throat when I hear of more cases and more deaths, I think about Dr. S. And I try to keep my head about me and surround myself with rational minds. Be reasonable. Be safe. And focus on the calendar.