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Lemons….  Or Lemonade

Lemons…. Or Lemonade

April 28, 2020

With the Covid-19 virus keeping us sequestered and working from home, we are learning new things every day – like where the dog dozes most of the day, what snacks we don’t have and maybe how to go ‘stir crazy.’ 

Now that the first month of confinement is over, I can truly state that I now know more about video conferencing than I ever thought possible and I am finally reading my emails. I am actually talking with clients more than usual.

The confusion about CARES Act benefits prompted us to create software that will estimate benefits of the Paycheck Protection Program [PPP] to be compared to the Employee Retention Credit [ERC] and the Economic Industry Disaster Loans [EIDL].

The sitting and talking –no drive time—has led to some interesting discussion regarding the markets (down) and the economy (down) and the mood of clients (worried, scared) and the 12-month outlook (surprisingly up, optimistic).  The last may be because we have already fallen so far, or perhaps, because most of us recognize the pandemic and the oil war as “Black Swans,” unprecedented anomalies, temporal in nature.

With the administration’s policies dedicated to stave off individual poverty and business bankruptcies, it seems clear that most of us will survive the dual catastrophes, though a few may not.

While we wait for the all-clear, it is a good time to consider making some moves.  First, knowing you will have “helicopter money” to help, but little or no pay, calculate whether you have at least 6 months’ living expenses available, including rent or mortgage, food, your insurance, communications, etc. You have probably saved a small amount by not going out to eat or buying gas.

Next, if you own a business, consider whether you want to use PPP or ERC.  Each has its merits which are too specific to outline here.  An easy explanation of the CARES Act is provided by Dr. Roy Ackerman in his blog, “Cerebrations:”  The short slide presentation at the bottom of the page is very helpful.

If you need additional cash flow, two good places to look are: and

As you now have time to ponder items besides your business, look at what the market has done to your IRAs, 401(k), or other retirement funds. If you have a “want list” of stocks you want to own when they are cheap, now is the time to update that list.  Warren Buffett is famous for saying the best time to buy is “when there is blood in the water” -- everyone else is selling. However, price alone is not a sufficient catalyst. The company must have assets and positive cash flow as well as earnings. Limit orders (setting a maximum price) can keep you from paying too much.

At the same time, you should review your retirement objectives and weigh the cost of the market drop.  Will it require you to recalculate your expectations for income in retirement?  Do you need to change your approach and your Financial Plan to compensate for your lost assets?

Also, this is a time that will most likely put you into a lower than usual tax bracket – lost or reduced wages and bonuses but fewer expenses, same overhead. It may be opportune to move some of your pension funds to a Roth IRA, paying 2020 income tax on the transfer to reap tax-free income in retirement. This strategy is particularly appropriate when you consider that CARES Act money and other programs will have to be paid for by taxpayers, sooner or later.  It is unlikely we can afford to maintain our current low income tax rates.

Next, some clients are finally reacting to my clarion call to adopt an Exit Strategy. While their businesses are idle, thinking about that ultimate “goodbye” to it is not unnatural. Planning as early as possible means the cost of transition will be minimized and the deed, efficient. The numbers flow easily when paired with your retirement review, as most owners expect the sale of their business to cover some part of retirement expenses. Hopefully, this hiatus will be short and profits will quickly return.

With the current uncertainty, you should not expect to be able to complete these projects quickly. You built your business or career over many years. Putting a Plan in place can (and usually does) take months.

Just as you are confined to meeting via Zoom or other media, we are doing the same. Key questions and video conferences are getting Plans and actions started. We often procrastinate on these topics using work as an excuse when in reality, it is just that it is hard to make tough decisions. You do it in your business; now do it for yourself and your family.

When life gives us lemons, we have a choice: bitch and moan or make lemonade. (Sometimes, I do both.)