Here’s What You Need to Know About the Updated PPP Package

The popular Paycheck Protection Program (PPP), which provides forgivable loans to small businesses to keep them afloat during the pandemic, will reopen with a few changes as the federal government attempts to better target the money to the underserved, smaller businesses that need it most. 

Below you will find some key facts from the updated stimulus package. Check here for further information and details. 

  • The PPP was re-upped by the $900 billion stimulus package President Trump signed just after Christmas. 

 

  • The Small Business Administration will restrict lending the first two days of the program, to community-based lenders like CDFIs making loans to first-time borrowers. 

 

  • That restriction follows criticism that businesses with strong banking relationships and more resources were more easily able to access money from the first round of the program than were their smaller, less-resourced peers. 

 

  • Then the program will open up to second-time borrowers that can demonstrate losses of at least 25% between 2019 and 2020 and that have 300 employees or fewer. 

 

  • The SBA said that larger lenders will be able to begin making loans under the updated program “shortly” after Wednesday, January 13, but did not specify an exact date. 

 

  • This new round of the PPP will be open through March 31, 2021.

 

  • The new stimulus bill set aside $284 billion for the current tranche of the PPP.

As we learn more about the details and regulations of this PPP package, we will share with you. Please reach out with any questions or if this new stimulus may impact you in any way. You can book a free 30-minute consultation on our site here.

Avoid These Mistakes when Rolling Over a 401(k) to an IRA

As we kick off 2021 and you begin thinking about money moves you want to make this year, we want to provide you with some insights on a common rollover and some costly mistakes associated with it. 

A good place to start is by distinguishing the difference between 401k plans and IRAs. You may be subject to penalties and taxation if you break any of the rules associated with a rollover, so it’s important to do your research first or consult with a financial professional. Both types of retirement accounts, 401(k)s and IRAs let you save tax-advantaged money.

Let’s discuss a few things you should look out for if you or your spouse rolls over a 401(k).

“Once you’ve decided to move your retirement money to an IRA, it’s best to avoid receiving a check made out directly to you from the 401(k) plan, even if it is sent to you,” according to a CNBC article. You do this so that there is no tax withholding that occurs. 

When conducting a rollover, make it clear that you want a direct rollover so that the process is easier for yourself and you can avoid any withholdings. With a direct rollover, funds are transferred directly from one trustee to another automatically, whereas with a indirect rollover, a check is paid directly to the participant, less a 20% with holding, along with a time window to get it transferred. 

Always remember to keep the rule of 55 in mind. Well what is the rule of 55 you may ask? The rule of 55 is an IRS guideline that allows you to avoid paying the 10% early withdrawal penalty on 401(k) and 403(b) retirement accounts if you leave your job during or after the calendar year you turn 55.

If your significant other is rolling over their 401(K) to an IRA, you could lose the right to be the heir of those funds. Once the money moves into rollover IRA, that account owner has the right to name any beneficiary they want without your consent. Things also tend to get tricky when a divorce occurs, so make sure to consult with your financial professional before making any financial moves or assuming any money. 

When rolling over money to an IRA, there are many steps and factors to think about and things can certainly get complicated. It may be best to consider seeking the guidance of a financial professional. If you find yourself in this situation, we would be happy to help and walk you through your rollover. To inquire more, schedule a free 30-minute consultation on our site. 

 

Is Tax Being Withheld From Your PayCheck?

Do you know how much money is being withheld from your pack check? Probably not. In fact, 45% of the people polled by the American Institute of CPAs said they don’t know when they last reviewed the amount of tax withheld from their paychecks.

Truthfully, many people we talk to do not really understand their tax implications nor understand their W-4 forms. Why should you care about your W-4 forms? Because, even though your taxes and filing a tax return may seem daunting, it’s important to remain on top of the situation to know how it will impact your finances. 

You might think that you just owe taxes, but thats not necessarily true. Indeed, the IRS issued 125.3 million refunds for the 2019 year, with recipients getting back an average of $2,535, according to agency data as of Nov. 20.

With the new year approaching, it’s important to become aware of your financial situation so that you can be in good shape come the beginning of next year. 

While tax season can be confusing and stressful, it’s crucial to understand your situation. Consider seeking help from a financial advisor or accountant when it comes to your taxes to help you better understand your withholdings. If you have any questions, please reach out to us at info@shermanwealth.com or schedule a complimentary 30-minute consultation.

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. 

The Stock Market Saw a Historic November Rally

November was a big month for the stock market, signaling that Wall Street sees better things ahead for the economy in 2021. Between the coronavirus pandemic, the election, vaccine news, and where we were just nine months ago, it’s hard to believe that our stock market is breaking record highs these days. It will be interesting to see how the November rally holds as we move into December.

 

This month alone, The 30-stock average rose 11.8% in November, its biggest one-month gain since January 1987. Back then, the Dow jumped 13.8%. Just last week the Dow Jones Industrial Average traded and closed above 30,000 for the first time.

 

The Russell 2000 remained up nearly 19% for November, putting the small-cap gauge on track for its biggest monthly gain since its inception more than 40 years ago. It was far outpacing the large-cap benchmark S&P 500, which was up more than 10% and on track for its biggest monthly rise since April, while the tech-heavy Nasdaq Composite was up around 11.3%.

And while December is historically a strong month for equities, analysts state that the strength of those November gains suggests a note of caution would be in order. We will continue to monitor how the market plays out this December, but November’s strong rally proves how important it is to stick with your long-term plan. Here at Sherman Wealth, we always encourage you to drown out the noise and biases within the market and stick with your initial plan for the long-term. If you have any questions about your portfolio, please reach out to us at info@shermanwealth.com or schedule a complimentary 30-minute consultation on our site.

How To Better Your Credit Score At Age 40

Credit score is an essential part of your financial life, setting you up for success in the long-term. Whether you are a recent college graduate, starting your first job, or in your 40’s and a mid-career professional, credit score remains equally as important. While it’s extremely important to save money when you are first starting out, it’s also quite important to know how to spend money and understand the repercussions of not spending responsibly. 

We read an interesting article that reported New Experian data that found consumers between the ages of 39 to 53 (aka Generation X) have a considerable gap in their credit scores when compared to older generations. The credit bureau’s 2020 State of Credit report shows that Gen Xers, with an average credit score of 676, are closer to the scores of Gen Y/millennials (658) and Gen Z (654) than they are to Boomers (716) and the Silent Generation (729).

No matter your age or financial situation, paying your bills on time is a crucial part of building and maintaining solid credit score. Having a good credit score helps you when its time to take out a mortgage, purchase a new car, or get a new credit card with better benefits. 

It’s crucial to make sure you know how to track your payments and and credit score every month. Consider using credit monitoring apps such as Credit Karma that update you with real life changes or sites such as AnnualCreditReport.com to see where your credit stands and ways to improve it.

If you have any questions about your credit score of explaining it to your children or grandchildren, we are happy to help. Please reach out to us with any questions at info@shermanwealth.com or book a free 30-minute consultation here. 

The CARES Act’s New $300 Charitable Contribution Deduction for 2020

The holidays are a great time to give back to people in need, especially if you are in a position to do so. If you are thinking about giving back this holiday season, you’re in luck, you can now get a tax deduction for it. 

The CARES Act, which was signed into law this spring, included a “partial above the line deduction for charitable contributions. This allows people who take the standard deduction — which is $12,400 for single filers and $24,800 for married-filing-jointly in 2020 — to claim a deduction of up to $300 in donations. You’d claim this tax break when you file your 2020 return next spring”, according to the IRS. 

Accordingly, fewer people also claimed a tax break for donations: 14.8 million returns claimed a charitable deduction in 2018, down from 37.9 million in 2017.

So what do you do once you donate? If you expect to take a write-off for the cash you’re giving to your favorite charity, make sure to keep the receipts for your records. According to the IRS website, You typically can write off a donation of $250 or more  if you have a written receipt or email of proof. 

At Sherman Wealth, we are very passionate about giving back to the community and supporting our local charities, especially around the holidays when we are appreciating all we are thankful for. We encourage those who are in a position to give back to find local charities to support and do as much as they can. If you have any questions about charitable contribution deductions or your portfolio, please contact us at info@shermanwealth.com or set up a free 30-minute consultation here. 

Below are some local charities we are passionate about: 

Nourish Now, No Kid Hungry, Manna Food Center, Jewish Federation of Greater Washington, So What Else, Montgomery County Coalition for the Homeless, JCC, and A Wider Circle 

 

Attention Robinhood Power Users: Most Day Traders Lose Money

It’s easy to get swept up in the rush of day trading and the ability to trade money at the tip of your fingers. And over the course of the last few months, we’ve seen “TikTok” investing and day trading increase in popularity, especially amongst young investors. But according to a CNBC article, despite what some might think, in reality day traders often have terrible track records. While we think investments and long term ownership is a great way to build wealth, we want to raise light to be careful when day trading and understand the tax implications and risk tolerance there. 

“I don’t confuse day traders with serious investors,” Princeton professor Burton Malkiel, author of “A Random Walk Down Wall Street.”  “Serious investing involves broad diversification, rebalancing, active tax management, avoiding market timing, staying the course, and the use of investment instruments such as ETFs, with rock bottom fees.  Don’t be misled with false claims of easy profits from day trading.” He also added, “Large increases in Robinhood users are often accompanied by large price spikes and are followed by reliably negative returns.” 

Why did that happen? The authors noted that most Robinhood investors are inexperienced, so they tend to chase performance. The layout of the app, which draws attention to the most active stocks, also causes traders to buy stocks “more aggressively than other retail investors.”

As young and inexperienced individuals begin day trading more and more, it’s important to spread the message about behavioral and investment biases that are present in investment management and financial planning, and oftentimes persuade one’s decisions about when and what to purchase and sell. Day trading may or may not have a piece in your portfolio, but if it does make sure to understand the whole picture and take your risk tolerance into consideration. Long term stock ownership and appreciation is a great way to build wealth but it’s important to be aware of the biases that are hidden within day trading. In our previous blog, we discussed ways to identify these biases and use that knowledge to make the best decisions on behalf of your investments. If you would like to discuss this day trading trend or behavioral biases that pertain to your portfolio, please reach out to us at info@shermanwealth.com and schedule a free 30-minute consultation here. 

 

Sitting on Cash? Here’s What To Do with It:

In our previous blog, we wrote about how a great deal of American’s households ‘ finances are in surprisingly good shape eight months into the pandemic. While this certainly is not the case for all households, we wanted to discuss options for those who may be sitting on an abundance of cash or have too much money in their checking accounts. 

It’s important to note that if you have more than you need to pay your bills in your checking account, you should consider putting away some of the cash in taxable investment accounts or savings accounts that accrue compounding interest. When choosing a savings account, consider banks that have higher interest rates than your standard bank, which currently have interest rates close to zero. Utilize FDIC-insured accounts such as Max My Interest or Capital One 360. With these record-low interest rates, it’s crucial to get your money into accounts that are maximizing and compounding your dollars overtime. 

Additionally, as the end of the year is just around the corner, think about checking off your financial planning to-do list, which may consist of funding your HSA and/or maxing out your 401(k) and IRA’s for the year. As mentioned earlier, if you have additional cash laying around, make sure to direct those funds into a taxable account.  If you are saving for your children or grandchildren’s college tuition, make sure to contribute to your 529 plans and inquire about all of your options there. Also, if you are considering end of the year charitable giving, make sure to contribute those funds as well. If you have any questions about your financial portfolio or end of the year planning, please contact us at info@shermanwealth.com and we are happy to set up a free 30-minute consultation with you. Lastly, check out our other blogs for more resources.  

 

The American Consumer Is Flush With Cash After Paying Down Debt

Almost a year into the pandemic, and we’re seeing American’s in pretty good shape financially. This may seem like a surprising statement given the current climate and widespread of lockdowns earlier in the year, but it’s true statistically. We know this doesn’t apply to all families in the same way, but it shows how strong the US economy is recovering from such a year year.  

During this time we saw very low mortgage rates, that may have had something to do with the Fed policy, but we also saw that more and more Americans are holding onto extra cash, which is something we wouldn’t think to be true. 

“Despite the surge in Covid-19 cases, economists project a 4% annualized rate of U.S. economic growth this quarter, though down from the prior period’s record gain”, according to a Bloomberg survey. The survey also showed that the pandemic has been financially challenging for working class families more than wealth ones, but they all seem to have been stockpiling cash. One reason savings and cash has remained flush could contribute to the fact that due to the pandemic, many people have not been spending on activities such as dining, leisure, and travel.

In all, it seems as though many American’s may have entered the pandemic in a strong financial position, which has helped them get through it. It’s surprising and great to see how after all this turmoil,  households are still remaining strong. It’s important to take advantage of situations listed above, especially refinancing, to help lower payments and in turn pile up your cash account. If you have any questions or want to discuss your portfolio or finances, please reach out to us at info@shermanwealth.com or schedule a complimentary 30-minute meeting here.