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Preparing Your Finances and Budget for a Post-COVID Landscape

Preparing Your Finances and Budget for a Post-COVID Landscape

We have all heard the overused phrase “new normal” too often. Pundits and media types love to tell us that this is a different time, situation, or environment than we have ever seen before. I tend to look skeptically at these prognostications because history has a way of repeating itself. All of that said, we are all finding our footing in the soon-to-be post-Covid lockdown period. It will feel strange to eat in a restaurant or shop in a store without wearing a mask. This will not, however, be a new normal as much as a move toward “back to normal,” not only in our personal and social lives but also in our financial lives. 

Savings Rates on the Rise

We all were forced to adjust our lives and adapt to a Covid world. We all stayed at home more and limited our exposure to populated situations. A silver lining emerged from this very difficult period in our lives by way of our personal savings rates. Personal savings rates in the United States skyrocketed in 2020. The savings rate in 2020 was almost double that of 2019 and more than doubled the respective rates of 2016 and 2017. This was the direct result of our travel and discretionary spending being greatly restricted; therefore, most people changed their spending habits without necessarily trying to change their spending habits. We didn’t intentionally tighten our budgets. More so, our budgets were tightened for us. For this reason, we need to be cognizant of how our budgets are likely to change again in the post-Covid world. 

In the chart above, 2020 became one of only two years since 2000 that Americans’ personal savings rate eclipsed 10%. Click here for the interactive chart. Source: Statista.com

Pitfalls on the Move Back To Normal

Our economy is emerging from the past 15 months and the US consumer appears ready to spend again. The travel statistics in the U.S., while still low, are strongly rebounding, with nearly nine in 10 Americans preparing to travel in the next six months. Bars and restaurants are also seeing foot traffic slowing moving back to pre-Covid levels. All of this means one thing for our finances – plan or deal with the consequences. We will likely experience myriad influences over the coming months, including the lack of a spending budget and the desire to do everything we couldn’t during Covid – all at once. These can cause major problems to our monthly budget. We should anticipate an increase in our discretionary spending and plan for it. Make a conscious decision to set a monthly budget for spending on dining out, entertainment, and travel.

We should also be aware of the desire to make up for the lost time. For many of us, we haven’t seen a concert, attended a live event, or traveled on vacation in roughly a year and a half. We should fight the urge to make up for that in the next six months. Spread out those more costly, splurge-type purchases over the next year or two. It is important to establish a dedicated travel line item into our budget. This will make it much easier to control those costs. 

Assess Your Financial Situation 

Your financial life is in a different place than it was at the beginning of 2020. Many people have experienced a job change or an increased balance in their cash reserves. Now is the time to re-examine your financial goals and meet with your financial advisor. You may have a former 401k to roll over or room in your existing employer-sponsored retirement plan for additional contributions. The investment markets are in a significantly different place than they were 15 months ago, as well. Have you rebalanced your investment allocation since the pandemic started? Investors should determine if their risk profile has changed. Life events that are the size, depth, and breadth of Covid-19 change us individually and can easily have an impact on our view of risk. For all of these reasons and many more, you should book an appointment with your financial advisor and update your financial plan. If you do not have a financial plan, feel free to reach out to Walkner Condon.

Nate Condon, Financial Advisor

What to Know about the 2021 Advance Child Tax Credit Payments

What to Know about the 2021 Advance Child Tax Credit Payments

In March of 2021, President Biden signed into law the American Rescue Plan which was intended to help ease the economic burden faced by many families due to the Coronavirus pandemic that has affected the world over the last 16 months. This bill had numerous additional benefits included in it, and one of them may impact you or someone you love. It is the Advance Child Tax Credit payments that are scheduled to begin on July 1, 2021. We want to make sure that you know where to go to find out if you qualify and what you would need to do in order to receive your payments.

How Do I Receive the Advance Child Tax Credit Payment?

First off, this child tax credit payment is actually an advance of a portion of your 2021 child tax credit. In order to qualify for the payment, you MUST have filed your 2020 tax return by May 17 of this year. The IRS is currently setting up two portals, both of which will be live by July 1, that qualified individuals can use to manage their child tax credit and update information pertaining to their situation. The second portal is specifically for non-filers or people whose situations – number of dependents, income, etc. – have changed. You will have two options for how to receive this money. As one of the options, you can take monthly payments from July through December of 2021 and receive the rest of the amount you qualify for when you file your return in 2022. The other option allows you to take a lump sum for the total amount in 2022 when you file your return.

What is the Amount of the Child Tax Credit?

The amount of the tax credit per child is based on your AGI from your 2020 tax return, so it is important that you go to the IRS portal to calculate what your advanced tax credit is going to be as well as determine how you would like to receive your money. In order to receive the lump-sum payment, you will need to opt out of the default monthly payment option. The credit will increase the amount of child tax credit from $2,000 to $3,600 for children under six years old. For children 6-17 years old, families will receive $3,000 per child. You can also claim $500 for children who are 17 or 18 years old and full-time college students between the ages of 19-24. There is a requirement that the children be related to you and reside with you for at least six months out of the year.

Are There Income Requirements? 

As far as income eligibility is concerned, married couples filing jointly will be eligible for the full credit if their AGI is below $400,000 and single filers below $200,000. The larger tax credit will begin to phase out if your AGI is above $150,000 for married couples and $75,000 for single filers. The phase-out for heads of household filers is $112,500. The amount will be reduced by $50 for every $1,000 over that threshold. In order to calculate what you are eligible for, visit the Kiplinger 2021 Child Tax Credit Calculator.

Jonathon Jordan, CFP®

Creating a Culture of Philanthropy

Creating a Culture of Philanthropy

New to the Walkner Condon team, I come from 10 years of fundraising for non-profit organizations. Whether it was promoting wildlife conservation or helping to eradicate preventable diseases (which feels especially poignant these days), my career in charitable giving has cemented my understanding of the importance of philanthropy.

I have had the privilege of working for some highly reputable organizations, but I have also had the privilege of working with a highly diverse swath of donors and volunteers – ages, nationalities, and socioeconomic backgrounds. 

Taking some time now to reflect on my tenure in charitable giving, I have noticed a common thread among those generous donors and volunteers. No matter the size or shape of their gifts, they subscribe to a culture of philanthropy. Somewhere along the way, the importance of giving back was impressed upon them. Perhaps their families have supported the same causes for years, or perhaps they themselves were beneficiaries of gifts that changed their lives. Regardless, experiencing a culture of philanthropy instilled the importance of exploring the many ways in which we can all make the world a better place.

But where to start? Depending on the charity, gifts can be made in several different ways – for example, outright cash, monthly sustaining gifts, gifts of appreciated assets such as stocks, IRA qualified charitable distributions (QCDs), as well as giving posthumously from your estate. But beyond that, giving can also take the form of volunteering and advocacy for your favorite organization(s). Is there a cause that you find important or an organization that intrigues you? Research it! Visit that charity’s website, send an inquiry to their volunteer office, or do the really fun task of reading their annual reports. 

Some families have established family foundations that allow and ensure their culture of philanthropy transcends generations. But for the majority, it can be as simple as taking the small step of making room in our monthly or annual budget for this purpose. Perhaps it’s a monthly contribution to your favorite cause. Or perhaps you choose 2-3 charities to give to each December. And even beyond financial support, consider the other resources you have to offer (time, talent, etc.).

Deciding where and what to give can be a solo decision – or one that you make together as a family. We know our kids are watching and learning from us as we talk about money, so why not include them in the discussion? Instilling this culture of giving back at an early age can be critical and lead to a legacy of giving.

If you ever think a gift is too small to make a difference, I would challenge you to reconsider. Think about that “small” gift combined with hundreds of other families doing the same thing. That “small” gift now becomes something substantial. And not to mention, that act of giving can turn into a habit or inspire others to join you, especially those in your own circles of influence.

We all know how it feels when asked to contribute to a friend or family member’s fundraiser for this or that. All are important and worthy to support, but might be difficult to prioritize. So maybe create some space in your budget for those individual fundraisers that pop up. It may even give you a sense of security knowing you can be there for those who need you when they need you. Plus, you are demonstrating to your children (or other impressionable connections) that you can care passionately about something and actually do something about it.

In the world we live today, there is no shortage of worthy causes. Just remember to do your research and ensure you understand where your money is going. Charity Watch and Charity Navigator are two great places to start.

This is one of the things I’m most excited about in joining the Walkner Condon team: learning the money management side of this equation. After all, thanks to smart financial planning, your family can create space for giving back and making your own brand of difference in the world.

While I leave behind a career of soliciting, processing, and stewarding donations, I look forward to helping our clients achieve their goals, whether that includes charitable giving or not.

But if you think about it, the simple act of giving once and talking about it with your children, grandchildren, nieces, or nephews, could be the inspiration and catalyst for creating your family’s culture of philanthropy.

Polly Price

A Big Problem with using Cryptocurrency as a Payment Tool

A Big Problem with using Cryptocurrency as a Payment Tool

So you got a little adventurous a few years back and decided you wanted to make the leap and buy some cryptocurrency. Whether it’s ether, bitcoin, or any other variety of cryptocurrency, eventually you may decide that you would like to use some of that newfound wealth (presuming that it, in all likelihood, has increased in value) to send a payment in your cryptocurrency of choice to a vendor, like maybe to buy that NBA Top Shot NFT or even to show off your trading prowess by buying a Tesla with bitcoin

You agree to buy something and send out your payment for that digital artwork that you just had to have. If it’s bitcoin, it probably takes around ten minutes for the transaction to actually clear (far longer than a U.S. dollar-based credit or debit card transaction of course, at a far higher environmental cost). 

Let’s say this was a transaction in the equivalent of $5,000 in USD. Here’s the problem – unlike sending a stable currency like the U.S. dollar (which triggers no capital gain or loss), this will trigger taxation on the cryptocurrency transaction. In a very simple example, if you originally bought $500 USD in bitcoin in 2015 and you sent out the $5,000 USD to buy your artwork, you will have to recognize a $4,500 capital gain from the transaction despite never converting the cryptocurrency to USD.

In another example, you saw a cute cat meme that became the avatar for the newest coin that you couldn’t pass up, kittycrypto. You decided your dogecoin was no longer the “in” currency to have and therefore, you exchanged your $10,000 USD equivalent of doge, which you bought for $6,000 USD three months ago, into kittycrypto. Unknowingly, you have again triggered taxation, and this time it was held less than 12 months; it is now a short-term gain taxed at ordinary income tax rates. 

For those that may think these are merely examples, the Oakland Athletics have recently become the first team to accept Dogecoin for tickets. This is not the first time they have dabbled in accepting alternative currencies to USD, but as in my example above, be sure to track your transactions since it may involve a capital gain or loss. 

As the utilization rate of cryptocurrency continues to escalate, unanticipated taxation may be triggered with transactions. Because we are not used to looking at the cost basis of our U.S. dollars when we make daily transactions, this certainly isn’t top of mind for people and should be treated with a critical eye and solid accounting. If you are also getting the feeling that using cryptocurrencies for everyday transactions is fraught with peril, also consider the Bloomberg Opinion article linked above, “One Bitcoin transaction would generate the CO2 equivalent to 706,765 swipes of a Visa credit card.” Maybe next time you should just use the plastic.

Clint Walkner

For more information on cryptocurrencies, see:

A (Somewhat) Plain English Introduction to Cryptocurrency and Blockchain (blog)

Welcome to NFTs: An Intro to Non-Fungible Tokens, NBA Top Shot & Digital Collectibles (podcast)

Please note that this is not an offer or endorsement to purchase cryptocurrencies or NFTs, nor does Clint Walkner offer tax advice and is not a CPA or tax professional.