On August 8, 2020 President Trump issued four Executive Orders (technically three memorandums and one order), that offer possible additional eviction and foreclosure assistance, a payroll tax holiday, student loan payment and interest deferral, and unemployment pay.

There is a question of the legality, as federal spending is a power reserved for Congress, and they could be stopped by a court order, but so far Democrats have not proposed that, as negotiations for another stimulus package have stalled, and they are unlikely to stop the additional unemployment amount given under the orders.  

This article will be updated as more information becomes available.

Memorandum: Student Loan Payment Deferral

The CARES Act deferred payments and interest on Federal Direct student loans until September 30, 2020. This memorandum offers further deferral until December 31, 2020. The memorandum specifies that those who want to can continue to make payments.

We don’t know yet if this continued deferral will be automatic (it most likely will be), and whether the skipped payments will count towards forgiveness programs, such as Public Service Loan Forgiveness (PSLF).

Memorandum: Unemployment Pay

Under the CARES Act those who are unemployed received their state benefit plus $600 a week, fully funded by the federal government. However, that $600 extra per week ended in late July. This memorandum provides $400 extra per week, ending no later than December 27, 2020.

Of that $400 extra, states have to pay $100 of it.

What we don’t know is what will happen if the states don’t have the funds, as many states have already said they don’t. Will the unemployed get an extra $300? We also don’t know when the extra $400 per week will start.

Memorandum: Payroll Tax Deferral

This memorandum defers payment of payroll tax from September 1 through December 31, 2020. This only applies to those with bi-weekly pay less than $4,000, calculated on a pre-tax bases (or $104,000).

This is a deferral only, and the tax will be due in the future, most likely with April 2021 taxes.

The major criticisms of this memorandum is that is does not help the unemployed, and that it will have to be paid back. It is also extremely unpopular among both Republicans and Democrats. If Congress decides to extend it, they will have to decide how much to reduce it and how long it will last.

If the deferral is the full employee portion of the payroll tax (7.65%) someone earning $40,000 year will get approximately $255 extra on their monthly paycheck, while someone earning $100,000 will get approximately $637 extra per month. Again, though, this is simply a delayed tax, not a cancellation. My concern is that people will spend that money and not be able to pay it back when it becomes due.

Chances are, if Congress chooses to include this in their bill, that they will cancel the collection of the tax, but nothing is sure yet.

President Trump has tied this directly to his re-election, stating that if he is re-elected he will make the deferral permanent and that it will not have to be paid back. Presidents, however, do not have this authority, so it would take an act of Congress to enact this.

If this is upheld, we don’t know whether that $104,000 is for single or married borrowers, and there is no word on whether or not there will be a deferral of the employer portion (it is unlikely that there would be a deferral of that portion).

Executive Order: Assistance to Renters and Homeowners

The CARES Act moratorium on certain evictions and foreclosures expired on July 31, which could start a wave of people losing their homes or rental. With unemployment still high the concern is that a loss of housing will spread the Coronavirus faster if people end up in homeless shelters or in a crowded multi-family home.

This Executive Order, however, does not really stop either evictions or foreclosures. It simply directs the Secretary of the Treasury and the Secretary of Housing and Urban Development to identify Federal funds to provide temporary financial assistance to renters and homeowners who are struggling to meet their monthly or mortgage obligations.

Basically this order says these groups need to look into it and try to figure out how to help. Measures mentioned in the order may include, “encouraging and providing assistance to public housing authorities, affordable housing owners, landlords, and recipients of Federal grant funds in minimizing evictions and foreclosures.”

We don’t know what will come of this – it could be a full moratorium, or a partial one. If there is direct money we don’t know if funds may be provided directly to landlords or to tenants to pay their landlords.

Millions are people are out-of-work, furloughed, or have had their hours reduced. One of the first payments that often goes when times are tough is the mortgage or rent payment. It is generally a person’s largest bill (representing 25-50% of many people’s budgets) and not making that large payment can be seen as a way to continue purchasing things that are necessary right then (such as food and utilities).

If you, or a client you are working with, is struggling there is some relief in the CARES Act.

As is always the case in situations like this, TALK WITH YOUR LANDLORD OR MORTGAGE SERVICER ahead of time. Let them know what is going on. There are programs and policies in place, not just with the CARES Act, but in many states, cities, and companies. Chances are there is a program in place to help, but your best bet is to contact them before the payment is due.

Let’s take a look at both rent/eviction and mortgages/foreclosure and what provisions are in the CARES Act for each.

RENT/EVICTION

It is estimated that 1/3 of Americans did not pay rent or only paid partial rent in April. Under the CARES Act tenants cannot be evicted for non-payment of rent if their landlord has a federally-backed mortgage (which would include, among others HUD, VA, USDA, Fannie Mae, Freddie Mac, and public housing).

This moratorium on evictions last for 120 days starting on March 27, 2020. After that the tenant needs to be given 30 days notice before they can be evicted.

It is important to note that this is not free money or free rent – the rent is still due, and the tenant can be evicted after the moratorium is over. Also this provision only applies to non-payment of rent – eviction can continue for other reasons such as violating the terms of the lease or damage to the property.

No additional fees, penalties, or other charges can be added beyond the rent payment.

It is important to remember the effect this is having on landlords as well. For most landlords rentals are their livelihood and they are concerned about the implications of the economic shutdown on their business and on their tenants.

In addition to the CARES Act provisions, many states have passed laws temporarily banning evictions. Columbia Law School and other lawyers have put together a database that outlines eviction orders in place in all 50 states.

How do you know if your landlord has a federally-baked mortgage? The only way to find out for sure is to ask them. If the landlord is not forthcoming about information or they illegally start the eviction process (officially or unofficially) you may need to talk with a lawyer.

If you are a landlord it is possible to qualify for an Economic Injury Disaster Loan through the Small Business Administration. As of April 20 the program was out of money, but there is talk in DC about Stimulus 3.5 which would appropriate more money to the program. When (or if) a deal is reached, this article will be updated.

Landlords may also qualify for mortgage forbearance (described below) under the CARES Act.

MORTGAGES/FORECLOSURE

If you can pay your mortgage, pay your mortgage. If you cannot pay your mortgage, reach out to your servicer as soon as possible.

Under the CARES Act there is a moratorium on foreclosures for federally-backed mortgages, which includes U.S. Department of Housing and Urban Development (HUD), USDA, FHA, VA, Fannie Mae, and Freddie Mac loans.

Fannie Mae and Freddie Mac hold about half the mortgage loans in the US. You can ask your servicer who backs your loan.

Under the CARES Act lenders cannot begin or finalize a foreclosure for 60 days starting March 18.

If a borrower cannot make their payment there is a forbearance provision available, which will pause or reduce payments. The borrower does not need to provide any documentation other than a statement that they need to take advantage of the forbearance.

The initial forbearance lasts for 180 days, with a 180 day extension available if needed.

During the forbearance only scheduled interest can accrue, and the loan has to be reported as current to the credit bureaus.

To take advantage of this borrowers need to contact their loan servicer. They should also discuss a plan for making up the payments in the future. For most borrowers that will mean re-casting their payments to the end of the loan term. Borrowers should avoid sending in partial payments unless their lender agrees to apply those payments to the balance and not end the forbearance.

On either a rental or mortgage deal you should get all provisions of the deal in writing.

NOTE: This article will be updated as new guidelines or laws are passed about economic support during the Coronavirus pandemic.

NOTE: Updated 4/9/2020 due to the passage of the CARES Act and updated guidelines from the U.S. Department of Education.

There have been some significant developments to the federal student loan program during the pandemic and as a result of the CARES Act, which was signed into law on 3/27/2020. I will continue to update this post as new information is announced.

The CARES Act temporarily suspends payments on the following student loans that are owned by the Department of Education (ED):

• Defaulted and non-defaulted Direct loans
• Defaulted and non-defaulted FFEL loans
• Federal Perkins loans

The automatic suspension does NOT apply to any other student loans, including:

• FFEL loans held by commercial lenders
• Perkins loans held by a school
• Private student loans

The payment suspension lasts from March 13, 2020 until September 30, 2020. In addition to the payment suspension, all covered loans have their interest-rate set to 0% during that same time period.

Questions and Answers about the Payment and Interest Suspension

How can I find out if my loan is owned by ED?

To find out who owns your loans check the website of your servicer or go to StudentAid.gov/login. Either one will list the current owner – if it lists ED or Dept of Education the loan is covered under the payment suspension. In addition, most servicers got their websites updated by early April to reflect a new payment of $0. If you are unsure whether or not your loans qualify, check with your servicer.

Is interest suspended for students in school now as well?

If you have an unsubsidized Direct loan interest will not accrue from March 13 until September 30, 2020.

My loans are in default and my wages are being garnished or my federal tax refunds have been seized. Will my loans qualify for the payment and interest suspension?

Yes, involuntary collection is suspended from March 13 until September 30, 2020 as well. In addition, you can request a refund of any amount that was garnished or taken from your tax refund after March 13. The same is true of any Social Security or Disability payments withheld after March 13. You can check with your servicer or call the ED’s Default Resolution Group at 1-800-621-3115.

Can I continue to make payments during the payment suspension?

Yes, borrowers can make voluntary principal payments during the payment suspension. However, all accrued interest needs to be paid off before payments reduce the principal balance.

I have heard that suspended payments count as payments for forgiveness programs. Is that true and which forgiveness programs are included?

Suspended payments are considered payments for loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF). In addition, payments count towards forgiveness on income-driven repayment plans (IDR).

My loans are in default and I am in the process of rehabilitating them. Should I continue to make payments during the payment suspension?

ED has recently confirmed that the suspended payments will count as on-time payments during the payment suspension period, so there is no need to continue making payments.

Rates on private student loans are low – should I refinance my loans?

Refinancing loans only makes sense if borrowers have a high federal rate and they know for sure they will no be using any of the federal benefits, such as forgiveness, deferment, or forbearance. With 0% interest and no payments for now, though, I would just focus on paying the principal balance down.

My loans don’t qualify for the automatic suspension. Is there anything I can do?

You can always check with your loan servicer and see if they have a payment suspension option for the pandemic. Most likely any payment suspension will not include an interest suspension.

Can I consolidate my FFEL loans and take advantage of the payment and interest suspension?

You can, but consolidating can take 45-60 days, and any accrued interest capitalizes, which means it is added to the principal balance. In addition, it can have an effect on loan forgiveness as well, so you want to make sure you do not consolidate them with Direct loans that are in a forgiveness plan.

If you want help navigating these changes and setting up a student loan plan visit my website https://studentloanplanning.com/.

Due to the economic shutdown from the Coronavirus many Americans have been laid off, furloughed, or had their hours cut dramatically.

Typically between 200,000 – 300,000 new people file for unemployment benefits each week, while a record-breaking 3.2 million filed for benefits with the week ending March 21, and that number will continue to go up as more and more companies are laying off or furloughing employees.

The passage of the CARES Act is opening up unemployment benefits for more people, increasing the length time they can get unemployment, and increasing the amount they can get each week.

Who qualifies for unemployment benefits?

The CARES Act makes more people eligible for unemployment, including self-employed, gig workers (such as Uber or Lyft drivers), part-time employees, independent contractors, freelancers, and others. In many cases even workers who have had their hours cut, but they are not totally unemployed, will qualify for partial benefits.

Career One Stop, which is an unemployment site sponsored by the U.S. Department of Labor, states that under the new law, states can pay benefits where, “An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work; An individual is quarantined with the expectation of returning to work after the quarantine is over; and An individual leaves employment due to a risk of exposure or infection or to care for a family member. In addition, federal law does not require an employee to quit in order to receive benefits due to the impact of COVID-19.”

How much can I get in unemployment benefits?

The benefit level is determined by the state, with the lowest being Mississippi at $235 per week, and the highest being Illinois at $1,495 per week, with most states paying between $300-$500 per week.

Most states have a similar calculation – they take the worker’s highest earning quarter over the last year and divide that by 26, capped at a maximum amount. For example, if a worker earned $12,000 in their highest quarter they would get $461 per week ($12,000/26 = $461). If their state caps benefits at $420, they would get $420 per week.

Under the CARES Act all those who are unemployed will get an additional $600 per week, which will last up to four months through July 31. In the previous example where an unemployed person was receiving $420 per week they will now get $1,020 per week.

How long can I get unemployment benefits for?

Each state provides benefits for different lengths of time, but the average (before the CARES Act) was 26. Some states, such as Florida and North Carolina, only provided benefits for 12 weeks, while Massachusetts provided benefits for 30 weeks. The CARES Act extends unemployment benefits by an additional 13 weeks (making the maximum length in most states 39 weeks). The extended benefits will last through December 31, 2020.

The CARES Act also eliminates the one-week waiting period, which means you can get a check starting on the first week instead of the second week.

How do I apply for benefits?

Each state has a different process to apply. You can learn about unemployment benefits here and find a list of state offices here.

Looking for a job

While many employers have had to lay off employees, others are hiring part and full-time workers, including Amazon, Costco, CVS, pizza chains, Dollar General, Walmart and more. USA Today has an article that links to many of the major employer’s websites who are hiring. Be sure to check in your local community and state as well. Many communities have Facebook pages where employers looking for help post the job.

Small business forgivable loans

If you own a small business (from one employee up to 500 employees) you can apply for a loan through the Small Business Administration, and, if certain stipulations are met, that loan can be forgivable. The loans can be used to pay payroll, payroll expenses (such as health insurance), interest on mortgage loans, rent, and a few other expenses. Small business owners can learn more and apply for a loan here.

This article will be updated as more information becomes available.

These graphs show the S&P 500 and DOW Jones averages since the beginning of 2020 through the close of the market on March 20, 2020:

Some “experts” are predicting it could go down another 20% before this is over. Maybe they are right. Maybe they are wrong. Maybe it will start going back up tomorrow, maybe it will drop another 30% or more. No one knows for sure. My crystal ball is out of order, so I certainly don’t know.

Investors are panicking and pulling money out of the market. I hear people use words like “stressful” “scared” and “worried” with only the occasional investor using the word “opportunity.”

Let’s address the stressed, scared, worried, panicking investors first.

If you have a financial advisor, this would be the time to call them. Actually, if they are a good financial advisor, they should have contacted you already. If they are avoiding you, it’s time to find a new advisor.

I could give you all the statistics about not missing the up days in the market, or not buying high and selling low, but stress and worry and being scared are emotions, not logic. Our brains have been wired to “fight, flee, faint, or freeze” when we deal with stressful situations, including stressful financial situations. Getting out of the market is our way of fleeing as we see our balances going down.

I would encourage you to pause. What are you investing for? Most people would say retirement or college or some other goal. What values are those goals based on?

Our behavior should be framed by our goals, which should be framed by our values. If your financial planner hasn’t done this with you, or if you don’t have a financial planner, here is an important question for you:

• Why is money important to me?

Write down whatever answer comes to mind first. Let’s say you thought “security.” Write down security then ask:

• Why is security important to me?

Keep this process going until you dig down to the deepest reason money is important to you. Don’t dismiss this as simplistic and unimportant! Pause the panic and do this exercise.

For me, money is important because it represents security, freedom, time, and the ability to support and spend time with my family. Money is simply a tool to help me live these values, and I invest in the market to help it grow. That is true in up markets, and honestly it is even more true in down markets.

For the average 40-year old they have years until they will need the money invested in the market, and years in retirement.

What about someone who is 60 and planning to retire in the next few years? First of all, you should probably be moving towards a more conservative portfolio if you don’t have time to weather the ups and downs of  the market. If that describes you, it is time to talk to a financial planner. Remember, however, that you likely have 20 or more years in retirement. Don’t panic and sell now or you lock in the losses that are just on paper now.

Many people can’t understand how some investors see this as an opportunity. How is it an opportunity? The stock market is on sale! You can buy additional shares of stock or mutual funds right now at a steep discount. America and the world will recover from this, and the market will go back up. Maybe not tomorrow, maybe not next month, and maybe not this year, but it will recover.

Let’s say the stock of a company was trading at $30 a share and it is down to $15 right now. Instead of buying one share at $30 you can now buy two shares for that same $30. When the market recovers to $30 you now have two shares worth a total of $60. You can make much more money during a down market because of the discounts.

Can I share a few good investing principles with you to think about during the down times?

• Only look at your balance once a quarter, at the most. How is my portfolio doing? I have no idea. I haven’t looked at it. Not because I am worried or scared, but because I don’t care. I’m not investing for the short term.
• If you can put any extra money in the market right now, go for it!
• If your financial advisor is avoiding you or not dealing with the emotions of investing, it is time to start looking for a new advisor. Ask any potential advisor lots of questions and make sure you feel comfortable with them.

If you have questions or want to talk more, let’s have a conversation. Contact me or leave a comment below.

Since 2007 money has topped the list of sources of stress for Americans, with almost two-thirds reporting that money caused them very significant or somewhat significant stress.

Money is also the leading cause of stress in relationships, with 70% of married couples arguing about money. According to research arguments about money are by far the top predictor of divorce, and fights around money take longer to recover from than any other type of argument.

Reading all of that might make everything seem hopeless. After all, don’t all married couples fight about money? No! My wife and I have been married for almost 20 years and we have never had a fight about money. We had a lot to learn about money together, but we have never fought about money.

In addition, I have been counseling individuals and couples about money for close to 20 years and have learned a lot about what works and what doesn’t work. Through personal experience, counseling experience, and research, I have discovered many things that financially healthy couples do with money.

Here are my top ten tips for couples:

1. Find a financial counselor that can help you walk through everything. A trained financial counselor understands the financial side of money and the emotional side of money. I strongly suggest couples work with an Accredited Financial Counselor, which can be found at http://afcpe.org/find-an-afc. If you are not married yet, see a Financial Counselor as part of your pre-marital counseling.

2. Meet as a couple on a regular basis and discuss (discuss – not fight) your budget, goals, dreams, and creative solutions to your financial challenges.

3. Each partner in the couple should take the online Money Habitudes assessment. This tool will help you understand your money habits and attitudes, and will give you important tools and knowledge to discuss with each other and your financial counselor. You can learn more here: https://online.moneyhabitudes.com/

4. Set financial goals together and work towards achieving those goals.

5. Make sure each partner has money they can spend on whatever they want.

6. Set some money aside for each partner to be able to grow and develop their talents. For example, if your spouse wants to learn to play tennis, they could sign up for lessons. If you want to learn how to cook healthy meals, you could take a class. Even better, see if there is a class you both would enjoy.

7. Spend money on experiences, not things.

8. Be sure there is absolutely NO financial infidelity in your marriage (financial lies). Few things will destroy trust in a marriage faster than lying about money.

9. Review both partners credit reports on a regular basis (at least once a year).

10. Learn about money together – listen to podcasts and read books together. A few suggestions for podcasts include Stacking Benjamins, You Need a Budget, The Ric Edelman Show, and Money Tree Investing. A few books I recommend are You Need a Budget, The Difference, and How Rich People Think.

What other tips do you have for making money work in your marriage or relationship? Please share in the comments below or on Facebook at https://www.facebook.com/RyanHLawBlog/

Sources:

American Psychological Association (2017, November 1). APA Stress in America survey. Retrieved from http://www.apa.org/news/press/releases/2017/11/lowest-point.aspx

Jacques, S. (2013, July 12). Researcher find correlation between financial arguments, decreased relationship satisfaction. Retrieved from https://www.k-state.edu/media/newsreleases/jul13/predictingdivorce71113.html

MagnifyMoney (2017, February 13). 21% of divorcees cite money as the cause of their divorce, MagnifyMoney survey shows. Retrieved from https://www.magnifymoney.com/blog/featured/money-causes-21-percent-divorces925885150/

Money (2014, June 1). Poll: How husbands and wives really feel about their finances. Retrieved from http://time.com/money/2800576/love-money-by-the-numbers/.

Vincent, S., (2015, February 4). Love and money: People say they save, partner spends, according to SunTrust survey. Retrieved from http://investors.suntrust.com/news/news-details/2015/Love-and-Money-People-Say-They-Save-Partner-Spends-According-to-SunTrust-Survey/default.aspx

What do Beanie Babies, Baseball Cards and Bitcoin have in common?

None of them are a good investment.

For those unfamiliar with Beanie Babies, they are a stuffed animal that became a fad in the mid-90’s. Ty Warner, Inc. created the toys but strategically only produced a limited amount of each new stuffed animal and retired them regularly. People would wait for hours and hours for the chance to buy one of the limited ones, then they would sell them for as much as ten times the price, mainly on Ebay. At one point Beanie Babies made up 10% of Ebay’s sales!¹ People spent fortunes buying and carefully storing them. The bubble, of course, burst, and now those bins of Beanie Babies are essentially worthless. There are stories of people going bankrupt after spending over $100,000 on the toys² or carefully sorting their Beanie Babies in a divorce.³

And how about baseball cards? This was a fad of the late 80’s and early 90’s. Topps, Score, Donruss and Upper Deck were among the companies that printed millions of cards and were religiously collected by almost every boy in America (myself included). Baseball card shops opened up all over the nation, and a price guide printed monthly by Beckett detailed how much each card was worth, often driving the market by setting prices. While a Mickey Mantle or Honus Wagner card might be worth a lot, the remainder are essentially worthless. It was a bubble that was bound to burst.⁴

Both Beanie Babies and baseball cards produced no real value – they were hyped up by the market and the prices were artificially inflated. Again – these items held no intrinsic value – they did not produce any further value. If you like Beanie Babies or baseball cards because you enjoy them, great, but if you bought them as an investment it was a bad gamble.

Enter Bitcoin.

Without getting technical, Bitcoin is a form of currency (called cryptocurrency). It is “mined” by massive computers running complex algorithms. According to a Bitcoin forum⁵ someone trying to mine bitcoins on a home computer will mine about 0.00001406 bitcoins per week, which means it will take well over 1,000 years to mine 1 Bitcoin.

Clearly mining isn’t the way to make money.

The basic idea behind cryptocurrencies like Bitcoin is that there is no bank or government or currency backing it up. If you own a Bitcoin you own an electronic coin that you can (hypothetically) use to purchase items (although the documentary Life on Bitcoin⁶ shows how hard that can be).

The basic idea would be that if a Bitcoin was worth $1, you could buy a $1 drink for 1 Bitcoin. You transfer ownership of that Bitcoin to the company selling you the drink. If a Bitcoin is worth $2 you would transfer ½ a Bitcoin to buy that drink. The new owner can either spend it or save it.

People buy Bitcoins in hopes that they will go up.

For early adopters, it went well. In 2010 the highest price was 39 cents. Bitcoin hit its high price on December 17, 2017 at $19,843.11.⁷ If you bought 100 Bitcoins at 39 cents each and sold them on December 17, 2017 you would have made $1,984,272 ($1,984,311 minus $39 initial investment). Not bad, right?

Wait – you didn’t buy any when it was 39 cents?!? Too bad. I didn’t either.

Let’s say you wanted to buy Bitcoin starting in 2018. On January 1 it closed at $13,500. It reached a high on January 6 at $17,152. On January 22 it closed at $10,823. Will it go back above $13,500? It’s hard to say. It might, but it might drop back down to $100.

By the way, let’s say you owned one Bitcoin when it was worth $10,289.26. To buy that same $1 drink with Bitcoin you would transfer 0.000097 Bitcoins. There’s some fun math for you!

However, people aren’t buying Bitcoin to buy a $1 drink (there are few places in the world where one can do that). They are buying Bitcoins in hopes that someone else will buy them for more. It is a purely speculative investment, with far more risk than most people should take on.

Maybe I’m wrong.

Maybe you can buy one Bitcoin today at $10,832 and it will be worth $100,000 next year.

Maybe it will be worth 39 cents.

That’s what speculative investments do.

Yes, there are cryptocurrency millionaires. There are also others who have lost far more than they could afford to. When people realize that there is no intrinsic value in Bitcoins they will have nothing.

Hopefully they can find comfort in their Maple Bear Beanie Baby while holding their Daryl Strawberry rookie card.

I recommend that you stick to real investments where real value is being created. Slow and steady wins the race. If you really, really want to buy Bitcoin never invest more than you can afford to lose, and speculative investments should never make up more than about 5% of your total portfolio.