|Here’s a quick note about the new economic relief package that Congress passed just yesterday. The Consolidated Appropriations Act, 2021 comes in at over 5,000 pages and the NorthStar Team has been totally nerding out on it!
What’s in the box?
Who is eligible for the stimulus payments?
While dependent children under 17 will also receive $600 each, it doesn’t appear that adult dependents like college students or elders qualify for the payments.
If your family added dependents in 2020 or you earned too much in 2019 to qualify (but would qualify in 2020), you may not receive full payments immediately but can request additional money once you file your 2020 taxes. If you qualified based on your 2019 income but your 2020 income would have reduced your payment, you won’t have to pay it back; nor will it count as taxable income.
How do I claim a stimulus payment?
While the IRS hasn’t released a timeline for sending out payments, it’s possible electronic payments could start before the end of the year. When the last round of stimulus passed, the IRS began distributing payments two weeks later; however, plenty of eligible folks still haven’t received them many months later.3
What else do I need to know?
Small business relief: Congress included another round of relief for small business owners by extending the Paycheck Protection Program with another $284 billion in forgivable loans. Some of the funds will be set aside for very small businesses, and the PPP is now available to nonprofits and local media outlets.4
An extra $20 billion has also been appropriated for Economic Injury Disaster Loans for businesses in low-income communities, and $15 billion more is earmarked for live venues, movie theaters, and cultural institutions that have been financially damaged by the pandemic.
The deal also clarifies that PPP borrowers will be able to deduct expenses paid for with forgiven loans, clearing up a potentially nasty tax issue.
Unemployment benefits: The package also extends unemployment benefits of $300/week for another 11 weeks, beginning as early as December 27 and lasting at least until March 14, 2021. A benefits program specifically for contract and gig workers that was slated to expire at the end of the year is also extended through March.
What should I do with my payment?
If you’re among the very fortunate who don’t need to shore up your finances, we’d recommend putting it toward your retirement savings, other financial goals, or investing it in yourself through a course or hobby. Or even better, donate it to your favorite charity.
That’s it for now. We hope you and your loved ones are safe, warm, and well.
Questions? We’re here. Reach out at (704) 350-5028.
Happy Holidays and Warmest Wishes!
P.S. Wherever there’s money, there are scammers after it. Please be on alert for “official-looking” emails asking you to open an attachment or click a link—they may contain malware. If you get a suspicious email, check the sender’s name and email address to make sure they’re not fake. When in doubt, delete the email. The IRS or Treasury department will not require you to follow emailed instructions to receive a stimulus check.
P.P.S. Some great news to share: 556,208 folks were vaccinated against COVID-19 in the first week! That’s the power of human ingenuity and collective effort. We’re so grateful to be seeing some light at the end of this dark tunnel!5
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax professional.
Let’s face it. Buying meaningful gifts for our family and friends is really, really hard.
If you want to give something that has a larger impact long after the holiday season has passed, why not give the gift of financial education and wisdom for living a fulfilled life?
Given the academic background of our firm (“PhDs with passion”), I know the following is going to be a big shocker.
We love reading books and we love giving books as gifts!
Below you’ll find our revised & expanded 2020 NorthStar Guide to Gifts That Pay Off. It’s full of our favorite book and money-related gift recommendations for those ages 4 to 94!
So what’s the most valuable holiday gift of 2020? A fun lesson in financial literacy and living your best life!
The end of the year provides a number of financial planning opportunities and issues. These include tax planning issues, issues surrounding investment and retirement accounts, charitable giving, cash flow & savings, and insurance & estate planning issues.
We use the checklist below to proactively scan for many actionables to help serve our clients. In this checklist, we cover a number of planning issues that you need to consider prior to year-end to ensure you stay on track, including:
This is a comprehensive checklist of the types of year-end planning issues that you should be discussing with your financial advisor to ensure you maximize cash flow and tax opportunities in the current year and beyond.
Heading off to college is an exciting life transition and a major growth opportunity. For many young people, it’s their first chance to manage their own finances. Parents and students who invest a little time, planning, and partnership up front will reap profound benefits for life. Follow these four tips to ensure that you have a great financial launch!
Open a checking account
Often the university credit union or local counterpart is a trustworthy, low-cost option. Download the bank’s mobile app to make easy deposits and to check account balances. Set automatic alerts to provide low-balance notifications or other helpful information. Parents will likely find it convenient to link their bank account to their child’s to provide monthly allowances, etc.
Build a budget
Discuss sources of money and allowances. Know what money is coming in and going out by tracking it. Sign up for Mint.com. Draft a simple spending plan and follow it. Don’t overspend. Don’t forget to budget for an occasional indulgence (within reason!). Resist temptations and impulse purchases. Learn to differentiate between wants versus needs. Expect to iterate a few times on your budget as parents and students adaptively learn the reasonable costs of college life.
Get a credit card
Credit cards are for the convenience and security of not having to carry large sums of cash. Credit cards are NOT for spending money you don’t already have. If you can’t pay off the entire credit card balance each month, you are OVERspending. Avoid on-campus promotions that covertly proffer high-interest-rate cards via enticements of free t-shirts, tumblers, or other trinkets. Again, the university credit union is often a safe space. It’s ideal to have a checking and credit card at the same bank to make payments and management easier. Set alerts (e.g., purchases > $100) to flag transactions above normal spending patterns and protect against fraud.
Start Saving and Investing NOW
I know it’s hard, but having the foresight and the discipline, as a college student, to save and invest will be LIFE CHANGING. No one ever told us this and it is our greatest financial regret. Committing to saving even a small amount each month will add up quickly over time and instill a good habit of saving. Compounding growth is magical — save $20 per month starting at age 18, invest it to grow at 8% per year, and keep doing this for 40 years. You will have contributed $9,600, but your account will have grown to $64,422 thanks to compounded growth. This is your “army of dollar bills” working and growing for you. To get started, open a Roth IRA at a low-cost provider (e.g., Vanguard or Fidelity) and invest your earned income in an S&P 500 index fund. Long-term success is predicated on time in the market, not timing the market.
The budgeting, spending, and savings habits that students form in the coming months and years in college will likely establish their money management persona for life. By cultivating this money-centric parent-student learning partnership, you’re making an investment in your long-term security and happiness.
If you purchased your house years ago, you might be wondering: is now a good time to refinance?
You’d think the answer would be simple: getting a lower interest rate on a loan is better, right?
However, the right choice really depends on your situation. And with the way fees and mortgage interest work, a refinance is often a bad deal for a homeowner.
We made a short video walking through the key questions you need to ask before jumping into a refinance.