Friday night, May 15, 2020, the SBA issued it's Loan Forgiveness Application for businesses who received a Paycheck Protection Program Loan (PPP Loan), and I'm going to give it to you straight: it's ugly. Maybe I was naive to think it wouldn't be. When I looked at the guidelines, it made me feel like I was in math class, and I forgot that there would be an exam, and here it was sitting on my desk.
It made me feel that way because of how unsettling it is to know that a lot of these details were not published and available to businesses and borrowers on the outset. There is that feeling of not being prepared to do these calculations because we didn't have all the formulas. The other reason is because of the nuances of calculations.
Read MoreManaging your spending is fundamental to making any progress in your financial life. Way too many people write to me to tell me that they are struggling with this issue. The best way to get a grip on spending is to set up a system that prevents you from spending money that you should be saving or using for essentials.
This method takes no skill whatsoever. It's like bowling with bumpers in the gutters. Sure, you can still somehow screw it up at the very end of the lane, the ball can take a sharp left and only knock out a few pins, but youโll significantly reduce your chances of that with the bumpers.
Read MoreIf you formed an s-corp, it's probably not because it's something you've been dreaming of doing since you were a child. No kid has ever thought, "Gee, I can't wait to be a grown-up so I can form a corporate entity all my own!" That would be disturbing. You probably formed an s-corp because your accountant, attorney, or colleague told you it was a good idea and that you'd save a bunch of money on taxes, like maybe even thousands of dollars. Which seems like a great trade-off, right? Your accountant or attorney files some paperwork, you come up with a funny corporate name, you open up a bank account, and then you get to save money on taxes.
Read MoreSecond to running a small business, the most I've ever learned at work was my experience working at a boutique financial planning firm. I learned tons of ratios and formulas, got good at creating excel spreadsheets, and took multiple classes on insurance. Economists made visits to our office to give us their economic predictions and how that would impact the financial markets. So I learned how to distill and communicate that dense information into digestible pieces. I learned how to go about doing all the financially prudent things one ought to be doing; that alone is a wealth of knowledge that I'm forever grateful for stumbling into.
Read MoreHere are some more thoughts after a couple more weeks of conversations with clients with colleagues, messages, and emails from friends and strangers, observing the outside world from both big media platforms and personal social media accounts, a lot of reading, and a lot of doing nothing.
Read MoreIn 1930, John Maynard Keynes, who is considered the father of modern economics, wrote an essay titled, Economic Possibilities for Our Grandchildren. In that essay, he describes his prediction for what life would be like for future generations. He predicts that economic prosperity will be so great and abundant that our need to work across all of society will diminish. And since the vast majority of people will no longer need to "sell themselves for the means of life," he warns that humanity's next great challenge will be how to look forward to and not dread the "age of leisure."
While he predicts there will be some people who have an "intense, unsatisfied purposiveness" that causes them to continue to pursue wealth blindly, he goes on to imagine that the vast majority of society will have a shift in moral codes. That we will recognize that loving money as a possession, as opposed to as a means for the realities and enjoyments of life, will finally be collectively viewed in the harsh light of truth; that it is disgusting, morbid, semi-pathological and semi-criminal.
Read Moren a personal attempt to try to understand and process what the fuck is going on right now, here are some things I'm learning during this crisis. Some things I already knew, but the lens of a pandemic puts it into focus.
Read MoreImagine that your financial life is a sandcastle youโre building on the beach. You can learn what works for building it up, and in the good times, when the threats to your progress are manageable, you take for granted that itโs easier to build in those conditions. Now imagine the tide rising, the waves start coming in, getting closer and putting your sandcastle in danger of being damaged or worse, being washed away. In this analogy, the tide is a financial shock. The thing about the tides - and economic shocks - is they will always come in. Sometimes very quickly and suddenly as if out of the blue and other times, you can feel it gradually creeping in. Experiencing a financial shock is not a matter of if; itโs a matter of when and to what severity. Shocks can come in the form of global recessions, pandemics that freeze the economy, you lose your job, your kid getting very sick, a parent dying, the industry youโve worked in for decades slowly getting cannibalized by new technology or war.
Read MoreIn the financial world, we call things like the current pandemic a black swan event. A black swan is an unpredictable event with potentially severe consequences. The name comes from the rare sightings of black swans in nature. They exist, but seeing them is exceptional. So while the financial world has terms for these types of events, how we deal with them isn't always the same. Take the 2008 housing crisis. It was the result of a perfect storm of things: sub-prime mortgages, derivatives, hubris, and the lax, or often fraudulent practices within the real estate, mortgage and lending sectors. Finding a way out of the crisis was terrifying, but pointing to the causes gave us a sense of certainty.
I want to be clear: what we're experiencing today is very different from the housing crisis of 2008. Although there is one similarity: we didn't have a playbook for dealing with the crisis then, and it goes without saying, we don't have one today. While it's true, the world has experienced pandemics in the past, our modern economy, in all of its globally connected glory, has not experienced something of this scale. I have no idea what is to come in the approaching days, weeks, or months. I'll do my best to help you all understand our changing reality through the lens of money, finance, and economics.
Here are my thoughts on how to not freak out about your finances during a global pandemic.
Read MoreIf you haven't worked with a bookkeeper, it might be hard for you to imagine the benefits of working with one. Maybe this example will help: imagine a time you went to a restaurant with a large group of people - like twenty, or more. Everyone orders different things, and of course, when the bill comes, everyone in the party wants to split the bill according to what they consumed. If you're like me, this might sound like your own personal hell. But others might have a natural affinity for figuring out the best way to divide twelve bottles of wine unevenly shared with 27 people. That insane person, who willingly takes on this math problem, spots errors like getting charged for things that never came and can figure out how to divide tip and tax fairly would be the bookkeeper for the party.
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