It’s hard to know what to expect from the rest of 2020 even as many salons, restaurants and other “non-essential” businesses start to reopen across the country. One thing is for sure, a takeaway from this crisis is how important it is to be flexible and ready to adjust to what life throws at us, financially and emotionally. Ultimately, that’s something to keep in mind for any financial plan at any time.
What are some of the things you should be thinking about now? Here are some questions I’ve been coming across in the past couple of months:
What should I consider for my equity compensation?
Many of my clients work in industries where equity-based incentive compensation comes into play. Sometimes referred to simply as “stock options,” this type of compensation also includes restricted stock or performance shares. Equity compensation lets workers share in a firm’s success via stock price appreciation, and it often has a vesting requirement. That’s where restricted stock units (RSUs) and performance share units (PSUs) come in.
There are always multiple factors to consider with equity compensation, and now more than ever it’s important to take your own personal situation and goals into consideration before making a decision. Maybe you already had a long-term strategy. Should you change it and cash out now if you need money for your first home, rising day care costs or starting a new business? Take your cash flow needs into account and balance that with your long-term goals. And don’t forget there are always tax implications tied to RSUs and PSUs at the time of vesting.
If you are well-diversified and you don’t need money in the short-term, you might want to stay the course. In the end, the best move to make depends on your personal situation.
I have an idea for starting a business–is this the right time to go all in?
I shared a post on my Facebook page recently about how some of the biggest names in business, including Uber, Airbnb, Slack and Venmo, originated amid economic downturns. Times, needs and priorities are changing fast. It could be just the time to start up an innovative small business. There’s a unique ability as an entrepreneur to customize your plan to be the type of business customers are comfortable (and excited) to work with.
Be sure to consider short-term cash needs if you don’t expect to make a profit right away. How much will you need to put into the business? Is current income sufficient to pay bills, maintain an emergency fund, and start a new business. Answering these questions help with establishing a solid foundation, especially during a pandemic.
A major purchase I planned is delayed–what should I do in the meantime?
So many weddings, home purchases or other major–and expensive–life events have gotten kicked down the road because of the pandemic. And who knows for how long? If you have money set aside, and you don’t need it to meet your monthly cash-flow needs, make it work for you!
There are several options to consider: If you aren’t sure of the timeline of when you’ll need to access the funds, some banks are offering savings account rates above 1 percent. And if you know you have a year or more of time to work with, you could look into a CD. Keep in mind that rates have been decreasing since the Federal Reserve’s March 2020 rate cuts, so you should definitely shop around for the best one.
It’s something that’s true in the best of times and the worst–you should always examine the best choices for your personal situation and make educated decisions with your money. A personal financial planner can help you with making your money work harder for you. Kelly Luethje is a CERTIFIED FINANCIAL PLANNER™ professional and founder of Willow Planning Group, LLC. She provides financial education and guidance to help you live life on your terms. Kelly can usually be found on a mountain, or by a lake, working virtually with clients across the country.