CARES Act for Attorneys

The CARES Act contains several key provisions helpful to attorneys and law firms.

On March 27th, the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  These rules are brand new and include significant tax and cash flow planning opportunities.  These are just a few of the provisions.  You should consult with your tax professional to understand the final rules and regulations and how it might affect you.  I have bolded potential planning opportunities that you may want to consider:

  • Individuals who had up to $75,000 in adjusted gross income in 2019 (or 2018 if 2019 is not filed) will receive a one-time payment of $1,200, while married couples with AGI up to $150,000 will get $2,400. Additionally, taxpayers will receive an additional $500 for each qualified child, while individuals and families with income above their respective thresholds will see their relief payments reduced by $50 for every $1,000 in AGI.

Delay filing your 2019 tax return if you would qualify on your 2018 tax return.

  • Small businesses (up to 500 employees) are eligible for SBA 7(a) small business loans up to a maximum of the lesser of $10 million, or 2.5 times the average monthly payroll costs over the previous year (excluding amounts over $100,000 per person). The loan can be used to cover payroll, rent, utilities and group healthcare insurance premiums.  The loan may be forgiven is specific criteria are followed.  The loan interest is set at a maximum of 4%, making this loan incredibly affordably.

If you follow the guidelines, your loan may be 100% forgivable, making this free money to keep your employees on the payroll.  Contact your local banker immediately to get started as the bankers are going to be incredibly busy helping people. 

  • If you do not qualify for the loan program, you may qualify for tax credits equal to 50% of wages paid to each employee, up to a maximum of $10,000 per employee. You must show a decrease in revenue in one quarter of more than 50% compared to the same quarter in 2019. The rules are very complicated, so check with your tax professional.

Small businesses may receive a credit of up to $5,000 for each employee that they pay over $10,000.  You should begin to run pro-forma calculations on your revenue to determine if you qualify for this benefit.

  • Required minimum distributions are waived in 2020, and taxpayers who have already taken their RMDs for 2020 have the option of returning them, if they so desire.

Consider altering your RMD payments this year to reduce your tax liability.  Utilize other sources of cash flow besides IRAs.

  • The 2019 IRA contribution deadline has been extended to July 15, 2020.

Consider contributing additional amounts to an IRA, including Roth IRAs. If you are not eligible due to income limitations, consider non-deductible contributions and if possible, a roth conversion strategy.

  • Federal Student Loan payments can now be deferred until September 30, 2020. No interest will accrue during this time.

Check to see if your student loans qualify.  They must be federal loans.  Private loans do not apply, but many lenders may follow the Federal rule.  Check with your lender.  Also consider paying down student loans now.  You will effectively be reducing your loan principal by 100% while interest is at zero percent.

  • The Act provides for special “coronavirus-related” distributions from IRAs and employer-sponsored retirement plans of up to $100,000 that are exempt from the 10% early withdrawal penalty, can be repaid over a three year period and are includable in taxable income over a three year period to the extent not repaid. A coronavirus-related distribution means a distribution made on or after January 1, 2020 and before December 31 and generally may not exceed $100,000 in total for an individual.    The term “coronavirus-related” distribution means any distribution from an eligible retirement plan made to an individual:
    • who has been diagnosed with COVID-19 (as confirmed by a CDC-approved test),
    • whose spouse or dependent is diagnosed with COVID-19, or
    • who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.
    • The Act permits the Plan Administrator to rely on the participant’s certification that they qualify for the distribution.

If you need cash flow now, you can take a non-taxable distribution without penalty and repay it within a 3 year period.

  • 401(K) loans have a temporary increase in the loan limit of up to the lesser of $100,000 or 100% of the participant’s vested account. (The usual limit is the lesser of $50,000 or 50% of the participant’s vested account balance). This provision applies to loans made during the next 180 days.

Consider a 401(k) loan carefully and use some cash flow modeling software to determine if this is in your best interest.  This is very tempting, but probably not a good time to take a 401(k) loan.

  • Any loan payment due on any outstanding loan between now and December 31, 2020 is delayed for one year. The five-year repayment timeframe is extended for one year and interest continues to accrue on the loan during the delay period.

If you currently have an outstanding 401(K) loan, contact your service company to suspend payments for all of 2020.

  • $300 above the line charitable deduction- Taxpayers who do not itemize are now eligible to deduct up to $300 from a cash only contribution to a qualified charity.  This does not include donor advised funds or 509(a)(3) supporting organizations.

Consider making up to a $300 charitable donation to help out your community.  This is new if you do not itemize.

  • The AGI limitation on qualified cash contributions to charity (for those who itemize) has been temporarily increased to a maximum of 100% of AGI.  In essence, one could wipe out their entire tax liability for 2020 by donating cash to charity.

If you have cash available you can significantly reduce your current tax liability.  Utilize some cash flow planning software to determine how much this can help.

Self-employed individuals may be eligible for pandemic unemployment insurance. If you are self-employed, you now may be eligible for some unemployment benefits which has never happened before.

As you can see, the provisions in this new bill can be incredibly helpful to you, your business, and your family.  The rules are complicated and be sure to follow them in order to be eligible for these benefits. 

Our team at Envision Wealth Management is ready to help you and your business.  If you would like to speak with me and brainstorm how this new law can help you, I am available for 15 minute phone calls here: 

Jonathan Muhlendorf Schedule




5 Ways to Run Your Law Firm Efficiently Using Technology

Lawyers, like everyone else are facing weeks or even months of isolation, uncertainty and business disruption.  Working from home presents several new challenges to keep your law firm running.   From learning how to hold meetings remotely to ensuring that client’s invoices still go out, lawyers must rely upon technology to keep the revenue coming in and need to continue to serve their clients on a timely basis. Now is a great time to assess your law firm’s technology stack and determine what is really working and perhaps what areas your firm can improve upon.

Here are 5 ideas or considerations to help you run your law firm during difficult times:

Video Conferencing

Video ConferencingThere is no question that face to face meetings with your staff and clients is the best way to do business.  If you cannot meet in person, the next best thing is video conferencing, which has revolutionized my own business.  Let me give you two examples of how this technology has changed my business:

I use Zoom Videoconferencing.  It is inexpensive, incredibly smooth and allows me to share my screen with my clients in real time.  I can show clients their financial plans and test our recommendations on the fly.  Clients can still visually see how recommendations are can positively impact their finances.  Attorneys can use this technology to continue face to face meetings, show and review documents, and most importantly, continue to advise your clients in an intimate way.  Oh, I almost forgot, video conferencing with your clients is certainly billable time!

I can service clients no matter where they are located, and this has helped me to grow my practice organically by widening my geographic footprint to include the entire US.  Like many of you, I have specialized my practice to help a specific type of client.  Before video conferencing, it was more difficult to acquire clients outside my geographic area. Think about all the potential clients you can serve in your specialty using videoconferencing to widen your territory.

Online Scheduling Software

Time TradeAlmost all lawyers agree that time is their most asset.  I don’t think there is a better way to protect your valuable time then to start using an online calendar system.  I use a company call Time Trade, but there are many out there.  This system syncs with my outlook calendar, sends me notices when somebody schedules some time with me, and automatically posts the phone call or video conference time slot on my calendar so I don’t double-book. 

Instead of clients calling in at random times when you are not available or are focusing on other projects and interrupting you and your staff, their concerns can be properly addressed at a set time by them.  You set the rules on your calendar when you are available, and let your clients pick a timeJonathan Muhlendorf Schedule to catch up with you.  This leads to less interruptions and better time management.  Oh, and don’t be afraid to have your staff utilize this as well to schedule time with you.

Client Management System

ClioAre you storing information in the cloud so you can access it anywhere or do you still rely upon your server locked up in your office?  From Clio to PCLawPractice Panther or MyCase, there are certainly many good solutions available to you.  Just be sure that your solution allows you to continue to serve clients remotely with ease.  If you are having trouble accessing the information that you need, then this may be a sign to start looking for a better solution.  Most of these firms provide a free trial period, so take advantage of this and play around a bit to see if it appears to be a good fit.  Don’t forget to have you staff look as well because they are typically heavier users than you might be, and their input is essential.


bandwidthIf you are having trouble accessing all the programs and services that you need, perhaps you should consider upping your internet bandwidth.  At my house I am currently competing with my son’s Xbox and my daughter’s Tick-Tock videos.   Gigabyte after gigabyte of videos, chats, and complete non-sense are flowing through the wires leading to my house. This is the life we currently live in.  If you think you are light on bandwidth, consider running a test.  One great service is There are many others available. Call you Internet service provider to see if you can increase your speed if needed. And for a bonus now your internet home service is deductible since you are using it for business!  Check with your tax advisor on this one.

Training and Development

Legal TrainingI don’t know about you but thinking about all the idle time that my staff has is frustrating.  One way to fill up holes in their day is to increase their training and/or catch up on continuing education credits by utilizing online continuing education services. (if you state allows for non-live course).  Don’t forget that your client management system should have a ton of resources, including videos, to help them become more efficient running your practice.  There really is no excuse for all of us to better ourselves and keep up to date on the latest and greatest.  None of us like unbillable time, but we all know it exists.  So, let’s make the best of it.


These are just a few ideas to help you run your law firm practice remotely.  And one last tidbit- Turn off the news and stop watching the stock market go up and down.  You will feel much better and be more focused to serve your clients without interruption or delay.  

If you would like to schedule a 15 minute phone call with me to talk about your practice and how we can help, please use this link.Jonathan Muhlendorf Schedule




Bear Markets Come And Go

The longest bull market in history lasted almost 11 years before coronavirus fears and the realities of a seriously disrupted U.S. economy brought it to an end.

If you are losing sleep over volatility driven by a cascade of disheartening news, it may help to remember that the stock market is historically cyclical. There have been 10 bear markets (prior to this one) since 1950, and the market has recovered eventually every time.

Bear markets are typically defined as declines of 20% or more from the most recent high, and bull markets are increases of 20% or more from the bear market low. But there is no official declaration, so in some cases there are different interpretations regarding when these cycles begin and end.

On average, bull markets lasted longer (1,955 days) than bear markets (431 days) over this period, and the average bull market advance (172.0%) was greater than the average bear market decline (-34.2%).

Bear Markets Since 1950 Calendar Days to Bottom U.S. Stock Market Decline (S&P 500 Index)
August 1956 to October 1957 446 -21.5%
December 1961 to June 1962 196 -28.0%
February 1966 to October 1966 240 -22.2%
November 1968 to May 1970 543 -36.1%
January 1973 to October 1974 630 -48.2%
November 1980 to August 1982 622 -27.1%
August 1987 to December 1987 101 -33.5%
July 1990 to October 1990 87 -19.9%*
March 2000 to October 2002 929 -49.1%
October 2007 to March 2009 517 -56.8%

*The intraday low marked a decline of -20.2%, so this cycle is often considered a bear market.

The bottom line is that neither the ups nor the downs last forever, even if they feel as though they will. During the worst downturns, there were short-term rallies and buying opportunities. And in some cases, people have profited over time by investing carefully just when things seemed bleakest.

If you’re reconsidering your current investment strategy, a volatile market is probably the worst time to turn your portfolio inside out. Dramatic price swings can magnify the impact of a wholesale restructuring if the timing of that move is a little off. A well-thought-out asset allocation and diversification strategy is still the fundamental basis of good investment planning. Changes in your portfolio don’t necessarily need to happen all at once. Try not to let fear derail your long-term goals.

The return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification are methods used to help manage investment risk; they do not guarantee a profit or protect against investment loss.

The S&P 500 is an unmanaged group of securities that is considered to be representative of the U.S. stock market in general. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary.
Source: Yahoo! Finance, 2020 (data for the period 6/13/1949 to 3/12/2020)


Does The Secure Act Affect Me?

Congress recently passed—and the President signed into law—the SECURE Act, landmark legislation that may affect how you plan for your retirement. Many of the provisions go into effect in 2020, which means now is the time to consider how these new rules may affect your tax and retirement-planning situation. However, clients, financial advisers and tax professionals must pay close attention to the effective dates of the various provisions of the SECURE Act. For example, some of the SECURE Act’s provisions became effective prior to 2020.

Here is a look at some of the more important elements of the SECURE Act that have an impact on individuals. The changes in the law might provide you and your family with tax-savings opportunities. However, not all of the changes are favorable, and there may be steps you could take to lessen their impact.

Setting Every Community Up for Retirement Enhancement Act (SECURE Act)

Selected key provisions affecting individuals:

Repeal of the maximum age for traditional IRA contributions.

Before 2020, traditional IRA contributions were not allowed once the individual attained age 70½. Starting in 2020, the new rules allow an individual of any age to make contributions to an IRA, if the individual has compensation, which generally means earned income from wages or self-employment.

Required minimum distribution age raised from 70½ to 72.

Image result for required minimum distribution

Before 2020, retirement plan participants and IRA owners were generally required to begin taking required minimum distributions, or RMDs, from their plan or IRA by April 1 of the year following the year they reached age 70½. The age 70½ requirement was first applied in the retirement plan context in the early 1960s and, until recently, had not been adjusted to account for increases in life expectancy.

For distributions required to be made after December 31, 2019, for individuals who attain age 70½ after that date, the age at which individuals must begin taking distributions from their retirement plan or IRA is increased from 70½ to 72. In addition, certain individuals working past age 72 may be able to defer RMDs even further.

Partial elimination of stretch IRAs.

For deaths of plan participants or IRA owners occurring before 2020, beneficiaries (both spousal and nonspousal) were generally allowed to stretch out the tax-deferral advantages of the plan or IRA by taking distributions over the beneficiary’s life or life expectancy (in the IRA context, this is sometimes referred to as a “stretch IRA”).

However, for deaths of plan participants or IRA owners beginning in 2020 (later for some participants in collectively bargained plans and governmental plans), distributions to most nonspouse beneficiaries generally are required to be distributed within ten years following the plan participant’s or IRA owner’s death. So, for those beneficiaries, the “stretching” strategy is no longer allowed.

Exceptions to the 10-year rule are allowed for distributions to (1) the surviving spouse of the plan participant or IRA owner; (2) a child of the plan participant or IRA owner who has not reached majority; (3) a chronically ill individual; (4) a disabled beneficiary; and (5) any other individual who is not more than ten years younger than the plan participant or IRA owner.

Those beneficiaries who qualify under this exception generally may take their distributions over their life expectancy (as allowed under the rules in effect for deaths occurring before 2020).

Note: This particular provision of the SECURE Act can significantly affect your current retirement plans and planning for beneficiaries of your IRAs and certain qualified plans (e.g., IRC section 401(k)) upon your death.  For individuals who died prior to 2020, the SECURE Act’s impact will be more limited regarding stretch IRAs. 

If your retirement and/or estate plan include designated beneficiaries, other than those enumerated exceptions in the paragraph above, then you need to determine whether your goals and objectives are impacted by the SECURE Act.  For example, if your designated beneficiaries include adult children, a trust, etc., the SECURE Act will affect such beneficiaries’ ability to accomplish a stretch IRA strategy.

 While a stretch IRA strategy may be limited under the SECURE Act, there are other strategies that can help extend a beneficiary’s recognition of income. In addition, there are methods to replenish (or replace) the benefits lost, that were available to designated beneficiaries prior to the passage of the SECURE Act.

Expansion of IRC section 529 education savings plans to cover registered apprenticeships and distributions to repay certain student loans.

Image result for 529 education plan

An IRC section 529 education savings plan (a 529 plan) is a tax-exempt program established and maintained by a state, or one or more eligible educational institutions (public or private). Any person can make nondeductible cash contributions to a 529 plan on behalf of a designated beneficiary. The earnings on the contributions accumulate tax-free. Distributions from a 529 plan are excludable up to the amount of the designated beneficiary’s qualified higher education expenses.

Before 2019, qualified higher education expenses didn’t include the expenses of registered apprenticeships or student loan repayments.

However, for distributions made after December 31, 2018 (the effective date is retroactive), tax-free distributions from 529 plans can be used to pay for fees, books, supplies, and equipment required for the designated beneficiary’s participation in an apprenticeship program. In addition, tax-free distributions (up to $10,000 per beneficiary) are allowed to pay the principal and/or interest on a qualified education loan of the designated beneficiary, or a sibling of the designated beneficiary. Be aware that some states may not follow the federal law changes relating to 529 plans.

Kiddie tax changes for gold star children and others.

Image result for kiddie tax

In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which made changes to the so-called “kiddie tax,” which is a tax on the unearned income of certain children. Before enactment of the TCJA, the net unearned income of a child was taxed at the parents’ tax rates if the parents’ tax rates were higher than the tax rates of the child.

Under the TCJA, for tax years beginning after December 31, 2017, the taxable income of a child attributable to net unearned income is taxed according to the brackets applicable to trusts and estates. Children to whom the kiddie tax rules apply and who have net unearned income also have a reduced exemption amount under the alternative minimum tax (AMT) rules.

There had been concern that the TCJA changes unfairly increased the tax on certain children, including those who were receiving government payments (i.e., unearned income) because they were survivors of deceased military personnel (“gold star children”), first responders, and emergency medical workers.

The new rules enacted on December 20, 2019, repeal the kiddie tax measures that were added by the TCJA. So, starting in 2020 (with the option to start retroactively in 2018 and/or 2019), the unearned income of children is taxed under the pre-TCJA rules, and not at trust/estate rates. Additionally, starting retroactively in 2018, the new rules also eliminate the reduced AMT exemption amount for children to whom the kiddie tax rules apply and who have net unearned income.

Penalty-free retirement plan withdrawals for expenses related to the birth or adoption of a child.

Generally, a distribution from a retirement plan must be included in income. Unless an exception applies (for example, distributions in case of financial hardship), a distribution before the age of 59½ is subject to a 10% early withdrawal penalty on the amount includible in income.

Starting in 2020, plan distributions (up to $5,000) that are used to pay for expenses related to the birth or adoption of a child are penalty-free. That $5,000 amount applies on an individual basis, so for a married couple, each spouse may receive a penalty-free distribution up to $5,000 for a qualified birth or adoption.

Taxable non-tuition fellowship and stipend payments are treated as compensation for IRA purposes.

Before 2020, stipends and non-tuition fellowship payments received by graduate and postdoctoral students were not treated as compensation for IRA contribution purposes, and so could not be used as the basis for making IRA contributions.

Starting in 2020, the new rules remove that obstacle by permitting taxable non-tuition fellowship and stipend payments to be treated as compensation for IRA contribution purposes. This change will enable these students to begin saving for retirement without delay.

These are just some of the SECURE Act’s significant changes that may affect your current retirement and/or estate plans. Please contact us so we can help tailor a plan, with your other advisers, that will work best for you.


The content of this material was provided to you by Lincoln Financial Advisors Corp. for its representatives and their clients. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.

Cash Flow Planning for Small Law Firms and Solo Attorneys At the End of the Year.

Cash flow planning for the solo attorney and small law firms remains one of the most critical areas of financial planning to get correct.  Below are several ideas to help you finish strong this year and prepare for next year by focusing on cash flow for your family and your business.

Review your receivables


One of the best ways to finish this year strong is to review your current receivables backlog.  You should know the average length of time it takes to collect on your hard work.  If it is more than 60 days, there may be room for improvement.  Is it a staffing issue, or a process issue?  Are you still making staff print out bills, mail them, wait for the client to return the invoice with a check, then deposit the checks?  This process itself may slow down your receivables by at least two weeks.  One suggestion is to invest in an automated billing process like LawPay that will allow clients to pay their invoices online and on time.  Increasing the pace of cash flow is critical to the success of your practice.


Fund Your Retirement Accounts

For 2019, the IRS set contribution limits for most investors at $19,000 into a 401(K) retirement account.  If your firm utilizes a Simple IRA, your contribution limit is $13,000(if you’re over 50, you may be able to make catch-up contributions of up to $6,000 in a 401(K) and $3,000 in a Simple IRA). If you have not already maximized your contribution for 2019, now is the time to adjust your paycheck to fill up this important bucket of money.  Don’t wait until December as you may not have enough paychecks left to fully fund your retirement.Envision Wealth Management

Roth contributions create a bucket of money in the future that is 100% tax-free. If you consider that the current tax rates are historically low and our country is starving for revenue, the chances that tax rates are going up in the future remains high.  In order to diversify your tax strategies in the future, it is critical to diversify the taxation of your investments now.

Seriously consider Roth 401(K) contributions.  If your plan does not allow for Roth 401(K) contributions it is also important to amend your plan to allow for this important feature and this needs to be done ASAP to be able to allow them for 2020.

Reinvest In Your Firm Technology and Training

If you have fully funded your retirement account, congratulations for paying yourself first.  This means that your paycheck may be a little bigger now.  You should consider reinvesting in yourself and your firm.  It may be time to upgrade your timekeeping system, CRM, or billing system.  Invest in additional training for yourself or your staff.  The increase in efficiency by learning your systems can make a significant difference in your firm output.  Not to mention your staff will appreciate your investment.

Get Ready For an Increase in Health Care Expenses for 2020

Healthcare-ExpensesAccording to PWC’s Behind The Numbers study, medical costs are expected to rise by 6% for 2020.  Your health care broker will probably deliver the bad news to you soon.  Now is the time to consider absorbing the cost or passing it on to your employees.  You may need to give them a raise to offset this cost.

You may want to speak with your healthcare broker to determine if switching to a High Deductible Health Plan (HDHP) makes sense for you and your employees.  This type of plan combines insurance with a high deductible and the ability to save pre-tax into a health savings account.  For 2020 the IRS has announced an increase in deductible contributions to HSA plans to $3,550 for individuals and $7,100 for families.

This is the type of plan I run for my small business.  Over the last two years I have deducted off my taxes almost $14,000 and have invested the same amount into an HSA investment account which grows tax-free. I pay no tax ever if I use the money for qualified health expenses now or in the future.  No other investment provides this triple-tax advantage.

Estimate your 2019 Tax Bill


The 2018 Tax Cut and Jobs Act made significant changes to our tax code.  Now is the time to pull out your 2018 tax return and begin to estimate your 2019 taxes.  If you received a refund last year there is a good possibility that you may receive one in 2020.  Instead of waiting for the government to return your hard earned money you should consider reducing your 4th quarter estimated tax payment or withholding to more closely match your actually tax amount owed.  Envision Wealth Management is gearing up to help our clients estimate their taxes utilizing our cash flow management software that all of our clients have access to on their personalized website.

Buy A New Phone But Skip The Installment Plan


My 11 year old son has informed me that I need a new phone soon (of course, so he can get my old one).  He has been researching all the great deals available and noticed that most phone companies will sell you a new phone on a monthly no interest payment plan.  However, it may be better to buy the phone outright.  I may be able to deduct the purchase price of the phone from my 2019 taxes if I purchase the phone this year.  Keep in mind that you should estimate what percentage you use your phone for business vs personal use.  A good ratio to use if you do not know is 70% business/30% personal, allowing you to deduct 70% of the total cost.

As a business owner you can deduct most legitimate expenses and any acceleration of those expenses at the end of a tax year can make a significant difference in your 2019 tax bill.

For most of our clients, this has been a great year with increases in cash flow, a better work-life balance, happy clients, and a growing practice, not to mention above average stock market returns.

Envision Wealth Management has room to take on a few more clients before the end of the year.  If you think you and your firm may benefit from our valuable work, please reach out to us at 757-777-3121 for your complimentary cash flow and financial plan review.  Additional information can be found on our website at

Jonathan Muhlendorf is a registered representative of Lincoln Financial Advisors. Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer and registered investment advisor.  Insurance offered through Lincoln affiliates and other fine companies. Envision Wealth Management is not an affiliate of Lincoln Financial Advisors. Lincoln Financial Advisors does not provide legal or tax advice. CRN-2738842-092019


7 Ways To Spend Your Summer Bonus

Summer is a great season.  We spend more time outside, take a vacation, or just cut out from work a little early, perhaps to enjoy a local concert or meet friends on the beach.   Summer is also when many bonuses are distributed.  If you got one, congratulations!

Do yourself a favor and first consider taking up to 25% of your mid-year bonus and spend it on you and your family.  You worked hard and deserve to enjoy the fruits of your labor.

Consider these 7 ways to spend your summer bonus to help accomplish your financial goals.

1 Put Your Bonus Back Into The Business

The best use of your mid-year bonus may simply be to re-invest in your business.  Review your business plan (you do have one right?) and determine where you can put a few dollars to work.  In most cases our client’s money is invested in new technology, marketing, or human capital.


2 Pay Down Student Loans

You may choose to pay down your student loan.  Many clients ask us if it is better to pay down student loan debt faster or invest extra dollars in the stock market.  There is no question that over a longer period of time you may be able to do better investing extra cash as opposed to saving on the student loan interest.  This depends on the interest rate that your lender charges you.  If you can get a higher return than the interest you are being charged, it may make sense.  Our cash flow modeling, available to all of our clients on their personal website, is a great tool that we use to help our clients make this decision.


3 Increase your retirement plan contributions

Now is a good time to calculate just how much you are saving in your 401(k) retirement account and if you should contribute more.  People under 50 can save a maximum of $19,000 from their paycheck in 2019.  If you are over age 50 in 2019, you can save a total of $25,000.  Since we are halfway through the calendar year, look at where you are and adjust your contributions.  Consider contributing to your Roth 40(k) account which may provide tax-free income during retirement.

4 Fund Emergency Reserves

Most financial planners recommend 3 to 6 months of expenses be held in cash for emergency purposes.  That is a lot of cash on the sideline.  Our customized financial plans consider access to lines of credit and liquid investments to help determine the proper emergency reserve amount.  If you have access to a line of credit or other assets that can be easily converted into cash without penalty (within 3 days), then we recommend no more than 2 months of expenses to be held in cash as an emergency reserve.  Ensure that you have the proper amount of reserves and then deploy the rest of your bonus in other areas to help you reach your goals instead of making the banks richer.


5 Fund a 529 college savings plan

A 529 college savings plan allows you to set aside dollars that can grow tax-free if used to pay for higher education qualified expenses.  A recent change in the laws also allows you to use up to $10,000 per year for private high school tuition.  We almost always recommend that law firms and other businesses set up an employer-sponsored college savings plan.  In Virginia you can purchase a 529 plan with no upfront or back-end sales charges using the employer sponsored share class.  This could potentially save you thousands in fees.  This design does not increase overhead and is simply a way to pass along a savings to all employees.


6 Fund your Flexible Spending Account

Many employers offer a healthcare flexible spending account.  Adjust your future paychecks and fund this account with pre-tax dollars which also will save you on taxes.  FSAs cover a variety of healthcare products and services, from acupuncture and physical therapy to vaccines.  The best use of the benefit is to pay for any deductibles and co-payments, but you cannot use the funds to pay premiums.

You can put up to $2,650 of tax-free money into this account in 2019, according to the IRS. Note that you must spend the money saved in an FSA by the end of the year.


7 Fund Your HSA Account

Another health-related benefit you may be able to use is a health savings account (HSA).  Many high deductible health plans (HDHP) include this valuable pre-tax benefit.  Again, you may want to adjust your future paychecks to fund this account. The contribution limits are higher than FSAs.  You can save up to $3,500 for an individual or up to $7,000 for a family.  If you are older than age 55 you may also contribute an additional $1,000.  The contributions are tax-deductible, the earnings inside the account grow tax-free, and distributions may also be tax-free if used for qualifying medical expenses.  Most HSA providers now include access to investment accounts so you can grow this money for future medical expenses.


If you need help deciding what to do with your bonus, give us a call and we will be glad to brainstorm for a few minutes with you or set up a quick cash flow model to help you make a better decision so you can reach your financial goals.

Jonathan Muhlendorf Schedule


Envision Wealth Management is a marketing name for registered representatives of Lincoln Financial Advisors Corp.  Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor.  Insurance offered through Lincoln affiliates and other fine companies.  We do not give tax or legal advice. CRN-2665968-080119


5 Cash Flow Issues Attorneys Face And How To Fix Them

At some point, almost all lawyers struggle to find the cash necessary to pay both business and personal expenses on time.  The variability of your income is typically to blame.  Managing your expenses properly can ease the stress.  Here are 5 tips from Envision Wealth Management to help attorneys manage both personal and business cash flow issues:

  1. Many lawyers underpay themselves and then “catch-up” after quarterly distributions. Consider setting your salary to cover your basic core household expenses.  Expenses such as vacations, excess loan payments, eating out, and entertainment should be considered non-core expenses.  We often recommend that our attorney clients utilize 3 credit cards combined with 3 checking accounts:  1) for business expenses 2) for core household expenses 3) taxes and “joy” expenses.  Try this over three months and in most cases, a pattern of business vs core vs joy expenses will emerge to help you set the proper salary.

  2. Set a realistic cash balance in your business and household checking accounts that can cover 2 months of core monthly expenses, and don’t go below this number at any time.  We find that the stress related with a lack of cash on hand can reduce your productivity and often leads to problems at home.

  3. Maintain separate lines of credit for your business and for your household.  Each line of credit should be large enough to cover 3-4 months of core expenses. Lines of credit are very useful during difficult times, but should be avoided for day-today expenses.

  4. Quarterly bonus payments should be deposited into the third “joy” checking account.  Pay quarterly estimated taxes owed, then “joy” credit card bills.  Excess cash accumulated after vacations and entertainment should be transferred and invested to support your other goals, such as college funds, or retirement.

  5. Avoid paying invoices too quickly.  We find many firms process payables when they are received.  Instead, set up a system to pay invoices a few days before they are due.  This will allow you to hold onto your cash a little longer, giving you some breathing room.

Although differences between firms exist, one constant is our ability to help you.  Our short term and long term cash flow modeling is part of every client’s overall plan and is always available on a personalized website for review at any time.  Let our team help you better understand your cash flow and we will provide actionable recommendations to ease the stress of your variable income.

Jonathan Muhlendorf is a registered representative of Lincoln Financial Advisors. Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer and registered investment advisor.  Insurance offered through Lincoln affiliates and other fine companies. CRN-2560447-053019