There are so many reasons to ask, How can I make an extra $10,000 this year? Maybe you want to retire early and a small extra income will do the trick coupled with your savings and investments. The economy might be bad, your hours cut or are unemployed. Maybe you are retired and just want something to do that adds value to the lives of others while providing extra income for bills.

Regardless your reasons for wanting to earn extra money, what you need is a list of ideas for accomplishing the goal. Below is a list of 10 ways to earn an extra $10,000 this year (unless you are reading this New Year’s Eve, then you can start next year). Each of these opportunities are used to earn extra money by family members or clients in my office. If you read to the end I have two bonuses.

 

Home delivery is the biggest opportunity for side hustle money today.

 

Grocery Delivery

This growing trend has turned into a very good paying job you can work whenever you feel like it. You can work as many or as few hours as you want. Mrs. Accountant (my lovely bride) works with elderly and shut-in people. One of the most requested tasks is grocery shopping.

Finding clients is easy. Instacart and similar services are always looking for more people to deliver groceries. You can do an internet search for companies looking for delivery people in your area. The pay is good, the tips better. And best of all, you choose your hours and which orders you want to fill. Remember to keep good records. Miles are tax deductible so if you don’t drive a Ferrari you will probably have some income that isn’t taxed, too, since the mileage deduction might be larger than the expense of operating your vehicle.

 

Delivery Services

This is a broad category. Groceries are listed above, but that is only one type of delivery service. I have clients who deliver meals from local restaurants. If you respond to requests quickly the tips tend to be quite generous. 

Food is only the newest fast growing delivery service. If you have a truck (or a trailer) you can deliver large items from hardware stores and other retail outlets. One of my clients turned a small delivery business into a 7-figure business. He handles a large percentage of deliveries from several hardware stores. 

Almost anything a person or business buys needs delivery. The hours are flexible, coupled with a high income. You can start your own business, making a few calls to set up the service, or use online companies already in the delivery business. Either way, the delivery business is the biggest opportunity for above average income and flexible hours in our economy at this time.

 

Selling Tradelines

This idea has been around for a while. I published several times on the issue. You can start your research here. 

I don’t sell as many tradelines as I used to. I still earn around $4,000 per year for about 2-4 hours of work. The biggest drawback is it takes time to get your first payment (typically about 2 months). 

The reason I pulled back is time. Yes, the money selling tradelines is really good, but I also have a tax practice, this blog and more people than I can count who want consulting services. Selling tradelines is about the easiest way to make side money I ever saw, especially if you only want a couple thousand extra for fun money. Tradelines would not be a good option if your goal is $50,000 per year. However, when I worked it hard in the beginning I did approach $30,000 the first year. For a modest effort it is possible to earn $10,000 per year and more.

 

Consulting

Consulting needs clarification. Making money consulting is different than coaching (another possible idea I will not cover) and requires a narrow niche to do well. 

There are plenty of people selling coaching/consulting courses on social media that basically tell you to do what they are doing. That is not consulting! At least not a kind of consulting that adds value and is worth buying.

The trick to successful consulting is focusing on one issue. For example, I consult on tax issues. That makes sense. I run a tax office and stay up-to-date on the tax laws. Of course my consulting services expand beyond the original topic. People ask about investments, retirement planning, legal issues, starting a business and even personal problems. Many times I’m qualified and comfortable expanding the scope of the consulting agreement. Retirement planning and business issues rise to the top. Legal issues I defer to an attorney. Personal issues many times require a professional social worker or medical professional. When possible, I try to help the client find the appropriate professional. 

Consulting done right is very profitable. A 6-figure income is not unheard of. Focus if the key. As I write there are several new tax laws to stimulate the economy. Just that one topic will keep you busier than you want if you choose to focus on it. Businesses and individuals are in desperate need for quality consulting and accounting firms like mine can’t handle all the work. BTW, I turn away over 90% of consulting requests because there are not that many hours in a day. Consulting is a good business.

Remember, focus if you want a consulting side gig. You don’t want to and can’t be everything for everyone. 

 

Elder care services is a fast growing full-time or side hustle opportunity.

 

Elder Care

Demographics provide the direction jobs are going. An aging population is going to need more services for the elderly. As you will see below and in the first bonus, elder care is not about working in a nursing home. 

People want to stay living in their home. They want their independence. It is cheaper for families and communities to give as many people as possible the option of living at home. 

Elder care extends to the disabled. Mrs. Accountant works for a company very part-time helping an elderly couple and a disable man. She cleans their homes, cooks meals and runs errands for them. She works less than 15 hours per week. It’s something Mrs. Accountant wants to do and she enjoys it. Of course you can work more hours if you want.

Clients are found one of two ways. Most counties hire, along with private companies contracted through state or local agencies. You can also provide cleaning, cooking and shopping services outside government supported programs. 

It is easiest to work through a company handling all the back office work or government agencies. For part-time work you can add $10,000 or more to your income in a year without working long hours. You can also choose your own schedule.

 

Gardening

Do you like working outdoors? Growing a garden? Did you know you could get paid to garden?

This unique side gig is overfilled with benefits. You get to work outdoors during the summer months doing what you love most and get paid for it.

It is a seasonal job, however. Where you live determines the scope of your gardening side hustle. Northern areas have a shorter growing season. Southern areas might include planting fruit trees. It all depends where you live.

Here in NE Wisconsin I have three clients who help people who can’t handle all the gardening chores. There are farmers outside the Fox Cities with plots divided in a field people can rent to garden. One of my clients helps elderly people by driving them to the garden plots and helping them with the gardening chores.

Best of all is that most gardens provide more produce than the client can eat so you get a wonderful supply of fresh fruits and vegetables as they come into season.

 

Lawn Care

There is a theme forming in this list. Lawn care services for those folks who want to stay living in their home, but can’t handle pushing a lawn mower are ideal clients. 

Don’t forget businesses! Business owners and landlords are always looking for high quality lawn services at a reasonable price. My office pays to have the lawn cut.

Lawn care is more than clipping lawns, too. Dealing with weeds and fertilizing lawns is also part of the deal if you want. There are also plenty of opportunities for light gardening work here as well, though many times it involves working flower beds. rewarding work that also fills in for healthy exercise, too.

 

Tax Preparer

I have encouraged this side hustle for years. There are an army of people pulling $10,000 per year and more working part-time seasonally.

Once again there are two ways to address this opportunity. First, you can run it as your own small business. A 15-minute presentation at a local Optimist Club or apartment association and you will have more clients than you want unless you want a very full-time business. 

The second way to earn a hansom income in spring is to work for an established tax office. Tax offices are always looking for good seasonal employees. (God, don’t I know it!) Not every tax office is for you; choose which fits best. There are the low cost tax offices where basic returns are prepared. If you can run a computer you can handle the returns they prepare. As your skills grow you can work at more traditional tax offices and CPA firms. Starting wages generally are $10-$17 per hour, depending on the part of the country you are in. Office like mine and CPA firms frequently pay people with tax experience $20 per hour and up. Very experienced preparers can demand $50 or more per hour. Not bad for part-time seasonal work.

For readers in the northern climes this is perfect. When the snow melts and you feel like running around outside tax season is over. 

 

Dog Walking

Mrs. Accountant enters again. The same elderly couple who has Mrs. Accountant buy groceries for them also has her walk their dog. Coco the dog, I am told, goes wild when Mrs. Accountant arrives. He is so excited to go for a walk with his human.

Mrs. Accountant wears a lot of hats when performing elder care services. However, there is no reason you can’t focus on a narrow niche. Dog walking is getting to be big business. If you love animals I can’t think of a more rewarding side hustle.

And the pay can get very generous.

 

Pet sitting and dog walking are high paying side gigs you can do on your own schedule.

 

Pet Sitting

If you enjoy animals and walking outdoors, dog walking is for you. Married to that side gig is pet sitting. The demand for pet sitting services is massive and growing, at $440 million in 2017. 

There are several avenues to earning extra coin in this hustle.

First, you can pet sit at the pet owner’s home. Second, you can provide pet sitting in your own home. This option does require the space and the ability to have pets in your home or apartment. Third, you can work part-time at a pet sitting service or kennel. Generally the pay is low, but getting paid anything to pet cats and dogs and feed them is beyond awesome.

Finally, humane societies and shelters are always looking for help. Again, this is a low wage route. But if you love animals and there is no other option available, this can be the perfect option to earn some extra income on your schedule doing something you love.

 

Bonus #1: Friendship Service

In 2019,  36.48 million Americans lived in a one-person household. That is a lot of lonely people. Many are older and have lost a spouse or significant other. Many times they have no surviving family. Some suffer disabilities.

Loneliness is an extremely painful experience you can resolve by providing a friendship service. There are clients in my office who spend 10 or so hours a week visiting their client just to talk. Sometimes they need help finding someone to help with a household need, such as hiring a plumber, or for repairs to their home. 

Usually all they want is someone to talk to. Local social services sometimes cover the cost of friendship services, other times not. The work, obviously, is not hard, but it is important. Not only are you providing human contact to people alone, but are also visiting to assure they are safe and healthy. 

As our society ages and people have smaller families, friendship services will become more and more common. At this time demand far exceeds the supply of people willing to be a friend. I can’t think of a better way to earn some extra money than by providing a ray of sunshine to the life of a wonderful human being.

 

Bonus #2: Tutoring

I have a large number of clients (and my oldest daughter) earning a good income tutoring. There are several levels you need to consider with this hustle.

Tutoring can be a work-at-home business with all the tutoring done online. You can focus on local primary and secondary students or college kids. There are numerous online options for tutoring. I have a client who teaches at the local high school and also teaches (not technically tutoring) at several online schools. His income is well into the 6-figures. 

Companies that offer tutoring services are also a good place for a part-time side gig. It can turn into a full-time job if that is your desire, or it can remain small, falling within our discussion of earning $10,000 per year.

My daughter tutors online, but also meets with students at the local library. She works closely with the parents and the teachers so she can provide the best help. In these cases the parents pay the tutoring fee. Generally, the parent pays for a package of 10 tutoring sessions at a time. It doesn’t take many of these to start earning some generous side money.

Teaching English as a second language is in high demand. My oldest daughter traveled to China for a year to teach. She lived with a host family and was paid by them as well. It has been a highlight of her life. She is now working to teach/tutor not only in the US, but in countries around the world online. 

Group tutoring is also an option in all these situations. An important point to consider, if you want to be successful tutoring, is to focus on the kind of client you want to serve. My daughter has a few local clients she tutors, but her passion is to tutor children around the world. Being everything to everyone is usually a recipe for failure. Focus on the type of student you want to tutor and you will find tutoring a rewarding side hustle providing a nice income. You can always change your mind on the kind of student you wish to tutor.

 

Our 10 ideas turned into 12 way to earn an extra $10,000 or more this year. Extra money is always nice, filling the vacation or holiday fund. Or invest it for long-term income stream. No matter what the economy does there are always opportunities to earn extra money doing things you enjoy. 

Do you know side hustles I haven’t mentioned that pay $10,000 or more per year? Do you have experiences with the side hustles I mentioned? Please share them in the comments section below. Thank you. 

 

 

More Wealth Building Resources

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

  • The large number of new programs for small businesses is causing choice overload.
  • Tax professionals and small business owners are confused by the conflicting guidance from the IRS.
  • The Employee Retention Credit (ERC) could be worth more to a small business owner than a Payroll Protection Program (PPP) loan.
  • Business owners are focusing on the forgivable PPP loans and forgetting about the possible better value in the ERC where you do not need SBA approval.
  • Time is running out for small business owners to make a choice before some benefits are lost forever.

 

In 1970 Alvin Toffler introduced us to the concept of overchoice in his book Future Shock, where many people freeze instead of taking action when offered too many choices. Choice overload has been studied extensively over the past decade with the evidence overwhelming that more choices does not lead to better results. Rather, too many choices makes people less happy. And worse, causes many to do nothing even when any action would be preferable to doing nothing at all. 

Too many choices can cause you to make the worst choice of all: doing nothing.

While choice overload is a common discussion in investing circles, overchoice is rearing its ugly head again with the CARES Act and other stimulus measures to deal with the pandemic. Seasoned tax professionals are challenged by the new programs and the IRS and Treasury Department have been less than helpful in their guidance, changing the rules time and again. 

Overwhelmed small business owners and tax professionals stunned into inaction need to snap out of it fast. Many of these programs have an expiration date. Businesses need to access these resources while they can — even if they don’t have a current need — so the funds are available when they are needed later in the year.

This article will focus on the Employee Retention Credit (ERC) and how it relates to other stimulus programs. Unlike the PPP where loan forgiveness is based upon set factors, the ERC is a tax-free credit that never has to be paid back. 

Business owners are focusing on the forgivable PPP loans and forgetting about the real value in the ERC, where you do not need SBA approval. Just because you qualify for a PPP loan does not mean it is the best course of action. Some business owners may want to return the PPP loan in favor of the ERC. 

 

Qualifying for the ERC

The best way to determine if the ERC is a better option for your business we will need to review the details of the ERC program and then compare those details to various features of the PPP.

Here are the general facts of the ERC:

  1. The ERC is a refundable tax credit of 50% of the first $10,000 of wages per employee, including health insurance benefits paid by the employer. The maximum credit is $5,000 per employee. Wages after March 12, 2020 to December 31, 2020 qualify.
  2. The ERC applies to any qualified business in operation in 2020. For the ERC, the business must have had full or partial suspension of operations at any time during 2020 or Point #3 below. This is probably an easy hurdle to jump because current IRS guidance states that limited group meetings or travel would satisfy this requirement and most states have limited these activities.
  3. A qualified business must experience a greater than 50% decrease in gross receipts unless the business qualifies under Point #2 above. The ERC starts the first quarter of 2020 that gross receipts are below 50% of the 2019 gross receipts for the same quarter and continues until gross receipts are greater than 80% of the 2019 gross receipts of the same quarter, or until the end of the fourth quarter of 2020, whichever comes sooner.
  4. For employers with an average of 100 or fewer full-time employees in 2019, qualifying wages are all wages paid as outlines in Point 1 and 3 above and 5 below. If the employer has an average of more than 100 full-time employees in 2019 the credit is limited to wages paid to employees while not working. Wages must be no more than the equivalent amount paid the 30 days prior to the suspension or reduction of services. Full-time employees are defined as employees who average 30 or more hours per week or average 130 or more hours per month.
  5. Employer paid health insurance premiums not included in employee’s income are included in qualified wages.
  6. The ERC is taken on Form 941 starting with the second quarter of 2020. The IRS, as of this writing, has not issued an updated Form 941 to reflect this credit. You can check here for the most current Form 941.
  7. The credit reduces the employer’s payroll taxes to zero before becoming refundable. 
  8. Any credit over the payroll taxes reported on Form 941 are refundable. 
  9. Employers can apply for an advance refund of the ERC, sick and family leave credits on Form 7200. 
  10. An employer needs to decide between a PPP loan and the ERC, as both are not allowed for the same employer.
  11. Sick and family leave credits are allowed along with the ERC, but not on the same wages.
  12. The ERC does not cover self-employed income (sole proprietors filing on Schedule C). However, wages paid to employees of a sole proprietor do count, except for related individuals. Wages paid to employees of a partnership qualify (except for related individuals again), but not guaranteed payments to partners. Wages to owners of regular corporations and S corporations with a direct or indirect ownership of greater than 50% do not count. Household employees also do not count for the ERC.
  13. The ERC is not included in income for the employer or employee.
  14. However, the IRS currently states that the amount of the ERC reduces the amount of the employer’s deduction allowed by a similar amount. Note: This matter is not settled as Congress may change this requirement and some tax professionals disagree with the IRS’ position. If Congress does not act, expect this issue to be litigated in Tax Court.

 

The coffee house, the perfect gathering place to share good times with friends.

 

Maximizing the ERC Benefit

In most cases the PPP will be a better option for the small business. However, there are a variety of issues where the ERC is either the only choice or the preferred choice. In my office I consult with a large number of business owners. In nearly all cases the result was that the PPP was the preferred route when available.

Under the PPP the owner’s wages are included. This is a significant advantage. Under the ERC owner’s wages are specifically excluded, along with wages paid to related individuals. 

Another serious issue with the ERC is determining if gross receipts are less than 50% of 2019 gross receipts of the same quarter. Early in 2020 gross receipts were probably little changed. If businesses reopen this test could be failed for future quarters as well. IRS guidance says we can claim the ERC if we later discover we would have qualified by filing an amended Form 941. However, a business should know their gross receipts shortly after a quarter end so the ERC should be taken as soon as it is determined you qualify.

But is there a claw back if the economy (and your business) have a spectacular comeback later in 2020? Not really. Once your gross receipts exceed 80% of 2019 gross receipts you no longer qualify for the ERC. Therefore, once business activity exceeds the threshold you should no longer claim the ERC.

PPP loans are forgivable in whole or in part. When consulting with clients I found that if wages would reach at least half of the PPP loan, the PPP loan was superior to the ERC. Since wages of owners are included with PPP loans it is much easier to allocate the entire loan to wages. 

If the PPP is superior to the ERC, who should use the ERC?

If you have been denied a PPP loan your next course of action is to determine if you can still get some refundable credits with the ERC. 

Another possibility where the ERC is better than the PPP is when the small business has a lot of part-time employees. Since the ERC is 50% of wages up to $10,000 — the maximum credit is $5,000 per employee — there are situations where the ERC provides a better result than a PPP loan when many part-time employees are involved. Therefore, if you have a lot of part-time employees with low wages the ERC could be the better option. The only way to determine if the ERC is better is to put a pencil to paper for your specific situation. Be aware you still need to qualify for the ERC as stated above, such as a required full or partial shutdown at any time during 2020 and gross receipts less than 50% during at least one quarter of 2020 over the same quarter of 2019.

I suspect IRS guidance will soften on many of the issues surrounding the PPP and ERC. Businesses already struggling would fail in large numbers if the IRS takes a hard line approach. I doubt Congress would tolerate such action. 

A large number of business owners have avoided the many benefits the government has offered in these trying times. The large number of choices has led to a perfect example of people’s behavior when confronted with too many choices. Even tax professionals are struggling to understanding all the different programs. Alvin Toffler’s overchoice is clearly hampering small business owners. Too many options reduces the number of businesses that will apply for any, even if they qualify. That is the biggest risk facing the American economy in 2020. If business owners shy away from programs designed to help them through these unique times more will fail, costing jobs and long-term damage to the economy and harming America’s competitiveness. 

I encourage you to discuss your situation with a competent tax professional. Yes, the IRS is still playing with the rules because they haven’t figured it all out yet themselves. But you can still plan accordingly. Whether a PPP loan or the Employee Retention Credit is best for you, you owe it to your employees, community and yourself to explore all the options.

 

More Wealth Building Resources

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

 

Open for business.

It is said we stand in preparation to fight the last war. It never plays out as planned and the war of the prior generation is ultimately not the war of the present.

Economic crises are cut from the same cloth as war. We prepare for the prior economic calamity with significant resources. Then, when we least expect it, a new threat rises and brings the best laid plans of men to dust. 

We are presently experiencing a crisis like never before. A pandemic has swept the planet and threatens to keep circling the globe in waves of slightly different variations man has no natural immunity against. Knowing we have prepared for the last war, the pillars built after the financial crisis of 2008-9, is meaningless. Man has experienced pandemics before, even more deadly contagions than the current infection. But economically, we will have to venture further back in time for an equivalent.  And when you mix the two together it becomes a crisis unrecognizable.

President Herbert Hoover

Fearful we will make the mistake of preparing for the wrong confrontation, we quickly shift our focus from the prior economic crisis of a decade ago and focus on the pandemic of 1918-9 and The Great Depression of the 1930s. 

Except even that isn’t the same on virtually all levels. Never before has the stock market collapsed so fast from an all-time high to a bear market (a 20% or greater decline). The prior record from The Great Depression has fallen handily. 

The death toll is lower today than the pandemic of 1918-9. So far. It is fear that drives us. In a knee-jerk reaction we shutter large swaths of the economy, leaving only those industries we consider vital, functioning. The wheels of industry ground to a halt until the world stopped. All is quiet on the Western front, a front that covers the whole of mankind.

Fear controls decisions — and if you have control of your fear — others will manipulate your activities as if you acted on your personal fears. The disease is not the worst and modern medicine is containing the damage. It is worrisome, but it seems man will conquer the new scourge in a reasonable amount of time. Then, life can return to normal.

Or can it?

Healing the sick and preventing illness will prove the easy part of this theatrical presentation. The damage already done to the economy is massive. Many businesses, large and small, will not return. The question remains: Is the the next Great Depression?

It is dangerous to say this time is different. Fortunately it is already different so there is room for hope. 

And, before we point out why this is not the next Great Depression, we can thank the gods that be we had The Great Recession of 2008-9 as a dress rehearsal. For without that economic nightmare, we might never have had the courage to use the tools necessary to make this time different in a better way.

 

A History of Economic Collapse

It is acceptable banter in polite company to say this is the worst economy since The Great Depression or the economic consequences will be worse than The Great Depression. But the story starts before that great economic event, and Herbert Hoover was instrumental in the solution. 

During World War I, The War to End All Wars, Herbert Hoover earned the nickname “The Great Humanitarian.” As Europe descended into war, Hoover organized the largest relief effort in history. With tireless effort he secured funding for resources to feed the civilians on the Continent. Even after the war he worked to stabilize the destroyed nations on both sides of the battlefield.

President Wilson turned to Hoover to head his Food Administration. Hoover labored hard to bring 120,000 Americans home when they were caught unprepared in Europe as war broke out. Then he fed Belgium, a nation controlled by Germany, an enemy of the U.S. in that Great War. Hoover manged to feed millions while keeping America’s soldiers well fed at the same time. A delicate balancing act at best.

After the war Hoover headed the American Relief Administration, feeding 20 million in Central Europe. A devastating pandemic took hold during the later days of the war. As soldiers returned home they brought the deadly Spanish Flu with them. 

In 1918-9 the government closed businesses and churches to fight the pandemic. Face masks were required in many communities with harsh penalties for failure to comply. The shelter-in-place policies of today were not part of the strategy in fighting the Spanish Flu in the same blanket manner applied in early 2020. 

After the war the stock market enjoyed a relief rally. Businesses grew tepidly, if at all, as a war hangover recession loomed. The reduced war spending eventually affected economic activity. Though not spoken about often historically, the recession of 1920-21 is the result, in part, from the efforts to combat the pandemic of a few years earlier. 

President Harding tapped Hoover for his Secretary of Commerce. A recession that began in January of 1920 and ran until July of the following year was especially deep. Research conducted by Robert Barro and Jose Ursua indicated the Spanish Flu reduced worldwide economic activity by 6-8%. 

Herbert Hoover proved up to the task of defeating this deep economic decline of the early 1920s. His work led to the booming economy in the decade ahead. 

 

It has never been a good bet to bet against America.

 

The Great Depression

If ever there was a president up to the task of defeating an economic crisis it was Herbert Hoover. President Hoover was concerned over the wild speculation on Wall Street. A nasty tariff fight in Congress spooked the markets and caused sharp declines, but quickly recovered each time in early and mid-1929. Then the wheels came off. 

On September 3, 1929 the Dow Jones Industrial Average hit a high, a level it would not see again until November 23, 1954. What started slow turned into a steamroll. In October 1929 it was free fall.

But the economy seemed sound by many measures. The stock market was down much more than economic activity would dictate. This started a process of efforts by President Hoover that never seems to work.

One measure after another was tried. Fear the solutions (usually involving more government debt) would exacerbate the problem caused President Hoover to use only half measures. Tax cuts were on the table, but not too many so as not to sink the national debt into the unknown abyss. Increased government spending was also on the table, but once again, only in half measures as to at least pretend fiscal constraint was being applied.

Hoover’s ideas were exactly what the nation needed to exit The Great Depression early, if only the president could have seen clear to unleash the dogs 100% in battle against the economic disaster unfolding. FDR, once in office, used virtually all the programs proposed by Hoover. FDR used greater flare to describe his programs and gave them different names. FDR also did not hold back. The national debt ballooned like never before. It was different that time.

Yet, even President Roosevelt could not go all-in. FDR’s programs started the economy rolling again, but not to new heights. And after a period of growth he increased taxes to reduce the deficit, triggering the second phase of The Great Depression in 1937. A quick learner, FDR saw the economy stall and stepped on the gas again quickly. There seemed no end to the deficit spending.

It took another world war to open the spending gates wide enough to permanently end The Great Depression. In 1946 the federal budget deficit exceeded 26% of GDP. This may stand as the largest imbalance in the U.S. government’s history.

 

2020 Is Not the Next Great Depression

This time is different is the battle cry of the unenlightened. History may not repeat, but is tends to rhyme. My good buddy Samuel Clemens once told me something along those lines a long time ago. However, every once in a while, it is different. In short, there always has to be a first time for everything.

By many economic measures the economy is taking it on the chin worse than any time in modern history. The stock market collapse is faster than 1929 or 1987. Thirty million are out of work in the first month of the pandemic and counting. Many businesses were forced to close and many never reopen due to the financial shock to their budget. 

There is another difference nobody wants to place front and center. Unlike the early days of The Great Depression, the government stepped up with all canons and fired fast and hard this time around. Even during the Great Recession of a decade ago Congress dragged its feet on how much stimulus should be provided the economy. 

This is the greatest time is history to be alive. What mankind is accomplishing was unthinkable a mere decade ago.

Unlike The Great Depression and with lessons learned from a half generation ago, the Fed dropped rates to zero instantly and reignited quantitative easing on a scale unthinkable a decade ago. Congress passed, and the president signed, stimulus bills at lightning speed. Trillions of dollars were pumped into the economy with fiscal policy (government spending) and trillions more with monetary policy (Federal Reserve activities).  

Never before have so many economic weapons been brought to bear, not even in a wartime situation. Some snickered when President Trump said he was a wartime president. Not a personal fan of the current president, I still agree with him on this issue. It will take a war time effort and war time powers to right the economic ship.

The Great Depression spiraled ever downward as elected leaders provided ineffective levels of economic stimulus 90 years ago and the reluctant efforts of a decade ago led to anemic economic growth as the economy left the Great Recession behind. The just finished economic expansion had one of the slowest, if not slowest, starts in U.S. history. 

The willingness of leaders in Washington to spend whatever is necessary, coupled with the Federal Reserve’s willingness to use unlimited resources to counter the economic dislocation, make it impossible for economic activity to descend into the chaos of the 1930s. Stimulus checks to individuals and forgivable loans to small businesses will limit the damage. Make no mistake, the damage will be acute and will linger. That lesson was taught us by The Great Depression. WWII spending proved the path necessary financially to beat the economic demon into submission. 

More proposals keep coming forward. Nearly $3 trillion in stimulus spending is already passed and working its way into the hands of individuals and businesses. It is not enough and will run short. Congress knows it and keeps pumping more stimulus measures at every whiff of a slowing economy. How much more stimulus spending will come is anyone’s guess. All I know is nobody seems to want to rein in the excesses at this time. And that is probably a good thing. The 26% of GDP deficit in 1943 is only the worst year of many with large fiscal deficits in the early 1940s. The spending was insane back then and America thrived afterwards. With the money going into the hands of Americans (back then and now) there is no doubt in this accountant’s mind the economy will pass this painful speed bump reasonably quickly with far fewer casualties than if belated measures similar to 2008-9 were used; or worse, the reluctant policies of 1929-1932.

The stock market has enjoyed a healthy bounce off the initial bottom. Nobody knows if this is a bear market rally or the first leg up in a V-shaped recovery. As always, follow the advice from another buddy of mine, Warren Buffett: It has never been a good bet to bet against America.

 

What Could Derail the Stimulus Measures

The Fed dropped rates to zero, opened the gates to unlimited quantitative easing bond purchases and has extended the purchases far beyond Treasuries. It seems the printing press (creation of more money/increasing the money supply) has not caused inflation to increase by any discernible amount over the past decade. In fact, inflation has been stepping lower and lower since the early 1980s. 

Printing more money, if you will allow my use of the term, has not ignited inflation in recent decades. What always seems to be an unbreakable law in times past does not seem to be an issue at present. Reason says at some point more money will force prices higher. Where that point is nobody knows. Many economists expected it to be an issue by now. Since inflation never seems to rear its ugly head anymore, economists as less frightened by it. 

Perhaps the lack of fear over inflation is low because most have never lived through it or it is a very distant memory. 

If inflation should make an appearance it could be game over. This whole fantasy of stimulus spending with the Federal Reserve buying all the newly issued bonds with fiat money only works if inflation does not attend the party. 

SpaceX is taking us to the future.

The national debt is likely to pass $25 trillion this calendar year with more red ink on the horizon. We could be paving the groundwork for one of the richest economic booms in the history of mankind or a worldwide inflationary disaster of Biblical proportions. I lay odds on the former.

Inflation may increase for a short time as demand is high and supply is artificially constrained. Once the pandemic passes completely in a year or two (the virus fades into the history books like the Spanish Flu or with the advent of a vaccine) supply and demand should find an equilibrium.

I know people are scared. Scared of getting sick and of losing loved ones. Scared of not having enough to feed themselves or their family, shelter and care for their family. Scared their business will fail. There are so many things that can befall us. I am an optimist and a realist. Businesses will fail. People will die. It will not be all roses. But we, as a people, will survive and even thrive. 

New businesses will be started; jobs will be created. Families will heal and new friendships forged. Warren Buffett is right, America’s best days are still ahead. The same can be said of the entire human race, all peoples, from all nations. 

This time is different. It is also the same. And like every time tragedy struck in the past, humanity has survived, thrived, grown and reached higher afterwards than ever before.

I for one am glad I am on this journey with you, kind readers. We should never be afraid of making the hard decisions. It will not be as bad as The Great Depression because this will not stretch out for a decade followed by a world war. This will last a year or so at most with the worst happening this year. And the other side will be glorious as the resources to build new businesses that will travel to the stars and beyond as being created as we speak. 

That is the hope you and I both need to live through this trial. There is no one more than you I would rather be on this journey with. Godspeed.

 

 

More Wealth Building Resources

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

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QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.