A new administration brings with it an abundance of change.
Based on President Joe Biden’s economic policy plans, it appears that Congress will be making many important decisions on legislation that will affect the majority of Americans financially. The big question people are asking themselves as they are exposed to the many proposed changes is, “How will all of this affect me personally as far as my finances are concerned?”
What are the policy changes which could affect your finances? Let’s take a look at each potential change and then talk strategy afterward.
Though it was less than the $1,200 stimulus checks many Americans received earlier this year, the $600 stimulus checks that started going out in late December were welcomed by most. Though it was just a small band-aid to a large financial problem, it was a temporary lifeline for many people.
Then President-elect Biden wasn’t nearly satisfied with the amount of the second checks. On January 10th, he tweeted that $600 “is simply not enough when you have to choose between paying your rent or putting food on the table. We need $2,000 stimulus checks.”
There is little doubt that getting a third round of checks for $2,000 approved by Congress will be a challenge. Many members have voiced disapproval based on the price tag of the stimulus package the stimulus money is part of. They feel that an additional $1.9 trillion of financial aid to citizens, small businesses, and the government is too hefty a sum considering the trillions of dollars that have already been spent propping up the economy.
Will you receive any additional stimulus money? Will there be a third round of checks going out? Nobody knows for sure, but most experts feel that it’s very likely to happen. It may not be the full $2,000, it may be $1,400 ($2,000 less the $600 already sent your way), or it may be less. If it happens, it’s most likely going to be in March after much House and Senate debate. It will probably become a reality, but don’t spend the money until you actually have it in hand.
[ Related read: How much should you have in an emergency fund? ]
Will your taxes be going up or down? It depends on how much you earn. Anyone with an income of $400,000 or more is likely to see a tax increase, while people earning $160,000 or less will probably experience a reduction in their income tax because of the many proposed tax credits.
Corporate taxes are expected to go up under the Biden-Harris administration. This means that for corporations to add more profit to their bottom line than the previous year, they’ll most likely be raising the prices you pay for their goods and services. This means that what you save because of tax credits may be offset by rising prices at the cash register when you shop.
[ Related read: 7 financially-savvy ways to use your tax refund ]
If you have a student loan, you may get some relief. President Biden has indicated his inclination to forgive a portion of outstanding student loans. Though many Democratic officials began clamoring for $50,000 of student loan debt forgiveness, President Biden’s proposal is a more modest $10,000. Either way, it’s a tidy sum of money that you won’t be paying interest on.
If you or a child are considering going to college, it’s also expected that the new administration will be giving you a better sense of how much college costs will be. This transparency will help you make better financial decisions when you’re comparing colleges, which could help you save thousands on your total cost for a degree.
Anyone that says they can predict the future of the stock market probably believes they can predict next month’s weather. Nobody knows whether the stock market will go up or down from one day to the next, but there are a few conclusions we could draw based on statements the President has made.
Clean energy is a good example. President Biden has long made it known that he is a strong proponent of alternative energy sources, making mutual funds containing companies involved with alternative energy, electric vehicles, and clean energy a potentially profitable investment choice.
President Biden is also seen by many as a potential threat to “Big Tech.” He’s expressed his viewpoint that some of the prominent names in technology are borderline monopolies, meaning increased regulation of these companies may be in the offing, potentially hurting their stock prices.
Will you be doubling the value of your portfolio anytime soon? It’s not likely. According to CNBC, data compiled by financial firm LPL “shows that beginning in 1950, the average annual stock return was 17.2% under a split Congress, 13.4% when Republicans held both chambers, and 10.7% when Democrats had control.” Don’t count on the new administration to have a dramatic effect on your investments.
Recently, President Biden told Americans that he was authorizing the purchase of 200 million additional doses of the vaccines that have been developed to fight the virus. His goal is to have every American receive the requisite two doses by the end of Summer 2021. A lofty goal, indeed, but hopefully one that will be achieved.
The economy is now expected to be well on its way to a speedy recovery in 2021, thanks mainly to the vaccines that have been developed. This will have a positive impact on your finances.
If you’ve been out of work because of the pandemic, the prospects for you getting back to work are favorable with the vaccine. Many shuttered small businesses will be re-opening and hiring new employees or bringing back former workers, and corporations that downsized because of a downturn in business will be rehiring people to take care of new business.
Low unemployment is generally the sign of a healthy economy, barring hyperinflation, and it’s quite likely that you’ll personally benefit from America’s return to a flourishing economy.
What’s the best strategy for you as changes unfold? Stay the course. Changes the administration makes over the next year will be relatively slow in impacting your finances.
Yes, a stimulus check bringing an infusion of cash into your account would be nice. But, will it be life-changing? Probably not. Nor will any of the other changes we’ve looked at. What will make a difference will be staying disciplined with your finances and putting into practice sound, fundamental strategies like keeping a budget and contributing systematically to your retirement account.
[ Related read: 13 best personal finance tips to help you master money in 2021 ]
It’s clear that this administration is not shy about making changes. Stay up-to-date on legislation and make your adjustments accordingly. Your willingness to adapt to the changes will have as much of an impact on your finances as external events will.
Jack Wolstenholm is the head of content at Breeze.
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