As with any new president, Joe Biden will have his work cut out for him when he takes the oath this month. And while his plans to “build back better” are already in place, it remains to be seen what impact his administration can actually have on your finances.
The COVID-19 pandemic is not behind us, so the recovery will be slow, which Biden has made clear. And while Democrats will have the thinnest possible Senate majority after winning both Dam races in Georgia this week, many initiatives of the administration will still be subject to the legislative process.
In short, we can’t read far into what Biden has to offer and use it as a playbook for our personal finances today. “I’m not a huge fan of people who review their finances or take action on the assumption that something is going on, just because there are too many unknowns,” Greg McBride, chief financial analyst at Bankrate.com, on my Podcast.
Here’s a breakdown of some of the major economic initiatives proposed by President-elect Joe Biden and Vice-President-elect Kamala Harris, and how to interpret them in the interest of our financial well-being. As always, personal accountability will be just as, if not more, important than questions of politics.
Higher federal taxes, but only for those earning over $ 400,000.
Proposal: The Biden-Harris team proposes to increase the taxes of the richest of the country, including those who earn more than $ 400,000 per year. This means raising the highest individual income rate to 39.6% for people earning over $ 1 million and taxing investment income at the same rate as salary income.
At the same time, the team is proposing to extend certain tax benefits like the Child Tax Credit during the pandemic for middle and low income families. In the long run, we are told that we can also expect additional tax credits for the purchase of a home, as well as for child care and health insurance costs.
How should we act: It looks like the nation’s wealthiest can expect a bigger tax bill in the near future if Biden and Harris are successful. But that doesn’t mean everyone is off the hook. Remember, states are bankrupt right now and will have to cover their deficits somehow. “The general trend for states and municipalities to increase their tax revenues kind of tells you which way the wind is blowing over time,” says McBride. Even if your federal tax bill doesn’t change, some should be prepared for state and local taxes to go the other way. Hope for a decrease, but expect an increase.
Student loan debt
Good news for borrowers, better news for future college students.
Proposal: Student loan debt in the United States exceeds $ 1.6 trillion and is a giant obstacle on the road to success for millions of recent (and not so recent) college graduates. The Biden-Harris administration understands this and has initiatives announced to help existing borrowers save money and make higher education more affordable.
They include free community college tuition fees for a period of up to two years, free public college and university tuition fees for all families with incomes below $ 125,000, and doubling of the maximum value of certain federal aid, such as the Pell Grants for low and middle incomes. -class individuals.
For graduates, there is also a plan to give more loan cancellations to those who choose to work in the public service and to make the repayment plan based on existing income (an Obama-era provision) again. more affordable by reducing monthly payments by over 50%.
How should we act: While it might seem odd to say this, don’t pay off your federal student loans too aggressively over the next year or so, just in case new laws come along that offer more relief. If you have benefited from the federal student loan deferment program set out in the CARES Act, stay the course until it expires at the end of the year.
There is a lot to look forward to if Biden’s plans are implemented. But stay on top of the news and don’t wait for your lender to call you with ideas on how to make your loan more affordable through income-based repayment or other programs. As we learned during this pandemic, help is available, but you often have to seek help yourself.
For private borrowers, support will be provided on a case-by-case basis. Make sure you stay ahead of any financial challenges by calling and refinancing request or modify your loan.
Know what grows.
Proposal: In general, we are told to expect more jobs both now and in the months and years to come. Biden’s plan also refers to “higher wages, greater benefits, and fair and safe workplaces.”
The Biden-Harris team is pledging state, local and tribal governments with financial support to help first responders and essential workers keep their jobs. There are also plans to create new jobs “immediately” by employing people in areas such as contact tracing to help fight the pandemic. And in a bid to spur private job creation, there is a multi-faceted proposition to help grow the workforce by investing in key industries such as infrastructure, clean energy, care and health. ‘education.
As for unemployment insurance, the administration intends to extend Unemployment insurance linked to COVID-19 to help people who are currently unemployed. It would also implement an employment insurance scheme in which all states would adopt and increase “short-term” compensation programs. Indeed, it would allow struggling employers to avoid layoffs and keep more workers in place (perhaps at reduced hours) by asking the federal government to make up the difference in pay. Also known as “work sharing”, this has already been adopted by 27 states.
How should we act: If you work in any of the above industries, or if you are considering embarking on a career that includes, for example, education or caregiving, you can rest assured knowing that the next administration is planning to there. devote a lot of resources and funds. . If you’re about to pursue a career in retail versus education, smart money could bet on job security education.
But don’t be too confident or comfortable. Do as we always should when it comes to protecting income security: perform best (and defend your interests) at work, consider upgrading your skills to increase your indispensableity, have a reserve for the days rain (because nobody’s job is bulletproof) and consider adding a secondary source of income to help supplement your full-time salary.
For anyone who lost income in 2020 and did not apply for unemployment insurance, now is the right time to do so. Access to benefits has been expanded under the CARES Act, but these provisions expire at the end of the year.
The racial wealth gap
Plans are promised, but don’t forget to personalize them.
Proposal: The Biden-Harris administration’s action plan includes several ideas to Help alleviate the many wealth inequalities caused by racism in this country For example, they want to promote small businesses by investing more public-private money in entrepreneurs. They say they will reform the Opportunity Zones, invest more in home ownership and access to affordable housing for black, brown and indigenous families, and provide more equity in management, ownership and access to affordable housing. training and higher education linked to the jobs of the future. There is also a goal of strengthening retirement security and wealth, and ensuring that workers of color are paid fairly.
How should we act: It’s wonderful that the next administration has boldly made this a top priority, but I think we can all agree that we can’t just wait for government officials to create the change. They play a vital role and we should certainly hold government accountable, because so many systemic issues that create racial inequalities are the result of racist policies. But we must continue to work fast, together and hard. Individuals must continue to do the important work of being anti-racist, supporting black businesses and programs with our dollars, and reducing inequality. Ask yourself: what can I do now to help support racial equality?
Reform will be slow.
Proposal: With America in the midst of a pandemic, health care is on everyone’s mind. The Biden-Harris team is committed to protecting and building on the Affordable Care Act that President Barack Obama signed into law in 2010. The Biden-Harris team’s biggest plan is to create a “public option” for medicare, run by the government and accessible to people of all ages. This would, in theory, be more affordable than the private market options.
As with many of their other proposals, this will require Senate support, so we shouldn’t quickly assume that health care promises will be kept. More imminently, the existing ACA again faces a potential Supreme Court ruling on its constitutionality.
How should we act: With patience. Strengthening the ACA is important to Biden-Harris, but issues such as stopping the pandemic and rebuilding the economy will take precedence and could last through 2021. In the meantime, do your best to Staying Healthy One of the best ways to lower your future health care costs is to take care of yourself. The last place you want to be now or in the next six months is a hospital. So remember to get away from others, wash your hands and, for everyone’s sake, wear a mask.