On November 3, the United States will hold an election to determine whether former Vice President Joe Biden or President Donald Trump will hold the highest office in the country for the next four years. It will also determine the composition of the US House of Representatives and the US Senate.
The result could shape many aspects of American life and profoundly affect your personal finances. Here is how.
1. Minimum wage could change
If he is elected president, Joe Biden has promised to raise the state minimum wage and promises to hit it up to $ 15 an hour from the current $ 7.25 an hour. If the minimum wage goes up, millions of workers could get a raise. Indeed, if the minimum wage increases, it is likely that companies will have to raise the salaries of many other workers as well.
While this is good news, some economists, as well as the Congressional Budget Office, warn that jobs could be lost if the minimum wage is raised. Given a higher minimum, companies could automate more or make other changes to reduce labor costs.
2. The stock market could rise (or fall)
The choice can affect the stock market in many ways, especially in the short term. For example, when Trump was elected, the market rose amid widespread belief that he would become a pro-business president.
However, should Biden hold high office, he has pledged to raise the capital gains tax rate, the affordable tax rate that investors pay on long-term investments. If investors think it will pull through, there could be a big sell-off ahead of the opening day as investors take profits at the lower tax rate.
3. Interest rates could change
The Federal Reserve controls the benchmark interest rate, which in turn affects the interest rate borrowers pay on mortgages, personal loans, and other debts. The Fed could make interest rate changes based on its perception of the president’s economic policy.
If the Federal Reserve believes that new economic policies could usher in economic growth, it could raise interest rates slightly to keep that growth under control. On the other hand, with interest rates currently close to 0%, the Fed is unlikely to cut rates – regardless of the president’s policies – as it wants to avoid pushing rates into negative territory.
Since interest rates are more likely to go up than down, if you expect to need a loan soon, consider getting a mortgage, refinance loan, or personal loan before choosing.
4. Your health care costs can vary
Biden has indicated support for a public option that will allow more Americans to purchase Medicare coverage. He also wants to expand the Affordable Care Act. President Trump and Republicans still seem more interested in ditching Obamacare in favor of other solutions.
You may find that your healthcare costs change dramatically when there are new options in the insurance market or other important changes.
5. You could pay more (or less) taxes
Biden has announced plans to raise taxes for the rich, but not for those who earn less than $ 400,000 a year. And the Democrats plan to lift the cap on state and local tax deductions that the GOP has included in its signature tax legislation. If you’ve lost part of your deduction, you could get it back when Biden takes office.
Trump, on the other hand, has signaled an ongoing desire to cut taxes, including lowering or abolishing the payroll tax. This could mean more money in your paycheck, but it puts Social Security’s dedicated source of funding at risk.
Will the 2020 election affect your finances?
It is possible to make educated guesses how the choice might affect your financial situation, but no one knows exactly what will happen. The best way to be prepared is to follow solid financial principles that will serve you well in all circumstances. Minimize the debt and make sure that you borrow at the lowest interest rate. Develop a solid investment strategy and maintain an emergency fund to help you through tough times.