As for any new president, Joe Biden will do the job when he takes his oath of office this month. And while its “build better” plans are in place, it remains to be seen how much of a real impact its management can have on your finances.
The COVID-19 pandemic is not behind us, so recovery will be slow, which Biden was aware of. And while the Democrats will have the lowest possible Senate majority after winning the two Georgia runoff elections this week, many of the government’s initiatives will still be legislative.
Related: President Biden will suspend payments on federal student loans. Here are all of his student debt relief plans
In short, we cannot read far into what Biden is proposing and use it as a playbook for our personal finances today. “I’m not a huge fan of people reviewing their finances or suspecting something’s over simply because there are just too many unknowns,” Greg McBride, chief financial analyst at Bankrate.com, told me in mine Podcast.
Here is a breakdown of some of the key business initiatives proposed by President-elect Joe Biden and Vice-President-elect Kamala Harris and how they are interpreted in the interests of our financial well-being. As always, personal accountability will be just as, if not more, more important than political affairs.
Higher federal taxes, but only for those who earn over $ 400,000.
The application: The Biden-Harris team suggests raising taxes for the richest people in the country, including those who make more than $ 400,000 a year. This means that the highest individual income rate for those earning more than $ 1 million will be increased back to 39.6% and investment income will be taxed at the same rate as wage income.
At the same time, the team suggests extending certain tax benefits such as the child tax credit to middle and low income families during the pandemic. In the long term, we are told that we can also expect additional tax breaks for buying a house, as well as childcare and health insurance costs.
How should we act: It seems that the richest in the country can expect a higher tax bill in the near future if Biden and Harris get their way. But that doesn’t mean everyone else is off the hook. Remember that states are currently bankrupt and need to somehow make up their deficits. “The general trend for states and local governments to raise more tax revenue tells you which way the winds blow over time,” says McBride. Even if your federal tax bill doesn’t change, some should prepare for state and local taxes to go the other way. Hope to decrease but plan to increase.
Student loan debt
Good news for borrowers, better news for future college goers.
The application: U.S. student loan debt tops $ 1.6 trillion and is a huge headwind on the road to success for millions of new (and not so new) college graduates. The Biden-Harris government is aware of this and has announced initiatives to help existing borrowers save money and make higher education more affordable.
These include making community colleges free of charge for up to two years, introducing free public colleges and universities for all families with incomes below $ 125,000, and doubling the maximum amount of certain government grants, such as government grants. B. Pell grants for low-income and middle-class individuals.
For graduates, there is also a plan to give those who choose to work in the public service more loan relief and to make the existing income-based repayment plan (a provision from the Obama era) even more affordable by increasing monthly payments by more than 50 be lowered%.
How should we act: While it may sound strange to say, don’t be too aggressively paying off your state student loans over the next year just in case new laws provide more relief. If you’ve benefited from the federal student loan deferral program set out in the CARES Act, keep the course until the end of the year.
There is much to be expected if Biden’s plans are implemented. But stay tuned 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 in this pandemic, help is out there, but you often need to seek support yourself.
For private borrowers, support is regulated on a case-by-case basis. Make sure you forestall any financial challenges by calling and requesting refinance or loan modification.
Know what is growing.
The application: In general, we are told that we can expect more jobs both now and in the months and years to come. Biden’s plan also refers to “higher wages, better benefits and fair and safe jobs”.
The Biden-Harris team pledges an infusion of financial assistance to state, local, and tribal governments to help first responders and key workers keep their jobs. There is also a plan to create new jobs “immediately” by hiring people in areas like contact tracing to help fight the pandemic. And to boost private job creation, there is a multi-faceted proposal to increase the workforce by investing in key sectors such as infrastructure, clean energy, care and education.
As for unemployment insurance, the administration intends to expand COVID-19 related unemployment insurance to support those who are currently unemployed. It would also implement an unemployment insurance plan in which all states enact and ramp up “short term” compensation programs. Indeed, this would allow struggling employers to avoid layoffs and keep more workers (possibly on reduced hours) in their jobs by the federal government making up the wage gap. Also known as “worksharing”, this has already been adopted by 27 countries.
How should we act: If you work in any of the above industries, or plan to embark on a career path that may include education or nursing, you can rest assured that the next administration will provide plenty of resources and financial resources. If you’re on the fence between a career in retail or education, the smart money could bet on education when it comes to job security.
But don’t get too safe or comfortable. Do what we should always do when it comes to protecting income security: be a top performer (and stand up for yourself), think about improving your skills to make yourself more indispensable Make a stash of rainy days (because nobody’s job is bulletproof) and consider adding a source of extra income to supplement your full-time paycheck.
For anyone who lost their income in 2020 and has not yet applied for unemployment insurance, now is a good 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 remember to make it personal.
The application: The Biden Harris Administration Action Plan contains several ideas to alleviate the many wealth inequalities caused by racism in this country. For example, they want to encourage small businesses by investing more public-private money in entrepreneurs. They say they will reform opportunity zones, invest more in home ownership and access to affordable housing for black, brown and indigenous families, and provide more equity in management, training and higher education related to the jobs of the future. There is also a goal of enhancing pension security and prosperity, and ensuring that colored workers are paid fairly.
How should we act: It’s wonderful that the next government has boldly made this a top priority, but I think we all agree that we can’t just wait for government officials to make change. They play an essential role and we should certainly hold the government accountable, as so many of the systemic problems that lead to racial inequality are the result of racist policies. But we have to keep working quickly, together and loudly. Individuals must continue to do the important job of being anti-racist, supporting black businesses and programs with our dollars, and reducing inequalities. Ask yourself: what can I do now to support racial equality?
The reform will proceed slowly.
The application: With America in the middle of a pandemic, everyone is talking about health care. The Biden Harris team pledges to protect and build on the Affordable Care Act, which President Barack Obama signed in 2010. The Biden-Harris team’s biggest plan is to create a “public option” for health insurance, run by the government and available to people of all ages. It would theoretically be cheaper than private market options.
As with so many of their other proposals, this will require Senate support, so we shouldn’t rush to assume that the health promises will be a success. Immediately, the existing Court of Auditors is again faced with a possible ruling by the Supreme Court on its constitutionality.
How should we act: With patience. Strengthening the ACA is important to Biden-Harris, but issues like ending the pandemic and rebuilding the economy will be a priority and may last all through 2021. Future healthcare costs is to take care of yourself. The last place you want to land now or in the next six months is a hospital. So remember to keep your distance from others, wash your hands, and wear a mask with all love.