Get Ready For These New Financial Trends

financial trends

How Will New Financial Trends Affect You?

There is much discussion of major changes coming with the new administration that could affect your personal finances. Today we look at a few important new financial trends that could make a difference for your financial outlook.

When it comes to getting ahead financially, understanding the trends and being prepared to take every advantage to improve your situation is very important. Here’s a look at two new financial trends that could be on the horizon.

financial trends

Income-tax reform

If president-elect Trump and the Republican-controlled Congress get their way, a lot of Americans could pay less in taxes next year. But more than just cutting rates, the new powers in Washington also could reshape the role of deductions and simplify tax planning.

Trump wants to compress the current seven individual brackets to three rates of 12 percent, 25 percent and 33 percent. He also has vowed to eliminate personal exemptions and repeal the Alternative Minimum Tax and the 3.8-percent tax on net investment income for high-income taxpayers. A plan advanced by House Republicans would do much the same. Trump also would more than double the standard deduction to $15,000 (singles) and $30,000 (married filing jointly), with the standard deduction also going up under the House Republican plan. For people who continue to itemize, deductions would be capped at $100,000 (singles) or $200,000 (married filing jointly) under Trump. House Republicans have discussed eliminating all deductions, except for the mortgage-interest and charitable-deduction tax breaks.

With deductions de-emphasized, tax-return preparation and planning could become simpler. Most Americans don’t itemize anyway, instead opting for the standard deduction. Under either GOP plan, the percentage of non-itemizers could rise further.

Higher interest rates

The Federal Reserve’s decision in December to boost short-term rates was the latest sign of rising borrowing costs. The central bank doesn’t directly influence long-term rates, such as those on 30-year mortgages, but those loans have become a bit more expensive too, reflecting percolating economic growth and slightly higher inflationary expectations. Average rates on 30-year mortgages are running around 4.3 percent now, a two-year high. Some credit-card and auto rates also have pushed a bit higher.

Gross Domestic Product in the third quarter increased to 3.5 percent, a relatively robust level compared to recent years. While there remains slack in the economy, the broad trend points toward higher interest rates generally. The flip side of that —  more attractive yields on bank deposit accounts and other short-term investments — hasn’t yet materialized. – USA Today 

New Financial Trends For Student Loans

Keep an eye on changes in student loan lending. If you are considering taking out a student loan in the near future these important changes could open up possibilities for better loan terms and make a big difference in your outcome. Be prepared and ready to take advantage of better terms should these changes develop.

More Student Loan Options

Trump may revive the role of private lenders in the issuance of federal student loans. This means a potential reduction of the federal government’s role in student lending and a corresponding increase in the role of private lenders.

In 2010, the Obama administration began originating all federal student loans through the Direct Loan program. Before then, in addition to the federal government, private banks also issued federally-backed student loans. Today, banks issue private loans, and several private companies service government-issued loans.

Under Trump’s proposal, the federal government and private lenders may both originate student loans.

What To Do: This proposal pertains to the issuance of new, direct federal student loans for incoming and current students. If you are looking to refinance your student loans now, this proposal would not impact you. If private lenders play an increased role in federal student loan issuance, it could lead to better customer service, streamlined process and tech-friendly features for consumers. More details are needed, however, on the exact role that private lenders would play. For more on Trump’s student loan plan, and how it may impact you, read Trump’s Plan To Make Student Loans Great Again. – Forbes

Do you watch for financial trends and how they could affect your finances?

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