A brand new year lies ahead of you. Time and again, you’ve got the opportunity to pay off your debts, enhance your investment portfolio, and contribute a larger share of your paycheck towards your retirement accounts.
As you set fresh personal financial goals, make sure you’ve analyzed your present financial health and what mistakes you’ve committed, what all you did were right, and how you can do better.
Before that, you need to note some of the most disruptive personal finance trends in 2017 based on which you can improve your financial life ahead. Here are they:
1 Better student loan alternatives
As per Trump’s proposal, both the federal government and private lenders may issue federal student loans. His proposal are for fresh, direct federal student loans for both incoming as well as current students. You may refinance your student loan, as this proposal won’t affect you.
There could be some immediate improvements in the current lending scenario with the revival of the private lenders. These lenders could provide improved customer service, simplified loan origination process, and a wide variety of tech-friendly options to the borrowers. Moreover, you can be one of the fortunate borrowers to enjoy the Federal Reserve’s student loan forgiveness proposal and have better financial life ahead.
2 Escalated interest rates
Last December, the Federal Reserve hiked its benchmark interest rate by 0.25%. The Fed also foretold that there could be 3 other rate hikes in 2017. As a saver, you could see your yield increase from your saving accounts. On the other hand, hiked interest rates would badly affect your variable interest rate student loans, mortgages, credit cards, and car loans.
So, if you’ve got any variable rate loan, then you may consider having it converted into a fixed rate one. Take for instance, if you have variable interest student loan, then you can refinance it by a private lender and have it converted into a fixed interest loan.
3 More affordable travel
In 2015, the U.S. Dollar grew stronger than both the Euro and British Pound. Besides other reasons, the Euro further weakened to a 20-month low against the dollar, following the resignation of Italian prime minister, Matteo Renzi. Moreover, the Brexit vote in June 2015 sent the British Pound crashing to an unprecedented 30-year low against the dollar. In the recent past, the British Pound was trading at around $1.23 while the Euro was at around $1.05.
Meanwhile, if you are planning an European vacation, then this is one of the most financially rewarding opportunities to do that. If the dollar continues to grow stronger than the Euro, then traveling to Europe would become more affordable in the near future.
4 Improved investment portfolio automation
Retail investments are expected to get a shot in the arm too. Both companies, Wealthfront and Betterment, have taken the initiative to provide automated portfolio management facilities to the retail investors, thereby simplifying the entire investment process for them.
The whole automation process would provide enhanced tax efficiency, reduce operating costs for the investors and grant them access to a plug & play system. In case you’re on the lookout for a budget-friendly, passive investment plan for your portfolio, then you may opt for one of these automations now.
5 Increased online brokerage merger & acquisition (M&A)
In October 2015, TD Ameritrade agreed to buy Scottrade for $2.7 billion. The buyout happened between two leading discount brokerage firms in the country, and with that, there remains only 3 other major players in the brokerage market: E-Trade, Charles Schwab and Fidelity. The buyout is still subject to regulatory approval and it happened 3 months after E-Trade bought Options House.
If there is anymore consolidation in the online brokerage market, then make sure that you’re aware of the fine prints, in case your broker has been acquired. In addition, your charges, customers advantages, local branch and financial advisor may also change.
6 Novel credit card rewards
According to industry experts, credit card companies may choose a fresh approach in rewarding its customers in 2017. As per industry insider reports, they’re going to dole out “bread-and-butter” or financial rewards, instead of aspirational ones.
For instance, as credit card rewards, consumers may receive cash back offers, rather than free hotel accommodation or airline tickets. This reward strategy may appeal the middle class more than any other strata of the society. It’ll be an added financial help for those who spend a major portion of their paycheck on groceries and other basic needs. So, credit card users may keep a close watch over their issuer’s freebies and rewards for good.
7 Reduced taxes
A host of major changes to the tax policies are expected to come in 2017, as proposed by the Trump Administration, that could have a disruptive effect on your personal finances. President Donald Trump is likely to follow through with his pre-election promises that would ease as well as reduce federal personal income taxes in many avenues. Some of them could be:
- Tax brackets may be reduced from 7 to 3. For instance, married joint tax filers might have to pay either 33% (having annual income $225,000), or 12% (having annual income >$75,000). Hence, there would be a sharp reduction of tax rate from the present 39.6%. Similarly, the tax brackets for single tax filers might be reduced to half against the married joint filers.
- Married joint filers might see their standard deductions increase from $12,600 to $30,000, and for the single filers, it’d be $6,300 to $15,000. The personal exemptions and head of household filing status will be done away with altogether.
- Instead of taxing capital gains, President Trump has proposed to tax ‘carried interest’ as ordinary income. If you’re invested in private equity or hedge funds, then it may have an adverse effect on your net return on investments.
- The Trump Administration has moved the motion to repeal the 3.8% tax and the alternative minimum tax (AMT) levied under the Affordable Care Act or Obamacare.
- A cap on itemized deductions has been proposed at $200,000 for married joint filers and $100,000 for single filers.
- There may be an above-the-line deduction for the taxpayers with dependents’ expenses like eldercare and children aged below 13.
One of the top most priorities of the Republican-controlled Congress would be to push through some major tax reforms. Still, you could expect a different tax plan than the one promised during the election. Work with a certified tax professional to guide you through the tax planning process.