Navigating the Financial Landscape Amidst Political Uncertainty

As the 2024 presidential election approaches, the nation finds itself in a state of political flux. With the two leading candidates, Donald Trump and Kamala Harris, neck-and-neck in the polls, the outcome remains uncertain. While it's crucial to exercise your right to vote and engage in thoughtful discussions with friends and family, it's equally important to prepare your finances for the unpredictable future that may lie ahead.

Securing Your Financial Future, Regardless of the Election's Outcome

Buffering Against Uncertainty

The upcoming election has the potential to bring about significant economic changes, regardless of who emerges victorious. "Economic uncertainty often follows elections," explains Doug Carey, CFA, founder of WealthTrace. "By building your savings now, you create a financial buffer, no matter how the next president's policies affect the economy or financial markets." While the future may be uncertain, proactively strengthening your financial position can help you weather any storm that comes your way.

Preparing for Tax Changes

Tax policies are a significant concern for many Americans, and the 2024 election could bring about significant changes. "Many provisions of the Tax Cuts and Jobs Act of 2017, such as an increase in the standard deduction and the lowering of income tax brackets, are scheduled to expire at the end of 2025," warns Amy Loftsgordon, an attorney and editor at Nolo. "While that might sound like a long way off, now is a good time to start preparing for potential changes to tax laws by increasing your savings in case you need to pay more in taxes." Regardless of the election's outcome, it's crucial to be proactive in managing your tax obligations.

Navigating Persistent Inflation

The U.S. economy has been grappling with high inflation, and experts are divided on whether the next president's policies will alleviate or exacerbate the issue. "While inflation is no longer at a 40-year high, the cost of almost everything from groceries to borrowing money remains elevated," Loftsgordon notes. "When inflation and rates are high, it makes sense to put money in savings, as well as pay down your existing debts, rather than spend your available money." By taking a prudent approach to your finances, you can insulate yourself from the impact of sustained high inflation.

Preparing for Potential Social Security Changes

The long-term viability of Social Security is a pressing concern, with projections indicating that the program may become insolvent by 2033 without any fixes. "The math just isn't pretty on Social Security spending. Fixing it would require large benefit cuts or tax hikes — both of which are unpopular to put it mildly," Loftsgordon explains. "That's why neither party seems able to tackle the problem, and the House Budget Committee forecasts that Social Security will be insolvent by 2033 without any fixes." Given the uncertainty surrounding the future of Social Security, it's crucial to take responsibility for your own retirement planning and savings.

Focusing on What You Can Control

While it's natural to want to hold politicians accountable for the state of the economy and personal finances, the reality is that you have the most control over your own financial well-being. "You control your career choices, your savings rate and your investment decisions. Focus your energy on what you can control," Loftsgordon advises. "Your future self will thank you for having more options available, because you saved and invested more money now."

Harnessing the Power of Compound Interest

The power of compound interest is a powerful tool in building long-term wealth, and the earlier you start, the more significant the impact. "In general, saving and investing earlier yields exponentially greater wealth," Loftsgordon explains. "Imagine you wait until your 50s, and you want to save up $1 million in the next 10 years for retirement. At a (generous) 10% return, you'd have to invest nearly $5,000 each month." However, by starting just five years earlier and giving your investments 15 years to compound, you can reach the same goal by investing less than half as much each month. The lesson is clear: the sooner you start saving and investing, the better positioned you'll be, regardless of who occupies the Oval Office.