Don’t freak, just be on the defensive
FOR ALL OF Trump’s talk about being a businessman, his various corporate bankruptcies, staggering debt, dubious tax dealings, and financial conflicts are anything but exemplary for the average citizen. And while there’s evidence that his new gig will be huge for business, Trump’s unpredictability as a decision-maker may make for a volatile economy. In preparation, get smart to the financial state of things to come.
The President-elect promised to dismantle Dodd-Frank, an Obama-era bill meant to implement stricter regulations on Wall Street and end bailouts. Critics say it wasn’t that successful, but its repeal would be a win for big banks. He’s threatened to cancel NAFTA—a 1994 agreement that eliminated most trade tariffs between the United States, Mexico, and Canada—and impose a 35 percent tariff on some Mexican goods. This could weigh heavily on U.S. consumers, costing the average American household $2,200 a year, according to the National Foundation for American Policy. Lastly, he has said he plans to withdraw from the contentious Trans-Pacific Partnership, or TPP, which, if ratified, will liberalize trade by lowering tariffs.
Trump’s brazen bigotry may encourage a work culture in which employers pass over qualified disabled applicants or candidates of color, or deny women the raises they deserve, simply because the president’s rhetoric endorses that behavior. What you can do in these uncertain financial times is advocate for yourself: Expand your professional networks and plan to save six months’ worth of expenses, in case you find yourself needing to leave a bad situation. Calculate your bills, fixed costs, and any other necessary monthly expenditures. Multiply that number by six—and that’s your savings goal.
Trump wants more American-made products. And while U.S. manufacturers shifting production back to the states would create jobs, it would also mean driving up the cost of goods. For example, Apple moving operations to the United States would increase the price of an iPhone 6s by at least five percent—and that’s just labor costs. It doesn’t include any globally sourced parts. Or, if Trump levies those proposed tariffs on products from Mexico, a 43-inch Toshiba flat-screen TV could jump from $400 to $540. This doesn’t mean don’t treat yourself, but keep an eye on trade agreements—it may be worthwhile to stretch the lifespan of your luxury items another few years, rather than springing for the newest models.
Morale-boosting purchases may feel imperative, but it’s important to make emotional spending impactful, not aimless. One approach is to set up a recurring donation to an organization you want to defend—one where you understand how your money is being used. Giving to your neighborhood LGBTQ resource center, where money immediately benefits the local community, may have a more direct effect than giving to a larger nonprofit. If grief spending means dining out, consider tipping someone in the service industry an additional 10 percent. Women make up 70 percent of full-time food service professionals, according to the U.S. Bureau of Labor Statistics, and often work for less than minimum wage. Your gratuity is a crucial source of income.
Despite any future market fluctuations, use the next four years to start or keep building an investment portfolio. Panicking and pulling funds because you’re worried about an impending financial crisis is a common, but precarious, move. “Retirement is about decades, not months,” says Jeff Reeves, a Washington, D.C.-based investment expert and the author of The Frugal Investor’s Guide To Finding Great Stocks. “Markets consistently go up over time, which is why we have eclipsed the highs from before both the dot-com crash and the 2008 financial crisis.” Bottom line: Stay vigilant and informed, so you can react to any financial instability, but don’t derail the trajectory of your life’s plan out of fear.
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