Personal Finance
What a new Trump administration could mean for your money, advisors say
Trump supporters take photographs near the U.S. Capitol building as the sun sets the day U.S. President Elect Donald Trump was declared the winner of the presidential election in Washington, U.S., November 6, 2024.
Leah Millis | Reuters
Now that Donald Trump has been elected president, many individual investors are wondering what that means for their money.
The markets rallied this week on news of Trump’s win, with the Dow Jones Industrial Average climbing past 44,000 for the first time on Friday.
Yet, when it comes to long-term performance of the markets and policies that Trump proposed on the campaign trail, financial advisors say it’s best to take a wait-and-see approach before making any big money decisions.
“If clients have a financial plan, have a long-term strategy that meets their goals, our best advice is to stay with that plan and strategy,” said Jude Boudreaux, a certified financial planner who is a partner with The Planning Center in New Orleans.
“Then we’ll make adjustments as more details come forward,” said Boudreaux, who is also a CNBC FA Council member.
Lee Baker, a CFP and owner of Claris Financial Advisors in Atlanta, said he’s also told clients not to make wholesale financial changes now.
“That’s not to suggest that, based on the policies, that there might not be tweaks or tilts, depending on how things play out,” said Baker, who is also a CNBC FA Council member.
Markets may be volatile
The markets reacted favorably to Trump’s win. However, it remains to be seen whether that upward trajectory will continue.
“One thing that I’ve cautioned people about is don’t necessarily confuse the market pop that we saw being an affirmation of all things Trump,” Baker said.
Markets generally don’t like uncertainty, and experts say the post-election rally is evidence of that.
“The markets could be reacting with relief that this toss-up election actually really did produce a clear, undisputed winner,” said CFP Stacy Francis, CEO of Francis Financial, based in New York City.
Many investors expect Trump to lead with faster economic growth and more market friendly policies, said Francis during a Friday webcast on what Trump’s presidency could mean for investors’ money. Francis is also a CNBC FA Council member.
For individual investors, it’s still best to base asset allocations on their individual situation, such as personal goals, time horizon and risk tolerance, said Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
Those factors should not change based on the outcome of the election, said Cheng, a CNBC FA Council member.
Because Trump is expected to be easier on regulation, some investors expect to see a boost for energy, financial and industrial stocks. To mitigate risk, individuals may get exposure to those sectors by investing in a broad-based index, she said.
Ultimately, market moves do not necessarily depend on who is president.
“The stock market tends to perform well no matter which party holds the White House,” Francis said.
Lower taxes could be extended
The Tax Cuts and Jobs Act, which was enacted in 2017 during Trump’s first presidential term, ushered in lower tax rates. That legislation — which included a higher standard deduction, a $2,000 child tax credit and a $10,000 cap on the state and local deduction — is due to expire at the end of 2025. With Trump’s re-election, many of the tax changes could be extended, advisors say.
Both individuals and corporations are expecting tax cuts with Trump’s win, Francis noted during her Friday webcast, which may have also been a factor in this week’s stock market surge.
“These tax cuts are expected to lead to somewhat faster economic growth in both 2026 as well as 2027,” Francis said.
On the campaign trail, Trump also floated the idea of eliminating taxes on Social Security benefits, as well as on tips and overtime pay. While those policies would put more money in Americans’ pockets, Francis noted, other experts say it’s too soon to count on those changes.
“You don’t know what the law or policy is going to be if it hasn’t even been properly drafted yet, much less adopted,” David Haas, a CFP and owner of Cereus Financial Advisors in Franklin Lakes, New Jersey, told CNBC.com earlier this week, referring to the proposed Social Security changes.
Inflation could go up
The Federal Reserve has helped to bring the pace of inflation down, close to its 2% target.
Yet, some policies proposed by Trump may risk elevating inflation.
Tariffs could prompt prices on imported goods and services to go up. Inflation may also increase if individuals have more money in their pockets due to Trump’s pro-business policies as well as tax cuts, Francis said.
That could change the trajectory of the Federal Reserve’s interest rate policy. The central bank cut interest rates by 25 basis points on Thursday. However, any coming moves in 2025 could be impacted by Trump’s leadership.
Chip Leighton’s viral ‘teenager texts’ highlight how little some kids know about money.
Courtesy: Chip Leighton
Chip Leighton knows how funny kids can be.
As the creator of “The Leighton Show,” his social media posts, which have collectively been seen more than 250 million times, hilariously highlight some of the texts teenagers send their parents. Many are related to money.
“A mom told me the other day that when she told her teenager that she’d registered for a 401(k) at her new job, the response was ‘How much is that in miles?'”
Leighton, who has two children of his own, receives thousands of messages from parents of teenagers across the country — some of which he uses for content. “There’s definitely a lot of good money ones,” he said.
Often questions are the most basic, from “Do I need to tip the eye doctor?” to “Hey, is the ATM going to be open later?”
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Leighton said it’s not necessarily that kids know less about financial topics today, it’s simply that these questions are more likely documented in a text now.
“I tell parents not to sweat it, but there are a few doozies in there,” he said.
Among other recent queries: “What is generational wealth and why don’t we have it?” and “Do I have a trust fund?” Another classic: “What is my net worth?”
His new book “What Time Is Noon?” covers some of the best — or worst — texts from teenagers.
One section is devoted entirely to money-related topics, often related to a first job or taxes. With no shortage of material, a sequel is likely to follow, he said.
Leighton retired from a corporate career last year. Being a social media content creator is now his full-time second act.
The value of learning financial basics
In many ways, these could be teachable moments, Leighton said — and there has been growing momentum to cover these topics in high school.
As of 2024, only half of all states require or are in the process of requiring high school students to take a personal finance course before graduating, according to the latest data from Next Gen Personal Finance, a nonprofit focused on providing financial education to middle and high school students.
“In the absence of a national or state-wide strategy to teach youth about personal finance in schools,” there is something to be said for online communities that “openly talk about money and finances,” said Billy Hensley, NEFE’s president and CEO. Hensley is also a member of the CNBC Global Financial Wellness Advisory Board.
However, there should an “overall strategy for your individual financial management,” he said.
Further, students with a financial literacy course under their belt have better average credit scores and lower debt delinquency rates as young adults, according to data from the Financial Industry Regulatory Authority’s Investor Education Foundation, which seeks to promote financial education.
In addition, a 2018 report by the Brookings Institution found that teenage financial literacy is positively correlated with asset accumulation and net worth by age 25.
Among adults, those with greater financial literacy find it easier to make ends meet in a typical month, are more likely to make loan payments in full and on time and less likely to be constrained by debt or be considered financially fragile.
They are also more likely to save and plan for retirement, according to data from the TIAA Institute-GFLEC Personal Finance Index based on research collected annually since 2017.
Parents tend to splurge on their children during the holidays.
This year, 63% of millennials, many of whom now have school-age children of their own, said they plan to spend the same or more on holiday shopping as they did last year — the highest share of any generation, according to a quarterly report by TransUnion.
Millennials are also more likely to say their income went up over the last few months and that they expect their earnings potential to increase again in the year ahead. TransUnion polled 3,000 adults in October.
“I see a lot of optimism going into the holiday season,” said Charlie Wise, TransUnion’s senior vice president and head of global research and consulting.
For many in this group, recent wage gains have outpaced rising prices and, although the broader unemployment rate has ticked higher, “we are still seeing a steady employment situation,” Wise said. “When people have jobs, that confidence is going to translate into spending.”
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“It’s clear that millennials will play the largest role this holiday shopping season with the greatest expected spend,” Wise said.
Holiday spending between Nov. 1 and Dec. 31 is forecast to increase to a record total of $979.5 billion to $989 billion, according to the National Retail Federation.
Even as credit card debt tops $1.17 trillion, holiday shoppers expect to spend, on average, $1,778, up 8% compared with last year, Deloitte’s holiday retail survey found.
Meanwhile, 28% of holiday shoppers surveyed in September said they still had not paid off the gifts they purchased for their loved ones last year, according to a holiday spending report by NerdWallet, which polled more than 1,700 adults.
Holiday spending may lead to holiday debt
While most shoppers — 74% — use credit cards to buy holiday gifts, 28% will dip into savings to make their purchases, and 16% will lean on buy now, pay later services, NerdWallet found. Survey respondents could choose multiple payment methods.
Buy now, pay later is one of the fastest-growing categories in consumer finance and is expected to become more popular in the weeks ahead, according to the most recent data from Adobe. Adobe forecasts buy now, pay later spending will peak on Cyber Monday with a new single-day record of $993 million.
However, managing multiple buy now, pay later loans with different payment dates may make it more likely for consumers to get in over their heads, some experts have cautioned — even more than with credit cards, which are simpler to account for, despite sky-high interest rates.
Sometimes, the option to pay in installments can make financial sense, especially at 0% interest, according to Marshall Lux, a senior fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School.
“If used properly, it’s great,” Lux said.
“But a lot of people are going to spread out purchases over a longer period of time and then you get into high interest and a cycle of debt,” he said.
The more buy now, pay later accounts consumers have open at once, the more prone they become to overspending, missed or late payments and poor credit history, other research shows.
If a consumer misses a payment, there could be late fees, deferred interest or other penalties, depending on the lender. In some cases, those interest rates can be as high as 30%, rivaling the highest credit card charges.
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