5 money lessons from the 2016 election
By Matt Alderton
June 7, 2016
The 2016 presidential race has candidates and everyday Americans talking about the economy, jobs and paychecks. Why? Exit polls in Indiana, West Virginia and other states have found the economy is top of mind with voters.
But no matter who you vote for in November, here are five credit and money lessons from the 2016 election that can improve your financial life:
1. If you’re in debt, you’re not alone. And debt isn’t all bad.
Democratic presidential candidate Bernie Sanders has reported having $25,002 to $65,000 in credit card debt, and former Republican presidential candidate Marco Rubio had $150,000 in student loan debt and $30,000 in credit card debt when he entered the Florida Legislature in 2000.
Now compare that to the debt burdens carried by everyday Americans.
The average credit card debt per U.S. adult is $5,540, and the average household with credit card debt is $9,600 in the red, according to CreditCards.com. The average student loan debt in 2014 was $28,900, according to the Institute for College Access and Success. Seven in 10 seniors graduated in 2014 with student loan debt.
That debt isn’t all bad, says financial adviser Maksim Netrebov of Maks Financial Services in Princeton, New Jersey.
“Debt can be a great tool,” he says. “Where people get into trouble — and where Bernie got in trouble — is using credit cards and debt as a way to buy things they can’t afford.” High interest rates on those cards and sending only the minimum payment can create a mountain of debt that keeps growing.
“Debt can be a great tool. Where people get into trouble … is using credit cards and debt as a way to buy things they can’t afford.”
— Maksim Netrebov,
Maks Financial Services
“If you have a credit card with 15 to 20 percent interest, and you start charging things you can’t afford, you’ll end up paying for that dinner you charged for the next five years,” Netrebov says.
2. Budgets must be balanced.
Sanders, Hillary Clinton and Donald Trump talk a lot about reining in government spending, but closer to home, household budgets also must be kept in check.
“Knowing your expenses is really important,” says Bradford Pine of Bradford Pine Wealth Group in New York. “If I asked, ‘How much did you make last year?’ you would be able to tell me exactly how much you made.
“But if I asked, ‘What were your annual expenses, broken down into different categories?’ most people wouldn’t be able to tell me,” he says. “You should know exactly what your expenses are … so you can see where you have opportunities to reduce spending and increase savings.”
3. Make the most of tax breaks.
Taxes are something many Americans dread, which partly explains why each candidate has a plan to overhaul the present tax system. Regardless of what changes are made — if any — to the tax system, there will always be tax breaks that can save you money.
For example, “The tax credit for buying an electric car is an incentive to encourage people to purchase electric vehicles,” says Tom Wheelwright, CPA and author of “Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes.”
“You just need to make a few small changes in your life to be able to take advantage of the tax laws and reduce your own income tax,” he says. “For example, you could start a small business in your home, which would allow you to deduct a portion of your home as an office and likely would allow you to deduct some of your travel, meals and automobile expenses.
“Start early and save aggressively. When you speak to the younger generation, 30 years from now sounds like an eternity. … But if you ask anybody who started saving early, they’ll tell you that when the time comes you’ll be glad that you did.”
— Bradford Pine,
“Taxes are the single biggest expense for most people, especially the middle class,” he says. Understanding tax policies — and staying on top of changes in the tax code — will enable you to reduce the tax you pay.
4. Note how wealth is created.
Whether you’re for Trump or against him, his presence in the race is an opportunity for voters to explore how wealth is created, says Netrebov. He notes that Trump grew his current fortune by borrowing $1 million from his father and investing it in real estate and business.
“One of my favorite books is ‘The Richest Man in Babylon,’” says Netrebov. “It basically talks about the difference between rich people and poor people: When rich people get their paycheck, they save their money and spend what’s left; when poor people get their paycheck, they spend their money and save what’s left.
It’s about your priorities. Is your priority saving for the long term or spending money now?
“If you look at Trump, he took a relatively small loan from his father, as far as real estate is concerned, and he put his money away and made it work for himself,” Netrebov added.
Putting your money to work for you is a good way to be smart about your finances.
5. Start saving now.
An education policy priority for both Sanders and Clinton is tuition-free public college, and candidates from both parties have been debating the future of Social Security. Both issues illustrate the importance of saving for long-term goals such as college and retirement, explains Pine.
“Start early and save aggressively,” says Pine, who adds that it’s never too late to start saving. “When you speak to the younger generation, 30 years from now sounds like an eternity.
“‘I’ll worry about it when it happens,’ they say. ‘I need the money today.’ But if you ask anybody who started saving early, they’ll tell you that when the time comes you’ll be glad that you did.”
So start saving, mind your budget, make the most of tax breaks, put your money to work for you, and be careful not to get mired in debt. These are bedrock principles of personal and household finances.
Focus on these five things and no matter whether you vote red or blue on Election Day, you will be working toward increasing the green in your wallet and keeping your budget in the black.