Donald J. Trump has officially been sworn in as the 47th president of the United States, and he’s made some pretty big promises about what he’s going to do to help the economy. Some might even call them . . . yuge promises. (Okay, I’m done.)
Now, here’s the deal: Whether Trump delivers on his promises or not, the only real path to financial security is one you create for yourself. I’ve talked to plenty of folks on The Ramsey Show who built wealth under presidents of both parties, and plenty who made dumb money mistakes under both parties too.
But the economy does matter, and new plans from the president can affect your personal finances. So, let’s break down Trump’s policies and see what they could mean for your wallet. We’ll hit these five highlights:
1. Trump’s Tax Cuts
Trump has said his economic plan will “massively cut taxes for workers and small businesses.”1
And one of the ways he wants to do this is by extending his 2017 tax cuts, which include lower tax rates for most income brackets and an increase in the standard deduction.2
For a quick refresher, the standard deduction is the automatic deduction available to most taxpayers. These days, the majority of people take the standard deduction rather than itemizing when they file taxes.3 So a higher standard deduction means those people get to hang on to more of their money at tax time.
Specifically, under the current tax law, experts estimate that a household making $60,000–100,000 a year will owe about $1,000 less in taxes than if Trump’s 2017 tax law expired.4 Trump also wants to remove federal taxes on Social Security benefits, overtime pay and tips.5
That would certainly help the majority of the middle class. Which is why, if these tax cuts continue, I’m going to call it a win. It’s hard to get mad about an extra $1,000 in your pocket.
But it’s not all sunshine and rainbows. See, cutting all these taxes means less government revenue, which experts say could add $7.75 trillion to the national debt.6 That’s trillion with a T. This would put pressure on programs like Social Security, which, according to one nonpartisan group, would lead to a 23% cut in Social Security benefits in 2035.7
To sum it all up, I’m a big fan of the average American paying less in taxes, but the government will have to figure out how to replace that revenue so it doesn’t lead to an even bigger dumpster fire with the national debt.
2. Trump’s Tariffs
Up next: tariffs. Yep, this is the one your mom keeps talking about.
Now, Trump loves tariffs. In fact, the only thing he loves talking about more than tariffs is himself. And Greenland . . . for reasons that shall remain unknown. So, what exactly is a tariff? It’s just an old-timey term for taxes on goods coming in and (sometimes) going out of the country.
And Trump has said he’ll impose a 25% tariff on all Mexican and Canadian imports and a 10% tariff on Chinese imports.8 Trump claims this will boost American manufacturing and jobs.
The whole idea here is that more companies will start making goods in the U.S. and hiring American workers if it becomes too expensive to import from other countries. Not to mention, tariffs can also serve as a bargaining chip in foreign trade negotiations—or as a way to keep other countries from using unfair trade practices.
My main beef with this tariff plan is that it has a good chance of making inflation worse. See, foreign countries won’t be the ones paying the tariffs. They’re paid by importers based in the U.S., and that cost is passed to the consumer through higher prices. And if other countries retaliate by imposing tariffs on the U.S., prices for certain goods could shoot up even further.
Back in August, analysts estimated Trump’s proposed tariffs could add around $2,600 annually to household expenses on items like electronics, cars and household goods.9 So you might want to buy that electric butter spreader you’ve been wanting while the gettin’ is good.
3. Gas Prices
Time to talk about energy production. To bring down prices at the pump, Trump plans to increase U.S. oil and gas production, which would reduce our reliance on foreign suppliers.
Here’s the problem, though: The U.S. already produces more oil than any other country, yet our gas prices still mostly depend on what’s happening around the world.10 So even if we start producing more oil here at home, you probably won’t see much of an impact at the pump.11
4. Housing Under Trump
Buying a house right now can feel about as impossible as eating a Nature Valley granola bar without getting crumbs in every crevasse. So, if you’re planning to shop for a home in the near future, you might be happy to know how Trump’s economic plan could affect the housing market.
Trump hopes to make housing more affordable by cutting regulations that increase costs and opening federal land for new construction to boost the housing supply. That’s something I can get behind.
To be clear, presidents don’t directly control interest rates or housing prices—it’s all about supply and demand. So don’t expect Trump to snap his fingers and magically give you affordable housing. But if his policies lead to an increase in supply, that could reduce home prices.
Now, if we’re trying to keep housing more affordable for the long haul, experts say we’ll need zoning and infrastructure improvements as well. But even a temporary drop in home prices would be great for those of you who are ready to pull the trigger on a nice little three-bed, two- bath, midcentury fixer-upper that’s just begging for a kitchen island and some shiplap.
5. Trump’s Health Care Plan
Finally, let’s go over health care. Trump has gone back and forth between saying he wants to repeal the Affordable Care Act (ACA) and saying he wants to replace it with a better program.12 But we don’t have a lot of details about his plan (or should I say, his “concepts of a plan”).
A repeal, or even a modification, of the ACA could lead to higher premiums and reduced coverage for some people. Until we see more concrete details, though, it’s hard to say with certainty how this would impact your budget—or your “concepts of a budget.”
The Bottom Line
When you look at all of Trump’s policies together, they aim to increase disposable income, protect and create jobs, and lower home prices. And all that sounds great—but there are trade-offs to consider. Namely, higher prices for certain goods, pressure on Social Security, trillions more added to our national deficit, and potentially higher health care costs.
But remember: No president, policy, political party or government program will fix your financial life. The power to build financial stability is, and always will be, in your hands. You can take control of your spending, debt and savings regardless of what the economy is doing or who’s sitting in the Oval Office.
So, no matter how you voted, here’s the bipartisan truth I want you to remember: What happens in your house matters way more than what happens in the White House.
