It’s a new year, and for better or worse, this one promises to be an exciting one concerning personal finance. The goal here is to identify the trends that will help you reduce debt, save more money and expand your investment portfolio faster. We’ll spot some of these trends by reflecting on what happened in 2016 and the past several years, but other trends will be recognized by knowing what will change in the upcoming months and forecasting the effect.
Investment Portfolio Automation
Portfolio automation has been trending for several years now, but we’ll look back on 2017 as the year it went mainstream. Automation is about lowering your costs as an investor and also about ensuring that routine tasks as well as triggered responses are performed as efficiently and as soon as possible. This will be a great option for the average investor because it will provide a high level of portfolio oversight but at a minimal cost.
Decreased Tax Obligations
The Trump administration is seeking to reduce and streamline personal tax obligations in a number of important ways. These include reducing tax brackets to just three categories, eliminating a host of additional taxes, including the Affordable Care Act tax, increasing the standard deduction significantly and so on and so forth. So, what does less taxes have to do with personal finance trends? Well, a reduced tax obligation is happening. It’s a matter of when not if. The trend is in smart investors reacting to this change proactively by, for instance, securing more cash flow now in order to invest more now.
Rising Interest Rates
Tax breaks sound great, but it’s not all rainbows and unicorns, unfortunately. At the end of 2016, the Federal Reserve raised interest rates by 0.25 percent, and it forecasted three hikes for this year, which was up from its previous forecast. One upside is that savers will earn higher yields. Borrowers, on the other hand, will pay more, including those already in debt with a variable rate. A trend among smart borrowers this year will be to lock in a fixed rate. Smart borrowers who currently have variable rate debt will seek to refinance it.
Favorable Exchange Rates
Both the Euro and the British Pound dropped against the U.S. dollar in 2016. Investors who see USD-Euro parity as sustainable and inevitable will be shorting the Euro. Those who expect the Euro to bounce back will long it. The same will be happening with the Pound, and those not averse to risk can win big with a leveraged approach. Something else to consider is that, because of these exchange rates, travel to Europe hasn’t been this favorable in a long time. It’ll get cheaper before the year is out too.
Broadened Student Loan Options
The role of private lending in federal student loans is going to return in a big way starting this year. It’s going to change how people save and borrow for their own education as well as the education of their children. Those paying for school have to forget what they think they know and begin investigating all of the avenues again. Be mindful that this probably has no bearing on existing loans, so if you’re looking to refinance, these trends won’t affect you.