I know, I know, we all hate hearing about politics. These days it’s hard to separate any part of your life from politics – especially with current trends and how politics are becoming more heated and divisive than ever. However, it’s important to understand how politics can affect you and your personal finances. So, in this article I’ll be breaking down what elections mean for your personal finances and what you can do about it!
Ultimately, Politics Affect Your Finances
Whether we like it or not, politics (and ultimately elections) will affect your finances. I’m not trying to scare you or convince you to vote a specific way here – it’s just an aspect of personal finance to be aware of so that you can handle any issues as they arise. Ultimately, it’s unavoidable, so we may as well accept it and get with the times. There is no point in fighting it, so we may as well be prepared. Or, at the very least, try to prepare.
The Impact From Federal Elections
Clearly, federal elections can have a huge impact – period. Things like major tax reform, new spending plans, student loan forgiveness, changes to imports, and everything like that can actually have a major impact on your finances. However, federal elections don’t impact people as much as they think. Yes, it’s important. Yes, they impact you. However, the massive changes at the federal level that would impact you don’t happen routinely – they can be far apart. So, if you’re looking at more immediate and noticeable changes, you should pay attention to your local elections.
The Impact From Local Elections
Local elections may seem like less impact at first glance, but they’re far more likely to affect your day to day life. While many of their changes can seem minor, it’s more likely to be a direct impact to you. Also, those changes are probably going to be felt more immediately by you – for better or for worse. So, don’t discount your local “minor” elections. They matter, and you should keep up to date on them.
Direct Impacts
Now that we’ve gone over the difference between the felt impact of local and federal elections, let’s talk about some direct impacts you will likely see sooner or later. These aren’t all of the direct impacts, but they are two common ones you’ll see.
Taxes
First and foremost, there have been changes to the tax code in recent years. On top of that, there could be more in the future! Now, the direct and immediate impact of tax changes is that your net income could increase or decrease. Obviously we’d all like it if we had more money in our pocket with each paycheck. However, depending on the exact tax changes they could hurt businesses (and consequently consumers) or cause an increase in inflation.
Sometimes tax changes seem good at first glance but can have negative long-term impacts. Alternatively, sometimes tax changes seem bad at first and turn out much better in the long-run. It pays to keep an eye on it and think about the short-term as well as the long-term effects you’ll see.
Increased Spending On Different Infrastructure
Government spending on infrastructure can be a mixed bag. On one hand, it can lead to things like tax hikes. On the other hand, it can made goods easier to transport or reduce the cost of some commodities. This can be even more complex than tax changes, as there is a lot of give and take. Just pay attention to it and make sure your tax dollars are being put to good use here, and think about how it betters your life (and appreciate it)!
Indirect Impacts
We’ve already touched on them a bit, or at least alluded to them, but elections and policy changes can have some indirect impacts too.
Inflation
Take what I discussed with taxes as an example here. Increased spending by the public can help lead to inflation, which can then hurt in the long-term. That doesn’t mean that lower taxes are a bad thing, it’s just a potential consequence. In fact, this could even be a short-term impact – in the case of tax cuts – that stabilizes with time. Either way, look out for the possible impact for inflation on different major policy shifts.
Oil And Other Commodities
Changes to local and federal policies can both affect the prices and availability of oil and other commodities. For example, pipelines can reduce the price of oil. If you shut down a pipeline though, it can then increase the price! Beyond that, international relations can affect the prices of different commodities. If we no longer procure something from a nation that is rich in that commodity, then we may suffer higher prices.
These Are Generalities, But You Should Keep Them In Mind
Of course, everything I’ve said here is a generality and not completely concrete. There is a lot of nuance to certain policies, and a policy can have wildly different effects than what it seems at a surface level. This information just serves to give you an idea of what to look out for and why some of it happens the way it does. If you want to learn to handle some of the potential fallout from certain policy choices, the second best thing to do is to build and stick to a strong budget.
Get Out There And Vote!
Naturally, the best thing to do – by far – is to get out there and vote. Research the candidates, see what they’re running on, and engage in local elections too. Your vote matters. Even if you’re jaded about federal elections and how they impact you, engaging in local elections can help you immensely. That can change property tax, sales tax, income tax, and even what your local government spends their money on.
People underestimate the power of their vote and it’s a shame. If you want to better life for yourself, make sure you stay engaged in the community. You don’t have to be super political to stay engaged and knowledgeable.
Conclusion
Hopefully this provided useful information about how elections and shifts in policy can impact your finances, even when you don’t expect it. If you have thoughts of your own on the topic, be sure to let us know in the comments!
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