5 Things That Affect Your Money More Than Who’s in the White House
Written by
Angela Mae
Edited by
Angela Corry
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The U.S. President can make decisions, like approving or rejecting certain policies, that impact your finances. But other factors affect individuals’ money more than who’s in the White House. They include things like the economy, interest rates and even where you live and work.
Here are five things that affect your money more than who currently sits in the Oval Office.
Federal Reserve
The Federal Reserve is the central bank of the United States. It performs several key functions that influence the economy and, by extension, your finances. This includes handling the country’s monetary policies to maximize employment rates, keep prices stable, and moderate long-term interest rates.
National and regional employment rates can affect your job options as well as your finances. The lower the unemployment rate is, the better. Currently, the national unemployment rate is 4.1%.
Then there are long-term interest rates.
As Chad Gammon, a CFP® and owner of Custom Fit Financial, put it, the Federal Reserve sets “the interest rates which impacts loan rates and savings returns. Even if you did not have a loan or savings account, you are still impacted as this impacts the stores you visit and shop, thus it passes on to you.”
While the Federal Reserve doesn’t control inflation, it generally raises interest rates whenever inflation is too high — and vice versa. This is to try to stabilize prices and the economy.
States and Local Governments
The federal government isn’t the only thing that affects your money. Local and state governments can as well.
“We are a collection of United States and each of these states and even local governments often have a larger financial impact on our personal financial situation than actions of the president,” said Jeffrey Wood, CPA, CFP®, and partner at Elysium Financial.
Take taxes for example. Depending on where you live, your state income tax, sales tax, and even county taxes could be higher — or lower — than other areas. On a base level, higher taxes means less money in your pocket at the end of the day.
State taxation can affect both individuals and businesses.
“Tax rates and how favorable various states are to small businesses play a big part in the decision of business owners when starting a new venture,” said Wood. “States may have different housing regulations or incentives that can affect individuals more than the federal level.”
High Interest Debt
The Fed sets the effective federal funds rate, which influences interest rates. But on a more personal level, the amount of debt you have — particularly high interest debt — can have a major impact on your money, both in the short- and long-term.
Say you take out a 5-year auto loan for $30,000 with a 6.5% interest rate. Excluding taxes or other fees, your monthly payment would be about $587 and your total loan amount would be $35,219. Over the five years, you’d be paying $5,219 in interest charges alone.
But what if you have a credit card? Say you owe $10,000 on a credit card with a 25% interest rate. Assuming a monthly payment of $300, it would take you nearly five years to pay off the full balance. You’d also be paying roughly $7,250 in interest alone for a total of $17,250.
High-interest debt can chip away at your monthly income and make it harder to save or invest in your future. If you have it, you might want to prioritize paying it off as quickly as possible.
“Anytime your debt interest rates are higher than the average that you could conservatively earn in your investments, consideration should be given to paying off debt first,” said Wood. “Think of it this way, if I could guarantee that I earn 28% in the stock market year-over-year, I would be ecstatic. Yet, many people carry credit card debt month to month paying these same rates and essentially being the great investment earning provider to someone else.”
Local or Regional Income Levels
Unemployment rates are one thing, but the median income levels in your area can also play a key role in your finances. Many employers set their pay rates based on factors like experience, education, and skills. But you might also find jobs that pay more (or less) based on where you live.
In a blog article, Sundar Pichai, CEO of Google and its parent company Alphabet, said, “Whether you choose to transfer to a different office or opt for completely remote work, your compensation will be adjusted according to your new location.”
While this is only one company, making changes to compensation based on location is nothing new. It can, however, have an adverse effect on your money.
Your Budget
Simply put, your personal budget is one of the biggest things that affect your money more than economic policies or who’s in the White House. Considering how your budget can directly tie into how much debt you have, this makes sense.
“Individuals should understand their budget and ensure their expenses stay as low as possible to allow them to save and invest more and to stay out of debt,” said Wood.
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