2020 was one for the books, and not for any particularly good reasons. The year kicked off with the Australian wildfires, ushered in the first global pandemic in more than 100 years and plunged millions of Americans into joblessness and poverty. The stock market went haywire and could still crash, more than 4 million acres in California burned to the ground, Supreme Court Associate Justice Ruth Bader Ginsburg passed away and climate change continues to accelerate.
Now that a new year is well underway, the most vital hope we have revolves around the success and distribution of the vaccines — which have slowed down cases and hospitalizations, though we have yet to achieve herd immunity, according to experts.
Perspective: How 2020 Changed the Way We Look At Money
Of course, there’s no way to really know what will happen in the future, but we do have a fair amount of clues as to what we can expect, at least when it comes to our wallets. GOBankingRates consulted a number of financial experts to learn what this year will look like from the perspective of our bank accounts. Though we have some silver linings, like possible student loan forgiveness, we have quite a lot of recovering to do before the pains of 2020 are behind us.
The Stock Market Will Pick Up
“Stock markets are gaining as we continue to get news of vaccines, which is a sign we are ready to return to business as usual,” Cruz said. “Many investors are buying stocks at reduced prices due to the virus. Buying discounted stocks with the knowledge of what those stock prices can reach is attractive to investors and may be a leading factor in what people will, or have, purchased. We expect to see more of this in 2021.”
Check Out: The Most Undervalued Stocks So Far in 2021
People Will Be Forced To Sell Their Homes
“As a home-buying company, we have already seen an increase in people needing to sell their homes because they have been in forbearance for months and are now in a place where they can’t pay the lump sum that is coming for all the back due payments when their forbearance ends,” said Erik Wright, owner of New Horizon Home Buyers. “I believe this is just the tip of the iceberg and that we will begin to see a huge increase in foreclosures in the housing market in 2021 as forbearance periods end. Most people who lost jobs during COVID and applied for forbearance will have a hard time paying all those back due mortgage payments as one large payment to get caught up. Unless banks decide to change their strategies and allow people to defer their payments to the back end of their mortgage, many people will have no other choice but to sell or allow the home to go into foreclosure.”
It’s a dismal forecast for many homeowners who have been hit hard by COVID, but it also means that first-time homebuyers could stand a better chance at getting a reasonable price on a house.
Consumer Credit Will Be Harder To Access
“Consumer credit will be even more difficult to access for those with poor credit history, and the number of families with poor credit will increase due to their inability to continue to pay bills on time as a result of the job losses created by COVID-19,” said Marion Mathes, CEO of CreditWorks, adding that banks will further curtail their consumer lending activities due to uncertainty around consumer repayment capacity.
Healthcare Costs Could Soar
President Joe Biden has a comprehensive healthcare strategy — aiming to fortify and expand the Affordable Care Act — but even with the Democrat-majority Senate, healthcare costs will probably go up before they go down.
“I think in 2021 we will see a rise in healthcare costs due to the pandemic and with the possibility of some type of single-payer or ‘Medicare for all’ type of coverage to be announced by this new administration, our health insurance premium costs could be affected,” said Sa El, co-founder of Simply Insurance. “Any change probably won’t happen anytime soon so we have to be ready for higher premiums in the near future and maybe much lower rates over the next few years.”
Cruz added that healthcare is infamously tricky and costs “usually climb with inflation, so a good indicator of what may happen is to follow the inflation index. If it climbs, healthcare costs may also climb. If inflation drops, healthcare costs may also drop. Keep in mind this is not a guaranteed way to gauge healthcare costs. There could be an increase (in) costs due to the coronavirus. Hospitalizations are at an all-time high and we are straining our healthcare workers and systems. We may still see a significant increase to healthcare costs no matter what happens to inflation.”
Taxes Are a Wild Card
Biden also has an ambitious plan for tax reform, but it may have to wait while the country deals with dangerous natural disasters, new variants of COVID-19 and vaccine distribution problems. But even if Biden does reform the current tax laws, the average American probably won’t be affected.
“If you are earning under $400,000 per year, you probably will not incur a substantial tax hit,” said Bennett S. Stein, CPA/ABV, CFP, Arbor Wealth.
Some Student Loan Debt Could Be Forgiven
“There is talk of possibly forgiving federal student loan debt for people who make less than $125,000 per year for undergraduate debt,” said D. Shane Whitteker, owner and chief broker, Principle Home Mortgage. “This would have a pretty significant impact in my opinion. Student loans are one of the biggest hurdles for many prospective first-time home buyers.”
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