10 Essential Budgeting Tips for the Middle Class in a Trump Economy
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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The economy is not a static force, but one that shifts and adjusts to a variety of factors, not the least of which are the policies set by a presidential administration.
Just a few weeks into President Donald Trump’s second term and significant policy changes are already underway, some of which may impact the middle class. The middle class spans a wide swath of income levels from around $50,000 annually to $150,000.
First, let’s take a look at some of the ways your budget may be affected by Trump’s policies.
The tax cuts enacted during the first Trump administration under the Tax Cuts and Jobs Act (TCJA) back in 2017, set to expire at the end of this year, are likely to be extended by Trump 2.0, according to David Johnston, a managing partner at Amwell Ridge Wealth Management.
“For those in high property tax states, there is a possibility of lifting the current cap on deductions. In short, odds are you’ll be taking home the same amount, if not a bit more,” he said.
Here are tips for the middle class to budget for a Trump 2.0 economy, in which tariffs are already imposed (though temporarily paused to varying degrees) with Mexico and Canada, as well as China.
Plan For Inflation and Interest Rates To Stay the Same
Interest and inflation are not really going to be in the middle class’ favor for a while, Johnston said. Inflation is likely to rise again depending on how Trump’s tariffs impact prices. And while the Federal Reserve lowered interest rates recently, Johnston said that the longer term rates, which are controlled by market influences “have been disappointing, especially for those looking to buy a home.”
Be Patient With Investments
If you’re hoping for consistency in investment, be careful, Johnston warned.
“Expect volatility — including potential over-reactions to policy initiatives,” he said. Certainly, Wall Street already saw a dip after Trump announced his tariffs on Canada, Mexico and China, though stocks then rebounded slightly when the U.S. agreed to month-long moratoriums with Canada and Mexico.
“It’s always best to keep in mind the market typically rises like an escalator but drops like an elevator. Any money you’ll need in the next two to three years should be kept far away from the stock market,” Johnston said.
Adopt the 50/30/20 Rule
Regardless of who sits in the White House, Johnston recommended adopting the 50/30/20 rule of budgeting. You break out your take-home pay as follows, apportioning 50% for necessities (housing, food, transportation), 30% for wants and 20% for debt reduction or savings.
Keep Your Emergency Fund Robust
Johnston also pointed out that an emergency fund, which he describes as “a financial runway to help take care of all life throws at us,” is more important than ever. Not all expenses you might draw out of this fund qualify as emergencies, though. It might be something like large home repairs, such as new roof tiles or an HVAC repair, new tires for your car or a buffer for job loss.
If you find yourself well short of the three to six month’s target and/or you have some lingering debt to eradicate, he suggested, “incrementally start to ramp up the savings in the first step.”
Always Look To Cut Costs
Whenever there is uncertainty about a situation, you want to prepare, according to Ashley Morgan, debt and bankruptcy lawyer and owner of Ashley F Morgan Law, PC.
“Making sure that you are cutting costs where possible and saving money is your best defense to dealing with any increase in costs or changes in the economy,” she said.
Review Essential Expenses
Review all your essential expenses, Morgan insisted, “and see if you can get them as low as possible.”
While costs like rent and a mortgage are the hardest things to lower, don’t lock into leases that are too long unless it guarantees no or low rent increases.
Other than refinancing for a lower interest rate, Morgan said that to lower a mortgage payment, your next best bet is to shop around for homeowners insurance. “Changing insurance can help reduce your escrow payment. If you have private mortgage insurance (PMI) as part of your mortgage, see if you are in an equity position to get it removed.”
Let Small Cuts Add Up
For other expenses, like food and entertainment, Morgan said that while it may seem small to reduce monthly expenses by only $50 to $100, it adds up. “If you are having to use savings to survive because expenses rise or income drops, small changes can allow your savings to last longer.”
Cut Expenses Preemptively
Especially in regard to the kinds of goods and services that tariffs will likely increase in price, Morgan suggested you look to cut some costs “preemptively” to help weather increases in expenses.
“We all love the morning Starbucks run, but if you are able to cut out one coffee a week, it will be easier to deal with your grocery bill going up $10 per week,” she said.
Look For Promotions
Recurring expenses like phone, cable, streaming services and subscription services can be a great place to cut expenses from your budget by seeking out better prices or promotions or a contract for a longer stretch of time that locks in a better rate.
“Similarly, you can check to see if you are paying for three streaming programs and figure out if you can cut one or two of them,” Morgan said.
Pay Off Debt
Pay off high-interest debt now, before price hikes hit your bank account, Morgan said. If you have credit card debt, see if your bank or lender can lower the rate.
“While you want to try and pay the credit card debt as quickly as possible, if you are put into a situation where you can only make minimum payments, you will want to make sure the payment is as low as possible and your interest rate can play a factor in that payment.”
Times of economic change call for being careful, thoughtful and frugal.
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