Few can be certain what a New Year will bring but strong economic trends do help us forecast what’s to come. With the help of recent data and some of our own interviews with experts on Farnoosh.TV here are five financial changes you can expect in 2013, how they’ll impact your wallet…and what you can do.
1. Interest Rates Will Remain Low
In an effort to spur economic growth, The Federal Reserve has promised to keep interest rates low until unemployment drops below 6.5%. In previous statements, Fed Chair Ben Bernanke also hinted at 2015 as an end date to this low-rate environment, which has encouraged some activity, namely in the housing market, but also frustrated investors looking for safe options in interest-yielding saving accounts.
What you can do: Review your investment portfolio. A balanced portfolio can curb the threat of inflation. But if you’re looking to secure your principle investment, consider savings accounts with online banks or credit unions, where yields are typically higher. You can also purchase liquid CDs. They have on average lower yields but also fewer penalties, allowing you to stay flexible in an uncertain environment.”
2. The Housing Market Will Stay Strong
As we mentioned last week, home sales are likely to increase – encouraged by low interest rates. Real estate experts also forecast home prices to rise by more than 3% in 2013.
What you can do: Prepare to buy your first home in 2013 by getting on strong economic footing. With interest rates around 3% to 4% for a 30-year fixed-rate mortgage, it’s an opportune time for first-home buyers and perhaps even those looking to buy an investment property or vacation home.
3. Taxes Will Increase
No matter what happens with the “fiscal cliff,” experts agree that your taxes are likely to go up. “Everyone needs to be on alert, not just the wealthy,” said CPA Joshua Jenson in our recent interview. According to Jenson, the average household, making $60-$80k a year, will pay more in taxes in just their first paycheck this year as the result of an expired Social Security tax cut.
What you can do: There’s no cheating Uncle Sam. The best option for minimizing the financial strain is to take advantage of remaining deductions. And because your tax liability is likely to change in the coming year, consult with a personal accountant. Tax attorney and writer Kelly Phillips Erb says a visit with a CPA can cost as little as $300-500 but can go a long way in identifying appropriate deductions.
4. Healthcare Changes
Many of Obamacare’s changes are already in place but most are expected to occur in 2014. That means a lot of movement in healthcare for the coming year. The Washington Post has a roundup of significant 2013 healthcare changes. Perhaps the most important is that enrollment for the government provided Health Exchanges will begin in October and private providers will be required to send new, plain-English summaries of coverage and benefits.
What you can do: If you’re already covered, talk with your provider about what changes you’re likely to see in coverage and cost. If you enrolled in your current plan after September, request the new summary of your coverage from your insurance company. It should look something like this. And a fringe benefit of expanded health care is growth in the industry, which is positive news for jobseekers. If you’re seeking employment in the New Year, don’t leave out the healthcare industry.
5. A Raise In the Minimum Wage
Ten states: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont, Rhode Island and Washington all decided recently to raise their minimum wage. So when the first paychecks in January come around, nearly one million workers will get a slight raise that will add up to about $190 to $410 per year on average. Other employers surveyed across the country also expect to raise wages by 2.9% in 2013 – more than in 2012 and 2011.
What you can do: This is improving news for many workers who need to offset expenses and debt. If you’re expecting a raise of any kind, it’s best to redirect those funds mainly towards debt first, like credit cards. If you have a handle on debt, consider increasing your retirement savings. Saving his pay raises was a strategy helped Darrow Kirkpatrick, who we profiled earlier in the year, retire before 50.
Photo Courtesy, rjrgmc28.