The pandemic has hit Uncle Sam’s budget hard. In the past six months, the federal gov’s deficit (aka the difference between what it spends vs. brings in) grew to a new record. That’s driven, in large part, by COVID-19 relief efforts – think: stimulus checks, small biz loans, and extra unemployment payments – and lower tax revenue.
The deets that matter for your wallet: When the gov's budget is out of whack, it has to figure out a way to balance it. That could mean putting certain programs on the chopping block. Like Social Security. In 2019, experts projected that the Social Security reserve fund would officially be out of cash by 2035. New research shows that the pandemic could speed things up. Another way the gov could fix its budget: increase your taxes.
Your move: Since you can’t put the gov on a budget, shore up yours.
Rev up your retirement contributions. Uncertainty around Social Security means it's even more important to make sure you’re looking out for Retired You. Step one: figure out how much money you'll need. Then start investing.
Take care of your tax bill. Aka look up all the deductions and credits available to you, and claim them. Friendly reminder: certain retirement account contributions can lower your taxable income. Win-win.
Look for low-risk investments. Treasuries are usually considered one of the safest investments. And when the federal deficit is high, there’s a theory that investors will get trust issues and sell. That could drive yields (aka what you earn from a bond) up. But don’t expect to get rich. Low risk usually = low reward.
theSkimm: You might not be able to control what Uncle Sam does with his money. But you can be smarter about yours. That could mean giving your savings some love, adding to your retirement account or just staying on top of news that can affect your financial future.
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Skimm'd by: Ivana Pino, Casey Bond, Stacy Rapacon, and Elyse Steinhaus
And how to protect your finances if your personal info has been compromised.
Depends on who you ask.
If lawmakers come to an agreement.