What 2019 may hold for your fi­nances

The Malta Independent on Sunday - - BUSINESS & FINANCE -

It's tough to know what each new year may hold. But when it comes to eco­nomic is­sues, there are usu­ally enough in­di­ca­tors to pro­vide a solid glimpse into what's ahead. So we asked ex­perts to weigh in on how they an­tic­i­pate how those big driv­ers may im­pact your fi­nan­cial well­be­ing in 2019.

IN­TER­EST RATES

The Fed­eral Re­serve re­cently an­nounced that it is rais­ing its key in­ter­est rate by a quar­ter of a point, to a range of 2.25 to 2.5 per­cent. That marks the fourth hike this year and lifts the bench­mark rate to its high­est point since 2008. But the Fed in­di­cated it only an­tic­i­pates two hikes for the year ahead.

Greg McBride, chief an­a­lyst at Bankrate, says bor­row­ers al­ready felt the pinch from higher rates and will see the ef­fect of the lat­est hike soon.

"They are feel­ing the im­pact, and un­for­tu­nately, whether the Fed raises rates once, twice or three times, bor­row­ing rates are go­ing to go up," McBride said.

Peo­ple who have vari­able rate debt, like credit cards, will see it first. A quar­ter of a point in­crease by the Fed could be re­flected as soon as one to two state­ment cy­cles later. To avoid tak­ing a hit, pay down your debt ag­gres­sively. If you have a vari­able rate home eq­uity line of credit or adjustable rate mort­gage, see if you can move to a fixed rate.

"Your best de­fense is a good of­fense," McBride said. "Take steps to in­su­late your­self from fur­ther rate hikes."

On the flip side, if you are able to save, you can make a bit more off that money. It pays to shop around as many banks are of­fer­ing around 2.4 per­cent on ba­sic sav­ings ac­counts these days. McBride noted that this is the first time in roughly a decade that savers can earn more on sav­ings than the rate of in­fla­tion.

GAS PRICES

Ex­pect prices to be rel­a­tively sta­ble com­pared to this year, says Tom Kloza, global head of en­ergy anal­y­sis for the Oil Price In­for­ma­tion Ser­vice.

Kloza said there is a good chance that 2019 will be book­ended by a very weak start for prices and a shaky fin­ish, with prices around $2.35 to $2.40 a gal­lon at each end. In be­tween, prices will likely rise for both crude oil and ga­so­line.

Kloza ex­pects the high­est prices should oc­cur in the sec­ond and third quar­ters. He an­tic­i­pates na­tional av­er­ages in the $2.75 to $2.85 per gal­lon neigh­bor­hood, with per­haps a dozen or so high-tax states flirt­ing with $3 a gal­lon or more at those times.

West­ern states, in­clud­ing some Rocky Moun­tain states, will prob­a­bly move well above $3 gal­lon, led by California, Hawaii, Alaska, Wash­ing­ton, Ore­gon and Ne­vada.

Ga­so­line de­mand should be rel­a­tively flat thanks to an aging pop­u­la­tion and more ef­fi­cient ve­hi­cles.

JOBS AND WAGES

2019 should be an­other ban­ner year for work­ers, says Mark Zandi, chief econ­o­mist at Moody's An­a­lyt­ics.

Un­em­ploy­ment is low, and is likely to fall fur­ther in the com­ing year, he said. There are a record num­ber of job open­ings, across nearly all in­dus­tries. With such a tight job mar­ket, Zandi ex­pects wage growth will con­tinue to ac­cel­er­ate from about 3 per­cent cur­rently to 3.5 per­cent a year from now.

"Work­ers have the up­per hand with their em­ploy­ers, and that should re­main the case in the com­ing year," he said.

Glass­door Chief Econ­o­mist An­drew Cham­ber­lain said that one of the driv­ers for this tight job mar­ket ahead is an aging workforce. For the first time in U.S. his­tory, there will likely be more re­tirees in Amer­ica than chil­dren un­der age 18 by 2035, ac­cord­ing to U.S. Cen­sus data. So as those peo­ple leave their jobs, there will be a con­tin­ued strug­gle to find the right work­ers to re­place them.

TAXES

It will be the first year that tax­pay­ers file re­turns un­der the sweep­ing new tax laws pushed through by Pres­i­dent Don­ald Trump's ad­min­is­tra­tion.

Be­cause the new law re­duced tax rates, some peo­ple may think they'll see more cash at tax time, said Lisa Greene-Lewis, a CPA and tax ex­pert at Tur­boTax. But for many, it al­ready showed up dur­ing the year in the form of big­ger pay­checks. Thanks to that and other changes in the law, they may not get the re­fund they are used to.

An­other big change: the new law nearly dou­bles the stan­dard de­duc­tion and lim­its a num­ber of com­mon item­ized de­duc­tions many peo­ple took in past years. Tur­boTax es­ti­mates that nearly 90 per­cent of tax­pay­ers will now take the higher stan­dard de­duc­tion, up from 70 per­cent last year.

Gen­er­ally speak­ing, the law re­duced the tax bur­den on the wealth­i­est Amer­i­cans, while mak­ing more mod­est tax re­duc­tions for most oth­ers.

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