President Trump vs. Physician Finance

NOVEMBER 17, 2016
Future Proof, MD

Photo by Gage Skidmore, shared under CC BY-SA 3.0 via Wikimedia Commons
No matter what your political leaning, there is a good chance the outcome of the 2016 US presidential election came as a surprise.  My very own mother, who professed that she would have voted for Trump (she didn’t as she was visiting in China during the election), still did not think he could actually win the election.  Much has been written about how the Trump presidency will impact the Affordable Care Act (“Obamacare”) and other facets of our economy.  Now the dust has cleared a little, I want to approach it from a different perspective – how President Trump will impact your finances on a personal level.

For your income

While there is no direct impact on your salary by the election of Mr. Donald J Trump, there is a very significant potential benefit – “YUGE” tax savings.  You can view President-elect Trump’s plan on taxes in more detail HERE.  But suffice it to say if Mr. Trump gets his way – that’s a big if – all of us will stand to keep a lot more of our hard-earned cash.  However, as we are all aware, making changes to the tax law is a lot harder than coming up with campaign slogans.  I wouldn’t hold my breath if I were you.

For your debt

Again, the election of Mr. Trump should have no direct impact on any of your outstanding debts.  However, as discussed previously, if Mr. Trump carries out the promise on lowering taxes, then you would end up with quite a nice windfall of extra cash.  And as socially and financially responsible professionals, I would hope one of your first priorities would be to pay down debt – credit cards, student loans, car loans, mortgage etc. 

For your spending

If Mr. Trump carries out his promise of renegotiating trade deals, his satisfaction or outright back out of any trade treaties he deems unfair, you can expect your spending to increase significantly.  For example, if Mr. Trump carries out his pledge to slap a 45% tariff on goods made in China (our 2nd largest trading partner behind Canada), you can be sure China will respond in kind.  In short, trade wars are bad for business.  Imagine if everything cost 45% more…

For your retirement

For something dubbed “Brexit Plus, Plus, Plus,” did you feel the market crash of the 2016 election?  Me neither.  While markets initially reacted negatively to the election results on election night, the impact didn’t even last a full trading day – the Dow ended Wednesday 11/9/2016 up 257 points.  In fact, for election week ending Friday 11/11/2016, the Dow had its best week since 2011.  What does this mean?  Not a whole lot!  Such drastic changes in the market reflect a high level of uncertainty.  And going forward, you can expect that uncertainty to continue in the Trump administration.  I recommend ignoring the short-term jitters in the markets, especially if you have a long time to retire on the scale of decades.  While long term investment performance may still be influenced by economic policy changes of a new administration, the impact will likely be less dramatic in an economy as diverse as ours.  For an example of what could go wrong in a less versatile economy, take a listen to How Venezuela Imploded.

Bottom line

You may have noticed a lot of “if … happens” above.  Honestly that’s not unique to this election.  Every new administration brings with it many questions.  The uncertainty has simply been magnified in this election by Mr. Trump’s propensity to share sweeping soundbites rather than detailed policy specifics on how he will “make America great again.”  It’s anyone’s guess how things will play out.  So settle down, relax, and get ready to roll with the punches.  As they say, “time will tell".   
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