2020 has been one for the books, and not for any particularly good reasons. The year kicked off with the Australian wildfires, ushered in the first global pandemic in more than 100 years and plunged millions of Americans into joblessness and poverty. The stock market went haywire and could still crash, more than 4 million acres in California burned to the ground, Supreme Court Associate Justice Ruth Bader Ginsburg passed away and climate change continues to accelerate. Now, as COVID-19 cases spike again, all but canceling the holidays for many, the most vital hope we have revolves around this nightmare year ending. 2021 will have to be better, because it can’t be worse, right?
Of course, there’s no way to really know what will happen in the future, but we do have a fair amount of clues as to what we can expect in the new year, at least when it comes to our wallets. GOBankingRates consulted a number of financial experts to learn what 2021 will look like from the perspective of our bank accounts. Though we have some silver linings, like possible student loan forgiveness, we have quite a lot of recovering to do before the pains of 2020 are behind us.
Last updated: Nov. 18, 2020
The Stock Market Will Pick Up
“Stock markets are gaining as we continue to get news of vaccines, which is a sign we are ready to return to business as usual,” Cruz said. “Many investors are buying stocks at reduced prices due to the virus. Buying discounted stocks with the knowledge of what those stock prices can reach is attractive to investors and may be a leading factor in what people will, or have, purchased. We expect to see more of this in 2021.”
People Will Be Forced To Sell Their Homes
“As a home buying company, we have already seen an increase in people needing to sell their homes because they have been in forbearance for months and are now in a place where they can’t pay the lump sum that is coming for all the back due payments when their forbearance ends,” said Erik Wright, owner of New Horizon Home Buyers. “I believe this is just the tip of the iceberg and that we will begin to see a huge increase in foreclosures in the housing market in 2021 as forbearance periods end. Most people who lost jobs during COVID and applied for forbearance will have a hard time paying all those back due mortgage payments as one large payment to get caught up. Unless banks decide to change their strategies and allow people to defer their payments to the back end of their mortgage, many people will have no other choice but to sell or allow the home to go into foreclosure.”
It’s a dismal forecast for many homeowners who have been hit hard by COVID, but it also means that first-time homebuyers could stand a better chance at getting a reasonable price on a house.
Consumer Credit Will Be Harder To Access
“Consumer credit will be even more difficult to access for those with poor credit history, and the number of families with poor credit will increase due to their inability to continue to pay bills on time as a result of the job losses created by COVID-19,” said Marion Mathes, CEO of CreditWorks, adding that banks will further curtail their consumer lending activities due to uncertainty around consumer repayment capacity.
There Will Almost Definitely Be Another Stimulus
“Expect another [COVID] relief/stimulus package early in the year,” said Jonathan Howard, CFP and financial advisor with SeaCure Advisors, who adds that it might not be as substantial as what we saw with the CARES Act given the “political meat grinder” that is a potentially bitterly split Senate. But there’s also the possibility that Americans could see a heftier check than the average $1,200 they saw last time. We’ll have to wait and see.
Healthcare Costs Could Soar
President-elect Joe Biden has a comprehensive healthcare strategy, aiming to fortify and expand the Affordable Care Act, but if the Senate goes Republican (we’ll know in January following the Georgia run-off elections), it’s highly unlikely that Biden will be able to advance his plan much. Even an evenly split Senate could see Biden gridlocked. As such, healthcare costs will probably go up before they go down.
“I think in 2021 we will see a rise in healthcare costs due to the pandemic and with the possibility of some type of single-payer or ‘Medicare for all’ type of coverage to be announced by this new administration, our health insurance premium costs could be affected,” said Sa El, co-founder of Simply Insurance. “Any change probably won’t happen anytime soon so we have to be ready for higher premiums in the near future and maybe much lower rates over the next few years.”
Cruz added that healthcare is infamously tricky and costs “usually climb with inflation, so a good indicator of what may happen is to follow the inflation index. If it climbs, healthcare costs may also climb. If inflation drops, healthcare costs may also drop. Keep in mind this is not a guaranteed way to gauge healthcare costs. There could be an increase [in] costs due to the coronavirus. Hospitalizations are at an all-time high and we are straining our healthcare workers and systems. We may still see a significant increase to healthcare costs no matter what happens to inflation.”
Taxes Are a Wild Card
Biden also has an ambitious plan for tax reform, but just what he gets done there again depends on the Senate.
“Nobody can say for sure what U.S. Fiscal Policy will look like until we know the results of the Georgia Senate special elections. If Democratic candidates Jon Ossoff and Raphael Warnock can defeat Republican incumbents David Perdue and Kelly Loeffler, then the Democrats will have a majority in the Senate and an easier path to pass tax legislation,” said Bennett S. Stein, CPA/ABV, CFP, Arbor Wealth. “If Republicans retain control, the chances of meaningful tax changes are much lower. President-Elect Biden has stated that income, payroll, and capital gains taxes should go up on top earners, but again, so much rides on the Georgia Senate races. However, if you are earning under $400,000 per year, you probably will not incur a substantial tax hit.”
Some Student Loan Debt Could Be Forgiven
Biden has a detailed plan to tackle federal student loan debt, and though many of his moves may be blocked by a Republican or divided Senate, there’s hope that he’ll be able to advance in this area.
“There is talk of possibly forgiving federal student loan debt for people who make less than $125,000 per year for undergraduate debt,” said D. Shane Whitteker, owner and chief broker, Principle Home Mortgage. “This would have a pretty significant impact in my opinion. Student loans are one of the biggest hurdles for many prospective first-time home buyers.”
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This article originally appeared on GOBankingRates.com: What Experts Say 2021 Will Look Like for Your Wallet