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Thriving Stylist Podcast
#364 - How to prepare for the American government administration change
00:27:44
As we step into a new presidential term in 2025, uncertainty looms large. How will these shifts impact our daily lives? From healthcare and taxes to retirement and social security, the implications are far-reaching. A lot of this is speculative, but...
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Do you feel like you were meant to have a kick ass career as a hairstylist? Like you got into this industry to make big things happen? Maybe you're struggling to build a solid base and want some stability. Maybe you know social media is important, but it feels like a waste of time because you aren't seeing any results. Maybe you've already had some amazing success but are craving more. Maybe you're ready to truly enjoy the freedom and flexibility this industry has to offer. Cutting and coloring skills will only get you so far, but to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy. When you're ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists. I'm Brit Seva, social media and marketing strategist just for Hairstylists and this is the Thriving Stylist Podcast. What is up? And welcome back to the Thriving Stylist Podcast. I'm your host, Brit Siva and today we're talking about how to prepare for the American government administration change. So at the time of this recording, we have a new president elect. This podcast is being recorded at the end of November 2024. Donald Trump has just been elected the US President heading into 2025, and there are a lot of questions about how this is going to impact the American people. And this always happens when there's an administration change. The reason why this administration change I think is so significant is similar to why it was significant last election when President Biden was elected. The last eight years have been intense. We went through a pandemic in 2020. So during Donald Trump's last presidency, we have been in very challenging economic times for the past four years and everybody is looking for relief and wants peace of mind. And there's a lot of concerns about how we're going to make that happen. And so I've been getting a ton of DMs asking me to speak to this and I continue to respond and say I don't want to report on speculation. Whenever there's an election, there's a lot of promises made and big ideas shared. And then if you look back historically, never ever has even 75% of what a politician has shared their intentions are come to fruition. It's just kind of like seeing their point of view and hearing their promises that they're going to shoot for. And then time after time we see things that don't come together or a pandemic happens and everything changes. Right. So what I don't want to do is speculate and say, you know, start making stuff up. So instead what I want to do is talk about how this administration could impact our economy. And I know that we could dig into social injustice issues, climate change, deportation, women's rights, deregulation. There's so many things that we could unpack. The biggest questions that I'm currently getting are on healthcare, taxes, tariffs. And I also am going to choose to talk about retirement, investing and Social Security Security because I think those components are important to talk about as well. So when I was looking into this episode specifically, the resources I pulled from were Kiplinger, Forbes Times, CBS News, some quotes directly from the certified financial planner that we have come into to coach Thriver Society members totally for free as part of their membership. So those are the places I pulled most of my information from. We're going to start right at the top and talk about potential healthcare changes and impact. So there's a lot of concern about the Affordable Care act in general. It was signed into law March 23rd of 2010. So if you've heard people talk about Obamacare, very similar. It's kind of a term that's used to refer to ACA or the Affordable Care act, which was signed into law by President Obama. It has changed several times over the years. It's not what it was in 2010, there were major provisions made in 2014, there were changes made in the last few years. And there is a big concern about some of the subsidies that were approved in the last few years by President Biden and what's going to happen to those things. And so there's a lot of concern about cost of healthcare and that's how that's going to affect the American people. So I want to break down what could happen happened there and what it could potentially look like. So President Trump has said openly he's not going to try to repeal ACA or the Affordable Care Act. So his intentions, at least as far as he's said so far, are not to shut down what we refer to commonly as Obamacare or the Affordable Care Act. However, the piece that is in question is the subsidy that was put into place in response to the COVID pandemic. So assistance was made available specifically to middle class families. When you look at lower income families and individuals, often through aca, they're paying nothing for healthcare or very, very little. We're talking like $50 a month. So extremely minimal healthcare costs. When you look at those who are wealthier, they're not getting hardly any support when it comes to Affordable Care coverage. Nobody's concerned about them so much. It's really the middle class that we're concerned about. And so these subsidies were into place and those are set to end at 2025. It was a temporary relief provision. And President Trump and several Republicans within Congress have said they have no intention of renewing those subsidies. So when I looked up projections, they said that if the subsidies are allowed to expire, premiums will increase by an average of 400 to $1,000 annually. That's an average. So that's a really wide average to me. So if that's an average, that means for, you know, some people, it's going to be more than $1,000 a year. I'm going to assume for someone to be less. And that's the thing about aca, is that it is based on the income that you make. If you've ever filled out an application through your state's open market, it asks a lot of information about your income and your family dynamic. And then based on kind of what you have going on, you're quoted a price for healthcare. And so there would be a really wide ra of how families would be impacted if these subsidies are allowed to expire. So combine that with the fact that premiums are already set to increase by anywhere from 4 to 10% plus next year, just from insurance companies. So we know this as well. The cost of healthcare generally from insurance companies does increase pretty much annually. You can almost bank on it now by the amount in which it increases varies greatly. And so we are seeing fairly high increase projections heading into next year. So let's say on average, insurance rates are increasing by 7, 8% plus this subsidy expiring. That could be a pretty significant increase for people. You're looking at another 100, 150, $200 or more every single month for health care. That is obviously a concern. And when things like that happen, we also see out of pocket costs such as deductibles and co pays increasing, because often what you'll do is if your insurance premium is increasing, you'll choose a lower level of coverage, which would in turn mean higher CO pays, higher deductibles. It's almost like a pay to play insurance plan where, yes, you're basically paying for major medical care, but then when you go in for routine visits and things like that, sometimes you pay more per visit. So there is quite a concern around cost of health care. Honestly, whether these subsidies get approved or not, you can bank on Cost of health care increasing in 2025, because whether or not the subsidies get extended, insurance companies are saying rates will increase. So by how much, we're not sure. But my advice is prepare for it, because I don't see a world in which people are not paying more. It's just a question of how much I saw. There's a woman named Lynn Gish. She's a California based affordable health care advocate. And she's quoted as saying more people are enrolled in ACA marketplaces than ever before. And that ties into the fact that so many people are self employed now. So many people chose to be entrepreneurs and business owners. And when you do that, you're not covered by your employer's health plan. You're uncovered by yourself. So of course, that only makes sense. And then she goes on to say, you're talking about a world where we are doubling how much people pay. That is a major concern. So my advice is plan to spend more on health coverage in 2025 and beyond. It looks like it's pretty much a surefire bet. So let's shift forward and talk about taxes. Taxes are always a big conversation. And one of the big concerns right now is over what's called tcja. That was the Tax Cuts and Jobs Act. This was something that was implemented in 2017 by President Trump. And this was widely received well by most people because most everybody got a reduction in their federal tax rate. So if you fell into the lowest tax bracket, nothing changed for you. So your rates didn't go up, but they didn't go down. They're already at a really reasonable rate according to tax standards. But everybody else saw a really significant deduction in how much they pay in federal tax. Now, this TCJA is set to expire also at the very end of 2025. It expires December 31, 2025. It is widely believed it is going to be renewed. 53% of taxpayers would see an increase in their tax burden if certain provisions are left to expire. We don't know what's going to happen with that, just like we don't know what's going to happen with pretty much everything I'm saying on this pod. But when you look at what is being predicted, people are saying it's hard to see a world where the current administration would choose to end that. But I want you to keep this in mind. So if this TCJA stays in place, the tax rates stay the same moving forward. We have no idea how long that extension is going to be, but our tax burden will stay reduced. It's important to know that. Oh, other thing to note before I move on. This also shifted the amount that was available for the child tax credit credit. People were able to take a larger credit there. Things change with the standard annual deduction. So essentially everything that was put Into Place in 2017 is expected to be renewed. We don't know what's going to happen for that yet, but that's what the projections are looking like. So let's shift forward and talk about taxes on tips. This is something that became a big topic in the fall of 2024. Both parties ended up saying that they were going to go in this direction. Vice President Harris said that we would exempt tips from income tax, but not payroll taxes, so contributions that people make to Social Security and Medicare would stay in place. Now, this was the interesting caveat. Her proposal would allow workers in the service and hospitality industries with income below $75,000 to claim exemptions up to a currently unspecified capped amount. And this is what's important to understand is we hear these things and we say, oh, my gosh, no taxes on tips sometimes. And so a lot of these things are not an all for one, one for all kind of rule or statement. Actually, most of these things don't fall into those categories. And so when you kind of pull back the curtain and dig a little bit deeper, it wasn't a blanket of no taxes on tips. It was a really specific sector of the workforce who could get some relief. And that's what I think is important to. So currently, the way things are right now, among tipped workers, 37% earn so little that they're already not paying federal income tax. So they would not benefit from that tax cut at all. We're talking about a really specific, again, middle class where they're seeing some kind of partial relief there. Now, the Trump administration never said exactly what the no tax on tips would look like for them. So Vice President Harris was a little more specific on what her vision would be. We've not seen clear guidelines on what President Trump's vision is, so all we can do is assume at this point. But something that was noted in the research I did is if the Trump proposal in facts shields tips from payroll taxes, then workers, perhaps unknowingly, would receive reduced retirement benefits, which are based on total career contributions to Social Security and Medicare. Now, I know that there's a lot of buzz about Social Security and Medicare right now. I would love, if you're interested, to do an entire podcast episode on Social Security, Medicare, what that's going to look like and how that could shake out. If you're interested, send me a DM or leave me a rating or review on this podcast, and I can certainly serve that up to you. I've done a lot of research on it. It's something that interests me as well, and we could talk about that, too. But if that went into place, just know that either way, if that did impact Social Security and Medicare, it might provide relief right now, but in the long run, it could reduce your support for both medical care when you retire and also potentially Social Security earnings. So just wanted to keep keep in mind, let's actually shift and talk about Social Security right now, since we kind of opened that box just a touch. So one of the things that President Trump said was I vowed to fight and protect Social Security. So Social Security is a fairly fragile system at this moment in time. There's a lot of conversation about it. And what he said is he does want us to carry forward and is committed to doing so. One of the things that's been talked about, but I think widely misunderstood is he says he's proposing to end tax taxes on Social Security benefits, not deductions, not payroll deductions, benefits, meaning a retiree would not have the big tax implication on their Social Security benefits that they do right now. So depending on a retiree's income, up to 85% of the benefits that they receive right now are subject to taxes. And what he's looking to do is reduce that tax implication to retirees. If you know any retirees that are living off of Social Security, it's a fine line and it's really tight. And so he's looking to put more money in their pockets. That was the promise. There is some concern about Social Security, however, like I said, I can do a full podcast episode on this. The idea that it's all going to go away in 10 years is not true. And so if you look into it further, there's other pieces at play and things going on. Some things will expire, but it's not going to go poof in 10 years. And he is interested in looking for ways to preserve the program. So let's talk one more time about corporate tax, actually taxes in general, caveat, corporate tax. And then we'll shift forward and talk about tariffs. So one of the big things that some people got really excited about was he promised to do deep corporate tax cuts. So this is at the corporate tax rate. A corporation is owned by shareholders, not its members. So if you are an llc, this likely Would not impact you if you're an S Corp. This is a C Corp Based businesses. So most corporations are private when they first incorporate, meaning their stock shares are privately held. 86% of corporate corporations fall into this category. So shareholders are in place if you have a C Corp. If you do not have shareholders in your business, you do not fall into this category. Now corporations have a fixed structure with a board of directors and officers. LLCs can be managed by members or managers. So most of us listening to this podcast are LLCs or LLCs filing as an S Corp or sole proprietorships. You'd be a C Corp if you have shareholders. So that's just something to keep in mind. So when we talk about shareholders, we are often talking about publicly traded companies. So not always, but when you look at a company that's publicly traded, it is a C Corp. So any company that's going to be on the US Stock Exchange is going to be a C Corp. So those companies would benefit from this very significant corporate tax cut. Now put a pin in that because we're going to come back to it. So let's talk about tariffs because this is the big thing I keep getting DMs about and people are thinking like, okay, so what do I do? Do I stock up a lot of concern in the extension industry? Do I stock up on hair right now? Do I stock up on hair? Color is another, another thing that people are really concerned about. So let's dig into what this could mean because I think it is a really big question mark and there is some concern here. So the initial plan that was proposed by the administration is having tariffs of up to 60% placed on imports from China and then 10 to 20% on other countries importing goods into. The widely accepted assumption is that this is going to cause inflation and increase consumer prices. And usually when that happens, we've already lived through this, so this should not be a surprise to you. When that happens, we see interest rates increase to try and calm inflation. Now, nobody's a huge fan of higher interest rates. However, they did work. I'm not a fan of them either. But when you watched inflation start to soften, it was because of the things that were put into place, like the higher interest rates. We're going to talk about that in a second too. But there is a lot of chatter around if these tariffs go into place, we will see again additional inflation and interest rates could go up again as well. There is no doubt that if this happens, costs would be passed along to the end consumer. So if you were buying a product even at wholesale, your wholesale cost is going to go up. And then what do you think to yourself? I can't just eat the cost, my client's going to have to pay for it. So there is a widespread understanding that that's how it's going to go down. So post Covid, we saw a spike in inflation that peaked in 2022 at 9.1%. That was the highest level since 1981. That's more than my lifetime. So for a lot of us, that's the biggest increase in inflation that we've seen as working adults. Prices today remain 26% higher than before the pandemic. Cost of groceries is one of that. Were expected to see an increase. Now here's a quote I found that was interesting. Tariffs are considered a regressive form of taxation, meaning they hit the lowest income consumers the hardest. That's because low income families spend a larger share of their budgets on essentials like groceries versus higher income earners. So that only makes logical sense. You know, a billionaire, if they have to spend $1,000 a week on groceries, no worries, right? Because they're probably spending $10,000 a week investing in something or way, way more than that versus the average American family who's spending $1,000 a week on groceries, it hurts. And so what they're saying is with these tariffs, it's going to be more of that. The lower income families, individuals are going to feel it the hardest. Now here's what I thought was interesting. There was a quote coming out of Steve Madden, the shoemaker and their brand said, we plan to import fewer goods made in China to the US and replace them with items made in other countries. Now this specifically stood out to me. CEO Edward Rosenfeld said we've been planning for a potential scenario in which we would have to move goods, goods out of China more quickly. We've worked hard over a multi year period to develop our factory base and sourcing capability in alternative countries like Cambodia, Vietnam, Mexico, Brazil, et cetera. So for us, we're like, oh my gosh, tariffs. And we're panicking right now. Tariffs are something that Donald Trump was talking about last time he was in office. So for a lot of these bigger corporations, they've been thinking about this and it sounds like if you look at a company like Steve Madden and I'm sure others, they have been setting wheels in motion to diversify in case something like this happens. Because here's the thing we have to understand. Do you think these companies want to charge More. No, they don't, because they know that people are going to buy less, like they got it. So something like this, while we do say like, yes, it does hurt the lower income earner the most, it will trickle its way back up. And these businesses aren't stupid, they want to sustain their sales as well. And they're nervous too. And I think that that's something that we should keep in mind is that we will see move movement if this happens, things will change. Another thing that was interesting is there's a concern. I keep seeing it noted as tit for tat. So we've seen this before when tariffs have gone into place. If we put a tariff on Chinese imports, then China could retaliate and be like, oh yeah, sure, we're going to do the same. And so you can see the cost go up on both ends. It's often a two way street. So we will likely see that come into place as well. What's interesting about tariffs is everybody's like, we want lower taxes, like, don't charge us as much for things we cannot control. With tariffs, you're now in control. You don't want to spend money on things that are being imported, don't do it. But what's happening is the money has to come from somewhere. So if taxes are lower, how do we intend for the country to fund itself? And so what this administration is saying is, well, we're going to do it through things like tariffs. And there's a big concern and fear over that. But I think one of the easier ways to look at it is it's like the money is going to be spent and it's a matter of do you want it to be auto pulled in the form of federal taxes or in one of these other ways where yes, you can't pick and choose what you're buying, but everybody will be affected. And here's what it's just important to understand that that's how these things work. And if you go back and look at like economic history, that's how these things have always worked. So one of the things that I thought was really interesting was the certified financial planner who comes in and speaks in thrivers and coaches our members brought up that we're in one of the lowest tax and interest environments in 100 years. So while it feels really crunchy to us, when you look back historically, in the 1950s, the top marginal tax rate was at 91%. Today it's at 37%. Houses were cheaper for sure, but mortgage rates were higher. Like if you look at the 80s, a mortgage rate was 13.7%. Right now we're feeling the heat at 7.5. And we got spoiled, right, with like rates below 3%, 4%, that felt great. But if you think back to 2020, when rates were at 3% and lower, we were seeing houses double in cost, right? A house that was once $200,000 is now $400,000. A house that was once a million dollars is now $2 million. So how does work out? And this, this is what our financial planner was saying, was that when you look at interest rates, it can really burn you. So a $300,000 house with 10% down, a 30 year mortgage at a 7.5% interest rate over the lifetime of the loan, you'll pay $709,000. With that same $300,000 house, 10% down, but a 13.7% interest rate, well now you're paying $1.158 million. So the interest rate will kill you more than the cost. And that's really important to understand. Like affordability of the housing market is a huge concern. But if the interest rates go down, you can bet that the cost of homes will go up. And the reason why we saw interest rates go up was because the cost of houses had gone, become astronomical. And now you've seen it flat level out. And that's why I think it's important to have these conversations and understand everything is relative. Everything is relative. And all of us are on this constant quest to like make more, keep more, save more, protect more. Same, like same. Same for me too. The government will get their money one way or another. And what we're seeing is a conversation around how is that going to go down? I want to end this on kind of like a plus because this was an interesting take that I saw. So tariffs that were imposed by Trump in his first term as president acted as a headwind for stocks. So tariffs were put into in his previous presidency, they just weren't quite as hot of a topic. Or maybe social media didn't blow them up at the same rate, I don't know. But they had a really positive impact on stocks. If you remember that time, the stock market had a real nice go of it. So if the corporate tax rate does reduce from 21% to 15%, which was part of the big promise, that goes right to corporations bottom lines, which boosts their profitability and that is a huge driver of stock prices. So if you have been hesitant to put into retirement, invest, like really keep an eye on things like that because there could be massive stock growth. And this is why it's really important to be smart about your money. Because, yeah, cost of groceries might be going up, but like I keep saying, it's all relative. So what else is going up? Where can you make your money work for you? What are some investments you can make? Where are some ways that you can get smart to protect your assets as best as possible? And when we look at things like we say the rich get richer. Look at what they're doing. We have to. We can't just live small and, you know, complain about things that hurt. We have to get really, really smart with our money. So here's the key takeaways. Things are going to get more expensive in 2025. They always were, no matter how this election shook out. So you need to financially prepare yourself. Either taxes will go up or tariffs will come in, but the money's got to come in one way or another to the government. So it'll be coming. And you've got to find a way to increase your income. You have to. There is just no other way about it. And by the way, that was always going to be what was going to happen. The cost of living adjustment for 2022 was 5.9%. The cost of living adjustment for 2023 was 8.7. Holy smokes. And the cost of living adjustment for 2024 was 3.2. So if in 2021 you were doing $5,000 a month in services, you need to have made $6,000 a month in 2024 just to sustain. Not to improve, but to sustain. So heading into 2025, I would hope that you're doing like $6,600 a month. If in 2021 you were doing 5,000, and if your income is not growing at that rate, this economy will pass you by and things will start to get more painful. So, like I said, a lot of this is speculative. I just wanted to really dive into the facts and figures of how this administration could impact our wallets, our savings, our retirement, our healthcare. And if you have more questions, if you want to dive deeper into Social Security and all those things, leave me a rating or review on itunes. Send me a dm, let me know what comes up for you. As I always like to say, so much love, happy business building. I'll see you on the next one.