The Weekly Commentary - 06/07/2021

Calls For Longer Pause To Student Loan Payments To Help Personal Finances

Those with student loans are looking for a longer pause on repayments which is due to end on the 30th of September. Student loan repayments were paused last year due to the COVID-19 pandemic, its restrictions and the impact that had on individual and household finances. The result has been that many people have found that their finances have had breathing room for the first time in a while without the hefty repayments they had to make each month.

Now, with the repayments due to restart in the Autumn, many are asking either for a further pause or for them to be forgotten entirely. In fact, many have put forward to the current administration to cancel $50,000 in federal student debt loans. Biden has so far said he would support $10,000 in student debt forgiveness.

However, given the size of many Americans’ student debt, that may not be enough. Plus, as many are now trying to make ends meet – whilst also saving for any children’s college tuition, student debt can feel like a huge burden to many. It may be that some may benefit from refinancing student loans, but any support from the government would be much appreciated for huge swathes of graduates across the country. Student loans are a heavy weight on anyone’s personal finances. In times where incomes are squeezed, they are arguably impossible to pay off.

Cryptocurrency And Tax Evasion Come Under Fire

Cryptocurrency has started to be seen as a good way to avoid paying tax as it is easy for any holdings to go unreported. While this amounts to tax fraud, many are guilty of not admitting to cryptocurrency holdings and crypto income to the IRS. Now, those who are participating in this form of tax evasion may find themselves subject to more stringent checks by the taxman. The IRS has already added a question to its first page of 2020 tax returns regarding cryptocurrency and whether a person has any holdings.

Up until now, the IRS has found that any non-reporting that transpires has been difficult to identify as the IRS is currently not able to trace crypto income or any crypto transactions. As a result, some individuals do not pay tax on income that they receive. Furthermore, there have not been clear rules on how to account for crypto income or crypto holdings.

The current administration is keen to stamp down on these practices amongst others to help lessen the tax gap currently at play in the US. Too many Americans are not paying the amount of tax they should be due to clever reporting tactics that make it hard for the IRS to legally find them liable for tax evasion. And, as 80% of the US tax gap is due to underreported income, the administration is obviously keen to stop that.

The net result is that those who have holdings in cryptocurrency as a way to shield their income from the IRS will start to see the lax reporting standards begin to tighten up considerably.

The End of Housing Protection Will Hit Millions With Poor Financial Health

Over 11 million Americans are facing eviction when the current housing protection expires in June. Due to the impact the pandemic has had on so many people’s incomes, large sections of the population have fallen behind on their rent. There has been a huge amount of Government money pumped into the system to directly support renters who were finding it difficult to pay their rent in a timely fashion. However, that has not been distributed quickly and so even with the best budgeting attempts possible, many simply cannot make their lower income stretch.

Around 15% of renters are behind on their rent and so, when the ban to evict ends on June 30th, the fear is that evictions will explode across the country. However, landlords are also in need of a more normalized income which a great deal are not receiving at the moment. The hope is that the $45billion in rental assistance will be distributed as quickly as possible to stop evictions occurring so that both renters and landlords alike are helped out. However, with rental arrears believed to be amounting to $70billion, not everyone will be saved from fear of eviction.

The expiration of the initiative in place to protect people from eviction has highlighted how many Americans were in a financially vulnerable position before the pandemic. Many will have been living paycheque to paycheque and the consequent dip in income that so many people endured will have meant they were using informal and formal means of paying for everyday essentials. Even with the stimulus cheques the Government distributed, staying afloat to many families has been incredibly difficult.

Rising Inflation and Rising Prices Make Protecting Your Nest Egg Even More Important

Given the huge shocks that large sections of the population have had to endure since the beginning of 2020, many of us will be looking at how to protect the money that we do have saved in our nest eggs. While some of us may have had to sadly dip into our savings to make ends meet this last year, it is still possible to protect your investments – much helped by using a portfolio tracker to keep tabs on your holdings.

With prices rising across a broad spectrum of goods and inflation starting to increase at a quicker than normal rate, we are all paying more for everyday goods. Arguably, this has been down to a huge surge in demand in the Spring of 2021 when restrictions started to loosen in the post-Covid era as well as stimulus cheques allowing for a big splurge by many households. However, that does impact investments.

As a result, it has been highlighted by many economists and financiers that it can be beneficial to have a wide range of investments as well as just stocks. Looking out for key opportunities in real estate, commodities and gold which can help hedge against any inflationary pressures. Doing so may prove to help protect the health of your personal finances.