Voting with your wallet? Why experts say you should think twice

The economy is typically at the top of voters' minds in presidential elections, and Americans aren't feeling too optimistic as they head to the polls Tuesday. 

A Gallup poll released in mid-October shows confidence in the economy remains low despite a decrease in unemployment and interest rates, lower gas prices and rising housing and stock values. Four in 10 Americans (40%) told the Financial Health Network they're experiencing moderate or high levels of financial stress, with some groups facing more than others: women, lower-income households, renters, the unemployed and unmarried people.

Although inflation has cooled, food and housing costs remain higher than before the pandemic. And while that may lead some voters to vote with their wallets, experts warn that it's important to understand a president's influence over the economy and prepare accordingly.

"There's a lot of speculation and misconceptions that people have about what presidents say they can do and will do, versus the process to actually get a lot of these things done," said Jovan Johnson, a certified financial planner and co-founder of Piece of Wealth Planning. "But no matter who becomes president, the initial roadmap and financial planning are things you should have to begin with, and I don't think any president will influence that. Just do what you need to do regardless of who wins. And if things were to get in the works, you can adjust your plan as needed." 

Presidential positions

Here's a general look at the candidates' positions on areas that can impact voters' finances:

Taxes: Former President Donald Trump's tax policy includes extending the 2017 Tax Cuts and Jobs Act, which is set to expire at the end of 2025, bringing down the corporate tax rate for domestic production, and nixing green energy tax credits. He has also proposed ending taxes on Social Security, overtime pay and tips. Trump also folds in imposing significant new tariffs, which experts have said would raise prices for American consumers.

Vice President Kamala Harris' policy includes raising taxes for higher earners and businesses, expanding the child tax credit and ending taxes on tips. She has mentioned opposition to tax increases for folks earning less than $400,000. This could mean extending certain provisions of the Tax Cuts and Jobs Act. 

Housing: The U.S. is estimated to have 3.8 million fewer homes than needed. Harris' housing proposal includes more robust subsidies for first-generation homeowners and $25,000 in down payment assistance. She proposes building 3 million affordable homes over four years.

Harris also supports expanding the federal Low-Income Housing Tax Credit and a new tax credit for rehabilitating or building housing occupied by owners in lower-income neighborhoods. Her plans to boost the housing supply include a $40 billion fund to help local governments in housing construction. 

Trump supports ending regulatory hurdles to building new homes. He has alluded to reducing regulatory costs for homebuilders and opening up swaths of federal land for home construction. 

Energy: Harris is anticipated to continue the Biden-Harris administration's focus on clean energy through environmental initiatives such as Justice40 and the Inflation Reduction Act. 

Trump's campaign favors incentives and deregulation of traditional energy sources such as natural gas, oil, coal and certain renewables. His running mate, JD Vance, has opposed most climate change policies but has shown support for regulation as it relates to the health of the environment. 

Consumer prices: Harris and Trump have made higher food prices a top issue. Harris has proposed policies to ward off supermarket and grocery store price gouging. The pandemic has significantly impacted production costs and food supply chains.

But Harris' and Trump's proposals won't do much to bring down the national debt, according to an analysis by the Committee for a Responsible Federal Budget. Harris's policies could either have no significant fiscal impact or increase the debt by $8.10 trillion through 2035. Trump's plan could add anywhere between $1.45 and $15.15 trillion to the nation's existing debt loan, the analysis said.

Presidential influence

When considering a president's influence on the economy, it's important to recognize that we have a market economy, said Michael Walden, a Reynolds Distinguished Professor Emeritus at North Carolina State University. 

According to Walden's paper, "You Decide: Can the President Control the Economy?" companies and households make the majority of day-to-day economic decisions. "This is by design," writes Walden. "Promoters of the market system argue that individualized decision-making about the economy maximizes freedom." 

"A major misconception is that people often say, 'We need someone better to run the economy,' " said Walden. "I think a lot of people indeed think the president has a lot of power and clout over the economy. The president does have influence, but certainly doesn't control the economy." 

With consumer prices rising, voters expect that a president can drive prices down. But Walden said the federal government plays a bigger role. "A president has influence over both fiscal policy and monetary policy, but the influence is indirect," said Walden. "Fiscal policy is implemented through the federal budget."

While a president can make recommendations about the budget, it ultimately is in the hands of Congress. Walden writes that this often equates to lengthy negotiations between the president and both chambers and political parties. 

Voters should follow the Federal Reserve, which has a lot of direct influence on the economy in reducing the rate of price increases, said Walden. 

"We see this every time the economy goes through an inflation bow," said Walden. "Case in point: In the 1970s and early 1980s, the election between Carter and Reagan in 1980 was very similar to the election we're having now. That's because inflation and living standards are issues. It makes sense that both candidates will say, 'Hey, elect me. Everything's going to be fine.'"

Money moves to make

Regardless of who wins, it's important to plan financially for the long term. "Don't build financial life plans based on who gets elected," said Neal Van Zutphen, a certified financial planner and president and founder of Intrinsic Wealth Counsel. 

To start, focus on what you want in your life and figure out how to plan for that. Here are some steps to take: 

Save emergency funds. While the recommended amount is six months' living expenses, this might be more or less depending on particular circumstances and needs. 

"The assumption is that the world isn't free, and you'll have to get a job, work to earn and save money, and find a place to live, said Van Zutphen. "You'll want to make sure you have some reserves available other than credit cards," "That way, you can take care of a flat tire, car bill–or whatever emergency comes your way." 

Create a spending plan. Living expenses typically will continue to rise no matter who is in office. In turn, you'll want to manage your expenses, boost your income and diversify your investments, said Johnson, the financial planner. "To make sure you have financial security, set those things in place." 

Contribute pre-tax dollars to a 401(k) plan. Many employers have an employer-sponsored retirement plan, allowing you to contribute pre-tax money from your paycheck. Van Zutphen recommends opting to defer some of your regular payments for your retirement. "That way, you can start accumulating some capital for your future you." 

If there's an employer match, while technically it's part of your employer package, you can think of it as free money, said Van Zutphen. Aim to match it, if you can. 

Be a lifelong learner. Bolstering your skills and continuing your education enhances your ability and your value to your employers, said Van Zutphen. If you're self-employed, it enhances your ability to deliver better services. This can, in turn, boost your earning potential. 

Revisit your estate plans. Make sure that the legal documents for your estate plans are up to date and that you have the appropriate advance directives, Van Zutphen said. You'll also want to make sure you have sufficient life insurance. 

Stay steadfast in investing. As they say, it's not the timing of the market but time in the market that matters. In turn, you'll want to invest according to your risk tolerance, goals and target date —and keep your eye on the long term. 

"The investments themselves may fluctuate, but we're talking long-term," said Johnson. "These are the things that matter 10 or 20 years out, no matter how many presidents we'll have between now and then." 

Creating a long-term financial plan that's in step with your goals is important and can help you grow your money throughout multiple presidential terms. 

"Taxes, inflation and markets will fluctuate," said Van Zutphen. "Have plans, and be flexible enough to make adjustments when taxes, fiscal and monetary policies change."