What to expect for your money in 2018 — and how to brighten your financial future

As we enter 2018, it makes sense if you’re feeling uncertain about what your financial future holds: Last year was more of a game changer than usual in the world of money. Not only is the United States about to see the most radical overhaul of its tax code since the 1980s, but cryptocurrencies like bitcoin are suddenly the rage, even as prices continue to vacillate after rising to (and falling from) record highs.

And, quietly but perhaps most importantly, the Federal Reserve raised interest rates — and signaled even more rate hikes could be coming.

That’s important for a few reasons; many economists are feeling good about 2018, but concerns remain, ranging from the uncertainty of geopolitics to stagnant wages. At least some experts worry about fiscal policy — stimulating through tax cuts — that is seemingly at odds with monetary policy: raising interest rates because the economy is already in recovery mode. Traditionally, tax cuts are passed in times of national emergency, like during the first and second world wars. Much rests on whether new Fed leadership can keep the U.S. on its current positive path. At least some experts are optimistic.

“Obviously the economy has some pretty good momentum behind it, even before the tax bill was passed,” said Mark Hamrick, economic analyst at Bankrate. “An under-appreciated aspect of that is the fact that there’s a recovery going on in most of the industrialized democracies around the world.”

But how directly consumers and workers actually feel economic growth is another question. Though markets have boomed, gains have been mostly reaped by the richest 10% of Americans — who own more than 80% of the country’s stock shares. Though the nation’s mean wealth since the recession has recovered, median wealth is still 34% lower. Translation? A small number of people may be capturing more than their fair share.

So what can we expect from the economy in 2018? And perhaps more importantly — what are the odds you’ll be able to get that elusive raise? Here are three big questions you should have about 2018, and how you can prepare yourself to make the most of it.

1. Will the tax cuts get you a raise?

President Donald Trump has often referred to the recently passed tax cuts as a Christmas gift. And in the wake of the bill’s passage, a handful of companies including AT&T and Wells Fargo came forward to announce that their employees would be getting bonuses.

Of course, holiday bonuses are not particularly unusual. And some of the companies that came forward actually were planning to give those raises anyway — and have experienced recent regulatory problems — giving them an incentive to suck up to the Trump administration, a point many like Vox’s Matt Yglesias made on Twitter.

But there are reasons to expect that your raise in 2018 will be a modest one, investor Barry Ritholtz said. The reason? 2017 saw some of the highest corporate profits in six years, figures that were not necessarily matched by corresponding wage hikes.

“I’m not all that convinced that tax reform will mean all that much,” he said. “We’ve had increased taxes and regulation over the past eight years and the market has done just fine.... Perhaps we’ll see some modest wage gains.”

That said, there might be ways to maximize on the plan’s benefits for you. If you can, you might be able to defer some of your income until next year — that will save you a chunk of change come tax time.

Depending on your profession, you might also consider making 2018 the year you go freelance, since the new tax code is expected to pay off big for contractors. And if you really kicked butt at work last year (and have no intention of becoming self-employed), consider asking for a raise — after a little preparation for the talk with your boss: Start by writing down your biggest 2017 accomplishments and how you plan to build on them in the new year.

2. Will the bitcoin bubble pop?

2018 is almost certain to be another big year for bitcoin and cryptocurrencies. Last January, you could have bought an entire bitcoin for a less than $1,000 — then later in 2017 that same coin would have been worth nearly $20,000, according to CoinDesk.

Other cryptocurrencies like Ethereum-traded ether tokens and Ripple have had banner years as well, prompting concerns about a speculative bubble, which happens when an asset price climbs too much, too fast based on people’s expectations rather than any true underlying value. Usually, bubbles pop — and that mean major losses for investors, particularly rookies. The New York Times’ Mike Issac tweeted that he found a Reddit forum of people who were taking out costly loans to get in on the ride: a very bad idea.

That said, bitcoin and its ilk aren’t going anywhere. On Dec. 21, Bloomberg reported that the mega-bank Goldman Sachs would be setting up a desk for its clients to trade cryptocurrencies, an action that’s all but certain to bring in more Wall Street money. And in 2018, proponents expect another major milestone: Government central banks will start investing in digital currencies of their own.

“Central banks will begin to embrace blockchain-based assets and digital currency as a means of transferring value more securely and efficiently,” said Jesse Lund, who heads Blockchain market development for IBM. “That will have enormous downstream benefits.”

If you’re thinking of buying some cryptocurrency in 2018, make sure you have the stomach for it: The price of bitcoin has fallen by 30% in a single day, a point the investor Charlie Bilello made on Twitter.

Never, ever borrow money to invest, and always make sure you’re putting enough of your paycheck into more traditional investments like a company-matched 401(k) or retirement account before springing for crypto coins. If you do bet some money (and that is what it is — betting — not “investing”), use cash you would have spent on something relatively fun and frivolous, like a Seamless delivery or Uber ride... and consider cooking at home, carpooling, or taking public transit instead.

3. Will income inequality continue to climb?

While the economy is largely expected to continue improving, some observers are worried gains won’t reach most people, thanks to rising inequality, already high to begin with. CEOs, for example, make about 271 times what their employees make on average, a gap that grew 37% between 2010 and 2016, according to a report last year from the Economic Policy Institute.

And the Roosevelt Institute’s Marshall Steinbaum said he actually expects the economy to slow, as government money gets redirected from programs for the needy into stock portfolios. “In general, the effect of the tax bill will be to worsen the macro economy,” Steinbaum said. “The problem that has plagued us since the recession is the incentive... has been to pay out to shareholders... Everything in this tax bill worsens that set of incentives.”

Income inequality may also rise in 2018 as the Federal Reserve continues raising interest rates. Every time the Fed raises interest rates, the balance of power tilts from borrowers — who need money — toward savers who already have it, because it makes borrowing that cash more expensive: Bankrate’s Hamrick said that could squeeze consumers.

“Look to economies like Greece and South America where they have gone down a path where income inequality was more dramatic and accelerated than we have, and we’ve seen that model doesn’t work well,” Hamrick said. “You have a sharp increase in interest rates, either coinciding with or against rapid inflation, that’s pressure on consumers from multiple fronts.”

So, despite those dreary prognostications, what can you do to get ahead of the curve? The good news is that rising interest rates always have silver linings. Sure, you will want to try to pay off your debt faster, if you can, or potentially refinance it at a new fixed rate, so that your lender can’t jack up your payments. But if you’re in the black, 2018 will be an especially good year to shop around for different banks to see who can give you the highest-paying savings account — since the rates you get paid out should rise, too.

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