Forex Articles

Change is inevitable. In fact, the only thing that is certain is uncertainty. Therefore, it's important to forecast and prepare for the financial changes that have the potential to impact everyday life. Below is a list of the top three financial issues that are likely to affect life in 2016.

Crude oil prices hit a historic low in December of 2015, falling to an average of $38 per barrel, representing the lowest cost in more than 10 years. Analysts expect crude oil prices to remain low in 2016. OPEC (Organization of the Petroleum Exporting Countries) producers have made it clear that they plan to continue increasing oil inventories, increasing supply in an already high-supply environment and putting downward pressure on oil prices.

The United States Energy Information Administration (EIA) expects oil prices to average $40 per barrel in 2016, up a grand total of $2 from the previous year. Regarding the increase, experts expect average prices to remain below $40 until well after April 2016, as most OPEC companies build their inventories predominantly in the first half of the year.

The EIA also predicts volatile crude oil prices throughout 2016. The organization cites unknowns such as Iranian oil volume, the speed of oil consumption growth and the response of non-OPEC production to low oil prices as the reasons for oil's increase in volatility in 2016.

The everyday consumer can expect gas and other products that use petroleum in production to have low prices throughout 2016. Low oil prices should keep the average cost of living down and help increase savings, investments and consumption.

The Centers for Medicare & Medicaid Services expects the cost of an average health plan under the Affordable Care Act (ACA) to increase by 7.5% in 2016. Further, many expect volatile changes to the premiums listed on the Healthcare.gov website. Of the 37 states represented on the site, analysts expect some to see average premiums increase by more than 30%, while they expect other states to see average premiums decline by more than 10%.

The issue here in 2016 is that the average cost of premiums is increasing across the board. Experts expect the average premium for a typical employer-sponsored health plan to increase by more than 4%, meaning that even those not receiving health care under the ACA are likely to experience cost increases. For everyone who has, or expects to have, health care in 2016, it's important to factor these increases in costs into a health insurance budget.

The Federal Reserve made news in 2015 when it increased interest rates for the first time since the 2008 financial crisis. The hike was small, increasing interest rates from 0.25% to 0.5%, but it's a sign that the Fed may impose a second increase in 2016.

The Federal Reserve increases interest rates when it decides that the economy is doing well and expanding. It decreases interest rates when it sees the economy slide into a recession. So, while the Fed may increase interest rates in 2016, this will depend largely on the performance of the overall economy. The Fed considers unemployment numbers, market volatility and the rate of inflation when deciding whether or not to increase interest rates.

For the average person, this can mean a variety of things in 2016. If rates increase, it entices people to hold more cash and invest less in stocks and bonds that may give lower returns. Further, it increases the cost of corporate borrowing, reducing the profits of large companies, making cash more attractive. Finally, any person with a variable interest rate on debt sees that interest rate increase, so those in such a situation should make sure to pay off variable interest rate debt as quickly as possible.