Heading into 2024, people are advised to be careful with their money. Stated by the economist of The Conference Board, suggests that consumers should try to spend less, pay off any debts they have, and save money if they can.
According to economists, This “three-point action plan” is important for households since there’s “a high risk of recession” in 2024, probably in the first half of the year.
But the good news is, if there is a recession, it’s expected to be short-lived. Economists believe it would likely be over by the second half of the year.
To save money, people can review their weekly budgets and cut down on expenses, according to economists. This could mean choosing store-branded products over brand-name ones at the grocery store or clothing shops. It could also involve changing entertainment habits, such as watching movies at home through streaming services instead of going to the cinema, for instance, economists suggested.
During the pandemic, inflation increased, impacting household budgets at the highest rate in four decades. Although it has dropped considerably from its highest point in the summer of 2022, it’s expected that inflation won’t completely go back to the target level of around 2% until sometime next year, according to economists.
“Everything, just about, is very expensive,” the economist mentioned.
2. Pay Down Debt
The Federal Reserve has increased interest rates significantly to control inflation. This has led to a substantial rise in borrowing expenses for households, affecting various aspects such as mortgages, auto loans, student loans, and credit card debt.
As an illustration, the average annual percentage rate (APR) for credit cards has reached record levels, surpassing 20%.
They advise putting any additional funds towards reducing debt. In general, financial experts suggest focusing on paying off the debt with the highest interest first. It’s also recommended to pay bills on time and in full each month, if feasible.
3. Save if You Can
Even if individuals don’t have much extra money to save, every dollar makes a difference.
For those with a 401(k) plan at their workplace, financial advisors typically suggest starting by saving enough to receive the full company match, which is essentially free money.
After that, people might think about building an emergency fund, contributing to a health savings account (if available through work), or opening an individual retirement account, for instance. However, experts advise that those with high-interest loans should generally focus on paying down that debt after saving enough for their 401(k) match.
One positive aspect of high interest rates is that savers are now earning higher rates on cash than they have in decades.
The economist advises being careful with money in 2024. Its plan includes budgeting, paying off debts, and saving. Despite the chance of an economic downturn, there’s optimism that any recession would be short-lived. Also stresses the importance of adapting spending habits and taking advantage of higher interest rates for savings.