Use these 3 money tips heading into 2024, economist says
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Heading into 2024, consumers should “economize” their budgets, pay down debt and save money, if possible, to boost their personal finances, Dana Peterson, chief economist at The Conference Board, said Thursday at CNBC’s Your Money event.
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, Peterson said.
However, that recession likely wouldn’t last long: It would end in the second half of the year, she estimated.
1. Budgeting
Consumers can “economize” by looking at their weekly budgets and trimming expenses where possible, Peterson said.
That might include buying store-branded rather than brand-name items at the grocery store or at clothing retailers, or shifting to different types of entertainment, like streaming movies at home instead of going out to the movie theater, for example, she added.
Pandemic-era inflation ate into household budgets at the fastest pace in 40 years. While it has fallen significantly from its peak in summer 2022, inflation likely won’t fully retreat to its target level around 2% until sometime next year, Peterson said.
“Everything, just about, is very expensive,” she said.
2. Pay down debt
The Federal Reserve has raised interest rates aggressively to rein in inflation. That has dramatically increased borrowing costs for households, for everything from mortgages to auto loans, student loans and credit card debt.
For example, average credit card rates — known as annual percentage rate, or APR — are at all-time highs, over 20%.
Put any extra money toward paying down debt, Peterson said. Financial experts generally recommend prioritizing the highest-interest debt first, and paying bills on time and in full each month, if possible.
3. Save if you can
Even if consumers don’t much disposable income to save, “every dollar counts,” Peterson said.
For those with a 401(k) plan at work, financial advisors generally recommend first saving enough to get their full company match, which is essentially free money.
Then, consumers might consider building an emergency fund, health savings account (if they have access at work) or individual retirement account, for example. (However, those with high-interest loans should generally prioritize paying down that debt after saving enough for their 401(k) match, experts say.)
One benefit of high interest rates: Savers are getting higher rates on cash than they’ve seen in decades. Â
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