Are you wondering what to expect on the personal finance front in 2024?
After a tumultuous two years, the economy is showing signs of stability, but we’re not out of the woods yet.
Here are six 2024 predictions from financial experts:
1. Interest Rates Will Drop
In December, the Federal Open Market Committee (FOMC) announced that the federal funds rate may be at its peak for this cycle and shared that the first decrease may come in June 2024.
“I think we may see some relief, but we won’t get down to the rates we experienced a few years ago,” Regina McCann Hess, certified financial planner, certified divorce financial analyst and president of Forge Wealth Management, said in an email.
She explained that the definition of high rates is relative: “Many of us can remember average interest rates of 6% to 7% that spanned multiple years. That was our normal. Within the past few years, many took advantage of the low 3% to 4% rates and can’t fathom going back to those higher rates. If we’re lucky, we could land somewhere in between.”
For those who are looking to take advantage of the high rates, now is the time to act.
“If you’ve been waiting to put your money into CDs or high-yield savings accounts in hopes of higher rates, my advice is to go ahead now. The potential for higher rates in the near future seems limited,” Jeff Rose, a certified financial planner and the founder of Good Financial Cents, a financial planning and personal finance blog, said in an email.
2. Inflation Will Continue to Trend Down
Thanks to the Fed’s series of rate hikes, inflation has been on a downward trend since hitting a record high of 9.1% in June 2022.
Although the rate increases are likely over for now, the FOMC is still working toward a 2% inflation rate, so we’ll likely see inflation continue its downward trend.
[Related:Tips to Make Ends Meet During High Inflation]
“I believe inflation is trending down. It still feels like prices are higher than they used to be, but they aren’t rising like they did two years ago,” Hess said.
3. White-Collar Jobs Will Grow
“While overall job numbers didn’t look bleak in 2023, the dichotomy between two types of applicants was clear: Jobs traditionally thought of as blue-collar were in demand, while white-collar employees experienced layoff after layoff, a correction against the pandemic-era over hiring,” Radhika Duggal, chief marketing officer at Super.com, a financial services company, said in an email.
She also said she believes companies will continue to be far more efficient with hiring expenses (for example, white-collar salaries will not see the growth they saw during the pandemic).
Further, she predicted companies that cut professional staff to the bone in 2023 will revert to hiring, decreasing unemployment and under-employment among white-collar workers.
4. A Mild Recession May Occur
Rumors of a recession swirled throughout 2023, but will we enter one?
“While several are calling for a mild recession, many economists are predicting a soft landing and no recession. I believe that we will experience a mild recession in 2024,” Hess said.
But what exactly will trigger a recession?
According to the National Bureau of Economic Research (NBER) Business Cycle Dating Committee, which decides when a recession occurs, a recession is “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
While no fixed rules define a “significant decline” or the required timeline, the committee considers industrial production, real personal consumption expenditures, nonfarm payrolls and real personal income minus government transfers as key factors.
5. High Housing Prices Will Hold
Many are waiting for the housing market to improve, but 2024 might not be the year.
“Now that interest rates have risen; many homeowners have little motivation to move. They don’t want to give up their 3% to 4% mortgage rate for the current rates. Thus, they won’t be putting their houses up for sale,” Hess said.
[READ: Things to Watch When Interest Rates Go Up.]
Prices have also remained high due to the supply shortage. As of December 2023, the U.S. housing inventory sat at 714,176 active listings, compared to more than 1 million in the years leading up to the pandemic.
“Even if interest rates drop in 2024, they probably won’t go down enough to prompt people to give up their current mortgage rates. As a result, I don’t see the housing market improving anytime soon,” Hess said.
6. Low- to Moderate-Income Consumers Will Feel Squeezed
There are also signs that low-to-moderate-income Americans are likely to feel squeezed in 2024 and will have less discretionary income to spend, Duggal said.
“Inflation wreaked havoc on household budgets in 2023, pandemic-era stimulus checks have run out and the need to pay back high-interest credit card debt, which is at an all-time high, is putting pressure on everyday Americans’ pocketbooks,” she added.
[Read: How to Create and Maintain a Family Budget.]
As a result, we may also see debt and default rates continue to increase, especially with the myriad credit products available on the market.
“We can pay with nonbanks like ApplePay, Amazon, and Buy Now, Pay Later. We can buy things easier than ever. And we can accumulate debt in more ways than ever,” Victor Wang, the CEO of financial services company Stockpile, said in an email.
The Bottom Line on Personal Finance for 2024
Although 2024 is looking to be less volatile than 2023, we’re still not past the post-pandemic corrections.
While inflation and interest rates are likely to come down, ripple effects may still be felt in the housing market, job market and budgets of many American households.
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Personal Finance Predictions for 2024 originally appeared on usnews.com
