Use These 3 Financial Tips By 2024, Says Economist

By 2024, consumers should “spare” their budgets, pay off debt and save money, where possible, to improve their personal finances, Dana Peterson, chief economist at the Conference Board, said Thursday at the CNBC’s Your Money event.

This “three-point action plan” is important for households because there is “a high risk of recession” in 2024, likely in the first half of the year, Peterson said.

However, this recession would probably not last long: it would end during the second half of the year, she estimated.

Consumers can “save” by reviewing their weekly budget and reducing spending when possible, Peterson said.

This could include purchasing name-brand rather than name-brand items at the grocery store or clothing retailers, or switching to different types of entertainment, such as streaming movies at home instead of going to the cinema, for example, she added.

Pandemic-era inflation has eaten into household budgets at the fastest pace in 40 years. Even though it has declined significantly from its summer 2022 peak, inflation likely won’t fully return to its target level around 2% until next year, Peterson said.

“Everything, pretty much, is very expensive,” she said.

The Federal Reserve has aggressively raised interest rates to curb inflation. This has dramatically increased borrowing costs for households, from mortgages to car loans to student loans to credit card debt.

For example, average credit card rates – called the annual percentage rate or APR – are at all-time highs, above 20%.

Put any extra money toward paying down debt, Peterson said. Financial experts generally recommend prioritizing debts with the highest interest rate and paying bills on time and in full each month, if possible.

Even if consumers don’t have much disposable income to save, “every dollar counts,” Peterson said.

For those who have a 401(k) plan at work, financial advisors typically recommend first saving enough to get the full company match, which is essentially free money.

Next, consumers might consider building an emergency fund, a health savings account (if they have access to it at work), or an individual retirement account, for example. (However, those with high-interest loans should generally prioritize paying off that debt after saving enough for their 401(k) match, experts say.)

One benefit of high interest rates: Savers are getting higher interest rates on their cash than they’ve seen in decades.