2023 was a frustrating year for many Americans, with high inflation and rising interest rates. Many people depleted their savings and felt like they were falling behind in their personal finances. Economic experts called this the “vibecession” — even though America was not in a recession, the economy’s “vibes” were bad. People felt like the economy was terrible, even though unemployment was low and people were getting wage increases.
There’s good news for 2024: This vibecession seems to be ending. Many Americans are likely to feel a bit richer in 2024 because of falling prices and a strong job market. Let’s look at a few reasons why the economy could be getting better (and feeling better), and what money moves you can make for your personal finances in 2024.
Is the economy getting better in 2024?
People hate high inflation because it makes them feel poorer. But with the Fed likely to cut interest rates in 2024, there are signs that inflation is getting better. According to analysis from Bloomberg columnist Conor Sen, there are a few reasons why Americans’ economic mood is likely to improve in 2024.
Food has gotten cheaper
One cause for alarm during 2022 and early 2023 was the sky-high price of food at the grocery store. Remember how expensive eggs used to be? Fortunately, food inflation is down near 3%, compared to 11% in 2022.
Gas prices are down
Between June 2022 and December 2023, retail gas prices decreased by about 40%. For Americans who live paycheck to paycheck, high prices at the pump make it harder to have any money left at the end of the month. Lower gas prices will help keep more money in the bank accounts of millions of American families.
Workers are getting paid better
As of December 2023, according to the Bureau of Labor Statistics, the U.S. unemployment rate was 3.7%. Bloomberg’s analysis finds that wages are rising faster than inflation — meaning that many workers will have more money in their pockets and enjoy better buying power. Even if prices are higher, your paycheck is (ideally) getting bigger, too.
The combination of low inflation, low unemployment, and strong wage growth is known as a “Goldilocks economy” or a “soft landing.” When working people can see more take-home pay in their paychecks without losing it to rising prices, that makes it possible for more people to save, invest, and build wealth.
What to do if you’re making more money in 2024
Are you benefiting from a strong economy and the end of the “vibecession”? If you have a good job and your wages have increased, here are a few ideas for some smart financial moves you can make in 2024.
Pay off high-interest debt (like credit card debt)
Many people who have good jobs and good incomes might still be struggling with credit card debt. If you got a pay raise in 2024, or if you are finding some extra cash in your bank account at the end of the month, make a plan to pay off your credit card debt.
One good way to do this could be a balance transfer credit card. If you have a good enough credit score to qualify, you can open a new credit card with a 0% introductory APR and transfer your credit card debt to that new card. This helps you pay off debt faster, at 0% interest for a certain amount of time.
Open a high-yield savings account
Another smart money move in 2024 is to open a high-yield savings account. Ideally, you should have three to six months of living expenses saved in a bank account in case of emergencies. 2024 could be a good year to replenish your emergency savings. And the best high-yield savings accounts are paying over 5.00% APY (as of Jan. 14, 2024).
Save more money for retirement
If you get a pay raise in 2024, you should also try to increase your retirement savings. Put an extra 1% or 2% of your salary into your 401(k) — at the very least, make sure you’re getting the full amount of any 401(k) match that your employer offers.
You can also save money for retirement with a traditional IRA or Roth IRA. Opening an IRA can let you save an extra $7,000 for retirement in 2024, or $8,000 if you’re age 50 or over.
Bottom line: No one can predict the future, and the problems of the “vibecession” could come back. But if you suddenly seem to have more money left over at the end of the month, if you’re getting a pay raise or promotion in 2024, that’s a good sign that the American economy is growing and thriving. Make some smart moves now to take advantage of a healthy economy — and improve your financial wellness.
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