Yahoo Finance 6 Money Lessons From 2023 To Take Into 2024
Finances in 2023 represented a roller coaster ride, filled with uncertainty around every turn, climbing interest rates and plummeting markets. But if there’s one thing such a roller coaster can teach us, it’s how to get comfortable with discomfort.
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For all the stress it created, 2023 also taught many important financial lessons. If you can take these lessons into 2024, you can begin building a stronger financial future and create a safety net to help you handle whatever surprises the new year may bring.
Free Up Liquid Cash for Emergencies
Financial expert Suze Orman emphasized the importance of building an emergency savings account in a prior GOBankingRates article. Even if you can only save $100 per month, you should focus on using that money to build up cash reserves. Putting money into savings even if you have debt can help change your money mindset. “You should absolutely put it in an emergency savings account,” Orman said. “Because even if you pay down your credit card debt, you then don’t have any money.”
With interest rates higher than they’ve been in quite a while, you can invest in a high-yield online savings account. You’ll still earn a good return of 5% or more, without worrying about tying up that money in CDs, stocks, or other investments that may not have as much liquidity.
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Choose a Reliable Bank
When you set aside cash, you’ll want to make sure it’s safe. The collapse of Silicon Valley Bank, Signature Bank, and several others in 2023 caused many people to look closely at where they stash their savings, investments, and everyday spending money.
Look for a bank insured by the FDIC or a credit union insured by the NCUA up to the maximum allowable limits. If you’re choosing an online financial services company — often known for no fees, high APYs on savings, and plenty of perks — make sure it’s backed by a federally insured bank.
Beyond FDIC insurance, look for a bank with a large, fee-free ATM network, customer service by phone or chat with generous hours, and local branches (if in-person banking is important to you).
Leverage High Interest Rates To Work For You — Not Against You
This past year taught us that compound interest is wonderful when you can collect it, but dangerous to your financial well-being if you are paying it. With the U.S. Federal Reserve raising interest rates four times in 2023, any debt you are carrying costs more.
“On average, it costs about $50 more per month this year versus last to carry a $1,000 balance,” Arijit Roy — executive vice president, head of consumer segment and solutions at the U.S. Bank in Chicago — told Fox Business.
You can try to mitigate this damage by calling your credit card companies to see if they will lower your rates. If you’ve been an excellent customer and have a high credit score, they might oblige.
You can also transfer balances to a credit card with a 0% introductory APR. Many of these offers are still available for consumers with a high credit score. Then, work to pay down that debt as quickly as possible during the introductory period.
Enter 2024 With as Little Debt as Possible
Even if you’ve been financially responsible all year, the December holidays may undo some of the progress you’ve made toward saving, investing, or paying down debt. Get a jump start on building good financial habits in 2024 by sticking to a holiday budget.
Even as credit card debt tops $1 trillion, almost all shoppers (96%) said they expect to overspend this season, according to a TD Bank survey shared by Kennedy Reynolds, chief education officer at the Acorns investing app.
“Avoid being another statistic by sticking to your budget,” Reynolds said. “This will keep you from impulse buying, especially during holiday sale days.”
She offered these tips: “Determine your overall gifting budget. Then, make a list of who you’ll be gifting this year. Allocate a budget for each person and look for ways to save.”
She suggested handmade gifts, taking advantage of seasonal deals, or looking for ways you can earn cash back or bonus investments — like those that come with the Mighty Oak debit card when you shop at more than 15,000 select retailers.
Prioritize Spending That Matters to You
For many people, 2023 was the year of spending. Personal consumption expenditures rose 3.4% between September 2022 and September 2023, according to statistics from WhiteHouse.gov.
Although fears of a recession loomed, consumers bolstered the economy by continuing to splurge. Many of those purchases were experiential, statistics show. Mastercard’s Travel Industry Trends Report, detailed by Forbes, found that consumers continued to spend on “entertainment, food, and experiences.”
While creating memories and experiences are important, we often spend money we don’t have to without realizing it. In an inflationary economy, losing track of things like automated subscriptions or quick trips to the convenience store can spell financial trouble.
“Life is busy, and it’s easy to miss unnecessary subscriptions, or small spending on your card,” Reynolds said. “Keep an eye on your bank and credit statements weekly or monthly and check your emails for order notifications and subscriptions. Cancel unneeded subscriptions and invest that money in your future instead.”
Taking those steps will free up cash — not just for saving and paying down debt, but for paying toward things and experiences that really matter to you.
Visualize What You Want Your Financial Life To Look Like in 2024
The new year often represents a time for personal reflection and goal setting. Make sure you focus some of that introspection on your finances. Whether you are dealing with “money dysmorphia,” which is a disconnect between your actual financial situation and your actions, or struggling with student loan debt, the new year is a good time to face that reality and create a plan.
A little creative visualization can go a long way when it comes to setting goals, according to Reynolds. “Imagine New Year’s Eve next year,” she said. “How do you want to feel about your financial life?”
Once you have pinpointed that feeling, whether it is financial security or full-fledged financial independence, start taking action to make it happen. “Automate your saving and investing now so you can reach your goals in the background of life,” Reynolds concluded.
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This article originally appeared on GOBankingRates.com: 6 Money Lessons From 2023 To Take Into 2024
