Financial Trends for 2024

6 Personal Finance Trends in 2024

As you evaluate your financial situation and objectives, here are some of the major trends to keep in mind.

1. Interest Rates Remain High

At the end of last year, economists predicted that inflation would ease enough for the Federal Reserve to start lowering its federal funds rate around the middle of the year. But the inflation rate has been stubborn through the first few months of the year, and while there's still hope that rate cuts will happen this year, the outlook is more uncertain.

The federal funds rate is designed to help manage consumer spending, which is a major factor in economic growth. When the rate is high, the prime rate, which lenders use to determine interest rates on various loans and credit cards, follows suit, helping to curb spending.

As a result, credit card interest rates reached a record high in the third quarter of 2023, and while they're lower now, the difference is negligible. Inflation also influences the yields for Treasury bills, which directly influence mortgage rates. The average interest rate for a 30-year fixed-rate mortgage continued to be above 7% as of May 2024, making homeownership unaffordable for many homebuyers.

2. Student Loan Changes Continue

During its first term, the Biden administration has canceled nearly $160 billion in federal student loan debt for almost 4.6 million borrowers. That's roughly 10% of the total amount Americans currently owe in student loans, according to the Federal Reserve Bank of New York.

In April, President Biden announced plans for a new student loan forgiveness plan after his first attempt at widespread forgiveness was struck down by the U.S. Supreme Court. The new plan is expected to offer relief to 30 million borrowers, but is still in the early stages of the rulemaking process, so it's unclear whether it will go into effect.

In the meantime, the administration's new SAVE income-driven repayment plan will get some new features in July 2024, including payments as low as 5% of a borrower's discretionary income and forgiveness in as little as 10 years—half the 20-year minimum for other income-driven plans. That measure is also the target of lawsuits by Republican critics, however, so stay tuned.

3. Household Debt Reaches Record Highs

Americans owe $17.1 trillion in total consumer debt, according to the latest data from Experian, which is a record high. The biggest increases came from home equity loans, credit cards and personal loans.

In particular, people with poor credit saw their debt balances grow the most from 2022 to 2023, with a blistering 20.5% increase. Generation Z and millennials have been hit the hardest, while baby boomers and the Silent Generation saw decreases in their average balances.

These are all indicators that younger consumers are relying more on debt to manage their expenses in a time of high inflation, and high interest rates aren't helping. While there's not much individuals can do about macroeconomic conditions, make sure you're taking steps to minimize costs when possible.

4. Markets Remain Volatile

Stock prices are generally volatile in the short term, but during the first few months of 2024, returns soared on the expectation that the economy was in for a soft landing with inflation, essentially meaning that the Federal Reserve can meet its target inflation rate without causing an economic recession.

The strides the tech industry has made with artificial intelligence also spurred optimism about revolutionary business opportunities. But stubborn inflation and weaker-than-expected jobs growth resulted in a major setback in April.

While the stock market has recovered somewhat, and the year-to-date return is about 10% through mid-May, investors should continue to expect a bumpy ride, especially during an election year, which creates its own brand of uncertainty.

5. Unemployment Rises Slightly

In 2023, the unemployment rate in the U.S. reached its lowest point in more than five decades, hitting 3.4%. It's started to tick up this year, however, reaching 3.9% in April, according to the U.S. Bureau of Labor Statistics.

Experts say that a loosening job market is necessary to help pave the way for lower inflation, resulting in the Federal Reserve easing its policy of high interest rates. But layoffs can be devastating for individual workers and families, so it's important to take steps to address your unemployment situation promptly to minimize the damage.

6. Loud Budgeting Goes Viral

Social media has long been a source of various cultural trends, and in early 2024, TikTok influencers set their sights on budgeting.

The new trend, called loud budgeting, is simple: Save money by setting boundaries for social situations. If a friend invites you to get dinner or to see a movie—or, in extreme cases, to their destination wedding—and the expense doesn't fit in your budget, decline the offer and tell them why.

For some people, this form of communication may already be common practice. But others may feel pressured to spend money when they can't afford to or when it conflicts with their financial goals.

Financial influencers hope that loud budgeting going viral could help encourage people to be more comfortable with having potentially difficult conversations and sharing their financial goals with their friends and family members.

How to Improve Your Finances This Year

Whether you're still working on your financial resolutions for 2024 or you're just trying to get by, here are some steps you can take to improve your financial situation through the rest of the year:

• Start a budget. If you don't already have one, now is an excellent time to make a budget for your monthly expenses. You can start by looking at your income and expenses over the past few months to get an idea of whether you're living within your means. You can also categorize your expenses for a more detailed view of where your money is going. Then, evaluate different budgeting plans to determine which one's best for you.
• Take advantage of high savings rates. While loan and credit card rates are still high, the same is true for interest rates on savings products, particularly high-yield savings accounts and certificates of deposit. If you can afford to set aside some cash, consider your options to take advantage of a high and safe return on your savings.
• Check your credit. Your credit score is a crucial component of a financial plan, especially when it comes to qualifying for low interest rates. Check your FICO^® Score^☉ and Experian credit report for free to get an idea of where you stand and identify different steps you can take to improve your credit.
• Tackle high-interest debt. Debt payments can put a strain on your budget, especially if it's high-interest credit card debt. If you're carrying a balance on one or more credit cards, evaluate your debt situation and develop a strategy to pay down your credit card debt as quickly as possible to give yourself some more breathing room.
• Evaluate your investment strategy. If you have a retirement plan or other long-term investment strategy, evaluate your current approach and consider adjustments as needed. This may include raising or lowering how much you're investing, adjusting your portfolio's holdings to align better with your goals or working with a financial advisor to get some expert personalized guidance.

Ultimately, the steps you take to improve your finances this year will depend on your current situation and your financial goals. As you consider these and other steps, focus on what makes the most sense for you.

The Bottom Line

So far in 2024, some financial trends have been cause for disappointment among consumers and experts alike, while others have created room for optimism about the future. Although there are several factors that impact your finances that are outside of your control, keeping up with financial trends can help you plan for the future and make smart financial decisions to make the most of what you have.