Heading into 2024, Middle-Income Americans Should Be Taking These Financial Steps
Inflation may be waning going into 2024, but that doesn’t mean all aspects of the economy are on the right track — nor that middle-income Americans are out of the woods yet when it comes to their own finances. In fact, Primerica’s recent white paper highlighted that inflation is […]
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Inflation may be waning going into 2024, but that doesn’t mean all aspects of the economy are on the right track — nor that middle-income Americans are out of the woods yet when it comes to their own finances.
In fact, Primerica’s recent white paper highlighted that inflation is continuing to impact the financial outlook of many middle-income families. That’s because even though it is on the decline, the disproportionate impact on middle-income Americans over the past 2.5 years has created a cumulative deficit of nearly $2,500 per household. That’s likely why Primerica’s most recent quarterly survey shows that middle-income Americans remain pessimistic about their financial situation, with more respondents rating their finances negatively than positively for the first time since 2020.
While the white paper noted that the financial outlook of these households is likely to improve in 2024, it also cautioned that progress will take time — anywhere from several more months to potentially several years. And as uncertainty over a recession still looms, it’s critical that middle-income families take steps to shore up their personal finances.
“This is a really good time to take stock of where you are financially and to make a plan for where you can cut back or delay expenses in order to build a little bit of a nest egg or add to your rainy day savings account,” said Amy Crews Cutts, Ph.D., CBE®, economic consultant to Primerica.
Looking to set yourself up for financial success in the new year? Here are a few simple steps to take:
Investing for the long term
The reality is no one actually knows what the economy or stock market will look like in 2024. That’s why the philosophy Howard Lashner, a PFS Investments Inc. Registered Representative with over 25 years of experience, has shared with his clients that it’s always a bad time to gamble on what’s going to happen in the next year, but it’s always a great time to invest if you’re investing long term.
“When we invest, we understand that there’s going to be good times and bad times,” Lashner said. “You’ve heard the expression buy low and sell high. In order to buy low and sell high, there’s got to be highs and there’s got to be lows.”
Lashner tells his clients to use the new year to check their investment allocations based on how close or far they are from retirement. Too often, he says, people are too conservative with their investments even when they have decades before they’re going to touch the money. His reminder for them: “Time in the market is always more important than timing the market,” he said.
Cut frivolous spending
With many middle-income Americans still feeling the pinch of inflation, cutting back on discretionary expenses can be a lifeline for getting monthly budgets in order, beginning to chip away at that pandemic-driven deficit and starting to build up savings accounts once again.
“I’m not saying you have to completely become a hermit and not enjoy life at all,” said Cutts. “It’s about looking for where you can trim some of those extra costs on things you don’t really need and whether you can put off major expenses, like buying a new car, for just a little while longer.”
“Some small splurges that a year or two ago might have cost just a few bucks have gone up sharply with inflation. A fast-food meal can now cost $15-$20, so cutting out a latte a week or packing lunch instead of buying out can make a sizable difference over a year without taking away all the fun,” Cutts added.
A full examination of your monthly budget should help you find at least a couple areas where you can easily cut back. When clients do find that extra money, Lashner tells them to invest it — pronto.
“I have helped hundreds of people retire; no one has ever complained to me because they have too much money,” he said. “Your future self will be grateful you’re making the sacrifice today.”
Get out of debt
Nothing is more crippling to personal finances than debt, especially when it stems from high-interest credit cards. Those rates are far higher today than they were just a few years ago, compounding the problem, Lashner notes.
“When I look at the high interest debt, I just think to myself, it’s just crushing them. That’s a huge amount of money down the road that you could have had,” he said.
It’s why Lashner is so passionate about working with clients, no matter how old they may be, on becoming debt-free, including paying off big-ticket items like mortgages earlier than planned.
“People will say there’s good debt, bad debt, but it’s just debt — a payment that you owe to somebody,” he said. “And it’s this quiet financial stress that people feel and sometimes they don’t even discuss, where a third of the paycheck goes to debt.”
Looking ahead to the new year, this combination of trying to pay off debt, balance your budget and invest more in retirement savings may make you want to consider one additional way to invest in your financial future: enlisting the help of a pro.
“If there is a recession, having somebody who can talk you through what that means for you personally can be really helpful,” said Cutts. “A financial professional can coach you through that and lend a critical hand to ensure you don’t fall through the financial cracks.”
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