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- #45: How's The Economy? Not Good
#45: How's The Economy? Not Good
Here's What I Would Do This Year
With the Christmas season over and the new year started, it’s a good time to think about your finances for 2024.
You probably know about the viral Stanley cup. Stanley just released a limited Valentines edition at Target. What’s crazy is that people lined up for it early in the morning to grab one when Target opened.
I posted this on Twitter/X.
It makes me wonder what the latest data is telling us about the current state of people’s personal finances so I’m here to share some eye-opening data to hopefully convince readers to be more intentional with their finances this year!
Heads up, this is going to be a long one..
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Let’s Start From The Top (Macroeconomics)
Inflation
Since June 2023, the annual inflation rate has been hovering between 3% to 4%.
In November 2023, the annual inflation rate slowed to 3.1%
Keep in mind that annual inflation rate is the percentage change compared to the same month of last year so this is still an increase (as per usual) but at a lower rate than the previous month year-over-year.
While energy costs have gone down, things like food, shelter, new vehicles, and apparel increased at a lower rate. Luckily, the used car market has seen prices go down again.
I expect inflation to continue its downward trend because everyone is just waiting for a recession at this point. What the trigger will be, who knows.
Consumer Debt
The US hit a “milestone” of a TRILLION dollars of consumer debt back in July 2023.
As of December 27, 2023, consumer debt was at $1,029,292,500,000!
Since April 2021, which was the lowest in recent history, consumer debt has increased from $736 billion to over $1 trillion.
Now The Bottom (Microeconomics)
Retirement Savings
The median retirement savings for someone under 35 in 2022 was $18,880. The mean for this same group was $49,127. A lower median than mean tells us that there are people with more than $18,880 in retirement savings that skew the data like Peter Thiel.
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Personal Savings Rate
This metric measures the savings from disposable income.
It’s pretty darn low at 4.1%. In times of recession, the personal savings rate increases because people cut back on spending.
Other Shocking Findings
In 2020, the Federal Reserve reported that only 64% of Americans had enough money to cover a $400 emergency.
In February 2023, a report by LendingClub said that 60% of US adults live paycheck to paycheck. Even worse is that of those living paycheck to paycheck, 40% are considered HIGH INCOME earners.
So What Should You Do?
If I was completely new to personal finance, here’s what I would do:
Think about your current expenses like rent/mortgage, food, car, utilities, etc. and then come up with a budget on a napkin. For example, let’s say your rent is $1,800. So my total housing budget which will include utilities and internet will be around $2,000 because my utilities range from $80 to $150 and my internet is always at $50. Do the same with the other expense categories. Once you complete all your expense category budget, let’s see the actual numbers doing step 2.
I would download Empower or Monarch Money and link my bank accounts there. These applications will aggregate your total spending and you’ll be able to review your expenses by month and year. Review all the transactions and label them in the correct category. Once you do that, review the data! See how much you’re spending on each category.
After reviewing your finances, come up with a plan to reduce your actual spending (if it’s more than you budgeted) or reallocate your spending if you realized your initial budget isn’t feasible. Not only is this exercise a great way to understand your true spending, but it also allows you to be more mindful of your actual spending moving forward.
If personal finance isn’t the only thing you want to work on this year, I created a Goal Tracker for myself (I upgraded from my Notes app) and I made it available for purchase. This tracker can help you organize AND track your goals like I’m doing.
Goals can be bucketed into different categories like Personal Finance, Career & Business, Personal Development, Health & Fitness, Social & Relationship, and Hobbies.
My HIGHLY Recommended Apps/Services
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