Trends in 2024: Personal Finance

Consumers rode the finance roller coaster in 2023. High interest rates persisted, with an increasing number of Americans believing that inflation is the new normal and 57 percent of employees citing finances as a top cause of stress. 

In the new year, will Americans continue to simply survive, or will consumer spending tell a more optimistic story?

Wenyao Hu, Ph.D., CFA, assistant professor at the School of Management, shares his predictions.

“In response to inflation, the Federal Reserve has raised the federal funds rate since the beginning of this year, but forecasts, including those from Goldman Sachs, suggest a possible decrease in rates in 2024 if inflation subsides. This anticipated shift aims to prevent economic slowdowns, echoing the strategic rate cuts of 2019 amidst stable unemployment and inflation rates,” says Hu, who also advises investors to consider exploring alternative investment opportunities beyond quasi-safe assets. 

He also predicts that 2024 will be an interesting year to watch Gen Z spending and saving trends.

“Gen Z is leading a ‘soft saving’ trend, prioritizing quality of life and present experiences over traditional savings,” he says. “This means they’re more likely to spend money on things that bring immediate happiness and are open to investing in causes that reflect their values.”

For many Gen Zers, as well as others, there’s a good chance this means prioritizing spending on entertainment.

“The post-COVID era is witnessing a surge in the concert economy, exemplified by the success of Taylor Swift’s ‘The Eras Tour.’ This trend demonstrates a strong consumer appetite for in-person entertainment experiences, significantly boosting local economies,” says Hu, adding that Swift’s tour has had a remarkable economic impact, with each show grossing approximately $13 million and generating substantial consumer spending.

“This phenomenon is not just limited to ticket sales but also extends to related spending on travel, accommodation, dining, and retail, which significantly benefits local businesses,” he says.

Savvy investors could also have potential opportunities to capitalize on the concert economy. Hu notes that individuals can profit from the “concert economy trend” by investing in businesses related to the entertainment and events industry, such as companies in event management, ticketing platforms, hospitality, and transportation services that benefit from increased consumer spending around major events. Additionally, investing in stocks or funds related to the entertainment sector can be a strategic way to leverage this growing trend.

Hu also shares the following tips to improve personal finance habits in the new year:  

• Create a realistic budget that tracks your income and expenses. This helps to identify unnecessary expenses and provides a clear picture of where your money is going.
• Have savings set aside for unexpected expenses, such as medical emergencies, car repairs, or job loss. A good rule of thumb is to have at least three to six months’ worth of living expenses in an easily accessible savings account.
• Prioritize paying off high-interest debts, such as credit card balances or pay day loans. The interest on these debts can quickly add up, making it harder to save or invest your money effectively.
• Regularly evaluate your career and income prospects to align your investment strategy accordingly, ensuring a well-rounded approach to managing your financial portfolio.
• Consider your future income potential, or human capital, as a key asset in your financial planning. If your income is stable, you might safely invest more aggressively. On the other hand, with variable income, a cautious investment approach may balance overall risk. 
• Leverage financial technology by using apps and online tools for budgeting, tracking expenses, and managing investments. Many of these tools offer personalized insights based on your spending habits and financial goals, and they can automate savings or investment contributions.
• Continuously educate yourself on personal finance. Regularly read books, listen to podcasts, or follow finance blogs, which can provide valuable insights and strategies for managing your money more effectively.

This article is part of the “Trends in 2024” series, which features perspectives from New York Tech experts on emerging trends, tips, and predictions for what’s to come in the new year.