Financial breaks, higher bank accounts and lower household costs are predicted for Alabamians this year. That’s according to a new study from the financial website MarketWatch Guides.
Experts studied previous economic developments to predict a list of Financial Trends To Watch in 2024 and What They Mean for You. This includes monitoring interest and inflation rates, student loan debt and credit card debt. Researchers say the results show this year is expected to bring positive change to the economy and a chance for Alabamians to save more and spend less.
David Straughan works at MarketWatch as a senior finance journalist and researcher. He said the Federal Funds Rate, a rate controlled by the Federal Open Market Committee at which lenders borrow money to finance banking and borrowing, is predicted to lower this year. This means loan rates and payments for Alabamians would also decrease.
“A lower [Federal] Funds Rate would mean lower interest rates on consumer lending rates, like credit cards and mortgages and auto loans. That means cheaper financing for people who need it,” he explained. “If rates drop significantly, that also means that people who took super high interest loans in the last few years with have a chance to save money by refinancing to lower rates.”
Straughan said another helpful shift is the decreasing inflation rates. Peaking at 9% in 2022, the inflation rate is expected to drop to 2.5% this year. This prediction comes from nine of the country’s largest financial institutions. Straughan said the recent raised inflation rates haven’t just affected the price of products, they have also made it harder for people to plan their budgets.
“You may have decided to buy a car that you had written the budget for a year or two ago, but when the cost of food and medicine and all those things goes up, all of a sudden that purchase might not really fit in your new budget,” he explained.
Straughan said this can lead to people struggling to make ends meet, even if they haven’t changed a lot about their lifestyle habits. He explained having a steady inflation rate makes finances more predictable for people.
Another big takeaway is the amount of student loan debt, which has now reached $1.6 trillion, according to MarketWatch Guides. Researchers report student loan forgiveness may continue into this year, which means individuals would have lowered rates, or no debt at all. Straughan said the wiping of student debt could help in several ways.
“That translates into a little bit more room in the budget to save money, invest money or just have access to more credit,” Straughan explained. “Without loans as part of those debt obligations, people might have the ability to meet the requirements for mortgages and auto loans.”
MarketWatch Guides reports the declining Federal Funds Rate and inflation rates are notable factors this year, but complications may arise from the massive amount of credit card debt in America. The outlet found household debt increased by 4.8% from 2022 to 2023. However, credit card debt grew by 16.6% during this period, according to researchers. Straughan explained that household debt comes from paying off property, but credit card debt presents different circumstances.
“Mortgages and auto loan debts are backed by collateral in the form of real property. Credit card debt is not backed up by anything, and it only continues to grow as people just continue making minimum payments,” he said. “The big issue with this is that defaults could increase and that could affect the overall banking situation.”
Straughan said this won’t create a crisis in the economy, but it’s not a healthy trend to continue in the new year. Despite the unknowns, there are ways to help manage an individual’s finances. He recommended seeing a financial professional to get legitimate advice and guidance. Straughan also said seeing a financial planner or a credit counseling program can help an individual feel less alone and more in charge of their finances.
To read more on the Financial Trends To Watch in 2024 and What They Mean for You report from MarketWatch Guides, click here.
