Money Management

Interest rates are high and wages haven’t kept pace with inflation. Keep reading to learn how you can cope in 2024. 

I can hardly believe we’re already in 2024 — it feels like a science fiction year. It’s not likely that we’ll be able to buy flying cars or jetpacks this year, but we will be uniquely positioned to make major improvements to our personal finances.

I spent the last few years using the following strategies and managed to completely turn my finances around — now, in 2024, it’s your turn. Here’s what to focus on this year.

Earn interest on your savings

There has never been a better time to have money saved, thanks to a combination of a higher federal funds rate and banking technology. To combat the highest inflation in 40 years, the Federal Reserve raised interest rates 11 times between 2022 and 2023, and while the federal funds rate doesn’t directly inform consumer interest rates, they are linked. Banks have raised rates on deposit accounts, and you can find APYs that would’ve been unheard of not long ago. But they won’t last (when the Fed lowers rates, expect banks to follow suit).

If you’ve got money in the bank and aren’t earning at least 4% APY on it, focus on finding a new home for that cash now. You’ll be joining the 31% of Americans surveyed by The Ascent about savings — that’s a pretty low number of us who are taking advantage of higher APYs. Opening a new savings account with an online bank (they’re offering the best rates, thanks to having no overhead costs to maintain physical branches) is pretty darn easy, and worth it. I earned over $1,000 on the cash I had in my high-yield savings account in 2023. You might really like being with an online bank — they offer great mobile apps and fun features to make saving easier.

And don’t neglect the less-discussed types of interest-earning accounts if they might work for your finances! A certificate of deposit (CD) could be a fabulous choice if you’re comfortable locking up your money for a period in exchange for a locked-in APY that won’t fall during your term. And if you need easier access to your money (say, by checks or a debit card), a money market account could be perfect for you.

Pay down debt

That higher federal funds rate has a downside for folks who have variable-interest debt, like that on a credit card or a home equity line of credit (HELOC). Financial institutions have made it more expensive to borrow money from them, and if you’ve got debt already, the rate on it may have climbed recently. As such, it’s a great time to get out from under it, if you can.

This isn’t where I tell you to pay off debt by giving up your lattes and perhaps your will to live. But I will tell you that it’s a great time to increase your pay. You could do this by asking for a raise at work (more about work below) or taking on a side hustle. I originally started freelancing in 2022 as a means to pay off debt, and to my utter shock, I loved it and became a full-time freelancer a year ago.

But a side gig for you doesn’t have to be an all-consuming thing. You might drive for a ride-hailing service, or consider doing takeout or grocery delivery — you can do these jobs on your own schedule, as much or as little as you want. Money earned won’t already be committed to your bills, so you can roll it right toward debt payoff (less taxes, that is). Watching your debt balance go down feels amazing and you’ll free up more of your income to save, invest, or spend on what you enjoy.

Embrace your work options

Finally, I recommend really digging into all your options for work in 2024. Despite all the employer saber rattling (“back to the office or else!”) since 2021, remote work isn’t going the way of the dodo. American workers like flexibility, and many of us have vowed that we won’t work for an employer that doesn’t offer the opportunity to work remotely at least some of the time. Remote work saves you money on gas and commuting, your wardrobe, and perhaps also food costs. Brown-bagging it when you schlep to an office every day may be cheap, but being trapped in a fluorescent-lit cubicle day in and day out can make you yearn for lunch outside the office.

So consider how your employment situation is working for you this year. If you feel underpaid, dread going to work, or just feel stuck, maybe this is the year you change jobs — or even careers. Changing jobs is likely the most effective way to see appreciable wage growth, too — especially if your wages haven’t grown with inflation. You might also want to consider freelancing — when I became a full-time freelancer last year, it led to the kind of financial and personal freedom I’ve never experienced before.

I especially recommend evaluating your work options if you’re a woman. We’re already at a financial disadvantage thanks to the gender pay gap and all sorts of socioeconomic factors, and no one will advocate for us — we have to do it ourselves.

2024 already — kinda wild, right? Focus on the above strategies to position yourself for financial success in this year’s economic landscape.

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Need tax help this year? Read on to make sure you don’t hire the wrong person for the job. 

Like it or not, we’re slowly but surely reaching the point where it’s time to start thinking about taxes. Tax returns for 2023 aren’t due until April 15 this year. But the IRS recently announced that it will begin accepting tax returns as early as Jan. 29. So the sooner you file your taxes, the sooner any refund you’re due is likely to hit your checking account.

When it comes to filing taxes, you have a choice. You could opt to go it alone, or you could hire professional help.

The latter is a move you should especially consider if your tax situation is complicated. It’s one thing if the only income you have to report is wages listed on a W-2. But if you were self-employed in 2023, that opens up a world of possible deductions and rules to follow. So in a situation like that, getting help is something to strongly consider.

Mark Steber, Chief Tax Information Officer at Jackson Hewitt Tax Services, says, “I almost always recommend people work with a tax professional rather than risk filing a tax return by themselves. But, unfortunately, there are a lot of scammers out there because it’s not a regulated market.”

As such, if you’re going to get tax help this year, make sure to be on the lookout for these red flags.

1. Your tax preparer doesn’t have the right credentials

It doesn’t take much to whip up a glossy sign that says “tax help,” post it on a door, and offer up assistance to prospective clients. But Steber insists that it’s important to make sure any tax professional you work with has a PTIN, or Preparer Tax Identification Number. “If they don’t have any credentials that you can verify, this is something to watch out for,” he insists.

2. Your tax preparer can’t give you an estimate of what your filing will cost

The cost of filing a tax return for one person might differ from the cost of filing a return for a different client. And that’s understandable, as there may be a different level of work involved.

But all told, Steber insists that your tax preparer should be able to give you an estimate or price for doing your taxes upfront so you know what number to budget for. “A good tax professional has set prices based on the complexity of your return,” he explains.

3. Your tax preparer calculates their fee as a percentage of your refund

Some tax preparers might tell you that the amount you’ll be charged for their services will be calculated as a percentage of your tax refund. This, says Steber, is the sort of arrangement you’ll want to run away from. “It’s just not the truth that every single tax-payer is going to get a refund, and if someone tells you otherwise, watch out,” he says.

Not only can a tax preparer not guarantee you a refund, but you don’t want that person to be too loose with deductions to pad your refund and score a higher fee. If the IRS audits you and you’re penalized for underpaying your taxes, that fee is going to be your financial responsibility, not that of your tax preparer.

4. Your tax preparer won’t sign your return

A legitimate tax preparer will sign any return they work on. If yours won’t, Steber says, it’s a major red flag. You shouldn’t agree to work with anyone who won’t take this basic step.

Getting help with your taxes could make the process of filing a return much smoother. It could also, in some cases, help you avoid an audit and potentially eke out more tax-related savings. But if you’re going to hire a professional, it’s important to find the right person for the job. And that means steering clear of these red flags every step of the way.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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You won’t get the best CD rate out there if you open a CD with a 60-month term. Read on to see why I’m planning to go this route anyway. 

The start of a new year is a good time to think about the different financial moves you may want to make in the near term. And one of mine is putting money into a CD while CD rates are strong.

I specifically plan to open a 5-year CD soon, even though rates on them generally aren’t as good as the rates you can find for a shorter-term CD right now. But there’s a reason I have my eyes set on a 5-year CD.

I want to lock in a great CD rate while I can

A big reason CDs — and savings accounts, for that matter — are paying so generously these days is due to the string of interest rate hikes implemented by the Federal Reserve in 2022 and 2023. But as inflation continues to cool, there’s a good chance the Fed will start to cut rates.

That may happen to some degree in 2024. And it’s even more likely to happen in the years that follow, since interest rates today are quite high. But while lower interest rates are a good thing for borrowers, they’re less great for savers, since it means you don’t get to earn as much on the money you have in the bank.

That’s precisely why I’m looking to open a 5-year CD now. I expect rates to fall quite a bit in the coming years. If I lock in an attractive interest rate now, I won’t have to worry about what rates look like in two or three years.

Now to be clear, if you’re looking for the best interest rate on a CD in general, you’re probably better off sticking to a shorter-term CD. A lot of banks are offering better rates on shorter-term CDs because, like me, they anticipate Fed rate cuts and don’t want to offer the best rates for longer-term products.

Case in point: At Capital One, you can get a rate of 5.25% on a 1-year CD. For a 5-year CD, you’re looking at 4.10%. (At the time of this writing)

You might think the 1-year CD is a better bet. But remember, in a year from now, a 1-year CD might only be paying 3.75%. A year after that, it might only be paying 2.25%. And a year after that, 1-year CD rates might be down to under 2%.

Of course, this isn’t a given. I don’t have a crystal ball and I can’t predict with any amount of certainty exactly what CD rates will look like in the coming years.

The point, however, is that I expect CDs to start paying less as early as some point during the current year. So I want to lock in a great rate on a longer-term CD while it’s available.

It’s not a very big risk for me

For some people, putting money into a 5-year CD can be a risky move. If you cash out a CD early, you risk costly penalties. And a lot can happen in five years. You might end up needing money for a move, or a new car. So it’s important to make sure you can really afford to commit to a 60-month CD before opening one.

That’s something I’ve already thought through, and I’m not worried. I have several different savings accounts, one of which is my general emergency fund. That savings account has enough cash to cover about a year of essential expenses.

I have a separate account for home and car repairs, since the cost of those can be substantial. And then I have another account for expenses like vacations, furniture, and so forth, which have the potential to be near-term expenses.

The money I’m looking to put into a 5-year CD is separate from all of this. And because of that, I don’t feel that making that long a commitment is too risky for me.

All told, I think it’s a great time to lock in a 5-year CD. If you’re interested in going this route, shop around and see what rates different banks are offering.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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