Money Management

We seem to have avoided a recession in 2023. Is a downturn in the cards for 2024? Read on to see why one expert insists that consumers need to prepare. 

If you look at the data, you’ll see that the U.S. economy seems to be in good shape. Unemployment is low, and during the third quarter of the year, the GDP (gross domestic product) rose 5.2% year over year, up from the 4.9% growth rate the U.S. Commerce Department initially projected.

In spite of that, not everyone is convinced that all is rosy. In fact, one big name in the financial world is continuing to warn consumers about a recession in the near term.

Is a recession in store for 2024?

JPMorgan Chase CEO Jamie Dimon issued a warning in late November with regard to the economy. “A lot of things out there are dangerous and inflationary. Be prepared,” he said at the 2023 New York Times DealBook Summit in New York. “Interest rates may go up and that might lead to recession.”

Now to be clear, this isn’t the first warning of this nature that Dimon has issued. He and other financial experts were quick to sound alarms about a potential 2023 recession when inflation started surging in 2022. But clearly, we’ve managed to get through the current year without a recession. And while 2023 isn’t over yet, things are unlikely to take a notable turn for the worse in the next 30 days.

Will things get worse in 2024, though? That’s the big wild card. Many experts are convinced that the Federal Reserve is done raising interest rate, and that inflation will continue to cool. But Dimon warns that things may not play out that way. And if inflation remains stubbornly high, additional interest rate hikes on the part of the Fed could be in the cards.

At this point, consumers are already struggling with high borrowing costs. So if borrowing becomes even more expensive, it could lead to a serious pullback in spending and result in a recession.

It’s good to prepare

Despite Dimon’s warning, there’s really no need to lose sleep over the idea of a 2024 recession. The economy is in solid shape right now, and things have the potential to stay that way for a long time. But one thing you should know is that the threat of a recession pretty much always exists. So it’s always a good idea to be prepared.

One of the best ways to do that is to equip yourself with a fully loaded emergency fund. Ideally, aim to have enough money in your savings account to cover at least three full months of essential expenses. That way, if you were to lose your job, you’d have a means of paying your bills without having to charge every last expense on a credit card.

If you’re not sure where the money for an emergency fund will come from, consider turning to the gig economy. Earning extra income could help you build cash reserves if your current paycheck doesn’t leave you much wiggle room for savings.

Another good bet is to grow and diversify your job-related skills. The more you know, the easier it may be to find a new job should your current one end up on the chopping block.

Finally, do your best to whittle down high-interest debt, like credit card balances. That’s a good thing to do in general. But during a recession, the last thing you’d want is extra debt payments hanging over your head.

Jamie Dimon has cautioned of a recession numerous times over the past few years, so it’s important to take his warnings with a grain of salt. But also take them to heart, because the reality is that a recession could hit sooner than expected. If you prepare accordingly, you’ll set yourself up to get through a downturn with just a bit less stress.

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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.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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Saving more money is a popular New Year’s resolution for many people. Check out the steps one writer plans to take to save over $20,000 in 2024. 

As someone who likes to be financially prepared, saving continues to be an important goal of mine. Before each year ends, I set a savings goal for the upcoming year and figure out how to make it happen.

Whether you’re looking to boost your emergency fund or are saving up for a big purchase, there are ways to set yourself up for success if you have a savings goal you’re trying to meet next year. Here’s how I plan to save more than $20,000 in 2024.

I determined a savings goal that works for me

First, I sat down and determined exactly how much I wanted to save next year. My savings goals for 2024 include boosting my existing emergency fund, saving for future travel costs, and preparing for several expected costs like vehicle registration fees, car insurance premiums, and prescription glasses and contacts purchases I plan to make later in the year.

I calculated each individual goal, then added everything up to determine a grand savings total. Once I know how much I want to save throughout the year, I can easily calculate how much I plan to contribute each month. Breaking bigger goals into more manageable ones works well for me, making the big goal feel less daunting.

My savings goal doesn’t include the money I plan to set aside for tax payments. I’ll do that math in the coming weeks. As a self-employed freelance writer, I make quarterly estimated tax payments, and I save up throughout the year for these payments.

I’ll put everything on autopilot

The next step is probably the No. 1 reason why I have been able to meet my savings goals each year. I automate the savings process, so there’s no extra work involved for me. It also ensures I don’t forget to save. In the coming weeks, I will set up automated savings contributions so money is automatically transferred from my checking account on a regular basis.

You can easily do this through your bank’s mobile app or website. You can decide how much and how often you make contributions. If you frequently forget to transfer extra cash to your savings account, this strategy may help you stay on track with your personal finance goals.

I prefer to spread out my contributions so it doesn’t feel as if all my money disappears at once. For me, a bi-weekly system works nicely. But for others, a weekly or once-a-month schedule may be more ideal. You have complete control over how you automate your savings.

I’ll stick to the plan and avoid making excuses

Since everything is set on autopilot, I don’t fall behind and can meet my goals by year’s end. But, of course, life happens. If I need to dip into my emergency fund to pay an unexpected bill, I will. That’s what the money is there for and that security provides great relief.

But I hold myself accountable when I feel like giving up. I don’t pause my automated contributions or pull from my emergency fund because I feel like going on a shopping spree. Staying determined and focusing on the end goal helps me stay on track as I save.

I’ll earn interest as I save

Saving more than $20,000 next year will be a big accomplishment. But in addition to the money I set aside, I’ll also earn interest. That means I’ll have even more money in the bank by year’s end. This is possible because I keep my savings in a bank account that earns interest. In 2023, I earned over $1,200 in savings account interest. Those interest payments add up fast!

If you plan to save money in 2024, that’s excellent news. I believe in you! Before you start saving, consider what bank account to use. Since most checking accounts don’t accrue interest, you’ll want to keep your savings elsewhere. A high-yield savings account is a great option, and annual percentage yields (APYs) on them are higher than usual thanks to Federal Reserve rate hikes in 2022 and 2023.

Check out our list of the best high-yield savings accounts to find the right one for your savings in 2024 and beyond.

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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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It’s the season of giving. Here’s why you may want to give away your vehicle this year. 

I’ve never donated a car before, but I’ve owned a few that looked as if they were donated to me. I once bought an old used car that I thought would last through graduate school, and then I’d get rid of it right after that. Ten years later, I was still driving it around.

At some point, I came to the conclusion that it was time to let it go and had I thought about it more, I would have considered donating to a charity. The car probably would have gotten more use from the charity than the amount I got for it at the dealership.

If you’ve got a vehicle you’re ready to part ways with, here are a few underrated benefits of giving your car to charity.

1.​ You can get a tax deduction

Donating your vehicle can be a win-win scenario: A charity gets a car, and you get a potential tax deduction. This might be especially beneficial if your car isn’t worth all that much. TurboTax says if you donate a vehicle that’s worth more than $500, but the charity sells it for less than that, you may still be able to claim a deduction of up to $500 when you file your tax return. Note that you must itemize your deductions on your return; if you take the standard deduction, you will not be able to deduct the car donation.

Make sure you don’t overestimate how much the vehicle is worth. For example, if you donate your car to a charity and it sells the car for $1,000, you can only claim how much it was sold for, regardless of how much it might actually be worth on the private market.

And if you’re claiming a vehicle donation deduction of more than $5,000, you’ll need a receipt from the charity proving that it sold for that amount. Be sure you review IRS rules and find the proper forms.

2. It feels good to be generous

While most of us don’t give things away just to get a psychological boost, doing so is an underrated benefit. The American Psychological Association says that research studies have shown that being generous “creates more interaction between the parts of the brain associated with processing social information and feeling pleasure.”

This might be especially true when you donate a vehicle to a cause you really care about, so spend some time thinking about what charity you want to help.

3. It’s a pain to sell the car yourself

Meeting strangers and trying to convince them to buy my car isn’t what I’d consider a fun Saturday. But everyone’s different, maybe you’ll like it.

Listing the car for sale online and trying to coordinate a time to meet up with potential buyers is going to take some time. You’ll likely have a few no-shows, which will waste more of your time, and by the time you find someone really interested in buying your car, you may have to sell it for less than you wanted.

Or, you could drive it to a charity’s offices and toss a staff member the keys. Just make sure to fill out the appropriate paperwork first. Then, you can chuck the keys.

A few things to remember before donating your car

Most charities that accept car donations will have a process in place for switching over the car title. It might be a good idea to call ahead and make sure your charity has the right paperwork to do this before you show up with your vehicle.

Also, it’ll be up to you to cancel your car insurance. Paying for insurance is one of those things that most people set up and then forget about, so make sure that you cancel your policy once you’re no longer driving the car.

And finally, get a receipt from the charity. It’ll make it much easier to list the donation on your tax return accurately.

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Unlike with a savings account, you can’t really have too much money in a brokerage account. But you can have money that doesn’t belong there. See why. 

Deciding where to put your money can be complicated. If you’re trying to balance where your funds should be for the best financial benefit, you may be wondering if it’s possible to have too much money in your brokerage account.

The reality is, unlike other kinds of financial accounts, you can’t really go wrong with a bigger brokerage account balance. However, while you want to put as much money into a brokerage account so you can invest in the market, you don’t want to end up with more risk than you should take on.

So while it’s not really a problem if you have a big brokerage account balance, it can be a problem to have money invested with a broker when it should be accomplishing some other task.

Here’s why you can’t have too much money in your brokerage account

Putting your money into a brokerage account allows you to invest in stocks. You can buy shares of individual companies if you want. Or you can opt to purchase exchange-traded funds (ETFs), which are traded like stocks but track the performance of a broader financial index (which can make them easier to invest in).

The stock market has historically been the best way for average people to invest because you can usually earn a pretty good return over time with minimal risk if you make smart investments, such as buying shares of an S&P 500 ETF that tracks the performance of around 500 large U.S. companies.

Since you can expect a good return over time if you make informed choices, you can’t really have too much money in your brokerage account. After all, you want as much money as possible earning the highest possible returns. This is different from, say, keeping your money in a high-yield savings account. If you put too much in savings, you end up capping your potential returns in a way that can hurt your wealth-building efforts because you can only earn so much on that cash, depending on your account’s APY.

You can have too much in a savings account

Say, for example, you have $50,000 in a brokerage account earning a 10% average annual return over 30 years. (This is in line with the stock market’s average annual return over the last 50 years.) That $50,000 would turn into $872,470 over 30 years. If you instead kept it in a high-yield savings account and earned just a 4% average annual return over that same time period, you’d end up with only $162,169.88. It’s also important to note that savings account APYs fluctuate, and it’s unlikely that you’ll see a 4% return over such a long period.

Since you don’t want to lose the chance to earn the returns needed to build wealth, you only want to put money in savings that you think you’ll need soon and can’t take the risk of investing in stocks. So your savings account balance could definitely be too big. A bigger brokerage account balance, though, would just end up allowing you to invest more over time, and you could end up a lot richer as a result.

Some money doesn’t belong in an investment account

While investing as much as possible in a brokerage account isn’t a bad thing, you could run into problems if you’re putting money into one when it is needed for something else.

Your emergency fund and any money you may need in the next three to five years should be in savings rather than in a brokerage account because you need to keep that money safe. You don’t have time to wait out a market downturn and recovery if you’ll need the cash to make a down payment on a home or fund another large purchase.

If you have money in a brokerage account that you can’t risk losing, you should move it to a savings account where it will be safe and accessible if you need it. But if you already have a fully-funded emergency fund, are saving for short-term and mid-range goals, and don’t have a lot of high-interest debt you need to pay back, then you’re good to go and can put as much of your spare cash into a brokerage account as possible without worrying about a large balance.

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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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