S4-12: Economy in 2024 and How to Prepare for a Job Loss

How to Prepare for a Job Loss

Meghan, the Family Finance Mom, held a Q&A session on Instagram to discuss personal finance and economic matters. They addressed the possibility of impending layoffs in 2024, advising on strategies to prepare for potential job loss such as expanding skills and networking. Meghan emphasized the importance of having a budget and an emergency fund to cover living expenses for 3 to 6 months and unexpected costs. They also stressed understanding state rules and regulations regarding unemployment benefits, noting that they can vary widely and might not fully cover lost income.

Meghan discussed the possibility of a recession in 2024, noting the cooling of the economy and labor market. They stressed the importance of personal financial preparedness for potential economic downturns, with job loss being the biggest risk to personal finances in an economic slowdown.

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Updates on the Federal Reserve

Meghan also addressed rumors about the Fed lowering interest rates five times in 2023, clarifying that these were estimates from financial experts, not statements from the Fed. They emphasized that the Fed's decisions are based on their own data and projections, rather than external predictions.

Meghan concluded by announcing that they would share updates from the Fed's upcoming meeting, scheduled for next Tuesday and Wednesday.

Baby Boomers' Retirement Impact on Stock Market

Meghan discussed concerns about the impact of baby boomers withdrawing from the stock market. They explained that retirees typically don't withdraw a lump sum from their retirement savings, but instead draw on the earnings generated by their assets over time. Meghan also addressed the issue of wealth transfer upon retirees' deaths, suggesting that it's unlikely that the assets will be entirely cashed out due to potential tax implications. They emphasized that any cashed-out funds could be put back into the economy, providing additional cash and potentially boosting earnings for companies.

Fed's Inflation and Interest Rate Cut Strategy

Meghan discussed the Fed's approach to interest rate cuts in the context of inflation. They explained that the Fed had raised interest rates to cool inflation and would be slow to cut rates because they want to ensure inflation doesn't return. Meghan noted that inflation readings are still around 3 to 3.5 percent, which is 50 percent higher than their target. They also pointed out that the Fed would likely not cut rates until inflation reaches its intended target and demonstrates that it's staying there for a significant period of time. Meghan also mentioned that a big increase in unemployment might force the Fed to cut rates earlier.

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Investing Books for 12-Year-Olds Recommended

Meghan recommended three books for a 12-year-old interested in learning about investing. They suggested How to Make Your Kid a Money Genius, which provides conversations about money for different age groups, The Psychology of Money, which gives insight into the mindset needed to understand investing, and A Random Walk Down Wall Street, a fundamental book about the stock market. Meghan stressed the importance of having conversations about finance and investing with children. They also mentioned that they might recommend a new book called Same as Ever, a new book by the same author as The Pschology of Money, for the Q1 FFM Book Club.

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Credit Card Balance Transfer

Meghan discussed the financial benefits of transferring credit card balances to a new card offering no interest for a certain period, warning about the potential for increased spending power and emphasizing the importance of using the interest-free period to aggressively pay off the debt.

Commodity Tracking

Meghan also addressed the topic of tracking commodities, recommending the use of an ETF and keeping an eye on the prices of specific commodities such as crude oil futures.

What Does Emerging Markets mean?

Meghan explained what the term "emerging markets" means in the context of mutual fund names, emphasizing that these are typically higher growth but more volatile and risky.

Economic Uncertainty and Financial Preparedness

Meghan discussed the uncertainty surrounding the possibility of a significant recession in 2024. They explained the difference between a slowdown and a recession, and highlighted various factors contributing to economic uncertainty, including geopolitical tensions and the upcoming US election year. Meghan also emphasized the importance of financial preparedness, particularly having an emergency fund to mitigate the impact of job loss during a recession.

Roth 401k vs. Roth IRA

Finally, they advised on the decision between rolling over to a new company's 401K plan versus keeping funds in a Roth IRA, suggesting it's generally better to keep funds in a Roth IRA due to lower administrative fees, although they encouraged investment in the new company's 401K plan as well.

Related post: How to Choose the Best Investment Accounts for Beginners