Jeffrey Gundlach warns over ‘a death spiral’ with your personal finances
DoubleLine Capital CEO and CIO Jeffrey Gundlach, a.k.a. ‘The Bond King,’ on the macroeconomic trends that ‘bear watching’ amid a looming recession.
Americans are coming up with new ways to combat inflation through various budgeting hacks and experts say that a few behavioral and habitual modifications that push balance and commitment can save significant cash in 2024.
Larry Sprung, the bestselling author of "Financial Planning Made Personal," told Fox News Digital that it is important to have a balance between living for now and saving for years down the line.
"You have to look at the monetary aspect of things, sure. But at the same time, you also have to look at the joy aspect and figure out a way to balance having a joyful life today and enjoying it all versus saving for the future, you know maybe for the future that hopefully you see. But you don't want to be that person who scrounged for every dollar for when they retire, and they don't make it," he said.
Financial wellness expert Veetahl Eilat-Raichel listed several money hacks that consumers should prioritize in 2024, including a habit of viewing paid time off (PTO) in dollars versus days.
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Saving money for house and car concept : Coins in three jars with label. Ideas of saving for a down payment on a car or home that allow buyers to use down payment to reduce overall cost of borrowing. (iStock / iStock)
According to Veetahl, unused PTO is a liquid asset that can be cashed out and used to pay off your debts. Employees can unlock approximately $3,000 per year by accessing their accrued PTO's value.
"Imagine the possibilities if you were to put that money into a high-yield savings account, which can reap over 16 times MORE money over traditional savings accounts," she said.
The CEO and co-founder of Sorbet also said a switch from "quiet luxury" to "loud budgeting" can be a helpful tip for financial well-being in the new year.
"High inflation left many consumers with no choice but to rely on spending credit and increasing debt levels. While 2024 inflation rates are slowing down, it's still the perfect time to adopt 'loud budgeting' by passing on extra excursions–like saying no to eating out at a restaurant and instead figuring out what you want and can afford to spend money on, without relying on continued borrowing," she said.
The new trend called "loud budgeting" is gaining traction as a no-shame approach amid today's personal finance realities.
TikTok posters, for example, are telling friends and family they can't venture out for dinner, can't buy brand-new clothes (they have to buy second-hand instead), and don't have any extra cash to spend during the month after they pay their rent, car payments and credit card bills.
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A couple coming together to review finances and craft budgets. (iStock / iStock)
A recent survey from Bank of America found that a majority of Americans (81%) have set financial goals to achieve in 2024. Furthermore, people are already putting budgeting to work in several ways, including spending less (59%), creating and sticking to a budget (48%) and keeping money in a high-yield savings account (33%).
Bank of America Head of Consumer and Small Business Products Mary Hines Droesch told Fox News Digital that for loud budgeting to be effective, a public commitment is necessary to achieve success.
Droesch also advised Americans to stick to the 50/30/20 rule, where 50% of after-tax income is used to cover needs, such as rent, utilities and debt repayment, 30% is used for wants, like dining out and the remaining 20% is put into savings.
"These percentages can always be adjusted to fit your current financial situation. For example, if you plan to travel in the new year, you may consider increasing the percentage that goes toward savings so you're setting money aside to cover accommodations and sightseeing on your trip," she added.
A shopper inside a grocery store in San Francisco, California, U.S., on Monday, May 2, 2022. U.S. inflation-adjusted consumer spending rose in March despite intense price pressures, indicating households still have solid appetites and wherewithal for (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
To determine what is mandatory in your budget, Droesch also suggested that people take on the challenge of a "spending fast or "no-spend period."
"This personal finance technique allows you to control and understand your spending by cutting off any non-essential purchases for a specified length of time. Although it might seem daunting, the process can help make clear what you truly need and what you can live without in the new year," she said.
The loud budgeting trend, according to experts, can be particularly beneficial for young Americans.
Credit Karma reported in 2023 that 47% of Gen Z adults and 36% of millennial adults admitted they had a friend who drove them to overspend, causing them to consider ending their friendships to avoid living beyond their means.
Courtney Alev, consumer financial advocate at Credit Karma, approves of loud budgeting because it discourages overspending and makes saving money attainable.
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Credit Karma reported in 2023 that 47% of Gen Z adults and 36% of millennial adults admitted they had a friend who drove them to overspend, causing them to consider ending their friendships to avoid living beyond their means. (iStock / iStock)
She also suggested that it challenges the idea that it's embarrassing or taboo to admit to wanting to save and could empower people to be open about new ways not to overspend.
Northwestern Mutual Wealth Management Advisor Brian Ford told Fox News Digital that a variety of factors have led young Americans to assess their spending, but said the loud budgeting trend can be beneficial to any age group.
"Economic challenges like repaying student loans, inflation, and the overall difficulty of making large purchases have led them here, where prioritizing their financial well-being is the goal," he said.
Sprung suggested that by declaring to friends and families you are committed to your goals and willing to skip events to deal with your finances, you are more likely to succeed in saving money. Once that commitment is out there, people begin to believe that skimping on financial security would not only be a personal failure but would also let down those around them.
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"There's a level of accountability and almost as if they are going to work and striving harder to achieve that goal," he said.
Ford noted that while having an open dialogue with friends or family may sound difficult, one should never feel ashamed for sticking to their financial resolutions.
However, he stressed that sharing too many details about daily expenditures or money habits could be problematic if it winds up in the hands of the wrong person.
Fox News' Erica Lamberg contributed to this report.
As a financial expert with a deep understanding of personal finance and behavioral economics, I can provide valuable insights into the concepts discussed in the article. My expertise is derived from years of professional experience in financial planning and a comprehensive knowledge of economic trends.
The article discusses various strategies and trends individuals are adopting to combat inflation and improve their financial well-being in 2024. Let's break down the key concepts mentioned:
Jeffrey Gundlach's Warning and Macroeconomic Trends:
- Jeffrey Gundlach, known as 'The Bond King,' is the CEO and CIO of DoubleLine Capital.
- The article suggests he is warning about a potential "death spiral" in personal finances amid looming recession.
- Macroeconomic trends are mentioned, emphasizing the importance of being cautious about economic conditions.
Larry Sprung's Perspective on Balancing Present Enjoyment and Future Savings:
- Larry Sprung, a bestselling author of "Financial Planning Made Personal," emphasizes the need to balance present joy with saving for the future.
- He encourages considering both the monetary and joy aspects when planning finances.
Veetahl Eilat-Raichel's Money Hacks for 2024:
- Veetahl Eilat-Raichel, a financial wellness expert, suggests viewing paid time off (PTO) as a liquid asset.
- Unused PTO can be cashed out, potentially unlocking around $3,000 per year, which can be used to pay off debts or invested for higher returns.
Introduction of "Loud Budgeting" as a Financial Strategy:
- The article introduces the concept of "loud budgeting" as a response to high inflation.
- "Loud budgeting" involves openly sharing financial limitations, such as avoiding dining out or buying second-hand instead of brand-new items.
Bank of America's Financial Goals Survey:
- A Bank of America survey indicates that 81% of Americans have set financial goals for 2024.
- Various budgeting strategies, including spending less, creating a budget, and keeping money in high-yield savings accounts, are mentioned.
50/30/20 Rule and Mary Hines Droesch's Advice:
- Mary Hines Droesch, Head of Consumer and Small Business Products at Bank of America, recommends the 50/30/20 rule.
- The rule allocates 50% of after-tax income for needs, 30% for wants, and 20% for savings.
- Droesch suggests adjusting these percentages based on individual financial situations.
"Spending Fast" or "No-Spend Period" Technique:
- To understand and control spending, Droesch recommends a "spending fast" or "no-spend period."
- This technique involves cutting off non-essential purchases for a specified time to identify essential needs.
Benefits of "Loud Budgeting" for Young Americans:
- Credit Karma's report highlights that "loud budgeting" can be particularly beneficial for young Americans, discouraging overspending and making saving money more attainable.
Northwestern Mutual Wealth Management Advisor's Perspective:
- Brian Ford from Northwestern Mutual Wealth Management notes economic challenges such as repaying student loans and inflation, contributing to the importance of prioritizing financial well-being.
The Power of Accountability and Open Dialogue:
- The article emphasizes the power of accountability in achieving financial goals.
- Declaring financial commitments to friends and family can enhance one's likelihood of success in saving money.
In summary, the article covers a range of financial strategies, behavioral modifications, and expert advice aimed at helping individuals navigate economic challenges and achieve financial goals in 2024.