5 reasons to be positive about your finances in 2024

After a difficult economic backdrop in 2023, it seems that there may be hope on the horizon. A recent study reported by FTAdviser has revealed that the majority of UK adults (52%) feel positive about their finances going into 2024.

With inflation falling, the cost of living crisis easing, and interest rates forecast to be cut, the light at the end of the tunnel seems to finally be coming into view.

So, with the old year behind you and the new one ahead, here are five reasons for you to be positive about your finances in 2024.

1. Inflation is falling, helping your wealth to keep pace with the cost of living

In January 2023, the UK inflation rate was at 10.1%. A year on, inflation has more than halved, with the Office for National Statistics (ONS) reporting that inflation fell to 4% in the year to December 2023.

Although economists generally agree that a degree of steady inflation is good, and the current rate is still above the Bank of England (BoE) target of 2%, it is certainly moving in the right direction.

As inflation falls, it can mean that returns on your savings or investments may be more likely to keep pace with the cost of living.

For example, IG reports that the total annualised return of the FTSE 100 averaged 7.48% between 1984 and 2022. So, if inflation is lower in 2024, your returns may outstrip rises in the cost of living and your wealth could grow in real terms.

2. Interest rates are forecast to be cut, reducing borrowing costs

The BoE sets the base rate of interest in the UK and adjusts it to help regulate inflation. When inflation is high, the BoE will often raise the base rate to dampen demand, when inflation is low, the BoE will often reduce the base rate to encourage spending.

Interest rates have been at 5.25% since August 2023, which represents the highest base rate for 15 years. However, Reuters reports that many experts expect the BoE to lower the base rate to around 4.25% by the end of the year as inflation continues to approach the BoE’s 2% target.

If interest rates fall, mortgage and borrowing rates will usually come down too. This could be great news if you’re a first-time buyer, your mortgage deal is ending in 2024, or you’re a business owner with outstanding loans.

3. The UK avoided recession, meaning sound news for markets

Despite predictions to the contrary, the UK economy avoided falling into recession in 2023, and experts predict no recession in 2024. A growing economy means more job security, higher levels of employment and, typically, better business performance.

Furthermore, there are knock-on effects in the economy that can be difficult to predict, but positive news in one area often leads to positive developments in another.

For example, the Guardian reports that energy bills are forecast to fall by 16% in April of this year, which should help to further ease the cost of living crisis that has squeezed the nation for the past two years.

As the economy steadies and the cost of living crisis abates, stock market performance may also improve as consumers and businesses have more money to spend and invest. So, if the economy continues to grow, this could result in positive returns in 2024 and beyond.

4. A fall in National Insurance contributions means more in your pocket

One of the headline announcements in the Autumn Statement was the reduction in National Insurance contributions (NICs), some of which came into effect from 6 January 2024.

Class 1 contributions, paid by all employees, have already been reduced from 12% to 10%. This means that if you are employed on a salary of £50,000, you will save around £748 a year.

Class 2 contributions, a flat rate paid by self-employed workers who make £12,570 or more in annual profits, will no longer be a requirement from 6 April 2024. In positive news, if you have profits above £6,725, you will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs as you do currently.

Finally, Class 4 contributions, paid by self-employed workers who make £12,570 or more in annual profits, will be cut from 9% to 8% from 6 April 2024. This reduction will save a self-employed worker on the average salary around £350 a year.

So, whatever your employment status, a reduction in the NICs you will pay is something you can feel positive about going into 2024.

5. The State Pension is going to increase

Another popular announcement in the Autumn Statement was the pledge to raise the State Pension by 8.5% in April 2024.

If you receive the full State Pension this increase will mean you benefit from an extra £900 a year, which is certainly another good reason to be positive about the year ahead.

Get in touch

If you’d like advice on how to positively boost your wealth this year, please get in touch. Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.