BALTIMORE — In 2022, everything seemed to cost more. Inflation hit record highs, interest rates went up, and gas prices caused pain at the pumps, but some things are starting to level out.
WMAR-2 News Mallory Sofastaii spoke with an expert about how to take advantage of the current market to meet your financial goals in 2023.
When looking at your financial portfolio, Loyola University Maryland Accounting Professor JP Krahel recommends starting with the basics.
“I think paying off debt should be people's first priority going into 2023 because whatever happens, good times and bad, the less that's sitting on your back from the past, the more you can look forward to the future,” said Krahel.
But higher interest rates haven't made that an easy thing to do. The Federal Reserve implemented seven consecutive rate hikes in 2022 impacting how much consumers pay for new loans and existing debt.
“I would prioritize not what's biggest in terms of amount owed, but what's highest in terms of interest rates because that's what's going to grow the fastest,” said Krahel.
Then turn your attention to saving.
“Every dollar I don't spend is a tax-free risk-free dollar that I've saved and I think people need to start thinking how can I stop spending money that I don't need to spend,” Krahel said.
Once your accounts are in order, you may want to focus on ways to grow your wealth.
Sofastaii asked Krahel for his predictions on big financial issues and what consumers should consider.
His verdict on buying a home in 2023? Do it.
“You've got to live somewhere, you might as well be paying yourself and be your own landlord. Now, I know that interest rates have been rising and that hasn't quite been cancelled out by a decrease in home prices, but I'm hoping that that's going to change,” Krahel said.
Dumping money into the stock market? Krahel recommends sticking with low-risk investments.
“For instance, Treasury bonds right now are around 4 percent, which is way better than the 1 percent you'd be getting from your bank,” said Krahel.
And his opinion on cryptocurrency hasn’t changed.
“I don't know what cryptocurrency is going to do but I know it is more than volatile enough that I let all my loved ones know, please don't touch it because something like FTX could happen again. There's little oversight and little regulation and that's why you see this volatility,” said Krahel.
Most importantly, invest your time in finding ways to cut costs starting with a full financial audit.
“If you can spend an hour maybe going through 3-4 months of credit card statements, bank statements and you can pick out things that save you $100 a month,” said Krahel. “Yes, it's boring and it's tedious and it's a little bit scary but if you don't know where you are then you don't know how much better things could get.”
While there's been progress in the inflation fight, analysts don't expect interest rates cuts until 2024. So instead of borrowing, really focus on saving.
Once you've built an emergency fund, think about contributing to retirement savings accounts and tuition savings plans.
There are different ways to eliminate debt including debt management plans. Johnika Dreher was able to pay down $70,000 in debt and lose 50 pounds after signing up for a plan.
Click here to see her story.
