Amy: Tonight, happy New Year to you, but just how happy will this year be for investors? You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. A lot to get into tonight, a lot about what we can expect for the new year, some smart decisions of things you can do with your money. But first, we're here in Cincinnati, and we need to address, of course, what happened last night during the Monday Night Football game, with Damar Hamlin, of course, collapsing on the field after that hit. And we just wanna say that our thoughts and prayers are with him, with his family, with the entire Bills organization. Just a tough one.

Steve: There's nothing else you can say except, you know, we pray for the best. You don't expect that to happen in sports, you know, it's a fun time. It's, you know...

Amy: It's entertainment.

Steve: Yeah. It's entertainment. Okay. It's a violent sport, but, you know, everybody gets up, walks away, you know? And not last night. Yeah. It's a darn shame. And, yeah, both for prayers for him, his family, the entire organization. Let's pray for a good outcome on this.

Amy: Yeah. And I was actually just saying to someone earlier today that I have a friend in the news business, you know, for years, and he always used to say, "All the big stories come back to Cincinnati." This could have happened on any field on any day. Right. It could have been a Sunday night game, it could have been a Thursday night game, but it happened in Cincinnati. And in media, I've worked in a lot of different markets, and there is no city, and I truly believe this, and I know I'm from here, that is more generous and kind than Cincinnati.

So if this had to happen to Damar Hamlin anywhere, you know, he is in a place where he is surrounded by just so many good, caring people. You saw that, and people leaving the stadium last night and going to the hospital overnight, and the vigil that was there. And so, again, yes, our prayers join countless others in Cincinnati and across the world.

All right. As we transition into the 2023, we hope you had some time to just unwind, right, over the holidays, kick back. 2022 was without a doubt a tough year financially. The economy, inflation, your 401(k) was probably down. Happy to put 2022 in the rearview mirror. But also, what can we talk about for 2023?

Steve: Well, you know, first of all, 2022 was all over the place, you know, so if you kind of lost where you're at, you're not alone. I mean, you know, we started off the year with the market at an all-time high. We had, you know, just a couple of back-to-back really fantastic years in the market. And then, you know, okay, we have a down week the first week of 2022. Oh, and then another down week. And all of a sudden, people are starting to worry a little bit. And, you know, between inflation, the Federal Reserve, stocks, worst year since 2008, bonds...

Amy: Since the Great Recession. Yeah.

Steve: ...worst years in 40 years.

Amy: Nowhere to hide.

Steve: Yeah. So, I mean, let's have a reset. You know, let's take a look at where are we at today, and where will we be going, and what are our concerns. Because one thing I've learned in 40 years, Amy, is that all the lights on your way to work are never green.

Amy: Yes.

Steve: There's always gonna be a red light. There's always something to worry about. And I don't think 2023 is gonna be any different, but I really think 2023 is gonna be better than 2022. That's not going out on a limb...

Amy: I hope so. Yeah.

Steve: ...you know, I really don't think so. But let's take a look at where we're at right now. Inflation, have we seen peak inflation yet? I think we have.

Amy: I think we've seen a trend in the right direction. You know, 7.1% is where we are now. Keep in mind the goal here is 2%. So we are still far above, right, kind of the Fed's goal for inflation, but we are also below the peak that we've seen. And we've seen a trend, right, a trend down. And in the beginning, when the Federal Reserve started to raise interest rates, it seemed inflation was impervious to it.

You know, every month, these inflation numbers would come in, and it would creep a little higher and creep a little higher. And finally, in the fall, we kind of got a little bit of a loosening there, a little bit of, you know, kind of sunlight through the clouds, and since then, we've kind of seen inflation numbers start to recede. I really hope that continues into...and I don't see...

Steve: I think it will. Yeah.

Amy: ...any reason why it wouldn't.

Steve: Yeah. But it's sticky. And the reason it's sticky is because of the labor market. And I think that if there's one thing that's really confounding the Federal Reserve, why aren't their actions just, you know, tearing inflation out by its roots and bringing it back down to 2%? It's the labor market because there are still lots of jobs out there. And they might not be in the highest-paying sector. Tech is getting killed in jobs, but, you know, service sector, you know...

Amy: Isn't that crazy? Think about it. If two years, someone were to say one sector is gonna be hit super hard, what sector do you think it's gonna be? You would've never guessed the tech sector because it seemed like that's where you gotta go. If you're graduating from college, that's where you gotta go. And not to say that these aren't still great career fields, but certainly a tough time in the tech sector.

Steve: Well, yeah, and it's gonna continue to be a good sector to be in, but, you know, when people are involved, the highs get too high, and the lows get too low. And if you look at what's been going on in the tech sector last two or three years, I mean, these companies have been expanding like crazy. You know, hiring left and right, and "Let's pay 'em," you know, "six figures fresh outta college. That's what we need."

And when you see that kind of growth, at some point, there's gonna be a reckoning. And we're starting to see that. So I don't think it's going out too far on a limb to expect some layoffs in the tech sector. And believe it or not, that's what the Federal Reserve wants to see. Yeah. I mean, when they talk about reducing inflation, what they're talking about is reducing demand. If you don't have a job, you're not demanding a whole lot, you know...

Amy: Yeah. Your spending goes down.

Steve: Yeah. And so that is an expected outcome of increasing interest rates in the eyes of the Federal Reserve. We want a recession if I'm Chairman Powell in the Federal Reserve, we want to slow down the economy because that will bring inflation down, which, in the long run, is a lot worse than any recession we're gonna have.

Amy: Yeah. But keep in mind where we are right now. Right? Jobless claims ticked up a little bit at the end of the year, but they're still kind of where we were in 2019. The weekly kind of average then is right where we are right now. So this seems to be a place that is just stubborn, right? The labor market incredibly stubborn. And we'll see where we go in 2023.

You're listening to "Simply Money" tonight, here on 55KRC. Happy New Year. 2023 is with us now, and we're figuring out kind of just a reality check of where things stand and where maybe we can expect them to go in the future. Certainly, the labor market has not responded in a major way to the Federal Reserve, our nation's central bank, raising interest rates. But...

Steve: Yet. Yet.

Amy: Well, yet. The housing market did, almost immediately.

Steve: Oh, it, like, turned on a dime, didn't it?

Amy: Yes. Like whiplash.

Steve: Well, when you're out there looking at homes and, "Okay, do I take the mortgage from this bank at 2.3% or that bank at 2.4%?" that's not normal.

Amy: No.

Steve: And that's where we were at. And once the Fed changed their attitude and started raising rates, it was literally about 3 weeks, we saw 6%. And, you know, when you're talking about...

Amy: Doubled, almost overnight.

Steve: ...yeah, maybe a $200,000, $300,000 mortgage, that's a big difference in monthly payments. I mean, that's a huge difference. So you're gonna say, "You know what? Let's just sit tight a sec and see if these rates come down." And they didn't, they kept going higher. But what's interesting now, and I was talking to my brother-in-law, my wife's brother up in Minnesota, who's a very successful realtor and good guy, and it's regional. It's regional, both on mortgage rates and the activity in the market. In Minnesota, he's still going strong.

Amy: Interesting.

Steve: And I check rates here in Cincinnati, and I've seen on 30-year fixed rates as low as 5.5% and as high as 6.875%. That's a big difference.

Amy: That's a huge disparity there.

Steve: That's a big difference. Five and a half percent, historically, not that far out of the ballpark. I mean, it's not where it was, you know, a few months ago. But it's not as high as it was in times past, like in the '80s.

Amy: I think there might be some kind of regional pockets of healthy activity in the housing market. But pretty much across the board, what we're seeing is, you know, mortgage application rates at their lowest that we've seen in 25 years. And that happened pretty quickly. And I think that we can probably expect that to happen, continue maybe at least through the first half of this year, depending on where rates go with the Federal Reserve.

Steve: You know how long it's gonna last? It's gonna last until the people say, "Well, I was waiting for rates to come down. They didn't come down all that much. We need a house." That's what's gonna happen.

Amy: Well, and to your point, you know, 2.5% is not the norm. We may not see that again. But, you know, now that we've gotten up to where we are, 5% sounds pretty good for...you know what I'm saying? Like, what used to be considered normal is starting to sound pretty good once again.

Steve: And you know what? If you need a house, you need a house, and if rates come down, you can always refinance. I mean, how many people that refinanced at 2.5%, 2.875% or had an original mortgage in the 4% or 5% range? Is that right?

Amy: Yes.

Steve: So, you know, keep your credit good. Get whatever you need to get. And I think you're gonna see mortgage rates come down somewhat in the next couple of years. Not 2%, but I don't think 5.5%, 6% is gonna be the low in the next couple of years.

Amy: Well, it all depends, right, on where the Federal Reserve goes with rates as well. And let's get to them because we had a little bit of reprieve from mid-December until the end of January of, like, no major Fed decisions. But come the end of January and the first day of February, we're gonna get the next announcement of what's coming. They're looking at the same data that we are.

Steve: They are. And it's not just chairman Powell, there are nine board members.

Amy: Yes.

Steve: Okay. There are nine members of the Federal Reserve, and they're all over the place.

Amy: They all have opinions.

Steve: These are smart people, with the best data that you can possibly get on the economy, and they all come up with different conclusions. So it's anybody's guess on what's gonna happen. The announcement will be the 1st of February after they meet January 31st. But the guess is, and the markets are kind of telling us, it's not gonna be another 0.75%. It might only be one quarter of 1%. We'll see.

But it seems like the Federal Reserve feels like, "Okay, we've done most of what we need to do. Let's just take a break. Let's gather data and see what impact we're having and where we need to go." So I don't think it's gonna be a huge hike, but it's probably gonna be some hike, quarter, half point, something like that.

Amy: Keep in mind, I think it was Q1 of last year, I don't know, maybe February, March, the Federal Reserve was kind of anticipating or projecting that they would raise interest rates in total about three-quarters of a point last year. We ended up way above that, and so...

Steve: It was January, because when they made the announcement, I think it was the third week of February, that's when the bond market just nose-dived.

Amy: Yeah.

Steve: Yeah. The bond market doesn't wait for the Federal Reserve to do what they said they were gonna do. The bond market reacts as soon as the Fed makes a change in policy announcement. So that's why...you know, we'll see what bonds do this year, but if the Fed's done raising rates sometime in the next month or two, who knows? We may see a turnaround.

Amy: Let's talk about a recession in 2023, which could be kind of...

Steve: Do we have to?

Amy: Yeah, I know. We have to go there because if we talk about the Federal Reserve, this is kind of a kind of anticipated byproduct of what they're doing. It would be great if they could raise interest rates in a vacuum and, you know, get those back down, and then everything else not be affected, but that's just not how the American economy is set up. That's not how this works.

I was just reading over the weekend, a lot of big banks calling for recession in 2023, some pushing it back to 2024. I think though when a lot of people hear the word recession, you think, "Ugh." Right? You get that nauseous feeling in your stomach because you go right back to '08, '09. That's not what we're talking about here. At least I don't think that's what we're talking about here.

Steve: No, no, no. We're not...no. Yeah. Let's set the record straight.

Amy: Yes.

Steve: We're nowhere close to 2008, we're in much better shape than that. But, you know, here's my pet theory. Anybody who's under 35 studied 2008, they didn't experience it.

Amy: They didn't live it. Yes.

Steve: Yeah, they didn't live it. You and I lived it. Okay. Yeah. It was horrendous. It was crazy. It was scary. If you're under 35 and you're writing some of these articles, and I think a lot of the people writing these articles are under 35, you know, they're making it sound like this recession's this big bad bugaboo. Some are, but a lot of them aren't. And this may very well be a soft landing where we don't have huge unemployment, we don't have massive problems in the economy.

And a soft landing is more or less...okay, on paper, it's a recession, but a couple of people got laid off, but they got jobs right away. You know, that's what we're hoping for. But, you know, is there gonna be a recession? I think there has to be. That's what the Federal Reserve has...maybe not intending to do, but knows it's a very likely byproduct of their increase in interest rates.

Amy: But to be clear, you are saying it will not be a "big bad bugaboo." I love it.

Steve: I'm inferring maybe.

Amy: I love it. All right. Here's the Allworth advice. As long as the Fed continues its fight against inflation, well, market volatility is going to continue into 2023. Wish we could have left it in 2022. I think it's come into the new year with us.

Still to come, we're looking at some new policies that went into effect in 2023 that could impact you, plus steps that you need to take with your financial plan right now. You're listening to "Simply Money," here on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you can't listen to our show every night, well, subscribe, and you can get our podcast every day, listen the following morning on your way to work or when you're at the gym. And if you've got that friend that's talking about getting their act together when it comes to their money in 2023, spread the word to them, too.

Just search "Simply Money" on the iHeart app or wherever you turn to to get your podcast. Shoot ahead at 643, what to do with maybe that holiday bonus you received? How to make a big difference in 2023 using that. So there is a lot going on in 2023. A lot of changes that we can talk about. And one of them is the fact that Secure Act 2.0 passed. It is not this game-changing legislation for retirement, but there are a lot of pieces of it that I really like.

Steve: Yeah. It's more like they fixed a couple of things that they should have taken care of and..

Amy: Things that were kind of always bothering me, that got under my skin. One of them is the fact that if you have money in a Roth 401(k), right, if your company gives a Roth 401(k) and you save some of your money in that, you still had to take required minimum distributions out of that money. You've already paid taxes on it...

Steve: That's ridiculous becuase a regular Roth IRA, you do not, but a Roth 401(k), you do.

Amy: Yeah. You already pay taxes on it, so why are they telling you when you need to pull that money? It doesn't make any sense. This is one of the things that makes more sense now that the Secure Act 2.0 is now law. This is changing, and this is a good thing.

Steve: So are you saying Congress may not have done something correctly? Is that possible?

Amy: I'm saying that they finally did something correctly, and I think that is the biggest, maybe the biggest statement that I have made so far in 2023.

Steve: You know what I pulled out of this Secure Act 2.0 that is now law, it's been signed, the required minimum distribution age was increased again. I mean, people were just getting used to the fact of, wait a second, it's not 70 and a half, it's 72. Well, now if you have not achieved age 73 yet, it's age 73. And it'll go up to 75 10 years from now.

So if you haven't been subject to the required minimum distribution, where you have to take money out of your IRA or 401(k), it is now age 73. And the best part is they fixed the penalty.

Amy: Yes.

Steve: Why did Congress set aside the highest penalty, 50% of what you were supposed to take out and maybe just forgot to take out of your IRA? Fifty percent penalty. Well, at least they cut it in half. Now it's only 25%, which I think is still egregious.

Amy: I do, too. Moving in the right direction.

Steve: But it's better.

Amy: Yes.

Steve: Yeah.

Amy: Yes. Also, speaking of, if you are getting close to retirement, right, age 50 and older, catch up contributions of your 401(k). Right now, you can put an additional 7,500. The Secure Act actually bumps that up to 10,000. That's not starting until 2025. But for those who are starting to think about retirement, maybe you're 10 years out, this could be a game changer.

Steve: It saved me. I was one of those late bloomers. I had a lot going on, helped start the business and...

Amy: So many people are, right?

Steve: Yeah.

Amy: I mean, it's like kind of once your kids get out of the nest, and it's so busy, and it's so hectic, and it's so expensive when they're home, you finally get 'em through college, and all of a sudden, you look at your spouse, and you say, "Oh gosh, the next step for us is retirement, but I'm looking at my 401(k) statement balance, and we're nowhere close to where need to be."

Steve: One of my favorite financial days, I'll be careful on that, one of my favorite financial days was, "Hey, wait a second, isn't this when I usually write that check for college...? Wait a second. No, he's graduating this year."

Amy: The last check has been written.

Steve: "No more checks." And so that went right into retirement savings. I mean, the catch-up provisions are huge. One that doesn't get a lot of attention, Amy, is gifts. Okay. A lot of people have been comfortable. Okay. I think I can give my kids a gift without any tax up to a certain amount. Used to be 15,000, that's now $17,000. And guess what? It doesn't have to be to your kids. So you can give me $17,000...

Amy: I'm writing the check right now.

Steve: if you feel like. I just want to throw it out there.

Amy: Yes.

Steve: But 17,000, and you and your spouse can each do it. So, technically, the two of you can give me 34,000.

Amy: I'll tell you one thing that I really love about the Secure Act 2.0, is we look at the changes that are coming now that it is law, is the fact that if you start a new job, you are automatically enrolled into the 401(k), and that can auto-escalate from there. Now, this is something, I think, your boss has to opt into, but it gives you the option of doing that.

And let's face it, for many of us, and I think back to the 20-year-old Amy, the 25-year-old Amy, I made very little at the time, and priority for me was not retirement. But if someone automatically was taking a few percentage out of what I was making at the time and putting that into retirement, I wouldn't have even really noticed it, I don't think.

Steve: Yeah. And in the old days, well, you had a pension, you know, at your company. Well, guess what? You don't generally...

Amy: Not so much anymore.

Steve: Yeah. You don't see that much anymore. And, you know, that is a way to make sure people start putting some money away. You know, there are a lot of things in this act that really help you. And one of them that I've noticed is the ability for your employer to pay off your student debt. Now, that's one of those things that they will match, okay, to help you pay off your student debt.

Amy: Kind of like your 401(k), right? You put a certain amount into your 401(k), and then they can do a percentage of that matching.

Steve: But it's voluntary. It's not required. So, you know, it would be awful nice if every company helped you pay off your student debt. Just check with HR. "Hey, is that something our company decided to do? Are you matching my payoffs on student debt?" If the answer is, yes, man, that's a great tool.

Amy: In competitive industries, I can see this being kind of the wave of the future. We'll see. Here's the Allworth advice. We recommend hiring a qualified financial professional to make sure that you're taking advantage of all of these new changes and new rules that are now in place in 2023.

Coming up next, the financial steps you should start taking right now with a kickoff of this new year. You're listening to "Simply Money," here on 55KRC, THE Talk Station. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach, new year, new year's resolutions. And I think for a lot of people this year, though, Steven, of course, everyone is eating healthier right now, and everyone's at the gym.

Steve: Of course. Everybody's at the gym.

Amy: We're still in the first week of the new year.

Steve: I don't go the first two weeks because that's when they are...

Amy: You're not that guy.

Steve: I don't go much the other 50 weeks either.

Amy: Funny.

Steve: Let's move on.

Amy: Funny how that turns out. But I think this year, when you look back on 2022, you know, we were paying more at the grocery store, at some points at the pump. And for every bill that we were paying for, we were paying more for everything. Our 401(k) balance was down. And I just think money was on the minds of a lot of people, and that's showing up in some research now. That there's more people this year making new year's resolutions that have to do with money than we've seen in the past.

Steve: Yeah. And this is interesting, maybe it's because it was such a rough year in 2022.

Amy: Yeah. I think so.

Steve: But a company called Numerator did a survey, and more than half, I mean, almost 60% of the people, responded that their number one resolution is financial, save more money, which I've got a problem with that. Save more money is like, "Yeah, I'm gonna lose weight." Okay. How? You gotta be a little more specific, don't you think?

Amy: Well, and maybe we should start there because for those of you who are nodding your head along with us, like, you have made a new year's resolution when it comes to money. We've been doing this show for a long time. We've been helping people make smart money decisions for a long time. Here's what doesn't work, being super vague about what you're gonna do. "I'm gonna save more. I'm gonna pay down for debt."

The people who really reach these goals are the ones who give themselves milestones along the way, and they're very specific. And I'm saying, okay, if you're gonna save more in 2023, here's what it looks like. "I'm going to save $10,000 more in my emergency fund by doing X, Y, Z by such and such a day." And that's how you get there.

Steve: It's like, say, "I'm gonna lose 20 pounds." No, it's not gonna happen. If I say, "I'll stop eating Graeter's at 8:00 p.m. every night, I'll get there." Okay. This is purely hypothetical, purely hypothetical. Okay.

Amy: If you see Steve Sprovach in Graeter's this year, turn him around and send him back out the door. Sorry, Grater's.

Steve: The way you do it is either payroll deduction, you can do payroll deduction into a savings account. It doesn't have to be into your 401(k).

Amy: You make it automatic. And I think that's the easiest way to achieve financial success.

Steve: No question. If you don't see it, you don't spend it. And you have to be that specific with your goals or else you're gonna be, you know, heading into Christmas of 2023, saying, "You know, I just never really got there. I never really did save the money I wanted to," because you weren't specific. Be specific with your goals.

Number two on the list was also financial. Track spending more carefully. I love that one. Because when somebody comes in to do a financial plan, that's number one, is, okay, they give me all their statements, "Here's what I've got." And my question is, "Okay, how much do you spend?" "Huh?" "How much do you spend?"

Amy: Nobody ever knows this answer. You think you do, you ballpark it, and then you come in and talk to us and we start looking over your credit card statements, and start asking questions, "What about this?" "Oh, yeah, I do pay for that. I forgot about that." "Oh, what about vacation?" "Oh, yeah, vacation."

Steve: What about credit cards? Yeah.

Amy: Yes, exactly. You start looking through these things. If you get a handle on exactly how much you spend right now, if you are in your 20s, 30s, 40s, 50s, 60s, it doesn't matter, if you've got a got a handle on this now, the transition into retirement is so much easier because you already have the numbers in front of you. Nobody wants to get to retirement and completely change their lifestyle. So if this is how much you're spending now, well, it's likely close to what you'll be spending in retirement. And so rather than being 64 and a half, and saying, "Let's figure this out," you've got a great headstart.

Steve: Notice we never said cut back, we just said track.

Amy: Figure it out.

Steve: Track is different. And one thing I tell people as they get close to retirement is if you don't spend more than you expected your first two years of retirement, you're doing it wrong. Okay. Because that's the whole point of working your you know what off all those years. Enjoy life while you've got your health. You need to do this.

Amy: You wanna travel, you wanna spend time with the grandkids. You wanna do the things that you've always wanted to do. Number three on the list of the top five goals among those who made financial resolutions. So we've got saving more money, track spending more carefully, reduce spending across the board, followed closely by cutting spending on non-essentials.

Steve: Yeah. Okay.

Amy: They're tied together.

Steve: Let's get down to the nitty-gritty on that. Does that mean you give up Netflix? Well, no, I'm not gonna do that. Apple+, well, maybe after "Ted Lasso" is done airing this... Yeah. You know, this is where you gotta really make the hard decisions. And do you need to make the hard decisions? I don't know. That's why if you get a financial plan drawn up, it might show that you can spend what you're spending now, not worry about it, still retire the year you wanna retire, and you're fine. But if you don't have a plan done, you don't know...hey, if your plan says you wanna retire at 62, but you can't, but if you reduce your spending by 10%, you can, okay, maybe make those hard decisions. That's up to you.

Amy: You know, I hear from people all the time who will say, like, a lot of people do sober January. Right? Like, you're just gonna drink more over the holidays, and the whole month of January, you know, it's water, not wine. Or people are at the gym, or they're cutting back on what they're eating. I find that I have been drawn the past few years to spend less in January. I just feel like...so you're getting at your credit card so many times over the holidays that I'm intentional in January about asking myself about every purchase, "Is that something I need, or is that something I want?"

And the interesting thing is, when you start the year in that mindset, you realize there's a lot of stuff that you buy. And a lot of times when you grab dinner, you know, at a fast food restaurant on the way home or you eat out, that you don't really have to if you were just planned a little better. All of our meals are planned for this week at home.

Steve: Okay.

Amy: I don't always do that, but it just gets you kind of in that mindset of, "I don't really need these things." And once you get into it, it kind of goes into the rest of the year with how you just think about certain purchases.

Steve: I think that's a great point. And that goes right into 40% of the people say pay off loans. Well, what is a credit card? That's a loan. Okay. Chances are you may have spent money on a couple of things heading into the holidays for Christmas, for the holidays, that you don't spend each and every month, you know? Here's the way I explain it to people. "Hey, I've got some extra money, what should I do with it?" "Well, you want a guaranteed 22% rate of return? Pay off your credit card."

Amy: Yes.

Steve: You know, pay it off. Don't carry a balance. And if you pay down debt, it's boring as all get-out to do, but, man, there is nothing better you can do with your money if you have a big old balance that you weren't planning on paying off for a few months. Don't carry it. Just get it done. Pay it off. Get out from under that.

Amy: You know what, I've had so many people ask me over the years, what's more important, paying down debt or saving? And I don't think they're mutually exclusive. They don't have to be mutually exclusive.

Steve: I agree.

Amy: If both of those are your goals for this year, well, you're not taking on too much. I think you have to be specific. "Here's how much I'm going to save, and here's how I'm going to do that. And here's how much I'm going to pay down, and here's how I'm going to do that." And both of those things usually involve cutting back a little bit, right, making some smart money decisions. But I'm telling you, you start 2023 off making those smart money decisions, it just kind of grows, the ball keeps falling down the hill, right, it keeps growing, and you're gaining momentum, and suddenly, I think you find yourself in a much better position when you get to June or September.

Steve: Yeah. I've been there. I've had more credit card debt than I wanted years and years and years ago. It's no fun paying them down. But when you're done, it's like, "Ooh, I've got some breathing space."

Amy: Also, be done. Right? Once you do it. Because I know there's a lot of people that get in these cycles, they pay it off, and then the next month, they go...

Steve: Yeah, I know. They transfer to 0%, you know, that but in and of itself doesn't accomplish anything unless you're not putting anything else on any of the credit cards. I had a couple walk in my office one time, and this was interesting. As I'm, you know, gathering information that I need for a financial plan, "Okay, credit card debt. You got any?" And the one spouse said, "You don't need to know that." "Yeah, I do. I really do." "Well, I'm not gonna discuss it with you or anybody else." And the other spouse kind of looked at her and said, "Do we have an issue here?"

Amy: Is there something we don't know here?

Steve: And you know what? They decided that was something that they were not gonna discuss, that it was, in this case, her issue. She would take care of it. And, you know, that opens up the next concept of communication, you really need to talk about this stuff. You really do. Otherwise, it can cause a wedge in any relationship.

Amy: But for anyone who grew up in a household where talking about money is not the norm, I completely understand it feels really uncomfortable at first to put yourself out there and talk about. But I think one great way to do it, especially as a couple, is to start with your goals, and your hopes, and your dreams. "Do we wanna help the kids pay for college? Do we wanna retire at such and such age?"

And then you back up from there, "How do we get there? What are the changes that we have to make?" It's a lot easier when you're on the same page, looking for the same thing down the road, to make some changes now. Here's the Allworth advice. If you plan to make New Year's resolutions with your money, make sure your goals are specific and touch each area of your financial landscape.

Coming up next, what to do with maybe a holiday bonus you might have received or any windfall for that matter. You're listening to "Simply Money," here on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Do you have a financial question you want us to tackle here on the show? Easy way to do it. There's a red button you can click on while you're listening to the show on the iHeart app. Go right there, record your question, it's coming straight to us. We'd love to talk about it right here.

Straight ahead, we're going to analyze all of those predictions, right? They're out there for 2023, what we think of them, and then we're also gonna track them in 2023. We're gonna come back to them and see exactly how these things pan out.

If you are maybe one of the lucky people who was talking to your boss in 2022 and they said, "You know what? We recognized your hard work, a bonus is coming to you." Maybe it came at the end of last year, or it's coming at the beginning of this year. What do you do with that money? And going back to...we're talking about some New Year's resolutions that people made, right?

Steve: Sure.

Amy: There's kind of a different mindset. And I think it's easier to start the beginning of the year saying, "No, how can I make smarter long-term financial decisions with this money?" than maybe, "How can I blow all of this bonus money in one fell swoop on this really cool thing that I've always wanted?"

Steve: You know, when somebody drops...you know, maybe it was a couple of grand, you know. Somebody drops a big fat bonus in your lap, the first thing 99.9% of the people are thinking about is, "Ooh, now I can buy that..." whatever.

Amy: You know, that vacation.

Steve: Yeah. Yeah. Exactly.

Amy: I'm not gonna lie, my mind does go there.

Steve: Everybody's does. Let's be serious, you know.

Amy: Yeah, and I'm not saying, listen, if you get a $2,000 bonus, right, that you can't spend a few hundred dollars, like, doing something nice for yourself, but if you blow the whole $2,000, a few weeks from now, what are you gonna have to show for it? Where that money, if treated the right way, can make a huge difference.

Steve: Well, let's just say you've got a $2,000 visa bill, that there's no way you can pay that off without wiping out your emergency fund, right? That bonus was a godsend, you know. Again, you know, you want a guaranteed...some of these credit cards are close to 30% interest, Amy.

Amy: They are.

Steve: You know, and most people, I know...I don't check my interest rate. I pay mine off every month, so I don't really care. But if you're not paying it off every month, you may have a 28%, 30% interest rate on your credit card. You can't afford not to pay that off. You have to pay that off as soon as possible. So in that case, the bonus is a godsend. You just gotta use it for that and say, "You know what? It would've been nice to buy that, but it's smarter for me to pay off that credit card debt and not carry that another month because that's 100 bucks out, you know, maybe 200 bucks out of my pocket for nothing." You know, just for interest charges.

Amy: Here's something else I would say that you could make a priority if you're getting a bonus or any kind of windfall this year, padding that emergency fund. We do not have a crystal ball in front of us in the studio. I really wish that we did. We would actually...well, we would be doing...

Steve: Maybe you don't.

Amy: We'd be doing this show from an island, a private island somewhere. And we're not, we're right here in Cincinnati. So that tells you we don't have the crystal ball.

Steve: Gray-sky Cincinnati. [crosstalk 00:33:03].

Amy: Yeah, exactly. Exactly. But, you know, there's talk of a recession this year, and recession often means that you lose your job, you could lose your job. An emergency fund is a game changer. It is a lifesaver. It is peace of mind. Even if you keep your job throughout the year, you don't have to worry. At least you know, "Hey, if something were to happen, I have enough money in that emergency fund where we can pay those critical bills for our family and get by for three months, or six months, or however long it takes to find that new job."

And so maybe this is the year that you prioritize that emergency fund. And I'm telling you, first of all, it will be used at some point. Something will happen. If you don't lose your job, you know, the car breaks down, or the HVAC, something will happen. You will use that money. You will need that money. But it keeps you from making really bad financial decisions when you're backed into a corner.

Steve: Ed Fink used to call that the sleep-at-night fund.

Amy: Yes.

Steve: I like that, okay, because...

Amy: Makes perfect sense.

Steve: ...you know, a couple of years ago, you're earning zero interest on it. That's not the case anymore. So not only will you sleep better at night by having that to fall back on, but, you know, you're getting some decent interest. Which by the way, Amy, this is one of my big bugaboos right now. There are a couple of banks here in Cincinnati that are paying nothing. They're still paying a tenth of 1% interest, and, to me, that's unconscionable. Because you can go out there, and I'm still talking federally insured banks and credit unions are paying well north of 2% on savings.

But this is not some, you know, risky investment. Savings, federally insured, guaranteed not to go up or down, paying 2%. And if you're willing to go online, like, to an American Express or Goldman Sachs money market, again, still federally insured, over 3% interest.

Amy: Yes. Another thing you can do, max out that retirement account, right, that 401(k), put some extra money into an IRA.

Steve: Sure.

Amy: What other big goals do you and your family have? Maybe it's a vacation, but maybe it's also saving for a down payment amount on a home, or helping the kids with college, whatever that is. Rather than taking this check, right, cashing it, and spending it immediately, think long-term. What could I do that will really make a difference in our family's life long-term with this money? If you start thinking that way, it makes it a lot easier to make smarter decisions.

Here's the Allworth advice. If you do receive, right, that big check this year, a windfall, be smart about it. Analyze how it plays into that full financial picture before saving, investing, or spending any of it. Coming up next, there are some predictions, right, from the so-called experts in 2023. Should you believe them? We'll take a closer look. You're listening to "Simply Money," here on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial, I'm Amy Wagner, along with Steve Sprovach. A new year, a new batch of predictions coming from economists and the so-called experts, telling you...and they're everywhere. I was laughing yesterday. I kind of took a break from a lot of the financial headlines over the holidays, and yesterday, I kind of...

Steve: Good for you.

Amy: ...weighted back in. And the front page on one of the big sources that I checked were, "These were the major losers for that last year. Here's the big winners for this year. Here's what you need to be in, which sector you need to be in, which stocks you need to be in." I was thinking, "Here we go again."

Steve: Well, I mean, we need to pay attention to these people because they were so on the money in 2022.

Amy: Yeah, exactly.

Steve: I need to know what's gonna happen in 2023. So let's go to these people and say, "Okay, you are so much on the money in '22. I want to know where we're gonna be in '23."

Amy: Yeah. One of those predictions, right, Wall Street predicting about the S&P 500, was that it was gonna hit about 4,950.

Steve: Is that a fact?

Amy: Yeah.

Steve: Is that right?

Amy: So nowhere close, yet here they come back again this year, making some more predictions. This year, though, they're giving it a range. Maybe they learned a little bit of their lesson last year. They say, "Ah, anywhere between 3,400 to as high as 4,500," which is kind of the wildest kind of dispersion, you know. Like, really, they're saying it could be anywhere.

Steve: Well, let's put that in perspective. So you've got some...and these are people that are very smart, paid a ton of money, looking all at the same data, and one guy says, "The market's gonna be up 18%," and another guy says, "Oh, no, it'll be down 11%." No, wait a second. What good is that?

Amy: Yes.

Steve: Okay. So if you're wondering what these experts are telling us, let's go with them because they get paid a lot of money, they know what they're talking about, I'm not so sure they know what they're talking about.

Amy: Yeah. Well, speaking of not so sure that they know what they're talking about, not the Federal Reserve, but the different members of the board do not seem to be on the same page. There were weeks in 2022 where there would be all these Fed speeches, and you'd have some people saying, "You know, I think we've hit the top here. And I think we're gonna start to loosen up on this policy next year." And then other members, like, the same small group of people in incredibly highly educated...

Steve: At the same meeting.

Amy: ...at the same meeting, looking at the same data, who are saying, "No, we need to tighten things, and we need to really continue this aggressive route that we have in order to bring down inflation." And it just makes you scratch your head. And all of these things end up in headlines and usually very strongly worded headlines about what you need to do, and what you need to know, and what is going to happen this year. And I would just say, first of all, maybe ignore a lot of those headlines. If you're gonna read 'em, take 'em with a grain of salt, please.

Steve: Yeah. Yeah. Do what you need to do for your life. And don't worry about what those people think. No question.

Amy: Thanks for listening tonight. We hope you're gonna tune in tomorrow. We're talking about ways to protect your money in 2023. You've been listening to "Simply Money," presented by Allworth Financial, here on 55 KRC, THE Talk Station.