A penny saved is a penny earned. Pay yourself first. Live below your means. These are timeless pieces of financial advice that everyone should take into the new year. But 2018 turned out a few gems worth packing (or unpacking) as Dec. 31 nears. Here are the best money lessons from 2018.
1. A recession is (probably) coming
Back in a June, a panel of leading economists predicted our current economic boom would end by 2020 and the country would fall back into a recession.
Forecasters couldn't agree on an exact timeline, but the over-arching point remains: All good economic times end. Fortunately, there are ways to get your money recession-ready.
2. Always recalculate your tax withholding
Major tax changes went into effect Jan. 1, 2018, but many Americans didn't account for them in their paychecks. Per the Government Accountability Office, about 21% of U.S. taxpayers are on track to owe Uncle Sam this coming April.
Legislation aside, it's a good idea to check your tax withholding each year, especially since the Internal Revenue Service has a calculator that helps you update your W-4s. Otherwise you risk a big bill when taxes are due.
3. Keep a diverse financial portfolio
This year's stock market has been a roller coaster, to say the least. But volatility shouldn't dissuade reluctant investors. Instead, mitigate risk by diversifying your portfolio to include stocks, bonds and shorter-term investments. And reduce the urge to flee a bear market by stocking some savings in a high-yield savings account. Their rates are getting more competitive in the changing economic climate.
4. Income protection is becoming increasingly important
Several reports published in 2018 found health insurance isn't a fail-safe when it comes to the long-term economic consequences of illness or injury. Cancer patients have increased odds of bankruptcy, for instance, due to costly treatments and their inability to work.
Disability insurance can provide relief from lost wages. To find affordable coverage, shop around for a policy. Consider shorter payout windows and longer elimination periods (the length of time after a claim before an insurance company pays benefits) to push down premiums. Policygenius can help you compare and buy income protection.
5. In some places, renters simply know best
Homeownership is intrinsically tied to the American dream, but given high housing prices and the end of ultra-cheap mortgages in 2018, there are many markets where most residents are better off sticking to a lease, at least in the short-term.
Case in point: San Francisco, where notoriously high rents actually pale in comparison to the price of real estate. Find out what other major metros are more cost effective for tenants as part of the Policygenius Renters' Index.
What were your 2018 money lessons? Share them in the comments.
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