Will 2014 be a year of financial pain or financial prosperity?
With the US and UK economies both starting to show signs of recovery in the last few months of 2013 it has left many thinking that 2014 will be a year of financial prosperity. When we look at some of the news stories around currently though about rising taxes and the potential for interest rate rises to turn the screw on those already struggling with massive debts, it has left me wondering whether 2014 will truly be a year of financial prosperity or whether for some it may actually turn out to be a year of financial pain.
The side of prosperity
Even though homeowners and buyers don’t seem willing to jump totally on board just yet, house prices do seem to be the main factor that is perking up the financial mood of many in the UK at the minute. I’m sure the thought of a new kitchen and bathroom or simply the ability to move home without having to face the huge hurdle of low or negative equity is causing many to get excited, though there are other factors that may make this prospect a little less exciting in reality.
Then we have the jobs market. Unemployment levels have been falling at a quite unexpected rate in the latter months of 2013 giving hope to those who are desperately seeking work. The thought of being able to once again put food on the table without having to rely on the government will be a welcome relief for job hunters as we head into 2014. Many of the young people who are out of work will also be hoping to find an opportunity to finally start a career for which they may have spent years obtaining qualifications.
The Side of Pain
What is it they say, every action has a reaction? What goes up must come down? Unfortunately this could well be said of the positive points we have just mentioned above.
Taking house prices as an example, although rising house prices may open the door for many to withdraw some equity – not that I’m encouraging this but I’m sure that some won’t be able to resist – or to move to a new home, this will likely be accompanied by rising interest rates that could potentially cause massive debt problems for borrowers and would likely lead to repossessions that could drag the housing market right back down again. Worse yet rising interest rates on a global level could threaten the global economic recovery as a whole.
Then we can look to the jobs market. If our economy does continue to rebound and more jobs are created then there is a good chance that workers will start looking for or even expecting a long overdue pay rise. While this all sounds good on the surface it could easily cause problems with inflation and threaten our ability to keep our exports market competitive, something that could again send the jobs market back to square one.
A balancing act
So will 2014 be a year of financial pain or financial prosperity? We’ll have to wait and see. One thing is for sure though, 2014 will be another year of governments and central banks desperately trying to keep this whole balancing act between low interest rates, quantitative easing and economic prosperity going until they feel that the economy is truly out of the woods. I for one don’t envy their task.
What do you think? Will 2014 be a year of financial pain or financial prosperity?