How to Handle Rising Interest Rates

How to handle rising interest rates. That’s something that we’ve heard a lot of from folks here in 2022 and we are looking at how the Federal Reserve hasn’t hiked interest rates this aggressively in decades. And so investors anticipate that Fed Chairman Jerome Powell continue raising these rates, so how do you prepare yourself? The hope is to ultimately control inflation. But ultimately could it end up tightening its way into a slow-down of the economy? That’s what everyone is talking about. But there’s supply bottlenecks, and shortages that are also to blame for inflation. But the Fed ultimately can’t control that with rates. So what do you do when rates are expected to rise and maybe continue to rise? Let’s start with paying down your debt, especially if you’re in a situation where you have a variable interest rate, so that might be the mortgage on your property where you maybe had a fixed rate for a period of time and then it goes to a variable. You’ll want to maybe look at refinancing. A lot of home equity lines of credit if you have that open, where you can borrow against the house for different home remodeling projects or whatever it might be, those may have a term that’s fixed for a period but then it adjusts depending on where interest rates are. So, again, it may be valuable to look are refinancing. Or what if you have different credit card debt? That usually has a higher interest rate. So have you looked at: Are there ways to start paying that off ideally or shuffling those over into low interest rates or maybe there might be some zero interest rate options that may be available to you. Another option would be to maximize your income. So, right now with inflation the way that it is and rising interest rates, there may be opportunities where you could negotiate pay. If you feel that you’re not making as much as you need, then you could go to your employer and talk to them about potentially increasing pay. Also, another option would be increasing your savings. Look with your savings, maybe start to look for better interest rates. If it’s money that you don’t anticipate spending over the next two or three years, we’ve started to see those interest rates really climb for maybe shorter-term commitments but the disadvantage there might be that the funds are illiquid. And ultimately, try to recession-proof your finances. Ultimately, live within your means. Don’t be spending out of control. Look at those areas that maybe you’re spending too much money in, if you can cut back there. With your investments, try to be careful with your risk. Make sure that it fits within your comfort zone for risk tolerance and ultimately look at sort of from a long-term planning perspective what makes most sense to you. So give us a call if you have any questions.