The Federal Reserve raised interest rates by 0.75% last week in their effort to keep inflation at bay. With inflation running hot, many people are wondering how this affects their financial life other than at the pump and grocery store.
One possible step to help you take control in this environment is to focus on paying down variable rate debts. As interest rates continue to increase, these expenses will continue to rise, even though your principal payment will remain the same. One of the most common variable rate debts is your credit card. Consider looking at your outstanding debts and order them based on highest to lowest interest rates to then pay down those with the highest interest rates first.
As interest rates rise, there also may be an opportunity on how you save your money. Consider checking with your bank to see if they have a High Yield Savings Account. These accounts tend to pay a higher interest rate than a traditional savings account, and when interest rates continue to rise you may be able to make a bit more interest.
Another planning consideration is evaluating larger purchases. The financing costs for the new home addition or new car you are considering to purchase, for example, are rising rapidly. We encourage individuals and families to consider the real cost of these purchases when factoring in the cost of interest. If you can delay certain purchases, it may be worth postponing until the economy and inflation cool down.
This environment is causing some people to rethink their short-term and mid-term financial plans. If you have any questions about your plan or planning opportunities, please reach out to your JNBA Advisory Team. You can also listen to our most recent podcast in which our Investment Committee shares thoughts on the current environment.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.
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