Here’s what interest rate hikes mean for you

When it comes to today’s economy, we have a mantra for you: Recovery takes time.

After all, the entire globe is recovering from the major disruption of a still-active pandemic. The interruption of a supply chain, combined with a still-robust job market, means a US economy with an excess of demand, and too little supply.

It’s not surprising that inflation would follow.

So, the Federal Reserve steps in to take action. Their job? To keep the economy stable. To curb the rising cost of…well, everything, the Fed raises interest rates to slow down spending, giving supply the chance to catch up with demand and eventually lower prices. 

Ultimately, an interest rate hike means Americans are feeling the pinch: everyday things simply cost more, making life more expensive, and saving more difficult.

The good news is that this is a cycle. Eventually, the Fed will lower these rates. But in the meantime, what’s a good financial strategy? It depends; financial well-being is not a one-size fits all journey. Regardless of the size of your bank account, it pays to adjust your money management accordingly, while the nation continues to recover from the COVID economy.

Aside from the regular penny-pinching strategies and budgeting ideas, read on for a few smart money moves for common financial scenarios. Are you…

Carrying a high-interest balance?

If you’re carrying a balance on a high-interest credit card, that debt is now costing you more. Check in on your rate, and if it’s high, consider a less-expensive way to carry that balance. An alternative borrowing option, like a Personal Loan, could be the right choice right now. While it’s not a long-term solution, you’ll be able to lower your interest rate, and preserve your purchasing power at the same time.

A homeowner?

If you’re interested in refinancing your mortgage, be aware that now may not be the best time. Again, rates will eventually come down, so it’s best to stay the course and preserve that low rate. It’ll save you so much more money over time.

The good news? You probably have equity in your home. While the rate may be higher than refinancing, a Home Equity Line of Credit (HELOC) can give you access to extra funds for home improvements—or a relatively better rate to pay off credit card debt.

Repaying a private student loan?

A private student loan is one you might want to consider refinancing. With First Tech you have the option to both lower your payments, or pay your loan back sooner at a lower rate. Either way, this is the best option for private loans—refinancing federal student loans means you may lose access to certain benefits (like income-based repayment plans)

Looking for a safe place for extra cash?

Let’s say you want to hold on to your money, and you’re not interested in a stock market roller coaster ride. A compelling interim strategy? Think about a high-interest certificate of deposit, or a Share Certificate. You can earn interest on a lump sum, and that rate will remain for the term of your Share Certificate. This means you’ll know exactly how much money you’ll get out of the deal, and exactly when it’s coming your way—and you’re guaranteed to get it back.

It won’t be a one-way ticket to the millionaire club, but you’ll have control over the outcome, and be able to protect that cash while we chase away inflation. Work with a First Tech financial service representative to figure out the best strategy.

Need a little more? Schedule a consultation with a First Tech financial services representative to get a more personalized plan.