Interest rates seem to be going up faster than blood pressure after eating biscuits and gravy at your favorite diner. But what do rising interest rates mean for your Paycheck? Let’s dig into this!
Here are Five Fast Facts about rising interest rates:
- 📈 The Reason - The Fed is raising interest rates to try to slow inflation. Higher interest rates mean loans and spending money is more expensive, so people are less likely to buy stuff…and inflation should stop. Theoretically. Is it working? Um, maybe. Inflation is down slightly, to 6%. That’s lower than the previous historic highs around 9%, but far more than the normal 1-2%. Um, yay…?
- 💰 The Good - Higher interest rates are great if you’ve got certain kinds of accounts. Savings accounts (especially accounts at online banks), CDs, Treasury securities, and newly purchased bonds are all showing great returns right now. Homeowners with long term fixed rate mortgages can rest easy, too. Cha-ching, baby!
- 📉 The Bad - Unfortunately, it’s not all puppies and rainbows. Renters are facing higher monthly payments, and folks with portfolios of stocks or bonds that have been held for a long time are cringing as values keep dropping. Retirement accounts in general are cringe-worthy as they dwindle each month, too. Also, pretty much any loan taken out right now is going to hit your wallet harder. Wah-wah-wah-wahhhhhh…
- 😱 The Ugly - Some of the worst impacts are felt in credit card debt, ARMs (adjustable rate mortgages), and car purchases. All of these things are getting hammered by the rising interest rates, and the pain isn’t really subsiding any time soon. Similarly, retirees who are seeing those dwindling account balances but don’t have time to see the market turn back upward are getting caught in a nasty time-vs-money vise. Kinda' like Indiana Jones in the Spikes Room, you know? PULL THE LEVER, WILLIE!
- 👷🏭 The Jobs - It’s hard to know how this will affect jobs. So far, the interest rate increases haven’t launched a full recession (though some would say we are, in fact, heading into a nasty one), or at least we’re not feeling the worst effects of one yet. On the one hand, the shortage of workers encourages companies to keep the people they have. On the other hand, an economic crash will inevitably cause job losses. Only time will tell.
🔥Bottom line: So what should you do? If you already have a long term plan for managing your money, experts urge you to stay the course. Investing is a marathon, not a sprint. Over the long haul, the markets rise, so stick to your plan and let time work for you. If you don’t have a plan, it’s time to get one! Things are weird right now, so it’s hard to know what’s going to happen. The bottom line is that you need to get informed and make decisions based on the best info available, and make your Paychecks work for you as much as you can.
Good thing for you that you’re reading this right now! Very smart choice on your part - you’re going to be just fine! 😁
What do you think about increasing interest rates?
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