Fed raises rates: smart money is on the move now

The Federal Reserve raised interest rates by 0.75% this week as policymakers work more aggressively to fight inflation, which is at a 40-year high and is hitting American consumers.

But experts say the price increase, the largest since 1994, can affect personal finances in many ways as well.

Here are some smart financial moves to make now that could put you in a better position with higher prices:

Lock in the interest rate on your mortgage

Whether you are preparing to buy a home or already have a mortgage, make sure your interest rate is fixed and not adjustable.

Housing industry insiders warn market is seeing signs of ‘real slowdown’

says Robert Gilliland, managing director and senior wealth advisor at Concenture Wealth Management.

A house for sale on Oak Street in Patchoug, New York on May 17, 2022. (Steve Buffost/RM Newsday via Getty Images/Getty Images)

“Interest rates will be higher, so [people] They will need to realize that it may make sense to review a mortgage refinance,” Gilliland told FOX Business, noting that ARM can go up “a lot” and that in some cases it may be wise to refinance from ARM even if the fixed rates are higher than The person pays it now.

“Manage your payments, it might make sense to fix prices,” he says. “The same would be true with your equity lines of credit.”

Pay off credit card debt and take steps to reduce the interest paid on balances

If you carry credit card debt, which is currently increasing amid high inflation, make sure you have a plan to pay it off because interest rates will continue to rise.

Why experts warn that consumers should pay off their credit card debt sooner or later

“With a credit card that has a balance, you want to be really serious about getting those payments because those interest rates are just going to keep going up,” Gilliland says.

Credit card

Plastic credit card fan in woman’s hand. The concept of favorable offers of the bank to customers (iStock / iStock)

In the meantime, try to either renegotiate the annual percentage rate that is charged on your balances, or transfer that debt to a card with lower or no interest. He suggests checking out a site like NerdWallet to find the best deals that are being offered for transferred balances.

Shop for higher yield savings accounts

One of the positive things about interest rates, Gilliland says, is that “Americans now have a lot of cash,” and “their idle cash will start to earn a little more than it used to.”

More than half of Americans go into savings or go into debt to make ends meet: NRF

Greg McBride, chief financial analyst at Bankrate, agrees, telling FOX Business “Cavuto: Coast to Coast” that the upside to higher interest rates is that savers will benefit, and recommends people shop to find the best rates.

“Returns have been very low for a long time,” McBride told host Neil Cavuto. “Things have taken a turn in the sense that, for most of the past three years, it has been a situation where savings yields have fallen and then inflation has started. Now we are in a situation where, over the following years, a year or two, we expect interest rates to go up and eventually hope that Inflation goes down.”

Reassessment of investment allocations

Gilliland recommends that people meet with their financial advisor to assess investment allocations, making sure they factor in stress tests planning for a higher inflationary environment — particularly people who are planning to retire soon or have retired in the past 10 years.

As for the stock market, Gilliland predicted that we are “on our way to ride a roller coaster” until there is more clarity on inflation, interest rates and geopolitical events.

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His advice, given the volatility in the market at the moment, is to maintain variety, and “don’t try to catch a fallen knife.”

FOX Business’s Talia Kaplan contributed to this report.

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