Federal Reserve Chairman Jerome Powell is laser-focused on reducing inflation using the best tool at his disposal – raising interest rates.
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And while President Joe Biden is optimistic about inflation in Augustthe combination of high inflation and rising interest rates is making millions of Americans uncomfortable.
It’s getting worse. Users shouldn’t expect this pinching sensation to subside anytime soon. In fact, with another interest rate hike almost certain next week, that feeling could soon become even more acute.
Here are five money moves you might want to make before rates rise again.
1. Deal with your debt
As the Fed raises interest rates, lenders follow suit. Some types of fixed rate loans will take a while to go up, but you should expect variable rates like credit cards or home equity lines of credit (HELOCs)](https://moneywise.com/mortgages/mortgages/what- is -a-heloc-and-is-it-for-for-you) to be affected immediately.
This means that your already expensive credit card interest rates will essentially go up overnight.
Although many households took time to pay down their balances during the pandemic, outstanding balances are rising again. Outstanding credit card balances increased by $570 million between the first and second quarters of this year, according to Federal Reserve data.
If you’ve been relying on your credit cards to make ends meet lately or overdrawn, expensive interest will add up quickly, meaning paying off your debt it must be a top priority—or it will cost you even more.
2. Work on your credit score
Improving your credit score is worth the effort, whether you want to get a loan quickly in the next month or two before interest rates go up, or you need to borrow later.
Boosting your credit score several hundred points will make you a more attractive borrower to all types of lenders, from credit card issuers to mortgage lenders.
You may need to take steps to improve your score to make sure you can borrow at favorable rates once the Fed starts tightening credit. Error checking is a good place to start.
3. Reduce your monthly expenses
with inflation is still stubbornly highconsidering everything costs more these days.
And although raising interest rates is the Fed’s best tool in fight against inflationthis means you don’t get a break for anything from your debt until dinners out.
Next, review your budget and see if there are items you can cut: cancel streaming subscriptions you don’t use, arrange meetings at home, and call service providers to see if they’ll offer you a lower price.
Even better, with insurance for example, if you haven’t looked at your options in the last six months, it might be time to shop around for a better deal – it could save you hundreds over the year.
4. Look for investment opportunities
If you have a little risk appetite, you can put more of your money into investments. Although the stock market has fallen significantly from its record highs during the pandemic, the recent decline offers forward-thinking investors a great opportunity.
If you don’t retire for a decade or two (or maybe three), then bear market offers the opportunity to acquire what would be an expensive portfolio for much less.
But if you can’t risk your principal or are worried about the stock market’s recent wild swings, read more about alternative investments which are not due to the ups and downs of the market.
5. Ask for help if you need it
Managing your money doesn’t have to be complicated, but it can be confusing. And there’s no better time to call for help than when you’re finding it harder to reach your financial goals on your own.
Working with a financial advisor can help you get your priorities straight and ensure you’re on track for your long-term and short-term goals.
Plus, you don’t have to commit to a long-term relationship if you’re not comfortable with that – flat-fee or fee-only advisors can help you work out a plan for a set price and leave you to it, if you just want a professional to guide you in the right direction.
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This article provides information only and should not be construed as advice. Provided without any warranty.