Federal Reserve Chair Jerome Powell.
Xinhua News Agency | Xinhua News Agency | Getty Images
Americans are dealing with a period of rapidly rising interest rates for the first time in years.
The Federal Reserve on Wednesday released the minutes from its latest meeting, showing that the central bank plans to deliver more 50 basis point rate hikes this year, likely at each remaining meeting on the calendar. In an effort to tamp down inflation, the Fed may also raise interest rates more than the market currently anticipates.
The minutes are from the central bank’s meeting in early May where it raised its benchmark rate a half-point.
As rates increase, there are some key money moves financial experts recommend consumers make to put themselves in a better financial situation. These broadly include paying down debt and shoring up personal budgets to be able to withstand any sudden shocks to the economy.
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“If your New Year’s resolution was to build a household budget, it may need a refresh and a review,” said Cathy Schaeffer, a certified financial planner, vice president and family advisor manager at Baker Boyer in Walla Walla, Washington. Now is “a chance to really look at your personal budget and identify some ways to pay down your debt more aggressively as these rate hikes are expected to continue.”
Pay down debt
Certain borrowers should be especially careful right now.
That includes anyone looking to buy a home, is shopping for a car or is carrying credit card debt, according to CFP Lauren Anastasio, director of financial advice at Stash.
“If you are shopping for a home, you might want to ask your lender if you can lock in your rate now,” she said. “Sometimes the lender, for a flat fee will allow you to lock in today’s rate even if you’re not going to close for another few months.”
Some borrowers are considering adjustable-rate mortgages, which offer lower initial rates but eventually revert to market conditions. People who had ARMs and are nearing the end of that period may want to consider refinancing to a fixed rate.
Car shoppers may want to stick with newer models and avoid the used car market, where prices have jumped the most. Taking time to shop for the best deal you can find is also in your best interest.
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