Rates are rising, and while savers benefit, those who need financing are starting to feel the impact. Inflation is also causing prices to increase in nearly every industry. There are ways to fight back — to take steps that will help you remain financially secure and in control of your finances.
Conduct a budget review.
With prices on food, fuel, and housing on an upward move, it can be challenging to make ends meet. Last month, we offered tips to save money on gas. This month, we encourage you to review your budget and see how making a few adjustments can be effective.
- How much are you spending?
An area you can control is what you spend on non-necessities or overspend on essentials. Start by tracking your spending. Dave Ramsey (Ramseysolutions.com) offers solid advice for most any consumer: By seeing where every dollar goes, you can see where you’ve spent too much or wasted money. “Ask what you are spending money on now that you could do without for a while? Where have you been overspending?”
- Can you save even a minimal amount?
Once you’ve completed your budget review, you’ll see patterns arising and where inflation impacts you the hardest. Then you can make a specific effort to reduce what you spend in pertinent budget categories.
Go generic on groceries. Plan your meals well in advance; make a list and stick to your list with no impulse purchases. Dial back on your electric usage (bump the air conditioning up, turn off the lights, and maintain your appliances). Eat out less and find more economical forms of entertainment.
- Do you want to earn some extra money?
Give yourself some budget relief by adding some income to your budget. In today’s techy world, for instance, there are many extra jobs. Consider doing computer work from home or joining the delivery workforce.
- Can you cut back on the extras?
Reducing expenses is an excellent way to fight inflation. It may not be fun to cut back but taking control of your finances (and spending) is exceptionally rewarding. Cut out a few streaming services and avoid new clothes if they’re not needed. Drop the coffee or fast-food purchases.
- Can you compare costs?
The internet is a wonderful resource to help you compare prices. Make a shift to a new grocery store if it helps you save more.
Ramsey notes that in 2021, groceries cost a monthly average of around $260 for singles to just over $1,000 for families of four. That’s on the moderate spending side of things. But those figures are rising. And while it may take a bit of time to compare your options, it is worth the savings.
Monitor your credit card expense.
GreenPath Financial Wellness reports that when the Federal Reserve raises the funds rate, interest rates on variable-rate credit cards increase. These changes can happen gradually, but if you carry this type of debt, start paying down your credit card balances first. Make sure to focus on the cards with the highest interest rates first, as they will be the most affected by the funds rate increase.
It’s even a better idea to find a low-rate, fixed credit card option — one that won’t fluctuate with the market. And if you do have high-rate credit card balances, consider transferring those to a lower-rate card. For example, our special 4.99% APR* on balance transfers can help you save. You’ll reap the benefits for 12 months with no annual or cash advance fees.
Also, focus on keeping your credit score strong. GreenPath advises you to:
- Pay your bill on time.
- Keep at least 70% of your credit available.
- Carry a mixture of debt types such as personal loans and auto loans.
Compare financing options.
Interest rates on new mortgages and loans are also expected to rise with the funds rate. Like credit cards, though, there are options that can help.
GreenPath notes that if you need financing during this time or want to prepare for the higher monthly payments on your loans, consider getting a fixed-rate loan before any substantial increases happen. Fixed-rate loans will NOT increase with rising interest rates, so your future set payments will not be affected. If you have an adjustable-rate loan, you could refinance it to a fixed-rate loan for the same benefit.
Our Mortgage options offer various refinancing options. You could lower your monthly payment, shorten the term of your mortgage, or use the equity you built to take out cash from your home.
Deposits are the bright side.
If you’re a saver, rising interest rates are a plus. You’ll earn more on your deposits and see a benefit in your earnings. At First United CU, you can take advantage of our savings and CD options — and our Bonus CD Rates. Additionally, your funds are federally insured by the NCUA, so there is no market risk.
The CD term you choose is relevant when rates are high. Typically, the longer the term, the higher dividend you’ll earn.
Our experts are here to help you budget, save money, and learn the tips and tricks to make ends meet. Contact us at 616.532.9067 and schedule an appointment.
We can’t wait to assist you!