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If you’re concerned because the Federal Reserve just raised interest rates again: Take a minute to get some perspective.
When the Federal Reserve raises interest rates to slow the economy and curb inflation, recession worries tend to surface. The fear is that the higher cost of money might brake the economy a bit too hard.
Agonizing over interest rates, the soaring pace of inflation and the ever-increasing cost of groceries, gas and most everything else — and on top of that, the possibility of a recession — it’s just not worth it.
Here’s how to worry less.
If you’re worried, take action
In a stock market trade, there’s a buyer on one side of the transaction and a seller on the other. Each trader has a different perspective. Likewise, higher interest rates can be bad or good, depending on your situation.
To boil it down, rising rates are:
- Bad if you’re borrowing money or paying off debt.
- Good if you’re saving money or retired and living off of interest.
Worrying gets you nowhere. Instead, consider small but impactful moves to improve your financial situation.
For borrowers and savers
Borrowers will be on the hook for higher fees. Work to pay down debt to minimize the extra interest load and consider a balance transfer credit card to get an interest-free breather.
Meanwhile, savers are likely to see better returns and can leverage rising interest earnings by seeking out higher-rate savings accounts and beefier certificates of deposit.
For home buyers and homeowners
If you’re looking to buy, sell or refinance a home or tap a home equity line of credit, the mortgage rate transition from low to high gear might accelerate your plans — or stall them. While many real estate markets are still very competitive, try to use looming higher mortgage rates as a negotiation tool.
Real estate agents, home sellers and mortgage lenders are well aware of what’s happening with rates, and you just might tap into their anxiety by getting a lower price on a home or lower fees on a loan. Hey, it’s worth a shot.
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For small-business owners
Rising interest rates may impact your small business in three ways:
- A slowing economy might negatively affect your sales. See if there are cost efficiencies you can implement to help weather any downturn.
- Your cost of credit card borrowing will rise. If you use credit cards for some business expenses, you’re likely to see higher payments due. Double-check your cost of goods, travel expenses and anything else you put on a card.
- Variable-rate loans are likely to get more expensive. Explore refinancing to a fixed-rate term.
If you have a student loan
Student loan borrowers are already waiting to hear if President Biden may forgive some debt. Even so, any write-off will impact federal loans only. Meanwhile, private student loan borrowers face the possibility of higher rates.
Use this student loans decision tree to help you determine if you should refinance now, later or not at all.
Options for personal loans
Personal loans often have fixed-rate terms, so current holders may have less to worry about when it comes to rising interest rates. But if you’re shopping for a personal loan, getting one sooner rather than later may be in your favor.
Remember to shop with more than one lender to help get the best offer.
Meanwhile, minimize the impact of inflation on your life
Higher prices take a juicy chunk out of a paycheck. Nobody likes that. There are at least nine ways to protect your spending power from inflation. Here are five:
- If you can, don’t delay a major purchase. Prices are likely to continue rising.
- Cut back on voluntary spending. It doesn’t have to be drastic. Just trim here or there.
- Use membership cards to save on gasoline. Examples include Walmart+ (offering up to 10 cents off per gallon at participating stations) and GasBuddy (with discounts up to 25 cents per gallon). Rewards cards can offer cash back, too.
- Renegotiate bills like streaming services and cell phone plans.
- Ask for a raise.
These are small changes that can help cushion the blow to your cash.
And there’s one big — and safe — money move that can earn you a walloping nearly 10% return. Series I savings bonds are government-guaranteed, and the rates are keyed to inflation. They have a minimum holding period of one year, though there’s a three-month interest penalty if held for less than five years.
A recession? You’ve already been through one or more
Everyone reading this has been through a recession.
Wrapped within the COVID-19 pandemic, the U.S. experienced a brief recession that peaked in the second quarter of 2020. That’s a small blip on the radar compared with the Great Recession of 2008, fueled by the housing crash and subsequent financial crisis. It was a slow, 18-month economic crash.
Now the experts are debating if we’re heading toward another financial setback. Rather than worry which is worse, the inflation disease or the slower-economy cure, take action: Choose one or two of the ideas above, and put them to work.
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Worrying about the Fed’s latest interest hike? Do this instead
AP Photo/Charles Krupa
Like many shoppers, I’ve noticed my grocery bill getting bigger each week: February food prices were 7.9% higher than they were a year ago, according to the U.S. Department of Agriculture’s Economic Research Service. To compensate for my family’s busy spring schedule, I’d also been turning to shortcuts like prepackaged snacks and meal kits, which further added to our total bill.
To counteract these pressures, I applied all my go-to savings tricks: opting in to my grocery store’s loyalty program for extra discounts, using a credit card that gave me bonus cash back on grocery purchases, and planning our weekly menus around sales. Still, shopping for my family of five continued to give me sticker shock.
For extra guidance, I turned to budgeting and cooking experts with experience making food spending more manageable, as the USDA predicts food prices will continue to increase, growing 4.5% to 5.5% in 2022.
Here are their best tips for saving money on food:
AP Photo/Charles Krupa
Like many shoppers, I’ve noticed my grocery bill getting bigger each week: February food prices were 7.9% higher than they were a year ago, according to the U.S. Department of Agriculture’s Economic Research Service. To compensate for my family’s busy spring schedule, I’d also been turning to shortcuts like prepackaged snacks and meal kits, which further added to our total bill.
To counteract these pressures, I applied all my go-to savings tricks: opting in to my grocery store’s loyalty program for extra discounts, using a credit card that gave me bonus cash back on grocery purchases, and planning our weekly menus around sales. Still, shopping for my family of five continued to give me sticker shock.
For extra guidance, I turned to budgeting and cooking experts with experience making food spending more manageable, as the USDA predicts food prices will continue to increase, growing 4.5% to 5.5% in 2022.
Here are their best tips for saving money on food:
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Worrying about the Fed’s latest interest hike? Do this instead
While so much about the economy can feel completely outside of our control, including rising interest rates, inflation and supply chain challenges, our food spending is actually one area where we hold a lot of sway, says Erin Lowell, a Bowdoin, Maine-based lead educator at You Need a Budget, a budgeting app . By spending more time cooking or substituting cheaper ingredients, you can feel an immediate savings impact, she says, unlike with other costs, such as bills or rent, which can be harder to change.
Lowell suggests assessing how much effort you’re currently putting into minimizing your food spending and taking that effort up to the next level. For example, if you currently order pizza for delivery, then consider buying a nice frozen pizza for a quarter of the cost. If you already buy frozen pizza, then consider making your own from scratch for just a few dollars’ worth of ingredients.
While so much about the economy can feel completely outside of our control, including rising interest rates, inflation and supply chain challenges, our food spending is actually one area where we hold a lot of sway, says Erin Lowell, a Bowdoin, Maine-based lead educator at You Need a Budget, a budgeting app . By spending more time cooking or substituting cheaper ingredients, you can feel an immediate savings impact, she says, unlike with other costs, such as bills or rent, which can be harder to change.
Lowell suggests assessing how much effort you’re currently putting into minimizing your food spending and taking that effort up to the next level. For example, if you currently order pizza for delivery, then consider buying a nice frozen pizza for a quarter of the cost. If you already buy frozen pizza, then consider making your own from scratch for just a few dollars’ worth of ingredients.
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Worrying about the Fed’s latest interest hike? Do this instead
“When people are overspending on food, it’s almost always because they’re eating out too often,” says Jake Cousineau , a personal finance teacher in Thousand Oaks, California, and the author of “How to Adult: Personal Finance for the Real World.” He says planning ahead is key to combating the temptation to order takeout at the last minute.
“If you meal prep on Sunday and make six to seven meals, you’re not faced with that decision of ‘Should I order out or prepare food?’ every night,” Cousineau says. He typically cooks meat for Sunday that he can use in tacos, pasta and salad later in the week, for example. “You can do the heavy lifting Sunday, then mix and match throughout the week.”
Planning also helps you avoid food waste, which is another budget killer, warns Rob Bertman, a certified financial planner and family budget expert in St. Louis. “Buy in bulk for things you know you will go through, but if food sits in the freezer or pantry and gets thrown in the trash, that gets expensive.” He and his wife keep a list of the potential side and main dishes they have on hand in the freezer, fridge and pantry so they don’t forget to use those ingredients.
“When people are overspending on food, it’s almost always because they’re eating out too often,” says Jake Cousineau , a personal finance teacher in Thousand Oaks, California, and the author of “How to Adult: Personal Finance for the Real World.” He says planning ahead is key to combating the temptation to order takeout at the last minute.
“If you meal prep on Sunday and make six to seven meals, you’re not faced with that decision of ‘Should I order out or prepare food?’ every night,” Cousineau says. He typically cooks meat for Sunday that he can use in tacos, pasta and salad later in the week, for example. “You can do the heavy lifting Sunday, then mix and match throughout the week.”
Planning also helps you avoid food waste, which is another budget killer, warns Rob Bertman, a certified financial planner and family budget expert in St. Louis. “Buy in bulk for things you know you will go through, but if food sits in the freezer or pantry and gets thrown in the trash, that gets expensive.” He and his wife keep a list of the potential side and main dishes they have on hand in the freezer, fridge and pantry so they don’t forget to use those ingredients.
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Worrying about the Fed’s latest interest hike? Do this instead
Maggie Hoffman, a Brooklyn, New York-based digital director at cooking website Epicurious, suggests substituting recipe ingredients for ones you already have at home. “Be confident in your cooking: If you have farro, use that instead of brown rice. Use hot sauce or vinegar instead of lemon.”
Hoffman also recommends “next-overing,” which is transforming the previous night’s dish into something new. Roast chicken one night can become enchilada fillings the next, for example.
Beans, which are generally inexpensive, are also a flexible staple, she adds. You can serve them on their own or add them to salads or soups. “Beans are still the greatest thing around. Just give them a little marinade, add garlic and make sure they’re seasoned.”
Maggie Hoffman, a Brooklyn, New York-based digital director at cooking website Epicurious, suggests substituting recipe ingredients for ones you already have at home. “Be confident in your cooking: If you have farro, use that instead of brown rice. Use hot sauce or vinegar instead of lemon.”
Hoffman also recommends “next-overing,” which is transforming the previous night’s dish into something new. Roast chicken one night can become enchilada fillings the next, for example.
Beans, which are generally inexpensive, are also a flexible staple, she adds. You can serve them on their own or add them to salads or soups. “Beans are still the greatest thing around. Just give them a little marinade, add garlic and make sure they’re seasoned.”
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Worrying about the Fed’s latest interest hike? Do this instead
Investing in staples can end up saving you money because then you can quickly make last-minute meals instead of ordering in. “I try to keep five to 10 easy, budget-friendly meals in the house at all times,” Lowell says. For her, that list includes ingredients for homemade pizza, frozen fish with fries, and a pasta dish. “It’s never expensive, and I’m always happy to eat it.”
Investing in staples can end up saving you money because then you can quickly make last-minute meals instead of ordering in. “I try to keep five to 10 easy, budget-friendly meals in the house at all times,” Lowell says. For her, that list includes ingredients for homemade pizza, frozen fish with fries, and a pasta dish. “It’s never expensive, and I’m always happy to eat it.”
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Worrying about the Fed’s latest interest hike? Do this instead
While some local food banks have eligibility requirements, many are open to all members of the community who need the support, says Willa Williams , an Orlando, Florida, area financial coach at Trinity Financial Coaching and co-host of “The Abundant Living Podcast.” Some neighborhood gardens similarly offer the community vegetables and other produce at harvest time. “The food is here, so come and get it,” she says. “It keeps you from spending your food budget.”
My grocery bill is still higher than I’d like it to be — even the savviest shopper can’t outsmart this level of inflation — but it’s more manageable with these tips. And my children have learned some frugal habits of their own, such as the simple pleasure of cooking lentil soup for dinner and the savings that come from packing their own snacks.
While some local food banks have eligibility requirements, many are open to all members of the community who need the support, says Willa Williams , an Orlando, Florida, area financial coach at Trinity Financial Coaching and co-host of “The Abundant Living Podcast.” Some neighborhood gardens similarly offer the community vegetables and other produce at harvest time. “The food is here, so come and get it,” she says. “It keeps you from spending your food budget.”
My grocery bill is still higher than I’d like it to be — even the savviest shopper can’t outsmart this level of inflation — but it’s more manageable with these tips. And my children have learned some frugal habits of their own, such as the simple pleasure of cooking lentil soup for dinner and the savings that come from packing their own snacks.
