In December 2015, the Federal Reserve revealed that it will be increasing interest rates after almost 10 years. This will definitely cause a big effect on anyone's finances so it's crucial to know a few rules to survive such an economy.
Since its interest rate hike late last year, the Federal Reserve has been indecisive recently when it comes to adjusting rates. According to Live Mint, the USFR is still monitoring the global economy and studying its implications to the country's inflation. Nevertheless, citizens should be able to learn how to deal with interest rate hikes so there will not be any problems with finances in the future.
Organize and study the numbers before making financial decisions. "You should no longer make assumptions that mortgage rates and student loan rates are always going to be lower than potential investment growth rates," said Julie Rains, a financial writer, as reported by Star Tribune. By doing so, you could overturn your view on stock market investment against payment of mortgages.
Now that the interest rates have increased, it is time to shift to fixed-rate mortgages. The good thing about this type of mortgage is that it would not increase even if interest rates do. The problem many people are facing at the moment is that they acquired variable-rate mortgage during the time that interest rates were at a significant low. Now that rates rose, their mortgages went up as well.
During interest rate hikes, investing in bonds is a more ideal way. Many believe that a change in interest rates could hurt bond investors the most. On the contrary, bonds are more stable than other types of investment. A few factors which could make bond investments more appealing include market factors (supply and demand) and bond maturity.
Lastly, study credits closely before obtaining one. Because of the increase in interest rates, many banks have also adjusted their prime lending rates. Most of these look attractive in advertisements so you would be enticed to acquire credit from them. However, you should not just look at the surface. Instead, read their terms carefully to avoid hidden charges and unwanted problems in the future.