I always liked it as a child when my older siblings would give me a head start in a race even if I didn’t win. As an adult, I want to get ahead in the financial game. It’s pretty obvious to me that interest rates are only going to go up. If I can get head of rising interest rates by making a few smart financial moves now, I will be in a better situation when I retire. According to a recent article by The Fiscal Times, now is the time to lock in on low rates. Experts predict the Fed may stop tapering by the end of 2014, which means interest rates could start going up soon. As a member of Generation X who grew up with double-digit interest rates, I am afraid of high interest rates that could devastate my budget. I am analyzing every aspect of my financial life from the perspective of runaway inflation and higher interest rates.
Keeping a zero balance
My first goal is to keep a zero balance on my credit cards each month. Some months are a bigger challenge than other months. I have to improve communication with my husband since we share our two credit cards. This past month, I knew I charged new tires on our credit card, but didn’t know he also used the card for a few purchases. I was just barely able to pay off the balance. According to The Fiscal Times, credit card rates may go up within the next 12 months.
Refinancing our home
My husband and I refinanced when interest rates on a 15-year term hit 2.75 percent. We also purchased a car at 1.99 percent. I made double payments to pay off our car loan so we can get another car loan at just 1.79 percent. Although we could wait to get a car, we don’t want to wait so long that interest rates go up. I had to pay more than 10 percent on my first car loan in the 1990s. As far as our mortgage rate, we don’t plan to refinance again.
Reviewing my investments
According to a recent article by U.S. News & World Report, investors who are worried about tapering may want to invest in shorter duration and higher yield funds. Instead of trying to figure out how to what kind of bonds I should have, I am sticking with dividend-paying stocks. Since I’m in my 40s, I have time on my side if the stock market experiences another bear market. Perhaps higher rates will trigger a stock market crash, which is why I keep at least 25 percent of my retirement money in a money market. I will purchase stocks at the bottom.
As a parent of two young adult children who don’t remember a high interest rate environment, I’m including the topic in our monthly money talks. I talk about why it’s important to avoid high interest credit cards and student loans. They are saving cash in case mortgage rates return to double digits by the time they are ready to buy homes. My son was able to get his first car loan at less than 2 percent. However, I encourage him to save for his next car since he can assume the interest rate will be higher. I’m not going to take out a home equity line of credit since I know the interest rate will inevitably rise in the next several years. I’m dreading higher interest rates as a consumer, but hoping to capitalize on them as an investor.
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