What you can do now against high prices and rising interest rates

5 insights from Suze Orman: What you can do now against high prices and rising interest rates

You saw the evidence at the gas pump. You may have seen it on your credit card statements if you have a balance. You have surely noticed it at the grocery store, while shopping online and of course on the stock market.

Prices and interest rates are rising. And your invested savings are likely to drop.

Yet, as personal finance expert Suze Orman says, it’s not too late to “consolidate your saving and spending strategies” to weather these rising interest rates and inflation. His recent ideas could help you cope with a financial blow.

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1. Interest rate hikes are “very significant”.

Inflation in the United States is rising rapidly with consumer prices up 8.3% from a year ago, and the Federal Reserve has in turn raised its benchmark federal funds interest rate twice this year, with other planned rate increases throughout 2022. And if you’re in the market to move, mortgage rates are on the rise too.

The first step recommended by Orman is to determine exactly where rising interest rates could hit you the hardest. Of course the higher revenue at the gas station and groceries are very visible reminders of higher prices.

But interest rate hikes could also hurt you through credit card balances, car loans, new residential mortgages and more. Basically, borrowing money is going to cost you more these days, so you’ll need to adjust your big purchases on credit accordingly to stay within your budget.

“The federal funds rate going from virtually zero to at least 1.75% may not seem like a big deal, but it really is a big deal,” Orman said. in a blog post this spring on how to respond to rising interest rates. “And if the 2022 hikes aren’t enough, the Fed will likely continue to raise the fed funds rate.” Let’s hope it doesn’t need to come near its all-time high of 19% in 1981. That’s not a typo.

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2. “Take your vulnerabilities and get rid of them.”

Now that you know where you might be feeling the interest rate burn, it’s important to get rid of non-essential debt as soon as possible, especially balances with variable interest rates that rise and fall with changes in federal rates.

First to go should be your credit card debt, which usually has the highest rates, says Orman

She also recommends seeking offers from credit card companies, perhaps offering customers a year interest-free. But those balance transfer deals tend to fade during a recession, which some economists say could happen this year.

What’s important is that you pay off that high-interest debt as quickly as possible, and Orman says there’s always a way. You just have to find it.

“There’s always something you can do,” says Orman in a recent episode from her women and money podcast. “I don’t care if you get four jobs against three, three against two, there’s always something. But you have to trust in who you are and that you have the ability to be a warrior and not turn your back on this battlefield.

3. “Is it possible you could live on half a paycheck and save the other?”

Orman says she knows how you feel about this idea: there’s no way to live on half a paycheck and save the other half. But Orman wants you to ask yourself, “Why not? And be honest, because during a recession you may not have a choice.

If your hours are cut in half at work, if you lose your job, if your rates go up, you could be forced into this position. So why not try now as an experiment and create a savings cushion? It’s something Orman recommended during the Great Recession in the late 2000s, and it worked for many viewers on The Suze Orman Parade.

“I know a lot of you think this can never happen to you. You’ve got a good job, you’re fine. But what’s wrong is how much it’s costing you…little by little to really live, pay today and do things,” Orman said on his podcast.

4. “This recent spike in inflation is temporary.”

People tend to panic at such times. But Orman says it’s important to remember that inflation spikes come and go. The most recent surge is heavily influenced by global uncertainty, supply chain slowdowns and businesses struggling to meet consumer demand following pandemic shutdowns.

That being said, while inflation may come back down, Orman says it is unlikely to return to extremely low levels anytime soon. So make sure you have savings on hand, an investment strategy for bring long-term returnsand enjoy all government benefits.

“If you’re young, you have time to ride out bear markets in stocks. But if you’re older, you’ll probably want to invest in stocks less than when you were 20, 30, 40, 50,” Orman said. in a recent blog post.

5. “The less you buy…the lower inflation is supposed to be.”

Spending less does more than keep money in your pocket. It can actually slow inflation, says Orman. Americans felt the need to go out to buy things and move around after the easing of pandemic restrictions, which led to a huge increase in spending. With such high demand and insufficient supplies, this imbalance is part of the reason for the interest rate increases we are seeing today.

These higher rates are supposed to help rebalance supply and demand. The idea is that people won’t want to borrow as much when rates are high, and by reducing their purchases on credit, the lower spending ends up helping to lower inflation.

“In general, it normally lowers inflation because the less you buy, the less you spend. The less you spend, the slower the economy, the lower inflation supposedly,” Orman explains on his podcast.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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