The Federal Reserve will raise interest rates again soon. Get that money moving now! UK news

Federal Reserve Chairman Jerome Powell.

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Americans are facing a period of rapid interest rate hikes for the first time in years.

The Federal Reserve released the minutes of its last meeting on Wednesday, showing that the central bank plans to raise interest rates by another 50 basis points this year, likely at every meeting remaining on the calendar. In an effort to curb inflation, the Federal Reserve could also raise interest rates more than the market currently expects.

Minutes from the central bank meeting in early May, where it raised the key interest rate by half a point.

With prices rising, financial experts are recommending consumers to take major financial steps to put themselves in a better financial position. These usually include paying down debts and strengthening personal budgets to be able to withstand any sudden shocks to the economy.

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“If your New Year’s resolution is to build a family budget, you may need an update and review,” said Cathy Schaeffer, certified financial planner, vice president and director of family advisors at Baker Bower in Walla Walla, Washington. Now “a chance to really look at your personal budget and determine your debt repayment methods more aggressively because those price hikes are likely to continue.”

Debt repayment

Some borrowers need to be especially careful at this time.

This includes anyone looking to buy a home, buy a car or have credit card debt, according to CFP Lauren Anastasio, director of financial advisory at Stash.

“If you’re shopping for a home, you might want to ask your lender if you can fix your rates now,” she said. “Sometimes a lender, for a fixed fee, will let you fix today’s rate even if you haven’t closed for a few months.”

Some borrowers are considering adjustable rate mortgages, which offer low initial rates but ultimately revert to market conditions. People who have ARM and are nearing the end of that period may want to consider refinancing at a fixed rate.

Car buyers may want to stick with the latest models and avoid the used car market, where prices have jumped the most. Taking the time to shop for the best possible deal is also in your best interest.

“There is still a lot of value there,” said Jackie Kearns, chief brand and strategy officer at Affinity Federal Credit Union in New Jersey, adding that while rates are rising, they are still historically low.

It’s a very delicate dance led by the Federal Reserve.

Lauren Anastasio

Financial Advisory Manager at Stash

People with credit card debt may also want to contact their lenders to see if they can strike a deal.

“I always recommend people to contact their lender and see if they can lower the interest rate,” Anastasio said.

It may also be a good idea to incorporate credit card debt into a fixed interest rate, as this type of debt is most sensitive to rising interest rates and often has the highest interest rate. Right now, the average interest rate on a new credit card is nearly 20%, according to LendingTree.

Paying off the debt in full is also a good idea, if possible. Kearns recommends pursuing cards with relatively low balances.

“If you have $200 or $300 [debt] There, just push it.”

Prepare for the future

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Paying off debt is just one way to prepare for future financial success, which is especially important when people are assessing the risks of a recession.

“It’s a very delicate dance the Fed is doing,” Anastasio said, adding that while the central bank will do its best to rein in inflation without shutting down the economy too much, there are many factors outside its control, such as the uncertainty associated with the war in Ukraine.

Financial experts recommend taking the time now to review your spending and savings to find a strong balance.

“Be smart about spending the money you have,” Kearns said. This could mean reducing discretionary purchases or budgeting more for items that have increased in price. Americans should also make sure they have solid emergency savings to counteract rising prices.

Anastasio said that as people plan for future spending, such as an upcoming vacation, they may also want to budget more than they normally would.

“The reality is that we may see rapidly increasing costs come down, but that doesn’t necessarily mean that when I go to the grocery store to buy the formula, the manufacturer will suddenly go back to what they were charging for two years,” she said.

asking for help

Of course, higher interest rates have some advantages. Over time, Schaeffer said, savers may start to see better rates on savings accounts. Kearns said investors also have opportunities to take advantage of market volatility.

“Now is a great time to invest if you want to,” Kearns said. “Literally a few dollars a day because of the volatility that we’re seeing can add a lot of value if it stays long term.”

Those who struggle with managing their money or feel nervous about the current environment may want to seek professional help to improve budgeting or future planning.

“Now is the time to take a hard look at your goals, risk tolerance, and financial plan,” Schaffer said, adding that this is especially important for those going through transitional times such as approaching retirement. Or getting ready to send a kid to college. .

“Make a plan and work with someone to put that plan into action,” Kearns said, adding that there are plenty of resources covering the pricing of digital tools, from platforms to personal advisors.

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