OPINION: Four ways to take the stress out of inflation anxiety
You may have noticed an increase in prices on everything from groceries to gas to used cars, and you're not alone.
In fact, the U.S. Bureau of Labor Statistics (BLS) reported last month that prices increased by 5% between May 2020 and May 2021. This is the largest increase since September 2008, and economists have taken notice and are warning inflation could be on the horizon. Meanwhile, Treasury Secretary Janet Yellen has signaled a willingness to increase interest rates to support the economy.
These recent headlines about rising costs and interest rates have a lot of people worried, but there is good news too: Smart money management strategies can keep your finances on track.
My name is Gabe Casas, and I serve as the manager of OnPoint's new Beaverton Town Square Branch inside the Fred Meyer store. My team and I see firsthand the everyday impacts national economic issues like inflation have on local family budgets.
In my nearly two-decade banking career, I have seen interest rates at all-time highs and all-time lows. While fluctuations are a natural occurrence, even a fraction of a percentage point can increase monthly payments on an auto or home loan by hundreds of dollars, depending on the balance and current rate.
However, there are ways to keep from getting caught off guard by these economic shifts. Below are four proactive steps you can take today to prepare yourself for the potential impacts of inflation and rising interest rates:
1. Stay up to date on the latest shifts in consumer prices by following the Bureau of Labor Statistics (BLS) on Twitter, and follow current interest rates on the U.S. Department of the Treasury's website. By staying informed, you can be prepared to adjust your budget when prices hit a certain threshold, which brings us to our second tip.
2. Update your monthly budget to account for a continued increase in prices and possibly higher interest rates. Start by calculating your monthly income and subtracting your expenses. Be sure to add the percentage that prices have increased in the last year as reported by the BLS. For example, you would add 5% to all expenses if you started today. The Federal Trade Commission (FTC) offers a helpful worksheet that can help you determine how much you make and spend each month. If you're like most people, you'll need to make adjustments. Consider spending less on gifts, limiting the number of days you eat out, decreasing your subscriptions, adjusting your cellphone plan or exploring less expensive housing.
3. Take advantage of today's low interest rates before possible increases. Begin with listing your debts, starting with the highest interest rate. Then, contact each creditor to proactively explore options to refinance your debt into a lower fixed rate, or transfer your balance to a lower-rate credit card and try to pay it off before the promotional rate expires. If refinancing or balance transfers are not an option, prioritize paying down larger balance accounts first. For more information, check out the FTC's website, which provides practical information and resources to help you get out of debt.
4. If you are a homeowner, your home value has likely increased in the last few years. If your budget needs more cushion to prepare for inflation, look into a fixed home equity line of credit (HELOC) as a more efficient way of paying off high-interest debt or a cash-out refinance to lock in a low rate with a manageable monthly payment. Check with your financial institution to see if it offers a home equity calculator, which can provide you with an idea of the cash back and loan options available to you.
Most importantly, always remember you are not in this alone. I encourage you to reach out to your financial institution for help in preparing for the potential of rising interest and debt payments and take advantage of fixed rates while they are still low.
My team and I love interacting with members and helping to improve their financial situation. Next time you are shopping in the Beaverton Town Square, feel free to stop by the branch. We would be happy to answer any questions you may have.
Gabe Casas is branch manager of OnPoint Community Credit Union's location at Beaverton Town Square.
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