5 Ways to Make Rising Rates Work for You
March 14, 2019
A hike in prices is rarely met with optimism; unless you’re the one profiting from them. As the cost of funds continues to rise in our healthy U.S. economy, short-term borrowing is becoming more expensive. At the same time, businesses and individuals have the opportunity to earn better returns on excess funds.
Positioning yourself to win in a rising rate environment can be fairly simple, and Q1 2019 is an excellent time to get started.
Here are 5 ideas to consider:
Get back to basics. Interest-bearing checking accounts may not have yielded much in recent past. That’s changing. Look at what your cash is earning today; can another financial institution offer you better returns?
Think short-term. Rates are predicted to continue rising. As you choose where to invest excess funds, make a specific plan for how you will monitor the return on those accounts frequently. Can you choose flexible, short-term products, like CDs or money market funds, which will allow you to take advantage of higher interest rates if and when they are established?
Think long-term. If you are anticipating a substantial capital expense, now may be the time to lock in a rate on financing. What’s ahead for your business or personal plan? Does it make sense to move just a bit more quickly to ensure the price you pay for financing remains in check?
Revisit your loan terms. When rates were at historical lows, many consumers and businesses took their lenders up on adjustable rate products. Does it make sense to migrate that loan to a fixed rate?
Consider diversifying your portfolio (and your team). In 2004, when rates rose more than a full point, firms like E*Trade and Charles Schwab experienced a 38-percent jump in interest income and a 10-percent improvement in profit. Can you evolve your investment strategy to capitalize on potential brokerage firm success? Is your financial representative proactively reaching out to you with opportunities like this? Could you use an extra set of eyes on your investment portfolio?
When it comes to money, anxiety fuels action. A healthy economy, therefore, can bring about financial apathy. The above is just a sampling of the steps you can take to ensure you’re staying active during prosperous times. Talk with your financial advisor to understand which are best suited to your financial ambitions. And then keep a close watch on rates. When they move, so should you.