As we’ve been discussing inflation and how to adjust your new budget accordingly, you might also be wondering how the continual rise in interest rates from the Federal Reserve will impact your wallet and investment portfolio. Let’s take a look. First, let’s start by digesting where interest rates come into play as they relate to your finances. Whether you have a savings account that earns interest, a mortgage or two, student or car loans, credit card debt and more, interest rates play a large role in each of these.

With rates being historically low for many years, many were taking the opportunity to refinance many of their loans and take advantage of a lower interest repayment. However, with the rise in rates from the Federal Reserve in order to slow down the economy and combat inflation, you might begin to think differently about your interest rates as a whole.

Now that rates are rising, loans, such as your mortgage, will be more expensive. So, if you are in the process of buying a home or refinancing, make sure you connect with your lender to see how the rise in rates will impact your situation. Furthermore, those of you with credit card debt will be seeing an even greater interest rate increase, so make sure you grab those zero percent interest rate credit cards or balance transfer options while they are still out there. 

As for student loans, if your student loans are at a fixed rate, which most are, this rise will not impact you. However, the Biden Administration just extended the federal student loan pause until September which will provide you with more time to prepare your budget for this additional payment. 

While rising rates will make some of your loans more expensive since you’ll be paying more in interest, they will have a positive impact on your savings account, accruing additional interest. If your emergency fund is in a traditional savings account, take this opportunity to open up a high-yield savings account to earn more interest on your savings fund. For more information on the perks of a high-yields savings account, check out our recent blog on why you should open one. For those curious about their investment accounts, especially given the recent market volatility we’ve seen over the last few years, the importance of a long-term oriented diversified portfolio is key. If you have further questions on how rising interest rates will impact your wallet, email us at info@shermanwealth.com or schedule a complimentary intro call here. 

The COVID-19 pandemic has certainly had a large impact on the financial decisions of many individuals across the globe. The uncertainty of the pandemic along with continued times of extreme market volatility caused many to pull out of the market temporarily, or at least until things “returned to normal”. At Sherman Wealth, we are firm believers in “time in the market” over “timing the market”. Despite great market volatility and being spooked by unprecedented times in the world, sticking to your long-term financial plan is proven to give you the best output at the end of the rainbow. 

So let’s take a look at some of the financial regrets young Americans have about their investing decisions over the last year. According to Fidelity Investments’ 2022 State of Retirement Planning Study, more than half of young adult investors halted saving for their retirements during the pandemic and nearly half said there is no point in saving until things return to normal.” While many of these individuals believed in pulling out of the market at the time, they now are wishing that they instead invested more instead. 

A recent study from MagnifyMoney found that “Some 57% of Gen Z investors and 50% of millennials regret how they invested in the last 12 months,” with many wishing they invested more money into the stock market, others wishing they didn’t sell assets when they did, and some wishing they had saved more as a whole. Those who didn’t save sufficiently during the pandemic or pulled assets out of the market during a crash are also now feeling unsure about whether they can handle another unexpected expense or event. As you can see from the data stated above, those who didn’t see the original March 2020 COVID-19 crash as an opportunity to stick to their long term plan or potentially even invest more, are now regretting those decisions. 

We know it’s easy to get spooked by the market, especially given the unprecedented events of the last few years. Now that it is financial literacy month, we wanted to take this opportunity to make sure to educate yourself on the benefits of long-term investing and recognizing behavioral biases that may be getting in the way of your financial decisions. We recently wrote a blog discussing how to identify behavioral biases and the “do’s and don’ts” during a market correction, so check that out if you find yourself having trouble sleeping at night because you are worried about your investments. Life is complicated, but your finances don’t have to be. If you start with the right foundation, such as creating a customized financial plan and stick to it, you’ll find yourself in a much better financial position in the long term. If you have questions about building your financial foundation or financial roadmap, email us at info@shermanwealth.com or schedule a complimentary 30-minute consultation here.