How Rising Interest Rates Will Impact Your Portfolio

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.