June 7, 2022
Wicked Smart Ways to Manage Your Money in a Challenging Economy
Let’s face it, the news can be downright depressing. That sure seems to be true with financial news. All we seem to hear about is rising rates, overinflated housing markets, soaring gas prices, stock market corrections, etc. It’s enough to make any of us looking to buy a home, retire, or simply keep up with our bills feel like we have no control.
But Avidia’s Margaret Sullivan, executive vice president & chief financial officer & treasurer, doesn’t see it that way. “Where there are challenges, we can find opportunities,” she shares. “Now’s a great time to gain greater control of your money and capitalize on opportunities to earn more.”
In fact, Margaret just so happens to have some helpful tips to help you manage challenging economic conditions. Let’s take a look:
Ways to reduce risk:
- Lock in variable-rate home equity lines. Yes, interest rates are rising for borrowers and are expected to continue to climb. If you have a home equity line with a variable rate and haven’t yet done it, lock it in to a fixed rate. Check with your bank for options to switch your variable rate line to a fixed rate loan.
- Make smart home decisions. Housing prices are inflated right now. So if you’re thinking about buying a home, it may make sense to back up that moving truck and wait. If you already own a home and are thinking about using the equity you now have to make home improvements, think carefully. Overextending yourself with home equity debt could hurt you if the housing market returns to normal and the value of your house declines. You could end up underwater (owing more than your home is worth), which unless you’re in a swimming pool, is never a good thing.
- Break up with high-interest credit card debt. If you have credit card balances, you’ve probably noticed that your monthly payments are higher. Rates are rising with the average credit card rate hovering near 20%. If you have the money in a savings account earning just 1 or 2%, it may make sense to use it to pay down your credit card debt. If you don’t have the money, look for balance transfer offers like 0% interest. If you consolidate or pay off your debt, just be sure to put your credit cards on ice.
- Borrow carefully. If you need a loan to help you consolidate credit card debt or manage other expenses, be careful to choose a reputable lender. Unfortunately, there are many predatory lenders that will charge excessively high rates and fees.
Ways to get more out of your money:
- Capitalize on the stock market. Stock prices have been falling. So, if you want to build assets for the long term, now may be a good time to buy. Of course, before making any decisions, it’s important to do your research and to talk to a financial professional about your tolerance for risk, goals, and the best options for you.
- Choose fixed-income assets. If you have lower risk tolerance and need your money to be liquid, you could invest in fixed-income alternatives, such as bonds or FDIC-insured CDs. Margaret suggests that instead of taking a lump sum and investing in one CD, ladder your money into several CDs with different maturities. For example, if you have $40,000, you could save the following way:
- $10,000 in a 3-month CD
- $10,000 in a 6-month CD
- $10,000 in a 9-month CD
- $10,000 in a 12-month CD
Laddering can help you get at your money if you need it and give you the flexibility to capitalize on higher rates.
Take charge of your money today!
Don’t fall into all the bad news hype – you’re still very much in control of your money. Of course, if you need help or have any questions, Avidia is here to help.