The Federal Reserve dropped the federal interest rate for the 3rd time. Here’s what’s happening and what we suggest you do with this information.
What’s Happening with Interest Rates?
The federal fund interest rate dropped again for the third time since July this year. But what does that mean for you? This may impact the interest you pay on your credit cards and the interest you earn with your money market account.
Interest rates had been climbing since 2015. While that is actually a good thing, an uncertain outlook for the global economy encouraged the federal reserve to yet again lower rates. The strategy is intended to encourage consumers to borrow, spend and invest in an attempt to boost the economy in these uncertain times.
There are many different ways this could impact you if you’re shopping for certain types of loans etc.
But for most of us, you’ll likely only experience the following effects.
Credit Cards: If you are working on getting out of credit card debt, rates dropping will likely help you reach your goals a little bit faster! So lower rates means more money going directly toward the principle. Giving each dollar more of an impact paying off debt. That means you get to keep more money in your wallet.
Money Markets: This one is a bit of a bummer, but if you keep your emergency fund in a money market (like we recommend) your interest rate just dropped. Obviously not the end of the world. But it is always good to know what is going on before you see the changes on your next statement.
How to Make the Most of a Low Interest Rate
Get out of debt Faster!
Take the opportunity to pump up your debt snowball and kick those credit cards out the door for good! It’s great to use all the extra momentum you can get when you are getting out of debt.
Refinance your Home
Do you have a fixed interest rate on your mortgage? If so, now could be a good time to refinance and lock in a lower interest rate! This move could save you thousands over the life of the mortgage.
Save! Save! Save!
Although interest rates are going down for savings accounts, it’s time to save as much as you can and take advantage of what interest you can earn. With the economy being uncertain enough for the Federal Reserve to lower interest rates 3 times within the year, we may be in for shaky times. It is time to take a personal inventory and ensure that you can weather a storm, should it blow your way.
Need help getting started? Book a 30-minute discovery call with us and let’s find out if you could use a little recession proofing.