PORTLAND, Ore. (KTVZ) – After a period of record low interest rates, the Federal Open Market Committee (FOMC), which is the Federal Reserve’s monetary policy governing body, yesterday announced an increase of 0, 25% in rates, the first quarter-point increase since 2018.
The Federal Reserve’s increase comes as the country sees the highest inflation in decades, with the consumer price index (CPI) for all items rising 7.9% in February 2022, the gain the largest since January 1982. To help individuals and families make sense of these changes and the impact on budgets, OnPoint Community Credit Union provides educational resources and budgeting tools to the community.
“Even a fraction of a percentage point can have a significant impact on a person’s or family’s financial well-being, especially as the cost of goods and services becomes increasingly expensive,” said Natalie Berning, Financial Advisor at OnPoint Investment Services & Raymond James.
“In the short term, higher interest rates make loans and mortgages more expensive. But it’s not all bad news. Higher interest rates will also increase the value of high yield savings accounts, but these increases take longer to trickle down after a rate decision has been made. People can prepare for their finances today and make informed decisions by being aware of these changes in the economy, becoming proactive, and developing a plan to protect their budget.
As the country enters a new economic climate of rising interest rates and inflation, OnPoint offers the following tips to help Oregonians and Southwest Washington residents protect their financial well-being:
- Take a financial inventory. This is the perfect time to develop a clear understanding of your financial health and make the necessary adjustments. Start by mapping your household income, expenses, assets, and debts. OnPoint’s budget calculator can help you break down those numbers. Inflation can complicate the budgeting process, but stay up to date on the latest consumer price changes by following agencies like the Bureau of Labor Statistics (BLS) on Twitter will help inform your expense calculations to avoid surprises.
- Reassess consumption habits. Identify areas where you can cut your budget, such as cutting back on leisure travel, delaying non-essential household projects, going out less, canceling subscriptions, and adjusting cable and cell phone plans. Regularly reviewing your spending habits and making adjustments as needed will help you live within your means through continued price and rate increases.
- Create an emergency fund. OnPoint recommends having at least three to six months of living expenses on hand for unforeseen emergency needs to avoid dipping into investment accounts or using credit cards with interest rates. high interest. Reassessing your spending habits will allow you to discover areas where you can save and put those dollars into your emergency fund. If you’ve already exhausted these methods, work with a financial institution about the options they have to help you through the tough times.
- Give every dollar a job. Identify where every dollar should go, whether it’s a retirement account, savings for short-term goals, paying bills, or discretionary spending. This will help you understand where your money is going and ensure it is being maximized in this time of rising costs.
- Investors should adopt a wait-and-see approach. For borrowers, people should act now to refinance debt as the Fed has signaled that it will continue with gradual rate increases over time. For savers, OnPoint recommends waiting before making binding decisions on savings accounts, as interest rates won’t go up right away, but will pay off later.
- Take advantage of today’s interest rates. Even with the announced increase, interest rates remain close to historic lows. You still have time to take advantage of current rates before they go up. List your debts and contact each creditor to proactively explore loan refinancing options at current rates, or transfer your balance to a lower-rate credit card and try to pay it off before the promotional rate expires. If you are considering making a major purchase, consider making it now at the lowest fixed rate possible. If you’re a homeowner, your home’s value has probably increased over the past few years. If your budget needs more cushion, consider a fixed home equity line of credit (HELOC) as a more efficient way to pay off high-interest debt, or cash refinance to secure a low rate with a manageable monthly payment. .
- Review your retirement accounts. Reviewing your 401K and other retirement asset allocations annually will also improve your long-term financial health. Individual risk tolerance changes over time, so it is important to do an annual financial review and re-evaluate the plan. Make an appointment with a credentialed financial advisor today who can help ensure your assets are allocated in a way that maximizes the return on your investments.
“As we enter a new economic climate, the most important thing for members of our community to remember is that you are not alone,” Berning continued. “We encourage people in our community to visit one of our 55 local branches to discuss how changes in the economy can impact their budget and create a roadmap that will protect their budgets and avoid unpleasant surprises.
From budgeting spreadsheets and home loan calculators to Enrich, a personalized and interactive financial education platform, OnPoint offers many free tools and resources to help individuals achieve financial well-being in times of uncertainty. To visit www.onpointcu.com/financial-education today to learn more about the complementary tools and services OnPoint offers to the community.
ABOUT ONPOINT COMMUNITY CREDIT UNION
OnPoint Community Credit Union is Oregon’s largest credit union, serving more than 465,000 members and with assets of $9.0 billion. Founded in 1932, OnPoint Community Credit Union membership is available to anyone who lives or works in one of Oregon’s 28 counties (Benton, Clackamas, Clatsop, Columbia, Coos, Crook, Curry, Deschutes, Douglas , Gilliam, Hood River, Jackson, Jefferson, Josephine, Klamath, Lane, Lincoln, Linn, Marion, Morrow, Multnomah, Polk, Sherman, Tillamook, Wasco, Washington, Wheeler, and Yamhill) and two Washington counties (Skamania and Clark) and their immediate family members. More information is available at www.onpointcu.com or 503-228-7077 or 800-527-3932.