Boogeymen aside, right now there are two things that scare me: Interest rates and Inflation. I know, I'm a strange person. But hear me out.
We have lived in a world where interest rates have been low for over a decade. During that time, the cost of goods has kept pace with inflation, which was around 1.5-2%. That's normal. Then a few things happened:
Minimum Wage Increase
Supply Chain Shortage
As someone who studied this boring stuff in school, I could draw you a chart, but I'll spare you that. The Coles notes are: Everything costs more than it did last year because covid is still a thing, staffing shortages are leading to delays in production, supply shortages are leading to increased prices, home prices are continuing to rise out of control. (that's the scary inflation part)
To stop that, the Government needs to increase interest rates to slow down spending, encourage saving and make it less desirable to remortgage or buy a new house. (the scary interest rates part)
But what does that all mean to you? In the long run, not much. We have all been through this before and we will go through it again. It's a cycle. But you can take advantage of it before it's too late:
Remortgage at a lower rate if you haven't already
Continue (or start to!) to pay down debt while it's cheap
Increase your savings rate
Re-assess your Financial Plan
What's that? You don't have a plan? You should call us!
Kenneth Coombs CFP CHS RRC
Ken has worked in the financial services industry since 2005, is a Registered Retirement Consultant and a Certified Financial Planner. Ken has written financial planning columns and has been a guest in financial print, radio, and podcast programs.