Home Interest rate Worried about your finances as interest rates rise? Here’s what to do.

Worried about your finances as interest rates rise? Here’s what to do.


Last week, the Federal Reserve raised interest rates for the fourth time this year, hoping to slow economic growth and reduce inflation. But what do these rate hikes mean for the average consumer — especially women and minorities — who have been hardest hit during the pandemic?

Over the past two and a half years, women have left the workforce in droves and their jobs have still not fully recovered. According to the Bureau of Labor Statistics, women lacked nearly 400,000 jobs in June compared to February 2020.

A quarter of mothers said they had reduced hours or not worked at all due to interruptions in childcare during the pandemic, leading to significant financial losses, according to the Federal Reserve.

Professor Paula Cole, an economist at the University of Denver who focuses on gender and inequality, told Know Your Value that the financial gap already present between men and women could impact women’s ability ride out those rate hikes and borrow money.

“Women tend to end up with higher interest rates when they borrow money because they’re not as financially stable due to these wealth and income disparities,” he said. she declared. “And so already they are facing slightly higher interest rates than their male counterparts, regardless of income level.”

Although there has been generational progress in closing the gender wage gap across the country, this growth has stalled amid the rising cost of living, the ongoing pandemic and economic consequences. conflicts at large, according to the World Economic Forum.

Additionally, if the economy doesn’t slow in response to rate hikes — especially the job market — Cole said it could have a disproportionately negative impact on women.

“Again, because of the wealth gap between incomes, it’s just harder for women to prepare for being laid off, because they’re less likely to have savings in the first place,” he said. -she explains. “'[This is] because of the type of work they do, the gender wage gap, the care responsibilities they have at home for children and the elderly.

With the potential for at least one more interest rate hike looming in September, here are some key tips to help blunt the heat of rising prices in the fall:

Now is the time to know – and pay – what you owe.

With the cost of borrowing only to rise as inflation remains at a 40-year high, credit expert Sara Rathner of NerdWallets says it’s imperative that women rule their budgets .

“This can help you, first, identify expenses that you can quite easily cut from your budget without really noticing and free up your cash flow… [to] help you understand, how to choose to spend money? she said Know your worth. “Sometimes it can be swapping one habit for another and that can make a big difference over time.”

NBC News senior business analyst and MSNBC host Stephanie Ruhle recommended prioritizing debt first — including paying off credit cards in full, not just interest payments. “You want to try to take control of your finances and know what you owe,” she said. “Write everything down and try to start cutting it down.”

Rathner said this is especially important for women, who tend to have lower credit scores than men, according to a Federal Reserve study. “It could be as simple as making sure you pay every bill on time every month, including rent, utilities, credit card payments and other loan payments,” she said.

Take advantage of the hot job market.

Ruhle added that now is the time to re-enter the workforce — or move on — while the labor market is still hot. This way, women can reap its benefits before higher interest rates potentially slow business growth.

“While everything is going well – getting a new job, asking for more money, asking your boss for more – just do it,” she said. “It’s a good time to be the worker, not necessarily the employer,”

Explore other options.

In a time when there is so much economic uncertainty, it can sometimes be difficult to know what financial action – if any – to take next. The good news is that you have other options.

Rathner and Bankrate.com analyst Sarah Foster recommended looking into a balance transfer card with zero percent interest, depending on your situation. “Obviously you need to compare the transfer fees for that balance, but if you have a large enough balance, that might help,” Foster explained.

Use higher interest rates to your advantage.

Yes, there is a silver lining amid soaring interest rates: savings accounts are becoming more valuable! When rates rise, these types of accounts benefit, especially high yield ones.

“If you have a checking savings account, find out what interest rate it pays, what annual percentage yield (APY) you’re getting out of that account, and see if there’s anything wrong with it. better because it’s so quick and easy to apply for a new bank account,” Rathner said. “It can make a really big difference in how much money you earn through interest each year.”

Be proactive, not reactive.

While this time can be stressful and anxiety-provoking, Rathner said it’s not wise to make big financial or financial decisions in an emotional frame of mind.

“It is important not to hear this news and assume the sky is falling on us. Because if you operate on that assumption and you’re anxious all the time, it’s actually going to have quite a negative effect on your decision-making,” she said.

Likewise, Ruhle advised female consumers to be proactive, not reactive in these difficult economic times.