Tips to surviving interest rates rises.
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Interest rates have a significant impact on the financial wellbeing of individuals and businesses. Interest rates in Australia have been at historically low levels for the past decade, but all signs are pointing to likely interest rate rises. In this blog post, we will explore ways to survive future interest rate rises.
1. Refinance your loans
One of the most significant impacts of rising interest rates is the increase in monthly mortgage repayments. Refinancing your home loan to a lower interest rate can help you reduce your monthly repayments and save you money in the long run. Shop around for the best rates and consider talking to a mortgage broker who can advise you on the best options for your situation.
2. Pay off debt
High-interest debt such as credit card debt or personal loans can quickly become unmanageable when interest rates rise. Focus on paying off these debts as quickly as possible, as the interest charges will only increase as rates rise.
3. Build an emergency fund
An emergency fund can help you weather financial storms such as job loss or unexpected expenses. Aim to save three to six months' worth of living expenses in a high-interest savings account. This will give you a cushion to fall back on if interest rates rise and your expenses increase.
4. Cut back on discretionary spending
When interest rates rise, it's essential to cut back on non-essential spending to reduce the impact on your budget. Look for ways to reduce your expenses, such as eating out less, cutting back on entertainment, or finding ways to save on your utilities.
5. Consider fixed-rate loans
If you are concerned about rising interest rates, consider fixing the interest rate on your home loan or other loans. Fixed-rate loans provide certainty and can help you avoid the impact of future interest rate rises. However, be aware that fixed-rate loans often have higher interest rates than variable-rate loans, so make sure you compare the costs before making a decision.
6. Invest in income-generating assets
Rising interest rates can have a positive impact on income-generating assets such as bonds or dividend-paying stocks. Consider diversifying your portfolio to include these assets, which can provide a steady income stream to offset any negative impact on your finances.
Interest rate rises can be challenging to manage, but by taking proactive steps, you can reduce their impact on your finances. Refinancing your loans, paying off high-interest debt, building an emergency fund, cutting back on discretionary spending, considering fixed-rate loans, and investing in income-generating assets are all strategies that can help you survive interest rate rises.
The information within this blog is general in nature and not designed to replace professional advice. Before applying for a credit product you should consider the appropriateness of the product taking into account your needs, goals, objectives and financial situation. Contact us today to work out what is right for you.
