Interest rates that affect our finances on a daily basis. They can benefit us by helping our savings grow while our money sits untouched in our account. Unfortunately, interest rates can also be a financial burden. They can cause our debt to increase whenever we borrow money, including spending on credit.
When it come to the interest rates we receive, they are determined by our creditworthiness and the influence of the broader market. If we are not financially prepared to pay for or afford a rising interest rate, we may feel a financial strain we did not anticipate or budget.
So how do you prevent financial headaches, improve your financial security, and give yourself financial room to cover interest rate increases? Try these three beneficial ways to prepare your finances for fluctuating interest rates:
Maintain a Good Credit Score: Practice responsible borrowing and credit card spending. By limiting or reducing your debt, you will increase your credit score. If you are carrying a large amount of debt from month to month on your credit card, your credit score can drop. But with a stronger credit score, you will qualify for lower interest rates. If you are faced with a higher rate than you would like, and you have a solid credit score, you are a good candidate to negotiate a lower rate with your financial institution!
Reduce Your Debt: The more debt you carry on a month-to-month basis, the more your credit score will not only drop, but you may also lose valuable funds to interest. Set a goal of systematically paying down your debt as much as possible over a set period of time. Assess your budget to determine how much you can afford to contribute to your debt each month. And push yourself to pay back as much as possible! Remember that your debt earns interest, which means you’re paying more in the end than the initial price tag on credit card purchases you make. The funds you lose to interest could have gone into your savings account instead. Based on the terms and conditions of your debt, the interest rate you are paying may rise, taking an even larger bite out of your finances.
Save For The Future: Interest rates can rise or drop at almost any time. This can make financial planning difficult. For example, you may budget a particular price-range for your home search. But when the time comes for you to become a homeowner, you may discover your mortgage rate is higher than what you initially planned for. Our retirement funds are also subject to the strains of interest rates. To counter this, save whenever possible. If we create an ample financial cushion, we increase the likelihood of achieving our financial milestone without faltering over fluctuating interest rates
Don’t be caught off-guard by rising interest rates. Improve your credit score, reduce your debt, and save what you can for the future. Want to learn more about how you can prepare for your financial future? Visit the Syncis blog at www.syncis.com/blog.