Experts have drawn parallels between the high inflation of the 70s and 80s and what’s happening today.
Back in the mid-80s, homeowners dreamt of a day they would see mortgage rates below 10 percent.
We’ve been extremely fortunate over the last few decades to see our interest rates at record lows, however, we are now seeing them climb again and it’s causing some panic for owners and buyers.
Here are a few tips on how to ride out a recession:
Pay Down Debt
One of the most important things you can do during times of high-interest rates is to pay down debt, starting with the debt that holds the highest rate.
While this will take a lot of discipline, it will save you countless dollars in unnecessary interest payments.
There are still plenty of options for consolidating debt with lower interest rates and may be a great option for you if you’ve got debt spread across various credit cards, loans, etc.
As tempting as it may be to take money out of your investment accounts, especially as you watch numbers take a dive, we highly advise against this.
We recommend that people remain invested, maintain their asset allocation that was designed in order to achieve their goals and objectives in the timeframes that they have set for themselves and continue to add to their investment portfolio through their retirement account savings.
Dollar-cost averaging is one of the most trusted strategies. It’s investing the same amount of money at regular intervals, regardless of what the market is doing.
By taking advantage of lower valuations you’re effectively buying more shares at a lower price. This is a great opportunity for younger generations to invest at a lower price.
Save, Save Save
This can be extremely difficult when every trip to the grocery store is costing you more and the price of fuel, along with everything else is going up, but saving is always extremely important.
As interest rates continue to rise, we will being to see interest rates higher in our savings accounts, and newly fixed income securities.
Saving your money in a high-interest savings account during this time, you are going to see growth faster than you would have a few months ago. While it may not keep pace with current inflation, it’s sure to help build a safety net.
Settle in for the Long Haul
The 1980s was a long decade. There were two recessions and it was years before inflation was under control and interest rates began to drop. And although our current situation is a little different, if there’s anything to be learned from the past, it’s that inflation and higher interest rates will be here for a while yet.
Throughout this time, try to work as hard as you can, make as much money as you can, and be as frugal as you can.
You have to be prudent, you need to pull back and watch your spending.