A Note from Our Founder: How to Cash in on Rising Interest Rates

Happy Holidays!  It’s been an interesting year for financial planning and investment management.   We had the worst year for markets since 2008, inflation increased and so did interest rates.  As we wrap up 2022, we find ourselves in a very different economic environment than we were in at the beginning of the year.  I spoke with Wall Street Journal reporter Julia Carpenter last week about how to make the most of the current environment and wanted to share my thoughts with the Brooklyn Plans newsletter.

Interest rates have gone up – fast.  At the beginning of the year, the Fed was holding rates at around 0%.  With the latest hike coming out of the December meeting, the Federal Funds rate has increased to a target range of 4.25% – 4.5%.  This rate and other economic inputs affect the interest rates consumers pay on debts and the rates earned on savings.

Where we find ourselves now is at an interesting tipping point on interest rates because some low interest debts now cost less in interest than what is available through a high yield savings account, CD or government bond, all of which are backed by the U.S. government, making them some of the safest investments around.  Many high yield savings accounts are offering rates over 3% on an annual basis.  If you locked in a mortgage, auto or other low interest debt at a lower rate than you can get in savings, the calculus on what to prioritize may have changed.

While interest rates may continue to rise in 2023, we may hit a plateau and cruise at higher rates for a while.  If things get choppy and tip into a recession, then we will likely see rates come down.  While I can’t predict the future, Brooklyn Plans can help you take advantage of whatever 2023 has in store.  You can apply for a consultation with a Lead Planner to see how we can help you meet your financial goals in the New Year.  Happy holidays to you and yours!  Wishing you your most prosperous year yet!

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