Tehachapi's Online Community News & Entertainment Guide

Rates, recession, inflation...oh my!

Navigate Lending

If you didn't know before, you know now... I am a fan of "The Wizard of Oz." For many reasons, but also because I am a fan of knowing that many of those scary things ended up not being so scary.

So, what does this have to do with rates, recession and inflation? Well just like lions, tigers and bears... (oh my!) they may not be as scary as they seem if you are aware of the potential impacts, prepare yourself properly and make wise decisions with your money. Let's review some actions commonly taken that can be considered smart positioning for times of rising rates, higher inflation and recession potential.

Paying down excess debt: credit card debt and high usage can be a financial killer during times like this. Finding a way to pay off these excessive payments as well as debts that are likely at a cost upwards of 20% interest and rising will give your monthly budget some essential breathing room to tackle necessary costs as they rise. Avoid new debt other than investments.

Protect your FICO score: keeping consumer debts low will help, but when money gets tight it can be easy to let a month or two of payments slip by that 30-day late mark. Late payments can harm you for periods long past these temporary market conditions and cost you money in the long run. It may be a great time to set automatic payments to ensure they are in on time for those debts that you cannot pay off or consolidate.

Save your money: There are industries that thrive in a recession and industries that suffer. If you are impacted by one of those industries that struggle during recession periods, make sure you cut unnecessary costs and save as much as you can.

Budget and stock essentials: I am not encouraging you to clear the store shelves of toilet paper and baby formula, but this is the time to have a little excess in certain areas. Stockpiling some savings would be very wise as mentioned, but also if there are things that would benefit you having on hand from a cost standpoint and essential needs, it may save you in the long run. Less trips to the store, saves gas. If prices rise, you captured lower prices.

Cashing out equity: Many homeowners are using the blessing of equity to solve all the problems above and secure not only a lower monthly out of pocket overall, but an emergency fund in savings as well. Historically during recessions, housing values continue to increase. Homeowners can use equity they have now and feel confident their home will continue to grow in value.

Real Estate Investment: Capturing today's purchase price saves you from increasing values that are projected. Interest rates typically drop during times like this so you can always refinance later and in the long run save both on the purchase price and the rate. Just don't spend a lot of money toward lender fees or discount rate points.

There's no place like home!

Alysha Boles – Mortgage Strategy Advisor for the Navigate Lending Team is a licensed loan officer serving California and Texas personally and in multiple states nationwide as a team. She can be reached at (661) 858-7214, or inquire online http://www.advisoralysha.com.