Hedge
Against Inflation
Many economists and the Federal Open Market Committee are
very concerned about inflation – you should be too. At today’s current inflation rate of 2%, the
value of a dollar will fall by half in 29 years. The average APR for credit cards is 16.71%
and expected to rise to 19% by the end of 2018.
If it sounds like you are being squeezed from both ends, you’re
right. Rising prices and rising rates
can paint you into a financial corner. How
can you hedge against inflation?
1.
Invest in
hard assets. Real estate is the
ultimate hard asset and often appreciates most in times of inflation. Rents are also pressured by inflation and
will generally rise. As a home owner
with a fixed rate mortgage, you can control your own financial destiny instead
of supporting someone else’s.
2.
Convert
your adjustable loan to a fixed rate.
Periods of low or declining inflation favor adjustable rates over fixed
rates when you borrow money for real estate. The opposite is true during times
of inflation. To hedge against
inflation, “disARM” yourself and you’ll sleep easier.
3.
Pay off
revolving debt. It will take 100
months (8.3 years) to pay off a credit card at current rates if no additional
debt is added. To elevate your credit
score, it is important to use your credit cards – but pay them off monthly to
avoid balances increasing and to avoid paying interest. If you already own a home, use the equity to
pay off debt. You can substantially
reduce your monthly outgo by paying off debt with your equity. Typically the cost of paying off debt with a
mortgage is only a fourth of the cost of credit card payments.
The Easterbrook Team
916.850.6050
EasterbrookTeam@spmc.com
www.homeloanworkshop.org
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