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Council Post: The Silver Lining Of A High Interest Rate Environment

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Founder & CEO of Wolfgang Capital. Writing to inspire confidence in people’s financial lives. Devoted husband, human dad x2, fauna dad x5.

It’s easy to forget about the silent depreciation of your assets when it comes to inflation. After all, it’s not a separate dollar amount that comes out of your bank account that shows up in your statement. Instead, it’s the unspoken increase on every purchase you make. That sneaky bloating of everyday prices that seems to catch up only when you realize how fast your money seems to be disappearing.

In June 2022, inflation soared to 9.1%. As of October 2023, we’re back down to 3.2%. In relation, 3.2% sounds much more manageable, but in the grand scheme of your savings’ longevity, any amount of inflation takes its toll. If your hard-earned savings are sitting in a bank account, not earning any interest, they are suffering from an evasive and unnecessary decrease in purchasing power. In short, you’re missing the “silver lining” of today’s environment.

See The Glass Half Full

If you’ve caught a glimpse of any recent headlines, you probably feel the doom and gloom of today’s volatile economy. Everything we buy, whether it’s a dozen eggs or a new home, seems to have costs that have gone through the roof. Between the constant bellyaching about high mortgage rates, inflation and expensive housing in the news, it’s easy to get lost in a whirlwind of bleak sentiment.

Unfortunately, if people are focused on the bad things, they’re going to miss out on the opportunity that’s right in front of them. Just like most things in life, today’s environment can look like a glass that’s half empty or half full depending on your focus.

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Take Advantage Of High Interest Rates

What are some ways you can take advantage of a high interest rate environment without subjecting yourself to excessive volatility?

• High-yielding money market funds.

• A high-bearing interest rate savings account.

• Treasury bills or Treasury notes.

Is the money sitting in your bank account earning a beneficial interest rate? Due to the current environment, as of October, if you’re not earning 4%-5% or higher on the money you have sitting in the bank or a CD, you could be missing out on the unseen benefit.

If you aren’t comfortable with investments or don’t know enough about T-bills or money market funds, chances are there’s a bank offering a much better interest rate than you’re currently getting. Even if you don’t want to switch banks because you’ve been banking somewhere for years, that’s a silly excuse to let inflation eat into your savings.

The point is if your bank isn’t offering it, some other bank is. Even if you think you might need your savings, there are still investment vehicles that offer liquidity and are still earning higher interest than the current rate of inflation, such as money market funds.

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For example, if you’ve been looking for a home and you have your down payment sitting in a bank account not earning any interest, it will be sitting there idle, depreciating while you search. If you put that down payment in a money market fund that is earning an interest rate that’s outpacing inflation, you can take it out whenever you find the perfect home, and your money has been working for you all the while.

Make The Most Out Of Your Money

From my experience, people tend to be wary of making any changes when the market is experiencing turmoil. If the current headlines make the thought of moving money just too stressful, don’t be a deer in headlights. Most of the time, if you’re feeling uneasy about what you’re doing, it’s because of either a lack of understanding or experience. Learn about what your options are so you can make the most out of the money you’ve earned.

Chances are, you’ve worked very hard for your money your whole life. If your money isn’t working for you, then your financial life is basically left to the whims of whatever economic storm is brewing. Take a step back, look at where your funds are sitting and assess your liquidity needs. If you’re practical enough to have stowed away retirement savings, emergency funds or a rainy-day account, use that practicality to benefit from what others are complaining about. There’s always a silver lining.

Fee-based financial planning and investment advisory services are offered by Wolfgang Capital LLC, a Registered Investment Advisor in the State of California. Insurance products and services are offered through Wolfgang Financial Group LLC dba Wolfgang Financial and Insurance Agency (CA LIC # 0K07551). Wolfgang Capital LLC and Wolfgang Financial Group LLC are affiliated companies.

An investment in a money market is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money. Yields fluctuate.


Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?


Source: Fox Business

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