This Week In Your Wallet: The Fed Rate Hike, A Looming Recession And What To Do Now

This Week In Your Wallet:
The Fed Rate Hike, A Looming Recession And What To Do Now

Happy Tuesday, and first, a request for our women readers: We want to hear about your relationship with risk. We know there’s so much going on in our current economic climate, and we’re wondering: What does risk mean to you in 2022? And how are all of the recent developments affecting your relationship with risk today? The findings will help us plan and create content for you in the coming months. (Plus, everyone who takes our survey can enter to win Elton John tickets!) So, please let us know where you stand.

If you, like me, enjoyed the oh-so-fun task this weekend of filling up your car’s gas tank, then you may have found yourself feeling inflation like never before. Although I was fortunate enough to keep the price under $5 a gallon and not have to fill it myself (thanks, New Jersey) I found myself wondering how the average American — particularly those with long commutes — are going to weather the $6 a gallon we’re hitting in many areas. And those summer road trips? It’s not just gas making them more expensive. (Is anyone else noticing $350 a night for hotel rooms that would last year have been around $130??)

The Fed — in a move to fight inflation without tipping the economy into a recession — raised interest rates by 0.75 percentage points on Wednesday. This was the largest rate hike in 28 years, and such a sharp increase is aimed directly at taming the runaway growth in prices that Americans are facing. (On gas and hotel rooms, yes, but also everything else, including groceries, home goods, toiletries, the list goes on.) We know that economic conditions like these can lead to a recession, and economists are widely predicting that we’ll be in one by 2024. Some say it will come sooner. Others believe we’re already in it now. That’s the thing about recessions — you won’t know that you’re in one until after it begins; you can thank backward-looking economic indicators for that.

Meanwhile, the Fed has warned of more rate hikes later this year, and U.S. consumers are already beginning to spend less on travel, services, and restaurants as prices climb ever-higher, which is troubling although not particularly surprising.

So, what can you do other than drive as little as possible, and fall back on your coupon-clipping savvy? It’s actually a really good time to look at your finances and take some practical steps to recession-proof your financial life and blunt the blow, explains Michelle Singletary of The Washington Post. Accelerating some financial plans and postponing others may be the best move momentarily.

Additionally, if you’re carrying credit card debt, the interest you’re paying on those variable rate cards (and they are basically all variable-rate these days) is going to become more expensive with every successive rate hike. So focus on eliminating this debt as quickly as possible. If you need some pointers on how to pay down debt quickly and efficiently, we’ve got you covered here.

Disappearing (At Least From One Place) Medical Debt

Speaking of debt — there is a little bit of good news on the horizon. Starting July 1, Equifax, Experian and TransUnion will make changes to when medical debt will appear on credit reports, and for how long. Specifically, the three major credit reporting bureaus will stop including medical debt that went into collections once it’s paid off. (Currently, this debt can remain on your report for up to seven years.) The changes will eliminate an estimated 70% (!) of medical debt from credit reports. And with around 11 million Americans who have medical debt of more than $2,000, millions of consumers may see their scores immediately improve.

A (Small) Boon For Savers

Next, although we know that many people have seen their pandemic windfalls whittled away the past few months, if you have extra funds that you’re looking to stash during these inflationary times — savings rates are starting to go up. I got an email from my HYSA that the rate was jumping to .79% which isn’t huge, but at least it’s moving in the right direction. As always, online banks and credit unions typically offer better rates than brick and mortar banks — and you’ll start to see rates on CDs moving as well. If you’re wondering where to put your money right now to secure the best rates, then check out our rundown. And my latest go-to suggestion for a safe space from inflation and volatile markets continues to be I-Bonds, which currently offer a 9.6% rate of a return.

The One Truly Limited Resource

No, we can’t time the markets, but we can control how we spend our most precious commodity — time. Over the last two life-changing years, the pandemic has shown us just how finite our time really is, writes Rachel Feintzeig in The Wall Street Journal. Sure, the clock has always ticked, she says, but there’s something about this moment that’s making us question both our working schedules and the choices we make about how we spend our downtime. Whether you’re working remotely, hybrid or are back in the office, we seem to have both more control over our time and more pressure to spend it well.

If you find yourself asking questions like: “Are we doing what matters? Are we doing what makes us happy? Are we enjoying the moments we have and being present, really present, in the moments we have?” Then, instead of trying to check off every line item on your list, get to inbox zero, or run all your errands, focus on being okay with doing “just the most important things.” (If you need help on setting boundaries and saying ‘No’ more often, we have the ultimate guide.

A Side of Fees, Please

Finally, keep your eyes peeled for a side-order of extra charges and fees that might have been snuck onto your restaurant tab. Yes, we see you: “non-cash adjustment,” “fuel surcharge,” and “kitchen appreciation.” They’re yet another way the hospitality industry is coping with the impact of rising costs in food and labor. And no, just getting takeout doesn’t necessarily exempt you. You might still be charged a 20% service fee.

Look, we get it. We love our restaurants and want to be sure they’re able to a) stay in business and b) make the money they deserve. But, we don’t like being caught off guard, either. And if you’re wondering why restaurants don't just raise prices, the truth is that fees are often more effective because people will be less likely to notice them on the final bill.

Have a great week,

Jean

P.S. Gretchen Whitmer For The Win

On Thursday, Michigan Governor Gretchen Whitmer signed HB 5190 — a law that officially mandates personal finance classes for Michigan high school students. Michigan is now the 14th state (Florida and Georgia passed similar legislation earlier this year) in the U.S. to guarantee personal finance education classes for its students. Woot! That brings the percentage of high school students who have access to finlit courses to about 25%. Until we get to 100%, if you’re looking to help a young person take control of their financial futures, check out our new HerMoney book, “How to Money.”