Apr 23, 2018
Learn 3 ways to protect your wealth when interest rates are rising.
The economy operates on cycles.
There is a key indicator of where we are in the cycle.
The key indicator is interest rates.
Interest rates are controlled by the Federal Reserve.
They set the rates and determine when to raise interest rates.
Interest rates are the cost of money.
It’s how much we pay to borrow money from banks.
It’s something I want you to pay attention to because many people were surprised by the crash of 2008.
They thought housing prices would only go up.
They thought is would continue forever.
But interest rates were rising, which meant the Fed was slowing down the economy.
When rates rise, people rush to buy homes.
There can be a big boost to prices at the end of the bubble.
If you don’t understand it, you can be caught thinking you have to rush out and buy a home because appreciation is going crazy.
Just as people do that, the market slows, sale reduce, until prices have to drop and supply increases.
It can become a downward spiral.
Be aware when interest rates are being lowered, that is positive for the economy.
When interest rates are rising, it’s negative (slowing) the economy.
That’s not the time to take a big risk, it’s time to reduce your risk.
Step 6 to wealth is “Protect your wealth.”
It means don’t stay too leveraged too long.
Here’s what you need to do:
1. Pay down high interest rate debt.
2. Refinance from variable rate mortgages to fixed rate mortgages.
3. Start being more cautious with real estate, which is interest rate sensitive. Take less risk.
When interest rates rise, it’s a time to become more cautious with real estate.
Not the time to be over-leveraged.
Watch the cycle and understand what rising interest rates mean and where you are in the cycle.