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Bend is changing. Every day, I hear concerns from people in our area. Long-time residents are upset about high home prices squeezing them out of the market. Aspiring entrepreneurs are shifting financial strategies to flex with the economy. Retirees are stretching their budgets as neighborhoods transition from town to city. I recently visited my hometown in Australia, and it was there that I realized these enormous shifts are happening in communities everywhere. The transformation is unsettling, but none of us are alone.
As we each navigate tumultuous times, I’ve been helping people of all backgrounds address one of today’s biggest challenges: financial security. As the South Bend Branch Manager at OnPoint Community Credit Union, I hear people’s worries over soaring prices and interest rates eating away at budgets and savings. Underlying all that economic uncertainty is the ongoing repercussions of the pandemic, making it challenging to plan for anything. To empower our community during this time, I want to share my thoughts on today’s most common financial questions about inflation, interest rates and personal finances.
How do I navigate inflation?
My advice is to get back to the basics. Start by evaluating your cash flow. Take note of your spending habits, savings and debt. Adapting to price increases requires consideration of your expenditures top to bottom. Where can you trim? Try cutting little-used phone apps or entertainment subscriptions. Consider carpooling and meal planning as opportunities to cut down on transportation and grocery bills. Saving $15 here and there may be enough to make up for various increases. Additionally, it’s still critical to have a rainy day fund that covers at least six months of your rent and living expenses during times of inflation.
Do rising interest rates mean it’s a bad time to take out a loan?
It depends. Let’s put interest rates in perspective. On May 4, the Federal Reserve raised rates by half a percentage point, its second increase since March and its largest increase since 2000. Despite recent increases, rates remain relatively low. It is still a favorable borrowing environment if you need access to funds. For example, considering rising gas prices, you may decide that it’s time to find a fuel-efficient or electric vehicle to reduce your dependence on gas.
Additionally, it’s still an excellent time to leverage home equity. With home values on the rise, I highly recommend looking at a home equity line of credit (HELOC). You can secure your HELOC today and only draw from it if and when you need it for future expenses like home renovations, college tuition, braces or unexpected expenses. HELOCs often have rates much lower than credit cards, providing an opportunity to consolidate debt and improve cash flow.
Do rising rates mean my savings will go up?
Interest rates on deposits remain low, which means traditional savings accounts and CDs are still not generating huge gains. For people looking at high-yield savings or CDs, it might make sense to wait and see how the Fed moves on interest rates going forward or explore short-term CDs or savings for a better rate without sacrificing long-term flexibility. Checking in with your local credit union on a savings strategy is a good bet, as they can discuss options that will fit your needs.
What does this economic environment mean for the next generation?
The economic uncertainty of the past two years has been uncomfortable for many families. I encourage parents and guardians to use this as an opportunity to discuss finances with the children in their lives. Talking about finances is hard. However, talking about long-term financial planning can help prepare kids for adulthood. If you’re cutting back on spending, talk with your kids about the changes. Learning about how to change spending habits can prepare youth for any financial situation.
Additionally, I encourage caregivers to be open with children about the importance of saving. Many financial institutions have incredible resources and options to support your efforts such as high yield savings accounts or financial literacy tools designed just for kids.
What are some resources that I can access to help me plan?
We recently released OnPoint’s Guide to Financial Wellness, which gives direction for improving household finances. I also encourage people to watch what’s happening with inflation and adjust their budgets accordingly. Interpreting interest rates is a bit trickier. I recommend speaking to your financial institution about that and other complex money questions.
These are just a few tried and true principles that apply to most of the people in our community, but financial needs are as diverse as the people who live here. Whether you’re a lifelong Central Oregonian, a recent transplant or someone in between like me, we can build a stronger community by creating a more secure financial future together. If you’re still unsure where to start, I encourage you to stop by our branch on Highway 97. We look forward to meeting with you.