The Fed Is Rising Interest Rates: Will It Impact You?

The Fed Is Rising Interest Rates: Will It Impact You?

Interest rates are rising again as The Fed continues working towards raising the target interest rate to a “terminal rate,” or endpoint, of 4.6% in 2023. The terminal rate implies a quarter-point rise next year but no decreases, with a goal to slow spending and help curb the inflation rate as it stretches the dollar.

Raising interest rates is how The Fed works towards lowering the inflation rate since American consumers are paying more at the grocery store, gas pumps, for electricity, and consumer staples such as household goods and hygiene products. The interest rate hike to help curb inflation is due to multiple things:

  • Supply chain issues
  • A shrinking workforce
  • Higher wage demands
  • Increasing raw material costs
  • Unpredictable oil prices and transportation costs

Interest rates and inflation are generally tied together as The Fed attempts to control both and help boost the economy. Here are ways that raising interest rates may impact you:

#1- Borrowing Becomes More Expensive

For those shopping for a new home, borrowing becomes more costly due to higher interest rates. An interest rate hike may make affording a home impossible since the higher interest rate can make the monthly premium, plus interest and mortgage insurance push the borrower under the qualification debt-to-income ratio limit on the loan.

#2- Increasing Interest Rates May Increase The Debt

Small interest rate hikes spread over a few months likely won’t be as impactful to individuals with low debt-to-income ratios. But for those with a lot of debt, increasing interest rates are unwelcome because they may increase what they owe if they carry a monthly balance. Here are debts that are interest-rate sensitive:

  • Student Loans
  • Home Mortgages with Variable Rates
  • Credit Card Interest Rates
  • Auto Loans

While some of these debts may have a set interest rate, the rate often depends on the prime rate, the rate The Fed borrows to banks. The banks then mark up the rate, which is the rate they charge lenders on loans.

#3- Stocks And Bonds May Be Impacted

Higher rates can affect companies’ stock prices by influencing their bottom lines. Higher rates make it more difficult to borrow, expand, acquire competitors or partners, and slow stock repurchases.

Bond yields, closely correlated to the federal funds rate, move opposite their prices. When The Fed raises interest rates, the action implies a bond rout, and bonds trade with negative yields.

Ways To Offset Inflation And Rising Interest Rate Risk

While investors can’t control interest rates, there are actions they can implement to help decrease the impacts:

  • Allocate part of your portfolio to specific products to allow asset allocation strategies to address rising interest rates.
  • Improve your financial literacy about the correlation between interest rates and inflation.
  • Develop a budget to manage your spending
  • Reduce your use of credit since inflation generally increases interest rates

Are you concerned about interest rates and portfolio performance? Your financial professional may help reduce your anxiety about rising interest rates and determine appropriate strategies to help mitigate interest rate risk in your portfolio. Contact them today.

SWG 2444322-0922c The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

In addition, M3 Wealth specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

Is Now The Suitable Time To Sell Your Home?

There are several reasons why now may be a suitable time for you to sell your house. Depending on your situation, here is what you should consider in your decision:

Timing

Historically, spring and summer are when buyers start shopping for their new home, but so are fall and winter. The geographic location and climate where your home is located should determine when you should list your home. But remember, following home season cycles may mean you may have more competition. Do your research online or talk to a realtor before making your decision.

Inventory

Over the past year, surplus buyers and low inventory have resulted in bidding wars and higher home prices. While this has benefitted sellers in the past, not all geographic areas are still experiencing low inventory.

Interest Rates

The Fed is working to lower inflation by raising interest rates which impact the interest rates on mortgages. The average rate on a fixed rate 30-year mortgage is 5.54%, significantly higher than one year ago. Rising interest rates may keep some borrowers out of the market if their increased monthly payment no longer qualifies them for a mortgage. You may consider how rate increases may impact your ability to sell quickly.

More Home Equity

Since home values have risen nationally, you may have a record level of equity at your disposal. You can use the extra funds to purchase a new home, expand your real estate portfolio, or invest in other wealth-building strategies.

Increased Profit

If you put your property on the market, there’s a possibility it will sell quickly for the top dollar, given the current housing market. If you decide to sell your primary home, you may have to pay more to live in a comparable property.

According to Bankrate, there are signals to look for to determine the appropriate time to sell your home:

When Is It A Good Time To Sell?

  • If interest rates are low- Low interest rates entice more prospective buyers to enter the market, which is advantageous to sellers. An increased number of buyers shopping for homes often leads to bidding wars and drives up home prices, meaning you can likely sell your home for a solid profit.
  • If supply is short- A shortage of housing inventory also drives up demand and prices for available homes. What’s more, when housing supply is low, homes on the market tend to sell much faster.
  • If you’re ready to downsize- Downsizing may be a more budget-friendly choice than maintaining a larger, costlier home. For older homeowners, downsizing may even be a necessity.
  • If you need to relocate- If you’re relocating to a new state for a job or want to enjoy your retirement in a new area, and you need the profits from the sale to put toward your new place, selling is unavoidable.

When Is It A Good Time To Wait?

  • If rates are rising- Rising mortgage rates often mean fewer buyers and a smaller pool of buyers who can afford to offer the price you want.
  • If you’re upsizing- The cost to purchase a new, bigger home may be unaffordable in a hot market.
  • If you’ve recently refinanced- If you’re recently refinanced your mortgage, it may not make financial sense to sell just yet. You may actually lose money doing so, when considering the closing costs and other fees typically paid as part of the refinancing process.
  • If your home is in poor condition- Got a long list of repairs waiting to be completed around your home? You may want to postpone selling until some of the work can be done. It’s important to show your home in its best light in order to land the most favorable offer possible.
  • If you have no game plan- If you’re simply trying to time the market to make a profit and have no plan for after your home is sold, it may be best to wait.

Source- Should I sell my house now or wait? Bankrate.com

In Closing

There is a lot to consider before deciding to sell your home. Your financial professional can help you investigate home trends in your area and determine an appropriate strategy for your situation and how selling your home now may impact your finances.

SWG 2306340-0822d The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

In addition, M3 Wealth specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

5 Things To Consider When Starting Estate Planning

One thing to keep in mind about starting estate planning is not to set it and forget it. As life changes, your estate plan should too.

The reason people choose an estate plan is that it avoids probate.  Starting an estate plan helps ensure that your money, property, and assets transfer more easily to your beneficiaries after you die. Here are five things to keep in mind as you start your estate planning process:

Keep An Up-To-Date Inventory Of Your Assets

You may not realize how valuable your assets are or who may want them when you’re gone, so be sure to list who receives each asset and the approximate value of each in the estate plan. During the estate planning process, asset information to keep in mind includes homes, land, other real estate, vehicles, boats, and collectibles. Intangible assets to include in an estate plan are savings accounts, life insurance policies, retirement plans, ownership in a company, and more.

Remember To Establish A Will Or Update Your Last Will

Even if you have an estate plan, you will also need a will since it takes care of assets or details that may not be included in your estate plan document. Work with a legal professional to create a last will that will detail your wishes regarding the distribution of your property, money, and assets. Your will is also the document to appoint someone to care for minor children or pets. Keep this document up to date as your financial and familial situation changes.

When Starting Estate Planning Consider Using A Living Trust

A house is an excellent example of something that can be extremely time-consuming and emotionally exhausting to transfer after someone dies. If you don’t have a living trust document, your family may need to go through probate. This is a tedious court process to transfer your assets retroactively, which can be expensive and public.

Establish Your Directives

A complete estate plan includes legal directives such as a power of attorney document, a medical care directive, and a trust document. Who you choose as your power of attorney is a critical decision. So choose wisely and keep your power of attorney document up to date. In case the relationship with that individual(s) changes.

Review Your Beneficiaries

Consistently check the beneficiaries listed on your retirement and insurance plans. These designations can outweigh what is listed in a will. Life transitions that may prompt a change in beneficiaries. These transitions include divorce, the birth of a new child, the loss of a loved one, a marriage, etc.

In Conclusion

Your legal and financial professionals will work together to help ensure that your estate plan contains specific information regarding your securities and retirement assets to help transfer your assets to your heirs when it’s time.

SWG2379430-0822b The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

In addition, M3 Wealth specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

How To Find Financial Help

Personal finance refers to how you make money, save money, build wealth, and protect your assets. It’s an essential part of life as it impacts how you live today and what your life will look like in the future. If you’d like to take control of your finances to meet various financial goals, rest assured many resources can help. Below are some ideas to help you find financial help.

Personal Finance Books

Countless informative books make learning about personal finance easier and more enjoyable. Here are several books you may want to consider to help you get started learning about personal finance:

  • Rich Dad Poor Dad by Robert T. Kiyosak
  • The Millionaire Next Door by Thomas Stanley and William Danko
  • Your Money or Your Life by Vicki Robin and Joe Dominguez
  • The Millionaire Fast Lane by MJ DeMarco
  • Think and Grow Rich by Napoleon Hill

Personal Finance Blogs

In addition to books, you may want to follow and read personal finance blogs you find online. While financial professionals or industry experts write some, many come from everyday people who want to share their experiences and knowledge about money. Here’s a list of personal financial blogs to put on your radar:

Trusted Family Members Or Close Friends

Chances are, you know people with a track record of financial success. They make intelligent financial decisions and have set themselves up for a financially secure future. These people may be parents, relatives, colleagues, or friends. Don’t be afraid to ask them what has worked for their finances. Many people are open about their successes and willing to share their experiences to help others.

Find A Financial Professional

A financial professional can work with you to design a solid financial plan that suits your unique needs. However, before you choose one, consider the following:

  • Why you’re seeking professional financial services: Maybe you need help with a budget. Or perhaps your priorities are improving your investment’s return, lowering your tax burden, or creating an estate plan. Choose a financial professional with the right expertise for your particular goals and situation.
  • Your budget: Think about how much you can afford to pay a professional. Robo advisors, for example, charge a fee that’s a percentage of your account balance. Online financial planning professionals and services usually charge a flat subscription fee or a percentage of the assets they manage. Traditional financial professionals charge a percentage of the assets they manage, an hourly rate, or a retainer.

Consult Your Financial Professional

In conclusion, a financial professional can be an invaluable resource to help you review your financial situation and develop a plan to help you work toward pursuing your unique goals. Contact them today to get started.

SWG 2306340-0822e The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

In addition, M3 Wealth specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

The Real Costs Of Buying A Home

When you’re ready to buy a house, it’s essential to consider the upfront costs and ongoing expenses outside of taxes, utilities, and home maintenance.

It’s critical to be prepared and save for these expenses since you will be responsible for paying them during the home-buying process. Here are some of the actual costs of buying a home:

Earnest Money

Earnest money is paid to confirm a home purchase contract. Typically 1-3% of the purchase price secures the buyer’s right and protects them from the seller backing out of the agreement or selling it to another buyer. Earnest money is later used as part of the down payment.

Down Payment

A down payment is generally required but can vary depending on your credit score and the type of loan:

  • Conventional loans can allow down payments as low as 3% of the purchase price.
  • FHA loans, which the Federal Housing Administration backs, can have down payments as low as 3.5% of the purchase price.
  • VA loans, which the U.S. Department of Veterans Affairs guarantees, allow service members and veterans to get home loans with 0% down.
  • USDA loans from the U.S. Department of Agriculture let buyers in rural areas pay as little as 0% down.

Source: How Much Money Do I Need to Put Down On a Mortgage? Investopedia.

Closing Costs

Closing costs are lender and third-party fees. For example, realtor commissions, home inspections, appraisal fees, title search, and transfer fees, etc. You pay for these when you buy a home. These costs are generally 2% to 5% of the purchase price.

Private Mortgage Insurance (PMI)

If you make a down payment of less than 20% on a conventional loan, you’ll have to pay PMI. Wwhich can be up to 2% annually. These premiums protect the mortgage lender if you default on the loan. Once you pay down 20% of the loan amount, you may be able to cancel your PMI, but not always depending on your loan. You must understand how PMI may impact your situation.

Escrow Account

Your mortgage lender sets up an account to pay certain property-related expenses such as property tax. The money in the escrow account is a percentage from your monthly mortgage used to help cover high costs later versus having to pay a hefty fee at once.

Homeowners Association Fees (HOA)

If you’re buying a home in a homeowners association, you may have a monthly HOA fee on top of your mortgage payment. HOA fees pay for landscaping or painting, snow removal, lawn care, or big-ticket improvements such as roof repair or parking lot resurfacing.

SWG 2306340-0822b The sources used to prepare this material are believed to be true, accurate, and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or consequences arising from your access to or your use of third-party technologies, websites, information, and programs made available through this website.

In addition, M3 Wealth specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

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