The Federal Reserve is expected to reduce interest rates for the third time this year, creating an opportunity to adjust your financial strategies. These changes can affect your loans, savings, and investments. Here are four steps to take before the Fed’s upcoming decision.
- Lock in a CD
Consider opening a certificate of deposit (CD) to secure current interest rates. When the Fed lowers rates, CD rates often decline as well. Locking in a CD now ensures a fixed return, with some CDs offering annual percentage yields (APYs) as high as 4.70%. CDs are a good option for money you won’t need immediately, as withdrawing early can result in penalties. - Open a High-Yield Savings Account
High-yield savings accounts provide significantly better returns than traditional savings accounts. These accounts are ideal for emergency funds because they allow easy access to your money while earning competitive interest rates. However, since their rates are variable, they may decrease if the Fed reduces rates. Opening one now lets you take advantage of the current higher rates. - Delay Major Purchases
If you’re considering a large purchase like a car or a home, it might be beneficial to wait. Lower rates following a Fed decision could result in more favorable loan terms. For those in the housing market, exploring variable-rate mortgage options might provide initial cost savings, though it’s important to consider the potential for future rate increases. - Pay Down Debt
Reducing high-interest debt is always a prudent financial move. High-interest obligations can limit your ability to save or invest. If rates drop, consolidating your debt into a lower-interest loan could help reduce your overall interest costs. Start researching reputable lenders now so you’re ready to act if rates decrease.
Taking these steps ahead of the Fed’s announcement can help position you to adapt to the changing financial landscape effectively.
