Fears About The Current Economy? Here Is What you Can Do! (Plus Crucial Info For Home Buyers!)

Right now, interest rates have hiked up to a 30 year high and the Fed is gearing to continue the increase. They are purposefully dousing the Real Estate Market and their intended result is less people able to afford home ownership. They refer to this as balancing supply and demand, but the market would have balanced organically once all the renters wanting to buy found homes. Unfortunately, with the Fed’s method of hurting working families by increasing the cost of home ownership, more families will be renting, during a time when rents will be very expensive.

In addition, there is a looming and intended recession that is coupled with inflated prices on necessary goods and services. Be aware that inflation numbers are relative statistics, so that eventually, when inflation is “down” that does not mean these high prices will necessarily go away. If an apple cost 50 cents last month and costs a dollar today, it is up 50%. If it costs a dollar next month, it is up 0% and yet, it is still costing us a dollar.

So what do we do to protect ourselves during this time of economic challenges? There is a great deal we can do.

First, if you were planning to purchase a home, local banks have, by far, the best rates right now. For instance, Milford Bank is offering 5.75% to first time home buyers who meet their criteria. We are still getting multiple offers on properties, but they are well below the asking price, so make sure you are working with a market expert (me) who can give you real time data on property values so you do not over pay.

BUT, do it! This may be your last opportunity before the Fed closes the window on you. If you can afford the monthly, home ownership is one major way to circumvent housing inflation, in that your monthly payment remains the same throughout the entire life of the loan. Rents, however, are on the rise.

As for the rest of us, Jean Chatsky, author of “How to Money: Your Ultimate Guide to the Basics of Finance” gives some great tips and ideas:

1. For sanity’s sake, calculate YOUR inflation rate. Reported inflation rates take into consideration things that may not affect you. For instance homeownership takes away the impact of the current economy because your monthly mortgage payment remains the same. Recognize also that if you do not sell your stock portfolio, the down market will not actually impact your finances. Waiting out the market is your best defense. Take a look at what is not affected, in order to retain some peace of mind.

2. Now, take a look at what IS being impacted and make smart adjustments:

   1. Food is at a high right now but it is estimated that most Americans throw away 40% of the food they buy. By proper planning and eating your leftovers, you can actually beat inflation! My family is challenging ourselves to not shop until all our food is gone - yams for breakfast anyone? Kidding, but you get the picture.

   2. Gasoline is also at a high. If you are working virtually, the price of gas has less of an impact and can be added to diminishing your personal inflation rate. And if an EV is not in your future, then planning, again, is the solution. Combine your errands and outings so you are using less gas and ride with others or take public transportation when possible. The train can land you in Fairfield Center from Milford, so why pay for the gas and suffer the parking? Stop at the grocery store and pharmacy on the way home from your appointment with the barber.

   3. Put a pause on purchases.

      1. This is a great time to clean out closets and look at what you already have and what you do not use. Nothing stops me from purchasing new clothes more than looking at what I bought and did not wear!

      2. Track your spending for just one month to see if your spending aligns with your goals and your belief system. Is there something else you can do with the $125/month Starbucks habit or the $300-$400 spent eating lunch out every day? (Those can add up to $6000+ a year!)

   4. Do a yearly financial inventory, making sure you are carrying the proper amount of insurance and also have available funds to cover at least 3 months expenses. This can also help curb your appetite for spending - we may be facing some months of financial challenges and being ready is your best defense.

Remember, if you own a home, you have already hedged against the economy’s ups and downs. If you don’t, there is still a window of opportunity for you to get off that roller coaster! You are not beating the market by waiting for prices to go down, because with higher rates, your monthly may even be higher next year - do not let the Fed block you from home ownership!