Tips for managing the current economic landscape

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Moderator: Welcome to the Everwise podcast. At Everwise, we empower individuals to take control of their financial futures. This series offers valuable tips and insights to boost your financial confidence and guide your decisions.

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I'm here with Jeff Sobieralski, the Financial Wellness Director at Everwise Credit Union, and we'll be discussing the current economic landscape and its implications for all of us. Hello, Jeff. Thanks for joining me.

Jeff: Thank you for having me.

Moderator: Let's dive right in. Tell me about the current economic landscape and how it has evolved over the past few months, and what it means for all of us.

Jeff: Well, there are both challenges and positive developments in the current economic landscape. One notable challenge is the increase in interest rates by the Federal Reserve. They've raised rates nearly 11 times in the past couple of years, primarily to combat inflation. However, this affects us as consumers because the interest rates on our credit cards tend to follow the Fed's lead. As the Fed raises rates, our credit card interest rates rise accordingly.

I've noticed a trend where, after saving more during the pandemic, people are now spending more on their credit cards. Personally, even though I have enough savings to cover my bills for six months, I didn't have sufficient funds to replace my roof after a major emergency. So, I'll need to use some credit for that, and it concerns me. This underlines the importance of distinguishing between our wants and needs and maintaining a separate savings account for the essentials. Additionally, the cost of food, fuel, and interest rates on loans for cars and mortgages can all be affected by these economic changes.

Moderator: Thank you for that overview. So, in your own experience, and from what you're observing, how is this impacting people and their families?

Jeff: As I mentioned earlier, there are some positive aspects as well. Those who can afford it and have money to spare are receiving better rates on their savings accounts at financial institutions. So, if you can put some money into CDs or money market accounts with favorable rates, you can earn more on your savings than with a regular savings account. I've also noticed an increase in the use of financial education tools by individuals. It's essential to instill financial literacy in children as well. Many parents are recognizing the importance of teaching their kids about money management, and I've noticed more people using financial education tools this year compared to the previous year.

Moderator: That's great to hear that people are becoming more informed. For those looking to navigate these economic conditions successfully, what specific actions or strategies would you recommend?

Jeff: Planning for the future during uncertain economic times is essential. One of the key strategies is to focus on building and maintaining an emergency savings fund. In our household, we've automated monthly transfers to our emergency savings account to ensure a consistent contribution. We maintain our minimum payments and allocate any extra funds to this savings account rather than paying off debts. This strategy helps prevent us from incurring more debt when unexpected expenses arise.

Another vital strategy is to differentiate between wants and needs. Consider budgeting and avoid using credit cards unless you can pay off the balance in full each month. Even rewards and cashback offers can lead to overspending if you're not careful.

In addition, looking for ways to increase your income can be valuable. Side jobs or passive income streams can help you make ends meet or accelerate your financial goals.

Furthermore, take advantage of financial windfalls like tax refunds or work bonuses. These can be used to bolster your emergency savings or make significant contributions to other financial goals.

Moderator: Those are practical and actionable strategies. It's clear that managing finances during challenging times requires discipline and a focus on the long-term. Now, for individuals who are struggling to save or plan for their financial future, what would you suggest to help them stay on track?

Jeff: Staying on track can be challenging, especially when you're dealing with financial stress. To help maintain financial discipline, consider creating a budget and regularly tracking your expenses. You don't need to spend hours on it every month; just a simple monthly review can make a significant difference.

Using spreadsheets or budgeting apps can help you visualize your financial situation. Also, involve all members of your household in these discussions and decisions to ensure everyone is on the same page.

Automating your savings is a smart move. Setting up automated transfers to your savings accounts ensures that you consistently contribute, even if you don't see the money leaving your checking account.

Building a financial cushion for emergencies, however small, can reduce the stress of unexpected expenses. And when you reach specific milestones, celebrate your achievements, which can motivate you to stay on course.

It's important to remember that financial education is an ongoing process. Keep learning about personal finance and consider seeking advice from a financial advisor to ensure your plans align with your goals and the ever-changing economic landscape.

Moderator: Those are great tips. It's evident that financial planning is an ongoing process that requires both discipline and adaptability. Lastly, how can individuals plan for the future and prepare for potential economic challenges that may arise in the coming months or years?

Jeff: Planning for the future requires a multi-faceted approach. First, start by creating a 529 college savings plan for your children's education. Even small contributions can accumulate over time, providing a valuable financial resource for their education. Automate these contributions to make it easier and more consistent.

Regularly review your financial plan with a financial advisor. Consider doing this annually, or even more frequently as you get older or experience significant life changes. Your financial advisor can help you adapt your plan to evolving circumstances.

Additionally, create a separate savings account for significant future expenses, like a new home, car, or vacation. Set specific goals for these savings, and you can use the motivation of nearing your goal to help you stay on track.

Remember, there's always hope for the future, even in challenging economic times. The U.S. has a vibrant economy with abundant opportunities for success and happiness. While times can be stressful, looking for the right resources and guidance can help you navigate these challenges and ensure a positive financial future.

Moderator: Thank you, Jeff, for your valuable insights. It's clear that planning and discipline are key to managing finances during uncertain economic conditions. We appreciate your time and expertise.

Jeff: Thank you for having me. It was a pleasure to share this information.

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Moderator: Thank you for listening. We hope you found this information helpful.

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