Learnvest.com released a relevant article this morning, especially as lawmakers on The Hill are deciding what to do with the federal debt ceiling and the fiscal budget. Entitled, "
Finally a Reason to Spend: Interest Rates Down," the article discusses the impact of the
Fed setting interest rates near 0 for the last 2 years, and what this means for you.
While the federal government is encouraging you to borrow money with loans that have very low interest rates, and then spend that money to stimulate the economy, you should always evaluate your personal finances first. If you are already struggling with student loan debt, a mortgage, credit card debt, car loans etc you should probably focus on paying those loans down, especially while inflation is high. I've noticed a lot of tacit advertising that tries to convince and sometimes even
guilt the consumer into buying products they simply can not afford by saying that it is stimulating the economy. While every purchase you make does support businesses, you should
never spend more than you need to.
The chart below, originally constructed by the Learnvest team, sums up the best plan of action when the interest rates are high versus low.
High Interest Low Interest Rates
| Banking | Good returns on your savings | Bad returns on your savings |
| Getting A Loan | More expensive | Good time to get mortgage, business loan, etc. |
| Paying Debt | Debt is more expensive | Great time to pay off debt |
| Investing | “Safer” investments still get good returns | Good way to make returns since bank rates are so low |
As you can see, if you have minimal debt and established emergency funds account, and a reasonable amount of liquid savings, then you might want to take advantage of low interest rates and either apply for a mortgage or refinance your existing one. If you already have existing debt, pay it off as soon as you can since inflation means your money won't be worth as much as time progresses.
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