Finding the Silver Lining
As news of closures, market volatility, and new cases of coronavirus are discovered, it's only natural to feel overwhelmed and helpless. While staying the course when it comes to your investments is likely the best approach (assuming your investments match your goals), here are a few things that you might want to take action on financially.
Open a high yield savings account
Although the interest rates on high yield accounts are likely to decrease due to the Fed’s recent cut to interest rates, it is still worth your time to do some research when it comes to your savings account. Here are some tips on how to get started:
Look up the interest rate of your current savings account. How does it compare to what you might be able to get? Bankrate.com and Nerdwallet are some of my favorite sites to compare current rates for high-yield products.
Don’t just pick the bank paying the highest interest rate. You’ll want to make sure there are no account fees or minimum balances. One of my favorite options with no minimum and no account fees is Ally, but there are lots of other great options out there too.
Review your Mortgage- Does it make sense to refinance?
Mortgage rates are closely tied to the 10-year Treasury note which last week dropped to a new low of under 1%. For the first week in March, this translated to an average 30-year rate of 3.29% and 2.79% for 15-year loans according to the Wall Street Journal. In other words, it’s cheap to borrow.
Getting in touch with a mortgage representative or broker may prove difficult at this time. The fact that it’s cheap to borrow coupled with many large companies transitioning their employees to a work from home model is making it difficult to get a hold of anyone. In addition, due to high demand and decreased liquidity in the mortgage markets, rates have actually increased slightly in the last week. While you are waiting for a callback, my recent post can help get you started on running the numbers.
If you have federal student loans, we found out this week that interest payments are currently suspended. The details of how long this will last and whether or not you will have to pay back interest at a later date have yet to be released. If you’re considering refinancing your student loans or already have private student loans, now might be a good time to look at your options.
Here are a few things to consider:
If you already have private loans, it's a no-brainer to refinance to a lower interest rate. Sites like Nerdwallet have some great comparison tools that will give you an idea of where rates are currently. There’s a lot of competition in the student loan refinance market so make sure to see if your lender offers protection in case you lose your job or pass away. This is a great benefit if you have someone that depends on you financially. Keep in mind that private lenders often benchmark their rates to things other than the fed funds rate.
If you have federal loans, you have to weigh the benefits of keeping your loans federal versus a possible lower rate. The federal government offers the best protection should you lose your job. This could be incredibly helpful if you are laid off as payments can be suspended for up to 3 years. There are also other great protections like forgiveness at disability or death. And let’s not forget Public Student Loan Forgiveness which forgives the balance of your loan after 10 years of payments and working in a qualified public service job.
For those of you with federal loans contact your lender for more information on how they will be handling the suspension of interest.
Credit Cards and Other Outstanding Debt
Now is a great time to review any outstanding credit card debt or personal loans. With lower interest rates, it could make sense to refinance your debt. Again, I like Bankrate and Nerdwallet as a quick way to review rates and possible lenders. Checking out your local credit union often makes a lot of sense. They tend to have lower rates because credit unions are nonprofit organizations.
Interested in learning more? Read more about my firm, and check out my service options.
Christine Centeno, CFPⓇ, MS is the founder of Simplicity Wealth Management. She has over 12 years of industry experience as a financial advisor and is a member of several professional organizations including NAPFA, FPA, and the XY Planning Network. She also holds her Masters in Financial Planning. In 2019, after years of working for large firms, she founded her own firm. Simplicity Wealth Management provides clarity to the complicated nature of financial planning and investing by delivering comprehensive advice without hidden fees and unnecessary jargon that leaves you in the dark. The goal is to deliver transparent, easy-to-understand guidance to help clients achieve their financial goals and remain informed every step of the way.
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