Is the time right to make major purchases?
How rising interest rates can impact your plans.
In this article...
- Consider major purchase carefully
- Pay off high-interest credit cards and loans
- Waiting for rates to come down could pay off
Cash or finance?
Lisa: "Right now, the decision to pay cash or finance a purchase is heavily influenced by our concerns over high interest rates. However, we believe the focus of the decision should be on the overall affordability of the purchase. Interest rates could go up further or they could go down again; we just don't know. We want to be certain that the purchase works into our clients' long-term plan, no matter what the current economic situation is. Major purchases and how or when to pay for them need to be integrated into that long-term financial plan."
Sean: "Play to your strengths. If you have sufficient liquid assets that can be accessed without large tax hits, rates at these levels can make cash payments attractive. Conversely, if you don't have large excess liquid assets but have strong recurring income, such as pensions, rentals, Social Security, etc., take advantage of the opportunity to stretch out the payments and not deplete your necessary liquid assets just to avoid a few extra percentage points of interest. Just make sure to not overburden your monthly cash flow with the added expense. Honestly, if another percentage point change makes or breaks the payment decision, you might want to reconsider the purchase overall at this point."