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Rampant inflation has cooled off significantly in America. While it remains slightly elevated, the Federal Reserve continues to hold its target interest rate. But if you think now is the time to upgrade your lifestyle, “Shark Tank” star and investor Kevin O’Leary has a wake-up call.
“We’re looking at a downsized America,” he said in a November interview with Fox Business. “Three years ago, even 24 months ago, you’d get a mortgage at 4.5%. You’re lucky to get one at 8% today.”
But the impact of high rates extends beyond the housing market. Edmunds reports that borrowing rates for new vehicles in the third quarter of 2023 hit an average of 7.4%, a figure not seen since 2007. In Q3 2024, it sat at 6.11%.
O’Leary summed it up by saying that if you are in your early 20s, your lifestyle will be “about 20% less.”
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The blunt reality is that while the headline inflation figure is no longer at 40-year highs, price levels remain elevated. In April, the U.S. consumer price index jumped 2.3% from the previous year.
Since the U.S. central bank is committed to using monetary policy to bring inflation down to 2% over time, O’Leary believes more rate hikes could be on the way.
Despite this intimidating financial climate, you’re not totally in the dog house so long as you adjust your finances accordingly. Here is how you can do just that:
Plan, don’t panic
If the prospect of a “downsized America” has you wanting to readjust your financial plan, consider hiring an advisor to help get you on the right track. Finding a financial advisor that suits your specific needs and financial goals is simple with Vanguard.
Vanguard — an investment management company — offers hybrid advisory services that combine advice from professional advisers and automated portfolio management to make sure your investments are working to achieve your financial goals.
With a minimum portfolio size of $50,000, this service is best for clients who already have a nest egg built up but are ready to grow their wealth with a variety of different investments.
All you have to do is set up a consultation with a Vanguard advisor, and they will help you set a tailored plan and stick to it.
Take more steps to reduce debt when rates are high
As O’Leary indicated, you may have to downsize — particularly for items that require borrowing money.
When rates are high, it makes sense to reduce your monthly costs so as to pay down your debts as quick as you can, while also increasing your savings.
You can reduce the cost of essential bills like home insurance and auto insurance just by taking a closer look at what’s available.
Do not assume companies charge the same price for the same benefits. The index for motor vehicle insurance has increased by 15% since March 2022, according to the U.S. Bureau of Labor Statistics.
BestMoney is a platform where you can compare the home insurance rates.
Simply answer a few basic questions, and the platform will quickly show you the top insurers in your area so you can find the best deal for the coverage you need.
Similarly, OfficialCarInsurance can help you find and compare car insurance rates quickly and easily.
When you fill in a bit of information about yourself, bestmoney.com will provide you with a list of car insurance options near you.
There are essentials you need to include in your budget, so make sure you aren’t overpaying on these monthly bills amidst high inflation.
Paying down debt amidst high interest rates and multiple bills can be daunting. But you can actually save money by consolidating your debt with a personal loan from Credible.
Credible makes it easy to find the right loan to streamline your debt repayment at an affordable rate. Their online marketplace of vetted lenders provides personalized personal loan offers based on your needs.
As a result, you can pay off your debt at one interest rate, instead of juggling multiple balances every month.
Debt repayment isn’t the only place you could be saving money in the current financial reality.
Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Find inflation-resistant investments
Inflation-resistant investments such as real estate can act as a solid safeguard against economic volatility. The good news is that, unlike in the past you don’t have to be an accredited investor to make your mark in real estate.
For accredited investors, Homeshares gives access to the $34.9 trillion U.S. home equity market, which has historically been the exclusive playground of institutional investors.
With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property.
With risk-adjusted internal returns ranging from 12% to 18%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets.
Another option is targeted investments in hot real estate markets. Arrived has simplified the process, making it easy and accessible for everyday investors through the Seattle City Fund.
The fund takes a strategic advantage of Seattle, a global business hub and home to some of the world’s most influential companies, including Amazon, Microsoft, Starbucks and Boeing. Potential returns are generated through rental income and any appreciation in the value of properties within the fund. The average home value in Seattle is over $910,000, with a 10-year average appreciation of 95.5%, according to Redfin.com
The Seattle City Fund lets you capitalize on the city’s steady growth and increasing property values, giving you diversification across multiple properties. Each home in the fund is projected to have equity ranging from $800,000 to $900,000.
If you are an accredited investor looking to add a larger real estate position to your portfolio, you also have the lucrative potential of commercial real estate open to you.
First National Realty Partners — a private equity firm that specializes in commercial real estate — stated that in times of market stress, there’s an opportunity to acquire high-quality properties at a discount.
With FNRP’s platform, accredited investors have access to institutional-quality, grocery-anchored commercial real estate investments. And since the investments are necessity-based, they tend to perform well during times of economic volatility and act as a hedge against inflation.
Using proprietary technology, FNRP’s team of experts vets every deal against a rigorous set of investment criteria and manages them in-house, which means you get to enjoy your quarterly returns without worrying about the quality of your investment.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
