money·6 min read

Skimm Money: Interest Rates, FIRE, And Inflation Worries

Woman looks concerned in front of a laptop
Design: theSkimm | Photo: iStock
Sep 23, 2022

Eyes On

Rising Interest Rates and What They Mean for You 

This week, the Fed bumped its benchmark interest rate up to 3%-3.25%. The increase follows a series of hikes aimed at getting inflation under control. But the higher interest rates are, the more expensive it is to borrow money. And borrowers (aka you) can wind up paying more for things like mortgages, credit card debt, and car loans. (Love that for you.)

Your move:

  • If you want to buy a home…Shop around for a mortgage. The Fed’s interest rate isn’t directly tied to mortgages, but it can influence them. So one lender might offer you a better deal than another.

  • If you need to buy a car…Get pre-approved for a loan so you know what you can afford before you start shopping.

  • If you have credit card debt…Work on bringing that balance down. Because higher interest rates = higher APRs on your credit cards. Psst…Here’s what to do if you get behind on payments.

  • If you’re paying off student loans…Skip the refi.Private loans can come with variable interest rates (read: they get more $$$ when the Fed raises rates). Plus, they’re not eligible for federal student loan forgiveness. 

  • If you've got savings…Put ‘em in a high-yield savings account. The best ones have interest rates of about 2%. Not enough to beat inflation (which currently sits at 8.5%), but better than the average (around 0.13%).

Financial Goal Unlocked

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The Goal: Retire ASAP.

A Winning Mindset: Overhaul your finances to reach your FIRE (aka financial independence, retire early) goals. Because you can call it quits well before 65…as long as you accumulate enough $$$. FIRE followers are typically high-income earners, have little to no debt, or are both. But you can adopt elements of the strategy even if that doesn’t sound like you. 

A Winning Strategy: Live way below your means to prioritize saving and investing. Here’s how to get started… 

  • Figure out your FIRE number. Aka the amount of money you need to retire on your terms.The formula is simple: Your annual expenses x 25 = Your FIRE number.

  • Reassess your budget. Because retiring ASAP means making some sacrifices RN. It’s not easy, but saving and investing up to 75%of your annual income is possible if you stick to a strict budget.

  • Pick your strategy. The FIRE method isn't one-size-fits-all.There's Fat FIRE, Lean FIRE, Barista FIRE, and Coast FIRE. Choose the one that fits your lifestyle and goals.

  • Set up your accounts. You'll be saving and investing A LOT, so you're more likely to hit your 401(k)and IRA contribution limits.Enter multiple investment accounts to meet your FIRE goal.


theSkimm: FIRE might seem extreme, but it is possible if you're willing to make some sacrifices (bye, lifestyle creep). Once you hit your FIRE number, work becomes an option vs. a necessity.  

And Also This…

Where can you rack up five-figure debt giving birth…

The United States. A Kaiser Family Foundation studyfound the average cost of pregnancy and birth  in the US is about $19,000. Example: One woman in Philadelphia received a bill for $84,000. She was covered by her husband’s insurance.But millions of Americans aren’t so lucky.

Who’s inspiring us to give two weeks' notice…

Jasmine Guillory. The lawyer turned popularromancenovelist quit her job in 2019 after herdebut novel “The Wedding Date”received rave reviews. Career change motivation unlocked.

What’s making us rethink our butter board plans…

Inflation. While groceries, in general, have gotten more expensive, butter prices have skyrocketed, up nearly 25% in August compared to last year. That’ll make your stomach churn.

Where we’re spending our $$$ this month… 

These Latina-owned businesses. A manicure that won’t chip? A leave-in conditioner that smells like guava? Just take all our money.

ICYMI: SkimmU Money

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The return on investment of SkimmU Money? Time well spent. Check out the recordings of our four SkimmU Money courses, presented by Fidelity. From assessing your risk tolerance and building a portfolio to generating long-term wealth and exploring crypto options, we’ve got everything you need to get informed on investing. Watch now.

Skimm’rs

Tell Us How You Really Feel: Calling all financially savvy Skimm’rs. What’s your #1 piece of money advice for other women?Share your wisdom here.

Last week, we asked you to tell us how inflation is impacting your budget.Here’s what you shared…

“I have less money to spend on ‘fun’ things like going out to eat and shopping for clothes. I think differently when shopping for the essentials, too. Some expenses are non-negotiable like diapers and my mortgage, so I'm looking for ways to save anywhere I can. I also need to start saving now for the holidays because we have a big family and lots of gifts to give.” — Marie G, San Jose, CA

“Thinking twice (and three times) about our grocery shopping. We eat a lot more out of our freezer and have cut back on dining out.Also, since we’re planning a wedding, thinking through whether a purchase is going to make a difference in that planning.” — Addie S, Des Moines, IA

“I'm not dining out,I'm buying fewer animal proteins (yay vegetarian/vegan lifestyle change!),and I really look for sales and digital coupons at the grocery and stock up on things that won't go bad.” — Elizabeth V, ​​Washington, DC

*Answers have been edited for length and clarity.


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