How physicians can save money amid rising interest rates

By Joe Hannan | Fact-checked by MDLinx staff
Published July 28, 2022

Key Takeaways

  • Rising interest rates are likely here to stay, which could prove costly for US consumers, including healthcare professionals (HCPs).

  • HCPs may feel the financial pinch in interest rates on their student loan debt, credit cards, and mortgages.

  • Providers should assess each of these debt categories and weigh refinancing options to potentially save money as interest rates rise.

Healthcare providers know that no two cases of the same disease are alike. They may share some similarities, but the human immune response hinges on an innumerable amount of variables.

The economy is similar, according to Brian Hartmann, a certified financial planner (CFP) and partner at Granite Bridge Wealth Management in Livingston, New Jersey.

Responding to the recent news of the Federal Reserve raising interest rates, Hartmann was quick to point out that the US has faced rising interest rates, inflation, and recessions before, and moved on to thrive—but each time the variables were different.

The current financial situation

“People always say, ‘Well, this one’s different,’” Hartmann said, in an interview with MDLinx. “Of course it is—because as the best economy in the world, we make sure that the last one isn’t the next one. It isn’t going to be a mortgage crisis; we’ve been through that. The regulators came and said, ‘Here’s how we protect against that.’ The next one may be something else."

So what might that “something else” be, and how can HCPs prepare for it? Hartmann offered some insights.

What makes the current economic situation different? There are several factors, including the war in Ukraine, pent-up consumer demand from the pandemic, its subsequent supply chain issues, and widespread hiring. Hartman said these factors have given rise to two things: inflation and rising interest rates.

The Consumer Price Index (CPI) is often used to gauge inflation, and CPI data issued July 13, 2022, painted a bleak picture.[][]

As of June, the price of food was up 10.4% year over year, energy commodities increased 60.6%, and new vehicles were up 11.4%. Overall, all items were up 9.1%.

Hartman added some context, saying, “When inflation came in, the Federal Reserve had their second dose of coffee and said, ‘Okay, now we really need to do something. We can’t wait any longer.’ And the textbook remedy to inflation is raising rates.”

And raising rates they are. On July 27, 2022, the Federal Reserve System (aka the Fed) increased interest rates by .75% in an attempt to steer the economy away from a recession.[] This is significant, because the Fed had instituted the same rate increase in June, marking the biggest rate increase to stem from a single Fed meeting since 1994.

Each of the past four times the Fed has met, it’s hiked rates.

Why? Hopefully to slow down spending, let some of the air out of inflation, and avoid a recession. The hikes nearly coincided with news on July 28, 2022, that the US gross domestic product had negative growth for the second consecutive quarter.[] Two consecutive quarters of declines is considered by some to be a recession.

Of course, this has consequences for all consumers—HCPs included.

How should HCPs respond?

Healthcare historically has been better insulated from recessions than other industries.[] But HCPs still feel the pain at the pump, the grocery store, and from the bite that rising interest rates can take out of their bottom lines.

Hartmann offered some insights on how to prepare for future rate hikes, which he expects to continue over the next year.

Student loans

Now is the time to really get a handle on your student loan debt, Hatmann said. Figure out how much you owe and what types of loans you hold. With fixed-rate loans, your interest rate will stay steady regardless of what the Fed does. If you hold fixed-rate loans, rising interest rates are a shrug-your-shoulders event. Not so with variable-rate loans, which could change.

If you’re on the fence about refinancing your student-loan debt, now may be the time to act. Interest rates are likely to continue trending upward for a while.

Your home

The same principle applies to your mortgage. Those with fixed-rate mortgages can take a breath. But, if you hold an adjustable-rate mortgage, your monthly payments may increase with interest rates. Refinancing may be in order, depending on your personal finances.

Looking to sell your home and relocate? If your neighborhood is following greater trends in the real estate market, you’ll probably get more than you paid for it, but end up paying more on your new home at a higher interest rate. But current rates are comparatively low, at around 5.6% for a 30-year mortgage.

Your credit

Got credit card debt?

“Crush it,” Hartmann said. “Pay, pay, pay off your credit card debt, and I bet you the result of that will be a really good night’s sleep.”

You will certainly feel the sting of rising interest rates on any outstanding credit card balances. Credit card APRs are certain to increase with inflation, meaning you’ll pay more month-to-month in interest on outstanding balances.

If you have good credit, own a home, and want to recession-proof your personal finances, Hartmann offered the following suggestion.

"If you’ve seen your home go up in value significantly, go to your local bank and take out a home equity line of credit, whether you need it or not."

Brian Hartmann, CFP

Your investments

Even though the economic outlook is rocky, you may want to buckle up and keep investing. Hartmann recommended dollar-cost averaging: investing a fixed amount over a fixed period of time.

“In an environment like this, there’s buying opportunity in the stock market, or in other investment portfolios or real estate,” he said. “If you don’t have full faith in that, then it’s a wonderful time to pay off debt.”

Looking ahead

It’s all-but-certain that interest rates will continue their upward climb for a while. But the relative job security that comes with being an HCP is something providers can leverage. With these tactics, you can take some control over how inflation affects you.

Plus, Hartmann felt, recent history appears to be on our side. “If I could relate this to medicine, I’d say it was never a better time in the US to go through this,” he said.

In January 2021, the American consumer was as healthy as ever. Jobs were bountiful and workers—including some HCPs—could go where they wanted and, in many cases, earn more money. And the average American had more cash on their balance sheets.

"If you were going to get surgery, you’d want to be the healthiest you’ve ever been before you walked into the OR. And I think that’s where we are."

Brian Hartmann, CFP

What this means for you

As long as there are sick people, there will be a need for HCPs—even in a down economy with rising interest rates. As medical professionals, you can use your relative job security to get aggressive about better managing debt to minimize the cost of rising rates. In addition, you can continue to invest using dollar-cost averaging, and potentially reap the rewards of economic recovery later.

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