Managing Debt and Investments in Times of Inflation

The Federal Reserve is expected to continue raising interest rates amid the highest inflation in 40 years. This means that many households are reassessing their finances.

Assistant Professor at the Carlson School of Management Jacelly Cespedes is an expert in corporate and household finance. She shares several tips on how to approach spending, debt, and investing in response to inflation.

Jacelly Cespedes, Ph.D.

“The rate hikes expected by the Federal Reserve in response to decades-high inflation will change the financial landscape for households. Those who have never faced higher interest rates may not know how to what to expect. Here are some tips:

  • Avoid accumulating credit card debt. As the Federal Reserve increases interest rates, any debt without a fixed interest rate will increase. Since credit cards have a variable interest rate, rolling over your debt each month will be very expensive.
  • Act now on car loans. If you are looking for a car, you may want to act as soon as possible. Interest rates are still quite low for auto loans but rates will only go up due to the Fed’s new monetary policy.
  • Negotiate expenses. You may be able to lower monthly payments for certain bills like insurance, cable, and phone. Businesses often expect customers to be price insensitive. Contact your suppliers and shop around to see if you might be able to get a better deal.
  • Review your investment portfolio. Some of your asset allocations in your retirement portfolio or your personal portfolio may be affected by inflation. You may need to rebalance and diversify your investments. Consider investing in Treasury Inflation-Protected Securities (TIPS), which may increase in value during periods of inflation.

Jacelly Cespedes is an Assistant Professor in the Department of Finance at the Carlson School of Management. His research expertise includes corporate finance, household finance, financial intermediation and FinTech.

About the Carlson School of Management
Located on the Twin Cities campus of the University of Minnesota, the Carlson School of Management exemplifies a commitment to excellence by emphasizing experiential learning and international education, and maintaining connections close ties with the Minneapolis/Saint Paul business community. Through its undergraduate and graduate programs, the Carlson School provides access to world-class faculty and an alumni network of 55,000. Learn more about

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