DENVER (KDVR) — Your budget is likely shrinking once again after the Federal Reserve raised the interest rate another three-quarter of a percentage point on Wednesday.

It was already a historic move when the rate was raised last month.  

This is all in an effort to combat inflation and cool the economy.

This really impacts people trying to borrow money right now and it also pushes the finish line further away for people paying off loans they already have. 

The Problem Solvers spoke with financial expert, Greg McBride, the chief financial analyst at Bankrate about what three things we can do right now set ourselves up for the future. He said aggressively pay down debt, increase what you’re putting into savings and continue making contributions to your 401K.  

This is not a year where it’s as fun to look at your 401K balance as it was last year when it went up but you have to keep with the habit. When you look back five, 10, 15 years from now, you’ll be really glad you’ve invested in 2022 and if you pay down that and boost savings, not only are you taking advantage of higher rates on savings and reducing your exposure to higher rates of borrowing, you’re also better positioning your finances to weather whatever may lie ahead economic,” McBride said.  

As far as which debts you should pay down, McBride said generally you want to aggressively pay down any variable rate debt, like credit card debt, personal debt or student loans.  

He said low-priority debt payments right now would be your mortgage and fixed-rate student loans. He said as far as your car payment, that could go either way because the rates can be relatively reasonable, but the payments are really big. McBride recommends you talk to your lenders about moving to a fixed rate loan if you can.  

“Seeing if you can grab one of those low-rate balance transfer offers on a credit card for example, or asking your home equity lender if they can fix the interest rate on your outstanding balance on your home equity line. Some lenders will offer that as a way to insulate yourself from the further increases so that you can truly make headway on paying off the debt,” McBride said.   

McBride said this isn’t the end of the line, more interest rate increases are likely until there is sustained evidence that inflation is beginning to recede.  

He mentioned that there are a lot of recession fears, and he says he doesn’t believe we’re in a recession right now, but adds that it’s more likely to come next year.