3 Things You Can Do With Your Money Before the Fed Starts Cutting Rates

The Federal Reserve hasn't cut interest rates yet, but financial planners say it's not too early to start reviewing high-interest debt.

The Federal Reserve has worked to tame inflation by raising its influential benchmark rate to record highs, raising borrowing costs of all kinds. However, the central bank seems to be on the cusp of cutting interest rates, with the first cut widely expected at the Fed's September meeting.

Financial planners recommend being proactive so you can be prepared to make money moves in reaction. Here are three things experts recommend you do before the Fed cuts rates.

Refinancing Is Finally Beneficial

It may be time to investigate refinancing your mortgage, financial planners said.

According to Investopedia's research, homeowners who bought after the Fed began its campaign against inflation took on mortgage rates that were more than 8% on average at their peak. Those homeowners may now be able to refinance at a rate more than 1.5 percentage points lower.

Shaun Williams, a certified financial planner for Paragon Capital Management, recommends refinancing if you can afford the time and money associated with the process—and you can find a rate at least half a percentage point lower than your current rate.

For example, refinancing a 30-year mortgage with $250,000 remaining from 7.79% to 7.29% could lower the monthly payment by more than $85, saving nearly $31,000 in interest total, according to Investopedia's calculations.

Try to Get Out of High-Interest Credit Card Debt

Mortgage debt isn't the only kind of debt planners say people should seek to refinance. Interest rates on credit cards have risen by seven percentage points since the Fed began fighting inflation, something many cardholders aren't aware of.

Trading one debt for another might be beneficial, perhaps through lower-interest credit cards or personal loans, according to Robert Persichitte, certified financial planner at Delagify Financial.

“Credit cards are just a piece of our life that most people don't think about,” said Sarah Paulson, certified financial planner for Valkyrie Finance. “I try to encourage my clients if they have the credit score for it, ‘Can we refinance credit card debt into either a balanced transfer card or would a personal loan be a better interest rate?’"

Make Sure Savings Are Optimized

There are ways to save money even when everything feels more expensive.

Socking away money in a high-yield savings account can help you take advantage of interest rates. Not only will this earn you more than an average savings account, but it can also deter you from spending money on unnecessary expenses, Paulson said.

You should also be intentional about where you put your savings, experts said. While CDs are popular with interest rates still near all-time highs, it may not be necessary to lock the money up or face penalties for early withdrawal if savings rates are high enough elsewhere, according to Persichitte,