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How to Put Better-than-Ever Interest Rates to Work for You – Part II

Part I of this article gave you just a taste of some food for thought when it comes to today’s climate of historically low interest rates and the numerous opportunities it affords those looking to improve their current and future financial situation.

We’ve already covered some ways you can make favorable use of these low interest rates before they start creeping back up: home ownership, becoming a landlord or refinancing your current mortgage.

In Part II, we’ll delve into even more ways you can use this unprecedented environment to make some important changes to your savings and investments plans.

Is it time to buy a new car?

If you’ve been waiting for a good time to trade up, you guessed it… now’s the time.  Automakers are currently offering outstanding interest rates and other incentives to put you behind the wheel of a new car, so if your credit is in good standing, you could lock in on a great 60-month loan and own your new car in a relatively short time.

Depending on your needs, as long as you’re buying a new vehicle, you could look into buying one of the many new high-mileage, hybrid or electric cars.  Buying an eco-friendly vehicle will save you even more green well into the future.  If the vehicle you currently own is in good shape, and your credit is in good shape too, consider shopping around to refinance your loan at a lower interest rate.

Should you pay off those credit cards, or save the money?

If you’re like many Americans, you’re not immune to credit card debt.  And since curiously, savings account interest rates don’t seem to be any more immune to the low-interest rate environment than homes or cars, if you’re torn between paying off high-interest credit card balances or saving, you should tackle those credit card balances first.  The faster you can put this debt behind you, the better.

If you’re in good standing with your creditors, it would be a good idea to give them a call to negotiate for a lower interest rate.  Like any other company, credit card companies face enormous competition, and will often work with existing customers to keep them happy.

Are you feeling philanthropic?

If you have the money and wish to share your wealth with family members or charitable organizations, do it now, before gift and estate taxes get any higher.  What’s more, this period of low interest rates means tax-favorable treatment if you set up the proper structure to make your donations or gifts.

Discuss your desire to give away some of your money while you’re still living, and together, investigate investment tools such as a charitable lead annuity trust (CLAT).  CLATs are ideal for individuals seeking to transfer wealth to another generation as well as make certain philanthropic gifts, in that they allow the grantor to fund a trust that pays a certain charity during his or her life.  When the grantor dies, whatever is left in the trust is payed out to the chosen beneficiaries.

This is just one of many strategies you and your advisor can employ to meet your philanthropic goals, so be sure you are presented with several options (and that you understand their provisions) before moving forward.

Can you shore up your retirement plan?

Since we’re talking about low interest rates, odds are good you have a few investments in your portfolio that don’t deliver much in the way of returns, such as traditional savings accounts and money markets.  So why not take this time to diversify your portfolio?  Talk to your advisor to explore whether there are investment options that would serve you better without exposing you to too much risk.