The Jamat is strongly encouraged to exercise caution concerning spending, investing, and borrowing decisions and to take defensive steps to preserve financial stability. In particular, please consider the following:
Rising expenses will deplete savings faster: Costs of essential items such as housing, energy, and food are rising faster than wages and business profits and are likely to continue for the foreseeable future; the Jamat should:
- Carefully manage household budgets. Reduce expenses, where possible, and consider delaying the purchase of high-ticket items
- Hold adequate cash for at least 6-12 months of personal and business expenses in case of reduced incomes
Note that inflation will likely cause future expenses to be higher than last year
Please plan for retirement and maximize tax-exempt benefits, where possible. Consider the impact of inflation on your retirement plans and adjust accordingly. As life expectancy increases, retirement funds will need to cover healthcare expenses and long-term care assistance.
Available resources: Budgeting and savings assistance is available at bit.ly/fsrequest1 or contact ACCESS
Rising interest rates will increase borrowing costs: The Federal Reserve has been raising interest rates to lower inflation. We anticipate higher interest rates through 2023, and the Jamat is encouraged to:
- Avoid adding unnecessary loans; seek to reduce credit card and other high-interest debt
- Take advantage of rising interest rates by establishing – or adding to – interest-bearing deposit accounts at FDIC-insured banks and credit unions
Available resources: The EPBs credit and debt services team is available for a confidential consultation. Please visit bit.ly/cds1on1 or contact ACCESS
We will likely see some price correction in the housing market: Higher interest rates are slowing home sales, and we may decrease property prices. If considering buying a home:
- Note that rising interest rates will increase monthly mortgage payments. Carefully budget for all home-related expenses to ensure your purchase remains affordable
Available resources: Please visit bit.ly/cds1on1 or contact ACCESS for assistance with home affordability exercises and help with the Buy vs. Rent decisions
While the labor market is currently strong, it will likely slow in the near term: US employment remains at record levels with over 11 million job openings. However, as the economy slows, job openings may dry up quickly.
- With current labor shortages, assess opportunities to renegotiate wages or benefits
- Do not switch jobs without doing your research and carefully considering the impact that an economic softening could have on your new position or employer. Those that have recently changed jobs may be impacted first if the economy slows
- Network with others in your industry to explore new opportunities
- Invest in developing new skills, particularly in fields and functional areas to help position you for in-demand industries and careers of the future
Available resources: Job seekers can contact EPB for help with finding new employment; members of the Jamat can also visit ipnonline.net or contact ACCESS.
Invest for the long-term: The stock market continues to be volatile, and bond investments have been impacted by rising interest rates. Commercial real estate forecasts also remain mixed as consumer behaviors reset to new normals following the pandemic. The Jamat is encouraged to:
- Avoid making impulsive decisions in response to stock market volatility
- Before making new investments, consider how different risk factors might affect cash flows and asset values. Be mindful of your individual risk tolerance, length of investment, the ease with which assets can be sold, if necessary, and your overall portfolio diversification.
- Talk to your financial advisor to ensure you consider the long-term investment view.
Lastly, exercise caution before making any investment decisions in large or speculative investments, such as cryptocurrencies. Conduct your own research; do not blindly follow others into investments. Carefully consider the potential downside of all investments; “too good to be true” opportunities often carry high levels of risk. Please use all third-party resources available to you or a financial advisor.
Available resources: For guidance and education on general investment principles and concepts, please visit this link bit.ly/fsrequest1 or contact ACCESS
Prudently manage businesses: Business profits are under pressure due to higher costs for labor, materials, and transportation, combined with lower demand for discretionary items.
- Consumer-facing businesses are encouraged to offer cheaper options for customers who will be exploring ways to combat inflation.
- Be cautious when purchasing inventory, given many national retailers will be discounting heavily into the second half of the year.
- Evaluate your cost structure for opportunities to reduce your fixed costs
- As labor availability and costs remain a challenge, focus on employee retention strategies, such as offering attractive benefits, flexible working arrangements, and competitive salaries
- Network with industry peers to continue to learn about best practices and future innovation
Available resources: For help on business-related matters please contact the Business Advisory team (BAT) by visiting bat.epbusa.org or contact ACCESS
In conclusion, the Jamat should prepare itself for an economic softening – domestically and globally – over the next 6-12 months. In addition, downside risks from the resurgence of Covid, geopolitical tensions, and the ongoing drought conditions in the western US may further impact energy, food, and other material supplies and prices. The Jamat is advised to remain prudent with spending, investing, and borrowing, given these uncertainties.
For assistance or advice on any business or personal finance matter, please contact the ACCESS Help Line 1 (844) 55-ACCESS or visit the ACCESS online link at https://the.ismaili/usa/jamati-service-request. Ya Ali Madad.