20 Expert Strategies For Navigating Fluctuating Interest Rates

Forbes

5 days ago

Interest rates have been anything but predictable in recent years, creating uncertainty for both business leaders and consumers alike. Fluctuations can drive up borrowing costs, reduce purchasing power and complicate long-term financial planning, making it harder to know when to act or hold steady.
With the right strategies, you can position yourself to take advantage of favorable conditions and cushion the impact when rates rise. Below, the members of Forbes Finance Council offer 20 smart ways for consumers and business leaders to navigate changing interest rates.
1. Let Your Timeline, Not Headlines, Drive Financial Decisions
Match the duration of your debt with the timeframe of your investment or business plan. That way, you're not reacting to every headline or guessing where rates are headed. Whether you are a company leader or consumer, your timeline should drive the decision, not the news cycle. - Rob Edwards, Edwards Asset Management
2. Conduct Regular Financial Health Assessments Of Partners And Suppliers
Unpredictable rates affect more than just your own financial situation. One strategy I implore CFOs to implement is conducting regular financial health assessments on their suppliers and partners. That way, you can determine if higher-for-longer rates will deteriorate their ability to deliver critical supplies or impact your distribution channels and, in turn, degrade your operations. - Charlie Minutella, RapidRatings
3. Diversify Your Debt Structure
One effective strategy is to diversify your debt structure by combining fixed and variable-rate loans. This balances exposure to rising rates while benefiting from potential declines. Regularly review refinancing options and maintain strong cash reserves. Whether it's a company or consumer, staying informed and agile ensures the ability to manage interest rate volatility effectively. - Meelan Gupta, GeBBS Healthcare Solutions Inc.
4. Study Your Budget To Find Root Challenges And Potential Solutions
When you're not feeling well and you go to the doctor, the first question is, 'Where does it hurt?' The same thing happens with your debt. There's no one cure for debt, so you need to study your budget—or create one if you haven't already. If debt is stressing you out, consult a nonprofit credit counseling agency or a debt-solutions company. Both can diagnose the problem and recommend solutions. - Howard Dvorkin, Debt.com
5. Assess Your Debt Tolerance In The Context Of Current Rates
The strategy we use with our clients is to assess their debt tolerance to determine when it makes sense to pay off debt versus keeping it for investments. For example, if your investments are earning 10% and the interest rate on the debt is 6%, you're coming out ahead by maintaining the debt. On the other hand, if the situation is reversed, it's wiser to use investment funds to pay down the debt. - Evan Jehle, FFO LLC
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6. Stagger Maturities To Capitalize On (And Mitigate) Rate Fluctuations
One strategy is to ladder CDs, bonds and U.S. Treasuries so that maturities are staggered to take advantage of upward swings in interest rates and dampen the impact of lowering rates. Fixed-rate non-qualified deferred annuities can also be laddered to efficiently target income. Unlike a CD, interest earned on an annuity is tax-deferred and can be rolled tax-free to another annuity at maturity. - Lina Storm, Cetera Financial Group
7. Keep Excess Cash In High-Yield Savings Or Treasuries
You must manage liquidity by avoiding long-term fixed-rate financing and keeping excess cash in liquid, high-yield savings or treasuries. It's also important to build a buffer into your budget to absorb potential increases in interest costs, helping you stay flexible and resilient in a changing rate environment. - Eyal Lifshitz, Bluevine
8. Build In Financial Buffers
Maintain flexibility in your financial planning by building in buffers and avoiding overcommitment. For consumers, this means keeping emergency savings available and avoiding variable-rate debt when rates rise, if you're borrowing, and vice versa if you're lending. For company leaders, it's about stress-testing budgets and maintaining liquidity. Adapting early helps you stay ahead of uncertainty, rather than reacting to it. - Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
9. Stay Liquid And Skeptical
Look beyond daily noise. Borrowers may benefit from locking in fixed-rate debt, while investors could find value in shorter durations. The early 2020s likely marked the end of a decades-long yield downtrend, especially amid rising U.S. debt. While strategies should reflect your goals and risk tolerance, staying liquid and skeptical may help in this new regime. - Brian Lasher, Euclid Harding LLC
10. Build A 'Rate Ladder' With Staggered Dates
Create a rate ladder: Split debt or savings across fixed and short-term variable tranches maturing at staggered dates. Like orbiting satellites, each piece adjusts on its own cycle, smoothing cash flow, preserving predictability and letting you capture better terms when stars align. - Terry Chen, Modulate
11. Conduct Scenario Planning For Best- And Worst-Case Environments
I recommend scenario planning. Build models that test your financial resilience at different rate environments—best case, next-best case and worst case. Whether you're managing household debt or corporate capital structures, knowing how rate shifts can impact cash flow allows you to make proactive adjustments instead of reactive moves. - Alexander Ronzino, Rework Capital LLC
12. Stabilize Interest Exposure With Hedging Tools
Use hedging tools like swaps or caps to stabilize interest exposure. For firms, blend fixed and variable debt to align with cash flows. Consumers should reduce principal during low-rate periods to build resilience. Strategic structuring transforms rate volatility into a managed opportunity. - Alfonso Cahero, Cahero Family Office
13. Stress-Test For Variable Exposures
Lock in fixed rates where possible and stress-test scenarios for variable exposures. Whether you're managing a household or a balance sheet, this strategy cushions against volatility and enables better cash flow planning in unpredictable rate environments. - Swati Deepak Kumar (Nema), Citigroup
14. Actively Adjust Your Portfolio Durations
Actively managing portfolio duration is my preferred strategy. Shorten duration when rates are rising to reinvest at higher yields, and extend it as rates peak to lock in gains when cuts are likely. This approach balances risk and return, allowing both leaders and consumers to adapt to shifting cycles without overexposure. - Tomas Milar, Eqvista Inc.
15. Be Proactive, Not Reactive
A smart strategy is to stay proactive, not reactive. Whether you're a business leader or consumer, review your debt and savings regularly and consider fixed-rate options during periods of rising interest rates. Building flexibility into your financial plan—like keeping cash reserves and avoiding overleveraging—can help you ride the waves without losing your footing. - Michael Foguth, Foguth Financial Group
16. Conduct Robust 'What-If' Drills
Think like a pilot and conduct "what-if" drills for your money. Consider: What if interest rates rise or fall sharply? Then, figure out how it affects your debt, savings and cash flow. Make a clear action plan for each circumstance. Whether you're a customer or a corporate leader, this activity promotes calm and clarity. You won't have to foresee the market; instead, you'll be prepared to respond - Neil Anders, Trusted Rate, Inc.
17. Lower Your Debt To Increase Your Cash Reserves
Reduce debt. When you owe less, your monthly payments are typically lower, which can improve your cash flow. Since your payments are less, you can increase cash reserves to absorb unexpected costs. In a volatile interest rate market, it's best to list all outstanding debts along with their rates and prioritize plans for paying down variable-rate debts first. - Lindsey Downing, TransUnion
18. Incorporate Rate 'Shock Absorbers' Like Callable Loans And Rate Caps
Build rate shock absorbers into your finances. Keep debt flexible with callable loans or lines that can shift from variable to fixed. As a consumer, look for credit unions or fintechs with rate caps. It's like adding suspension to your financial ride, so rate hikes don't throw you off course. - Karla Dennis, KDA Inc.
19. Adopt A 'Barbell Strategy' To Stay Balanced
Create a "barbell strategy" across your financial structure. Blend fixed and variable rate debt with refinancing triggers. Maintain credit facilities for rapid deployment when rates create opportunities. Split major borrowing between fixed-rate stability and variable-rate opportunities while keeping liquid reserves. The wealthy profit from volatility by positioning to benefit from change. - Elie Nour, NOUR PRIVATE WEALTH
20. Where Feasible, Lock In Favorable Fixed Rates
Wherever feasible, locking in on fixed rates is one successful tactic. This shields your budget from unforeseen increases and helps maintain regular payments. By keeping abreast of market developments, you may also make well-timed judgments and steer clear of unforeseen circumstances, which will help you maintain stable finances throughout fluctuations. - Jared Weitz, United Capital Source Inc.
The information provided here is not investment, tax, or financial advice. You should consult a licensed professional for advice specific to your situation.