If you own a mortgage, use a credit card or have money in savings or certificates of deposit (CDs), interest rates play a big role in your financial life. The Federal Reserve – which is tasked with monitoring and adjusting the nation’s monetary policy – changes the benchmark federal funds rate (aka the fed rate) to achieve a healthy economy, and this change ripples through all the financial products that consumers interact with.

When rates rise, they make it more expensive to borrow and therefore reduce consumer spending. This helps to control inflation and slow down the economy, but it also hurts companies and families that depend on borrowing for income. This is one of the delicate balances the Fed tries to strike when they raise rates.

Interest rate hikes can also cause a shift in investment strategies. When rates rise, stocks may not perform as well as they did in the past, especially if you invest in bonds. Bonds are a popular investment for people who want steady, secure returns. However, as interest rates rise, the prices of these investments tend to fall as more investors flock to the higher-yielding stocks.

It’s important to review your finances against the backdrop of changing interest rates, so that you can plan accordingly. This is why it can be helpful to work with a financial advisor. They can help you determine the best ways to prepare for rising rates and how to manage them in your finances to achieve your goals.