How rising public debt can impact your finances

What's happening?

According to Valor Econômico, the central government reported a primary deficit of R$ 14.4 billion in August, a 2.9% increase from the same month last year. This is concerning as the government debt reached 82.5% of GDP, raising the risk premium that investors charge to finance public debt. This situation not only complicates meeting fiscal targets but also results in higher interest rates for the population.

The increase in interest rates occurs because as the government accumulates more debt, investors require a higher premium to compensate for the risk, which raises market interest rates. This means that even with the Selic rate falling, the cost of credit and debt rises.

Why does this matter to you?

If you rely on financing, loans, or even have a credit card, this situation can directly impact your wallet. Higher interest rates mean you will pay more for your debts. For example, if you have a personal loan of R$ 10,000 with an interest rate of 15% per year, this could result in a significantly higher monthly payment if rates rise.

Moreover, if you are considering buying a property or a car through financing, your installments may also increase. A R$ 200,000 mortgage, for instance, could see a R$ 500 difference in monthly payments if the interest rate rises from 8% to 10% per year. This directly impacts your financial planning and savings capabilities.

What can you do to protect yourself?

First, it's crucial to review your personal budget and adapt to this new economic scenario. Adopt the 50/30/20 method to organize your finances:

• 50% of your income should go to essential expenses, like rent, water, and electricity bills.
• 30% can be used for wants and leisure, but consider reducing these expenses until the situation improves.
• 20% should be saved and invested. This is vital, especially in uncertain times.

Additionally, consider negotiating your debts. If you have loans or financing, contact your creditors to try to renegotiate terms and secure lower rates. Another tip is to prioritize paying off higher-interest debts, such as credit cards and overdrafts.

Connecting with your financial organization

The rise in public debt and interest rates should not be viewed merely as a distant economic issue. It directly impacts your daily life and finances. By understanding this relationship, you can make more informed decisions and better prepare for the future. The ADXIS platform can help you organize your finances, monitoring your spending and providing tools to keep your budget under control, even in challenging times.