Economic Challenges: How Public Debt Affects Your Wallet?

What happened?

According to G1, Brazil's gross debt reached R$ 11 trillion, representing 82.9% of GDP. Economists from various fields emphasize that balancing public accounts will be one of the main challenges for the next government, regardless of who takes office.

This situation is not just a distant macroeconomic question; it directly impacts our financial life. With public debt rising, pressure on interest rates and inflation also increases, making credit more expensive and hindering economic recovery.

Why does this matter in the bigger picture?

When the government spends more than it collects, it needs to borrow. If this debt is deemed unsustainable by investors, interest rates rise. Since interest rates are closely tied to various aspects of the economy, especially the cost of credit, you may see increased rates on your mortgages, car loans, and personal loans.

Additionally, rising public debt can lead to higher inflation, which directly affects your purchasing power. For example, if inflation rises, the prices of food and services will increase, and your salary may not keep pace with that rise, directly impacting your wallet.

What changes for salaried individuals and bill payers?

For those living on a salary, the scenario can be challenging. If interest rates are high, the monthly payments on loans and credit cards increase. Imagine you have a R$ 100,000 mortgage at a 10% annual interest rate. If the rate rises to 12%, your monthly payment could significantly increase, making budgeting harder.

This scenario can lead many to resort to debt to cover immediate expenses, creating a vicious cycle of indebtedness. With more people in debt, defaults increase, and financial institutions become more cautious, making it even harder to obtain credit.

What to do: concrete actions you can take

• Review your budget: Use the 50/30/20 method to organize your finances. Allocate 50% of your income for needs, 30% for wants, and 20% for savings and investments.
• Cut unnecessary expenses: Evaluate your spending habits and see where you can save. Every real saved can be directed to your emergency fund.
• Prioritize paying off debts: If you have debts, prioritize those with higher interest rates, like credit cards. This will help relieve financial pressure.
• Consider investments: With economic instability, it may be a good time to consider fixed-income investments that offer security while the situation stabilizes.
• Stay informed: Keep updated on economic changes and adjust your financial strategies as needed.

Connecting with financial organization and ADXIS

At ADXIS, we want to help you understand how these economic challenges impact your personal finances. By organizing your budget and implementing the 50/30/20 method, you can be better prepared to face periods of economic instability. Conscious financial management not only protects your wallet but also prepares you for future opportunities, even in tough times.