Get ready to pay more interest

September 15, 2026/Business, Regulations/

I’m not a macro economist. I’m just a common sense business person who tries to square big numbers into more household like comparisons. When I look at last week’s analysis that the United States inflation rate is rising 3.4% in a year over year comparison I see that as a signal that our country’s economic situation, in inflationary terms, is untenable for everyday consumers and something needs to be done to slow down the economy.

It’s not that the 3.4% inflation rate is unsustainable in itself, but it is apparent that the rate was beginning to trend down and now it is heading back up. In my opinion, that re-direction is not a good sign for a healthy economy. The August rate marks the 66th consecutive month that the inflation rate has been above the government’s 2% inflation barometer. . . a period going back to March 2021.

The Federal Reserve Board meets this week and I’m guessing that you will see that group agree with me and a Federal Funds target rate will be increased one-quarter or one-half percent in an attempt to slow down the inflationary economy. That means that if you have “adjustable rate” loans the interest rate will go up and if you are thinking about borrowing for any reason you will probably see slightly higher rates than you have seen for some time.

What does that mean if you are a funeral home owner? Simply put, more money paid in interest payments is cash-flow that cannot be used to pay salaries, compensate an owner, add equipment, advertise, or do any number of discretionary business ideas that could improve your funeral home or be used to build your market share.

Tom Anderson
Funeral Director Daily

What would I do? Debt can be used as a leveraged growth medium to help one expand their business and I’ve used it discretionarily and in small doses — both in business and personally. I’ve tried to take advantage of long-term, low rate interest when available because of my experience of having lived through a time in my life when interest rates, as measured by the Federal Funds Rate, reached 20% in December 1980 — back in a time when inflation reached a high of 14.6%. That’s in comparison to the Federal Funds target rate as of today of 3.5%-3.75% and the latest inflation reading as 3.4%.

So, when you see those numbers. . . . .there is some sense to “Everything’s Relative”. However, in general, when rates go up I would use my cash-flow to pay off my business debt rather than give a “bonus compensation” to myself as an owner. In reality, if you are the sole owner, the “Net Worth” effect of that move is probably neutral, but I always felt my first obligation, or “Job #1” for me, was “keeping the business healthy”. . . . and if I was able to pay less interest on debt that I owed or had less debt I believed I was the owner of a healthier business.

My attitude was “it is the business dynamics that provide for everything else in my life so keep the business healthy”.

When will we see interest rates come down?: Unfortunately, I don’t see rates coming down for some time. And, that, in my opinion, is disappointing because every quarter point increase in rates prices some people out of the market for expanding their business or young people out of the first-time home market. Most financial planners would tell families not to have more than 15-20% of your pre-tax income in total interest payments. Yet, our federal governement is paying about $1.27 trillion in interest payments this year in which we expect to collect about $5.60 trillion in total revenues — that’s over 22% of all government revenues going to interest payments.

While America has never defaulted on a debt payment, the ever-rising interest payment percentage of our national revenue increases risks of that happening. So, whoever buys our debt (U.S. Treasuries) will want a higher interest payment to compensate for that additional risk. . . . Again in my opinion, the cost of debt is simply a market-risk phenomena.

And, since that interest that the U.S. Government pays on what it owes is somewhat the bellwether or barometer of what it costs to get investors a commensurate return on their investment risk, it simply makes sense that what consumers or businesses will pay in interest rates for their credit risk, a risk that will have a higher risk of default than U.S. Government debt, will be higher than the government interest rate. . . . So, as the headline indicates, get ready to pay more!!

Countries with a better credit rating than the United States: Australia, Canada, Denmark, Germany, Singapore, Sweden, Switzerland.

By the Numbers: