by Robert K. Heady
Bank Rate Monitor

       If economic experts are correct, that interest rates will start rising again any day now, what steps should you begin taking to protect your pocketbook?
       A couple of things are for sure: Money market and CD rates will go up, but it's going to cost more to borrow money. That's especially true for loans whose rates are directly tied to the banks' prime rate - which increases the moment the Federal Reserve jumps its funds rate, now at 1 percent.
       To get a handle on your smartest moves, let's take the case of two hypothetical families, the Smiths and the Joneses, who have the exact same financial condition.
Let's also assume that after the Fed moves - probably beginning with a one-quarter percent hike, then more rate boosts after that - the banks' prime rate eventually gains by one full percentage point. What do the families do?

• The Smiths don't change a blessed thing. They go right on paying their current mortgage, continue to make only the minimum monthly payments on their credit cards and other personal loans, and decide to put off buying their next car for a year or more.
• The Joneses, on the other hand, who have been paying $734 a month on their original $100,000 mortgage that still has 25 years to go at 8 percent, decide to refinance with an adjustable rate of 3.3 percent for the first five years. Between now and 2009, their total cost will drop from $44,000 to $26,000. (ARM rates are the way to go if you don't think you'll remain in your present home for more than four or five years. After five years, the typical variable-rate ARM can switch to a fixed rate, and you'll be at the mercy of steadily-rising bank prime rates.)

       But suppose the Joneses don't get an ARM mortgage - they simply refinance their old mortgage for another 30 years at the current average rate of 5.34 percent. Assuming a balance of $95,000, and paying one point plus $2,000 in closing costs, that move alone would save the Joneses $26,378 with payments of $530 per month.
       Then, to pay off $10,000 owed on their credit cards at 17 percent, and another 10 grand in personal loans at 10 percent, the Joneses take out a $20,000 home equity line of credit for 10 years against their home at the current rate of about 6.5 percent. Even if that rate later leaps to 7.5 percent within five years, the family will save $8,850 by acting now compared with what their credit cards and other loans are costing them.
       Then there's the new car.
       Harry Jones has been moaning about his old jalopy, a 1991 Oldsmobile, for months. He wants a bright new vehicle he spotted at a local dealership for $22,000. By financing now at 5.33 percent instead of when rates are 1 percent higher, he'll keep $483 in his pocket. The same strategy also applies to refinancing your present vehicle.
       In short, the don't-wait-do-it-now approach will pay off on all borrowing, including consolidating the student debt you ran up to finance your kids' education.
       On the income side of the ledger, you can expect to earn more on your CDs and money market accounts down the road. But don't yell "hallelujah" just yet; the average numbers have been way down in the pits, and it's going to take time for them to go back up. (Those foxy banks know what they're doing - raise lending rates before they increase savings rates.) Whatever you do, don't settle for your institution's puny numbers. Visit bankrate.com for the highest yields in the United States, and know that each bank carries $100,000 FDIC insurance no matter where it's located.
       Finally, one piece of advice: Before you take your first step, get a copy of your credit report from Equifax, Experian or Trans Union and check it for errors. Odds are there are some and it'll take weeks to correct them. You don't want to try to lock up today's once-in-a-lifetime lower rates, only to see some lender jack them up because you have a lousy credit score.
       In short, make your moves the way the Joneses did - not like the Smiths. The Joneses will save a whopping total of $27,000 over 10 years by doing it right.
       Editor's Note: Robert K. Heady is the founding publisher of Bank Rate Monitor. He invites Bull & Bear reader mail on consumer money problems and solutions but cannot respond personally to all inquiries. Send e-mail to jrnl8888@aol.com, or write to P.O. Box 14875, North Palm Beach, FL 33408.