Rate cuts mean the economy is on shaky ground. Here are three ways to prepare

Lower interest rates mean the economy may be headed for trouble.

Central banks cut rates to make it cheaper for companies and people to borrow, which helps stimulate economic activity. It’s a shot in the arm when the economy looks anemic.

This latest Bank of Canada rate cut, in particular, signals that the financial pain of tariffs is starting to get real and spread. The unemployment rate is 7.1 per cent, the highest it’s been since 2016 outside the pandemic. So far, it’s been mostly tariff-sensitive manufacturing sectors and young graduates who’ve felt the brunt of the weak job market. But that’s beginning to change.

Here are four things to weigh to help you manage your finances as economic storm clouds gather:

• Should you boost your emergency fund? One thing to consider is how secure your job is. The other is how long it may take you to land a new one. With employers trimming back on hiring, unemployment spells are getting longer.
• Is this a good time to buy a house? In many ways, yes. Mortgage rates – both fixed and variable – are trending down. In many cities, there are plenty of homes for sale, and competition from other buyers, while picking up, remains relatively muted. The big asterisk here is, once again, your job security. If you’re even remotely worried about it, you may want to hold off on buying.
• What should I do with my investments? The stock market often loves rate cuts. Investors’ assumption is that cheaper borrowing will lead companies and consumers to spend more. So cuts by the Bank of Canada – and, even more importantly, by the U.S. Federal Reserve – could push already high stock prices even higher. Don’t let that tempt you into making risky financial bets. Generally, a weak economy eventually takes its toll on financial markets, too.