“Interest rates are set to start rising, some say sooner rather than later. How should people respond to this?”

Ford Prefect from Hitchhikers Guide to the Galaxy said it best: “Don’t panic! Don’t panic!”

Household debt levels tend to rise through your 20s and 30s – home, investment and business loans, plus lifestyle debt – then peak in your 40s before debt is reduced going into retirement.

Therefore, rising interest rates will disproportionately negatively impact on Gen X. (Retirees will be cheering for rate rises, because their incomes partly depend on them.)

Rising rates aren’t fun. But, like the Crash Test Dummies’ singer and the “Mmmm” song, they’re currently unnaturally low. The first Gen Xer hadn’t been born 49 years ago when rates were last this low.

How should you respond? Some won’t need to. If you left your loan repayments at their August 2008 levels, when rates began to fall, you won’t need to adjust for a while.

If your repayments fell as interest rates did, get ahead of the game. Now! Adjust your repayments to 1 per cent higher – and stay 1 per cent higher as rates rise. Secondly, pay off your dumb debt – credit cards, furniture loans, etc.

The Castle’s Darryl Kerrigan used to instruct son Dale to “tell ’em they’re dreamin’” to anyone wanting a ridiculous price. That advice applies to anyone who believed rates would stay low forever.

Gen Xers shouldn’t fear debt – home and investment debt can be an important part of building a solid financial future. But don’t be caught “dreamin’” when the rates cycle turns.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser.