This week’s blog post in our “Financial Planter” series is written by Chonce Maddox, a Financial Services Professional.*
Global events can leave a lasting impact on anyone’s finances due to how the economy improves or worsens. While it may seem like a global or national issue that occurs far away may not affect you directly, that is often not the case. From increased fuel and grocery prices, to the fluctuating value of your investment portfolio, widespread global events can have a domino effect that leads right to your personal bank account. Let’s discuss three main global events and how your personal finances relate.
It’s no secret that war can have many different effects on the economy which can trickle right down to your own wallet. First, the country needs to pay for war related-expenses and sometimes even damage to infrastructure, which can decrease the value of domestic currency. Looking back to previous wars the United States has been involved in, including World War II, the Cold War, the Korean War and the Vietnam War, they have all been paid for either through public debt, taxation, or inflation. Paying higher taxes can reduce your spending as a consumer not to mention take away from your direct earnings. Inflation is almost never good news as it is measured by the Consumer Price Index by the Bureau of Labor Statistics and raises the price of goods while decreasing the value of the dollar. Inflation can lead to events like higher grocery prices and a spike in the cost of home loans.
2. Breaking News
Whether you’re a long-term investor or a short-term investor, breaking news can have a direct impact on your stock market investments. In most cases, the supply-and-demand aspect of the market reacts almost immediately to breaking news but the effects are often short-lived and subside soon after. For widespread disasters and similar negative news, it can hurt companies and lower the demand of stocks which can lead to a downward spiral of the market. If you choose to sell after some negative breaking news and the value of your stock has gone down, you will most likely lose money. Back in 2008, Lehman Brothers became one of the largest bankruptcies in the U.S. after news spread that they were looking for a buyer and many stockholders began selling their shares of the company in a panic. In this particular case, the news might have helped some investors save some money by getting out early before the bankruptcy hit. With the news affecting the stock market dozens of times each day, it’s important to periodically check out news stories and cross reference them if you have to in order to confirm if they are true before you make any hasty moves.
3. Politics and Foreign Trade
The U.S. presidential elections will be a major event this year, especially in regards to foreign policy; specifically, foreign trade. China has been projected to surpass the U.S. trade as the largest in the world. If China’s economy slows down any time soon, it may decrease China’s need and demand for U.S. Goods. Since consumerism tends to drive the economy in the U.S. over American-made goods and products, a lack in demand for our products may affect workers most. Without a heavy need for products and goods, employees could lose their jobs causing the unemployment rate to go up, not to mention, the U.S. would lose out on the valuable revenue from global trade - a lose-lose situation. Whether you personally lose your job or not, due to a decrease in foreign trade, you will be affected in one way or another. When someone is unemployed, it’s no secret that they spend less money and probably don’t have enough to pay their debts or taxes. The less people there are spending money and contributing to the economy, the more state and local governments go into debt providing funds to support them. If the unemployment rate lags for too long, certain states will probably raise taxes to help weaken the effects of the loss of revenue which will cut into your disposable income as a taxpayer. When you have less money to spend because taxes have gone up, you spend less on non-essential items, and that will continue the downward spike in the economy. This is why it’s best for the unemployment rate to be extremely low and for many people to have job opportunities because what affects another person financially, may start to affect you if the impact happens to be widespread.
In sum, be mindful of what’s going on in the news and with the economy, continue to save and prepare for the unexpected. The effects might hit your home more than you think. If you are a Barclaycard Ring cardmember and would like to comment on this blog, please click here to access the internal Ring Community.
(Photo courtesy cooldesign/freedigitalphotos.net)
*All content provided in this blog is supplied by Chris Vasquez and is for informational purposes only. Barclaycard makes no representations as to the accuracy or completeness of any information contained in the blog or found by following any link within this blog.
Chonce is a Personal Finance Journalist who is passionate about helping others achieve financial stability and wellness. She chronicles her financial journey that is filled with aggressive debt payoff, frugal parenting, and maintaining motivation throughout life on her
blog, mydebtepiphany.com. You can follow her on Twitter or check her out on Facebook.