How Will The Situation In Greece Will Impact You?

The Answer Is That It Shouldn't- Don't Let Fear Keep You From Smart Investing

We’ve encountered many questions from clients and friends in the past few weeks about whether or not the situation in Greece can- and will- affect their personal finances.  As we inch towards the vote on July 12th- a vote for either a bailout or else the risk of an exit from the Eurozone- there are a lot of jitters and concerns right here at home. 

This Isn’t the First Time

While many people are just starting to understand the issues in Greece, the truth of the matter is that this isn’t the first time that Greece has been in this position.

Back in 2010, Portugal, Ireland, Italy, Greece and Spain were also “bailed out” due to their weakened economic situation post-financial crisis.  So here we are again, and this time Greece is facing a decision to be bailed out OR to risk an exit from the Eurozone.  According to a recent New York Times article,

“The ball is in Greece’s court,” Pierre Moscovici, the European Commission’s senior official for economic and financial affairs, said Wednesday, echoing a theme heard regularly in European capitals and the bureaucracies of Brussels as creditors demand evidence that Greece is willing to take concrete steps to get its finances in order.

But Prime Minister Alexis Tsipras of Greece said the situation was a European problem, in need of a European solution. “We all understand that this debate is not exclusively about one country. It’s about the future of our common construction, the Eurozone and Europe,” he said Wednesday, making his case that the only way out is for the other euro-linked countries to drop their insistence on painful austerity policies.

The Good News…

Let’s get back to the concerns here at home.  Here’s an important statistic that should help put your mind at ease:  Greece’s GDP (Gross Domestic Product), which represents the total value of all goods and services produced by a country, is about $242 billion.  In contrast, the state of Tennessee’s GDP is over $300 billion.

  With that said, it’s easy to see that Greece is not a major player in the world’s GDP equation.  In fact, it’s only about 1.3% of the European Union (UE) GDP measure.

Additionally, Greece’s current financial issues are due to several factors that are Greece-specific.  Let’s take unemployment.  The Greeks that do work don’t want to pay more in taxes, and they also want to keep taking lots of vacation days.  This situation in and of itself is a big contributor to Greece’s debt woes. 

So here is the way that we look at it.  There’s always going to be a big headline out there, but most of the time, that headline is not going to affect you personally.  Greece is a perfect example, and I can think of countless news-breaking stories over the years (excluding the Great Recession) that had everyone panic-ridden over what was going to happen to the markets.   Just think about the fiscal cliff in 2012, the fear that the stock market peaked in 2011…and how can we forget about Y2K?

The point is that as investors, if we truly give into the panic over every big issue that is presented to us on an almost daily basis, then no one would ever invest a penny.  We’d all have a stack of cash under our mattress.

  But the reality of the situation is that in most cases, the issues shouldn’t be holding us back from investing- if you are investing properly.  By investing properly I am talking about having a balanced, well-diversified portfolio.  This means having the appropriate amount of money in stocks and bonds.  A balanced, well-diversified portfolio will help you sleep well at night, even in the midst of uncertainty.

Investing can be nerve-wracking, especially when it’s not clear how big world events can affect you here at home.  If you are looking to create a well-balanced, diversified portfolio, please visit here for more information. 

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  Past performance is not indicative of future results.  Investing involves risk including the possible loss of principal.  This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.