Protecting Your Finances from the European Debt Crisis
With all the financial instability in the world, it's no surprise that almost everyone is worried about their own investments and assets. How can you protect your financial position while the Eurozone crisis plays out?
How the Euro debt crisis could harm your finances
The main dangers to your personal finances of the unfolding Euro crisis come from the following areas:
The threat of government austerity cuts: Up to 600,000 European public sector workers are likely to lose their jobs over the next few years. Be prepared, if one of them is you or someone in your family.
Your employer depends on trade with the Eurozone: In Britain, for example, an estimated eight million jobs rely on the nation's trade with the Eurozone. If the these countries go into recession then it’s likely many jobs will be lost here as well.
The danger of another financial crash: A major Eurozone crisis could lead to a second financial crisis this could hit business and jobs, perhaps your own employer — even if they don’t directly trade with the Eurozone.
Debts being called and/or new lending reduced: Many analysts suggest that banks will cut short term credit from individuals (for example, they could cancel personal loans or credit cards and demand immediate payment, or they could jack up overdraft fees) if they lose too much money as a result of the developing Eurozone crisis.
Falling property values in Eurozone nations: If you have a property or second home in a Eurozone nation, any negative change in the value of the Euro currency will either impact how much your home will fetch on the open market, or how expensive your mortgage is.
Keeping your money safe during the Euro crisis
You may not see a direct threat to your financial well-being from the Euro crisis right now, but it’s still smart to play it safe. You want to protect your cash pile in the event of a worst case scenario, so its impact on your life is minimal. Here are a few tips.
Spread your savings around: The Financial Services Compensation Scheme (FSCS) guarantees up to 85,000 pounds sterling held in a savings account. If you have more than this on deposit then spread it around between different providers to ensure that your cash is fully protected by the FSCS.
Pay down any credit card and overdraft debt: If the Euro crisis causes the banks to rein in their lending, then borrowers may find that short term debts are called in fast. Don’t put yourself in a position where this could throw your finances into chaos — pay this debt down now if you can!
Review any planned new expenditure: If your money is mostly in Europe, this really isn’t the time to be building up new debts or eating into your cash savings. The risks of a sudden Euro shock could push the financially extended over the precipice.
Keep a war chest handy: In case of job loss or ill health, most independent financial advisers recommend that you keep between three to six months worth of your salary saved away in case you need the cash.
Taking the above steps won’t guarantee that your finances will be left untouched by the Euro crisis, but they will give you the best chances of taking what the Eurozone, its bankers, and politicians might throw at you over the coming months and years.