The Financial Implications of Greece

Greece is heading towards another deadline in their ongoing debt struggles. The country has been dealing with deficits and financial problems for years.

Should this situation concern you? A little or a lot?

The Greece financial situation has been a constant hot topic in the financial press and media. This will likely continue for a while.

The Greece government faces a June 30th deadline to make a huge debt payment or work out another agreement that essentially kicks the “can” (solution) further down the road.

This is an example of a problem that causes lots of headlines and short term financial market volatility, as financial markets do not like uncertainty. Markets in Europe and the U.S. will continue to react based on expectations and actual events, both good and bad.

However, you should remain focused on your long term financial goals and investment plan, not on the short term volatility that the Greece financial crisis may cause.

Greece is a very small country, in terms of population and the size of their economy. Greece is struggling with a serious problem which will have a significant impact on their population. This problem may have an impact on the Eurozone, but it’s impact on Europe may be bigger politically than the long term economic impact.

For example, the value of all the companies on the Greece stock market as of 12/31/14 was $34 billion. Germany’s stock market value was $1,383 billion, or more than 40 times larger than Greece. Greece’s economy is so small that it would only be .15% of the U.S. stock market value (far less than 1% of all U.S. public companies).

While the Greece crisis will get the headlines, we don’t think it will have a dramatic effect on what American consumers buy, homes to be bought and sold, and the business plans of most large corporations throughout the world.

There will always be financial challenges and crises which occur throughout the world. Some can be anticipated, such as this one, and some which cannot be predicted.

A key factor of your financial success, and your own peace of mind, is to accept that events like this will occur. They may cause short term volatility, but you should not “react” to these events by changing your financial strategy.

We cannot control these events. We cannot accurately predict the specific outcome of the Greece crisis. We cannot know how and when it will be resolved.

You should focus on what you can control, such as working towards your long term goals. If your focus is 5, 10 or 15 years in the future, then events like this should be considered short term distractions. Keep your focus on the long term, not the short term noise.

 

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