Eurozone Woes Cross the Atlantic to Sink TSX

Many people look at what's happening across the Atlantic and wonder why eurozone troubles would bother the rest of the world. While it seems as though Canada should be fine without worrying about the eurozone, though, the global markets don't work like that. This morning, as the eurozone bailout plan began to fall apart, the S&P/TSX opened down 338 points. That's pretty substantial. And it means that you should care about what's going on in other areas of the world.

Eurozone Troubles Could Upset Global Economy Further

Concerns that eurozone troubles could upset the global economy further are fairly well-founded. The currency region is an economic leader, and its difficulties tend to blow back on the rest of the world. Indeed, if the eurozone fails to contain the sovereign debt crisis, we could see another major financial crisis.

Already, those holding Greek debt expect to experience a haircut. However, the latest announcement that the bailout plan (and its austerity requirements) will go to the Greek people in a referendum, has many worried about a straight-up default. There are even concerns that Greece could be forced to leave the eurozone. And there is, of course, the worry that other eurozone countries contending with high levels of debt, including Italy and Portugal, could be next. With the eurozone in shambles, the world economy would suffer a severe shock.

What Should You Do?

Of course, such a drop in the TSX, as well as concerns about what could be next, could induce panic. After all, there is a lot to be worried about, and our interconnected global economy means that the troubles of one can become the troubles of all. However, that doesn't mean that you should panic. Instead, it's time to carefully consider your options, and evaluate your portfolio. Chances are that you have a good plan in place. And, while things are going to be bumpy for a while, there is a strong likelihood that, in the long term, things will smooth out.

While it might be time to tweak things a little bit, it is probably not the time to totally abandon your financial plan. It is a good time to prepare for the possibility of another global financial crisis and recession, though. Some of the things you can do include:

• Paying down debt. (A low interest Canadian credit card can help.)
• Building your emergency fund.
• Looking for ways to cut expenses.
• Prioritizing your spending.

When you are financially prepared, recessions don't hold as much fear. You can be ready for what's next. So, tweak (but don't abandon) your financial plan, and shore up your finances. Things could get a little crazy.