It’s easy to feel disconnected from major events happening across the globe. From conflicts overseas and the rising price of oil to geopolitical tensions and natural disasters, these big-picture happenings can seem far removed from your life. Add in the fact that we’re constantly reading or seeing about these events on social media, and at times we can become desensitized to the goings-on around the world.

That being said, the reality is that these events can have a very real impact on personal finances. The global economy is so intricately connected that any major world event is like a boulder being thrown into a pond—its ripple effects are far-reaching, impacting our bank accounts and wallets. 

Understanding these connections can help you better prepare and make smarter decisions about money. So, let’s talk about how world events can shape your finances and what you can do to plan for them. 

The rising cost of living 

Significant world events, such as geopolitical tensions, natural disasters and other crises, can disrupt supply chains and impact the prices of consumer goods. (We saw this happen with the COVID-19 pandemic.) A conflict in a region that produces grain or oil can send food and energy costs sky-high.

What you can do: Reduce the impact of rising costs of living by limiting your debt the best you can. Try to eliminate variable-rate debt, such as credit cards, which will become more expensive if interest rates rise. Trim non-essential expenses (e.g., travel, streaming subscriptions, lottery tickets) to help provide a buffer against higher costs.

The job market roller coaster

Economic downturns, political instability and military conflicts impact employment levels. Some businesses facing challenges that are hindering growth may need to tighten their spending—sometimes through layoffs or hiring freezes. On the other hand, events that spur economic growth (e.g., consumer spending, tax cuts) can help increase the number of jobs available.

What you can do: Build an emergency fund with three to six months’ worth of living expenses in case of a job loss. And as a side note: Keep that resume updated and always be looking for job opportunities, just in case.

The turbulent market

If you have an investment portfolio, you know that global events can shake up financial markets. During times of uncertainty, investors become more risk-averse, causing stock prices to plummet. And, of course, events that improve the economy help drive markets higher.

What you can do: Ensure your investment portfolio is diversified across different asset classes, sectors and geographies to mitigate volatility. Also, avoid panic selling during downturns.

The vacation conundrum

When global tensions flare up or economic conditions deteriorate, travel can become riskier and more expensive. Airfares can spike because of higher fuel costs, and some travel destinations can become less appealing due to safety concerns. 

What you can do: Build flexibility into your travel plans and budget. If your destination becomes unsafe or travel costs skyrocket, consider a staycation instead of taking an international trip.

Get prepared 

World events have very tangible financial consequences. And while we can’t control what happens, we can control our preparedness. Stay informed, maintain flexibility in your finances and implement strategies to safeguard your money. When you’re well prepared, you’ll be able to face any global events with confidence and resilience. And remember, we’re always here to help.