Understanding the Global Economy and How Your Credit Fits Into It

SEP 15, 2011

Sept. 21 is the International Day of Peace. But if headlines about failing economies around the world have you feeling less than peaceful about the global economy and how you fit into it, youre probably not alone. Finances are a common cause of anxiety around the world.

Economies are cyclical and all countries have historically gone through economic ups and downs. Its probably safe to say, however, that technology has made us all more connected and aware of it than ever before. Think of it this way: When the stock market crashed on Oct. 24, 1929 it took a while for the ripples to make it all the way around the world via newspapers, telephone and telegraph. Today, if the stock market dips while youre reading this blog, investors around the world will know it instantly, thanks to the Internet.

Understanding the global economy can seem mind-boggling. Does what happens on the other side of the world really affect what happens to you? A hundred years ago, it might not have. Today, the answer is almost certainly yes.

While whats going on in world economies is definitely intertwined with our domestic economy, it doesnt mean youre economically powerless. Some things, like how you manage credit and personal finances, are still in your control.

For example, you cant influence the decisions of foreign nations that increase the price you must pay for a gallon of gas. But you can choose to not use credit to buy that gas. You can also choose to carpool, bike, or use public transportation to minimize the amount you have to spend on gas.

Making smart use of your credit can help you strengthen your credit score. Improving your credit score can help improve your overall financial health. And as more Americans improve their financial health, the better everyone including our domestic and global economies will do.