smart spending

5 ways the eurozone crisis may impact you

"If a money market fund has exposure to the sovereign debt (of some eurozone countries) or a bank in one of those countries, there's a risk that it could break the buck," says Scott Cramer, president of Cramer & Rauchegger Inc., an investment firm in Maitland, Fla. "In 2008, people in those funds got their money back, eventually. But it's not an experience you want to go through."

Few funds currently have exposure to the most troubled countries but, "if the crisis spreads to Germany, France or Great Britain, the risk that some funds may break the buck increases significantly," Cramer says.

For now, it's something Cramer says he's continuing to monitor. If consumers invested in a money market account through their bank, there's a good chance it's insured by the Federal Deposit Insurance Corp., but they should check. If their money market fund is through a brokerage house, it's not likely insured, but consumers can ask about the fund company's exposure.

Psychological

While there's a lot of data out there about the adverse effects of a eurozone crisis, the bad news also tends to erode consumer confidence and that could be most damaging of all, says Jamie Cox, managing partner of Harris Financial Group in Colonial Heights, Va.

"If enough people believe that something is true, then it becomes reality," Cox says. "Consumer sentiment is driven largely by employment. If consumers believe that their employment status is compromised, then they will spend less because they are afraid. The more pronounced the negative headlines, the more consumers believe that their employment may be at risk."

So far, those negative headlines in Europe haven't impacted consumer sentiment in the U.S. "But that can change quickly," Cox says.

In 2008, few people would have predicted the collapse of Lehman Brothers, and fewer still would have pegged that event to a widespread panic that struck at the core of consumer confidence. It is hoped that Europe won't see any Lehman-like collapses, but if it does, Cox expects real trouble on the consumer spending front.

"Consumer spending doesn't stop in a recession, it slows down," Cox says. "In a financial crisis, it grinds to a halt."

Travel

With the Euro under pressure and falling in value, you might guess the dollar stands to gain, making American currency that much stronger for tourists traveling to France, Germany or any of the 17 countries that use the euro. But while it's hard to predict moves in the currency market, travelers betting that the euro's loss will be the dollar's gain are probably right, says Christopher Vecchio, junior currency analyst at the foreign exchange trading firm DailyFX in New York.

"If the market unfolds as expected, the U.S. dollar stands to strengthen significantly against the euro," Vecchio says. "Traveling to Europe during the crisis would be the ideal time. The U.S. dollar would be stronger, which would reduce costs abroad."

Vecchio says that by next fall the euro and dollar may evenly trade at or near a 1-to-1 ratio. The dollar has traded from $1.32 to $1.42 against the euro over the last year.

But before you pack your bags, you might want to check your own finances, Connelly says.

"The euro will lose relative value against the U.S. dollar, which makes trips to Europe more affordable for the U.S.' now famous top 1 percent," Connelly says, "But the 99 percent will suffer the effects of a profound European recession."

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