By YOUNG MONEY Staff
28 July 2011

The August 2 deadline for the U.S. federal debt crisis, when the government must pay its debts or default, is fast approaching. American consumers are monitoring the process and preparing for potential effects on their personal finances, according to the Boston Globe.

Unlike the national financial crisis of 2008, the major markets on Wall Street have not shown extreme strain in the face of this issue. However, the Globe reports that this is not necessarily a sign that the new crisis is less serious, noting that stock prices fell noticeably yesterday, July 27.

The likely consequences of an August 2 default will be damage to the retirement accounts and investments of American consumers due to the devaluation of U.S. stocks. Interest rates and borrowing costs tied to U.S. Treasury funds may well spike significantly, as well.

Cheryl Costa, managing director of AFW Wealth Advisors, warned against panic among consumers. "The hard part will be to watch it and be concerned - because you should be - but don't let your emotions cause you to make irrational investment decisions," she told the news source.

According to the Chattanooga Times Free Press, the last U.S. default occurred in 1979 and led to increases in short-term interest rates and borrowing costs.