Scary economy, real solutions

There's a lot to fear in the economy these days, but that doesn't mean you should hit the panic button. These simple steps can protect you from looming dangers.

1 of 8
BACK NEXT
A looming recession
Solution: Beef up emergency savings

As a hedge - just in case the worst happens - the best strategy is to beef up your emergency fund. The standard advice is to keep at least three months' worth of living expenses socked away if both you and your spouse work and six months' worth if your household has only one earner.

But in a recession, a year's worth can make more sense, especially if you're near retirement. If you have no cash or barely any on hand, it even makes sense to sell stocks. It's never a good time to have no savings, and that's especially the case in a downturn.

If like a lot of people you have some ready cash but not enough to tide you over for an extended period, you can avoid dumping stocks. Instead, put off major purchases, cut consumption and, if necessary, redirect money you're regularly investing in stocks into a savings account.

Where should the money go? Forget CDs: You need to be able to withdraw the money quickly without penalty in an emergency. A money-market account or fund will do. --George Mannes
NEXT: A weakening dollar
Last updated July 17 2008: 1:39 PM ET
Where homes are affordable Residents who buy real estate in these 25 growing cities see their incomes go the furthest. (more)
Gas crunch hits homeThe record-high price of gasoline is putting a strain on motorists - and spurring some to shift their habits. Here are their stories. (more)
Your Money: McCain v. Obama See where the presidential candidates stand on the major economic issues. (more)
Special Offer
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.