Do the right thing in a recession

Your investments are in the tank, your annual bonus is a thing of the past, and you need to cut back on expenses. Problem is, tightening your budget can create pain for someone else.

If you let your housecleaner go, for example, you'd worsen her financial situation at a time when she's probably hurting far more than you. And it sure wouldn't be easy to tell your gifted daughter, who's been accepted by a prestigious summer music program, that she can't go. Or to give your elderly father the news that you can no longer afford to pay for the upkeep that allows him to remain in the home where you were raised.

What to do

In ethics as in financial planning, needs trump wants. So, we fear, Dad may have to give up his house for an apartment. But what happens when you have to decide which needs not to fund?

Unfortunately, there's no simple rule for determining who has the most compelling moral claim on your resources. But there are three principles to keep in mind. One is that sacrificing is a necessity, not a punishment. It's to be expected of everyone, and you can't feel guilty about not underwriting what you can't afford. Second, family comes first. As concerned as you may be about your housecleaner -- or your favorite charity -- your first obligation is to the loved ones who depend on you.

Finally, remember: Opportunity is priceless. Sell your jewelry, sell your car -- whatever you need to do to be able to invest in your child's future.
NEXT: Are you stuck with the tab?