The recent financial news may have you feeling a bit helpless when it comes to your finances.  While you may not have any control over the market, there are steps you can take to make your finances as strong as possible in these tough times:

1.  Fund your emergency fund.  It’s more important than ever to have an emergency fund, in case you lose your job, have unexpected medical expenses, or have a major house repair, so that you don’t have to sell investments (while they’re down), or rack up credit card debt.  The general rule of thumb is to have three to six months of living expenses set aside for emergencies.  You should keep this money in short-term, liquid assets, such as a CD or money market account.

2.  Reduce debt.  If you have high interest credit card debt, the greatest return you can get right now is to pay off that debt.  Start by calling your credit card companies and asking for a lower interest rate (if you have a good credit score, you could get your rates down to 8-12%, which is much better than paying 20+ percent).  Then make the minimum payments on all of your credit cards except the highest interest rate card.  Apply as much as possible to the highest interest rate card until it’s paid off, then move to the next highest interest rate card, and so on.

3.  Increase your retirement contributions.  Many people panic and stop investing in their 401Ks or other retirement accounts when the market is down.  When the market is down is actually the best time to invest.  Remember “buy low, sell high”?  Well, the time to buy low is when the market is down!  Make sure that you are investing in a diversified portfolio that meets your risk tolerance, time frame and goals, and that you rebalance once a year.

4.  Make sure your money is protected.  Your bank accounts are protected by the FDIC, while the SIPC protects your investments in the event that your brokerage company fails.  Make sure that none of your accounts are above these limits (generally $100,000 per owner and per bank for FDIC, and $500,000 per account for SIPC).

5.  Refinance your mortgage or other debts.  Interest rates are at historical lows, so why not take advantage of these low rates to do something good for your checkbook?  Remember, you will pay closing costs anytime you refinance, so it’s best to refinance if you expect to be in your home for five years or more and only if you can get your interest rate reduced 0.75-1.0%.

6.  Check your credit report at least once a year.  With the rise in credit card fraud and identity theft, it’s crucial that you check your credit report periodically.  You should check your credit report at least once a year, but 2-3 times per year would be even better.  To check your credit report for free (doesn’t include your credit score) go to www.annualcreditreport.com.

7.  Invest in yourself.  Unless you work for the federal government, tough economic times could mean job layoffs and higher unemployment.  Invest in yourself by taking classes to improve your skillsets, or even going back to school to get your degree.  The money you spend on your education could make the difference between employment and unemployment, and should pay off in the form of higher salaries over your lifetime.

Finally, turn off the news!  A CNBC reporter said it best, on one of the many volatile days we’ve experienced this year… “If you’re invested for the long-term, turn off the news, it doesn’t affect you today”.

Kristine A. McKinley, CFP, CPA, and founder of Beacon Financial Advisors, teaches individuals and families how to invest and plan for retirement, college, and other financial goals.  Kristine offers financial and tax planning on an hourly, fee-only basis.