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EMOTION HAS NO PLACE IN KEY CHOICES

With new - and frightening - stock market headlines dominating the news daily, it's getting harder to remain calm. And trust me, I completely understand. Your retirement accounts (and mine) are plunging, your savings and checking accounts (and mine) may have changed hands in a bank buyout, job security is questionable and, on top of it all, staples like gas and food cost more.

But panicking will get you nowhere fast. In fact, it may very well stick you in a position worse than the one you're in now.

"Do not get caught up in the day-to-day swings in Washington and on Wall Street. It can make you emotional, it can make you scared, and nothing leads to worse decisions," says Hugh Johnson, chairman and chief economist at Johnson Illington Advisors in Albany, N.Y.

So what do you do? First, you take a deep breath and remember that history has shown us that, given time, this economy will bounce back. Then, you give yourself a financial check-up, focusing on the following:

Investing. As I said, this is not the time to be making a lot of moves in the market. But you should double-check your strategy and make sure your asset allocation is still on track. You want to be taking enough risk with stocks to earn a hefty return, but not so much that your emotions start to take over. As you get older, you need to start being more conservative because you don't have as much time to make up for losses. But, as always, the most important thing is to continue buying into the market. History tells us that doing so over time gives you the best shot of coming out on top. But there is a difference between long-term investments - for retirement, generally, or for college - and short-term ones. The money that you need in the next three years should never be in the stock market. It belongs in safer havens like certificates of deposit and money-market accounts.

Spending. We are a country of spenders. In fact, out-of-control spending had a big hand in the mess we're in as a country. It has to stop. If you can't pay for something up front - and I mean with cash, without having to borrow from the money you've earmarked for the mortgage, or the car payment or groceries - then you shouldn't be buying it. And if you don't already, you need to really start paying attention to what, exactly, you're spending your money on.

Liquid savings. In an economy like this one, emergency funds are more important than ever. Of course, on the flip side, this economy makes it harder to save because we're pinching pennies just to cover the basics. So you really have to get creative. If you're $5 under on your grocery budget this week, put that extra cash in the bank. And, while in the past I've said that three to six months of living expenses is sufficient, right now I'm more comfortable telling you to shoot for the full six. Stash it in a money market account that earns you a bit of interest and provides easy access.

Credit. Credit is tight now, and it might get tighter. You've no doubt noticed that the credit card offers in your mailbox are becoming few and far between, and if you've shopped around for a mortgage or car loan in the past few weeks, you've likely been told that your credit score needs to be top-notch. But what was considered a great score a few years ago may be viewed as merely good or even mediocre today. What it means is that now, more than ever, you need to keep your nose clean. Pay your bills on time. Stop applying for loans you don't really need.

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