The downward spiral...and how to avoid it

Under the title "How bad can it get?" the Wall Street Journal laid out some wisdom for both the out-of-work and the employed, on how to manage in these uncertain times. But for some levity(?) before its pronouncements, it asked Worst Case Scenario Survival Handbook author Joshua Piven for input. Piven related the expected downward spiral of events thusly: "You lose your job, you run out of savings or a safety net, have to sell [your] home, it's a down market and you can't sell your house, you move, pull the kids out of school, it's not easy to get another job and your whole lifestyle has to change. Then there's homelessness, maybe spiraling alcoholism, and then living on the side of the train tracks." It was accompanied by a modern-day portrait: a couple throw their now-worthless stock certificates into a burning oil drum in order to stay warm. Cheery, no?

So, to avert that scenario, WSJ offers the following advice.

1.Stall. Immediately after a layoff, notify your landlord and/or other creditors you've been offloaded, and ask them if you can delay or minimize payments for the time being. 2.Educate. Definitely check out alternative health insurance options, whether that means COBRA or something more creative. 3.Calculate. Write down a budget that reflects your new situation, and seriously consider what's necessary (electricity, food) versus what's desirable ($12 cocktails). Pay bills for necessities before other obligations (sending minimum payments on store credit cards). 4.Unload dead weight. If you're jobless for a prolonged period, you may have to sell off jewelry, some investments and "extras."5.Wait. Don't tap into your 401(k) unless absolutely necessary -- the penalties and potential long-term consequences are too great. 6.Prepare. If you happen to be (one of the few) still working, try to keep 6-to-12 months worth of expenses in savings for emergencies, and secure extra lines of credit while you still can (but don't use them yet). WSJ also suggests you pay credit card minimums and take whatever else you would send to your accounts and hold onto it.

Did you live through the last recession -- or the Depression? Tell us what's worked for you?.

--Posted by Todd Obolsky, Vault News & Commentary