Financial experts are now calling Wall Street’s meltdown the biggest challenge to the American economy in recent history. An unprecedented run of bank failures and government bailouts have now joined our weak housing market, tight credit and high fuel costs. Here’s a list of dos and don’ts to help you stay afloat in these turbulent times.

What to do:

1) Pay attention. At no time has it been more crucial in our country’s history for the average Jane to watch what’s happening on Wall Street. Nowadays even workers at McDonald’s own securities through retirement accounts, and with major financial institutions failing, housing in the dumps and sky-rocketing fuel and heating prices in the wake of two Gulf hurricanes, there’s a real danger of more unemployment and inflated costs right before the holiday shopping season.

2) Consult a pro. Now’s a good time to get advice from a financial professional, especially regarding your retirement accounts. Investments are taking a beating, so your portfolio needs to be appropriately balanced for your age, risk tolerance and goals.

3) Save, save, save. Remember that three- to six-month emergency fund you’re supposed to have stashed? Well, now is the time you’ll need it. Many folks have lost jobs and if you find yourself in that unfortunate position, you want to be sure you can weather the storm. Robust savings will also help you get through a winter that promises higher heating costs.

4) Consider homebuying. While it’s still hard to borrow and home values haven’t yet hit rock bottom, 30-year fixed mortgage rates are falling again after the Fannie and Freddie bailouts. It all translates into a buyer’s market with plenty of bargains to be had where sellers can become a tad desperate. They key is to be prepared. If you’ve got stellar credit, a sizable down payment saved and plan to stay in your home at least five years or longer, now might actually be a good time to buy.

5) Use cash. Limit your spending by paying with cash. Unlike credit or debit cards, cold hard cash disciplines your budget.  If you have poor spending habits, real green enables you to spend what you have and not what you’d like to have.  Remember, this isn’t a Monopoly cash flow, so take time and really think about and plan your purchases.

What not to do:

1)    Panic. Think of the current financial turmoil as if you were at risk of drowning—panicking will only increase your chances of going under. These are scary economic times but cool, informed heads will prevail. Making rash financial decisions based on all the recent headlines could end in long-term losses.

2)    Pull out of your 401(k). This is one of the worst things you could do now, especially if you’re a young worker. The most important characteristics of a 401(k) are the compound interest you gain from years of investing and matching contributions from your employer. Both principals take years to pay off, so pulling out now could cost you dearly.

3)    Splurge.
One of the scariest things about the downturn is that it’s unclear when things will get better. It’s a safe bet that the economy will be in turmoil well into 2009, which means jobs and the value of investments could also be in jeopardy at least that long. Don’t buy anything too extravagant or do too much unnecessary spending.

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4)    Pay with plastic. It’s not called a credit crunch for nothing. Banks don’t trust anyone with their money right now, so they’re tightening the terms under which they lend. Don’t be surprised if the interest rate on your card climbs and new fees appear on your bill. Do what you can to avoid the credit card monster at all costs.

5)    Lend. It’s great to help family and friends in need, and a new study about Black women’s finances shows sisters are among the most generous people out there. But bankers are cautious about lending for good reason— too many people can’t pay their bills on time. This is the wrong time to let other people’s financial woes become your own, so exercise caution before doling out the money.

Keith Reed is a business reporter and personal finance blogger.  He contributes to and National Public Radio.