A bad economy can be painful, but it can also be a time of opportunity. With opportunity comes change, and change often involves learning to adapt.

Avoid Overextending Yourself Financially

Depending upon your financial situation, an economic downturn makes everything less certain—your income, your living situation, your ability to deal with a medical crisis. If you are overextended financially, you are in a dangerous position if you lose your job, lose your home, or are faced with an expensive emergency.

To get your finances in good shape before an emergency occurs: 

- Assess your situation. Are you in a credit or financial crisis? Are you close to one? Identify your monthly income and expenses, and note whether expenses exceed income.  

- Stop using credit for new purchases. 

- Pay off debts. You will need to decide whether to pay off the smallest debt first (for the gratification and motivation this provides—sometimes called the “snowball approach”) or to pay off the highest interest debt first. MSN Money contrasts the two approaches to paying down debt. 

- Begin building a liquid emergency fund of three to six month of expenses, or more.

Diversify Your Life to Provide Options

Diversification is a strategy that helps investors spread the risk among their investments. Diversification in your personal life—in a number of aspects—might help you weather a bad economy by spreading out various types of risk. Here are some examples of diversification to create options in your life: 

- Are you dependent upon one source of income? Could you minimize risk by creating additional streams of income? (i.e., additional jobs, a business on the side, passive methods of income, etc.) 

- Is the cost of health care a concern? Can you start to implement preventative, healthy practices in your life (exercise, better diet, ceasing smoking, etc.)? 

- Is the price of gas making it expensive to travel to work? Can you consider other options—ridesharing, public transportation, even car-sharing? 

- Is the price of groceries making a dent in your budget? Can you grow your own vegetables or work in a community garden?

All of these options lessen your dependence upon one source or one solution. Ultimately, options give you freedom and ability to maneuver in life’s tight situations—Including difficult economic times. Many of these options may also save you money.

Maintain a Positive Attitude to Challenging Times

You cannot change a bad economy, but you can change your response to the situation. You have control over your attitude, and ultimately this can make a huge difference in how you weather a difficult situation.

Some strategies to maintaining a positive attitude include: 

- Surround yourself with positive, motivated people who you respect. 

- Stay alert and healthy; move your body. Avoid dulling your mind and body with too much alcohol or drug consumption. 

- Be aware of situations that cause you to worry, and try to minimize these. For example, if watching the news causes you undue worry, turn it off. Worry is useless and unproductive energy. 

- Move your life forward in one small way, each day.

Simplify Your Life

Simplifying your life may reduce stress, and you will weather a difficult economy better in a stress-free state of mind. Simplifying your life may also save you money and time.

Simplifying your life can mean a number of things, depending upon your lifestyle and your household: 

- Can you sell some of your stuff, freeing up space and providing some income? 

- Can you vacation closer to home, saving time and money? 

- Can you eliminate time-wasters from your life that give you more worry than pleasure? 

- Can you say no to further commitments that you do not give top priority?

Additional Resources 

- USA Today discusses how teens weather a bad economy and learn to make adjustments in their lives.  

- Web MD looks at the effect of stress in our lives, and how simplification can ease that stress. 

- CNN Money offers lessons learned from the Great Depression that can be applied today.