What do you do when the bottom has dropped out of your investment portfolio? How do you react when watching your retirement nest egg shrink dramatically? How do feel about your seeing your children's college savings drain away? What reactions do you have each day as you read of more companies lowering their earnings projections for the coming year and announcing layoffs?

If you are like many people, the feeling holding you hostage is unexpected, uncomfortable and uncontrollable fear. Financial fear is something most of us have not experienced for many years - for most of the past decade, to be exact.

Most of us are now shaking our heads in bewilderment. How did it all end - and so abruptly? Many of us are shell-shocked over the loss of money in our investment accounts. Fear is creeping into our daily lives. We need to quell this uncomfortable emotion before it takes over. How?

There are steps you can take to ease your fears. The two big fears facing many of us are: loss of investment income and loss of a job. Facing each fear and coming up with a positive plan of action is the first step. Keeping calm and self-confident is the goal.

First, let's address fear over losses in your investment accounts. Review these accounts with your broker or financial advisor. Make sure you are invested in quality mutual funds, stocks and/or fixed-rate options. Are these accounts set up for retirement? College for the kids? Ask yourself how long this money has to grow. If you won't need it for five or more years, relax! Don't do anything. Bear markets are usually followed by bull markets. Don't even open your monthly statements from your brokerage - let it go a few months before taking a peek. This strategy is for those who are comfortable with their long-term investments. It will do you do no good at all to worry over the short term losses. Wait it out for several months and then review everything again.

If you have an automatic investment plan, review your investment options with your financial advisor, and again, make sure you are comfortable with your decisions. Keep investing! It's a great time to buy high-quality stocks and mutual funds. Your money will buy more shares and you'll be poised for big profits when the market goes back up.

Things are a little trickier if you are currently using the money in your investment account. Hopefully you are not using these accounts to cover your daily living expenses. Many of us got used to using investment proceeds to cover anything out of our ordinary budget, such as car and household repairs, @{vacations}@, landscaping expenses, camps for the kids, new cars, etc. This source of income has likely dried up. You will have to face the fact that, this year, the extras will have to go. Your family will survive without a new car for another year, you can visit a state park this summer instead of the beach, your children can spend the summer at home instead of camp, new landscaping can wait, etc. Let these accounts sit for now.

Now, let's look at the fear of losing your job. Ask yourself what you'd do if you lost your job tomorrow. Do you have a safe-rate emergency fund (savings account, money market, certificates of deposit, etc.) set up to cover three to six months' living expenses? If so, stop worrying! It's highly likely you would find another job within that time frame.

Didn't get around to setting up a "safe money" account? You'll need to analyze how you would cover your expenses during the layoff period.

First of all, know what kind of severance package you could expect from your company in a layoff situation. Many companies offer one or two weeks' pay per year of service. Also, be sure to check on @{insurance}@ options. Ask about continuing your coverage, even if you have to pay the premiums, for at least several months. Be prepared to trim "extra" household expenses, such as eating out, cable television and high-speed Internet access, to cover your important insurance needs during this period.

What else can you do to cover your expenses while laid off? Take an asset inventory to determine what you could sell to raise funds. Do you have an extra paid-up car or truck you could sell? In a two-car household, consider going to one car temporarily. How much would you bring in? Also, it might be time to cash in those collectibles you've been holding onto. Don't sell @{family heirlooms}@, but consider raising money from jewelry, high-tech equipment, furniture, and other items. Your goal is to have a list of items that could be sold fairly quickly to generate living expenses for several months. Arm yourself with this list and knowledge of what your severance pay and insurance options would be in the event of a layoff and stop worrying! You would survive a layoff and get back on your feet with a new job within several months.

No assets to sell and no emergency fund? OK, you would have severance pay, perhaps some vacation time and not much else. You would need to take a temporary job or several, immediately. You could work in construction, retailing, food service, delivery, assembly line or clerical positions. Who cares - it would be temporary and preferable to getting behind on your bills or taking on more debt through credit card, home equity or other loans. You would want to try and avoid more debt, if at all possible.

Other things to consider:

* Is your debt paid down as much as possible? Work on getting out of debt now. The last thing you'd need if faced with a loss of income is creditors hounding you.
* Consider trading down in automobiles - car debt can be very expensive and eat up a household budget. Can you trade in the SUV for an older but reliable sedan? Not flashy, but it's dependable transportation for a lot less money.
* Is your mortgage uncomfortable? If so, even with your current job, consider refinancing or even trading down in housing. Several hundred dollars less per month going toward housing can have a substantial effect on your financial peace of mind.
* Work on building that emergency fund. Consider selling some assets now, prior to any emergency. If you truly don't need these assets, trade them in for the peace of mind stable bank funds will bring.

By facing your fears, instead of burying them, you can arm yourself with plans of action in the event of a financial setback. Knowing what you'd do and how you'd survive will go a long way toward easing your fears.

You can and will survive an economic downturn - companies will always exist, work is always waiting, and life does go on. It is highly unlikely that you'd face bankruptcy, lose your home or end up on the street, as long as you keep your head, have action plans ready and don't become panicked or depressed. So get to work on those plans, face down those financial fears and stop worrying!

Copyright 2001 by Lucynda Koesters -
Lucynda is a free-lance writer focusing on family issues. Her work has appeared in various publications across the U.S. This article first appeared in the Dollar Stretcher and has been reprinted with permission. You can contact Lucynda at lkoestrs@venus.net