How to survive the next depression

By Liz Pulliam Weston

Let me make it clear at the start: I don't think we're headed for another Great Depression.

Many of you disagree. More than half the people polled in a recent CNN survey believe an economic depression is either very likely (21%) or somewhat likely (38%).

I do believe that a recession is probable, that it may be severe and that many people will lose their jobs in the coming months.

But I don't think we'll return to a time when:

• The official unemployment rate was 25%, with many more people who either gave up looking for work or who involuntarily worked part time.

• Bank failures wiped out the life savings of millions of customers.

• One-third of the nation was, as President Franklin D. Roosevelt famously put it in his 1937 inaugural address, "ill-housed, ill-clad, ill-nourished."

This 12-year period of economic disruption and widespread poverty was unprecedented in our nation's history. From it sprang many of the safety nets -- including Federal Deposit Insurance Corp. coverage, Social Security, unemployment insurance and food stamps -- that, though overburdened now, will continue to keep our most vulnerable citizens from falling into the destitution that characterized the Great Depression.

• Talk back: Are you worried about your finances? Acting or sitting tight?

Still, I think we're in for a rough ride. And the smart steps to take now are virtually the same whether you think what's coming is a run-of-the-mill downturn or a once-in-a-lifetime cataclysm.

Such as:

Implement your austerity budget

Pretend you just lost your job. Whatever expenses you'd cut in that situation, cut them now and use the savings to build up your emergency fund and pay off your toxic debt, such as credit cards.

"If you'd shut off the cable (after losing your job), shut it off now," says Sheryl Garrett, founder of the Garrett Planning Network, which represents fee-only financial planners who charge by the hour. "Only spend money on essentials."

If you need some inspiration, check out "Could you stop spending for a month?" Many people find they can save hundreds of dollars a month just by changing their food purchases: eating at home instead of dining out, cooking more meatless meals, reusing leftovers and shopping with coupons.

Erase that toxic debt

You know you should have done it long ago. Credit card debt is expensive and leaves you vulnerable to the ever-changing whims of credit card companies, which have been raising interest rates with abandon.

Now, though, shedding credit card balances may be critical. If you still have a job, Garrett says, use it to pay off this cancerous debt.

"Go ahead and get serious about it. Be a grown-up," Garrett says. "Realize you aren't going to get bailed out by a 0% credit card offer or another mortgage refinance."

If you're seriously behind -- if you can't pay the minimums or if you're getting collection calls -- make appointments with a legitimate credit counselor and a bankruptcy attorney. Between the two, you'll learn your options for dealing with truly difficult debt.

Keep your emergency exits open

Once you've paid off the cards, don't close them. Not only can closing accounts hurt your credit scores -- which have become all-important lately for getting loans -- but you may need access to that credit in an emergency.

The same holds true for other lines of credit, including home-equity lines. If you've got access to those, try to keep them open and unused so they're available in case of emergency.

Try to stay employed

No kidding, right? But here's exactly what that looks like: Volunteer for extra work, nab high-profile assignments, keep higher-ups apprised of your victories and value to the company.

Don't complain, and steer clear of people who do. And if you're on irredeemably rocky ground, tune up that resume now and start networking.

Continued: Save your cash

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