What Not To Do During Tough Economic Times

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It’s tough times ahead for the economy.

Americans must hold tight for months until the economy is on the upswing again and the housing market stabilizes, Treasury Secretary Henry Paulson told the Sunday morning news programs.

“We're going to be in a period of slow growth for a while ... I think it's going to be months that we're working our way through this period," the Treasury Secretary said on CBS’s [CBS] “Face the Nation,” as reported by Reuters. "We 're going through a challenging time with our economy. This is a tough time."

Translation: If you are not on a budget and saving actively, you better start. But if you are thinking about panicking, financial planner Morris Armstrong, of Armstrong Financial Strategies in Danbury, Conn., has some additional advice: Don’t panic about the economy and make rash decisions. “Everything’s a cycle,” he says. “You can even go back to the Bible – seven years of feast, seven years of famine. And hopefully during the feast, you put something aside.”

Here are the top five other "don’ts" to help you better ride out these "tough" economic times:

1. Don’t borrow from your 401(k) unless you absolutely need the money.
Financial planners agree that in times of financial strain, don’t be cavalier about borrowing from your 401(k)! “401(k)s are not savings accounts,” says Armstrong. If you must borrow from a 401(k), he explains, during the next quarter you will be required to repay the amount (either in quarterly installments or out of your paycheck) over five years (unless you borrowed for a mortgage, in which case you have a longer time, such as 10 or 15 years depending on your company’s plan). That means if you borrowed $5,000, you’ll have to repay $1,000 per year in four $250 payments.