by Dr. Michael Smith

Created on: December 22, 2008

In times of economic turmoil everyone's minds turn to adages and words of wisdom from parents and grandparents. In fact, most of their insights came from surviving one of the darkest financial days in history, The Great Depression. The Depression made such a lasting impression on them they never abandoned the lessons learned. Those same lessons are still valid today.

First, in the good times, always put away something for a rainy day. Having a reserve fund will ensure that whatever comes, you are prepared. In fact, conventional sources suggest you need to have a reserve fund equal to six months of expenses in case you lose your job or get laid off. Your reserve supplies ready money and does not dry up like other sources in an economic downturn.

Second, live within your means. Our grandparents did not buy things they did not need, with money they did not have. Theirs was a clear understanding between wants and needs. When they married they worked and saved to buy a house, car, or even clothes, and never liked to borrow money. Today, the rush for immediate gratification means newlyweds insist on getting everything they want up front, and then suffer through years of paying monthly payments with high interest. Wonder what our grandparents would think of our paying 29.9% percent interest on a credit card?

Then, it is also a good idea to have several streams of income. While granddad went off to work at the saw mill or cotton mill, grandma often made extra money by selling eggs, milk, produce or even quilts, made at the home quilting frames. Granddad often raised and sold hogs or cows. They did not depend on one job to make ends meet. Today, even if you have a good job, it is not a bad idea to have other sources of income. Conventional wisdom suggests that in today's economy, if you are not planning for your next job, you are behind. Go back to school part-time, learn a new skill, and find something you enjoy that could become a second source of income.

Don't put all your eggs in one basket was a favorite piece of advice. The recent financial meltdown has made the wisdom of this statement all the more pertinent. Diversification of assets is one of the first rules of investment. Amazingly, success leads to a false sense of security. How many historical examples could be sighted to prove the folly of such thinking?

Guard your credit because it reflects on your reputation. The previous generation had high standards and their word was their bond. When they promised to pay

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