How Worried Should You Be?

Stick with government-backed money-market funds or bank money-market deposit accounts. Right now, interest rates in all of these accounts remain so low that it isn't worth taking extra risks to be in an unsecured commercial money-market fund.

AIG's hurting, but your insurance is still being funded. Most policyholders need do nothing, says David Schiff of Schiff's Insurance Observer, an industry newsletter. AIG owns close to two dozen insurance subsidiaries, including American Life Insurance Company, AIG SunAmerica Life Assurance Company and Lexington Insurance Company. But those insurance companies have their own regulatory safeguards, and policyholders should be protected. "It won't have any material effect on those who have auto insurance with AIG," Schiff says. Life-insurance policies should remain solvent, too. AIG's problem is not solvency, but liquidity to cover calls on its bad investments. Those shopping for insurance should pay extra attention to ensure they're buying from companies with the best possible ratings.

The economy will continue to shake and quiver. Recession, recession, recession, says everyone except the official statisticians. Standard & Poor's is expecting economic weakness to continue through March, consumers are still debt-burdened and unable to shop the country into prosperity, and now banks and brokers are in the same tight spot. That means more layoffs and downward pressure on interest rates. Oh, and you can forget about the raise you were hoping for. The best move for consumers during a recession is to line up protection: 

Solidify your importance at work; sharpen the resume just in case and salt away cash for the rainy day, even if it's already raining. It makes sense to pay down debts like credit card bills, but not mortgages that may be at low rates already. With mortgage rates responding to the tumult by falling further, some pressured families may find it worth refinancing. Today, 30-year fixed-rate loans are priced solidly under 6 percent.

Investors can take their time putting their money back into the market. It's too late to get out of the way of the crashing financial sector, says Stovall: "Chances are, the worst there is behind us, so now is not the time to be selling."

"The financial crisis is much closer to its end than its beginning," says Mark Zandi, of Moody's Economy.com. Market analysts seem to be converging on a view of the market that looks like this: it's going to get worse before it gets better, but it will ultimately get better.