With the nation possibly facing the most worst financial crisis since the Great Depression, and as many as 6 million homeowners at risk of foreclosure, we all need to review our finances and make sure we are well positioned for the future. Home values, the stock market, and the economy will eventually recover, so the main goal is to make sure we protect our finances as best as possible in the meantime.

The appropriate action is related to your liquidity. If you have enough cash and liquid assets to cover one year’s worth of living expenses, you’re in pretty good shape for the near term. Liquid assets include things that are often overlooked, such as IRAs, 401Ks, cash surrender or withdrawal value for life insurance and/or annuity funds that are immediately accessible, so you may be in better shape than you think. There may be penalties associated with some of those withdrawals, so tap them only as a last resort.

While regularly reviewing your financial status is a good idea for everyone, there may be no need to modify a thoughtful and balanced long term financial plan if you have sufficient liquidity. Homeowners with minimal liquid reserves need to take action soon to strengthen their ability to access cash if they need it in increasingly uncertain times. Uncertain economic times can threaten even the safest jobs, and jobs take longer to find during a recession. For homeowners with less than a year’s liquid reserves, a top priority should be to protect their limited liquid assets, look for ways to expand liquid assets, and look for ways to improve your ability to get additional cash in the future if you need it.

Here are four important steps smart homeowners should take to protect their financial security:

1. Review your home financing structure and take action if necessary. If you have a 30 year fixed rate loan at current mortgage interest rates or less, no action may be necessary if your have enough cash and liquid assets to cover one year’s worth of living expenses. If not, refinancing your mortgage to reduce payments or prevent future payment increases may be a good idea if you have equity in your home.

If you have sufficient equity and your credit score is sufficient, you may be able to take out cash in the process, which is a particularly good idea if you have little savings and/or you can significantly lower your mortgage interest rate through refinancing. If liquidity is a challenge and you are eligible for a home equity line of credit, apply now so it will be in place in case of a crisis.

Things are trickier for homeowners with mortgages that are “underwater” (the mortgage balance exceeds the home’s current market value). Most lenders won’t forgive the difference unless you’re behind on payments and are out of money, and even then they are far more inclined to a restructuring that would temporarily reduce payments to an affordable amount while maintaining the mortgage balance.

A new “Hope for Homeowners” FHA program going into effect October 1, may enable some homeowners to get part of the mortgage debt forgiven and refinance with a 30-year fixed rate mortgage. Yet other alternatives may emerge out of the current Wall Street rescue effort over the next few months. In most cases a foreclosure should be avoided if possible.

In some cases it is unavoidable and in others may actually be in the homeowner’s best interest. Some financially-pressed homeowners whose mortgage balance far exceeds their home’s value have recognized that it will probably take many years for the home’s market value to catch up with their mortgage balance. In the meantime they are also trapped in their present home and unable to sell and take advantage of better job opportunities in other areas.

By the time home values do catch up, many could have restored the damage done to their credit rating by a foreclosure, and they would have advanced in their career as well.

2. Review the allocation of your other investments. Experts recommend diversification in good times and bad. If you do not have enough liquid assets to cover at least one year’s worth of living expenses, rebalance your investments to minimize the risk of further erosion of their value. Sell individual stocks and mutual funds and buy conservative investments like AAA bonds and federally insured savings accounts and federal, state and local bonds. They will hold their values in declining stock markets. While conservative investments will also trail other investments in appreciation when the market recovers, it’s better for homeowners with liquidity to be safe and miss out on some opportunity for investment growth until the market recovers.

Conversely homeowners who are in good shape financially probably needn’t restructure a well balanced investment portfolio. When recovery begins, appreciation of securities will outstrip growth of more conservative investments. Timing such market changes is notoriously difficult, and homeowners with balanced investment portfolios are usually better advised to stay in the market and benefit from all of that recovery.

3. Make sure your investments, insurance policies, IRAs, and/or annuities are adequately insured. Bank deposits are covered by the Federal Deposit Insurance Corporation (FDIC), which guarantees bank account balances of up to $100,000 in a single bank ($200,000 for joint accounts). If you have accounts in more than one bank, each account is covered by those limits. FDIC protects IRAs kept in bank accounts up to $250,000. Make sure that any other investments through stockbrokers or other financial service firms are insured by the Securities Investor Protection Corporation (SIPC). SIPC protects the assets in your investment account from losses due to a financial services firm’s bankruptcy, but it does not protect you from losses due to stock market declines. SIPC covers up $500,000 per customer, including up to $100,000 for money market funds.

With the failure of giant insurer AIG, many homeowners are concerned about the status of their life insurance and/or annuities. Life insurance policies are insured by each state’s guaranty association. Typical coverage is $100,000 in cash surrender or withdrawal value for life insurance and $100,000 in withdrawal and cash values for annuities.

4. If you need to improve your liquidity reduce unnecessary personal expenses, and stop making any extra payments on your mortgage. To build your savings, cut back on expensive vacations and non-essential activities like hobbies and expensive restaurants. Look for other ways to save money as well (never a bad idea even if your finances are strong).

The American Homeowners Foundation (AHF) is an independent nonprofit consumer organization serving the nation’s 75 million homeowners since 1984. AHF is dedicated to helping them make the wisest and most well informed decisions regarding what for most Americans is their single greatest financial investment. For more information, go to www.AmericanHomeowners.org.

Courtesy of the American Homeowners Foundation and the American Homeowners Grassroots Alliance, www.AmericanHomeowners.org.

For more information, visit www.AmericanHomeowners.org.

Like Wall Street, the real estate industry is feeling the painful effects of loose lending practices and bad mortgage loans. Now, more than ever, prospective home buyers and sellers should be aware of what’s happening with the housing market-and where it’s headed-in order to make smart decisions. In addition to understanding what fueled the collapse of investment bank Lehman Brothers and the government’s bailout of mortgage giants Fannie Mae and Freddie Mac, get familiar with these top 10 trends in real estate, according to HGTV’s new award-winning real estate site, FrontDoor.com.

1. Homes in foreclosure reach record highs. While some markets have started to show improvement, the number of homes in foreclosure continues to rise to unprecedented levels. According to a report from the Mortgage Bankers Association, a record 1.2 million homes were in foreclosure in the second quarter of 2008. This number is expected to reach 2 million by the end of the year, analysts say.

2. Home prices continue to fall. But because real estate is local, the rate of decline varies on your market. And in some high-demand markets, prices are still climbing, though at a slower rate. According to the Case-Shiller Index — a survey of home prices in 20 major metropolitan areas — prices nationwide fell 15% in the second quarter of 2008 compared with last year. Despite the national numbers, some regions are starting to make a comeback. Some say the trend in falling home prices will mean lower divorce rates because a couple is less willing to sacrifice their equity.

3. Borrowers will have a harder time getting a mortgage. During the housing boom, mortgages were easy to come by — too easy to come by. Risky lending practices have come back to bite companies who profited from millions of bad loans, and many mortgage companies (including industry giants Countrywide, Fannie Mae and Freddie Mac) and investment bank Lehman Brothers have fallen apart. As a result, U.S. banks have tightened their lending standards, limiting non-traditional loans such as interest-only mortgages and getting rid of subprime mortgages.

4. Bad real estate agents will get weeded out. In the past, homes practically sold themselves, and enterprising people became part-time real estate agents. Nowadays, home sellers are looking for premium service and expertise from Realtors in exchange for the 6% commission. And savvy buyers want an agent who offers insight and knowledge not available on the Internet. So be selective — only the best Realtors will succeed in this market.

5. Mortgage rates are still at historic lows. After the government bailout of Fannie Mae and Freddie Mac, rates of 30-year fixed rate mortgages plunged from 6.35% to 5.93% in a week, the biggest weekly drop in more than 28 years. However, some analysts believe mortgage rates will rise if the government has to borrow money to finance Fannie Mae and Freddie Mac. But remember before the 1990s, interest rates were in the double digits.

6. Urban areas are making a comeback. The U.S. experienced a mass exodus to the ‘burbs after World War II, but homebuyers are now regaining interest in downtown areas. Urban core homes are often more expensive per square foot than their suburban counterparts, but many buyers are willing to pay a premium to avoid long commutes and urban sprawl.

7. Bigger is not always better. While the size of the average American family shrunk from 3.1 people in 1974 to 2.6 people in 2004, the size of the average American home increased from 1,695 square feet to 2,349 square feet. However, many home buyers looking to save money on utilities, taxes and maintenance are now foregoing McMansions and instead opting for smaller homes.

8. Buyers are going green. Eco-friendly attributes such as radiant floor heating systems, Energy Star rated appliances and on-demand water heating units are all the rage with homebuyers right now. For sellers, promoting your home’s green features will give you an edge in the competitive market.

9. Technology and social networking are changing how we buy and sell homes. Listings, home valuations and other information previously only available through real estate agents are now available on the Web. Because of this, agents have had to rethink their roles in the real estate world and adapt to the times. For buyers and sellers, more technology means alternatives to the traditional route of selling through an agent, such as home swapping and online auctions.

10. Flipping is out, buying and holding is in. Falling prices and a large inventory of unsold homes mean there are more potential bargains out there. Real estate investors are taking advantage of current conditions, knowing that a down market is the best time to get a good deal.

For more information, visit www.frontdoor.com.

BEFORE HALLOWEEN:

• Plan costumes that are bright and reflective. Make sure that shoes fit well and that costumes are short enough to prevent tripping, entanglement or contact with flame.
• Consider adding reflective tape or striping to costumes and trick-or-treat bags for greater visibility.
• Secure emergency identification (name, address, phone number) discreetly within Halloween attire or on a bracelet.
• Because a mask can limit or block eyesight, consider non-toxic and hypoallergenic makeup or a decorative hat as a safe alternative.
• When shopping for costumes, wigs and accessories, purchase only those with a label indicating they are flame resistant.
• Think twice before using simulated knives, guns or swords. If such props must be used, be certain they do not appear authentic and are soft and flexible to prevent injury.
• Obtain flashlights with fresh batteries for all children and their escorts.
• Plan ahead to use only battery powered lanterns or chemical lightsticks in place of candles in decorations and costumes.
• This is also a great time to buy fresh batteries for your home Smoke Alarms.
• Teach children their home phone number and to how call 9-1-1 (or their local emergency number) if they have an emergency or become lost. Remind them that 9-1-1 can be dialed free from any phone.
• Review with your children the principle of "Stop-Drop-Roll", should their clothes catch on fire.
• Openly discuss appropriate and inappropriate behavior at Halloween time.
• Consider purchasing individually packaged healthy food alternatives (or safe non-food treats) for those who visit your home.
• Take extra effort to eliminate tripping hazards on your porch and walkway. Check around your property for flower pots, low tree limbs, support wires or garden hoses that may prove hazardous to young children rushing from house to house.
• Learn or review CPR skills to aid someone who is choking or having a heart attack.
• Consider safe party guidelines when hosting an Adult or Office Party.

BEFORE NIGHTFALL ON HALLOWEEN:

• A good meal prior to parties and trick-or-treating will discourage youngsters from filling up on Halloween treats.
• Consider fire safety when decorating. Do not overload electrical outlets with holiday lighting or special effects, and do not block exit doors.
• While children can help with the fun of designing a Jack O' Lantern, leave the carving to adults.
• Always keep Jack O' Lanterns and hot electric lamps far away from drapes, decorations, flammable materials or areas where children and pets will be standing or walking.
• Plan and review with your children the route and behavior which is acceptable to you.
• Do not permit children to bicycle, roller-blade or skateboard.
• Agree on a specific time when revelers must return home.
• Along with flashlights for all, older children and escorts should wear a wristwatch and carry coins for non-emergency phone calls.
• Confine, segregate or otherwise prepare household pets for an evening of frightful sights and sounds. Be sure that all dogs and cats are wearing collars and proper identification tags. Consult your veterinarian for further advice.
• Remind all household drivers to remain cautious and drive slowly throughout the community.
• Adult partygoers should establish and reward a designated driver.

WHEN TRICK-OR-TREATING:

• A Parent or responsible Adult should always accompany young children on their neighborhood rounds.
• Remind Trick-or-Treaters:
  • By using a flashlight, they can see and be seen by others.
  • Stay in a group, walk slowly and communicate where you are going.
  • Only trick-or-treat in well known neighborhoods at homes that have a porch light on.
  • Remain on well-lit streets and always use the sidewalk.
  • If no sidewalk is available, walk at the farthest edge of the roadway facing traffic.
  • Never cut across yards or use alleys.
  • Never enter a stranger's home or car for a treat.
  • Obey all traffic and pedestrian regulations.
  • Always walk. Never run across a street.
  • Only cross the street as a group in established crosswalks (as recognized by local custom).
  • Remove any mask or item that will limit eyesight before crossing a street, driveway or alley.
  • Don't assume the right of way. Motorists may have trouble seeing Trick-or-Treaters. Just because one car stops, doesn't mean others will.
  • Never consume unwrapped food items or open beverages that may be offered.
  • No treats are to be eaten until they are thoroughly checked by an Adult at home.
  • Law Enforcement authorities should be notified immediately of any suspicious or unlawful activity.

AFTER TRICK-OR-TREATING:

• Wait until children are home to sort and check treats. Though tampering is rare, a responsible Adult should closely examine all treats and throw away any spoiled, unwrapped or suspicious items.
• Try to apportion treats for the days following Halloween.
• Although sharing is encouraged, make sure items that can cause choking (such as hard candies), are given only to those of an appropriate age.