Let’s be honest. It’s hard to stay cool, calm and collected when your savings are near depletion, your job is in jeopardy and bills are starting to pile up.

This kind of financial strain can cause even the smartest consumers to make rash money decisions, based on fear, not fact.

But financial experts say people must keep a level head, least they dig a deeper financial pit for themselves.

Before making any major financial moves, first consider the long-term consequences, then explore all other options, said Scott Spiker, CEO of First Command Financial Services.

“As scary as it is, sometimes brainstorming the worst-case scenario can help you feel more prepared by ensuring you set realistic goals about what you need,” he said.

Here are some logical financial moves that Spiker recommends consumers take in four major financial areas: retirement, college education, refinancing and credit cards.

Emotions may run particularly high for retirees who have seen a big drop in the value of their lifetime assets. If you are one of them and feel a need to move your money out of the stock market for peace of mind, one option is to start small. Consider withdrawing only the money you need to cover living expenses for the coming year.

If you are planning to retire in the next 10 years, now may be the time to start shifting from asset accumulation to preparing your assets to generate retirement income. Generally, as you move closer to retirement, you will want to consider more conservative investment options.

College Costs:
If you have a child who is starting college next year, remember that you actually have a five-year goal. You’re simply paying one year at a time. If your child starts college this fall and you need money now, consider a state school or a community college, which are typically lower-cost options. Living at home can save thousands of dollars a year on room and board.

If your assets or income have taken a big hit in the current economic turmoil, be sure to update your Free Application for Federal Student Aid (FAFSA). This well-known form is used to determine eligibility for federal student financial aid.

Refinancing Home Mortgages:
Emotion may tell us to take the lower interest rate, while logic says to weigh the cost versus the actual savings.

Look at how much refinancing will cost, then consider how long it will take to recover that amount through lower monthly payments. If it will take three years to recover your costs and you’re planning to stay in your home for 10 years, it’s a no-brainer.

Another area where you may be able to save is on private mortgage insurance. If you’re paying mortgage insurance premiums on a home you’ve owned for several years, your loan-to-value ratio may have improved enough that your lender will eliminate the premium. Check with your mortgage company to find out.

Credit Cards:
Emotion tells us a few hundred dollars more won’t matter when we’re already in debt, but logic says stop adding on, especially if you are making only minimum payments each month.

If you don’t have three to six months of living expenses saved, continue making minimum payment and focus on increasing your savings.

Two additional ideas to help consumers get past fear and emotion:

  • Create a financial plan or revisit the one you have. It strengthens your financial confidence when you have strategy.
  • Consider scheduling an appointment with a trusted financial advisor. The more you know about your financial options, the more likely you are to make sound decisions.

Vicki Lee Parker is a personal finance columnist in Raleigh, N.C. She can be reached at vickileeparker@gmail.com or (919) 877-5719

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