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USA Today recently featured a nervous article about the economy. According to the authors, the U.S. credit crisis isn’t just a problem for big banks — it’s also a problem for you and me.

As the credit crisis seeps into farther-flung corners of the economy, more of us will find it harder — and costlier — to borrow money. The value of the funds in our retirement accounts could shrink. People with subpar credit will likely find it more difficult to qualify for auto and home-equity loans. Even consumers who make the cut may need higher credit scores and more documentation.

I generally ignore articles like this — they’re often “full of sound and fury, signifying nothing“. In this case, though, the authors offer a compelling argument that poor choices made by eager banks and borrowers really could cause problems for everybody else.

They worry that as the bad news continues, weak consumer spending will lead the U.S. economy into a recession. The sub-prime debacle has already begun to make credit more expensive for even responsible consumers. According to the article:

Credit bureau TransUnion’s TrueCredit.com division has begun recommending that consumers maintain a credit score of at least 680 to qualify for prime rates. For years, TransUnion had recommended a score of only 650 or above.

The article also notes that consumers are borrowing more on their credit cards, despite the storm clouds on the horizon:

Revolving balances on credit cards are at an all-time peak, with U.S. households owing a monthly average of $6,960 in the year that ended in September 2007, up 41% from four years ago, according to Synovate, a research firm in New York.

The best safety net against a downturn in the national economy is to place your personal economy on solid ground. I watched my father struggle during the late 1970s and early 1980s because his money situation was a mess. Runaway inflation and high unemployment made things worse. He had saved little, and the money he did have was devalued. Plus he found it difficult to get a job. I doubt the U.S. economy is headed that direction any time soon, but it comforts me to know that I’ve made some preparations in case there is trouble:

For myself, that means the the following:

  • In a few days, I will have eliminated all debt but my mortgage. From here forward, I intend to use credit as little as possible. (I’ll use a credit card only to purchase items for which I have cash in the bank.)
  • One of my top goals for 2008 is to boost my savings. At the moment, my emergency fund only contains about $1,000. By next December, I hope to have saved at least ten times that amount.
  • I’ll continue to practice frugality in my everyday life. Little savings here and there make a huge difference in the long run.

I try not to let news of financial doom and gloom bother me. I have to trust that if I’m doing what I believe is best, things will work out in the end. So far, the only effect the sub-prime mess has had on me is to deflate my Washington Mutual stock, and I actually see that as a possible buying opportunity! But I worry for others, for those people who are just beginning to pull themselves out of debt.

[USA Today: Housing woes have domino effect]