Despite recent gains in the stock market, portfolios remain badly damaged by the market performance of the past 18 months. With jobs still falling away at a rapid clip, the recession is still a serious concern and policymakers are scrambling to implement expensive and complex solutions。

　　As we wade through these difficult times, how should you think about your own financial situation? A good starting point is to remember what Kipling wrote: Keep your head about you as everyone is losing theirs。

　　It's a great temptation in times such as these to think things will never get better. But if history shows us anything, things do eventually improve. In fact, judging by the standards of past economic shocks, this recession is getting long in the tooth. The average recession since World War II has lasted 11 months, and the longest was 16 months in 1981-82. Our current crisis is 15 months old。

　　Also, hints of bottoming are starting to surface. Oil prices have begun to rise, indicating some increased demand. China is importing aluminum again. In addition, the stimulus plan will start to kick in later this year, creating jobs and, perhaps, helping soothe some of the enormous fears in the marketplace。

　　So, there are definitely brighter times ahead. Until then, here are some strategies to help you keep your head about you: five things that you definitely should do and five things you definitely should not do, as you weigh how to protect and build your assets。

　　Let's start with the five things you should definitely do:

　　1. Reduce Your Expensive Debt

　　Too many of us overextended ourselves during the past decade with credit cards and other debt. These bills now hang over people like the Sword of Damocles。

　　The first order of business is to reduce this expensive debt, even before saving for retirement or investing in the stock market. One smart strategy is to take advantage of much lower gasoline prices. One year ago, gas cost more than $4 a gallon in much of the country. Today, it's less than half that. You should devote the money you save to eliminating your credit-card debt。

　　2. Get On a Budget

　　Thrift is the new black. That means getting on a budget, measuring exactly what you spend and looking for ways to save money. Perhaps you are eating out more than you appreciate or spending too much on a cup of coffee. Budgeting is a lost discipline for many people and one that should be rediscovered。

　　There are several free Web sites, such as Mint.com, Quicken.com and Wesabe.com, that can help you sort out your spending and give you a sense of where you can save money。

　　You upload password information for your credit cards and other accounts, and the sites aggregate and sort the data, so you can see how much you're spending on, say, groceries, eating out and movies. You can then track your spending habits over time and make adjustments to save money。

　　What's more, some of these sites, notably Wesabe, also have active communities discussing various budgeting issues. If you are just getting started on developing budgeting discipline, talking with others who are doing the same can help make it easier。

　　3. Guard Against Inflation

　　Currently, inflation is a relative nonissue, and most commentators -- not to mention the Federal Reserve -- believe that it won't become a problem anytime soon。

　　Yet, many things are taking place that could raise the specter of inflation in rapid order。

　　For starters, the federal government is spending money like a drunken sailor. There's the nearly $800 billion stimulus program, a proposed budget of $4 trillion (up from $3 trillion in the previous year) and hundreds of billions more in bank, real-estate and credit-rescue packages. On top of that, short-term interest rates, set by the Fed, are essentially at zero and quite low in other countries as well。

　　All of which is like so much kindling waiting for a spark. Once that spark hits, growth and inflation could come roaring back to life。

　　For that reason, it's smart to have a portion of your fixed-income investments in Treasury inflation-protected securities, or TIPS. These bonds are backed by the U.S. government, like normal Treasurys, but also have built-in protections that boost returns to account for inflation。

　　Another inflation-hedging strategy is to invest in commodities. When growth resumes, demand for oil, copper and other commodities will rise, making their prices increase. A warning, though: Given the volatility of commodities, financial planners recommend that investors have no more than 5% to 10% of their portfolio in this sector。