Surviving a financial tsunami.

• Author: Hauserman, John
• Position: ECONOMIC OBSERVER

WHILE THE HUMAN tragedy that has unfolded in Japan is heartbreaking and unimaginable for those of us so far from that nation's ground zero, it forces us to ponder the possible ripple effect on our personal finances. The risks in play are enormous, including collapsing stock prices, skyrocketing oil and energy costs, and a return of runaway inflation--just to name a few.

The cracks in the Japanese landscape run deeper than the fissures which rocked seaside towns and hobbled once-busting factories. With food and gas prices on the rise, the costs--and even the availability--of goods and services may prove challenging for developing and developed economies alike. Governments around the world are announcing measures that may go from remedial to drastic as events beyond their control hammer the markets and geopolitical landscape.

All one needs to do is turn on the nearest television for a nonstop barrage of all of the worst possible outcomes. Perhaps the most obvious is the threat of nuclear calamity. While the costs of this most unsettling aspect of the catastrophe will not be known for years, the world already has tasted the early bitter effects. Governments across the globe have announced hasty plans to curtail nuclear activity, including the immediate cessation of new permits, refusal to renew expiring authorizations, and a host of tougher standards for the entire industry. Yet, the world consumption of everything power-related has by no means abated; in fact, the expectations are for increased demands as developed nations pull out of the waning recession and emerging nations continue their relentless charge ahead.

Even a cursory understanding of the law of supply and demand suggests this is a scenario that likely will push prices up even further. Other risks involve the dampening impact brought about by the grinding halt of the Japanese nation, which owns the third-largest economy in the world. The U.S.--and others have experienced production slowdowns, layoffs, and lagging orders brought about by the lack of Japanese component parts.

So, what is an investor to do? Many undoubtedly will make some very predictable mistakes. Here is how to avoid them:

* Go slow. The key to success is developing a long-term plan and sticking with it. Perhaps the most important step is to take some time to identify the difference between your long- and short-term money. For example, middle-aged investors who are saving for a teenage offspring's college fund, as...