Signs that the credit crunch is finally easing have emerged this week as big banks are lending to one another again. That's good. But it's hardly an all-clear shout. There's no telling if the budding recovery in credit markets will stick, and at this point a recession appears all but certain. So it's not too late to take defensive action. Here are 10 things to do right now to protect your financial future.

1. Hold More Cash
As always, when things get nutty in the markets cash is king. A healthy cushion in bank CDs or money market funds will let you ride out the slump without having to sells assets at fire-sale prices. A cushion will also put you in position to invest when the downturn's bottom is in sight — and that could come sooner than you expect. Mark Henn, a financial planner at Harvest Advisors in Cincinnati, says that stocks usually get a lift when the government takes extraordinary steps to fix a crisis — like taking ownership stakes in private banks. That's being done now in the U.S. and other countries. "It doesn't feel comfortable," he concedes. "But now's the time to buy while things are on sale." Tread slowly if you do jump back in, though, and before you go bargain hunting first build your cash position to at least a year's worth of living expenses, longer if you are retired.

2. Find Something to Cut
Eliminating expenses is the surest route to building a cash safety net. There are many costs you can easily hack away at in your home — dry cleaning bills, dinners out, domestic help. Yet you may be able to save even more, and painlessly, by paying closer attention to the fees you pay for financial services. Switch to a low-fee stock index fund. Make sure you've got overdraft protection on your checking account and aren't needlessly ringing up fees by using another bank's ATMs. Reassess your life insurance needs. If you've quit smoking or lost a lot of weight you may be eligible for a meaningful discount on another policy, and if you've paid off the mortgage or the kids have left home you may be able to reduce your coverage. The savings could add up to hundreds of dollars a month.

3. Pay Down Debt
It may seem like an overwhelming task, so do it by focusing on one piece at a time. Start by paying off your credit card with the smallest balance. You'll feel empowered once you've cleaned that slate. Then move to the card with the highest interest rate, and then onto consumer loans with variable rates. Where will you get the money? If you get a raise, or pay off a car or student loan or become free from some other regular expense don't spend the difference — dedicate it to debt reduction.

4. Make Sure Your Money is Safe
The federal government recently raised the amount of deposits per person per institution that it will guarantee to $250,000 from $100,000. But it had been discussing a limitless guarantee. So don't be confused. More important, this is a temporary bump in coverage that may last only through the end of 2009. So if you consolidate deposits in a single institution you may have to reverse the process in little more than a year. To keep things simple just play by the old rules — keep no more than $100,000 in any one institution, at least until it becomes clear that the higher limit will be made permanent. There have been no changes to government guarantees regarding securities held in a brokerage account. The limit is $100,000 of coverage on cash deposits and up to $500,000 on other securities like stocks and bonds. Note: the government does not guarantee against investment losses; only that the securities you own will be returned to you at prevailing market prices should your broker fail.

5. Diversify Internationally
You should always have your savings spread among large, medium and small stocks, bonds, and have some cash stowed in a safe short-term security. Now it's more important than ever to hold some foreign stocks and bonds as well. If the crisis deepens, the costs could prove so staggering to the government that the dollar will plunge and interest rates will rise. Foreign holdings won't be immune to the fallout, but they'll at least offer a buffer.

6. Refinance Your Mortgage
Believe it or not, long-term interest rates have actually been climbing in recent weeks, making mortgages more expensive. That's odd given the likely recession ahead. But long-term rates could continue to climb as the government pumps money into the economy and bond traders worry about a weaker dollar and inflation a little further down the road. If you are saddled with a variable-rate mortgage where the rate is set to jump in a year or two you may be better off locking in a 30-year rate today, even if it's higher than the rate you are currently paying.

7. Don't Panic
The end of the world only comes once. I'm pretty certain this isn't it. That means that stocks and bonds and real estate and jobs and business activity will all bounce back eventually. Selling assets now might prove to be an even worse decision than buying bank stocks at the height of mortgage mania a couple years ago. Reassess how much risk you are comfortable with, recognizing that stocks go down 10% often, 20% with some regularity and more than 30% occasionally. Yet they have always gone higher in the long run. If you just can't take the near-term gyrations you have too much in the market and should settle on an asset allocation you can live with — 60% stocks, 30% bonds, 10% cash is fairly conservative. To avoid making any big mistakes, rebalance your portfolio every six months — selling what has risen and buying what has fallen to keep your bonds and cash and stock exposure at your target allocation. With prices depressed, this is a good time to start a dollar-cost-averaging strategy — investing a set amount of money into a predetermined stock fund every month or every quarter.

8. Check Your Credit Card Rate
In recent years it has become much easier for card companies
to quietly raise your interest rate if you miss even a single payment. Call them and find out your rate, and if you've been dinged ask them to revert to the more favorable rate that you began with. It doesn't always work, but card companies don't want to lose your business, especially if you have a record of paying. If you missed just one payment you should have no trouble.
9. Check Your Most Recent Bank and Brokerage Statement for Accuracy
The pace of mergers and takeovers in the financial services industry has quickened as weak institutions fall into the arms of stronger ones. Given the upheaval of the past month it's possible — though, thankfully, far from likely — that your statement may contain an error. If you do not correct it promptly and your institution is taken over you will, at best, have a long and difficult case to press to get your money back.

10. Be a Lender
If for some reason you find yourself flush while everyone around you is starved for capital, take advantage by extending a loan to a friend, family member or even a third-party. Banks are being stingy, which creates opportunity for you in the fairly new P2P (peer-to-peer) loan market pioneered by Virgin Money and Lending Club. These are often vehicles for extending family members fully documented and collateralized loans at a favorable rate. But if you think stocks are dead money for a while and don't like the looks of paltry money market fund yields, you may be able to do better offering a market-rate loan through this new frontier of finance.