The Federal Reserve has no immediate plans to stop raising interest rates. The real estate market is rapidly cooling and home values in some parts of the country are declining. How can you protect yourself financially from an economy in a tailspin? Here are tips to help safeguard your financial well-being.

With the housing bubble poised to burst under the current administration, many homeowners, especially those with Adjustable Rate Mortgages, are concerned how the declining economy will affect their mortgage. If you are one of these homeowners, there is not much you can do to control the housing market; however, there are steps you can take to protect yourself from the Bush economy.

The most important aspect of protecting yourself financially is to purchase a home within your financial means. Many homeowners used risky interest-only and option Adjustable Rate Mortgages to purchase homes they cannot afford; these are the homeowners that will find themselves in financial hot water when the lender adjusts their mortgage payments.

To protect yourself, preserve the equity in your home; never borrow more than 80 percent of your homes loan-to-value ratio. This will give you a cushion in case your homes value drops. Avoid home equity lines of credit as these loans come with adjustable interest rates and make borrowing against your equity too convenient. Todays economy is not headed in a direction that you should be using equity in your home to pay for luxury items such as vacations or a new car.

When the economy is declining you want to pay down your mortgage principal as quickly as possible to protect yourself. The more equity you own in your home the easier it will be for you to weather drops in the real estate market. Avoid risky mortgages such as interest only and option loans where you build very little equity in your home. You can learn more about your mortgage and protecting yourself financially by registering for a free mortgage guidebook.