What happens when you get a downgraded?

     What happens when you get a downgrade of a country's credit rating?  It's quite simple.  you can expect major markets and indexes drop as people move to cash.  this happens because, with the downgrade you see increased yields on bonds and T-bills.  in other words, the country who's credit has been downgraded now must pay a higher yield as an incentive for people to invest in their bonds and T-bills.  thus, yields go up while prices go down. 
     A higher yield on T-bills (or treasury bills) also will cause the value of the country's currency to increase.  this seems counter intuitive but T-bills are essentially a bond that represents a holding of that country's currency.  With this you also see commodities that are valued in that currency eventually increase in value due to the new strength of the currency (although initially you will see a sell off in these commodities due to the initial sell off in the general markets as people try to find safety for their money).
     You can also expect a so called "flight to safety".  this means that people will move their invested money into things that appear to be safe.  what is a safe investment?  investments where prices and yields are relatively stable, like gold and other commodities (particularly precious metals).
     What does this mean for you?  Some time after the downgrade occurs, the general cost of borrowing will increase.  That is, credit card rates go up, variable or floating rate mortgages go up, and businesses increase their prices to offset the increased cost of their borrowing.  However, it isn't all that bad.  That is, the value of that country's currency is now worth more, i.e. you'll get more proverbial "bang" for your buck on imported goods.  Also, banks will loosen requirements on the loans that they give because they can now get more "bang" for their buck as well.