The past year has seen the simultaneous collapse of the stock, housing, and credit markets - and now of an economy that relied too much on all of the above. So how do you adjust? First, think hard about the risks you face, because they may not be what you thought they were. This can change how you save, invest, borrow, and plan.

Rule #1
Old thinking: If you can stomach the ups and downs that come with risk, you'll be rewarded.
New rule: Risk isn't about your stomach. It's about making or missing an important goal.

Whether you're investing, buying a home, or making a business decision, you know you have to consider risk. But what is risk? It's a tougher question than it appears. Many of us have learned to think of risk as synonymous with volatility. As long as you had the fortitude to see the occasional loss on your 401(k) statement and not panic, you would capture superior returns over time. As you now know, the "over time" part of that last sentence is the real risk of relying too heavily on stocks. If you hit a slump in returns at the moment you need the cash, the eventual upside of volatility won't do you much good. Because you have to sell falling assets to live on in the early years, your portfolio may be so small by the time the rebound comes that you still run out of money.

What to do: You shouldn't run from risky investments just because they lost money - that train has left the station. But the old buy-on-the-dips advice isn't quite right either. This bear market's lesson is that how much risk you can take is a matter of how much you can lose and still meet your basic goals. That may mean scaling back on stocks, even if you miss some of the next market rebound.

Rule #2
Old thinking: Keep enough money in ultra safe accounts to cover life's emergencies, but no more.
New rule: Relying more on cash can rescue you in an "asset emergency."

For most of your career you'll want to set aside about six months' worth of living expenses in the bank. That money covers the mortgage and puts food on the table should you lose your job. The fact that you'll earn only about 2% is beside the point. You can't take the risk. But what do you do after you build that cushion? Until last year the usual strategy was to put your savings to work for higher growth. But the simultaneous crash in stocks and houses has taught us that we need to redefine "emergency." It's not just something that happens to your income: There are asset emergencies too. If you had been counting on investment proceeds, a 401(k) loan, or home equity to pay a college tuition bill soon, you know exactly what that means.

What to do: It's not easy to build cash savings and a retirement fund at the same time. If you have to make choices, build up that emergency fund first because you can't expect to lean on your home equity or stocks if you lose your job. And see if you have some flexibility on big-ticket obligations. Maybe you plan for a state school rather than a private college, or downsize the wedding. If all your assets are in a 401(k), move some of that balance to low-risk investment options as you build your cash funds. That will preserve more to tap via a 401(k) loan in a pinch. Not a terrific option, but it can beat the alternatives.

Rule #3
Old thinking: The longer your time horizon, the more stocks you should own.
New rule: Time isn't everything. You must also consider your earnings potential.

It's one of the basic rules of thumb: The more years you have to recoup losses, the more aggressive you can be. Unfortunately, the math isn't so clear-cut. There's a better way to think about how aggressive your portfolio should be: Imagine that it includes not only stocks and bonds but also your human capital, meaning your ability to earn income by working. The safer it is, the more chances you can afford to take with your other assets - that is, your portfolio. Now, this doesn't mean that time no longer matters. When you're young, the value of your earnings potential far outweighs the balances in your 401(k) and other investment accounts. As you age, the value of your human capital declines and you'll need to secure more of your savings. So the conventional advice to hold a lot in stocks when you are young and gradually trim back can still make sense. But not for everyone. The nature of your career may make your human capital more bond-like or more stock-like.

What to do: Assess your human capital. A typical worker's income is about 70% like a bond and 30% like a stock, says Thomas Idzorek, chief investment office for Ibbotson Associates. Use that as your baseline and then think about how long you'll be working, the stability of your current job, and your ability to change careers if you have to.

Rule #4
Old thinking: Borrowing sensibly is a good way to build wealth.
New rule: Borrow cautiously. You have to worry about the other guy's debt too.

The quarter-century leading up to 2007 wasn't simply a golden age for stocks, it was also a bull market for leverage. (That's Wall Street-speak for debt.) Since 1982, mortgage rates have fallen from 16% to below 6%. Americans responded to easy credit in a predictable way. The personal savings rate fell from over 12% to zilch, and household debt payments as a percentage of disposable income rose by a third as families "put it on the card" and paid for lavish kitchen upgrades with home-equity loans. The obvious moral here is to be conservative. There are always good reasons to borrow, even today. You need a mortgage to buy a house, and a college education provides enough of a lifetime payoff to justify a loan. But you ought to stretch less.

What to do: Be very conservative about debt. especially when your neighbors aren't. Get a mortgage you can afford for the life of the loan, and put at least 20% down.

Rule #5
Old thinking: You can expect your house to appreciate handsomely over the long run.
New rule: Your home won't make you rich. But it is an important savings tool.

Even when prices are rising, gains on real estate aren't as dazzling as they look, once you account for expenses. Maintenance costs typically run at about 1% of a home's value annually, in addition to insurance and taxes.  If you remodel, the most you can expect to recoup is about 80%. You have to pay steep fees when you buy (up to 3% in closing costs) and sell (up to 6% for realtor fees).

What to do: This doesn't mean you have to rent, just that you should have modest expectations for your house as a wealth builder. There are still financial pluses. First, owning a house gives you a hedge against rising values in your own community so that you don't risk being priced out as rents go up. Second, a traditional 30-year mortgage acts as what economists call a "commitment device," or a tool that forces you to save. Instead of writing a check to a landlord, you gradually pay off principal. At the end, you own a house. Aside from your 401(k), no other asset enforces such discipline.

Rule #6
Old thinking: A diversified portfolio lowers your risk.
New rule: Diversification won't always save you - and you need more of it than you think.

Both U.S. and foreign stocks are deep in the red. Holding bonds did cushion your losses, but most kinds of bonds still declined. What happened? Jeremy Grantham, chief investment strategist at GMO, observed back in 2007 that we had a bubble not just in one or two kinds of assets, but in risk. Investors around the world were so confident, and so hungry for even a little extra return, that they were throwing money at anything that might deliver. Now that the risk bubble has burst, all those investors want now is the safety of U.S. Treasuries. So everything has moved roughly in sync, both up and down, for a few years. Bear in mind, though, that these times are, to say the least, unusual. Over a longer period - as little as a decade - diversification still looks effective. While large U.S. stocks are down the past 10 years, U.S. corporate bonds earned 4.6% a year for the same period.

But in a global economy where money moves quickly, you have to work harder at diversification than before. Rob Arnott, founder of Research Affiliates, has found that a well-diversified portfolio returned a healthy annualized 6% from 1999 through the end of 2008. Arnott's definition of diversification means a lot more than the usual mix of U.S. blue chips, high-quality bonds, and maybe some big foreign companies. It includes real estate investment trusts, emerging markets, and foreign and junk bonds.

What to do: To ensure you are diversified, you don't have to go out and buy 16 new mutual funds. First, look under the hood of the funds you have to see if you already own some of those assets. An easy way to do so is to plug your holdings into Morningstar.com's Instant X-Ray tool (click the Tools tab).

Rule #7
Old thinking: Retiring early is a prize.
New rule: Retiring early is a problem.

Ever since Uncle Sam set 65 as the age you could retire and collect full Social Security benefits (it's 66 or 67 for boomers today), workers have been trying to beat that bogey by quitting early. Retiring before you hit, say, 60, made sense a generation ago, when average life expectancy was still less than 70 years. (It's 78 today.) And a longer life on the beach seemed well within reach earlier in this decade after a bull market that gave workers confidence that their money could work for them rather than the other way around.

But the reality of early retirement, even before the stock market's sickening plunge, was never quite that rosy. More than half of early retirees leave work before they intended, and of those, nine in 10 depart because they get sick or are downsized. And now the financial prospects for those who had a shot at a secure early retirement have dimmed: Long-tenured workers nearing retirement have seen their 401(k) accounts shrink an average of 30% of the past 14 months, according to EBRI. There's no way around it: The numbers require you to rethink your plans.

What to do: "By delaying retirement just one year you could increase your annual retirement income by 9%," says Richard Johnson, senior fellow at the Urban Institute. If you can hang onto your current high-paying post, great. The reality, of course, is that in an era of harsh cost cutting, well-paid older workers are more vulnerable. And you might not want to stick it out any longer anyway if the severance is decent. But there's much to be gained from finding another job, even if it's a lower-paid or part-time position. If you can earn enough to avoid collecting Social Security benefits early or dipping into your retirement accounts, research by T. Rowe Price shows you'll barely feel a hit to your income when you do retire. If your new job comes with health benefits, so much the better. The average health-care tab for an early retiree before he is eligible for Medicare runs to $8,500 a year, says an AARP study.