How to play by the new money rules

The shakeup in the financial system has changed the rules of managing your money. Here's a shorthand look at how to use the new rules to build wealth for your family, no matter how old you are.

2 of 3
Stage 2: The peak years
Traditional advice: You're at the height of your earning power. Make the most of it.
  • Step up saving for college and retirement.
  • Consider your growing home equity as an extra source of funds, if needed.
  • Put together the right mix of assets for key goals; then sit back and watch those investments grow.
What's changed:
  • Don't count on earning top dollar until you retire.
  • Your home actually isn't a reliable source of ready cash.
  • When it comes to your investment mix, you can't just set it and forget it.
The right moves now:

Try lowering the odds you'll get the ax. Take courses to keep your career skills current. You'll be less vulnerable in the next round of cuts and more competitive in the job market if you do get whacked. And make sure you have an emergency fund that can cover your living expenses for six months to a year.

Rely on actual cash for cash, not on your house. Don't drain your home equity to pay for ordinary consumption (no HELOC-funded vacations or flat-screens). Abuse your credit line, and you could be out of luck if you need to tap that equity in a genuine emergency (see the move above). Worse, if home prices keep falling, you could end up underwater on your mortgage.

Actively monitor your portfolio. The hands-off approach needs to yield to hands on (just ask all the pre-retirees and parents of high school seniors who've learned too late that they had too much in stocks). Keep a watchful eye to ensure that market momentum doesn't push your allocation out of alignment. Twice-a-year rebalancing will help keep you on track.

Take advantage while you can. Invest as much as you can for college and retirement while you're bringing home the big bucks. Circumstances can change fast.

NEXT: Stage 3: The wind-down
Last updated March 24 2009: 2:45 PM ET
More Galleries
Our biggest money highs and lows How much money do you need to feel rich? What are your biggest money mistakes? Money magazine surveyed 1,000 Americans for the answers to these and other questions. See how your answers stack up. More
How we feel about our finances Participants in an exclusive Money magazine survey reveal how they feel about their finances. Although the Great Recession may be over, they're not all that confident about their prospects for the long run. More
8 ways to cut your tax bill To keep your tax bill as low as possible this filing season, you need to stay on top of all the ways the rules have changed. More

Special Offer
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.