This year has been a gigantic wake-up call to most of us. Many investors have lost more than they ever thought they would. Hundreds of thousands of households have been hit by layoffs, pay cuts and shrinking real estate values. Merchants are in the midst of what looks like a dismal shopping season. Some venerable financial and retail companies have faded into history.

There’s little or nothing most of us can do to change the big economic forces that affect us. But there’s a lot we can do to make sure we are properly protected in the bad times and poised to take advantage of the good times, when they return.

As we near the end of the year, I believe the most important thing you can do right now is to reexamine the basic issues. I can’t discuss them in any detail here, but the following list, in bullet-point form, will tell you where your focus should be.

I also suggest you let this list serve as a springboard of topics to discuss with your spouse or partner and your financial advisor.

•    Make sure you know what rate of return you need to achieve your financial goals. If your goals were set during the heady days of 2005, 2006 and 2007, you may want or need to make them a bit more realistic, given the losses that most of us have taken and the uncertain future. Many people think they require a higher rate of return than they really do. And in order to get that higher return, they take unnecessarily high risks. In a year like 2008, any unnecessary risk can turn into real pain. Knowing your needed rate of return can also be a reality check. If you must achieve an annual return of 15 percent (or more) in order to achieve your goal, you’d better re-think that goal.

•    With the new (most likely unpleasant) information you have gained this year, reevaluate your tolerance for taking risks and sustaining losses. One way to discover whether you really can tolerate a given loss is to observe what happens when in fact you do incur that loss. A few years ago, many investors were quite confident that they could tolerate sizeable losses in a year; they “knew” those losses would be temporary setbacks on the way to a rosy future. But when the losses became real in 2008, and when the future portrayed in the media stopped looking rosy, a lot of investors experienced panic. If this happened to you, it’s a sure sign you had invested beyond your risk tolerance. If on the other hand you have stuck with your long-term plans without ruining your mental health, then you may be appropriately invested.

•    Diversify, diversify, diversify. Look for opportunities to spread your investments among more asset classes. We recommend mutual funds and ETFs to achieve a very broad mix of equities that include large stocks and small ones, growth stocks and value stocks, U.S. stocks and international stocks. (You’ll find details in our recommended portfolios online at FundAdvice.com.) Do this carefully, of course, without following fads. Look for asset classes that have a long history of beating the large U.S. companies that make up the Standard & Poor's 500 Index.

•    Do an informal audit of how much you’re paying to have your money invested for you. If there’s somebody in your household who likes math and likes to solve riddles, see if you can get him or her to take this on. How much are you paying in continuing expenses? How much, if any, in commissions? Do you own products that “bundle” services that you don’t need or can get cheaper elsewhere (for instance the life insurance in a variable annuity)? How much are you paying in trading costs for turnover? How tax-efficient is your portfolio? If you’re a young investor, think about this rule of thumb: Every quarter of a percentage point of expenses you can cut will allow you to plan to retire one year earlier. For every investment expense you pay, make sure you know what you are getting in return.

•    Purge your portfolio of investments in bad asset classes that don’t have a history of superior long-term returns over the past 30 to 40 years. This means risky Nasdaq funds, gold, oil and most other commodities. It also means most individual stocks. If you own stock in the company you work for, sell most or all of that stock. Use the proceeds to strengthen your portfolio wherever it’s weak. Learn from the mistakes of people who worked for Bear Stearns and Washington Mutual and thought their companies were solid – and who were sure they would know when it was time to unload.

•    Rebalance your asset classes. This is the equivalent of a portfolio tune-up that will bring your risk levels under control and position you to take advantage of the market recovery, wherever and whenever it arrives. This includes having the proper balance between equity funds and fixed-income. It includes the right balance between large and small, between value and growth, between U.S. and international.

•    If you are wary of equity investments after the past 14 months, consider a mix of half equity funds and half fixed-income funds. Over the past 39 years, the S&P 500 Index has had a return of about 9.7 percent annually. A properly diversified 50/50 portfolio has achieved approximately the same return, but with about one-half the losses of the index.

•    Bring your spouse or partner up to speed on how your investments are organized, at least in general terms, and why. Make sure your spouse or partner knows who to turn to and trust if for any reason you are unable to continue managing things. Encourage your spouse or partner to get a basic education by reading a couple of excellent books: “Investing for Dummies” by Eric Tyson and my own book, “Live It Up Without Outliving Your Money,” which was revised and updated this year. For extra credit on this assignment, ask your spouse or partner for help in evaluating every issue on this list.

•    If you have a professional advisor, schedule a meeting to review your whole situation. If you don’t have one, read the relevant chapter in my book, mentioned above, and then pick one. Professional help is especially valuable now when emotions are leading many investors into mistakes they could and should avoid.

•    If you think you should bail out of the stock market completely, or if you have already done so, think about this: Do you still believe in the future of the United States, the future of the world and the theory of capitalism? This is the biggest fork-in-the-road issue for investors right now. I’m aware that most of us have suffered this year, and some people have lost virtually everything. But I firmly believe our future still has enormous potential. I believe that patient, careful investors who take the steps I’ve outlined in this little essay will have a high probability of reaping the benefits of that future.

Even though we may believe and hope that the long-term future will be bright, we won’t get to that future without living through the present turbulent and very uncertain times. And that requires more than just getting all your investments right. It requires attending to the psychology of successful investing and successful living. (For more on that topic, I highly recommend “Your Money and Your Brain,” a 2007 book by Jason Zweig.)

No matter where we fall in the spectrum of hurt, there has never been a better time than right now for all of us to think about two fundamental questions:

•    What does money mean in my life?
•    What truly makes me happy?.

I’m not going to pretend to give you the answers. The questions themselves are much more valuable than any answers somebody could write for you. Here’s my suggestion: Write those questions on a piece of paper and stick that paper on your refrigerator. If you live with other people, use these two questions to kick off some interesting household conversations.

If you do that, over time the answers that are right for you will gradually emerge and evolve. One nice thing about doing this is that you don’t have to arrive at some final conclusion or pass a test. What’s important is the thought you put into this, ideally again and again so you can discover new answers.

Finally, give yourself a dividend that doesn’t cost money and that Uncle Sam can’t tax. During this holiday season, do something nice for somebody who doesn’t expect it from you. If you put some time and thought into this, your life will be better for it. And you will receive dividends of satisfaction that can continue well into the new year.

Paul Merriman is a financial educator and founder of Merriman