Prior to our recent recession and the hesitant economy that followed, many investors had experienced only the good times and expected too much as a result. At the peak of the last bull market, surveys indicated that investors anticipated an average return of 20 percent from their investments. When they were dashed in the face by the cold water of recession, many took to the sidelines and shunned investing altogether.

Clearly, this was an overreaction, as abandoning the investing game will seriously hamper your ability to achieve your goals. Our economy always has recovered from recession. In fact, with each of the past 10 American recessions, the average return of the stock market 12 months following the bottom has been approximately +34 percent. Some years were higher and some lower, but when the market recovers, it can be a dramatic turnaround.

You may be down, but you’re far from out. Don’t throw in the towel. Instead, undertake a serious, comprehensive review of your financial plan based on expectations that are neither too giddy nor too gloomy. Here are four useful principles of financial planning in the post-recession era.

Revisit Your Goals

With any financial plan, the best place to begin is your life and career goals. No doubt you established these some time ago, whether they were financing your children’s education, acquiring a summer home or retiring early. But recession may have adversely affected your ability to accomplish your most cherished objectives within the desired time frame.

For example, downsizing or consolidation may have forced you to restructure your business or shift careers entirely - with correspondingly lower income. That hurts now, of course, but the impact on your overall goals can be just as profound.

Let’s suppose that you planned to retire at a certain youngish age complete with a large nest egg and a debt-free balance sheet, that is, with your mortgage and credit card debt paid off. It all seemed so easy when you imagined it. Now, however, look what might happen with your skinnier income. You’re unable to allocate as much to investments each month, so your nest egg will build more slowly. You can’t handle additional principal payments on your mortgage, so you’ll have that debt hanging around for awhile longer. The bottom line is that you may need to push back your retirement date a few years.

This isn’t the end of the world, but it is an important signal to revisit your goals based on realistic expectations. Above all, remember that retrenching from your original goals and establishing modified objectives does not mean that you should abandon investing. Markets will experience their ups and downs, but there remains no better way to reach your goals than through investing.

If you believe that you can defer investing for a brief period and make up the difference later, you’ve taken the first step down a slippery slope. The compounding effect of investment returns, over time, is one of your greatest allies. The sooner you can get your dollars working, the more likely you are to achieve everything you want.

Understand Your Risk Tolerance

"Risk tolerance" was not a term that resonated very deeply with investors before the dot.com bubble burst. Until the year 2000, many people believed risk tolerance meant enduring a 15 percent return on their investments rather than a 30 percent payback. My, how things have changed.

The market turbulence of the last few years has been more than many investors could take. How about you? What’s your tolerance for risk? How much market volatility can you bear on a daily basis before it affects your attitude - and possibly your health? You need a firm sense of your risk tolerance before you can settle on investments that make the most sense for you.

Review and Rebalance Your Portfolio

Portfolio review and rebalancing are musts for every investor. We advise our clients to address these issues at least twice each year. With your revised goals now in place, rebalancing will be especially timely. As you rebalance, keep several points in mind.

Your most important guideline will be sector diversification - it’s the key to building a less volatile portfolio. Owning a diverse mix of large-cap, mid-cap, small-cap and international investments can reduce your risk but allow you to achieve higher returns than you’d realize from fixed-income assets.

Don’t chase performance and follow investments that appear to be trendy. The darlings of the down market, bonds and real estate, may have run their course. They may appear conservative and safe, but avoid those seductions. Instead, pursue a well-balanced portfolio that can even out the bumps of the markets.

Also, now that you have a better feel for your risk tolerance, make any portfolio changes gradually to keep you within your comfort zone. If you can’t tolerate the risk of a particular asset, it probably has no business in your portfolio.

Finally, develop a realistic projected average annual return for your portfolio. Long-term investments in the stock market generally have provided average annual results in the eight percent range. If you design your investment strategy with the assumption that you’ll earn more than eight percent, you’re flirting with disaster. Even a one percent shortfall in your projected returns, over many years, can substantially lengthen the time required to meet your goals.

So, if you’ve been basing your calculations on an aggressive 15 percent (or higher) projected return, you may be in for a rude awakening when you recalculate using eight percent. And don’t think for a moment that, since eight percent is half the return you expected, you’ll achieve half your goal over the same time. Because of the impact of "compound investment returns," you won’t get even that far.

Always remember that average annual returns are just that - an average. Markets never are consistent, so you’ll have good years and bad. If you design a well-diversified portfolio that’s sensitive to your risk tolerance, you’ll find that the overall performance should exceed what you could have earned by not investing at all.

Take a Fresh Look at Your Insurance and Estate Plan

Many of us structure our insurance packages to cover the gap between the lifestyles we want and what our portfolios will finance. If your assets and earning power declined during the recession, that gap may be wider, your needs from insurance greater. If that’s your situation, you may want to enhance the insurance component of your asset package.

Look also at the types of insurance policies you own. For example, you may have purchased a term policy that expires at a specific point in the future; by that date, you reasoned, your investment portfolio alone would provide for your family. If that’s no longer the case, you may need a more permanent type of insurance.

Also on the insurance front, if you received life insurance through your employer but lost your job or changed careers during the recession, you may find yourself without this type of coverage. If you have an insurance need, it’s important to personally own some type of coverage independent of any employer. Get on this one now.

Take a fresh look as well at your post-recession estate plan to make sure all the components still make sense. If they do, wholesale changes may not be necessary. For instance, if you own a second-to-die policy to fund your estate taxes, don’t automatically assume that the policy no longer is necessary. When the market rebounds, you could again be looking at a healthy estate - and hefty estate taxes.

Don’t precipitously cancel insurance policies; your age and health can affect your ability to purchase new coverage should circumstances change. Finally, don’t assume that you should halt a gifting program because the value of your estate has declined. Getting assets out of your name - before the market bounces back - can help you leverage your gifts. The opposite also may be true. If you were in the La La Land of 20 percent projected annual returns on your portfolio, you may be gifting too aggressively.