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The bull market is dead, and it's about time.

Not necessarily the bull market for stocks. The markets looked panicky for a while there on Wednesday, but underlying conditions are nowhere near as dire as they were back in the crash of 2008-09. We may get out of this correction soon and see more gains.

The bull market in complacency is another matter. For the past five years, we Canadians have lived in a world of near financial bliss. Stocks rose, house prices surged and interest rates stayed low. Watching stocks fall is a reminder that it can't last.

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Wow, do we ever need that reminder. Investing habits have become sloppy, many people are too financially committed to their homes and lots of households owe too much. The lesson of falling stocks is that it's time to take things in hand in all your financial dealings.

Let's look first at your investments. Frustrated to distraction by low interest rates, some investors have made the mistake of either abandoning or slashing their exposure to government bonds. When stocks plunge, money flows into the safety of bonds issued by governments. It's a safety thing. Governments of financially stable, industrial economies don't default. If conditions get really bad, they can raise taxes to pay what they owe.

The signature of the sophisticated investor in recent years has been trash talk about government bonds. Now, we know that ignoring them is sloppy portfolio building.

The search for higher yields has drawn people to investments with risk levels that only become apparent at times of market stress. High-yield bonds are an example. Issued by companies with weak to modest financial strength, these bonds have more in common with stocks than high-quality bonds in the way they behave. Government bonds have been rising in price this week. High-yield bonds are falling.

Dividend stocks are the refuge of choice for income-seeking investors who dumped bonds. The dividends these stocks pay each quarter or monthly remain. In fact, there's nothing in the current market decline to raise questions of whether companies will have to cut dividends. That's very much unlike what happened in 2008-09. Still, dividend stocks can fall in price, and fall hard.

Prior to Wednesday's declines, the S&P/TSX Dividend Aristocrats Index had a one-month decline of 8 per cent and the broader S&P/TSX composite index was down 9.6 per cent. Seventeen dividend aristocrats were down 12 per cent or more for the month, including blue chips like TransCanada Corp., Suncor Energy and Canadian National Railway.

Dividend stocks are a super building block for a portfolio, but you can't count on them to weather a sharp market downturn like bonds. In the complacency of the past five years, this lesson was forgotten.

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Just as stocks have turned against us, so can house prices. This is a push to open your mind to the possibility of a price decline, not a prediction that one is coming. Stocks had a good run, and now they're pulling back. The same could happen to houses, even if it's just Toronto, Calgary and Vancouver that are hot right now. If those cities turn, the rest of the country will suffer with them.

A new report issued by CIBC Economics shows Canadians are doing a good job of making extra payments on their mortgages (read here: http://ow.ly/COHbr). That's a sign that people are far from complacent about the amount they owe on their mortgages. And yet, home buyers are still getting into crazy bidding wars in the Big Three real estate cities, people are still moving up to bigger but not better homes and they're still factoring high-water housing values into their retirement planning.

Low interest rate complacency is the toughest to address because there's little pressure globally for borrowing costs to rise. Powerhouses like China and Germany have shown disappointing growth lately, and Canada's economy keeps lurching between bad and good jobs reports. Six years after the financial crisis, it's a dismal reality that the world still can't handle the interest rates we used to consider normal.

Why pay down your debt, then? It's what you do when you realize that everything won't always go as well for us as it has in the past five years. Good riddance to the bull market in complacency.

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