XP is decrepit. Its certainly more insecure than 7 or 8.1. It isn't built for 2014.
Sigh. The security improvements in newer versions of Windows are mitigations to limit the damage in the event something bad happens. They don't prevent that something bad from happening in the first place.
If you want to keep using XP, these are the steps you should take:
1) Limit your exposed surface. Being behind the NAT of a home router is usually good enough for this. Otherwise, shut down things that have open ports (TCPView can help here), like SMB or remote desktop.
2) Use Firefox. Avoid IE. Just looking at the past few months of Patch Tuesday RCE fixes, many of them are exploitable only if the user uses IE. Keep your Firefox updated. (Chrome could work too.)
3) Don't do anything stupid. If there's an EXE file you don't recognize, don't run it. If there's an attachment that looks fishy, don't open it. Remember,
malware is harmless and inert until it's executed. But executing code without a user's help is hard. So in the vast, vast majority of cases, malware works by tricking the user into executing. A well-informed security-savvy user is the best defense against malware.
3a) Go dig around in the Windows Explorer options and set Windows to show all file extensions. The automatic hiding of file extensions (to make things "pretty") is one of the worst hindrances to #3.
4) Of course, malware can also execute without a user's help (I said "hard", not "impossible"), and that's via unpatched security flaws. So always keep your Internet-facing software patched. That means your browser, your IM client, etc. Since the OS is no longer getting patched, it's a really good idea to use programs that don't rely on many OS components. Hence Firefox instead of IE. If you do this, then, in conjunction to #1, the exposure of the OS should be very, very small.
4a) Since you won't be getting OS updates, you should be alert for security flaws in XP. Pay attention to security news about new XP flaws that are discovered. Read about how they're exploited, consider whether that exploit is applicable to how you use the computer (most aren't, actually), and if so, then you need to change the way you use your computer to avoid exposing that exploit. Also, subscribe to the
MSRC blog and see what's getting fixed each month. They probably won't post any new info about XP flaws, but it's still worth paying attention because some flaws in newer versions of Windows exist in XP, too. Again, same as above: see how it's exploited, whether it's relevant to your usage patterns, and adjust usage patterns in the (unlikely) event that it is.
Note that I made no mention of anti-virus. Anti-virus is good mostly for protecting a computer against a user's mistakes, but it's really ineffective against attacks that exploit unpatched security flaws. The end of support for XP increases your exposure to the latter, and that's something that AV does a pretty shitty job with. At best, it adds an extra (very weak) layer of last-ditch protection. At worst, it lulls a user into a false sense of security. It's optional. Install it if you want, but under no circumstances delude yourself into thinking that it'll actually protect you, because it probably won't, and it's a very poor substitute for following the 4 points above.