Financial planner Lawrence A. Krause sometimes borrows an assessment from Yogi Berra to give advice to anyone seriously considering taking command of his or her own financial life.
"If you don't know where you're going," he quotes the baseball great as saying, "you'll probably wind up someplace else."
So, Krause and other financial planners advise that you decide what you want to accomplish with your investments before you make them.
And be specific when you set your goal.
"Most people would say: 'My goal is more ,' " said Donald T. Levy, director of the tax department in the Los Angeles office of Laventhol & Horwath, the nation's ninth-largest accounting firm. "That's tough to plan for."
Being specific requires discipline and self-knowledge, because what you really are doing is making fundamental choices about what you want in life.
If you are 45 years old, for example, and decide you want to retire in 10 years with an annual income equal to what you earn now, you have to realistically confront your prospects. Try asking yourself these questions:
Is it possible to achieve your goal?
What will you have to sacrifice?
How big a risk will you have to take?
Are you prepared to lose?
Personal financial planners say that often they have to act as "financial therapists" as well as investment counselors for their clients, probing psyches as well as pocketbooks in tailoring portfolios to their clients' wishes and needs.
In deciding where to urge clients to invest money, professional planners have thousands of options. A host of new financial products comes into the market every month.
But in the broadest sense, there are only two categories of investments: relatively safe investments with lower yields and relatively risky investments that can shoot up in value--or slide.
Most personal financial planners suggest a blend of safe and risky investments as a means of achieving slow and steady growth.
They are advocates of diversification, not get-rich-quick schemes, noting that if they knew how to get rich quickly, they would probably be relaxing somewhere, enjoying their money rather than trying to sell advice to you.
That advice doesn't come inexpensively. Most of their clients earn upward of $80,000 a year and pay fees ranging from $75 to $200 an hour. Whether you're in that league, however, you can do a lot of effective planning on your own, they say.
Here are some of their guidelines:
Prepare a balance sheet.
Write down the value of what you owe and compare it with the value of what you own. The result is your net worth. It is tough to skip this first step, because it is undeniably helpful to know where you are before you decide how to get to where you want to go.
Figure out where your money goes each month.
Sit down with your checkbook and your charge card receipts, and write down in detail how you spend your money and how much you've got left--or could have left, if you alter your ways--at the end of every month.
What is left, or what could be left, is your money to invest.
It should be at least 5% of your gross income; 10%, if you possibly can.
Before deciding where to make your very first investment, consider your vulnerability.
Personal financial consultants recommend that you secure health, disability and life insurance as part of a reserve package that includes enough cash--or investments readily convertible to cash--to cover three to six months of your living expenses in the event of trouble, such as loss of your job.
For these liquid investments, which can include bank offerings such as money-market accounts and certificates of deposit, shop around for the best interest rates.
Also, consider making a will, if for no other reason than to name a legal guardian for your children in the event of the deaths of you and your spouse, said Roy Weitz, executive director of the American Assn. of Personal Financial Planners.
Once you've planned for the worst, it's time to give serious consideration to buying a house, or at least to saving up enough money for a down payment, some planners say.
"If somebody were coming into our office, we probably would lean towards designing a plan emphasizing a home purchase prior to the more esoteric investments," said Levy of Laventhol & Horwath.
His colleague, Philip Kavesh, who heads the firm's local personal financial planning division, cited some of the advantages of home buying. He identified tax benefits--mortgage interest is deductible--and both safety and the potential for growth if the house is well-valued.
In branching out after you have established a reserve fund--and perhaps bought a house--your age comes into play along with your goals in deciding where your investment dollars should go.
When you are young, you can afford to make more mistakes simply because you have more time to earn back the money you might lose. You can also afford to wait out market cycles.
So, all other things being equal, financial planners recommend more risk for the young.