Columnist Suze Orman

Look, I know how much we've become a nation addicted to contract labor. What past generations did for themselves, we now "outsource" to someone else without a second thought. Our lives seem so busy and stressful we are willing to pay someone to do just about everything but brush our teeth for us: someone to clean the house, another to tend the garden, the kid down the block to shovel the snow, an auto mechanic for the oil change, a nanny for afternoon carpool, a dog walker to make sure Fido gets his exercise.

And from a certain angle maybe that's understandable. Some of us spend so many hours at the office that it's easy to think there just isn't time to handle everything else without help. But we need to talk about one area of your personal life where I think it's imperative for you to do as much of the work as possible, rather than turning control over to someone else: your finances.

Let's cut straight to the bottom line here: what happens to your money affects the quality of your life, not your financial advisor's life, your banker's life, or your insurance agent's life. Just your life. So it's essential that you understand what is going on, and are able to make informed decisions for yourself. In fact, I am convinced all of you have what it takes to go it alone, especially with the easy-to-follow guide I am here to give you on the key steps you need to take to manage your finances.

Taking In Account First Impressions

Okay, all that said, I know a lot of you will still want to have help managing your finances. If you absolutely, positively think you want to farm out some of your financial responsibilities to an adviser, just do the homework to make sure you hire someone good. A really talented financial adviser is an incredible asset; but a bad or even mediocre planner is going to create a mess for you, and put your financial security at risk.

So let's talk about how to find the best planner. And if you already have an adviser, I suggest reading along to see if your pro meets the high standards you deserve.

Here are some important "first impressions" to look for:

• Someone who has you come to their office. If they come to you, it's a sign they have too much time on their hands.
  
• If you live with a spouse or partner, a good financial planner will ask that both of you attend any meetings; the planner's job is to truly understand the total financial situation of your household, which means he or she should want to be familiar with the needs, wants, and risks of you both, individually and as a couple.
  
• A clean office/desk. A planner who isn't organized isn't the right person to handle your money.
  
• A planner who works on a "fee-only" basis. Advisers should not make a penny off of commissions from investments they recommend you make. You can't trust someone who makes their living based on how often you buy and sell investments.

As for the interview itself, when you are talking to a planner you'll want to keep track of what is being covered. There's also something you should keep an ear out for right at the start of your talk: a prospective adviser who immediately launches into stocks or mutual funds you should buy is someone you should run from. Investing is just a small part of your financial needs, and besides, how can a person know what you should buy before they know anything about you? Before a planner tells you what to invest in, they should have talked to you about:

• The importance of a Will and Living Revocable Trust.
  
• Whether you have any debt other than a mortgage, such as credit card debt, student loan debt, and so forth.
  
• Your FICO score and how that will impact your financial moves.
  
• Whether you anticipate needing to provide financial assistance to your parents during their retirement, and/or receiving an inheritance from them.
  
• Your plans for a family, especially whether you intend to send your children to private school and to what extent you intend to finance their college education.
  
• Whether you rent or own a home, and what your goals in this area are. Do you want to trade up to a bigger place or different neighborhood, or downsize?
  
• Your life insurance needs, if anyone is dependent on your income.
  
• Retirement investments you already have, such as 401(k)s and IRAs.
  
• What you want to achieve with your investments: what your investment horizon is (Five years? Ten years? Thirty?) and how much risk you are comfortable with, meaning can you handle your portfolio falling, say, 15 percent so you can stay in position to reap potential gains over the longer term?

Late in the article, you'll find the specific questions you should be asking the planner during your chat, as well as tips on finding planners in your area.

But please promise me that before you sign on with anyone, you will really consider the possibility that you could do just as good a job for yourself. I promise it's not nearly as hard as you might think.

Do-It-Yourself Financial Planning

So often I see people run to a financial planner because they are psyched-out by the seeming complexity of their finances. That's because there is so much information floating around out there you think you can't possibly know what the right thing to do is. The truth is that most financial decisions can be stripped down to a fairly simple essence, and can thus be tackled by anyone. No professional help needed.

Let's run through some basic stress points and what you need to focus on. Here are some Simple Financial Truths to help you be your own financial planner:

• What's the right life insurance policy? The minute anyone is dependent on your income-be it your partner, a child, or an ailing parent-you need life insurance. And all you need to buy is Term Insurance. Plain and simple. Don't listen to anyone who tries to talk you into any of the more expensive forms of life insurance that go by the names Whole Life, Universal Life, and Variable Life. These are known as "Cash Value" policies, and they are totally unnecessary. Head on over to Yahoo! Finance's Life Insurance Center to learn more about term life insurance. And here's a tip on figuring out how big a death benefit you should get. For a super-safe approach, get a policy that will replace 20 times your dependent's annual income needs. I know that sounds steep, but term insurance is really cheap right now, and if you buy 20x, your beneficiaries can invest the proceeds in lower-risk bonds and live off the income without touching the principal.
  
• How do I invest for my retirement? Easy: 401(k), Roth, Regular. Let me explain. If you have a 401(k) at work and your boss kicks in a matching contribution, then you better be signed up, and contributing enough to get the maximum company match. Once you've gotten the maximum employer match for the year, it's fine to opt out of the 401(k) until the start of the next year. Just try to redirect as much of this extra money in your paycheck as you can to a Roth IRA. To contribute the full $4,000 to a Roth in 2005 ($4,500 if you are over 50) you need to be single with income below $95,000, or married and filing a joint tax return with income below $150,000. And of course if you have enough income to keep contributing to the 401(k) and fund the Roth, go for it. Finally, just pile any extra money into a regular taxable account at a discount brokerage or mutual fund company. Yeah, there's no upfront tax break, but all your gains will be taxed at the long-term capital gains rate, assuming you own the asset for at least one year. The current max cap gains rate is 15 percent. That's a lot cheaper than the top income tax rate of 35 percent-and every penny you withdraw from a 401(k) or Traditional IRA gets taxed as income, not as a capital gain. So you see, a regular taxable account can make a lot of sense. To keep your tax bill low, just don't trade too often, and stick with an index fund or ETF (exchange traded fund), to minimize your tax bill while the money is invested. (See below.)
  
  If you work for a large company, chances are the fund company that handles your 401(k) has a retirement planner that can help you figure out what you should be saving now to meet your goals. The folks at SmartMoney have some good online tools.
  
• I can't possibly figure out what to invest in. Sure you can. Just go with an index fund, or an exchange traded fund, which is basically an index fund that trades like a stock. Fidelity and Vanguard offer the cheapest index funds. If you want something simple, sock your money away in a broad-based index fund such as a "total market" or "extended market" index. In one investment you get the kitchen-sink of stocks: just about every size and style. If you are in your 50s or older, you might also want to keep a portion of your assets in a "bond" index fund. And to learn more about ETFs, check out my previous column all about them.
  
• I have no idea what are the right funds to have in my 401(k). If index funds are offered, focus on them. And if there is a life-strategy or life-cycle option, take a look. These "life" funds are designed to take the stress out of investing by packaging into one fund all the different types of stocks and bonds that are appropriate for your age.
  
• I spend too much and need help budgeting. A planner can draw up the most detailed budget in the world for you, but it's going to be worthless if you don't have the initiative and determination to take control of your spending. So why even get the planner involved? Come on, this is one area where you can't bellyache about it being too confusing, or claim you need some supposed expert to tell you what to do. Sit down with the past three months of your checking account and credit card statements, and separate the necessities from the desires. Then stare at those "desires" and start making some responsible choices about what to pare back, or cut out completely.
  
• I can't figure out how to save for retirement and the kid's college education at the same time. Focus on your retirement, period. Only once you are on target with your retirement investing can you start to think about college funds. That's just being really responsible. You don't want to be a financial burden to your kids when you retire, right? Besides, you and the kids can take out loans for college, if necessary. There are no loans for retirement. If you do indeed have the income to set aside some money for college, head on over to www.savingforcollege.com to learn more about your investing options.

Okay, that's a pretty good cheat sheet for starting your own financial planning firm and servicing the most important client you could ever have: yourself.

If You Absolutely, Positively Need to Hire a Planner

Here are my Five Questions for Grilling a Potential Financial Planner:

Okay, this bears repeating: if a prospective adviser makes money from commissions on your investments, then they fail my litmus test on that fact alone. There's simply too much conflict of interest. I want you to stick with fee-only planners; they charge a set fee for their services, rather than relying on commissions. And as you begin your search, keep in mind that friends are always a good place to start for referrals. You can also check out this Planner Search Tool that will point you to local fee-only planners.

1. What's Your Background? Did they do the work to become a certified financial planner (CFP)? What other formal training do they have? And how long have they been in business? Ten months, or ten years? Experience matters a lot.
2. Do you recommend Term Life or Cash Value policies for most of your clients? You better hear Term. If someone starts extolling the virtues of Cash Value life insurance, you should stop the interview right there and politely leave.
3. Do you use Index mutual funds and Exchange Traded Funds? You want to hear YES. They don't need to use index funds or ETFs exclusively, but you want to know that indexing is part of the mix. The bottom line is that very few actively managed mutual funds consistently beat the indexes. A big part of the reason is that good no-load index funds have super-low costs, and the less you spend on fees, the more you will have left in your account.
4. Do you recommend most of your clients have just a Will, or do you suggest a Will and a Living Revocable Trust? A living revocable trust is such an important document, that I would be wary about any planner who doesn't think it is useful.
5. Do you recommend using a Home Equity Loan or Line of Credit to pay off credit card debt? A responsible planner will say no to this. When you borrow against the equity you have in your home, the home becomes the collateral for the loan. Miss too many payments and you run the risk of losing the home. Your credit card debt, on the other hand, is what is known as unsecured debt: there is no collateral that the card company can come take if you fall behind on your payments. It therefore makes no sense to put your house on the line to pay off a debt that is unsecured.