Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

Dr. Don's top 10 for 2004

Jan. 1 means a fresh start, which makes it a good time to get your personal finances in order.

Here are my 10 tips for a healthy and happy financial life in 2004:

1. Spend less than you make
Whether it's finding money to pay off your credit cards, providing an emergency fund or saving for retirement, you have to spend less than you earn to make any progress toward meeting your financial goals. People write Bankrate and tell me that they're going to pay off a debt by acquiring another debt. That's not debt reduction; that's debt restructuring. It may make sense to restructure your debt but, short of filing for bankruptcy, it takes paying down your loan balances to get out of debt.

2. Know where the money goes
Take the time to put together a household spending plan. If you're already using Microsoft Money, Quicken or other money-management software it should be relatively painless, but a piece of paper, a pencil and last month's bills can get you through 80 percent of the planning process. If you don't know where the money goes, you won't be able to develop a strategy to spend less than you make. A line item that says $500 to Visa doesn't help you plan if you don't know whether $490 of that money went to shoes or sushi.

3. Invest more than you splurge
Binge spending doesn't make any more sense than binge eating. Control your spending by setting up a spending plan and include investing as a line item in that plan. If your company matches all or part of your contributions to a 401(k) plan, try to take advantage of the company match. If the company matches 50 cents to your dollar, you're getting a 50 percent return before you even decide where to invest the money. A month from now you won't miss the dinner out and you'll have something to show toward investing for your future.

4. Don't be afraid to ask for help
The hardest part about investing for your future, besides actually committing the funds, is deciding where to invest. After three years of a declining stock market and corporate scandals, the market rebounded this year only to have investors' confidence diminished by the controversy surrounding the mutual fund industry. The controversy revolves around market timing, trading frequency and the excessive fees charged by some mutual funds. The fund industry's response to these issues will shape investors' feelings about investing in mutual funds for some time.

Finding an investment professional you can rely on for unbiased advice is an important part of investing. Make sure you know how that professional is getting paid and what you're paying in fees to get that advice. I think that the National Association of Personal Financial Advisors is a good place to start looking for an adviser, although it's certainly not the only place to look. Bankrate's Investing Checkup has more about what to look for in a financial adviser.

5. Know how you pay for financial services
This one's a repeat from last year's top 10 list, but it bears repeating. Don't get me wrong, I'm all for finance professionals getting paid. I am one. But it's important to know in what way the professional is being compensated.

A fee-only financial planner, for example, will charge you directly for the service provided. If you buy mutual funds with sales loads, you're paying the finance professional by commission. If you buy stocks, you're also paying by commission. With bonds the commission is built into the price of the bond, except for new issues where the issuer pays the sales commissions.

Financial advisers are by some means getting paid for the service they provide to you, and knowing how they get paid helps you make better financial decisions. Are your mutual fund fees in line for the type of fund you're investing in? The salesperson's argument that you pay higher fees to have your money managed by better mutual fund managers just doesn't hold water.

There are great mutual fund managers out there running funds with low annual expense ratios. (They make it up on volume.) Annual expenses create a drag on portfolio returns. When the stock market was providing blistering returns during the '90s, investors didn't quibble over high annual expense ratios. Low yields in money market investments and bonds, along with the negative returns in the stock market, drove home the point that high fees slow portfolio returns.