Cut Through the Clutter

If you’re smart, accomplished, advancing in your career, and embarrassed by how little you know about money, you’re not alone. We have to make a lot of choices about our money these days — not just how to save it and spend it, but how to invest it and make it last for our lifetimes. The sheer number of options can feel overwhelming.

Fortunately, the principles for sound financial planning can be boiled down to just a few simple money rules. Stick to these and you’ll stay on course for financial success.

Start Early (Even if You Start Small)

When it comes to retirement savings, it’s really hard to make up for lost time. You can’t get back the company matches or tax breaks that you missed. Plus, the later you start, the more of your income you’ll have to save to catch up. Someone who starts saving for retirement in her 40s might have to put aside one third of her income to match what she could have gotten by contributing just 10 percent in her 20s. That’s how compounding works — the earlier you start, the faster your money grows.

If you’re getting a late start, be diligent about saving as much as you can. Even if you think you can’t save “enough,” anything is better than nothing!

Trust No One Completely With Your Money

No one cares more about your money than you. So trust no one completely. You should build a team of trusted advisors, but never give up control to anyone — whether it's your spouse, your advisor or your friend who's really smart about money. And when it comes to advisors, interview a few before you choose on and always ask, “What’s in it for you?” Your advisor should not only be willing to discuss how she gets paid but should also discuss potential conflicts of interest.

Be Smart About Debt

Debt is a tool — use it wisely. Moderate amounts of mortgage debt can help you buy a home that likely will appreciate in value over the long run. Likewise, moderate amounts of federal student loan debt can result in a degree that boosts your income. Obviously, you shouldn’t overdose even on “good” debt, but you also shouldn’t be in a rush to pay it off until you’re saving enough for retirement and you’ve eradicated all “toxic” debt such as credit card balances, payday loans and other high-rate debt.

Be Wary of the Little Fees

One percent may not seem like much. But the difference between fees of 1 percent versus 2 percent can total hundreds of thousands of dollars over a working lifetime — and some investments charge even more. Choosing investments with low fees can make for a much bigger nest egg. You also can find unnecessary fees lurking in your bank statements, cable bills, phone bills and credit card bills. The savings may not be as great, but every little bit counts. (Read more about avoiding hidden fees here.)

Keep It Simple

You don’t need to buy into a hedge fund, follow a market guru’s complicated trading strategies or take big gambles on a single stock. Low-cost investments in index mutual funds or exchange-traded funds (ETFs) will give you the returns you need to meet your goals without taking crazy risks or paying excessive fees. Look for funds that mimic broad market benchmarks, such as the Wilshire 5000 Total Market Index, so you can get proper diversification.

Keep Your Credit Score High

These three-digit numbers aren’t just used to determine whether you get a loan or credit card, and how much interest you’ll pay. Credit scores are also used by insurers to determine premiums, by landlords to evaluate applicants and by cell phone carriers and utilities to decide the size of security deposits. Simply put: A less-than-stellar score means you’ll pay more. Bad, mediocre or non-existent scores can cost you a small fortune. The good news is that you don’t have to be in debt to have great scores. You just need to have, and regularly use, a couple of credit cards that you pay in full every month. If your score is low and needs a boost, check out these hacks.

Protect Yourself and Your Money

Bad things happen to good people, which is why you need insurance. The liability portion of your auto and homeowners’ policies should at least equal your net worth, and consider buying more coverage if you’re a high earner to protect yourself from lawsuits. Health insurance is another must, since without it you’re just one accident or illness away from bankrupting bills. Disability insurance is often overlooked but protects your most important asset: your earning power. Finally, build your emergency fund over time so you have a safety net for things insurance typically doesn’t cover, like a job loss. (Read more on how to determine what insurance you need here.)

Liz Weston is an award-winning journalist and author of several money books, including the best-selling “Your Credit Score.” She writes about personal finance at her site AskLizWeston. You can like her on Facebook and follow her on Twitter.

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