Easy Rules for a Happy Financial Future

So you want to retire. And not only that -- you want to retire in a comfortable house, not a cardboard lean-to. You want to eat tasty meals during retirement, not cat food and grass clippings. And you want to travel to visit relatives and friends, but you'll need something better than a jalopy to do all of that traveling.

Fair enough. But a nice retirement doesn't just materialize on its own. Most of us need to plan for it and take action now.

Here are a few guidelines and bits of advice for you.

• Before you start investing, it's best to have an emergency fund in place, with three months' to a year's worth of expenses in it. With unemployment rising, losing your job is probably the top concern. To address that concern, the key to how much you should save is how long you think it'll take you to find a new job if you get laid off.

• Pay off all high-interest debt before investing. Remember that not all debt is alike. An affordable mortgage at a reasonable interest rate is very different from the credit card debt that burdens so many people these days, which can carry steep double-digit interest rates.

• Once you're able to start saving and investing, take full advantage of Roth IRAs and other available retirement plans. Many of us have heard the rule of setting aside 10% of your income, but let's face it -- the more you can put away, the more secure your future will be, especially in these days of rapidly escalating health care costs and disappearing pensions. (You don't want to end up with a gruesome retirement, do you?)

• Look into long-term care insurance, and disability insurance, and saving for college expenses -- all of which can make a lot of sense for most of us. It can take a while to get out of debt and get your ducks in a row.

• Think twice about life insurance. You probably only need it if your income matters to someone. Otherwise, save the money and invest it instead.

• Similarly, in considering annuities, I advise against most variable annuities, even if there are some reasons to buy them. I like many aspects of fixed annuities, which can provide income for life. Some income annuities will even offer inflation adjustments.

• If you're tempted by rental properties as an investment, remember that there are other ways to engage in real estate investing, such as real estate investment trusts. If you're dealing in real estate, you also have to deal with tenants, illiquidity, price volatility, repair and maintenance costs, and even more. In addition, if you buy one or two rental properties, you'll own just one or two. But a REIT can give you instant exposure to a host of properties -- commercial, industrial, medical, and more. And not only are REITs are easy to trade, but they also usually pay a solid dividend.

• Consider investing in individual stocks along with mutual funds. Many people simply haven't the time, energy, interest, or skills for it. But for those who do, individual stocks can offer a lot. Sure, not every stock will be a home run, but you can knock some investments out of the park. Check out these 10-year average annual returns and what they would do to a $10,000 investment over a decade:

Source: Yahoo! Finance.

I love mutual funds, but I like to keep a portion of my portfolio in individual stocks, too.

Finally, for detailed guidance on retirement planning, test-drive, for free, our Rule Your Retirement newsletter service. A free trial will give you full access to all past issues. It regularly offers recommendations of promising stocks and mutual funds, too.