The First Step to More Wealth

Want more money? Want more financial peace of mind?

Here's the secret technique: Get a plan.

Yeah, I know, that's awfully simplistic. For some of you, planning is second nature. You have a detailed budget and plan for everything, right down to the 10-year plan for that row of hedges in your side yard.

Then there's the other extreme, the folks whose level of financial organization involves knowing where to go to pay the overdue bill in person after the electric company shuts them off.

Hopefully that's not you sitting there in the dark (if it is, I really hope you'll read on before your laptop's battery runs out). But I suspect that most of you probably feel like you're pretty well on top of your financial situation. Or at least actively working on it.

That's good. But here's the thing: It's possible to have a house and a job and decent credit and an investment portfolio and still not really have a plan, at least not in the sense that I mean.

And if you want to build wealth and security over time, a plan is pretty close to essential.

But plans are boring. Let's pick stocks!
You could certainly do worse than just buying some good stocks and riding them; just ask that guy rummaging around his dark house trying to find a copy of his electric bill! Maybe you buy Apple (Nasdaq: AAPL  ) because you think the maybe-upcoming tablet thingy is going to blast its growth even further into the stratosphere, or you grab Ford (NYSE: F  ) stock because you're finally starting to feel sold on the strength of its bailout-free recovery, or whatever ... and maybe those stocks pay off well for you.

But maybe they don't. Or maybe, the stocks that catch your eye are all pharmaceutical stocks, because the great Peter Lynch suggests that you "buy what you know" and pharmaceuticals are your professional specialty. There's merit to that approach until something happens to clobber the whole sector.

Hopefully you won't get laid off and need that money.

But this isn't just about diversification
Diversification is really important. You might want to own Apple and Ford shares, but you'd also do well to include other types of stocks: small caps like Innophos (Nasdaq: IPHS  ) , medical stocks like Kinetic Concepts (NYSE: KCI  ) , utilities like France Telecom (NYSE: FTE  ) that pay fat dividends, energy stocks like BP (NYSE: BP  ) and Enterprise Products Partners (NYSE: EPD  ) , and ... well, you get the idea. That's exactly what I've personally done with those stocks: I picked them not just because I thought they were great companies, but also in an attempt to build an overall portfolio that covered a variety of bases -- including nonstock investments like bonds and commodities -- in the hopes of getting steady growth over time.

I had a plan, in other words, and it has worked out pretty well so far. But as I said, there's more to this than diversification. Having a full-blown financial plan -- one that covers paying off debt as well as budgeting for future home improvements, college tuitions, and goals like a vacation home or a boat in addition to retirement investing -- significantly increases your chances of accumulating wealth. I'm not making this up; there's research to prove it.

But this point shouldn't require research: If you're focused on a goal, you're more likely to achieve it, and nothing brings goals into focus like putting them in writing.

Make a plan, man, and ma'am
My fellow Fool Robert Brokamp has been making the case for financial plans for a long time. In the new issue of the Fool's Rule Your Retirement newsletter, available online today at 4 p.m. EST, he looks at the benefits of putting together a written financial plan, as reported by readers who have actually done it.

These benefits are considerable, and go further than you might think. Sure, creating and implementing a written financial plan can lead to more money every month and more peace of mind. But it can also help you see that some of your wilder dreams may be achievable goals. And, on the other hand, it can help you see risks you didn't realize you were taking -- like having too many stocks in one sector -- and a few you might not have thought of yet.

Do take a few minutes to look at Robert's article, and while you're poking around the new issue, check out the complete guide to creating your own financial plan that Robert and his team recently put together. You'll find it in the "Features" section under the "Online Exclusives" tab.

Not a Rule Your Retirement member? No worries. Full access to the new issue, the financial planning guide, and all of Rule Your Retirement's other resources can be yours for 30 days with a complimentary free trial. Signing up is quick. Click here to get started.