(MONEY Magazine) – Pick a fund

DO I NEED THIS FUND? Buying one fund after another can leave you with a lopsided portfolio fat with fees. If you already have a fund that holds big U.S. stocks, you don't need another. Use funds to lay the foundation of your portfolio and to fill gaps, not to purchase the same stuff over and over again.

WHY DOES THIS FUND HAVE SUCH RACY RETURNS? Could the factors behind that hot performance--a handful of hot stocks, a single sector like small stocks or overseas markets--go cold?

AM I THE RIGHT PERSON FOR THIS FUND? We all want to find the fund that will never lose money, but we're stuck choosing from real-world funds that can go up a little or down a lot. If you can't be sure you will stay invested when markets go bad, don't buy in the first place.

SHOULD I LOOK FOR NEEDLES OR OWN THE HAYSTACK? A traditional ("active") fund buys a selection of stocks and bonds. An index ("passive") fund buys virtually every stock or bond in a market benchmark. With rock-bottom costs (as little as 0.2%), passive funds beat most active ones in the long run. The trade-off: Passive funds are more boring.

CAN I TRUST THESE PEOPLE? Returns are notoriously unstable. Instead, look for more durable traits: annual expenses under 1%, big ownership by insiders, a consistent effort to keep taxes low, a reluctance to hype performance and a record of closing large funds. --JASON ZWEIG

Buy a home

HOW MUCH HOUSE DO I NEED? Because we think of our home as both a shelter and an investment--with visions of tax breaks and capital appreciation dancing in our heads--it's tempting to dream big. But by struggling to pay for a huge house, you may be shortchanging your 401(k), college savings or health care.

HOW MUCH DEBT CAN I HANDLE? The traditional lender guidelines cap total housing expenses (mortgage, insurance, property taxes and maintenance) at 28% of gross income, and total debt payments at 36%. That's simply a starting point. You may be able to handle more or less depending on your job security, savings and other income streams.

HOW MUCH WILL IT COST TO LIVE HERE? Appliances break, roofs leak, termites move in and furnaces give out. Ask an inspector for a timetable of what you'll need to update or replace. Set aside an annual budget of 1% of your home's value for maintenance.

WHAT IS THE HISTORY? A house with a history of numerous insurance claims may be all but uninsurable. You can check by asking the owner to order a CLUE report and insurance score for $13 at choicetrust.com.

WHO WOULD BUY THIS HOUSE FROM ME? Don't talk yourself into a fixer-upper or a view of a landfill just because you're worried you'll never find anything else. If it bothers you, it'll bother the next buyer. After all, your home is only worth what you can sell it for. --ELLEN MCGIRT

How can I stick to my renovation budget?

Denise Greene, 39 New York City -- Homeowner

HER STORY With one child, Greene and her husband Emir Lewis were willing to squeeze into the one-bedroom Manhattan apartment they owned. But when a second daughter came along in 2002, they rented their apartment, moved into a two-bedroom rental and kept their fingers crossed. Last December the apartment below the one they already own went on sale. The family of four is buying it and poised to create the duplex they so badly need.

THE ADVICE Think carefully before you okay plans, and then don't change your mind. Moving a doorway or switching showerheads midway can increase labor costs dramatically. Get an inspector on board early to spot problems like wiring that's not up to code. And make sure the contractor's estimate includes carting away what you're ripping out. --JOAN CAPLIN

Invest in stocks

DO I HAVE A PLAN? Settling on an investment mix--the percentage of your portfolio allocated to stocks, bonds and cash--is more important than any one stock pick. Every stock purchase will affect that blend.

WHAT'S MY TIME FRAME? Ask yourself when you want your money back. Is this an investment or a trade? The former means that you have a long time horizon and can tolerate price swings; the latter signifies that you want to pocket a quick profit. If you need the money back quickly--say, in less than a year--the stock market is not the place to park it.

HOW MUCH CAN I AFFORD TO LOSE? Everyone expects to make money--why else would you buy a stock? But it's easy to get caught up in what's hot, buy at peak prices and lose big, so calculate in advance how much you can bear to see your stocks go down (how does 20% sound?). If you can't accept investment risk, stay out of the market.

HOW HARD AM I WILLING TO WORK? Understanding what a company does and how its stock is valued takes as much time as buying any big-ticket item. Staying on top of your investment once it's made isn't as time consuming but still requires a couple of hours a month.

WHY IS SOMEBODY SELLING THIS STOCK? If you can rattle off the case for what could go wrong with a stock and still be convinced, call your broker. If not, save yourself from feelings of buyer's remorse and leave stock buying to the professionals. --PABLO GALARZA

What happens to worthless stock?

Joe Hwang, 60 Kalamazoo -- Investor

HIS STORY This retired physician invested $4,500 in K Mart in 1995, seven years before the biggest retail bankruptcy in U.S. history. He'd noticed that K Mart was in trouble, says Hwang, but "it seemed useless to redeem the shares for such a tiny amount of money." The stock stopped trading altogether last spring, right before K Mart emerged from bankruptcy, and Hwang claimed the loss on his 2003 return.

THE ADVICE To write off a worthless stock, you should get a broker's letter saying it couldn't be sold, or documentation that shareholders will not get any money (K Mart's bankruptcy took care of that). You must claim the loss the year the stock became worthless--or amend that year's return. --JUDY FELDMAN

Switch jobs

WHY DO I DO WHAT I DO? Knowing why you work hard isn't just navel-gazing; it's a key to job satisfaction. If you can articulate your passion, you'll impress potential employers--and perhaps land a fulfilling job. What a concept, huh?

WHO DO I KNOW? Chances are excellent you already know people who can help or hire you. Talking to people of influence who understand your strengths is more effective than cold-calling a stranger. The key is to be clear about what you want: a reference, an idea, a job, advice or feedback.

WHAT AM I WORTH? Do a rigorous inventory of your accomplishments. You may have new skills, milestones and responsibilities that you take for granted. How do you measure up in the world? What pay can you expect?

WHAT IS THE TRUE COST OF SWITCHING JOBS? Calculate what you could lose in benefits--a pension, 401(k) or stock options that are not fully vested, for example. Consider the dollar value of perks like on-site child care, a health club, transportation reimbursements and health care.

DO I WANT ADVANCEMENT OR CHANGE? Finding a bigger and better job in your profession is completely different from reinventing yourself in a new field. The latter may require expensive retraining and a dramatically different job search. If you can, do a trial run by volunteering. --E.M.

Hire an adviser

WHY AM I HERE? Start by figuring out what you want out of an adviser. Do you need specialized tax advice? A broad-brush financial plan? Do you want investment picks? Do you expect to talk once a month or once a year?

WHAT DID YOU DO TO EARN YOUR CREDENTIALS? Find out whether the pro has worked and studied for years (and continues to take courses) or passed a quickie test. A certified financial planner, for instance, typically studies for two to three years. Ask which organizations issued his credentials, then check with each to see if he's in good standing.

WHAT CAN YOU SELL ME? This will vary based on an adviser's training, licenses and firm. Does she sell a full range, such as funds from a variety of companies, or just one product, like insurance? Make sure these match your needs.

MAY I TALK TO OTHER CLIENTS LIKE ME? An unwillingness to offer references is a red flag. Here's what you should ask another client: Did you get the service you wanted? Were the costs what you expected? Did you work with the planner or an associate? Did he understand your goals and values?

HOW ARE YOU PAID? Typically, advisers make money one of two ways: by charging fees--hourly, a flat rate or a percentage of your assets or income--or through commissions on the products you buy. Your financial planning agreement should clearly state what method your planner uses. Ask if the adviser makes more money if she recommends certain products. --E.M.

How much will a planner cost?

Kelli And Ed Roche, 34 And 33 -- Brunswick, Ga. -- New parents

THEIR STORY Two years ago Ed and Kelli Roche relocated from northern Indiana when Ed, a food scientist, changed jobs. Their first child, Mikayla, was born last September. And Kelli recently found a new position in pharmaceutical sales. With those changes behind them, they now want advice on tax planning, saving for college and retirement investing. But they are concerned that a financial makeover will be costly. "That in itself might make or break the deal," says Ed.

THE ADVICE Advisers charge $100 to $500 an hour, according to Cerulli Associates, and financial plans run from $500 to $1,500. (For ongoing money management, an adviser may charge a percentage of your assets.) An adviser who's paid through a combination of fees and commissions may have lower initial fees, says Mark Johannessen, a certified financial planner in McLean, Va., because you'll pay commissions on investments you make. At the Financial Planning Association's website, fpanet.org, you can search for planners by zip code; the profiles include how they are paid. --MEGAN JOHNSTON

Start a business

CAN I HANDLE THE PRESSURE? Sure you want the challenge, freedom and unlimited upside. But can you make difficult decisions quickly, live with uncertainty, handle multiple roles and work long hours--with little immediate reward?

IS MY IDEA PRACTICAL? All ideas seem award-winning at 3 a.m. But to press ahead profitably, you need to seriously assess the market, the competition, your budget, your resources and your qualifications. The biggie: Will anyone pay for what I'm selling? A thorough business plan is the best reality check. For help writing one, visit sba.gov or score.org.

WHERE WILL I GET THE MONEY? Most new business owners tap their savings, home equity or friends and family. Financing from a lender to start or expand a business is important too. How is your credit? Am I good with details? Running a business means mastering bookkeeping, record keeping, insurance, financing, government regulations, legal obligations and taxes, to name a few. And that's before you conduct one minute of business. Be organized. Be very organized.

HOW WILL THIS AFFECT MY FAMILY? Going solo means that you get to make your own hours--sometimes all 24 of them. Nothing dispels the romance of being the captain like a neglected spouse and kids you don't recognize. Are you spending your retirement funds for this dream? Can your family survive without your paycheck until you turn a profit? --E.M.

How do I find the right franchise?

Richard Lalley, 48 Winnetka, Ill. -- Entrepreneur

HIS STORY Despite 25 years of experience, Rich Lalley couldn't land a new job after his position as vice president of advertising at Discover Financial Services was eliminated. So he decided to run his own business. As a first-time entrepreneur, Lalley preferred an existing business. Ultimately, he chose a franchise for its higher survival rate.

THE ADVICE For tips on how to find and analyze a franchise, start at the franchise-broker websites FranNet.com and FranChoice.com. Using a broker is how Lalley found his franchise, Designs of the Interior, a home furnishings showroom. He expects to spend more than $300,000 to launch it. Lalley also found that he needed a lawyer who specializes in Illinois franchises. Another tip: Ask existing franchise owners (listed in the offering materials) whether the advertised start-up costs were realistic and how long it took to break even. --J.C.

Book a vacation

WHEN IS THE BUSY SEASON? If you can travel during the off-peak or shoulder seasons, you'll pay less and fight fewer crowds. Know your trade-offs. Is off-peak cheaper because school is in session--or because it's rainy all the time?

CAN I TRAVEL ANOTHER TIME? You'll often find better prices if you can be flexible about dates and times. Early morning and midweek flights, when planes are least crowded, are cheapest. Rental-car and hotel-room rates generally drop on weekends, when business travelers go home.

CAN YOU UPGRADE ME? People often fail to ask about upgrades, which can make a good vacation a whole lot better. You can typically trade up to a better hotel room for $20 to $50. Rental-car agencies will give you a bigger car at no extra charge if they don't have one available in the class you reserved. Most cruises offer upgrades on flights, up to 60% off first-class seats.

CAN YOU DO BETTER? There are a myriad of discounts and promotional rates, from specials for AAA members to one-time deals a resort may offer during renovations. But most businesses won't mention them unless you ask.

WHAT ELSE DOES THE PRICE INCLUDE? Don't leave goodies on the table. Most hotels and tour companies include freebies that you might not be aware of, such as airport and around-town shuttles, concierges who make restaurant reservations and free snorkeling gear. --DONNA ROSATO

Choose a car

SHOULD I BUY NEW OR USED? A well-maintained used car is always a better buy because new cars depreciate so mercilessly. But new cars do grant you the latest styles, features, safety equipment and emissions performance, along with a typically longer warranty.

WHAT'S THE BEST MODEL FOR ME? First, be brutally honest about your budget and needs. Read up on features and stay out of dealerships until you have a short list of contenders in the class you want. Test-drive only those models, and then trust your research and driving impressions. Don't allow second-guessing by salespeople. Too many buyers find their perfect car only to be talked into something else.

HOW DO I GET THE BEST PRICE? Go online to learn what dealers pay for models--try Edmunds.com or Kelley Blue Book (kbb.com)--and use that info to solicit multiple bids. Don't assume the big rebate is the best deal; many top-value cars offer little in incentives.

HAVE I PAID OFF MY OLD CAR? If you still owe money on your old car, swallow hard and pay off your loan first. Rolling leftover debt into a new car loan is the same pit that traps credit-card abusers. If you truly can't wait, at least trade down to a used or cheaper model.

WHAT'S MY REAL BOTTOM LINE? If you answered your monthly payment, you're wrong. Ever-longer loans are letting buyers spend more and keep their payments the same. Instead, pay attention to all your long-term costs--the interest on your loan, resale value, repairs--to maximize value. --LAWRENCE ULRICH

Should I buy or lease?

Judith Moline, 63 -- Aventura, Fla. -- Car shopper

HER STORY Judith Moline likes new cars, and not just for the smell. "I change cars every three or four years," she says, "because I don't want to be on the highway and find myself stuck." Moline commutes 40 miles a day to her job as a bookkeeper in downtown Miami, and she visits family in Fort Myers and Daytona Beach--drives of up to four hours each way--several times a year. A fan of Lincoln Town Cars, Moline most recently spent $36,000--in cash--for one and would have to pay some $40,000 for a new model now.

THE ADVICE Buying costs less in the long term, but leasing can make sense if you regularly demand a new car. Once again, some brands are artificially lowering lease payments to lure customers. As long as you can stay within the mileage restrictions, you'll drive more car for less per month than you'd pay to own, and never worry about resale. That's why Moline's financial planner, Andrew Rosenberg of Fort Lauderdale, persuaded her to lease (and invest her cash). Just remember that when the lease is up, you don't own anything. --J.C. AND L.U.