So, let's say you would still prefer to pay for outside help. Whose door are you going to go knocking on when it comes time to hire? Start by asking around.

"Referrals are just great," says McMillan, who suggests asking money-savvy friends who they use. She's right. If a friend likes her financial advisor and sings his praises, that usually says something about his skill. Or try checking out Fpsccanada.org, the Financial Planners Standards Council's database of planners across Canada, or Advocis, Canada's largest association of financial advisors. But even if your best friend gives you the name of her financial planner, don't treat it as gospel. As Trista's story illustrates, a good word isn't always a reliable way to determine a planner's skill or ethics.

So once you have a planner on the phone, ask questions before agreeing to meet to make sure a longer meeting would be worth your time. Is the planner licensed? What's her investment philosophy? Does she work mainly with younger people—"money accumulators" in biz speak—or retirees?

Shop around until you're comfortable with the answers. McMillan recommends interviewing at least three people: one from the bank, one from an insurance company, and an independent. You might want to try a brokerage too. Then go with your gut.

"Do your homework," she says. "This is a long, intimate relationship."

This is the golden rule of personal finance (and a great way to build a long-term nest egg). Before you pay your bills, buy groceries, or anything else, set aside a portion of your income and save it. The first bill you pay each month should be going to you—or at least to your brokerage, mutual fund, or retirement accounts. Have it deducted straight from your paycheque and you won't notice it's missing—or be tempted to spend it. Many people swear that by saving 10 percent of their earnings, they're able to generate tremendous wealth over the long term.

Nearly all of us have heard the advice: don't put all of your eggs in one basket. The same concept—diversification—is used in investing and it is one of the most powerful investment strategies you're going to come across. Financial experts call it a tool for "managing risk" because by spreading out your money in many uncorrelated investments, chances are that most of your investments will remain up or holding steady if one or two take a nosedive.

It's not enough to simply invest in cola, drilling, and IT company stock, even if the businesses don't seem to have much in common. Instead, to decrease the odds that your investments get bashed, you'll want to put your money in different classes of investments such as bonds, stocks, real estate, and precious metals. You can further diversify your investments by hitting both the domestic and international markets.

If you're already making regular, fixed contributions to your investments you're taking advantage of the power of dollar-cost averaging. Here's how it works: when prices are high, your money buys fewer shares, and when prices are low, your money buys more. The beauty is that over time, you will probably wind up with more shares at lower prices than if you bought them all at once. It reduces your average share cost and spreads your investment risk over time. Just remember, in order for the strategy to be effective, you must continue to purchase shares when the market goes up and when it goes down.

Mutual fund companies are required to give investors information about what they're actually sinking their money into. Where will you find it? The prospectus. Before it lands at your feet with a resounding thud, this legal document is first reviewed and audited by securities regulators. Don't worry if much of what's written makes your eyes cross, though. The most valuable information—costs, performance histories, and objectives—is summarized in its first few pages. That's what you want to understand. The rest is mainly made up of monotonous legal ramblings.

Mutual funds also send out annual reports that shed light on whether the fund is doing well, or poorly. It also provides more details on the specific investments it holds. This is good information to know, not only because you'll be curious about how much money you've gained or lost, but if, for example, you prefer to stay away from "sinful stock" and the fund now invests in tobacco or weapons, you can decide to hold tight or bail out.

Now we finally come to the cornerstone rule of smart saving: save early and often.

Let's consider for a moment what would happen if you started stashing away just a few dollars every week now (brown bag your lunch one day, skip the latte, and invest the savings), instead of waiting until retirement looms. You'll actually need to save less money overall. What's more, your nest egg will be bigger. By saving now, you're taking advantage of the magic of compounding.

Here's an example:

Now consider this second scenario:

The lesson:

No one is going to deny that having a million dollars kicking around in an RRIF or annuity upon retirement would be great to add to our Old Age Security and Canada/Quebec Pension Plan benefits. Yet for most Canadians, particularly women who are out of the workforce longer to take care of children, it's tough to build that kind of wealth. No wonder Statistics Canada reveals only one in six people with a pre-retirement income of $40,000 or more saves as much money as the experts recommend.

The good news is that money conventions should be treated as guidelines rather than fixed rules. How much do you need to retire on? That depends on your lifestyle. If you're a high roller, you'll need more money. If you're frugal, you'll require less. Either way, two simple rules will help keep you on track: Get out of debt. Save whatever you can.

If you tingle at the mere idea of a day at the mall, rethink slapping down your plastic so often now. Aim for a target of zero-debt by retirement. Think about it: if you're shelling out $10,000 in credit card debt each year, paying that off automatically nets you that same 10 grand in principal and a guaranteed after-tax rate of return equal to your debt's interest, say, 22 percent.

What if you're trying to decide between an RRSP or paying off the house early? Maybe you can do both. That's right. Take your RRSP refund and pay down the mortgage. By the time you retire, you'll have a free house to live in and savings too.

Furthermore, by the time you reach your mid-40s or 50s, there's a chance many of your major expenses will be gone, such as child care, and your paycheque will be larger. In other words, you'll be in a much better position to invest that $2,000 each month for 15 years than you were in your mid-20s.

This is the essential strategy for investment newbies and the chronically time-challenged. The so-called couch potato investor buys a selection of index funds, which are a type of mutual fund that tracks the stock index (think the Canadian S&P/TSX Composite Index), and exchange-traded funds (ETFs), which are securities that trade on the stock market. Because they track the index, they contain a portion of all the stocks in that index.

One advantage is their low cost: both index funds and ETFs typically have fees of less than one percent of your purchase. By way of comparison, mutual fund fees, called management expense ratios, can go as high as 2.5 percent.

You might be thinking, these funds hold a portion of every single security on the market? You'd need a computer to track all of that. You're right. That's exactly what happens, and the upshot of all of this is that because that computer doesn't have to be paid like a person who manages the fund, those cost savings are passed down to you.

Another plus is the minimal time commitment that comes with investing this way. Fifteen or 20 minutes a year is often all it takes to keep on top of these investments. Basically, you're just along for the ride.

And the best news yet? Historically, index funds and ETFs have been shown to beat out actively traded funds over time because they don't charge high management fees. Many financial institutions offer an index mutual fund with low fees and low investment limits through a discount broker, which means you don't have to save up to invest an initial sum. Even $100 or $500 is enough to get you in the door. There are two families of ETFs to choose from in Canada: iShares and Claymore Securities.

You can find out more about how to be a couch potato investor by visiting Canadianbusiness.com.

Want to get more action than a typical couch potato? Try mutual funds for a quick road to a diversified portfolio. A mutual fund is a professionally managed investment that pools money from many investors and invests it in anything from stocks to bonds and from short-term money market instruments to other securities. The mutual fund's manager trades the pooled money regularly. If the fund does well, all of the investors are in the money. If it doesn't do well, however, they lose. Net proceeds or losses are typically distributed to investors annually.

So what do you need to consider before investing in a mutual fund? Cost, for one. The charges you pay to buy or sell a fund can have a huge impact on your rate of return. All fees are not created equal. Loads, or up-front commissions paid to brokers and financial advisors who sell mutual funds, take a bite out of your earnings too. Put it this way, if your mutual fund paid out 10 percent last year but you paid four percent in sales loads, that fabulous investment starts to seem ho-hum.

The only way to be sure you are getting a no-load fund, or at least a smaller load fund, is to look at the prospectus for the fund. Without all of the marketing hype, you'll be able to see quite clearly the fees you're actually paying. Research funds and track performance at Canadianbusiness.com.

Now for the risky option: stocks. Do well with these investments and you could be looking at a big, fat return on your investment. Do poorly, like those crying into their Bay Street bar beer glasses during recessions, and you could lose it all. So how can you make sure you're a winner? Well, there are no guarantees, but look for stocks offered by companies with low debt, high cash levels, and seasoned management teams. If you're adverse to risk, consider blue chip stocks, such as those of banks and utilities. They tend to pay dividends and have stable returns even during market downturns.

More of a risk taker? Check out resource- and commodities-based companies like those in oil and gas. While they tend to get hit the hardest when the economy tanks, they also tend to recover the most.

Experts suggest that investing in about 20 stocks across five sectors will give you a diversified portfolio (meaning one that is made up of companies that vary in size, sector, and geography). Investing in stocks requires a commitment of several hours a week, so you can stay abreast of company news and analysts' reports that will help you decide if you're going to stay the course or sell. Knowing when to sell is the toughest call of all, so you might want to put a stop-loss order on your stocks, which means if they drop below a certain price, your online broker program will automatically sell.

We'll be examining RRSPs at greater length in the following chapter, but because Registered Retirement Savings Plans offer such great benefits, we'll quickly mention them here too.

An RRSP is not actually an investment, but a way to register your investments. Think of an RRSP as an umbrella sheltering your hard-earned money from taxes. As long as these stocks, bonds, GICs, or mutual funds are registered as an RRSP, they won't get hit. At least not until you turn 71 and are required by law to terminate your RRSPs and convert them into some form of retirement income. But at that point, you might be in a lower tax bracket anyway.

Nearly any investment you can think of is deemed RRSP material.

So how many of your investment dollars can go towards an RRSP? The government's deduction limit is generally calculated as 18 percent of a person's earned income from the previous tax year minus any "pension adjustment," up to a specified maximum, plus any unused room carried forward. This specified maximum keeps rising.

It's important to remember that even though an RRSP is usually intended for retirement, the funds can also be used to take advantage of the federal government's Home Buyers' Plan, a program that allows you to borrow up to $25,000 tax-free and interest-free from your RRSP to put toward the purchase of your first home.

Quick! If someone gave you $5,000 would you:

Decisions, decisions. With so many options since January 1, 2009, when the government launched the new Tax-Free Savings Account, what should we do with our extra money? The TFSA is a flexible investment account that allows you to sock away money—up to $5,000 per year—without paying tax on any growth. As long as you're 18 and have a Social Insurance Number, you can open one of these accounts at banks or other financial institutions.

Unlike an RRSP, it's not tax-deductible so it doesn't actually bring down the amount of tax you pay each year, but—here's the kicker—you can withdraw your money at any time and you don't pay tax on those withdrawals. You also get to keep that balance available for later. Conversely, if you take money out of an RRSP, you get dinged big time because it's considered taxable income.

But its greatest strength may also be the TFSA's most onerous impediment to saving wisely. Because a TFSA gives us access to our money whenever we need it without penalty, it could be a little too easy to deplete those funds if, say, that spiffy spring jacket in your favourite boutique window beckons. But not many people would dip into RRSP money to buy something so frivolous. The penalties alone could cost more than the coat itself.

Read the papers and you'll see that financial experts say there's no real difference in earnings potential between an RRSP and TFSA, so maybe deciding between the two has to come down to self-restraint. If you're a spender, or are in a high tax bracket and could use the immediate tax rebate, stick with an RRSP, but if you're discipline incarnate, opt for the flexibility of a TFSA. Or split the difference and use both.

Spenders and savers alike could do worse than treating their TFSA like an RRSP anyway. Some planners recommend thinking of the TFSA in terms of long-term retirement savings, not merely as a means to save up for a trip to Florida next year. RRSP and pension funds can go to funding everyday living expenses when you retire, but that $60,000 saved up in the tax-free account sure could come in handy if the refrigerator blows or the leaky roof needs to be replaced when you're 72.