8 ways to change your financial life: these basic but powerful strategies can boost your net worth.

These are tough times for the sort of scrimping and saving required to boost net worth. Wealth building during the '90s stock market gave way to a cruel bear run just ending in 2003. And some experts say the situation might degenerate again after 2004 if the real estate rocket runs out of fuel.

Taking note of such cautionary signs, however, doesn't mean having to embrace a doom-and-gloom financial outlook. In fact, there are some basic strategies you can employ to bolster your finances. Start, of course, by making a commitment to wealth building by adopting the BLACK ENTERPRISE Declaration of Financial Empowerment, displayed in every issue of this magazine.

In this article, we'll show you eight ways to develop sound budgeting habits to free up cash for investments, and we'll give you tips on how to invest at minimal risk and maximum returns. Read on to find out how you can change your financial life.

1 budget in real time

Most of us are locked in a losing battle between wealth building and bill paying. But sound budgeting is the linchpin of any attempt to accumulate wealth. Beyond budgeting, there is no way to get a handle on how much money you're bringing in and how much you're sending out. In fact, budgeting is a key plank of BE's DOFE, set out in Principle No. 4: to engage in sound budget, credit, and tax management practices.

For most of us in this era of PCs and the Internet, the job requires nothing more than hopping on a computer with Quicken or MS Money. Unfortunately, says Pasadena, California-based financial planner Percy Bolton, what technology giveth, it can also take away. While technology helps make the development of a family budget hassle-free, it often sabotages efforts to live frugally. Says Bolton: "The fact is most couples who tap the ATM or make debit or credit card purchases on the fly find that their budget goes out the window in no time."

As she prepares for retirement in the next decade, Bettye Haysbert, 60, an educational consultant who lives outside of San Francisco, tracks her expenditures by logging them regularly online. "It is important to do so," she says. "I have to keep up with what goes out or I won't be able to stick to my investing plan."

2 slash debt now

You pay enough for goods and services, right? So dishing out two or three times the retail price for an item seems exorbitant.

Bolton's advice on how to gain control of your credit card purchases is simple. He suggests you pay the minimum on all charge cards except for the one with the highest, interest rate. Try to double or triple the monthly payment on that card. Once that debt is out of the way, attack the card with the next highest rate, again making minimum payments on charge cards with lower fees.

3 adopt a capital preservation lifestyle

The simplest and most basic wealth-building tenet is probably also the most difficult. We all love bright, shiny objects. The bling-bling and the automobiles all look good and they do wonders for our egos. But they also drain a lot of cash from our bank accounts. Money manager William Thomason has noticed as much. "The simple fact is that the rich often make conscious decisions to cut back on what can often seem like frivolities," he notes. "That might mean traveling coach, or buying a car off lease, or even dressing down, but at the end of the day, that is what preserves capital."

We are not here to preach. Of course, we all know that a dinner of steak, potatoes, and vegetables might run $30 at our favorite restaurant, yet amount to no more than a few dollars if prepared at home. But having spared you that lecture, we will note another fact concerning the cost of a big ticket item such as a car. (You might want to verify this fact for yourselves.) Say that a new 2004 sedan retails for $21.000. Purchase the car off of a two-year lease, and it will run you $14,000. The difference? "Basically, you've let someone else take the hit for the car's heavy depreciation," says Thomason.

4 to thine own self be true

There is always the temptation to follow the lead of your friends, neighbors, or idols. Yet, for all the pressure to follow others' paths, sometimes you just have to face the fact that your circumstances differ from those of the crowd.

Financial planner Bolton says that sort of clear-sightedness helps you not only focus on your goals but also produces significant cash flow. Take the question of whether to get a 30- or 15-year mortgage. Bolton says most of his clients have a knee-jerk reaction to the matter: They instinctively opt for the 30-year option. Closer scrutiny, however, often leads to a change of mind. For one thing, Bolton points out, encumbering oneself with a 30-year mortgage does not make sense if you intend to stay in your home for only 15 years. As of mid-March 2004, the 30-year mortgage carried a 5.1% interest rate while the 15-year one was only 4.4%. Over the long haul, that difference can amount to as much as hundreds of thousands of dollars in extra payments on your loan.

5 develop the habit of investing

Tackling debt might strap your budget for a while, but that doesn't mean you should forget to save or invest during this period. In fact, financial planners say it's a good idea to start investing a little something--say, $25 or $50--every month. Such investing helps you establish the habit of setting aside a portion of your income. Then, over time, as your credit card, car note, or student loan balances shrink, it will be easier to allot more money toward your longer-term goals. "There are patterns to wealth accumulation," says Thomason. "The sooner you get the knack of it, the sooner you benefit."

6 know your fees and taxes

Admit it. We all get hypnotized by the big numbers. The things most investors focus on first are likely to be the stock market's historical averages, a company's gains, a bond's yield, or a mutual fund's track record. Unfortunately, these mesmerizing numbers are just part of the picture. The fact remains that costs associated with buying stock or holding a mutual fund come out of your pocket and may serve to diminish the impressive gains that caught your eye in the first place.

Mutual funds, for instance, take a slice of your invested capital every year in the form of expenses and fees. Let's take a look at a fund with a 2% expense ratio. If the holding provided an average 10% annual total return, after a decade, as a result of management fees, the stated return of $5,187 would shrink to $4,318. So, while it's inevitable that you will pay to have a money manager guide your investing, the more you dole out, the longer it may take to attain your goals.

Thomason says taxes on such gains are worth your attention as well--especially if you hold stocks or bonds in an ordinary brokerage account that isn't sheltered from annual capital gains taxes. He suggests investigating tax-free alternatives such as municipal bonds and municipal bond funds as a way to avoid sharing too much with Uncle Sam.

7 prioritize your goals

In the not-too-distant past, financial planning took a one-size fits-all approach. Money set aside for retirement would be divided between a block of stocks or equity mutual funds and another block of bonds or bond funds. Money invested for college tuition would get the same treatment, as would cash earmarked for a new home.

The days of macro investing plans are gone, says Bolton. "What we do now is sit down with clients and ask them to list goals," he explains. Next, Bolton directs his clients to order their goals by importance and then rank them by timetable. Each target gets its own portfolio mix according to its urgency. The sooner a goal must be met, says Bolton, the more he is inclined to protect savings set aside for it. Under that scenario, he opts for bonds or, if time permits, stocks that offer high dividend yields. The longer the time horizon involved, the more aggressive Bolton says investors can afford to be. In that case, he might advise clients to slot more money into the stock market to help snare long-term gains.

For Joyce Hurley, 53, applying this strategy meant establishing financial priorities. A paralegal in Los Angeles, Hurley looks to have $130,000 set aside by the time her son, Jonathan, heads off to college in seven years. With her eye also on retirement, Hurley has developed a somewhat aggressive portfolio, with a sizeable weighting in stocks. "I sat down with my financial planner and set that as a goal with some urgency," she explains.

8 trust a professional to do the heavy lifting

The myriad responsibilities and concerns of day-to-day living make keeping an eye on investments a tricky matter. Hiring a financial planner is the best way to manage it all. In most cases, individuals don't have the time to do it themselves. "There's no better way to stay on top of matters," says Percy Bolton. "That way you can turn your attention to more pressing issues." And ultimately secure your financial future.

RELATED ARTICLE: Protect what you invest.

When it comes to safeguarding what you've invested--the strategy financial professionals have dubbed "capital preservation"--keep one thing in mind: Guarantees of getting your money back come at a price. In some cases, getting your principal back in full will clip your expected return; in others, your sacrifice will be the quick-and-easy access to your money.

Given these facts, you may need to readjust expectations. If you opt for a liquid, easy-to-cash-in solution such as a money market mutual fund, you can expect a low rate of interest in return--less than 1% according to iMoneyNet, a Website that tracks the market. Reach for more income or yield and a safe principal, and you will have to tie your money up for some time. In the case of a 10-year U.S. Treasury bond, 4% interest per annum requires a decade-long commitment.

Financial planner Percy Bolton says the more time you have, or the less critical your goal, the more risk you can afford to take on. If you're interested in investing in stocks, you might opt for companies paying dividends. Dividends produce regular income because companies that can afford to pay dividends typically have steadier profits. The price of their shares, meanwhile, tends to fluctuate less on the open market.

An even less volatile choice might be a large-cap value equity mutual fund, the type of fund with a large spread of stocks, many of which will pay shareholders--like your fund--dividends. A bond mutual fund is another option, but beware. Unlike bonds, bond funds do not promise you your entire principal and have no set return over time. Also, bond funds will slide up and down in value with interest rules. With many experts predicting a rise in rates, sapping bond values, the current environment might make bond funds a bit tricky over the next year or two.