If you're like most Americans, you probably didn't make a new year's resolution to get started with long-term financial planning.
A staggering 84 percent of respondents to a New Year's Resolution Survey from Allianz Life Insurance said that financial planning was not among their 2014 resolutions at all—the highest percentage ever to reveal that in the survey's history.
What held them back? Well, 30 percent said they don't believe they make enough money to "worry" about financial planning. That's bizarre. Shouldn't having less money increase your need to manage what you have effectively?
(Read more: Stocks still tops, advisor survey finds)
Regardless of your situation, I hope you'll engage in the planning process this year—and the sooner you get started, the better.
The advice my firm is giving our clients in 2014 features many themes often repeated over our 25-year history, along with some new information reflecting what's happening now. Here are eight key elements:
- Maintain a well-diversified investment portfolio. Although the economy is improving, the stock market is at an all-time high and corporate profits are setting records, much weakness and uncertainty remain. Therefore, this is no time to make big bets. For that reason, we continue to advocate extensive global diversification. Stocks should include U.S. and foreign companies of all sorts: large-cap, mid-cap and small-cap; growth and value; and emerging markets. Your portfolio should also include real estate (diversified by type and geography) and bonds (government and corporate, U.S. and foreign—more on duration later), as well as natural resources, including precious metals, oil and gas. One of the most cost-effective ways to accomplish this is through exchange traded funds.
- Rebalance the portfolio as needed. Most people never rebalance their portfolios, which can cause their risks to rise and profits to fall. And many who do rebalance do so on a calendar basis. We eschew that method as inefficient—who's to say you need to issue buys/sells/trades just because it's June 30? That's why we rebalance our clients' accounts on a percentage basis. When a portfolio drifts beyond preset limits, we rebalance—as often or as seldom as necessary. This requires a daily review of each portfolio, a chore our clients happily delegate to us. But you can do it, too, if you are willing to take the time.
(Read more: Recovering economy may rein in bull market)
- Avoid long-term bonds. The strengthening economy will eventually cause the Federal Reserve to raise interest rates—and when that happens, bond prices will fall. For that reason, we are placing almost all of our clients' bond positions in short- and intermediate-duration bond funds. This will help reduce interest-rate risk while maintaining diversification.
- Contribute the maximum to your retirement plan at work. If you can't put in the full amount now, increase your contribution each year until you can. And commit to placing half of future pay raises in the plan.
- Avoid Initial Public Offerings. IPOs got a lot of attention last year, largely thanks to Twitter, but it seems Facebook's IPO has been forgotten. Instead of trying to grab the latest hot stock, remember that your diversified ETFs probably will obtain the stock for you—meaning, you don't have to try to succeed by "getting rich quick."
(Read more: Soaring stocks, D.C. gridlock worry wonks)
- Review your estate plan. Look at your will, trust documents, powers of attorney and beneficiaries on your retirement accounts, annuities and life insurance policies. People may have died or been born since you signed the documents, or you might not still feel as you once did about heirs. Reading the documents will give you the opportunity to update them.
- Save for college with 529 plans. They let your money grow tax-free and are flexible enough to cover all expenses—including tuition, room and board and books—at any accredited college, public or private, anywhere.
- And here's what not to do. We do not recommend variable life insurance policies, nontraded real estate investment trusts, hedge funds, "alternative" funds, master limited partnerships investing in oil and gas, fixed or equity-indexed annuities, actively managed retail mutual funds, inverse funds, commodities trading, derivatives, short-selling, buying on margin, lottery tickets or viatical settlements (purchases of life insurance policies from the terminally ill).
If you don't have a comprehensive long-term financial plan for yourself and your family, get one from an independent, objective, fee-based financial planner. I can't think of a better new year's resolution.
— By Ric Edelman, Special to CNBC.com. Ric Edelman, a registered investment advisor, is chairman and CEO of Edelman Financial Services and CEO, president and a director of the Edelman Financial Group.