After you have computed your net worth, established a budget, outlined your debts, and devised a plan to conquer them, it's time to sit down with a financial advisor. This professional can help you better understand your true situation, refine your goals, and advise you how to best invest whatever money you do have. Also, if you are ready to purchase a home, an hour spent with a financial advisor can be very beneficial.

Get all your financial ducks in a row, and have pointed, prepared questions. To stay focused on the information, you need to become increasingly savvy about investments, the house you want to buy, or your budgeting needs.

When and Why You Need to Hire a Financial Advisor

If you've accumulated somewhere close to $100,000, it can be a good idea to consult with a financial advisor. A financial advisor will look at the investments you've already made, the level of risk you can and want to take, and the return you require. He or she will consider your future wants and needs and what you might need to change to be able to afford them.

You can get free or lower-cost financial advice through discount brokers like Charles Schwab, but if you have enough money saved — usually $250,000 or more — and are worried about managing taxes efficiently and setting up trusts for your children or taking other complex financial steps, consider using a fee-only financial advisor.

If you've just started accumulating savings, it's best to focus on the first steps in the process: Save more money and invest it.

Finding the Right Broker or Financial Advisor

A financial advisor is a professional trained to create a financial plan that will maximize your chances of being able to afford the things you want in life. He or she will usually create a written financial plan for you that you can later consult to check your progress. Ask around among friends and coworkers, call your Better Business Bureau, or ask your banker for references.

Once you've selected three potential advisors, ask them if they are willing to meet with you briefly to see if they are the right fit for you. You may be able to assess this over the telephone, but it's always helpful to see the person before you make a final decision.

Know Who Is Paying Them

Many financial advisors are paid on commission. They receive large payments for selling load mutual funds, annuities, or other investments to you. There is an obvious conflict of interest when you deal with financial advisors who profit by generating activity in your portfolio that may leave you less well off financially.

If you have enough money, use a fee-only financial advisor, who may have a professional designation like CFP or CFA after their name. Fee-only financial advisors are paid based on the amount of assets they manage, so the more money they make for you, the better off they are. As a result, fee-only advisors are more likely to work for your benefit when considering investments.

Know Where Their Loyalties Lie

You definitely want to know how your prospective financial advisor makes her money. If she is compensated based on product sales, it's likely that you will be sold those products, regardless of whether there are better options for you. If you firmly believe that your advisor won't do the wrong thing — if, say, she's a close friend you trust with your life — this may not be an issue.

Go In Fully Prepared

If you are going to see a financial advisor, put together a financial plan that you think could work. Also consider the risk you are willing to take and all the large expenses that you need to make over your lifetime (paying for your children's education, buying a home, taking care of your parents in their old age, and so on). Your advisor will appreciate that you are prepared, especially if you arrive with an open mind, ready to listen to and take the advisor's suggestions.

Determine Your Risk Quotient

Be ready to tell the advisor what level of risks you are willing to take. Keep in mind that investing involves measured risks you must take to achieve your financial goals. It usually takes some time to get used to the volatility in your portfolio, but without taking risks you won't achieve much in the way of return.

How to Evaluate a Financial Advisor

The National Association of Personal Financial Advisors provides a financial advisor checklist that will help you determine whether you've found the right advisor for your needs, as follows:

• Did she spend at least two hours at your initial meeting getting to know you, your financial situation, your goals, and your concerns?

• Did she fully answer your questions?

• Does she represent others within your income bracket range?

• Did she help you develop a strategy for improving your financial situation, establishing savings and retirement funds, and developing wealth?

• Did she provide you with supplemental materials that addressed your concerns or helped you learn?

• Did she fully explain any costs involved in the consultation or follow-up?

• Were her costs reasonable?

• Does she have a solid reputation?

• Did she help you create a workable strategy?