Financial Resolutions for 2006

Resolve to get a handle on your investments this year By Michael Matty, CFA, CFP Chief Investment Officer St. Germain Investment Management Special to PRIME So the New Year has arrived. In many cases, this means New Year's resolutions, which all too often fail almost immediately. Why? They are often health related (losing weight, exercising more, quitting smoking, etc.), and therefore require action by you on a continual basis. But if one of your New Year's resolutions was to get your finances in order in 2006, the good news is that very often, you need to do very little ... in fact, your financial advisor can likely do almost all of the work for you. So getting organized in 2006 is a resolution that is easy to keep! Part of the work's already done! So how do I get organized? Fortuitously, this is an easy time of year to do it. All your year-end financial statements are starting to pile up. You likely keep them all together because you will need them for tax preparation. Getting organized is as simple as making photocopies of these statements and bringing them in to your financial advisor. Your advisor can make an assessment of what you currently own, what can and should be consolidated, and then deploy the money in a way that makes sense for you. This is good for you, as you don't need to figure out how to go about moving these assets around ... let your advisor worry about it! Tips on consolidating What kinds of accounts can I consolidate? The miscellaneous IRAs that you have accumulated over the years can probably be combined with that modest 401(k) that you left at your previous employer. The oddball collection of mutual funds that you acquired over the years can be sold, and the proceeds combined into a single account. The stock that you inherited but never really kept track of can be sold or folded in as part of a new, properly diversified account. Regulations and tax impact will dictate much of this process, but it is really very little work for you. You'll get less mail! What are the advantages of consolidation? First, there is a value associated with some simplification of your life. With some consolidation, you will be able to cut down on the incoming monthly statements, as well as have fewer documents to gather for your taxes in future years. In addition, if something were to happen to you, it makes it that much easier for your spouse and other heirs to get a grip on your assets. Simplification can be very helpful, as long as it fits your situation. You'll know what you own Another reason to consolidate is that it is hard to get a handle on your overall strategy with widely scattered assets. You probably dabbled in "a little of this" when you were younger, bought "a little of that" for the kids' college fund, invested in some Internet stocks in the 90s, etc. You just collected assets, with no real overall strategy. If it's hard to figure out your current holdings, you may not even be able to tell whether or not they are working for you. And how will you achieve your long-term goals if you don't even know where you are currently? You might cut taxes for 06 Can consolidation save me money on my taxes next year? It's quite possible. Why? Because if all your taxable assets can be grouped in one place, it makes it far easier to do some year-end tax management (harvesting capital gain or taking some prudent losses to offset gains). While this is possible to do with your money in a variety of places, the extra complications involved make it much less likely that you will do so which WILL cost you extra at tax time. So this year, go with a New Year's resolution you can stick with by making somebody ELSE do the hard work. You do very little of the work, but reap most of the benefits. Column provided to PRIME by: St. Germain Investment management; 1500 Main Street, Springfield, MA. Phone is 413-733-5111 or 1-800-443-7624. web site: