Financial lessons for the new year

By Tim Suffish CFA, CPA Vice President, St. Germain Investments As I write this column there are roughly two weeks left in the year. I don't know about you, but 2008 can't come to an end soon enough for me! As a year of extremes is coming to a close in dramatic fashion, I'd like to focus on a few of the lessons learned in 2008, and some timely action that could save you money. Lesson #1: Do your due diligence ! We've all been reminded during the past few weeks that you must do your due diligence when selecting service providers; be it your doctor, dentist, investment advisor or insurance agent. Visit the office, get comfortable with the provider's strategy and philosophy, talk to the decision makers. These are all common sense ways to protect yourself that were surprisingly not done in the Bernard Madoff "ponzi" case. The news will continue to trickle out over the coming months, but one recent revelation that really caught my attention was the admission that, in many cases, clients were told that they would never be able to meet with the man managing their hard-earned fortune. They couldn't visit the office, and probably couldn't get a return phone call either. Despite this treatment, many clamored to get an account with Madoff. His cult of personality was strong, and his resume impressive, but regardless of this, secretive behavior should not be trusted. So, get to know your "trusted" service providers, and make them earn your trust! At the very least, you should expect access, information, and integrity, especially from your financial advisors. Lesson #2: when circumstances change, you change Belt-tightening is something that none of us like to do, but at times like this, when asset prices have suffered a decline, reducing the "draw" from your accounts is a way to prevent selling at an inopportune time. You'll see this automatically happen in your retirement accounts if you normally take the "required minimum distribution," or RMD. As this distribution is based on year-end market values, your RMD for 2009 will probably be lower than for 2008, reducing the need to sell when prices are down. Additional good news is potentially on the way as a proposal is being debated in Congress right now to eliminate the RMD for 2009. Act now: rates are low & the Federal Reserve wants you to refinance ! Rates on treasury bonds have declined dramatically over the past couple of months due to the ongoing "credit crisis," and overt language and action out of the Federal Reserve to lower rates at all maturity ranges. The Fed's goal is to drive rates to a level that is unattractive, thereby encouraging risk-taking in stocks, corporate bonds and real estate. This move is dramatic and is likely to get some traction, as they have so far succeeded in bringing rates down to very low levels. With rates down on treasuries, other rates, such as home mortgages, are also down. A quick search online today found a 30-year mortgage at 4.75 percent, down from 6.5 percent just two months ago. I think that rates are likely to go a little lower still, but they are at such low levels right now that refinancing is a surefire way for millions of homeowners to lower their monthly budget. This really is an opportunity that you should not miss ! Have a Happy New Year! Column provided to PRIME by: St. Germain Investment Management; 1500 Main Street, Springfield, MA; Phone is 413-733-5111 or 1-800443-7624; web site: www.stgermaininvestments.com