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Wealth Management

New Year’s Resolutions and Your Money

by Robin S. Davis, CFP

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New Year’s Resolutions and Your Money
How to make 2009 a better year than 2008!

It's that time of year again.  Time to bring in the New Year with champagne and caviar.  Time to restart your diet since the holiday feasting is over.  And, time to take a fresh look at your financial situation and make a few New Year's resolutions on how you are going to improve it.  This time may feel a little different, however, because we are coming off of one of the hardest hit bear markets, in one year, in history.   This should be a tough reminder that you shouldn't get overly confident when markets are going up; that you should make sure your portfolio is diversified using creative strategies that are affected differently in bull and/or bear markets; and, you should be working closely with a competent, ethical financial advisor who you trust will advise you when to make changes in your portfolio as markets change.  I have consistently said that the old "buy-and-hold" strategy is out the window.  I refer to that type of investing as "buy-and-hope", hope you are holding the right things.

The Dow Jones Industrial Average (DJIA) was born on May 26, 1896 as Charles Dow introduced the first index composed entirely of industrial shares consisting of 12 companies.  It increased to 20 companies in 1916 and 30 in 1928.  Today, the DJIA is still an index of 30 "blue chip" domestic stocks.   Does your current portfolio vaguely resemble the Dow Jones?  For example, are you holding AT&T (T), Exxon (XOM), General Electric (GE), General Motors (GM) and Citigroup (C)?  Have you held some of these stocks for a long time and hesitate to sell them because you do not want to pay the capital gains taxes that may be due?  Did you have stop losses in place (an order to sell a stock when it reaches a predetermined price on the downside) in order to lessen losses affected by economic changes?  Having an emotional attachment to stocks (or any investment) you have held for a long time, paying taxes, and selling at a certain price (because you know it will go back up one day), are all emotion-driven decisions.  These are some of the reasons there has never been a more important time to have your financial affairs analyzed, torn apart, and put back together to make sure you are properly positioned for the next bull market, on a non-emotional basis.  Therefore, one of your New Year's resolutions should be, "I will not make emotional decisions regarding my finances for 2009.  I will get professional help to help me determine what facts are important in planning my financial future."  

Speaking of facts, were you aware of the fact that only 23% of affluent households have updated estate planning documents?  You have worked hard all your life to build wealth and probably hope to have most of it pass to certain heirs at a certain time in their lives with the least tax liability.  You have heard me say many times that the government offers many ways you can avoid paying high income and estate taxes, if you don't use them, they don't care.  The problem with the IRS is that as soon as you understand how their rules can save you taxes, they change the rules.  With a new administration coming into governmental offices who have pledged to increase taxes on the wealthy, it has never been a more important time to make sure your estate plan is up-to-date with current tax laws as well as plan for possible income tax and estate tax increases in the future.  Therefore, your second New Year's resolution should be, "I will have my income tax plan reviewed, or one put into place.  I will also have my estate planning documents reviewed, or new ones created, to take advantage of current tax laws and inheritance distribution rules."  

The best advice I could give anyone reading this article is to go into the New Year with an optimistic and confident attitude as the market of 2008 forces you to rethink the direction of your financial plan, tax plan, and estate plan going into the unknown trend of 2009.  I highly recommend working with professional financial advisors, tax advisors and estate planning attorneys who specialize in the areas of finance that fit your specific situation.  

I wish you good wealth and good health in 2009!  Happy New Year to all!

Robin S. Davis is a Certified Financial Planner™, a member of the Financial Planning Association, and is the owner of Davis Wealth Enhancement Group, Inc., in Stuart, Florida. She has been advising retirees since 1984 and has held over 500 public seminars on financial issues. She is the author of the book Who's Sitting On Your Nest Egg? Why You Need a Financial Advisor and Ten Easy Tests for Finding the Best One. Davis expresses the importance of utilizing a competent financial advisor. For more information, please call (800) 896-5422 or (772) 463-4441, visit, or email:

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