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Identify your objectives and review them regularly. – Imagine the super bowl game without a goal! There could be no winner! To accomplish your financial goals, you must know what they are. Are you saving for college? Retirement? A new home? Whatever the goal might be, your financial plan must fit that goal. Your objectives must be measurable so you can compare your current status with your future goal. Obviously, things will not always go as planned, but having the goals set and regularly making needed adjustments is far better than blindly hoping for the best.

Review and adjust your Asset Allocation. – Allocating your portfolio properly will allow you to limit your risk and accomplish your goals. First of all, determine your personal risk tolerance and on that basis, establish the most effective combination of stocks and bonds. The stock category should be divided further into large, small and international stocks*. If this has not been done lately, the start of this New Year is a great time to for an analysis. Our company policy is to review this for every client, every month. It is that critical.

Shorten bond maturities. – Over the past months, the Federal Reserve has started to raise interest rates. The rate on the 10-year Treasury bond has gone 3.64% in March of 2002 to 4.29% in January of 2005**. It is possible—some would say likely—that rates will continue to rise. As interest rates rise, the price of bonds declines, so it is possible to lose money in bonds. Any current or future long-term bond investments should be carefully evaluated.

Know the Tax Law Changes. – Understanding the recent changes in the law is vital to making sure you most effectively limit your tax liability. The 2005 401(k) maximum is now $14,000 per year and $18,000 if you are over age 50. The Roth and Traditional IRA contribution limit is $4,000 and $4,500 if you are over age 50 subject to income limitations. The annual gift exclusion is $11,000. Long term capital gains and qualified dividend tax rates will remain at 15% for most taxpayers. Social Security FICA tax will be collected on wages up to $90,000. There is no ceiling on the Medicare FICA tax. The estate tax exclusion will stay at $1,500,000 until 2006 when it moves up to $2,000,000. Taking advantage of these and other changes could help you improve your financial future.

Take action now. - Procrastination is the greatest enemy of successful financial management. Whether paralyzed by fear or handicapped by busyness, you cannot get to your goal unless you begin. Set one or two realistic action steps, establish a date for achieving those steps, and then do it. The feeling of accomplishment and the realization of intermediate goals will start you on your way toward financial success.

Eric Freckman, CFP®, is a registered representative with and offers securities through Linsco/Private Ledger Member NASD/SIPC

Eric Freckman, CFP

Williamsburg Village
1625 Colonial Parkway
Inverness, IL
847.934.0010
eric.freckman@lpl.com

*International investing involves special risks such as currency fluctuation and politically instability. The prices of small company stocks are generally more volatile than those of large companies.
**United States Federal Reserve Bank

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