Key #1: SAVE, SAVE, SAVE. It's hard to over-emphasize the importance of saving. In the May newsletter, I recommended how much you may need to save for retirement depending on how old you are. You can read previous newsletters on the Client Forms page of our website. Click here to catch up.

Key #2: SET REALISTIC EXPECTATIONS. Since 1926 U.S. large company stocks have averaged an annual return of 10.4% - but should we expect this kind of performance over the next thirty years? Many of the best investment minds think annual stock market returns of 6% to 9% may be more realistic. This is another reason it's so important to save - you can't count on high returns to make up for poor saving habits - as many were tempted to do in the late 1990s.

Key #3: DON'T TIME THE MARKET/DON'T CHASE PERFORMANCE. You're not smart enough - no one is - and our emotions tend to get in the way. If your feelings are telling you to buy or sell, they're probably wrong. Take a look at the Callan Periodic Table of Investment Returns. This graphic is a testimony to how impossible it is to predict the next winning asset class - let along the next winning stock. The message is - own several different asset classes, all the time, because you never know which one is going to be the big winner.

Key #4: DIVERSIFY.To diversify means to invest in different asset classes. Some typical asset classes are cash, bonds, large company stocks, small company stocks, and foreign stocks. Each asset class has a unique role in your portfolio - and its job is to behave differently than the other asset classes. Remember when the stock market crashed in 2000, 2001, and 2002? Well, not all stocks did. While the S&P 500 lost nearly 40% of its value over that time period, small value stocks gained 24% and bonds gained 34%. A diversified portfolio would have held up quite well through the turmoil. For a colorful view of how different asset classes performed over the last 20 years, revisit the Callan Periodic Table of Investment Returns.

Next month we'll continue with the 10 Keys to Successful Investing.

Retainer clients will be receiving a series of audio seminars (CDs plus booklets) during their first year with Nashoba Financial Planning. The third seminar in the series is Fool's Gold - Today's Financial Fads, by Bert Whitehead, MBA, JD. Bert is a pioneer in the fee-only movement, founding his own firm in 1983 and the Alliance of Cambridge Advisors (ACA) in 1995. I'm a member of the ACA and with them, am committed to the fee-only, holistic approach to financial planning.

If you're not a retainer client, you may order individual seminars, the entire series or Bert's book Facing Financial Dysfunction at www.bertwhitehead.com.

Planning for retirement is not a game . . . or IS it? You're invited to play a unique, interactive game that's fun, educational, and empowering. Join other women as we help Norm and Sally prepare for and live in retirement. GET RICH SLOW was designed by the Center for Retirement Research at Boston College (one of my alma maters!) with technological help from Northeastern University. Wednesday, October 4th from 7 to 9 p.m. Sign up through Acton-Boxborough Community Education.

I recently attended a continuing education seminar that reminded me how important it is to keep estate planning documents up to date. Approximately 70% of Americans do not have wills. Of those who do, they tend to update them every seventeen years. A lot of changes can happen - to your family and to estate tax laws - in seventeen years. In particular, if you haven't reviewed your estate planning with your attorney since 2003, I urge you to make an appointment today.That's the year that many states changed their estate tax laws, including Massachusetts.

While you may not have a federal estate tax problem if your estate is between $1 million and $2 million, your heirs may have a very expensive state estate tax problem waiting for them. It's not unusual today to have an estate that's worth a million dollars or more. Add up everything you own (including your house) and subtract what you owe. Are you close to $1 million? Did you know you should include the value of your life insurance death benefits in what you own? Unless your life insurance is owned by a special trust, it's part of your estate. I bet you're over $1 million now.

Estate planning is one area where everybody drags their feet. If you're procrastinating because you don't really understand what it's all about, I highly recommend The Complete Idiot's Guide to Wills and Estates. Make sure you get the third edition, revised in 2005.

Over the summer I was asked by the Boston Globe to provide a Money Makeover for a Westford couple who were, in their words, "teetering on the brink". When they initially applied to the Globe for their makeover, they were "just" trying to deal with budgeting issues that were caused by bringing two families together, ala "The Brady Bunch". By the time the article went to press, both of them had been laid off and neither had another job lined up. Unfortunately, there were no easy answers to their situation.

Layoffs have become a way of life for many families in Massachusetts. This couple's situation demonstrates how important it is to be prepared to deal with those unexpected, expensive "Triple Whammies" that happen to all of us at one time or another - divorce, illness, job loss, uninsured property losses, etc. Here's some free advice - 1). Always live below your means and 2). Keep an emergency fund equal to 10% of your annual income in an interest-earning account. If you don't have that emergency fund, cut back your spending and start saving more today. You may be the next winner in the "Triple Whammy" lottery.

The Money Makeover appeared in the August 20th edition of the Boston Sunday Globe in the Business and Money section. You may still be able to access it by clicking on the link below.