Stacy’s Savvy Financial Advice
Stay Savvy with our founder Stacy Francis’ latest articles on financial planning, budgeting, debt management, investing, divorce, retirement planning, and more.
Stacy Francis founded Savvy Ladies® in 2003 with the mission to educate women about their finances and empower them to make proactive choices. Inspired by her grandmother who stayed in an abusive relationship due to financial reasons, Stacy has been determined to never let another woman become powerless by financial instability.
Get the resources, knowledge, and tools you need to make smart and informed decisions about your money and your life.
In addition to being the Founder and Board Chair of Savvy Ladies®, Stacy is the President, CEO of Francis Financial, Inc., a boutique wealth management and financial planning firm. A nationally recognized financial expert, she holds a CFP® from the New York University Center for Finance, Law, and Taxation, and is a Certified Divorce Financial Analyst® (CDFA®), a Divorce Financial Strategist™ as well as a Certified Estate & Trust Specialist (CES™).
Stacy has appeared on CNBC, NBC, PBS, CNN, Good Morning America, and many other TV & Financial News outlets. Stacy too is ofter sought out for her advice and can be found quoted in over 100 publications such as Investment News, The New York Times, The Wall Street Journal, USA Today. She shares her wisdom and expert financial advice here for you to learn and get savvy about your finances.
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STACY’S $AVVY ADVICE
My 401(k) Is Getting Rid of the Match – Should I Still Contribute?
by Stacy Francis, CFP®, CDFA
A client called me up with this excellent question yesterday. Of course, as long as your company matches your contributions, you should contribute as much as you can toward your 401(k). It is unwise to turn down free money, and especially free money that will grow and grow and grow – tax deferred – and make up a good portion of your nest egg. But what happens when your company ceases to match your contributions?
You always want to contribute toward some sort of retirement account – preferably by maxing out your 401(k) and a type of IRA if you can (certain income limits apply for Roth IRAs). The main difference between an IRA and a 401(k) – apart from the fact that 401(k)s generally have the added benefit of free company matches – is that with a 401(k), many times, you have limited investment options. Though many employers will add, say, a certain mutual fund upon request, some won’t. If the latter is true for your company, you are stuck. You cannot rollover a 401(k) unless you leave the previous employer and are no longer employed.
However, you may want to consider rolling the money in your previous employer’s 401(k) into a Rollover IRA and contribute toward that account instead. As long as this rollover takes less than 60 days, you will not face any tax consequences.
Of course, if you are already invested in the funds you like the best, there may be no reason to shake things up. You may be better off keeping the money where it is.
When Your Parents Need Help
by Stacy Francis, CFP®, CDFA
A new Starbucks just opened a block from my office – what a treat! It was an even bigger treat to run into an old friend there yesterday. Catching up over lattes (hot chocolate for me since I am pregnant), I learned that she has a fabulous new job, a gorgeous husband, and the best son in the world. Unfortunately, she is unable to enjoy any of it because she is so worried about her parents. Picking up their mail the other day, she found numerous overdue bills. Even worse, when she asked them about it, they acted very strange. In case you are one of the many people whose aging parents may need some financial assistance, here are a few tips:
- Be courteous. True, they may have made mistakes or be desperate for money, but nothing will get easier if you start bossing them around. Chances are, it is not easy for them to ask for your help – even less easy to accept it. Don’t make things any harder than they need to be.
- Gather all the facts. If you are going to straighten out their money problems, you need to see everything – every bank account, IRA, 401(k), insurance policy and credit card account that they may have. Only when you have a 360-degree view can you make sound decisions.
- Think long-term – in this case all the way to the end (for them, that is). Don’t start pouring money over them, but rather work out a long-term plan for how you can restructure their finances to make their dollars last longer. Then fill in the holes where needed.
Saving for College in Tough Times
by Stacy Francis, CFP®, CDFA
“My daughter is off to college in 2010,” a woman told me during the Q&A session at a recent conference. “Now the savings account we opened for her has been cut in half, and my husband has lost his job. Will a local community college be her only option?”
While there are many good community colleges these days, she was delighted to learn that the answer is no. There are many things she and her daughter (and of course the father) can do to secure that college education. Below are just a few:
- Now that stock prices are low and yields on income-generating securities are lower, they can maximize portfolio returns by keeping at least a portion of the money in mutual funds invested in stocks. The good news is that their portfolio has 2-6 years to recover.
- If at all possible, they should continue to contribute toward the college savings account. They now need the money more than ever.
- The lower their household income, the wider the range of financial instruments that becomes available to them. I suggest they take advantage of financial aid and grant opportunities!
- If the daughter happens to be a brainiac, or an athlete, or a minority, chances are greater that she’ll be able to obtain a scholarship to pay for part of the expenses.
- There’s always the option of the daughter taking on an extra job during her studies. Many colleges offer work-study programs where wages can be applied directly toward tuition expenses – and students can gain valuable work experience. I worked for four years in my college cafeteria. It gave me extra cash and the revelation of why going to college was so important. I did not want to be in that cafeteria for the rest of my life.
- Finally, let’s not forget about student loans. Despite the fact that many parents strive for their children to remain debt-free, this is not always possible. Student loans are there to bridge the gap between the education that will secure a child’s future, and the parents’ means to pay for it.
Money Considerations for Women
by Stacy Francis, CFP®, CDFA
The gentleman next to me during the opening dinner at a recent conference couldn’t get over the fact that I named my organization Savvy Ladies. Why, he wanted to know, did I find it necessary to focus solely on women? This, of course, is an excellent question. While men, too, benefit greatly from financial education, the following factors make it even more pressing for women to plan ahead and set financial goals:
- In average, women make less money than men. This isn’t always true – we have come a long way – but the many women living on mediocre wages need to take this into consideration when outlining their path to financial freedom.
- Women tend to live longer than men. While the life expectancy for an American man is 75.4 years, the average American woman can expect to live 80.5 years. While a long life is usually desirable, it also makes things a bit trickier for women: not only do they often make less money, but they need to set aside a larger chunk of cash in order to obtain the same standard of living as retirees.
- Many women take breaks from their careers to raise children. While for some, this is limited to six weeks of maternity leave, others find it rewarding to remain at home for several years, looking after their little ones. An average woman spends 11 ½ years out of the workforce, versus 16 months for men (Women’s Institute for a Secure Retirement). Whatever route you opt for, make sure you make the appropriate adjustments to your retirement plan.
Long-Term Care Insurance: When to Get It and When Not To
by Stacy Francis, CFP®, CDFA
I met with a new client yesterday. While this is not unusual, the reason he had come to see me was: he was in his thirties, healthy, athletic – and extremely anxious about the fact that he didn’t have long-term care insurance. While some would call this paranoid, for those who have yet to explore this type of insurance, here’s what you should know.
Long-term care insurance covers you if you need to spend an extended period of time in a nursing home or an assisted facility – or if you need long-term care at home. While this is also true for the government-sponsored program Medicaid, there’s one important difference: Medicaid only covers individuals with minimal net worth. The Medicare program covers stays in nursing homes or assisted facilities in certain cases, but only for very short periods of time. What this comes down to is that if you have a decent amount of money but no longer are able to take care of yourself, you will be very happy that you purchased long-term care insurance.
So should everyone get a policy? Well, the drawback is that long-term care insurance can be very expensive – a policy can easily cost you $2,500 per year. Because of this, unless some scary disease runs in your family, it is generally best to wait until you are close to your late fourties or nearing fifty before you take out a policy. You don’t want to make payments on a policy for years and years – only to be forced to drop it due to financial difficulties a year or two before you need it.
Tax Breaks for Your Investment Losses
by Stacy Francis, CFP®, CDFA
My girlfriend called me up last night. “So,” she told me, “I was seconds away from selling these bonds I have so that at least I’d get a tax write-off, when I realized that’s not how it works with bonds. If I hold them until maturity, I will get my money back, won’t I?” I was so proud of her! She remembered! A major difference between stocks and bonds is just that – bonds have a maturity date, while stocks don’t. This is part of the reason bonds are considered “safer” investments.
If my friend had owned stocks, her thinking would have been very strategic. Many investors sell stocks that are down just before the end of the year, and use the capital loss to lower their tax bills. This is a great idea for stocks, but does not work as well with bonds.
In the case of mutual funds, things get a tad bit more complicated – or complex, perhaps. The fund managers buy and sell securities now and then, and unless you keep a very close eye on the fund, you will be notified via mail whether you are entitled to a tax write-off or owe the IRS money. Since the fund managers may have bought securities several years ago and sold them during the past year, it is possible that you will have a taxable capital gain even when your fund is down. Conversely, it is also possible that you will be able to do a tax write-off even though your fund is up.
Ex-Couples: How Alimony Works
by Stacy Francis, CFP®, CDFA, Founder Savvy Ladies
“It is easy to preach financial independence,” a new Savvy Ladies member remarked at a recent seminar, “but I have already spent ten years as a housewife. My husband and I are miserable together, but there’s no way I would survive without his financial support.”
Unfortunately, her situation is far from uncommon. But the good news is that she can get divorced and still maintain a fair standard of living while she gets back on her feet and starts a career of her own. How? The answer is alimony.
| Alimony is financial support paid by one ex-spouse to the other after the marriage has legally ended. Alimony is also sometimes called spousal support.
How Does Alimony, Spousal Support Work?
While not a given right, US law mentions that parties in a divorce should be able to live “according to the means to which they have become accustomed.” This means that if, during the past ten years, you made zero dollars while your spouse made $300,000 per year, chances are pretty good that you’ll be able to maintain a decent lifestyle on your own. Each state has its own laws governing alimony. Spousal support is usually part of a divorce case that the court will address. Most spouses who are still married but separated can also seek spousal support in most states. It is important to check your state guidelines.
The length during which an ex-spouse receives alimony depends on many things, from age (younger individuals are generally considered as having better chances to move on with their lives) to how long the marriage lasted. So, while nothing is guaranteed, there is still hope!
How to Begin the Process for Getting Alimony from my Spouse?
One or both spouses must request it from the court – and can be stated at the initial filing for divorce. Alimony can be agreed upon through mediation, or the issue can be resolved in court, where a judge will decide. Alimony payments can be structured in many ways, from a one-time lump sum to payments over time. Again, states can look at various variables and make the determination based on the length of the marriage, an illness or disability.
Types of Alimony
Each case is specific to you and while it may vary by state, alimony can be structured as durational alimony for a specific length of time that is deemed necessary is one common option. Another is rehabilitative alimony, where payments are provided to allow the recipient to obtain the education to become self-supporting. There is permanent alimony for spouses who may be disabled, unable to work, ill, or elderly.
It is important to check with a divorce attorney and to have a CDFA, a Certified Divorce Financial Analyst, as you go through your divorce to make sure you are set up for a secure financial future.
5 Vital Questions for New Parents
by Stacy Francis, CFP®, CDFA
Shopping for my new baby earlier today, I met two very anxious soon-to-be mothers. Talking to them made me realize how much easier it is to be pregnant the second time around. Not only am I more relaxed about everything, but I also know what needs to be done, both around the house and financial planning-wise. For those of you still on your first child (or planning to have one in the future), below are five crucial things to ask yourself during those first, tired months to make sure you are on track.
- Have you updated your will to include your newborn? Many new parents have neither wills, nor have never seen the need for them in the past. With a little one to care for, this all changes.
- Have you set up a college savings plan? I am aware that college is eighteen years away. But as I have mentioned before, due to the concept time value of money, no dollar is going to make more of a difference than the ones set aside early in your child’s life.
- Have you acquired life insurance? True, it is unlikely that you and your spouse will die in the near future, but accidents do happen and you will sleep better at night knowing that your baby would be provided for in your absence.
- What about disability insurance? The thought of becoming disabled is no more pleasant than the one of dying, but since it will be many years before your son or daughter will be able to support him or herself, you need to be prepared for everything.
- Have you factored in the increase in your cost of living? There are cheaper and more expensive ways to raise kids. From helpful grandparents to nannies, hard-working parents to stay-at-home moms, the cost can vary widely, but according to statistics, the average cost for raising a child in the US is $250,000.
Donating to Non-Profits: Good Karma and Even Better Tax Breaks
by Stacy Francis, CFP®, CDFA
Tax season is here! A great time for anyone expecting a refund, and a not-so-great time for those who now have to come up with a chunk of cash for the IRS, on top of all their other bills and financial responsibilities. For the financially savvy, tax season is a fantastic opportunity to be clever and score some free money – or at least a smaller tax bill.
One fabulous way to reduce your tax bill is to donate to non-profits. For those of you who usually e-file, note that this rule includes far more organizations than the ones your tax program suggests after you have entered your data. There are literally thousands of non-profits from which to choose – ranging from religious institutions to organizations dedicated to curing diseases to those committed to financial empowerment for women like Savvy Ladies. And the tax break remains the same: if you donate $1,000, you will lower your tax basis with that amount, thus paying up to $350 less in federal taxes, depending on your current tax bracket.
And it gets better. Not only do you get a tax break, but you can help these organizations make the world a better place and improve your own life by generating goodwill and good karma.
No wonder so many US charities blossom!