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
Money Making Tips for Tough Times
by Stacy Francis, CFP®, CDFA
One of my mom’s friends has a daughter who studied interior design, and then scored an assistant manager position in an upscale furniture store right out of college. She was estatic, loving everything about her job . . . until last week, her employer cut everyone’s hours from forty per week to eighteen. She was on the verge of tears – how was she supposed to make any money?
As she is far from the only person facing a situation like this, I thought I should throw some ideas out there for how to create extra income in tough times.
- The first, obvious idea is to take on an extra job. While many businesses are crumbling, some are still doing well and hiring.
- Another idea is to finally clean out your closets, shelves and storage spaces and have a garage sale. You’ll make money and have a less cluttered home.
- If you want to unload a smaller amount of stuff, or you don’t want strangers coming to your house, try selling some things online instead. There is a reason eBay has grown so much over the past decade; many people do make a good deal of money there.
- Trade your car for a smaller one. If you play your cards right, you may end up with not only a chunk of cash, but lower bills at the pump, too.
How Much Debt Is Too Much?
by Stacy Francis, CFP®, CDFA
I was in back-to-back meetings all day today. This is not unusual – neither is the fact that four consecutive meetings started out with a prospective client informing me that she had come to me because she is in debt and would like to regain the control over her finances.
Debt is truly a widespread problem these days. So with each of them, I started out by breaking down their finances – income, costs, spending, and debt. In every case, their debt-to-income ratio came out higher than the limits most lending institutions use when determining how large a mortgage an individual can carry. According to them, if your debt payments (including mortgage payments) eat up more than 36% of your gross income, you should consider changing your lifestyle. If you do not own a home, of course your debt payments should be much smaller than that. Still, many people are far deeper in debt.
The good news is, by taking an honest look at your finances, drafting a budget, and making changes – some smaller, some bigger – you can turn this around and face a brighter financial future. I see it happen all the time. All you need is determination and a network of people who support you.
The iPod Issue: How Much Can -and Should- You Spend on Your Children?
by Stacy Francis, CFP®, CDFA
I took the subway uptown today, to meet a colleague at a favorite lunch place. Turns out, the subway I was in also had twenty-something ten-year-olds, on a field trip coming back from the New York Stock Exchange. As Sebastian is only three, I don’t spend a lot of time around older kids. Now, I couldn’t stop staring at their iPod Nanos, glossy cell phones, Seven jeans and designer handbags.
It got me thinking about the finances of reproduction. How much do parents spend on their children these days, and how much should they spend?
A bit of Internet research told me that the average family spends $7,500 per year and child, not including added expenses pertaining to the increased living space. If you have enough money to set 10% aside for retirement savings, live comfortably, and stay out of debt while spending $7,500 per child — go for it! But if you have to cut back on savings, skimp on your own needs or pull out the plastic, you should consider cutting back. But how do you make this happen without turning into the mean mom on the block?
An excellent way to go is to give your children some financial responsibility. If you increase their allowances, and in return require that they buy their own clothes, they may think twice about those $200 jeans when they see everything they have to pass up to get them.
Other ideas include sticking to the cheap stuff while your child is still too young to care about brands — and outgrows things quickly. Vintage stores for baby clothes can be true treasure chests – and you can sell the clothes back when your child has outgrown them. You can also scale down on things like extravagant birthday parties, and of course, encourage your children to take on part time jobs when they grow older. I know that my years at Dairy Queen helped me become the hard-working successful woman I am today!
Should You Do Your Own Taxes?
by Stacy Francis, CFP®, CDFA
My college friend was red-faced and bursting with anger when we met for after-work cocktails the other day. She arrived straight out of a meeting with her tax accountant, who had failed yet again to get her the tax refund so many people received last spring, and for which she was eligible. “Next time,” she muttered between her teeth, “I am going to do the taxes myself. What am I paying him for anyway?”
I tried to explain to her that whether or not you get a tax refund should not reflect on the quality of your accountant. In the safety of my home, away from her rage, I realized that her real question is “Should you do your own taxes, or hire someone to do them for you?”
To answer that question, here are a few things indicating that you could be better off on your own:
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You know your filing situation (you are up to date with legislation, know your status, etc) and have a very simple financial situation.
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You are organized and have your paperwork ready to go.
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You prefer not to disclose your financials to anyone.
On the other hand, these things may be signs you need help:
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Your financial situation is complex.
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You don’t want to waste time and energy preparing your return.
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Your life has changed drastically, and your filing this year will be very different from last year.
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You want the confidence of working with a trusted advisor.
Or, alternatively, if you are so furious at your accountant that you run the risk of expiring from a heart attack, you may also be better off on your own.
Credit Card Overwhelmed: Notes on Debt Consolidation
by Stacy Francis, CFP®, CDFA
“My credit cards are driving me insane,” a friend complained to me over mochas (bought with cash) yesterday morning. “It’s like I can’t stop thinking about how much debt I’m in, because the minute I’ve sent off one minimum payment, I get a bill from a different company.”
I asked her if she had considered debt consolidation, and she replied that she had heard about consolidation loans, but don’t you need to own your home to get them?
The truth is, there are numerous options for those looking to save time, hassle and frustration by combining all their monthly payments into one. Below are a few:
- Credit card transfers. This can be an excellent way to go, if – and only if – you are certain that you’ll be able to pay off your balance before the low introductory interest period is over. BEWARE: Watch out as rolling your debt from one card to another can hurt your credit scores.
- Home equity. This is the loan type to which my client thought I was referring. For those lucky (or unlucky, depending on how you view things) enough to own a house, this can be a great way to lower your interest and get better payback – and overall – terms for the money you owe. BEWARE: I know too many people who have innocently moved their credit card debt onto their home equity line of credit, only to rack up new credit card debt only months later.
- Loans against retirement funds or life insurance policies. Most employers allow this for 401(k) plans, and most insurance companies don’t even require that you pay back the loan – you can deduct the balance from the benefits paid to your beneficiaries. While the latter may not be too happy, this is an option and worthy of a mentioning. BEWARE: Taking money from a 401 K can impact your retirement security. Not to mention many loans are due in full 60-90 days after you leave or are fired from the company.
- Nonprofit credit counseling agencies. The employees of these agencies do debt consolidation for a living. They negotiate with credit card companies daily, and will be able to score you the smallest possible fees and most favorable interest rates. BEWARE: Not all credit counseling agencies are the same. Do your homework and make sure that you are working with a reputable company.
These are just a few examples of ways to get control over your debt situation – simple ways to commit to a plan that both eliminates your debt and takes your mind off it. Always remember that many people have had this problem before you – and many have gotten out of it.
Top Financial Fears
by Stacy Francis, CFP®, CDFA
This weekend, my family and I decided to go for a picnic in the park. So we filled a basket with Dean & Deluca foods and headed outside our door to Battery Park. There, the smell of grass, the sun, and the majestic beauty of the skyline behind us should have been a wonderful experience . . . except everywhere around us, people were voicing their concerns about the crumbling economy and its impact on their financial well-being. Do I have exceptional hearing or something? I am not sure why those around us were so loud about their financial woes. A construction worker reported that it’s been months since his employer last paid him on time. A new mother was packing up the baby room in preparation for the foreclosure looming at the horizon. An investor said his doctor refused to prescribe him any more sleeping pills, but instead advised him to take his money out of the markets.
Unable to drop the topic, when I got home, I went online to research financial fears in the US today. These turned out to be the most common:
- The rising cost of living. Nearly two thirds of Americans worry about their salaries not keeping up with rising costs of living, such as food, gasoline and medical expenses.
- Job security/recession. More than a third are anxious about losing their jobs. Almost nine out of ten are concerned about the recession, and two thirds worry about the future of their investments in the shaky stock markets.
- Debt. Credit card debt seems to keep the most people up at night, followed by student loans, medical bills, and home equity lines of credit.
- The housing crisis. Some worry they’ll be forced into foreclosures, others suspect that high mortgage payments will force them to trade their homes for less nice ones. Still others fret over repairs and maintenance they cannot afford, and almost everyone seems to worry about falling house prices.
- Savings. More than two thirds of people between 31 and 50 are worried because they either have nothing set aside for retirement, or can’t afford to save.
For whatever it is worth, if you are concerned about these things, you are clearly not alone. If you’ve been reading this blog regularly, you also know that there are steps (many of them small) you can take to reduce these worries and regain control over your finances.
How to Manage Student Loans
by Stacy Francis, CFP®, CDFA
A young woman at a recent Savvy Ladies seminar had just received her first student loan bill, and subsequently, her first panic attack. What was she supposed to do? There was no way she could spare that much money per month. Could she make smaller-than-minimum payments?
The answer is yes, she could. But for most people, it may not be the best idea. Here’s why.
Around graduation time, most students’ mailboxes are stuffed with offers from banks to refinance their debt and shrink their payments. So it is certainly possible. But the problem is, the longer you stay in debt, the more interest you are going to pay. And paying interest is basically throwing away money. While there are certainly worse kinds of debt than student debt, if you can stay on your regular payment schedule, it is generally wise to do so.
Another thing to note is that even if all your debt is with the same company, it is most likely split between a few different loans with different interest rates. If you do not stay on top of the company, they will apply your payments toward the lowest interest loans first – the exact opposite of what you want them to do. By making sure your money goes where you want it to go, you can save a ton of cash.
Of course, as I told the young woman in the seminar, there’s no reason you can’t pay off your loan earlier just because you have refinanced it. For her, refinancing now but striving to pay it off as soon as possible is probably the best option. What will work in your case will depend on your unique set of circumstances.
Selecting Your Stocks: Technical Analysis
by Stacy Francis, CFP®, CDFA
In the last entry, an email I received inspired a discussion about fundamental stock analysis. This entry covers its counterpart, technical analysis.
According to technical analysis, value is truly in the eyes of the beholder. Rather than paying attention to the book value of a company, technical investors define a company’s worth as whatever people are willing to pay for it. Technical investors therefore spend as much time analyzing charts as fundamental investors do perusing balance sheets and income statements. According to technical analysis, stock prices tend to follow certain patters — some long term and others shorter term. The price for a certain stock can be in a short-term upward trend even while in a downward trend overall. So if the charts look right, a stock trading for ten times its market cap may very well be a good buy.
It is impossible to say which out of the two works the best. There are investors who make billions using either, and investors who lose everything they own and then some. What I can say, though, is that the problem with either type of analysis is that they assume investors think and act rationally. If a company’s assets are worth a certain amount, fundamental investors trust that’s where the price is eventually going to settle. Similarly, if the price of a stock breaks through a certain resistance point, technical investors almost take for granted that it is going to climb for a while. The problem here is that — as you know — most people are not rational especially in the stock market. It is therefore extremely difficult to predict their behavior; what makes them buy or sell a stock and when. So while both techniques bring valuable information to the table, it is important not to take them too literally.
Selecting Your Stocks: Fundamental Analysis
I got an email from a client this morning, raving about this exceptional new stock everyone was talking about. It had already tripled since going public, and all the charts looked amazing.
Curious, of course, I went online to do some research. The company was in the mining industry, and had one early stage project, which, if everything worked out according to plan, would bring home a cash flow worth around $3,500,000. The market capitalization (the current price per share times the number of shares outstanding) was $40,000,000. Basically, the company was trading for more than ten times its worth, and yet this woman considered it an exceptional investment.
This is an excellent example of an instance where the two main schools in stock evaluation — fundamental and technical analysis — contradict each other. For someone who selects stocks using fundamental analysis, which deals with the book value of a company (its assets, in whatever form they come), buying this stock would be absurd. To the fundamental investor, companies trading below the value of its assets are good buys, whereas companies trading above this number are no-gos. And a company trading for ten times the highest possible value of its assets . . . well, you get the picture.
For a person using technical analysis, however, it could make perfect sense. In my next blog entry, I will explain how.
Note that selecting your stocks should follow this blog on the next day.