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
Top Tips for Saving on Holiday Airfare
by Stacy Francis, CFP®, CDFA
The airlines are gearing up for what looks to be one of the busiest holiday travel seasons in years. This is good news for American Airlines, Northwest and Continental, but it’s bad news for you. Travelers who need to fly over Thanksgiving or the December holidays will find stiff competition for affordable seats.
If you’re one of the millions of Americans planning to fly this holiday season, you’ll need to plan ahead and be flexible with your flight dates and times in order to get an affordable flight. Read below for tops tips to keep your holiday travel from busting your bank account.
Book early: Buy tickets at least 30 days in advance for maximum [seat] selection and savings.
Avoid peak travel dates: Certain dates around the holidays are more popular for travel than others commanding much higher flight fares. Needless to write, you will have a less frantic airport experience by traveling on less crowded dates.
Fly on the holiday: The cheapest times to fly are on the holidays themselves: Thanksgiving day, Christmas Eve, Christmas Day, New Year’s Eve, and New Year’s Day.
Use flexible online search tools: To help you find the cheap seats compare prices at Expedia, Hotwire, Orbitz, Priceline.com and even Ebay is getting into the action.
Fly out of an alternate airport: By avoiding major airports and flying out of smaller, less popular ones, you may find more availability.
Book a vacation package: If you’re not staying with relatives and need a hotel room, you may be able to save on airfare by booking air and hotel as part of a package.
Safe and happy travels!
Use It or Lose It: 25 Ways to Spend Your Flex Account
by Stacy Francis, CFP®, CDFA
If you’ve been healthy this year, congratulations! But if you’ve spent less on medical expenses than you expected when you set up your flexible spending account, you may be scrambling to find ways to use the money before it disappears. Studies by benefits specialists regularly show that employees typically forfeit more than $100 each year in medical flexible spending accounts.
Flexible spending accounts offer employees a great way to reduce their taxable income while at the same time paying for medical or childcare expenses they know they’ll encounter during the year. Many companies let employees set aside $2,000 to $3,000 annually in pre-tax money to spend tax-free on medical expenses.
It’s a great deal, but the big catch is that you lose what you don’t use by the end of the plan year. But in late October, the Treasury Department announced a new $500 rollover option that companies can adopt voluntarily.
Savvy Ladies’ Tip: You can use the flexible spending account money for almost any health-related expense that isn’t covered by insurance, including:
Deductibles and co-payments, dental work and orthodontia, eyeglasses, prescription sunglasses, contact lenses and laser eye surgery, psychotherapy, psychiatry, psychology, drug and alcohol treatment, smoking cessation programs and prescriptions, medically necessary cosmetic surgery, massage therapy to treat an injury, physical therapy and speech therapy, out-of-pocket expenses for fertility treatments, chiropractic care, doctor-recommended weight-loss programs, hearing aids and batteries, medical equipment (such as wheelchairs, crutches or oxygen equipment), assistance for the disabled (including guides, Braille books, seeing-eye or hearing-trained animals, note takers, etc.), birth control pills/devices and procedures, acupuncture or related procedures to treat a medical condition, medically necessary prescriptions, vaccinations
Now you can also use flex funds for medications that don’t require a prescription, such as allergy and cold medications, antacids and pain relievers.
Investing 101
by Stacy Francis, CFP®, CDFA
If you’re a novice investor — or you’re looking to brush up on a specific investing concept — this is the article for you. Savvy investing requires knowledge of several key financial concepts as well as an understanding of your personal investment profile.
The Difference Between Saving and Investing
Even though the words “saving” and “investing” are often used interchangeably, there are differences between the two.
Saving provides funds for emergencies and for making specific purchases in the relatively near future (usually three years or less). Ease of converting to cash is an important aspect of savings. Dollars used for savings generally have a low rate of return and do not maintain purchasing power.
Investing, on the other hand, focuses on increasing net worth and achieving long-term financial goals. Investing involves risk.
Investment Return
Total return is the profit (or loss) on an investment. It is a combination of current income (cash received from interest, dividends, etc.) and capital gains or losses (the change in value of the investment between the time you bought and sold it).
Risk
ALL investments involve some risk because the future value of an investment is never certain. Risk, simply stated, is the possibility that the ACTUAL return on an investment will vary from the EXPECTED return or that the initial principal will decline in value. Risk implies the possibility of loss on your investment.
The Risk / Rate-Of-Return Relationship
Generally speaking, risk and rate of return are directly related. As the risk level of an investment increases, the potential return usually increases as well.
Diversification
You can do several things to offset the impact of some types of risk. Diversifying your investment portfolio by selecting a variety of securities is one frequently used strategy. If you put all of your money in one place, your return will depend solely on the performance of that one investment. Alternatively, if you invest in several assets, your return will depend on an average of your various investment returns. Here are three basic ways to diversify your investments:
Variety of Assets – By choosing securities from a variety of asset classes, e.g. a mix of stock, bonds, cash and real estate
Variety of Securities – By choosing a variety of securities or funds within one asset class, e.g. stocks from large, medium, small and international companies in different industries
Variety of Maturity Dates – By choosing a variety of maturity dates for fixed-income (bond) investments.
Dollar-Cost Averaging
Another technique to help soften the impact of fluctuations in the investment market is dollar-cost averaging. You invest a set amount of money on a regular basis over a long period of time, regardless of the price per share of the investment. In doing so, you purchase more shares when the price per share is down and fewer shares when the market is high. As a result, you will acquire most of the shares at a below-average cost per share.
As most investors know, market timing . . . always buying low and selling high . . . is very hard to accomplish. Dollar-cost averaging takes much of the emotion and guesswork out of investing. Profits will accelerate when investment market prices rise. At the same time, losses will be limited during times of declining prices.
The Time Value of Money
Now that you understand the concepts of risk and return, let’s turn to an element that is at the heart and soul of building wealth and financial security…TIME. The essence of the concept time value of money is that money is worth more now than in the future.
Compounding also applies to dividends and capital gains on investments when they are reinvested.
Stop Flirting With Disaster
by Stacy Francis, CFP®, CDFA
Nobody likes (or needs) to spend much time thinking about a possible future disaster. But sometimes an ounce of prevention is worth a lot more than a pound of cure. Losing precious documents to disasters such as theft, fire, earthquake or flood can cost you countless hours and thousands of dollars as you try to restore them. Buying a fireproof safe will set you back about $100. You decide.
Savvy Ladies’ Tip: Buy a fireproof safe online (Google “fireproof safe”) and have it delivered right to your doorstep. Then store these documents inside:
• Birth certificates, marriage certificate, divorce papers • Passports • Social Security cards • Title to your home (the deed) • Title to your car (the pink slip) • Will, trust, and power of attorney • Advance directives (living will, health care) • Insurance policies (car, home, long-term care) • Stocks and bond certificates • Photographs of your possessions (for insurance purposes)
Will Millions Make You Happier?
by Stacy Francis, CFP®, CDFA
You’ve heard it ad infinitum, “Money can’t buy happiness.” Now there’s scientific data to give the old saw new teeth.
University of Southern California economist Richard Easterlin surveyed 1,500 people over nearly three decades to see what gets high marks on their “Happy-O-Meter.” His results revealed that time with family and good health are the stuff of happiness.
Money? Did this play a role in happiness? The study found that wealth doesn’t necessarily lead to joy and contentment. In fact, the magic number that equals satisfaction is far lower than you would expect. It’s $40,000 a year. Once enough is earned to meet basic needs, money in relation to happiness is a very personal equation.
Oprah’s magazine says so. And so does Harvard psychologist Daniel Gilbert, who studies such things. In fact, the rule is well established in research: The first $40,000 makes a big difference in one’s level of happiness. After that, the impact is much smaller. The difference between someone making $40,000 and someone making $15,000 is far greater than the difference between $100,000 and $1 million.
Your Happy-O-Meter
So technically, most of you should be happy. And if you’re working for the next big raise, forget it. You’re better off working on teaching yourself how to look at your money with a different eye.
The sad truth is that we’re twice as rich as we were in 1957, but only half as happy. As Dr. David G. Myers, an authority on the psychology of happiness, wrote in Does Economic Growth Improve Human Morale?, “Never has a culture experienced such physical comfort combined with such psychological misery. Never have we felt so free, or had our prisons so overstuffed. Never have we been so sophisticated about pleasure, or so likely to suffer broken relationships.”
Despite air conditioning, TiVo, carb-free wine and high-speed Internet access, we’re not as happy as our parents and grandparents.
Super Rich ≠ Super Happy
But what about the Donald Trumps of the world? Surveys reveal that even lottery winners and the superrich soon adapt to their affluence and are little if any happier than the average Joe. Moreover, those who strive most for wealth tend, ironically, to live with a lower overall well-being than those focused on intimacy and relationships.
“By far the greatest predictor of happiness in the literature is intimate relationships,” Sonja Lyubomirsky, a researcher at the University of California-Riverside, told a Chicago Tribune reporter. “It’s definitely not money.”
In the end, happiness is about wanting and managing what you already have, spending time with friends and family, as well as taking care of yourself. So the next time you get green with envy when you see your favorite Fendi handbag go parading by, take comfort in knowing you would not be happier even if it was on your own arm!
Buying a Home When You’re Female and Single
by Stacy Francis, CFP®, CDFA
Are you thinking about buying a home? Here’s some expert advice
A lovely little house with a white picket fence and a husband to buy it for her used to be the average little girl’s fantasy, or so goes the stereotype. But these days, the average woman is more than likely dreaming about buying her own home. And according to statistics, she and her savvy single friends are setting records doing just that!
In fact, over 52% of women-headed households in the U.S. own their own homes and single women constituted the fastest growing demographic of first-time home buyers recently.
Nonetheless, the prospect of buying a home on your own can be daunting. In order to purchase the home of our dreams you need to get real about your finances. Here are some questions you need to ask yourself before you purchase a home.
Can you afford to buy a home?
Consider these two guidelines:
1) Your monthly mortgage payment, including principal, interest, real estate taxes, and homeowner insurance, should not exceed 28% of your monthly income before taxes.
2) Your total amount of debt (mortgage, credit cards, car payments, student loans, etc.) should not be more than 36% of your gross income–this is referred to as your debt-to-income ratio.
Sadly, due to low interest rates many individuals are buying more home than they can afford. They strap themselves with mortgage payments that stretch them to the limit and forget to budget for maintenance. When the first thing goes wrong with the home, they’re in over their heads. Ladies, if you can’t afford the sort of place you want to buy — with a loan that does more than just pay your interest — you may want to wait until you can pay a more substantial down payment.
Should you buy?
Are you planning to stay put for three years or more?
If you’re not planning on living in the same place for at least three years, buying is not a good idea. You need to consider the cost of moving and the cost of buying and selling makes renting a smarter move if you plan on living there only for a short time.
Are you willing to maintain it?
Owning a home is more work than renting. No more calling the landlord when the plumbing breaks, the refrigerator stops working and the air conditioner dies.
Is your credit in decent shape?
Be sure to check your credit score at www.myfico.com before you decide to buy. Unless you have a credit score of 700 or above, you could pay above average rates to finance your purchase. That can be costly!
You are ready to buy!
By and large, whether you’re single or divorced, the toughest part of buying a house is coming up with the down payment. However, the following resources are a good place to look for mortgages requiring low down payments.
Fannie Mae: This type of mortgage features a loan-to-value ratio of 97%, meaning you need only come up with 3%. Only people with modest incomes will qualify for this type of loan, and a pre-purchase homebuyer education class is required for approval.
Federal Housing Administration (FHA): This government agency doesn’t offer mortgages, but it does insure residential loans provided by private lenders. This means that once you qualify for FHA insurance, you may buy a home with only 3%-5% down. FHA-backed mortgages have a maximum loan limit depending on the average housing cost in each region.
USDA Mortgage: 100% Financing No Money Down options exist for non-military borrowers, too. The U.S. Department of Agriculture offers a 100% mortgage, too. The program is formally known as a Section 502 mortgage, but, more commonly, it’s called a Rural Housing Loan.
The New Ozzy and Harriet – Financial Tips for Unmarried Couples
by Stacy Francis, CFP®, CDFA
A sharp rise in the number of opposite-sex, unmarried couples moving in together this year may be less about romance and more about surviving in a struggling economy, according to a new report by the U.S. Census Bureau.
The share of couples who are not married has risen in many places but is highest in areas that offer many people grim prospects for a better financial future: old industrial cities and the Mississippi Delta.
Unmarried couples made up 12% of U.S. couples in 2010, a 25% increase in 10 years, according to 2013 Census data.
Two-thirds of the cities with the largest shares of unmarried couples were in the Northeast and Midwest, up from about half a decade earlier.
The couples in the study range from young couples living together before marriage to elderly couples living together for convenience, and about 10 percent are gay couples. These single couples face unique money issues, and are less likely to plan for their financial future than married couples.
In the beginning of a relationship it’s best to keep your assets separate, to avoid property disputes later. Be sure to have separate checking accounts and own as little joint property as possible. Beware, if you both contribute money to the purchase of a major asset, such as a house or a car, this will be considered joint property.
As the relationship grows and your income and assets begin to increase, you may want to hire a family lawyer to draw up an agreement that addresses what will happen to your assets if your relationship ends. You don’t need financial troubles in addition to the emotional turmoil of a failed relationship.
You may also want to put into place a durable power of attorney that allows your partner to make financial decisions for you if you’re unable to make them yourself.
In addition, a healthcare proxy (or durable power of attorney for healthcare) can be useful. This allows a non-relative to make medical decisions for you if you’re incapacitated.
If you want to leave assets to your partner at the time of your death you will also need to draw up a will.
These are only a few of the issues you will need to discuss with your partner. It’s difficult to have to think about these things whether you’re married or not, but it’s important!
Do You Know Where Your Investments Are?
by Stacy Francis, CFP®, CDFA
A survey of those who own mutual funds found about 40 per cent didn’t know the names of the funds they bought. Even if you are a pro when it comes to rattling off the latest mutual fund you purchased, you still may not have a clue about the mix of stocks, bonds and other investments. Sadly, mutual fund names don’t always tell the entire story. You have to dig deeper in the prospectus to figure out where fund assets are invested.
Your goal should be to create a balanced asset allocation with the mutual funds you won. Asset allocation is an investment portfolio technique that aims to balance risk and create diversification by dividing assets among major categories such as cash, bonds, stocks, real estate and derivatives. Each asset class has different levels of return and risk, so each will behave differently over time. For instance, while one asset category increases in value, another may be decreasing or not increasing as much. For most investors it’s the best protection against major loss should things ever go amiss in one investment class or sub-class.
There is no simple formula that can find the right asset allocation for every individual. You will need to assess your goals and risk tolerance to find out which asset allocation is best for you.
Savvy Ladies Celebrates Labor Day
by Stacy Francis, CFP®, CDFA
Now that Labor Day is right around the corner you might be planning to spend that weekend relaxing at some oh-so-swanky resort in the Hamptons or that cute mountain hideaway in the Poconos. But have you ever really thought about why we celebrate Labor Day? That is, besides the fact we are in dire need of more three-day weekends. I didn’t think so!
So you know, Labor Day is dedicated to the social and economic achievements of American workers. It celebrates the contributions workers have made to the strength, prosperity, and well-being of our country. That means Labor Day is about celebrating you! And this is a perfect time to make sure your company and country are paying their dues to you.
Check your Social Security benefit estimate I am sure you think the government is never at fault. But let me tell you, the Social Security Administration does make mistakes. Make sure they have recorded your correct salary as well as the amount of time you have been working. Otherwise, you could have a nasty surprise when you need to collect disability or retirement from the government.
You can get a copy of your Social Security benefits estimate at http://www.ssa.gov/retire2/estimator.htm
Check your work benefits You know you put in too many long hours to be short-changed. Sadly, many American workers are. Due to tough economic times, many employers are slashing health, disability, life and health insurance provided through their company. Make sure you know your coverage. When a catastrophe strikes the worker is left unprotected and the employer does not have to do anything. You can call your HR department for the latest employee benefits handbook. Have a CFP™ look it over to make sure you are adequately covered.
Make sure you are investing in your company’s retirement plan You company’s retirement plan might be one of the hottest investments around. Many companies give generous matches to every dollar you put into your 401(k) or 403(b) up to a certain limit. It is better than winning the lottery!
Just think about it: If you make $100,000 per year and your company contributes up to 5% of your salary, that means an extra $5,000 in your retirement fund. There are two catches though. 1) You also have to contribute to the fund to get your companies corresponding match. 2) If you leave for greener pastures you could lose some or all of that money. However, your contributions are yours forever!