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
The New Triangle Drama: Remarriage, Kids, and Inheritance
by Stacy Francis, CFP®, CDFA
It is rare that anyone cries in my office, but it did happen last week. A client reported between sobs that her dad had passed on a while back. Not only was she paralyzed with grief; she had also just learned that she wouldn’t get a dime out of his estate. It was all going to the twenty-years-younger woman he married three years ago. It felt, in her words, like a slap in the face.
A sad story indeed, and more common than I think anyone would like. With an increasing number of people remarrying late in life, conflicts with children are on the rise – not just on a personal level, but financially, too. Unfortunately (and perhaps surprisingly), kids have very few rights in these scenarios. While it takes very little for a parent to disinherit a child, most states require that a surviving spouse receive between a third and half of the estate, at least (referred to as the elective share).
Sure, my client could make a court case out of it. Children often gain the jury’s sympathy in inheritance disputes. Unfortunately, the law is on the surviving spouse’s side.
The good news is: if you plan ahead, you can nip this ugly scenario in the bud and ensure that bereavement is the only reason your children cry at your funeral. Below are just a few ideas:
- Skip the wedding altogether. Many couples who meet late in life opt to just live together, keeping assets separate and making life a lot easier for their respective children.
- Draft a detailed prenup. It may not be the most romantic thing to do, but it can make all the difference later on.
- Set up a Q-Tip trust. Q-Tip trusts are designed for this very purpose. When the parent passes on, the surviving spouse receives the income from the trust while the children hold on to the principal. Once the surviving spouse kicks the bucket, everything in the trust is paid out to the children. While Q-Tip trusts have their advantages, they can also create a lot of conflict- especially if the surviving spouse is young with a long life expectancy. Furthermore, setup costs can be substantial.
Nanny Tax 101
by Stacy Francis, CFP®, CDFA
I do not make it a habit to eavesdrop, but the girls at the table next to me at the smoothie bar this morning were so loud and animated, there was no way around it. They were all international students, pushing the benefits of babysitting to the newest girl in the gang. It’s the perfect extra job, they said, because you don’t need a work permit.
Most moms will know this isn’t true. But since this isn’t the first time I have encountered this misperception, allow me to shed some light on employees in your home and taxes.
If you drop your child off at a sitter’s house on your way to work, and pick him or her up on your way home, the babysitter is not your employee. However, if your nanny works in your home and under your direction, she is considered an employee – regardless how many hours per week, month or year she does so. This means you both have to pay taxes. In order to do this, your nanny needs a work permit.
Now that we’ve gotten that part straightened out, let’s put this into numbers. If you pay your employee $1,400 per year or more, you need to withhold 7.65% percent from his or her paycheck, and then match this (a total of 15.3%). Minors under 18 and relatives such as parents and spouses are exempt from this rule.
If your employer has a childcare spending plan, you may be able to save some on your taxes and put money away pre-tax, to use for childcare. Even if you do not have access to such a plan, you may still qualify for a dependent care tax credit of 20-35% of the first $3,000 you spend ($6,000 if you have more than one child).
So while it may come as a surprise that such transactions are subject to taxation, you get a break, too. Not too shabby, is it?
5 Things You Should Know Before You Buy a Stock or Fund
by Stacy Francis, CFP®, CDFA, Founder Savvy Ladies
Are you considering buying a stock or fund?
A friend of mine is an aspiring author and eventually wants to leave her corporate job. Over bouillabaisse and freshly baked baguettes the other night, she announced that she just sold her first short story to an Ezine. All smiles, she explained what an important step this is for her writing career since, as she put it, now she’s googlable. This very versatile new verb got me thinking about the many, many ways the Internet helps investors. Just imagine the amount of information now at our fingertips, information to which, as little as fifteen or so years ago, investors had very limited access. Below are a few googlables to consider before you buy a stock or fund.
The five things you should consider BEFORE you buy a stock or fund
- Essence. What does the company (or companies, in the case of a fund) do? My general advice is that if you don’t understand the business, you shouldn’t bet your money on it. To stomach the ups and downs in the markets (especially today), you have to feel good about your investment.
- Sales. Are whatever products and/or services the company produces actually selling? If they are gathering dust in a warehouse, chances are your money will, too.
- Cost control. A $10,000,000 golf retreat for the executive staff is hardly an effective use of your capital. Put it to work elsewhere.
- Debt. People aren’t the only ones who suffer when overwhelmed with debt. Find the leverage ratio (calculated as total assets divided by shareholder equity) for the company (or companies) you’re considering. If it is higher than 5, reconsider.
- Bad news. Nothing spreads faster than bad news. If there’s anything fishy going on, chances are somewhere on the World Wide Web, someone picked up on it.
Are you ready to invest?
It is important to know the rules of the game and know the risk and return of each of your investments. Each stock and fund carries a risk and a reward. It is key to create a portfolio of investments that balance your risk and return potential. Know your timeline – how long is your investment horizon? Do you need access to your money? Create an investment strategy.
The Savvy Guide to Coupons
by Stacy Francis, CFP®, CDFA
Think coupons spell cheap and cheesy? So did I, until a couple of weeks ago the woman in front of me in line at the grocery store used a whopping sixteen of them, saving over thirty dollars. This, with hardly any effort! I just had to ask for her best coupon shopping advice.
If you have yet to try this way of saving, or if you’d like to get more out of your clippings, read on!
- The Internet is not just for shopping and email – it’s for saving as well. Check out sites such as hotcoupons.com, valupage.com, and coolsavings.com.
- Your Sunday paper, too, can be a wonderful resource. Allocate a compartment in your purse or wallet to this purpose, clip, and save!
- Many stores have fliers with coupons at the entrance. If this is true for yours, don’t miss out on this golden opportunity. You can combine these savings with the ones already in your purse. I now check the flyer at Whole Foods every time we shop. We save a minimum of $10 on every grocery visit.
- If you can’t find coupons for the brand you like, try giving the company a call. Many companies are happy to send valued customer coupons – you just have to ask.
I am taking the first, staggering steps toward becoming a coupon customer, using them mainly for restaurants and travel. What about you?
5 Quick Fixes for Your FICO Score
by Stacy Francis, CFP®, CDFA
An old friend – a real estate agent in the Midwest sent me an email this morning with a topic she suggested I post in my blog. With real estate prices at record lows, many aspiring homeowners are looking her up. Many fulfill both the down payment and income requirements for a mortgage. Unfortunately, they tend to underestimate the extent to which the credit markets have changed over the past couple of years. These days, there’s no way around it: your credit score must be sky high. Wanting nothing more than for her clients to have their dream homes, she has put together a list of quick lifts for that FICO score.
1. Pay down balances. A main ingredient in the credit score formula, the size of your balances really does matter. Pay them down – or even better, off.
2. Protest unfair information. If you have an entry on your credit report that shouldn’t be there (honestly, now), know that you can dispute it. If you submit complaints to the company that posted it as well as the credit-reporting agency, they will investigate and take it off, leaving your record a whole lot cleaner.
3. Ask for help. If you’ve been a loyal customer for years and normally make your payments on time, chances are, if you talk to customer service, they will disregard that one time you forgot to pay your bill because you were on your honeymoon. Ask politely – and thou shall receive.
4. Don’t neglect the oldies. Another important factor in the credit score formula is how long your accounts have been open. So even if the Victoria’s Secret card you applied for when you were in college doesn’t have the most useful perks, use it once in a while for a credit score boost.
5. Make your payments on time. It seems simple, yet so many people fail on this count. If you have a hard time remembering your payments, set up a reminder.
The Fear Factor: The True Cost of Emotion-Based Investment Decisions
by Stacy Francis, CFP®, CDFA
I am very intuitive, said a new client over raw food downtown yesterday. Thank goodness I can finally eat Sushi again. While I was pregnant this food was strictly off limits. Anyways, my client told me that she always listens to her gut when determining when to buy and sell. It has never been wrong in any other aspect of her life, yet she keeps losing money. Any idea why this could be?
I do have an idea, and I think it’s important enough to mention to the rest of you as well. The reason following her gut in investment decisions is getting my new client nowhere is that gut feeling is a biological function designed to keep you safe. So when things start to get shaky in the markets, it will tell you to pull out. When indexes start to head north again and others around you start to make money, it will pick up on their sense of security and conclude that it is safe for you to re-enter.
In essence, you will end up buying high and selling low – one of the worst investment strategies imaginable. Statistics show that it is not unusual for investors who move in and out of the markets to underperform major indexes with 1.5 points.
I’m not saying you should ignore your gut, because it is useful in so many other aspects of life. Sometimes, it can be a lifesaver! But when it comes to investing, it’s all about the rational. Draft a long-term strategy, stick to it, and – with the exception of your annual or bi-annual portfolio review – leave your money alone. You are much better off using that gut feeling to improve other aspects of your life.
6 Smart Money Moves in Your Thirties
by Stacy Francis, CFP®, CDFA
A couple of weeks ago, I attended my friend’s thirtieth birthday party. A week later, she called my office to schedule an appointment. While I was delighted to accommodate her, I couldn’t help but scratch my head a little. She never asked me about money before. What was going on?
It turns out that like so many people entering their thirties, she suddenly felt overwhelmed with financial responsibilities. Would she ever be able to pay off her student debt? What about buying a home? And retirement, it had dawned upon her, wasn’t as far off as it had seemed before. Nor was the whole baby thing.
It is true that your thirties bring a ton of financial responsibilities – but it is also a decade of wonderful opportunities! Below are six smart money moves and stepping stones toward a prosperous future.
- Learn to prioritize and keep your expenses down. While a few people pick this up in their twenties, many people never do – and they rarely enjoy a better-than-average standard of living.
- Pay off your credit cards. Not only will you save a bundle on financing charges, but as your FICO score improves, you can obtain better rates for mortgages and many other things.
- Build an emergency fund. Most experts recommend that you keep enough money to cover six months worth of living expenses in an easily accessible account. This is especially true today.
- If you haven’t done so already, start saving for retirement. You are best off stashing this cash in an account that scores you tax benefits, such as a 401(k) or a Roth IRA.
- Watch your debt. Get into the habit of spending less than you earn, making room for savings. Stay clear of high-interest and toxic debt.
- Review your insurance coverage. Chances are you have some sort of medical insurance already. Other types to look into include long-term disability and homeowner’s insurance (if you are planning to buy a home).
You don’t have to deal with them all at once. Just keep them in mind, and work on them whenever possible.
How the Recession Can Help Your Finances
by Stacy Francis, CFP®, CDFA
A newsflash from travelzoo.com just plopped down in my inbox. Apparently, this weekend, flight fares between New York and the West Coast run as little as $99, round trip. Now, with two little kids, spontaneous travel is not as easy for me as it once was. Still, I love that the possibility is there! Slashed airfares all over the country (and all over the world) is just one way the recession can help your finances. Below are a few others.
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Mortgage payments. With interest rates at record lows, this is an excellent time to refinance. Furthermore, with landlords growing increasingly desperate, renters with outstanding payment records may be able to negotiate a discount. Or take advantage of the rare low home prices-low interest rates combo and buy!
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Going out of business sales. Enjoy major discounts on the items you were planning to buy anyway (a car, new carpet for your bedroom, a flat screen TV) by sweeping up all the bargains out there.
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New business opportunities. Old, established companies going out of business means there will be plenty of room for up-and-comers once the economy comes back around. Start out slowly, be patient, and before you know it you’ll be in a perfect position to prosper.
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New wisdom. Yes, the past year or two have been painful for most. That we have learned the hard way may be the understatement of the year. Still, there’s no way around it: our attitude toward money has changed for the better.
Opportunity Cost and Holidays: Should You Stretch Your Budget for a Longer Vacation?
by Stacy Francis, CFP®, CDFA
During the latest Savvy Ladies teleconference, the topic of conversation was much rosier than the typical ones these days (unemployment, recession, and ways to cut spending). One member had just quit her job to realize a long-lost dream: to spend a year backpacking through Asia and Oceania. By staying in hostels and eating out of grocery stores, she wouldn’t use more money per month than a family visiting Disneyworld burns in a weekend. She was very proud of her calculation, and it does make a lot of sense …except she forgot to consider opportunity cost.
Since she won’t be making any money while traveling, she will also miss out on a year’s worth of salary. Whereas the family spending the big bucks during the weekend or while on paid time off wouldn’t face any loss of income.
Now, whether a weekend at Disneyworld is as much of an experience as a month trekking the Himalayas, I am going to leave up to you to decide. But considering how often people forget about opportunity cost, I always feel obliged to point it out.