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
Real Estate: Reading the Fine Print Before You Commit
by Stacy Francis, CFP®, CDFA
Reading the Fine Print Before You Commit
After December’s holiday festivities, January can feel like a dreary, lonely month. So you can imagine how delighted I was when I picked up the mail the other week and found an invitation to a cocktail party at an old college friend’s place. The invite promised delicious hors d’oeuvres and divine views, and my friend kept her promise. The condo was modern, light, spacious, and equipped with all the newest luxuries.
When I asked my friend how she had gotten her hands on such an amazing place, she laughed and told me getting her hands on it had been easy – getting rid of it was the challenge. Apparently, last October, one of the women on her floor had run into financial difficulties and therefore wanted to sell her condo. Unfortunately, it turned out that the contract had a clause prohibiting residents from selling their condos until all the units had sold. And the building, despite the marble counters and commercial dog driers, was only 33% occupied.
The Dalai Lama once said “leave your mistakes behind, but never the lesson.” So here you go. In the era of sign-on-the-dotted-line and inch-thick stacks of contracts, you really do need to read the fine print – or, even better, go over it with a legal professional.
Job Loss – Now What?
by Stacy Francis, CFP®, CDFA
We all know someone who lost his or her job last year. For my husband’s friend, though, it seemed to happen out of the blue – he is a news producer at a major news station. But with dwindling demand for advertising time, many stations are finding it difficult to cover the costs associated with local news. And so sixty people were advised in December that when the holidays were over, they would no longer be needed. The reason I am mentioning this is not to whine about the economy, but rather to share the story of how he coped – like a true role model for the millions of Americans in similar situations. If you are one of them, here’s what to do:
- Be professional. Many people said “no way am I working during the holidays if this is how you thank me,” but not my husband’s friend. By continuing to prove himself until the end of his very last show, he scored himself a much better chance of being rehired when the economy comes back around.
- Lick your wounds – but don’t wallow in self-pity. Yes, losing your job is sheer misery, especially in this economy. Feel sorry for yourself for a day or two – then move on.
- Cut your spending – but give yourself a pat on the shoulder for the emergency fund you have set aside. In the past, you sacrificed things you wanted to save that money. Now it is paying you back by saving your life!
- Manifest and focus on your best-case scenario. Taken the right way, the loss of a job can be a golden opportunity to make positive changes in your life. Take some time to figure out what you want the future to bring, set goals, and get to work on fulfilling them.
- When you are unemployed, your job search becomes your profession. That means setting the alarm at your usual hour and spending a good eight hours browsing job sites, writing cover letters, sending out resumes, networking and attending interviews.
What Size Mortgage Can You Afford?
by Stacy Francis, CFP®, CDFA
With real estate prices free falling in many areas, mortgages seem to be the topic on everyone’s minds. It is hard to narrow down all the different concerns people have into a structured format, but my facilitators report that one of the most frequently asked questions in the Savvy Ladies Empowerment Circles is: what size mortgage can I afford?
This is a great question! Even better, it has a simple and straightforward answer. Most lenders limit the size mortgage an individual or a couple can take on to 28% of the gross income. If you have other types of debt, the total payments for your debt, including your mortgage, needs to stay below 36%.
This comes as a surprise to many, as it is not unusual for people to spend 40% or more of their income on rent and still make all their payments on time. Because of this, some lenders will let you borrow a little more, especially if your credit rating is stellar or if you put down a decent down payment.
But what you also need to ask yourself is . . . how much can you pay, without having to cut down on things like contributions to retirement savings accounts? Don’t forget that taxes and insurance costs will pile up on top of your mortgage payment. As houses are illiquid (today more than ever), take an in-depth look at your finances – or hire an expert to do so – before you commit to a mortgage.
Credit Card Myths
by Stacy Francis, CFP®, CDFA
I went for a run in the park this morning, with my favorite workout pal. Thank goodness she is a good friend as I don’t run as fast as I used to now being pregnant. Anyways, she surprised me mid-run by asking whether it was really necessary to keep six months’ worth of income in an easily accessible emergency fund. Wouldn’t it make more sense to put her money in retirement accounts so that she could cash in on the tax benefits, and then do a cash advance from one of her credit cards if she got into trouble?
This got me thinking about credit cards, and how even though almost everyone uses them, few have a real perception of how they work. Below are three common myths about credit cards, starting with my running buddy’s.
- Doing a cash advance from your credit card is like taking cash out of the ATM. No. Rates and fees are sky high for this transaction. Avoid it.
- In times when money supply is short, you can stick to the minimum payments on your credit card balances. Again no. Not only will you waste horrendous amounts of money on interest, but paying the minimum balance only will drag down your credit score.
- It’s OK to take your cards to the limits. Third time no. This is OK only if you don’t care about your credit score, and don’t mind spending your money on interest instead of investing it – or enjoying it.
Scoring a Mortgage in Turbulent Times
by Stacy Francis, CFP®, CDFA
“For years,” a woman said during a recent telephone conference, “I was waiting for the real estate bubble to burst so that I could buy something. Now that it finally has, no one can get a mortgage.”
While it is true that it is much more difficult to score a mortgage today than, say, two years ago, it is still far from impossible. My husband and I just got a mortgage 3 months ago. Here are three things you can do to increase your chances:
- Work on your credit score and history. If you have a stellar credit score and a flawless history, you’re halfway there. And even if you’ve had a few hiccups in the past, paying down your balances and making your payments on time will greatly increase your chances.
- Don’t ask for a larger mortgage than you can afford. Banks are very wary of this problem right now. If your household income is, say, $6,000 per month before taxes, don’t ask for a mortgage where the interest alone will cost you $5,000 per month. Be realistic, and banks will think higher of you.
- Make a down payment. Not only will doing so make the amount you need to borrow smaller, but it also shows the lending institution that your finances are sound and that you are ready to be a house owner. We actuallyput down a 25% down payment making our monthly mortgage more manageable.
So while I won’t disagree that first time home buyers will have a harder time making their dream come true today, there is certainly hope. After all, many houses do sell even in today’s market – and so someone must be buying them. If you follow these easy guidelines, you may very well be next one.
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.
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.
