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
Why Investments Are Nothing Like Husbands
by Stacy Francis, CFP®, CDFA
With Sex and the City: The Movie hitting cinemas and everyone dying to see Carrie in her wedding dress, I became aware of yet another reason I love financial planning. Ready?
One of the greatest things with investing is that it’s nothing like love: there’s no need to choose just one. Marrying a security and holding on to it no matter what is mulish at best, disastrous at worst. The world changes constantly, and as a consequence, so do market outlooks, as well as future and current situations for industries and specific companies. Playing the field isn’t only accepted but advisable, and the savvy investor can – if she loses the reason she started the love affair — dump stock or a fund in an instant without a trace of regret. And why shouldn’t she? There are no joint assets, or children, or houses to fight over. It’s not personal – it’s just business. Still, few people lose money faster than the “investment sluts”, who change their portfolios daily depending on their mood; dropping stocks they no longer love in down markets and desperately chasing the ones admired by others.
So while most of us spend at least our younger years looking for that one person that makes our lives complete, with securities, feel free to gather yourself a whole harem. As long as you love them all and you have good reasons for bringing them into your life, having several isn’t only socially acceptable – most experts recommend it.
When to Give Up on an Investment
by Stacy Francis, CFP®, CDFA
I had an interesting conversation with a client the other day.
I don’t feel good about this certain fund, she told me, in a market like todays.
So let’s sell it, I advised her. Buy something you feel better about – or if you are really worried, leave the money in cash for now.
Oh no, she said, I can’t sell the fund, because it’s down from where I bought it.
I spent the following hour musing over when we should give up on an investment. Here’s what I think. No matter what your reason was for buying the security in the first place (you were bullish on this industry, you share the company’s values, you adore the business model, you like the fund manager’s expertise and performance, etc), if you lose this reason, you need to lose the investment. Every hour every market day, you choose whether you like your investment, or not. If you like it, you buy, or if you already own the security, you hold. If you don’t like it, you don’t buy it, or if you already own it, you sell. It is as simple as that. Holding equals buying, and selling equals not buying. Whether your investment is up or down from where you bought it is irrelevant, as the past has no meaning when it comes to investments. It is all about what the price is now, and what you – or the people you trust for advice – think it is going to be in the future. So be clear over the reasons for your investments, and use them to determine not only when to get in, but also when to get out.
Investing in Different Countries
by Stacy Francis, CFP®, CDFA
With China recovering from a devastating earth quake, and Burma still receiving aid to fix the damage from the enormous cyclone that hit the country recently, it is easy to pass “overseas” off as a scary place where you could lose your money just as easily as those people lost their homes. But the thing is, spreading your capital across several countries and markets may actually put you in a position of less overall risk. Here’s how.
First of all, it is important to note that between the tornado in the Southeast, Hurricane Katrina and the California Wild Fires last fall, plus a war at our hands and an economy headed for disaster, the US isn’t exactly the yoga retreat of investing, either. Those of you who have kept an eye on the stock markets this spring will know what I am talking about. By diversifying between different countries, you lessen the effect it will have on your portfolio if one of those economies turns sour.
Secondly, with the dollar dwindling lower and lower, if you invest in foreign markets, even if your stocks (or funds) remain flat, you can make money off the exchange rate. Of course, if you think the dollar is about to bounce back, investing overseas may not be the right thing for you, as your foreign investments will lose value if that happens, in dollar terms.
Finally, when countries that have traditionally been poor start to catch up, the growth rate can be tremendous. A good example is the explosive growth we saw in several South East Asia in the late nineties. Of course, as I have pointed out before, the higher the potential return, the higher the risk. But if your faith in the good old greenback is dwindling, it just might be worth it to look into a few interesting alternatives.
Pet Healthcare and Insurance
by Stacy Francis, CFP®, CDFA
Last week, I spent a long afternoon in the animal hospital with my cat. The good news is that Sunshine is doing just fine – the bad news is the bill – almost $700. Most people who – like me – love their pets to death have considered purchasing health insurance for them at one point or other. But despite the wild rates charged by many veterinarians, it may not be the best solution. Here’s why.
- Health insurance for pets is expensive. Expect to pay several hundred dollars per year and pet – if not more. If your local vet is reasonable, you may be better off paying his or her bills than dumping your money into a policy.
- Pet insurance plans usually have high deductibles. Don’t expect to be reimbursed for any minor checkups or procedures. These are on you – in addition to the insurance plan.
- The insurance company will tell you they cover pretty much everything – until you try to collect. Then, suddenly, you will learn that eye problems are not covered for this certain breed of dogs, or that this bird disease is exempt. Be very careful when you chose your insurance company and plan. When taking recommendations from friends, make sure their pets have actually been sick, and that they have successfully collected from the company in question.
- You may be better off giving your pet a savings account. Especially if your pet is young and healthy, it may be more beneficial to set a bit of money aside each month for vet expenses. This way, you have no deductibles and no holes in the coverage.
With all this said, of course, in certain situations it makes perfect sense to purchase health insurance for your pet. If, for instance, your horse colics and has to spend four days in the animal hospital, with rates of several thousand dollars per day, you may be glad you did.
Reverse Mortgages
by Stacy Francis, CFP®, CDFA
I had lunch with a friend today, who works with mortgages. She said that while for obvious reasons, not that many people are signing up for conventional house loans at this time, many are inquiring about so-called reverse mortgages. For those of you not familiar with these, I thought I should share.
If you are a senior who own your home and need more income, some people will suggest that you take out a reverse mortgage. A prerequisite is that you have paid off a good portion – if not all – of your home. You can then get a deal where the bank “pays” you a certain sum of money each month, and your mortgage grows accordingly. In a way, these “payments” are the opposites of amortizations, where you own more of your house each month, and the bank owns less.
After you pass on, the bank owns whatever portion of your house that you have mortgaged. For obvious reasons, the bank will not let you lend more than your house is worth. They use complex calculations to make sure that the monthly sum they “pay” you is small enough that your total mortgage will not go beyond the value of the house during your life expectancy.
While reverse mortgages can be the only way out of a desperate situation sometimes, be very wary of fees if you are getting one for yourself (or someone in your family). Many times the fees are so huge compared to the amount of money you can take out; you are better off seeking an alternative money source.
The Free Way to Clean Up Your Credit Report
by Stacy Francis, CFP®, CDFA
A client complained to me the other day about how she had spent months trying to have a certain entry removed from her credit report. It was a misunderstanding from the beginning, it didn’t belong there, and because companies use credit reports for pretty much everything these days, she was frustrated and angry and dejected. Did I have any advice for her?
Well, there’s one thing you can do. Many people don’t know that if you feel an entry on your credit report has been put there in error, you can complain in writing to the credit-reporting agency (meaning that if this certain record has been reported to all three agencies, you need to send letters to each one of them separately). The agency then advises the company that put the entry on your record about your complaint, and it has thirty days to respond and strengthen its case. If it fails to do so, the reporting agency removes the entry from your record.
This may sound like a “so what?”, but the truth is many companies are so overwhelmed, if your entry is minor enough (or complicated enough), chances are, they won’t think it’s worth their time to fight your claim. I know many people who have used this technique to improve their credit histories – and thus their futures. It only takes a few letters, and the most it’ll cost you is a couple of stamps.
So next time the thought of spending hours on the phone trying to cut through layers of bureaucracy makes you cringe, try this alternative approach and throw the bureaucracy right back at them!
The Concept Time Value of Money
by Stacy Francis, CFP®, CDFA
I came across an interesting article in the newspaper this morning. Did you know that in many Muslim countries, it is illegal to charge interest when lending someone money? This got me thinking about the concept time value of money – in a way, the very foundation of the US banking system.
The essence of the concept time value of money is that money is worth more now than in the future. All other things being equal, I’d rather get paid $10 today than $10 five years from now. Why?
Well, apart from a pinch of impatience and another one of instant gratification, strictly rationally, $10 today will score me more purchasing power than $10 five years from now. And not only will inflation have made everything I can buy with my money more expensive in five years, but it is also a matter of opportunity cost (what you un-choose when you select a certain path of action). Because if I receive $10 today, and decide not to spend any of it for five years, I can invest it and score myself a yield. Most likely, in five years I will have at least $14 – enough to make up for inflation and then some.
This is why US banks charge you interest on your loans. Because they know about time value of money, and they would rather have the $10 today, too. So you need to compensate them for lending you the money – make it worth it for them. This is also part of the reason we invest. Because if we’re going to put off spending our money, we had better not only make enough off our investments to offset inflation, but we need a little extra to make it worth the wait.
How Much Is Your Time Worth?
by Stacy Francis, CFP®, CDFA
A friend of mine, who is a lawyer, left work early today to clean her house before her in-laws were coming into town. With her earnings in excess of $350 per hour, I frowned and asked why she didn’t simply hire a cleaning service. No, she said, I can’t do that. I can’t just waste money.
Waste money? Looking at it from a numbers perspective, here’s what happened. By leaving three hours early, she missed out on more than $600 worth of earnings. You can get a decent cleaning service around here for $15 per hour. So if my friend would have stayed at work instead of running home early, she would actually have saved $600-$45=$555. Hardly my idea of wasting money.
I know I’ve mentioned opportunity cost in this blog before, and this is an excellent example. How much is your time really worth? If you are a stay at home mom with no college education, chances are, it makes sense for you to clean your own house. But if you are a career woman making the big bucks, should you really spend five hours per week cleaning (or, for that matter, shopping for groceries), when you could spend that time at work?
When battling decisions like these, always consider the opportunity cost. If you weren’t at home scrubbing your bathroom floor, what would you be doing? What are you giving up in order to engage in your current activity? Then, lose that outdated yuppie guilt, and use a rational perspective. You’ll be surprised at the changes you’ll find yourself making.
The Gas Issue
by Stacy Francis, CFP®, CDFA
I paid over four dollars per gallon at the pump today! While this may not impress Europeans, who have paid such prices for ages, the cost of oil certainly isn’t helping the US economy right now. Herds of people are making the switch from large SUVs to compacts – even hybrids. But in dollar terms, how much of a difference does it make what kind of car you drive?
Though the numbers vary slightly, the main consensus seems to be that the average American commutes 33 miles per day, between home and work. Nine out of ten drive a car. So say that your commute is 33 miles per day, and that you work 5 days per week, fifty weeks per year (gotta have a few days off). This adds up to 8,250 miles per year.
Now let’s look at cars. On one side of the spectrum, we have small Japanese hybrids such as Honda Insight, Toyota Prius, and Honda Civic Hybrid. These cars will get you 66, 57, and 47 highway miles per gallon, respectively. The other extreme is sports cars, or huge SUVs. A Hummer will get you 10 highway miles per gallon, a Dodge Ram 12, and a Lamborghini Murcelago 13.
So if you’re driving a Honda Insight 8,250 miles per year, at $4 per gallon gas, this will cost you $500. If you on the other hand go for the Hummer, and drive the same number of miles, your price tag will be $3,300. The difference is $2,800.
So while your car is likely to land you somewhere in the middle, with several thousand dollars per year in potential savings, it is not hard to see why to many Americans, bigger is no longer better.
