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 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!
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!
An Emergency Fund: Your First Line Of Defense
by Stacy Francis, CFP®, CDFA
If you don’t have an emergency fund, it’s time to get serious about building one.
The purpose of the fund is to sock away a minimum of three to six months’ living expenses. But this money could also be used when you’re staring at major, unplanned expenses such as a car breakdown or a leaky roof.
What’s important is that you put the money away consistently, and then tap it only for true emergencies. And let’s be clear! A new dress for your best friend’s wedding does not qualify as an emergency!
Why You Need It
Emergency funds are an absolute necessity for financial security because they give you funds to fall back on if you become ill or disabled and can’t work, or if you or your spouse lose your job, incur large medical bills, or have an unexpected large bill such as a major car or home repair.
Without an emergency fund, you may be forced to use credit cards that could take you many years to pay off. The steep interest rates of credit card debt will end up costing you much more in the long run. Pretty depressing.
How Much You Need
The minimum amount in your emergency fund should be three to six months’ worth of basic living expenses. Singles who don’t have dependents who rely on them may be able to get by with three months’ worth, but couples or anyone with dependents should definitely shoot for six months’ worth. The more people you support, the more likely you are to have unexpected or unplanned costs.
If you don’t have short- and long-term disability insurance at work or a private policy of your own, it’s a good idea to have even more cash stashed in your emergency fund. When estimating how much money should be in your emergency fund also consider the degree of difficulty you’d have in finding a new job if you lost yours. For example, if you’re a teacher and teachers are in demand, you probably wouldn’t be unemployed for as long as a person with skills that are not in demand.
Where To Keep It
While you wouldn’t want to keep your retirements funds in these types of accounts, saving accounts, money market accounts, certificates of deposit, money market funds, and short-term bonds are all good places to stash the cash you may need on short notice. These are the most liquid investments. Liquidity refers to how quickly an asset can be converted into cash. Your house is not a liquid asset because it could take months to sell it. Stocks are somewhat more liquid than real estate, but you can lose money on stocks if you’re forced to sell at a time when the market for your stock is less than favorable. Even though interest on liquid investments may barely keep up with inflation, the lower risk is worth the lower return when you may need the money quickly.
Savings Accounts
Savings accounts usually pay somewhat higher interest and segregate your savings from the money that covers your living expenses. They’re less likely to have monthly fees. One of the highest interest rates in town are offered by Capital One and Ally Bank.
Make sure that the account is FDIC insured so you know your account is always secure.
Money Market Funds
You can think of money market funds as low risk mutual funds. They’re not 100 percent risk free, but they’re safe enough. The Securities and Exchange Commission regulates these funds and limits the kinds of investments fund managers can make – primarily U.S. Treasury issues, and other securities carrying the highest credit ratings.
What should you look for when shopping for a money market fund?
Make sure the fund has low management fees. You want to pay less than 0.50% percent. Make sure to watch out for fees for check-writing privileges or electronic transfers from the fund to your checking account. Also be sure to ask what is the minimum check size. You should expect it to be between $100 and $500. You’ve got to shop around. Large, reputable financial institutions are your best bet. They are a good place to start.
Like any other mutual fund, you want to read the prospectus before you part with your money. Many investment companies will let you download prospectuses right from their Web sites. If you use an investment firm, talk to someone there or visit the company’s Web site to see what it has to offer.
Be sure to see a professional for guidance if you have questions about selecting a proper fund. Then set up an auto-withdrawal from your regular checking account or direct deposit amount from your paycheck right into this new account. Adjust your budget to accommodate having less money each month and forget about it.
You can also give your emergency fund a boost now and then by putting “windfall” money into to it. You know “free-money”: birthday gifts, inheritances, insurance settlements, escrow overages, rebates, tax refunds, etc.
Your emergency fund becomes your own financial insurance policy. And if you never use it you will have that much more money to play with when you retire. Or even retire early with the extra money you have saved!
Top IRA Trouble Spots
by Stacy Francis, CFP®, CDFA
Individual Retirement Accounts (IRAs) now hold more assets than any other retirement savings vehicles, but many people do not understand how they work and many IRA owners make critical mistakes that can cost them money. Here are some ways you can ensure that your IRA works for you.
1. Begin your required minimum distributions on time. Regardless of whether you are still working, you must begin taking an annual minimum required distribution from your traditional IRA no later than April 1 following the year you turn 70 1/2. You have much more flexibility with a Roth IRA and are not required to take distributions. However, for a Traditional IRA you will have still penalties if you don’t withdraw enough or you don’t withdraw it on time. You will owe up to 50 percent of the difference between the amount you took out and the amount you should have taken out. Why is the IRS so strict about taking distributions from a Traditional IRA and not a Roth IRA? The IRS wants your tax dollars. You must pay taxes on your distributions from a Traditional IRA while distributions from Roth IRAs are generally tax-free.
2. Don’t wait until the last moment. Don’t wait until the April 1 deadline to take out your initial minimum withdrawal. Don’t forget that you’ll have to make another withdrawal by December 31 of the same year. Watch out because these withdrawals in the same year could bump you into a higher tax bracket and increase your tax liability. Don’t let this happen.
3. Name a “real” beneficiary. One of the biggest mistakes is not naming a real (human) beneficiary. If you do not name a person, your assets will most likely go to your estate and this will cost you more money. That’s because if you hadn’t already started taking distributions yourself by the time of your death, the IRA assets must be distributed to your estate’s heirs within five years of death. Or if you had started, distributions must be paid out to the heirs over what would have been your remaining life expectancy. Either way, leaving your IRA to your estate deprives your heirs from “stretching out” the tax-deferred assets over their own lives and creates a bigger tax bill.
4. Name a contingent beneficiary. This allows the primary beneficiary to “disclaim” (reject) the IRA inheritance if he or she doesn’t need the money so that it automatically passes to the contingent, who typically is younger and can stretch out the inheritance longer.
5. Name the right beneficiary. Your spouse or parent isn’t always the best choice to name as the primary IRA beneficiary. An adult child might be a better choice. If you choose a young child you will want to consult a professional to find out if you need to set up a trust in their name to control the assets and distributions.
6. Changing your beneficiary. Don’t forget to change, in writing, your beneficiary in the event of a marriage, divorce, birth of a child, death of a beneficiary or similar circumstances.
Mid- Year New Year’s Resolutions for the Savvy Lady
by Stacy Francis, CFP®, CDFA
It’s halfway through the year and it’s time to make some changes. So what’s it to be? If you are REALLY serious about saving money and are willing to make a few changes in your spending habits, then read on.
1. Set goals and have fun The key to making your resolution become a reality is to set a ‘goal’. In other words, what do you want or need the ‘extra’ money for? Are you saving for a new beautiful handbag? What about a family trip to Las Vegas? Set up a savings account for nice things like shopping, holidays and other treats, and you won’t begrudge putting some of your hard-earned cash to one side each month.
2. Pay off one loan/debt over the next 6 months Some of us tend to collect debts like others collect handbags. The fact is, debts are not a necessary part of life. Make a pact with yourself over the next 6 months to get rid of as much of your debts as possible. Contact each credit card company and ask them for the total current balance. Work out how much that will cost you to pay off the debt completely over the next 6 months. It will probably surprise you how little it will impact on your lifestyle. Set up a direct debit and forget it.
3. Get a pay rise You know how, no matter what you earn, you always seem to live beyond your means? Well, now is as good as any time to take action. Collar your boss and ask for that pay rise. The worst that can happen is they’ll say no. And if they do, start looking for another employer who will pay what you deserve.
4. Cut out one money wasting expense like eating out This may be your number one money saver depending on how often you dine out. Trips to restaurants and fast food ‘joints’ quickly add up to be an expensive bill. Try and limit your outings to once a week. Not only will you find yourself saving money, but you’ll be eating healthier at the same time.
Financial Fitness for Newlyweds
by Stacy Francis, CFP®, CDFA
Let’s see, you’ve got the wedding chapel and the caterer booked, the dress selected, the cake designed, the wedding invitations mailed, vows written, finances talked about – oops, didn’t do the last one yet?
Money conflicts are a leading cause of marital strife and divorce. A frank discussion of finances before you say “I do” will go a long way in helping you stay “I do forever.” And harmony and understanding probably won’t happen by themselves. So couples should set aside some time to discuss their philosophies and goals about money — how much you want, how you want to use it, and how to make it part of your happy marriage.
While many of you would love to have the problem of too much money, most newlyweds will feel like there’s never enough money. That’s why it’s so important to understand your partner’s approach to money and to manage it well.
SPENDER/SAVER Which of you likes to spend money and which likes to save it? Often in a couple, one person has a more liberal approach to money and the other has a more conservative approach. It is important to understand that neither of you is “right.” Instead, you will need to come to a spending agreement that works for you both. You might agree on some spending strategies that include maintaining a joint household checking account for household bills, but keep separate accounts for spending as you wish. This will surely involve some compromises as well as give and take.
WHO DOES WHAT? Set up a weekly family meeting. My husband and I sit down for 30 minutes every Saturday morning (early before Sebastian and Samantha wake up) and discuss the upcoming events of the week as well as other concerns. Be sure to also talk about finances, marital roles, and existing obligations to friends and family members. Who is going to be paying the bills? Who is going to monitor the investments? These are just a few of the questions you need to agree upon. What you decide about rights and duties in your marriage is not important; whether or not you agree is. Make sure you talk about your life goals together to make sure you both are on the same financial page. Do you want to have kids, travel, purchase a home, or retire rich at age 40? You will have a much higher likelihood of achieving your dreams if you are both working together to achieve the prosperous life you deserve.
Contrary to common opinion, talking over one’s financial circumstances, and perhaps financial differences, usually doesn’t doom the wedding. Talking about your future finances will actually deepen, not divide, your relationship.
Mars and Venus – Women, Men and Money
by Stacy Francis, CFP®, CDFA
Mars may not be so far from Venus when it comes to money. According to a recent Redbook-SmartMoney Survey, most couples aren’t wasting time arguing over finances and they have few clashes over cash.
One of the most revealing survey questions asked, “Is money a source of fights in your relationship?” Only 7 percent of respondents said that money is the biggest cause of conflicts, while 62 percent money is “rarely or never” the cause of a clash.
More evidence of financial harmony on the home front: Most men and women (58 and 68 percent, respectively) said that both spouses have an equal say in financial decision-making. And just because one person may earn more than the other, they don’t necessarily feel that they should have more say when it comes to spending the family’s money.
Couples do seem to be honest with each other when it comes to their financial fears. This is a new cultural shift that is revolutionizing the marriages of the 21st Century. With women, men and money – we really do seem to be getting somewhere.
Savvy Ladies’ Tip: What’s the best way to keep such monetary disputes to a minimum? Know where your money’s going. To cut down on conflicts about spending carefully track your purchases.
Uncover what’s really behind those spats. Fights over your last manicure or his new tech gadget can sometimes be symptomatic of a bigger problem in a relationship. A good heart-to-heart can help reveal the real root of the fights.
Get your priorities straight. Taking the time to identify your financial goals is the first step towards a healthy financial relationship with your partner.
Does Gender Make a Difference?
by Stacy Francis, CFP®, CDFA
Women owned businesses experience greater success than those led by men, according to The Center for Women’s Leadership at Babson College.
Increasingly women are playing a larger role in the leadership of family-owned businesses. Women are making great strides in the business world, and we are building on our successes at a tremendous pace! Here are some of the highlights of The Center for Women’s Leadership recent study, which compares and contrasts the businesses owned by women versus men.
Highlights of the findings on woman-owned family businesses (WOFB) include:
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The number of WOFBs have increased by 37% in the last five years.
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WOFBs do more with less. Although they are somewhat smaller in size — $26.4 million — compared with the average annual $30.4 million in revenues of their male-owned counterparts, they generate their sales with fewer median employees, employing 26 individuals compared with 50 at male-owned firms. This means that female-owned family businesses are 1.7 times more productive than male-owned family firms.
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WOFBs are more than six times as likely to have a female CEO, with more than half of woman-owned firms led by a female chief executive.
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WOFBs experience greater family loyalty to the business, agreement with its goals, and pride in the business. They have a 40% lower rate of family member attrition.
Ready to start your dream business?
There are many resources to help you along the way including grants, free counseling and advice, and many workshops dedicated to helping women succeed. Check out these websites:
The Small Business Administration
SCORE NYC – Free training and advice on starting your business
A Spring Makeover for Your Finances
by Stacy Francis, CFP®, CDFA
Now that spring has officially sprung you might be making plans to stash those dull winter clothes away and reveal your swanky spring digs. Most of us have perfected this yearly wardrobe ritual, but many of us have a lot to learn about cleaning out our money closet.
Trim those spending splurges Track your expenses for at least one month. Record what you pay right down to the newspaper, bagel and mocha latte you grab on your way to work. If trimming these expenses will save $10 a day, you’ll be saving $300 a month, and be nearly $4,000 ahead by the end of the year.
Spruce up your savings If you don’t have direct deposit already, talk to your HR department and have 5% to 10% of your paycheck deposited directly to your savings account, mutual fund or retirement account. Saving regularly and using a payroll deduction plan makes saving less painful.
Write your goals in stone. Or at least on paper. Put your top five goals in writing. Study after study has shown that writing goals makes it much more likely that you will achieve them. Decide which are most important to you, how much you need to accumulate to meet this goal, and then take immediate action to turn your dreams into reality. If you do not start moving towards your goal now, you never will. This can be as simple as going on the Internet and researching houses, loan consolidation or mutual funds.
Make learning about finances a “girl thing.” Get a group of girls together and have a “Girls Night Out” and go to a Savvy Ladies seminar. Or have a Savvy Ladies seminar come to you at your office or favorite girls gathering place. In no time you will be dishing about where you are stashing your extra cash at the water cooler or offering your latest budgeting tips while sipping that oh-so-cool Cosmo at Light.
Follow these easy steps for a makeover of your money closet.
