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
Spring Cleaning Your Financial Closet
by Stacy Francis, CFP®, CDFA
Spring is a time of renewal, which means there’s no better time than now to dust off your personal budget, dig the change out from under your sofa, and clean the cobwebs off your savings plan.
So how do you get started?
Begin by reviewing your income and expenses for the past several months. You can set a budget and track your goals.
Review all cash, checks, and credit card transactions. This will also help you identify the majority of your spending. Keep in mind that credit card expenditures do count. You will have to pay expenses—ideally, in full—when the bill arrives.
The hardest part is tracking your cash outlays for your daily coffee and lunch at work. You can also track your ATM withdrawals; it is helpful to know how you spend your cash.
Once you have your income and expenses down, you can see where you are spending your money. You may be surprised to find out you are spending more than you realized. Once you budget you can’t hide the fact that you spend $20 a week on Starbucks’ coffees.
Armed with knowledge about what you’re spending your income on, you can begin to make lifestyle choices that help reduce your spending on a regular basis.
The difference between your income and your expenses (assuming the first number is bigger) should be considered your “opportunity money.” This money can be used for additional investments and savings and can help speed your path to financial prosperity.
Once you’re done cleaning your financial closet, you may be ready for a spring makeover of your finances.
The Benefits and Risks of Owning a Home
by Stacy Francis, CFP®, CDFA
With all of the excitement in real estate lately, you might be wondering if you should take the plunge and buy a home. Homeownership has many advantages – both financial and personal. But there are many things to consider before you jump in and make your purchase. Here we take a look at some of the benefits and expenses of owning your own home.
Firstly, the differences between renting and homeownership are:
Tax savings There are possible tax savings to be derived because you can deduct mortgage interest and property taxes from your federal income tax and many states’ income tax if you itemize your deductions.
A more stable monthly housing expense Depending on the type of loan you choose, you may be able to budget your finances more definitely. If you choose a fixed rate, your monthly housing loan or mortgage expense can remain the same for the life of your mortgage.
Equity Equity is the difference between the fair market value (appraised value) of the home and the outstanding mortgage balance. It is possible to build equity in your home over the life of your loan. This will allow you to plan for future goals like your child’s education or your retirement. But be careful, there are advantages and disadvantages to using the equity.
While there are advantages such as tax savings and equity, owning a home can cost a lot. Homeownership may not be right for everyone. You may not be in a situation in life where you are able to make the big commitment that is associated with owning a home.
So what are the risks of homeownership?
Monthly housing expenses can increase If you’re not careful, your monthly mortgage payment may be larger than your rent. While these higher monthly payments may be offset by a tax benefit at the end of the year, it is still a lot of money to let go at the time. It is recommended that you talk to a tax professional to understand your particular situation.
You become your own landlord This may sound like a good thing, and it certainly has its advantages, but being your own landlord means more responsibilities. If an appliance breaks, you will have to pay for its repair or replacement. You are also responsible for the maintenance and upkeep of your home and your property.
You must sell your house to move Owning a home is a big deal. If you decide to move one day, it isn’t as easy as packing up and leaving. Depending on the local real estate market, you might not be able to sell your home quickly.
Property values can depreciate Like with most products, the minute you purchase it, its value could depreciate. You can lose value in your home for a number of reasons, such as a recession, the condition of your home not being kept up, or a drop in a neighborhood’s home values. If your home loses value and you have to sell it for less than you owe, you will be required to repay the full mortgage.
Overall, homeownership is a good investment for most people, but there are risks. If you understand the benefits and risks of homeownership, you can make the best decision about when to buy a home.
Be Your Own Knight in Shining Armor
by Stacy Francis, CFP®, CDFA
Are you still looking for your knight in shining armor? Or have you already found him? Either way you have your work cut out for you when it comes to finances!
$ More than 50 percent of all marriages fail.
$ After a divorce, the average woman sees her standard of living drop by as much as 30 percent.
$ The average age of widowhood is 56 years old.
$ The average woman lives to 80. (The average man, to age 74.)
$ The poverty rate for elderly women is twice that of elderly men.
Savvy Ladies’ Tip: Read Prince Charming Isn’t Coming: How Women Get Smart About Money by Barbara Stanny.
Can’t Do It All? Your Top 5 Financial Priorities
by Stacy Francis, CFP®, CDF
“I can’t sleep at night,” complained a savvy lady over breakfast last week. Seeing the dark circles under her eyes, I didn’t doubt it was true. A venti caramel macchiato later, she explained that at age thirty-six, she had only recently started to look into personal finance. Now she felt so bombarded with should-haves that she had no idea where to start.
She has a good point. Even during slow, quiet periods of our lives, it can be difficult to keep up with everything financial. And when things turn crazy, like they do from time to time, it can be near impossible. Fortunately, there’s relief. See below for a list of your top five financial priorities – in order.
- Pay your bills – preferably on time. Make sure they don’t exceed your income, and if they do, make it your very first priority to cut your spending and/or boost your income. When your accounts payables and accounts receivables match, and you are no longer struggling to make ends meet, take a breather and give yourself a pat on the shoulder.
- Create a financial cushion for yourself. Even as little as a few hundred bucks can have a dramatic impact on your shut-eye. Even better, you will save a bundle on late fees, financing charges, bounced check fees, etc.
- Start saving for retirement. Even if the amount you can spare is so tiny, you can’t see how on Earth it’s supposed to make a difference. Not only do the dollars you set aside first matter the most, as they have the longest time to grow, but you get yourself into the habit of saving, which is, as MasterCard likes to put it, priceless.
- Pay off your worst kinds of debt, such as high-interest balances and debt where the lender can change the loan terms easily.
- Look into long-term disability insurance. This may not be the rosiest of topics, but life can be dangerous and you need to make sure that even if you do lose your ability to work, you’ll have food on the table.
Now, take a break. Really, you have taken the five most important steps toward financial success.
Is there such thing as a kid-friendly bank account?
by Stacy Francis, CFP®, CDFA
Have you ever given a dollar to your child and seen the expression of awe on their face? Imagine how that expression can change in a few years when they have their own bank account that has increased because of interest.
The problem? The high fees on low-balance bank accounts mean kids are likely to end up losing money. An ordinary savings account usually requires a balance over $200 to avoid those annoying monthly fees of around $3. This means that a child may pay $36 a year in fees and only earn 50¢ in interest.
The solution? Fortunately, many banks offer a no-fee, no minimum option for minors; however, they do not always advertise that fact–YOU have to ask. If you are lucky, you may find that some banks offer bonuses for kiddie savers like higher rates and prizes for deposits. Compare terms at local banks to find the best deal.
Keep in mind.. What matters most is the experience kids get when they go to the bank to hand over cash and they learn to feel good about saving money. This may be the best financial lesson you can give them.
Big Money VS Little Money
by Stacy Francis, CFP®, CDFA
There is always that friend that makes a little bit more than you or maybe you’re the one who makes more. Regardless, once in a while that feeling of awkwardness arises when it comes time to paying the check or deciding where to go for the night. Wealth differences can drive a wedge between even the closest friendships, where even a sociable lunch can feel weird. However, there are many ways to sustain your friendship without the feeling of guilt or resentment. If You Make Less
- Be Honest– If you cannot afford it then just say so. Remember, you did not become friends with the opening line: “how much are you making?” Simply say: “Sorry, not tonight.”
- Give A Little- If you cannot afford to split the check, say so beforehand and offer to pay for something else—the tip or the wine. If you get invited somewhere and he’s paying, contribute in other ways by making reservations.
If You Make More
- Sometimes, Suggest Burgers- You don’t always have to choose the expensive places to eat– try out a cheap place but make sure you don’t make your friend feel sorry for his or herself. Make it known that quality time is the principal.
Treat With a Purpose or Just For Fun-Treating too much can make your friends feel inferior, so give an excuse—a late birthday gift or a thank-you favor. One of the perks of being wealthy is the ability to be generous, so make sure you treat it lightly, like it’s no big deal.
Savvy Ladies
Finding the Money for a Baby
by Stacy Francis, CFP®, CDFA
A new mom the second time around, of course I run into many other new moms. Despite the lack of sleep, they’re all so radiant and happy. However, when they learn that I am a financial planner, a different emotion often surfaces – the feeling of being completely overwhelmed with new responsibilities. For most of us, it takes years and years to find the perfect father for our future child. We also tend to factor in safety and the quality of schools when shopping for our first home. Yet most of us fail to prepare for the financial impact of the new family member. Below are a few things you can do.
- Get the appropriate medical coverage. Make sure pregnancy checkups, birth, and hospitalization are covered. Of course, when your baby arrives, you need to add him or her to your policy.
- Acquire disability insurance before you try for a baby. Just in case, something should happen, you are covered.
- Find the right work-life balance. If your partner’s paycheck is big enough to support all three of you, you may want to take some time off to bond with your newborn. If you have flexible schedules, you may be able to take turns caring for him or her.
- Sort out childcare. This is an area where a bit of research can make all the difference. Between nannies, pre-schools, co-ops and other options, both quality and price tags vary widely. Don’t forget to take the dependent care credit on your tax return too!
- Cash in on your tax breaks. With the Child and Dependent Care Credit, you can save a bundle.
The Scoop on IRAs and Tax Losses
by Stacy Francis, CFP®, CDFA
My friend who is a stockbroker wrote heaps of sell tickets for his clients back in December of last year. This may seem controversial, considering that finance gurus always advise us to sell high and buy low and it has been a long, long time since stocks traded as low as they did at the time. However, selling stocks in a down market has one huge advantage: you can deduct the losses from your taxable income. Especially thinly traded, volatile stocks that have performed poorly throughout the year tend to be hammered to the ground in December, only to rebound in January as investors with a long-term, bullish perspective pick them back up again.
Taking advantage of these losses in your regular, taxable accounts is a no-brainer. But at times, it can pay off to take tax losses in your retirement accounts as well.
Before you read any further, take note that you can never deduct losses in traditional IRAs or 401(k)s. The reason for this is simple: you already made a deduction when you put the money in the account!
However, if you have a Roth or traditional nondeductible IRA, you may be able save a few tax dollars, as long as your cost basis is higher than your current account value. Unfortunately, this type of transaction has several drawbacks.
First of all, in order to deduct a loss, you need to liquidate the entire account. When you want to build it back up again, all the usual limits and restrictions will apply to you. Furthermore, losses in these accounts cannot be deducted directly from your taxable income – they can only be used as parts of an itemized deduction. Therefore, they are much less beneficial for this purpose than losses in regular, taxable accounts.
To sum up, taking a tax loss in your Roth or traditional nondeductible IRA may make sense if you have accrued only a tiny balance and you itemize. If you have a large amount of money saved up, you don’t itemize, or your account is either a 401(k) or a traditional IRA, don’t bother.
The 8 Characteristics of a Successful Financial Plan
by Stacy Francis, CFP®, CDFA
Having a financial plan in place means more than just having a good asset allocation or some insurance to protect the people you care for. No matter what your age is or income level, you should always have a plan in place. it is recommended that YOUR financial plan includes ALL of the following 8 characteristics for a healthy financial plan.
8 Financial Advice Tips from a Financial Expert
- A consistent flow of money into the plan. It isn’t enough to randomly “feed” your plan and rely on portfolio returns. Consistency breeds stability and predictability when it’s time to “reap”.
- A fair rate of return as it pertains to your individual plan objectives and risk tolerance.
- Minimum tax consequences while you are building your plan.
- Minimum tax consequences while you are reaping the fruits of your labor.
- Access to your money. Your plan will most probably include different “buckets” of money. Some intended for short-term objectives and some for longer term objectives. When an objective is reached the funds set aside for it should be easily accessible.
- Minimum risk. If you have gone to the trouble of putting together a well-thought-out plan, don’t try to accelerate your progress by taking more risk than you have to in order to accomplish the goals you set out for yourself with the help of your planner.
- Provide for emergencies and unpredictable events. “Life happens!”
- Flexibility to change and adjust as your life does.
Your plan will stand the test of time and will reward you well if you take care to include each and every one of the above. If you cut corners or leave out any of the above, your plan will at some point fall short.
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