Savvy Ladies Community

A Late Bill Won’t Kill Credit

Even the most responsible borrowers slip up sometimes. Maybe a utility bill went unpaid after you moved and the missed payment went into collections. Or perhaps there are unpaid library fines or parking tickets in collections that are hanging on to your credit history and affecting your FICO credit score, which is widely used by lenders to evaluate your ability to repay debt.

With the newest version of the FICO credit scoring system, however, minor delinquencies are now overlooked in calculating credit worthiness.

Under the updated scoring model, called FICO 08, small missed payments lingering in collections with original amounts of $100 or less will no longer do damage to your credit score.

Consumers also are less likely to be penalized for any single delinquency if it occurred two or more years ago- and if their credit history is otherwise unblemished. There’s more flexibility with missing a payment. If you have a more habitual pattern of paying accounts late, you’re more likely to get penalized for that.

If a consumer’s credit usage is high, that will be more likely to hurt his or her score with FICO 08. But getting close to your credit card limits- even if you always pay on time- is penalized in some way in very FICO score, not only the recent edition.

Which credit card is the best to earn mileage points?

 

 

There are so many credit cards to choose from to earn mileage points – a lot depends on your anticipated travel patterns and your preferred payment options. You could try this website to help you make a decision: http://www.frequentflier.com/card-intro.htm

 

When reviewing your options, don’t forget to look at the small print and get a handle on the interest rate (APR), annual fees and any other reward features as well as how points are earned and how you will most likely earn them based on your spending patterns. You’ll earn points quicker if you consolidate all your purchases on one card so try and choose a card that gives you the most flexibility in being able to utilize the mileage points you earn rather than seeing them being wasted because you can’t use them.

 

Some card issuers draw you in with some seemingly great perks, only to find that there are hidden clauses or penalties so watch out for these. There can also be blackout dates and seat restrictions and watch out for expiry terms for mileage points already earned.

 

Stacy Francis, Savvy Ladies

www.savvyladies.org

 

Ditch These Three Major Money Wasters and Save Hundreds

This weekend, my family and I spent some time browsing plasma TVs at Best Buy. Strolling past walls of pulsating light and sharp-as-a-knife imagery, I was amazed at how much prices have dropped lately. In line, I was even more amazed at the number of people who purchased extended warranties for their electronics. From a statistical standpoint, it makes little sense. The vast majority of such products malfunction either early on - while still under the manufacturer’s warranty - or way down the road, long after the extended warranty has expired. In this economy, few of us can afford to waste money. So do yourself a favor and decline these offers.

 

While we’re on the topic of money wasters, I would like to point out another one: gym memberships. I’m not saying you shouldn’t work out! Few things – if any – are more important than good health. But not only do many people pay more than they need to for their memberships (you can use sites such as globalfit.com to compare prices), but many of us don’t need the gym to stay in shape, at least not all the time. This time of the year, why not go for a run or bike ride in the park? The fresh air and change of scenery are free bonuses! I work out at 5:30 am four times a week and love being outside. It is relaxing and also super effective at helping me drop my post pregnancy baby weight.

 

The third major money waster on my list is overdraft fees. If you are unable to keep a cushion of a couple of hundred dollars in your account or if your balance bounces all over the place, consider signing up for overdraft protection. It typically costs $5-$10 per year, and with overdraft fees starting at $30 per transaction, you may end up saving hundreds.

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

Financial Planning 101- Where do I start?

 

Financial Planning isn’t only for the “rich and famous”.  The fact is that we ALL face three inevitable contingencies for which we should prepare;

 

1.       You may live a looooong life.  Do you have sufficient retirement savings?

2.       You may become ill and/or unable to work.  Do you have an income replacement plan? 

3.       You may die sooner than expected.  Will your family be financially secure?

                                   

One or two of these are guaranteed to happen, and therefore are a good starting point for planning your financial future no matter what your economic standing is.  If your answer to any of the above questions is NO, use that contingency as your starting point for planning.  Remember, these are inevitable so make sure these are addressed.  Once you get one taken care of, you’ll see that the rest will fall into place. 

Good Planning!   

 

Bounce Back Boot Camp

Recently, I received an email from one of my “Bounce Back Boot Camp” members who has difficulty planning a budget with a fluctuating income.  I’ve found that uncertain incomes are a common occurrence and can make your wallet stretch beyond its means.  There are so many jobs out there with incomes dependant on jobs completed and not salary-based which make preparing a budget a difficult, but an imperative tool to learn.  Because monthly income fluctuates like it does, budgeting could be one of the best skills you may acquire toward your path to becoming financially independent and secure. 

 

My friend recently the mistake of setting her savings goals on a fixed dollar amount per month or year.   A more flexible method would have been for her to try saving a percentage of the earnings she had each month to allow more flexibility.  Many advisors will recommend you save between 10% and 20% of your take home income and use 80% to 90% for living expenses.  I would recommend you follow these guidelines.  Aim to spend only 80% of your earnings on living expenses and save 20%.  Because of uncertain income, choosing to save closer to 10% during the less lucrative months and 20% when you make the big bucks is a good idea. 

 

If you have any outstanding bills that are overdue, then the beginning months may include 5% or 10% of your savings to contribute towards overdue bills.  My husband’s co worker had overdue bills of $1200, and he took home about $10,000 this month- so I advised him to  save about $1,000.  10% of the $1,000 is $100 he used to pay off his debt. Its efficient and it doesn’t set you back too much!

Depending on your personal situation and comfort level, you may decide to adjust these proportions to better suit your needs. 

Stacy Francis
Savvy Ladies
www.savvyladies.org

Your Cell Phone Bill: Is Prepaid a Better Option?

At a recent family get-together, the conversation turned to cell phones. More specifically, my sister-in-law had received a statement that morning. Stunned that she had used less than a third of the minutes she paid for, she wanted to know whether prepaid would be a better option.

What an excellent question! And indeed, many families could save big by making the switch. However, below are a few things to consider first:

1. How many minutes do you use – really? If you normally spend 600 minutes per month on the phone and the measly 100 minutes on your latest statement is the result of your phone being broken most of the month, you should probably stick with your plan. But if you find that during the past six months or so, you have never even used half of your minutes, prepaid could be for you.
2. Could it be that you just have the wrong plan? Have you looked at different plans and providers? From unlimited plans with majors such as T-Mobile and AT&T to cheaper options with lesser-known companies like Tracfone, chances are you could find a plan better tailored to your needs.
3. What about the handset? When you commit to a plan, most providers will throw in a free (or at least heavily discounted) handset. With prepaid, you typically need to purchase your own. If you have an extra handset, this may not make a difference. But if you don’t, you need to factor this price into the calculation.
4. Are you shopping for yourself or for your entire family? Family plans tend to be cheaper than individual ones. On the other hand, if you have teens, between chatting with friends and text messaging, a prepaid plan could save you a fortune.

Stacy Francis, Savvy Ladies

www.savvyladies.com

What’s Next For the Stock and Bond Markets in 2009?

With investors slowly recovering from the trauma of last fall, numerous clients have scheduled appointments over the next couple of weeks to discuss their investment strategies for the second half of 2009. While specific transactions should always be tailored to your unique, personal circumstances, below are a few general thoughts about investments in the New Year.

First of all, I don’t expect 2009 to be as bad as 2008. Not only was 2008 abnormal almost every sense, but the downside to investing is much smaller now than it was pre-2008. We don’t have as far to fall!

Secondly, most people in the know are predicting inflation, which should push yields on income-generating securities upward from the extreme lows where they are trading right now (if investors don’t expect the yields to beat inflation, the chances they’ll want to buy income-generating securities are small).

Thirdly, I expect that with slightly looser capital markets, the stock markets will slowly start to heal. This doesn’t mean that I expect a major rally. It is rarely wise to expect quick returns on investments, and now is no exception. But if you are in it for the long term, you should be fine.

Stacy Francis, Savvy Ladies

www.savvyladies.com

The New Triangle Drama: Remarriage, Kids, and Inheritance

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:

1. 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.
2. Draft a detailed prenup. It may not be the most romantic thing to do, but it can make all the difference later on.
3. 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.

Stacy Francis, Savvy Ladies

www.savvyladies.com

Nanny Tax 101

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?

Stacy Francis, Savvy Ladies

www.savvyladies.com 

This weekend, my family and I spent some time browsing plasma TVs at Best Buy. Strolling past walls of pulsating light and sharp-as-a-knife imagery, I was amazed at how much prices have dropped lately. In line, I was even more amazed at the number of people who purchased extended warranties for their electronics. From a statistical standpoint, it makes little sense. The vast majority of such products malfunction either early on - while still under the manufacturer’s warranty - or way down the road, long after the extended warranty has expired. In this economy, few of us can afford to waste money. So do yourself a favor and decline these offers.

While we’re on the topic of money wasters, I would like to point out another one: gym memberships. I’m not saying you shouldn’t work out! Few things – if any – are more important than good health. But not only do many people pay more than they need to for their memberships (you can use sites such as globalfit.com to compare prices), but many of us don’t need the gym to stay in shape, at least not all the time. This time of the year, why not go for a run or bike ride in the park? The fresh air and change of scenery are free bonuses! I work out at 5:30 am four times a week and love being outside. It is relaxing and also super effective at helping me drop my post pregnancy baby weight.

The third major money waster on my list is overdraft fees. If you are unable to keep a cushion of a couple of hundred dollars in your account or if your balance bounces all over the place, consider signing up for overdraft protection. It typically costs $5-$10 per year, and with overdraft fees starting at $30 per transaction, you may end up saving hundreds.