Savvy Ladies Community

A Better Family Budget

I’m a CEO, explained the new client with whom I had lunch yesterday, yet I feel as though I have no control whatsoever over my family’s spending. I never have any money left to invest, store and credit card bills grow larger each month, and my children demand more and more expensive clothes. I’m completely overwhelmed – and exhausted.

I have heard similar stories many times before, so I was able to ensure her that there’s an easy fix to her problem. She simply needs to manage her household budget the same way she manages her company’s budget! These days, many women possess exceptional organizational skills that make them extremely successful in the corporate world. What many don’t know is that these skills are just as useful at home with their personal finances.

If my new client’s situation hits a bit too close to home, follow these four easy tips to get your family budget under control:

1. Review spending history. Before you start to make changes, make sure you know where the money is going. To many, seeing their spending habits on paper is a big shock!
2. Listen to your employees – in this case your family members. Strategize together on how to save up for expensive items like vacations, and review budgets as well as ideas for how to make them work.
3. Make the budget public, leaving as little room as possible for doubt and misunderstandings. The budget should include both goals and ideas for how to make them a reality.
4. Review your progress frequently. Gather your family once per month to review the parts of the budget that are working out - and the ones that aren’t. If needed, solicit ideas for troubleshooting. Your spouse and children are much more likely to make an effort to stick to the budget if they were part of creating it!

Stacy Francis, Savvy Ladies

www.savvyladies.com

Top 5 Tax Savers

Times are bad indeed. My friend, who would normally never talk to anyone about money, invited me over for dinner last weekend to discuss her financial situation. Her husband is a stockbroker, so he’s barely making pocket change. Struggling to survive on her salary, they just crunched some numbers in their efiling software and learned that they owe the IRS almost $8,000. With no savings left except for the money stashed in their IRA accounts, how are they supposed to come up with the money?

 

Before you pull cash out of your IRAs or take out a loan, I told them, let me take a look at those numbers and see if I can shrink that tax bill. Many people pay more tax than they need to, because the tax code is complicated and the thought of studying it in detail makes them queasy. If you are one of these people, at least make sure you are aware of these top 5 tax savers.

 

1. Investment losses. I expect this to be one of the biggest tax savers this year, with stocks and mutual funds invested in stocks down across the board. If you have sold these types of securities, you may be able to deduct the losses from your tax basis. You can offset capital gains against capital losses. If you still have losses left over (as many of us do) you can deduct up to $3,000 off your taxes each year until you have used the total loss.
2. If you have an IRA, take your contributions to the limit. As long as you opened the account before the end of last year, you have until April 15 to add more money – and deduct it from your taxes if your income is low enough that you qualify to deduct your IRA contributions.
3. Itemize. Most people use the standard deduction – to their loss! True, the paperwork load involved in itemizing can be substantial. But many times your savings are, too.
4. Skip your AMT. While difficult and best done by an accountant, in some cases you may be able to skip out on this tax (yes, legally) by taking smaller deductions in certain places.
5. Save receipts for those charitable donations. Even my yoga studio has switched over to a donation-based not-for-profit. Keep track of your receipts, and you can lower your tax basis.

 

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

5 Money Lessons for Teens

I read in the newspaper the other day that in a survey, high schoolers answered only 48% of basic personal finance questions correctly. The number was only slightly higher – 65% - for college students. This is scary, as good money management skills are crucial for success – and for peace of mind. Since it all starts at home, below are 5 great money lessons that can help your teens get ahead in life.

 

1. Budgeting. How many teenagers do you know who always run out of money mid-month, and beg their parents for more? Teaching your teens to prioritize can make a huge difference as they grow into adults.
2. Establishing credit. Regardless of how you feel about credit, the minute your teens are off to college, their mailboxes will brim over with credit card offers. If you teach your teens to handle credit while they’re at home still, the damage is likely to be much smaller.
3. Differentiating wants from needs. This is a crucial skill in all aspects of life and no less important when it comes to money.
4. Filing tax returns. By becoming familiar with the filing process and learning a few tax smarts, your teens can save a ton of money later on.
5. Taking all costs into consideration. Many teens tend to forget about things like insurance, maintenance and repairs when estimating how much their next car is going to cost them. Taking all costs into consideration when making a money decision – no matter the specific circumstances – may be the most valuable money lesson of all.

 

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

Will a Cut in My Line of Credit Hurt My FICO Score?

This question popped up during a recent Savvy Ladies empowerment circle. The woman asking it had recently received a letter from American Express, letting her know that they had reduced her credit limit from $17,000 to $9,000. Credit score disaster or a mere annoyance?

 

It depends. The three main factors determining your FICO score are 1. timeliness of payments, 2. outstanding debt compared to your total credit available, and 3. how long your accounts have been open. So an $8,000 drop in total credit available can have a negative effect on your credit score, especially if you are carrying revolving balances on one or several cards (fortunately, she does not).  

 

The damage caused by a cut in your line of credit will be less significant if you have a decent credit score (720 or higher), and a long history of timely payments. If you have fewer credit cards, a shorter credit history or some late payments on your record, it will sting more.

 

The good thing with the FICO score is that it is not stagnant – the credit reporting agencies are constantly updating it. So when you make timely payments, reduce debt, and keep your old accounts open, your score improves over time. So while it is definitely a setback, having your line of credit cut short is not a major disaster.

 

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

5 Reasons the Recession Rocks!

The conference I attended last week was a study in pessimism and negativity. I feel that right now, people are paying far too much attention to the negatives and far too little to the many wonderful aspects of the current financial situation. For inspiration, see below!

1. We save more. For ages now, Americans have been living on plastic, spending far more than we earn, not giving tomorrow that much thought. When faced with fears of financial hardship, we start to set cash aside for emergencies – a first, staggering step toward a sounder financial future.
2. We get ourselves out of debt. It may seem controversial: how are we supposed to pay down debt when we make less money? But statistics show that Americans are now shredding debt instead of adding to it – for the first time in ages.
3. Investments become cheaper. Stocks, mutual funds invested in stocks, real estate – it seems these days, bargains are everywhere! True, many people have suffered immeasurable losses . . . but always remember that there are two sides to every trade. For every person selling a house at a loss, there’s another person buying it at a discount. If you have the money, this is a fabulous time to invest.
4. We learn to prioritize. When money is easy come, easy go, we can have it all. When the supply is cut short, we are forced to set priorities and differentiate real needs from fluff. This will enable us to get more out of our money once we head for the next boom.
5. We discover what really makes us happy. It is all so easy. We take a job we never really wanted because we need the money. We get a couple of promotions and raises, and adjust our lifestyles accordingly until we are completely dependent upon our income. Meanwhile, our dreams and passions slip further and further away. When we are thrust out of that security blanket and realize that we can survive on much less, we get another chance to give those dreams a go.

Stacy Francis, Savvy Ladies

www.savvyladies.com

How to Be a Winner in Today’s Real Estate Market

One of my best friends told me last night over tapas and sangria, that the time had come for her to purchase her first home.

 

She is well prepared: she has done all the research, checked off all the requirements for credit, income and money for a down payment, and thought about the future. She knows the importance of a great agent.

 

Now, did I have any tips for how to spot a bargain?

 

First of all, I told her, remember that a reduced price does not necessarily equal a good deal. Perhaps the house was overpriced from the start. Keeping this in mind, pay extra attention to the following types of listings:

 

1. Old ads. A survey by online real estate agent Redfin suggested that a whopping 83% of heavily discounted homes have been on the market for 90 days or more.

 

2. Estate sales. Chances are the sellers can’t wait to cash out. Plus, since they didn’t pay for the property, they may be less concerned about getting their initial investment back.

 

3. Fixer-uppers. Many times, the fact that the owners are selling before making major repairs signal a preference for a fast sell over a high price.

 

4. Recent purchases. If a house was purchased less than five years ago, chances are, the owners are either desperate house flippers or financially strapped and unable to make their mortgage payments.  

 

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

 

Homeowner’s Insurance Basics

I am aware that we are in a real estate crisis and many homeowners are suffering, but everywhere around me, people are buying, buying, buying. And truly, for those who have been patiently awaiting a decline (or weakness, or at least standstill depending on where you live) in real estate prices, this is a time to celebrate. With so many of my friends closing deals on condos and houses, the topic on everyone’s mind seems to be homeowner’s insurance. Here’s what you should know.

Homeowner’s insurance is usually mandatory, at least if you are taking out a mortgage. Even when you pay cash, I still strongly recommend it.

You know how when you rent, your personal property (the things inside your house or apartment) must be insured separately? Homeowner’s insurance is different, because it covers both the building and structure of your home (along with any other buildings on the property) and your personal property. In some instances, it even covers lawsuits. It is, however, important to note that homeowner’s insurance does not cover you in the event of flooding or a major earthquake. If you live in an area affected by these, you can purchase earthquake/flooding insurance separately.

In most cases, loan providers require proof of insurance prior to closing. They then can add the insurance policy to your mortgage payments, and may sell the right to service your loan to a third party. It is important that you keep track of who your insurance agent and servicer are, and that you check in with them a couple of weeks before payments are due to make sure everything is proceeding according to plan.

Stacy Francis, Savvy Ladies

www.savvyladies.com

What Health Insurance Plan Is Right for You?

With the birth of my daughter just around the corner, my husband and I spent Sunday afternoon reviewing our family’s insurance coverage. Many times, the addition of a new family member means that a different provider or different type of plan becomes more beneficial overall.

If you are shopping for health insurance on your own or if you are covered through your (or your spouse’s) employer and your open-enrollment period is coming up, below are a few must-knows.

Most health insurance plans fall into one of the following two categories: HMOs or PPOs. When enrolled in an HMO, your co-payments tend to be reasonable, but you must stick to doctors within the network. Many times, you need approval from your primary caregiver in order to be entitled to specialist care or certain procedures.

With a PPO, you have much greater flexibility to choose your providers, but co-payments are typically higher and many PPOs have high deductibles. If you are young and healthy, many times it pays off to select a PPO. If, on the other hand, your children are sick often or you have a chronic condition, chances are you are better off with an HMO.

Whichever type of plan you opt for, there will be a number of different providers available. You can research them online at www.ncqa.org.

Stacy Francis, Savvy Ladies

www.savvyladies.com

What to Tell Your Kids about the Recession

Watching the news hasn’t been very uplifting as of late, and last night felt like same old, same old - until my son walked into the room halfway through and sat next to me on the couch, transfixed. I wondered how much he could grasp, and if I should be worried. While I, of course, can’t read his mind, I do know this: when we are fearful, our children can feel it. They may not be able to pinpoint what is wrong, but it wears on them . . . which is why I find it so upsetting when parents tell their kids about the “tough times ahead”, “disastrous state of the economy,” and “next Great Depression.”

Sure, you shouldn’t lie to your children. If you lose your job or need to move because your home is in foreclosure, you should inform them about the changed circumstances. But always ensure them that they will have a safe place to stay, food, and clothes. Excessive pessimism is never helpful, so don’t be one of the many people who invent doomsday prophecies and share them with their children. It’ll only keep them up at night. Instead, tell them about how you are going to conquer the bumps ahead, together as a family, and focus on solutions and actions you and your child can take – however small - to make things better.

Nobody can predict the future, so assuming the economy is headed for a quick recovery is no more wrong than counting on the opposite – and it makes you feel a lot better! And if you absolutely have to practice pessimism, at least refrain from doing it in front of your children.

Stacy Francis, Savvy Ladies

www.savvyladies.com

Taxes: How Much Should You Withhold?

With only weeks to go before the arrival of my daughter, I go to a great deal of routine checkups. Fortunately, my doctor’s office is an efficient one, and I rarely have to wait for more than ten minutes. Yesterday, the other mother-to-be in the waiting room was quite chatty. Upon learning that I am a financial planner, she told me all about her savings strategy. She claims zero dependents even though she is the main breadwinner in her marriage and has a son. Consequently, every spring she receives a huge tax refund. She splits the money evenly between vacations and her savings account.

While it can be a major relief to receive a check rather than a bill from the IRS, her strategy has one drawback: in essence, she is granting the IRS an interest-free loan. If she would claim the correct number of dependents, she would keep a larger portion of her paycheck every month, and thus be able to invest the money earlier and start to make returns.

 

But before you slash your withholdings altogether to reverse the situation, so that you get an interest-free loan from the IRS, note that paying far too little taxes throughout the year can easily result in a $20,000 – or even a $50,000 – tax bill, enough to give the healthiest amongst us a stroke!

 

So what’s the golden number? Opt for the middle of the road, so that in the spring you get neither a terrifying bill nor a huge refund. That way, you safeguard yourself from financial panic and make the most out of your investment capital.

 

Stacy Francis, Savvy Ladies

www.savvyladies.com