Savvy Ladies Community

Cash Crunch in Your Forties: Your Children’s Future or Your Own?

This dreadful dilemma was the main topic of discussion at a recent Savvy Ladies empowerment circle. And the economy being what it is, alas, it is one to which far too many of us can relate. We all want what’s best for our children, so what could possibly be more important than securing them a top-notch education? On the other hand, past big 4-0, retirement is no longer a hazy, distant concept but something very real, approaching at rocket speed. So when faced with job loss and financial hardship, how do we prioritize?

The answer is quite simple: stick to your retirement savings plan, and direct whatever’s left toward the college savings account. It may sound selfish, but the truth is, no one’s going to give you a scholarship or a favorable retirement loan. And not only do your children have time on their side, greatly enhancing their chances to pay back whatever balances they may accrue, but the less savings you have set aside for them, the more financial aid becomes available to them. Once your financial situation starts to improve, you can certainly lend them a hand.

Ask any child what he or she would prefer – a bit of student debt or an aging parent crashing on the couch for, say, fifteen years. I’d say chances are high he or she will opt for the student debt.

So stick to your retirement savings plan. Then help your children.

Stacy Francis, Savvy Ladies

www.savvyladies.com

Use the Wallet-Half-Full Approach and Make Your Financial Dreams Come True

The book “Unwinding the Clock. Ten Thoughts on Our Relationship to Time” sat on my bedside table for months after a friend gave it to me. This past weekend, I finally got around to reading it – and I liked it much more than I thought I would! My favorite chapter dealt with a feeling most people will recognize: not having enough time. Author Bodil Jonsson turns this around and points out that in a way, time is all we have. Time is a wonderful gift, enabling us to start families, build careers, have hobbies, learn new things, and travel the world. Instead of panicking about running out of time, why not tell ourselves that we have all the time in the world? After all, it is no less true.

 

The same approach can revolutionize your relationship to money. If you stress about the money in your account not being enough to fulfill all your financial obligations and desires, try turning this negative thought process around, instead viewing each dollar as an opportunity to get closer to your personal and financial goals. Rather than worrying about the financial milestones you will fail to meet, imagine how the twenty-dollar bill in your wallet could buy you a better lifestyle in your golden years, part of a college education for your child or a lavish dinner. This simple change of perspective won’t cost you a dime, and you’ll have a lot more fun securing your financial goals.

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

How to Make Savings Easier Done Than Said

Over the past couple of months, I’ve been blown away by the number of people who’ve decided that 2009 is the year when they’re going to start saving – and, as a consequence, looked me up. I met with three just this morning! Unfortunately, no matter how much they want to, many people feel discouraged from saving because their incomes and/or portfolios have dropped lately. The good news is, you can still save! Use the simple steps below and, as the title suggests, make savings easier done than said!

1. Set a goal. As with any commitment, a clear, concrete goal (i.e. a down payment for a home or retiring at 50) is the first step.

2. Pick a number you can afford. Saving is a bit like dieting: if you push too hard, you will fail. If you can only spare $50 per month, let it be your intention to save $50.

3. Make it automatic. Not only can saving be dreary, with all the pleasures you have to surrender, but it is easy to forget, too. Fortunately, there’s an easy fix. Set up an automatic transfer from your checking account to your savings account. Done!

4. Cash in on free money. If your employer offers to match contributions to your 401(k), take him or her up on it! It’s free money, and in the best of places because it will grow tax deferred for years and years to come.

5. Regain strength from frequent reminders. It takes a lot of willpower to give up pleasures in the present for a better life in a distant future, and inevitably, there will be times when you feel discouraged. When this happens, regain the motivation by revisiting your goals.

Stacy Francis, Savvy Ladies

www.savvyladies.com

Top 5 Financial Books of 2009

I took a visit to the bookstore with Sebastian and Samantha for storytime this last week. I was also able to quickly browse the finance section, my favorite. This served as yet another reminder of how the economic landscape has changed. The titles that used to dominate the personal finance shelf: get-rich-quick mixed with investment ideas ranging from absurd to outrageous, have given way for ultra-conservative savings ideas and doomsday prophecies. While I have no intention to take part of all the fear and negativity, a few new titles did spark my interest:

1. Suze Orman’s 2009 Action Plan: Keeping Your Money Safe and Sound by Suze Orman. Her books are always informative and down-to-Earth. Right now, we could all use some Suze Orman in our lives.
2. Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner. It’s short, sweet, to-the-point and, just as the title suggests, has everything a twenty- or thirty-something needs in order to get a financial life.
3. The 250 Eldercare Questions Everyone Should Ask by Lita Epstein, because, quite frankly, aging is something we all need to worry about. And, as most of you know, planning ahead can –and usually does - make all the difference.
4. My Money Matters: a 30-Day Plan to Build Peace of Mind & Long-Term Wealth by Galia Gichon. I love this book because it’s so hands-on. By following the steps she suggests, you really can take charge of your finances in 30 days.

Of course, I am also looking forward to:

5. Rich Brother Rich Sister: Two Different Paths to God, Money and Happiness, by Robert and Emi Kiyosaki. Judging from the reviews, the only similarity between this book and Robert Kiyosaki’s blockbuster hit Rich Dad Poor Dad is the title. This time, he has thrown depth, narrative and spirituality into the mix, and I can’t wait to see the result.

Happy reading everyone!

Stacy Francis, Savvy Ladies

www.savvyladies.com

 

 

Spousal IRA 101

A woman approached me after maternity yoga last night. My husband is stoked about this child, she told me, and when my maternity leave is up, he would like to be a stay-at-home dad for a couple of years. I already know this means he won’t be able to keep contributing toward his 401(k), but is there another way for him to keep up his retirement savings?

 

A smart question, and she should really give herself a pat on the shoulder for planning ahead. And yes, provided that she makes enough money and that they file a joint tax return, he can contribute toward a traditional or Roth IRA (income limits apply for Roth IRAs). Even if her employer does provide a retirement plan, she may also be able to contribute toward a traditional IRA (or a Roth, as long as her income is below certain limits).  

 

Putting her and her husband’s case into numbers, they are each eligible to contribute $5,000 toward a traditional IRA in 2009 ($6,000 if they are over 50), as long as she makes enough money to cover the contributions. If they prefer Roth IRAs, their joint adjusted gross income must be less than $176,000 (phase-out between $166,000 and $176,000).

 

Clear as mud, isn’t it?

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

Term or Whole Life Insurance – Which Is Right for You?

I had breakfast with a new client this morning, at a cozy new bakery around the corner from my office. While the fruit and croissants couldn’t have been better, our conversation was anything but. My new client was  - like so many people these days – in a bit of a tough spot financially, so last week he attempted to cash out on the whole life insurance policy he purchased three years ago. He had put almost $9,000 into it, surely, he would be able to withdraw something?

Before sharing his account of this transaction, allow me to explain the difference between term and whole life insurance. Put simply, a term insurance policy is acquired for a certain period of time, often with an option to renew. If the insured person dies before the end of the term, the beneficiary is paid the face value of the policy. A whole life insurance policy is usually for life, and it has both insurance and cash value components.

Now, back to my new client’s case.

The woman who sold him the policy informed him that if he wished to make a cash withdrawal, he would have to wait several years. Even then, he wouldn’t get much.

This type of scenario is far from uncommon. Most whole life insurance policies you need to hold for at least twelve to fifteen years if they are to generate decent returns – some of them never do. Other drawbacks with these types of insurance policies include hidden fees, high commissions (100% of the first year’s premium is not unusual), and that overall, they tend to be lousy investments. There are so many better ways to save for retirement!

So unless you have a very high net worth and intend to use the whole life insurance policy for estate planning purposes or a disabled child or parent, opt for term insurance. It is simpler, less expensive, and you are much better off investing your money elsewhere.

Stacy Francis, Savvy Ladies

www.savvyladies.com

I Lost My Job – What About Health Insurance?

I received an email from a Savvy Ladies member today; a heartbreaking tale of how she had been laid off, and was now trying to figure out how to survive – and feed her two small children, as she is a single mom. One of the expenses she worried about was medical. I think any parent can relate to this: with children around, unless you have the proper insurance coverage, medical expenses tend to run the gamut. For those of you in the process of losing your jobs, here’s how to keep this aspect of your finances under control.

 

First of all, if you are still employed, make the most out of your insurance plan while you have it. Get all your routine checkups out of the way. If you use medications, take out as much as your insurance provider will allow. If you have been putting off procedures, now’s the time to have them done.

 

Once you do lose your job, know that you have options. Under COBRA rules, in most cases, your company must allow you to keep your insurance coverage for eighteen months, as long as you pay the full premium. While this is great news indeed, there is one drawback. The full premium can be quite a bit higher than the monthly payment you are used to, depending on your insurance plan and how much your employer has been contributing. Do your research – shop around, and request other quotes. You may be able to find a cheaper deal on your own, especially if you are eligible for a state run insurance program.

 

 

Stacy Francis, Savvy Ladies

www.savvyladies.com

5 Ways to Make Your Home Sell Faster

Great news from my friend who is moving to Miami: she found the condo of her dreams last weekend. Since she doesn’t have the money – or credit - to own two properties, she called me up to ask if there’s anything she can do to speed up the process of selling her Manhattan home, without lowering the price. Below are a few minimal-effort things that set you up for a quick and lucrative sale:

1. Keep the house or condo clean, neat, and cozy. At the end of the day, it is all about whether your prospective buyers can picture themselves living there. Make it easy for them!
2. Stay away from major projects, like remodeling. Instead, leave it up to the buyers to customize. Your taste for purple may not be theirs.
3. Consider painting the walls in warm, neutral colors. It adds a lot to the cozy-factor, and it won’t cost you much.
4. If you have pets, try to recruit a pet sitter during showings, and stow away food bowls etc. Even though Mystic, my cat, and Katy, my puppy, are my favorite furry friends, not all people are pet lovers.
5. Set the scene as though you are expecting guests – plates and flowers on the dining table, music on low volume, perhaps even a packet of yeast in water in the oven to create the smell of freshly baked bread! Chances are the prospective buyers will feel so welcome, they’ll never want to leave.

Stacy Francis, Savvy Ladies

www.savvyladies.com

Obama’s Health Care Plan

I visited Washington DC last week on a business trip, and I have to say - no matter how you feel about it - change is in the air. From the war in Iraq to taxation of the middle class and foreign policy, the winds of change are blowing through Capitol Hill. One of the main things Obama has promised to change is the health care system. While his plan is likely to be modified several times before it passes congress, below is an outline of his key points.

Obama wants:

1. An extension of the Medicaid program, to include a larger number of uninsured citizens
2. For all children to have health insurance
3. Subsidies for low-income individuals and small businesses, so that it’ll be easier for them to purchase insurance
4. A national exchange where uninsured people can purchase policies – whether private or public
5. A 50% tax credit for health care premiums small businesses pay for their employees
6. A penalty tax for businesses that decline to provide their employees with insurance
7. Coverage for another 45 million people
8. To cut costs by re-importing safe drugs from other countries
9. For insurance providers to be allowed to negotiate prices for prescription drugs directly with manufacturers
10. A pay-for-performance incentive program, and finally
11. A comprehensive disease management program.

Stacy Francis, Savvy Ladies

www.savvyladies.com

Cheap and Expensive Cars to Insure

When I bought my son a Scion Tc, a client told me over mid-morning mochas the other day, I didn’t anticipate that my insurance bill would skyrocket. I suppose I sort of assumed it wouldn’t make that much of a difference.

The key to staying clear of a situation like hers is to do your research before you buy. Overall, small, sporty, speedy cars mean higher insurance premiums – simply because they are involved in more accidents than bigger, chunkier, slower cars. Add a young driver to the equation (they are considered extra accident-prone) and your price tag will be hefty, regardless of what insurance provider you choose. Just for fun, below is a list of the five most expensive cars to insure – and the five cheapest.

Most expensive:

1. Cadillac Escalade EXT 4WD
2. Subaru Impreza WRX 4WD
3. Hyundai Tiburon
4. Mitsubishi Lancer
5. Scion Tc (my client near died when I showed her this)

Cheapest:

1. Ford Five Hundred 4WD (now called the Ford Taurus)
2. Buick Rendezvous 4WD
3. Buick Lucerne/Buick Rainier4 WD/ Honda Odyssey
4. Ford Freestyle 4 WD/Subaru Outback 4 WD
5. Buick Rendezvous/Honda Odyssey

So if cheap insurance is important to you, instead of the sports car, buy your teen a Buick! I know that my brother got a Trans Am when he was 16 and only 6 month later got a ticket for speeding at 40 mph over the limit! Yes that is right. The car went as did all future speeding tickets and by giving him a 10 year old clunker so did the high auto insurance bills.

Stacy Francis, Savvy Ladies

www.savvyladies.com