Financial advisor Stacy Francis shares her savings tips
We’re entering the New Year with money on our minds, so we checked in with Stacy Francis, founder of Francis Financial, an advisory firm focused on financial wellness, for some good advice.
Katie Couric Media: We’re getting a fresh start in 2021 and one thing that’s on people’s mind is money. What steps can people take to improve their finances.
Stacy Francis: The first thing people can do is redo their budget and revisit their expenses. Over the last nine months, everyone’s spending has changed and we have a new way of living. That might mean eating at home more often, not vacationing, not traveling, etc. Ideally, a lot of individuals have seen their spending go down. However, with the release of the vaccination and life slowly getting back to normal, expenses are going to creep up. The best thing you can do is start to track.
There are some great tools out there that will do it for you: mint.com and Goodbudget are great. These actually track your spending automatically. It’s a wonderful way to start the year on the right foot and make sure that your expenses don’t creep out of control.
Speaking of lifestyle changes, how can people reset their financial goals with these in mind? Any tips?
The best thing to do is what we call a year-end review. Look at where your money actually went. From there, think about the pieces that give you the most joy in your life. Maybe it’s travel, but maybe it’s not ordering in from Seamless. For me, personally, I’ve had a big aha moment with ordering in take out. It doesn’t really give me a whole lot of excitement, but what I really do miss is traveling. And so as I plan my budget and think about my future budget for 2021, I’m adding those things back in, but making sure that the costs that I’m not really enjoying don’t get out of hand.
How much should the average person try to save from their paycheck each month?
So I hope you’re sitting down… It’s ideally 20% of your income. Now, I know that is a huge number. So, what you can do is start off with what you can do. Years ago, I started saving 3% of my income and every year that I got a raise, I also gave my savings a raise. Now, I do hit that 20%, which is wonderful, but it took well over a decade to get there. And so that’s what I tell people. Start with what you can do.
Make sure that the way you’re doing this is putting that money into a different account that you don’t see and that isn’t attached to your ATM card. Let it grow and learn to live on the rest. Our human nature is that we spend what’s in front of us. Get this out of your sight so that you can start to build that emergency fund.
What is a good rule of thumb for people to always have in their emergency fund?
Something that we saw very clearly with this pandemic is that half of Americans don’t have more than $500 in their emergency fund.
The rule of thumb is typically three to six months of your living expenses. This includes the expenses you can’t stop. You can’t reduce your rent, your mortgage, your utilities whether you have a job or not. There might be certain expenses that you can cut back on, such as entertainment, but making sure that you can pay the important expenses.
Let’s talk about investing. What advice would you give someone who might be intimidated by the stock market?
A lot of people are intimidated by the stock market, because if we look back to March, we saw a 30% loss in a matter of weeks. However, the market has truly rebounded and recovered and most Americans, as they look at their portfolios, are up significantly for 2020, despite the rollercoaster ride. While many people might be intimidated, you don’t need to be because the people who fared well throughout this year have done three things:
1. They paid attention to their money and they picked an allocation mixture of stocks and bonds that was right for them for the longterm.
2. They stuck with it in good and in bad. When they saw their accounts drop in value, they kept that account balance — the mixture of stocks and bonds — and let it beautifully recover without getting nervous or without selling.
3. They know that the biggest determinant about whether they’re going to be able to get to retirement and live happily is making sure that they are in the market and they have a good mixture of stocks and bonds that’s right for them.
But the number one thing that is going to have the biggest influence is what they can control and that is saving. It really goes back to control what you can control and don’t worry about the rest. You can control your 60% stocks and 40% bond allocation in good times and in bad. You can control how much you save and then don’t worry about the rest.
What would you tell someone who is starting out in their career or just graduated from college?
My hope for our recent graduates getting out there is that they learn from this crisis. Take heed of watching so many individuals be financially impacted by this pandemic and make sure that they learn the lesson and set up their finances so that this doesn’t happen to them.
That means paying off credit card debt and making sure that they’re able to get a handle on paying back their student loans. Once they are in repayment status (when they get a job), they need to set up a life where they can afford to do all of these things.
The first paycheck that you’re going to get is most likely going to be pretty paltry. And so it might mean living with mom and dad. It might mean having two roommates or maybe even three. But still making sure that you have made a conscious decision of how much money it’s going to take to run your lifestyle so that you can pay off credit card debt, pay off student loans, be able to start that emergency fund and supercharge your retirement savings — even if you’re only putting in a $100 or $50 a month. Doing this at age 22 will get you on track to your retirement faster than you can ever imagine.
Stacy Francis is a nationally-recognized financial expert who attended the New York University Center for Finance, Law and Taxation, where she completed the Certified Financial Planner™ (CFP®) designation. She comes with over 18 years of experience in the financial industry and is dedicated to her ongoing professional education. Stacy is a Certified Divorce Financial Analyst® (CDFA®), a Divorce Financial Strategist™ as well as a Certified Estate and Trust Specialist (CES™). She is the Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter, the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA).