Holiday Planning Series with the Squash Brothers, part III, debt management

Watch our Holiday Planning Series, Part II, as Steven and the Squash Brothers discuss debt management so you do not overspend and end up with credit card debt you can’t pay off.

Thanks for watching our series!

Holiday Planning Series with the Squash Brothers, part II, cash management

Watch our Holiday Planning Series, Part II, as Steven and the Squash Brothers discuss cash flow planning so you have more to spend (or to save!).

Next time, debt management.

How to stay safe after the Equifax data breach

Equifax disclosed last week that the personal financial information of up to 143 million users had been exposed in a massive hack last July. This represents roughly two-thirds of all credit card holders, so you may be affected.

The delay in disclosing is troubling, and the hack raises questions about oversight of the credit bureaus and even about the impact on their management. We can see the impact on investors: the Equifax share price has dropped over 20%

While we can discuss these issues and more, the priority is shoring up your personal credit.

Impact

Was your data taken? There are links from Equifax, Norton and others where you can attempt to determine the impact on you personally. However, these sites seem to default to “you may be affected,” even if you put in bogus information.

The good news is that Equifax has responded to consumer pressure to make certain services free.

Act now

You will want to act as soon as possible to keep your financial information safe.

“There are so many entities who need to check your credit: when you’re renting an apartment, getting insurance, a new cell phone, utilities,” Liz Weston, a financial planner and columnist at NerdWallet, told BuzzFeed News. “But at this point the breach is so great” that taking measures to safeguard your identity is worth it. She recommends instituting credit freezes.

Equifax free service – sign up on line for the complimentary service being provided by Equifax, which provides the following:

  • three-bureau credit file monitoring with alerts,
  • credit report lock,
  • scanning of suspicious sites for use of your social security number,
  • Equifax credit reporting, and
  • $1 million identity theft insurance covering certain out-of-pocket expenses.

Monitor your cards – review your monthly credit card, bank and loan statements for suspicious activity. You have a right to free credit reports so obtain them and review for unauthorized activity.

Also, watch for unexpected calls or mail, such as debt collectors or people posing as IRS agents, because these may be signs that your information may be in the hands of thieves.

Credit freeze – request a freeze on your credit from all three agencies: Equifax, TransUnion, and Experian. Equifax will not charge you but the others will.

Requesting a credit freeze prevents thieves from using your identity to get loans or credit cards in your name, even if your personal information was compromised by the hack. You essentially pay to bar each of three credit reporting agencies — Equifax, TransUnion, and Experian — from providing a credit report without both your explicit permission and a personal identification number (PIN) that temporarily lifts the freeze. (Freezes do not affect financial institutions or companies you have an existing relationship with, only new ones.)

Make sure to place the freeze with all three bureaus and to keep your PINs for unlocking the freezes in a safe place.

“A credit freeze with only one bureau is incomplete protection,” Mike Litt, the consumer program advocate at the US Public Interest Research Group, a consumer group, said. Consumer experts recommended getting a freeze with all three agencies.

There are companies such as LifeLock that provide bundled services. If cost is not an object, that may be the best course of action. Here is the Lifelock response on Equifax.

Fraud alert – if you are certain that your information has been taken, place alert all three credit bureau websites. You can access the TransUnion site here. Some protection is free, but their premium package costs $9.95

If you are the subject of identity theft, there are many resources now that help you report and recover. The Federal Trade Commission website can help devise a recovery plan to implement.

PINs and passwords – the passwords and PINs you use could be the next issue. You may want to change what you use now and update annually, if not more often.

Updates – Equifax continues to provide updates on the status of the hack and their response.

And news sites continue to report on the hack – see this NY Times article.

Summary

There are many steps to take, and the information taken may not be used for some time. So, you will want to take some if not all the steps outlined above. If you have trouble doing so, or if you have questions, let us know.

And for more reading, the Better Business Bureau is one resource for tips on avoiding scams. And, the FTC is a good resource for identity theft.

Good luck and stay safe!

“Simplify your finances? No; “Gain control, understand your finances?” Yes

After reading a recent article in Kiplinger’s Finance Magazine  on simplifying your finances, I wondered if your personal finances can really be made simple.  While many of us may hope so, I am not sure that “simple” is best.

However, gaining control of your finances and gaining a better understanding do make sense.

clutter-286975_1920 Okay, that does need to be simplified!

Here are some ways that help you gain control that may also “simplify” your life:

Cash management and Debt management

Set up automatic payments with vendors so they use your bank or credit card, or set up payments using your bank website.

  • If the payments are regular, and of similar amounts, you save time and can plan on the withdrawals.
  • However, if you change banks, sorting and resetting auto-pay at the new bank can be a major headache. Similarly, if you change credit cards, you need to update information with all vendors.

You can also automate tracking of your spending by using websites like Mint or Personalcapital.  Or, you can use Quicken or QuickBooks software from Intuit to track your bank and credit card accounts.  You can download from your bank and credit card websites into the program and then review to analyze your cash flow and spending.

Setting up direct deposit for payroll into your checking is great.  You can also split part so it goes to savings or even have some go to your investment accounts.  You will then need to follow up to invest the cash that accumulates, but having money set aside saves it from being spent, and adds to your investments

Investing

Kiplinger’s recommended consolidating retirement accounts to avoid low balance fees.  It also makes updating beneficiary designations easier.

While avoiding fees makes sense, am not sure that putting all investments into a single retirement account does.  You cannot do this if you have Roth and pre-tax accounts like a 401(k) plan, and you probably should not do it if you have contributory IRA and 401(k) accounts that are subject to different tax rules.

Kiplinger’s also recommended using one broker for your taxable accounts.  This makes more sense, in that you have a higher balance which should mean lower fees and more attention from the broker.  However, I prefer using exchange traded funds, or ETFs, and avoiding most broker fees, which means essentially no attention from a broker.

One article said that your investment plan should be to “sign up and forget it.”  While avoiding investment pitfalls like second-guessing yourself out of panic when a fund goes down is good, I do think you need to review and rebalance your investments once a year.

Another article recommended using an “all in one” fund for investing.  Now, this really troubles me.  If your sole goal is retirement, then an age-targeted fund could make sense.  But, if you are saving for goals with different time horizons, this is a bad idea.

If you use an age-targeted fund, do your homework on the funds.  For example, if the fund plans to suddenly shift to bonds when you retire, that will not serve you well because you are likely to have several decades for which you will need the growth from stocks.

Protecting your information

Having a master password for access to all your other passwords reminds me of the joke about the student who repeatedly distilled his notes down, first to an outline, then to note cards, and finally to one word.  How did he do on the day of the exam?  He forgot the word.

Nonetheless, having passwords is clearly important so having a way to manage them is as well.  Check out this recent review of apps for managing your passwords PC Magazine Best Password Managers for 2015.  You can manage the passwords yourself by creating a document that you save as a PDF and then encrypt.  But don’t forget the password you used for the PDF!

Store files in one place

We did a post on using cloud storage when you do not need originals.  Here is another site to check out:  Shoeboxed

Credit cards

In addition to downloading transactions as noted above, you can track your credit score and credit history by using sites like Credit Karma

Estate planning

For insurance purposes, and for your estate plan, having a record of possessions, you can list all your property using sites like Know your stuff home inventory.

Conclusion?

There are ways to gain better understanding of your finances that also make your finances simpler.  But setting simplification as your primary goal risks distorting your finances – too simple may be a bad result.

P.S. Our sister website, www.wokemoney.com, encourages you to gain a better understanding of your finances so you can handle your own planning.  Let me know what you think.

Okay then, what is a financial plan?

You may hear some argue that robo-planners will not replace individual, human planners. I call them the “There’s no app for that” group.

We do believe that “There is an app for that.”
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Well, that is not what I had in mind.

But exactly what is “a financial plan”? Finding a good, workable definition is a challenge.

Wikipedia says:

Textbooks used in colleges offering financial planning-related courses also generally do not define the term “financial plan.” For example, Sid Mittra, Anandi P. Sahu, and Robert A Crane, authors of Practicing Financial Planning for Professionals[8] do not define what a financial plan is, but merely defer to the Certified Financial Planner Board of Standards’ definition of ‘financial planning’.

Can’t we define “financial plan”?

Yes. Investopedia offers this broad definition:

While there is no specific template for a financial plan, most licensed professionals will include knowledge and considerations of the client’s future life goals, future wealth transfer plans and future expense levels. Extrapolated asset values will determine whether the client has sufficient funds to meet future needs.

And Wikipedia gives more detail:

In general usage, a financial plan is a comprehensive evaluation of an individual’s current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans. This often includes a budget which organizes an individual’s finances and sometimes includes a series of steps or specific goals for spending and saving in the future.

So you need to project where your assets can take you to be sure you meet your future in good shape. Makes sense

And what is my definition?

A to do list or “action plan” that tells you what you need to change now so you optimize the use of all your resources to achieve your major, long term goals in the future.         

So what does a financial plan look like?

If you paid to have a financial plan prepared, and have a complicated situation, you may get a glossy, bound book filled with projections, charts and graphs, plus text. While much of it may be boilerplate, it will tell you where you are going from now until you die, how your money will follow if you invest according to the plan, and what you need to change on taxes, insurance, and your estate plan.

At the other extreme, you can glean the essential steps and write them all on a PostIt note, which you then place in a spot you see often enough to remind you what to do:

  • Maximize my 401(k) contributions,
  • Set up and contribute to a Roth IRA,
  • Review my investment allocation, use ETFs,
  • Steer clear of any major credit card debt,
  • Review my beneficiary designations,
  • Sign an medical directive, and
  • Save enough for a fun (not too expensive) vacation next summer!

In the end, it doesn’t matter how many pages or what the plan looks like; what matters is that you learn from reviewing your finances and change how you manage your resources so that improve your finances.

So, yes, a simple to do list could be enough, if you follow it!