Category Archives: Banking

How to stay safe after the Equifax data breach

Posted on by

(as also appeared online at IRIS.xyz)

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!

Budgets? “We Don’t Need No Stinkin’ Budget”

Posted on by

Budgets rarely work. It takes tremendous effort to accurately record all transactions so that you have a valid budget. Then, frequently, after all this effort, you rarely come back to the budget. That means that the work had no payoff. Furthermore, people often claim that they had nonrecurring expenses. Doing so, they artificially understate their expenses, not realizing each year has some nonrecurring event.

A much easier way to test savings is to take a twelve-month period, look at cash and credit card balances at the beginning and end, check for any inflows from gifts or other non-salary items, and then measure the change. Did the cash accounts go up or did the credit cards go up? That is your savings/dis-savings for that year.

Rather than doing a budget to adjust behavior, force a change. You can do that by removing money from your discretionary spending by contributing the maximum to a 401(k) plan, by an auto debit that put funds into an investment account, and other auto payments. If your credit card balances go up, then you have to make a decision to alter behavior, such as cutting entertainment, or decide to delay goals (retire later, no new car now, etc.)

How does cash flow relate to debts? Managing your debt means getting the lowest after-tax interest rate so that you pay as much principle with each payment to pay off the loan as quickly as possible. You can deduct the interest paid on a mortgage and an equity line of credit debt. You can deduct up to $2,500 of student loan debt. But you cannot deduct the interest on most other debt, unless used for your business (watch for a post on side hussles).

Financial impact of the budget plan and planning for tax reform

Posted on by

First, the on-going budget battle in Washington, or “the debt ceiling crisis,” should be kept in perspective. The battle is more a game of chicken, where one side will eventually blink and the ceiling increased. This political battle is not likely to have an impact on investments, as the markets have already accounted for the outcome, as usually happens well before the event. In fact, by way of example, this is much like 1989 when the municipal bonds of the Commonwealth of Massachusetts we downgraded to a rating just above that for Louisiana. Many investors panicked. However, the underlying economy had not changed. Therefore, the smart investment strategy at the time was to buy Massachusetts bonds. After Governor Weld came to office, the rating went back up and investors who held or bought the bonds had a nice profit. The equivalent today would be to buy treasuries.

Second, as it is shaping up, the deficit reduction package contains major tax reform provisions as well as huge spending cuts. This could ultimately be good for the economy and our markets, as it would bring corporate tax rates in line with other countries, falling in the 23 to 29% range. However, the base would be broadened, possibly including depreciation over longer periods, eliminating deductions for domestic production and trimming or dropping the R&D credit.
The tax overhaul raises substantial revenue, $1 trillion over 10 years. However, this less than half the amount that would have been raised by simply letting the Bush tax expire as scheduled.

New Tax Law: Many specifics will not be known until a new tax law is enacted, which is not likely to occur this year. What Kiplinger’s Tax Letter and others are predicting the following: Instead of six tax rates or brackets, with the highest at 35%, three are expected: one in the 8 to 12% range, the next in the 14 to 22% range, and the in the last in the 23 to 29% range. The Alternative Minimum Tax (“AMT”) would be repealed. The earned income credit and child credit would remain.

To do all this, there will be pain: itemized deductions would be significantly reformed, changing home interest and property tax deductions as well as charitable deductions. For example, deduction of interest might be limited to a mortgage of $500,000 used to purchase a home, but not any for a second home. In addition, the deduction of equity line of credit interest may be eliminated (no one knows what will be grandfathered, so better to have a line in place than to wait). Higher bracket taxpayers may see the deductions converted into a 12% credit.
Something of a surprise, given the push over the last ten years or more to increase personal savings, the deductions for retirement contributions may be cut back, lowering the ceiling and amount of the contributions that will be allowed for 401(k), IRA, Keogh, SEP-IRAs, profit-sharing plans and so on. Similarly, flex plan and health savings accounts may be curtailed or repealed.

We will continue to monitor the information on tax reform, and post updates when appropriate.

Any changes that are this sweeping will require serious tax planning, so that should be on your “to do” list for this fall!