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5 Ds of Identity Theft
Identity theft is, at its most basic level, the act of using someone else’s identity or credit without permission. From a stolen credit card to a forged phone bill in Moscow, it all involves your good money paying for the bad habits of another. Thankfully, there are ways to reduce the odds of having your identity stolen. LTC David Grossman reviews the “5 Ds of Survival” in his seminars and books. Today, I bring you the 5 Ds of Identity Theft.
In the words of the master, “Denial has no survival value.” Denying the possibility of identity theft will not keep it from happening. You have to take steps to keep yourself safe. “It could never happen to me” is not a valid defense mechanism in any situation, financial or otherwise.
Deterrence means keeping the information away from identity thieves. The harder it is for the criminals to get your information, the more likely it is that they will move on to an easier target. And yes, a kid stealing Grandma’s credit card is a criminal and needs to be treated as such.
- Some people use a shredder, but not me. I have a fire pit that catches all of my personal documents. I’d like to see an thief get my social security number from the ashes in the bottom of the pit.
- Don’t carry your social security card. If you lose your wallet, your driver’s license and social security card contain all of the information needed to steal your identity. Keep it locked up at home and don’t give the number out unless absolutely necessary.
- Don’t use stupid passwords. Anything listed on yourFacebook profile or otherwise available on Google in association with your name is a stupid password. Don’t make life easy for the people looking to screw you. Your birthdate, maiden name, and “password” all qualify as stupid passwords. Use KeePass to securely generate and store your passwords.
- Lock up your personal information. I throw two large parties every year. Purses and wallets get stored in a locked bedroom, so nobody can grab them. That was a lesson learned the hard way. If there’s someone in your home you don’t trust absolutely, lock up anything that can be used against you.
- Don’t release personal information to anyone, for any reason, unless you have initiated the contact. Don’t give a credit card number to a telemarketer. Don’t give a spammer your personal information. It’s your privacy, use it.
- Don’t click anything in an email. If it’s a company you have a relationship with, type the address in your browser by hand.
Detection is up to you. Some credit card companies will alert you to suspicious purchases, but you can’t rely on it. I was once called because I went to the gas station and Best Buy, which is apparently a common pattern for a stolen credit card.
- Examine your credit card statements. If there’s a purchase you don’t recognize, find out what it is.
- Watch for bills to arrive as expected. You do know when you pay the gas bill every month, right?
- Watch for unexpected bills to arrive. If you get a statement for a credit card you don’t have, it’s a problem.
- Check your credit report three times per year. AnnualCreditReport.com will let you see each of the three major credit reports each year. Space them out so you see your report every 4 months.
Defending your identity happens after you’ve detected a theft. This involves getting your credit and sometimes, your money, back.
- File a fraud report with the credit bureaus. This will force potential creditor to follow certain procedures before opening new credit accounts for your identity, including calling your cell phone, if you choose. Stop the identity theft in its tracks.
- Close the fraudulent accounts. Don’t leave them open for abuse.
- File a police report and report the fraud to the FTC at ftc.gov/idtheft . This may or may not help catch the criminal, but without it, there will never be a punishment. Make stealing your identity an expensive proposition. Hopefully, 1o years of his life will be wasted in jail in return for the theft.
Destroy. Unfortunately, fraud and identity theft are not yet capital crimes. Maybe someday.
Deter, detect, defend. These are the secrets to avoiding, and recovering from, identity theft.
5 Things to Do in the New Year
- Image via Wikipedia
CNN Money has an article up on 5 things to do this year. After posting a similar article a couple of weeks ago, I thought it’d be interesting to post about someone else’s perspective.
1. Shop for a no-fee checking account.
If you are paying fees for a checking account, go somewhere else. There are so many alternatives available that you shouldn’t be throwing money away. Ally Bank has a great no-fee checking account, as does INGDirect, though ING won’t let you write paper checks against the account. The same principle applies to credit cards. If you have a card with an annual fee and you aren’t getting some monster services or rewards to go with it, run away.
2. Save your raise.
I don’t necessarily agree with this one. If you are in debt, it’s better to use the raise to pay off that garbage, first. When I got my last raise, I immediately boosted the automatic payment for my car to use every new penny. I’ve never had the money available, so I haven’t missed it. Whatever you do, fight lifestyle inflation. Just because you have some more money doesn’t mean you need to spend it. At my last job, I got a substantial raise, so I bought a new car, only to get laid off a few months later.
3. Go for a checkup
Wealth doesn’t matter if you squander your health. Go get a physical. Every disease is easier to treat if you catch it earlier as opposed to later. Don’t make the mistake of running your body into the ground. You will regret it later. Effective this year, most health plans will cover a physical with no copay, co-insurance, or deductible allowed.
4. Score a better rewards card.
B***-****. If you’ve still got debt, don’t concentrate on using more of it. Get that crap paid off. If you’re out of debt, look into getting a rewards card that aligns with your goals. If you like to travel, get a card that gives you frequent flier miles. Otherwise, I’d go with a cash-back rewards card.
5. Use your vacation days.
37% of Americans don’t take all of the vacation to which they are entitled. That’s insane! We work harder and better when we have time to recuperate and relax. Unfortunately, I usually fall into that unfortunate 37%. My vacation resets on February 1st, and this will be the first year in a lot of years that I haven’t had to roll it over or even lose some.
What is your financial plan for the new year?
Credit Cards: How to Pick a Winner
We live in a decidedly credit-centric culture. Whip out cash to pay for $200 in groceries and watch the funny looks from the other customers and the disgust from the clerk. It’s almost like they are upset they have to know how to count to run a cash register.
If someone doesn’t have a credit card, everyone wonders what’s wrong, and assumes they have terrible credit. That’s a lousy assumption to make, but it happens. For most of the last two years, I shunned credit cards as much as possible, preferring cash for my daily spending. Spending two years changing my spending habits has made me comfortable enough to use my cards again, both for the convenience and the rewards.
Having a decent card brings some advantages.
Credit cards legally provide fraud protection to consumers. Under U.S. federal law, you are not responsible for more than $50 of fraudulent charges. many card issuers have extended this to $0 liability, meaning you don’t pay a cent if your card is stolen. Trying getting that protection with a wallet full of cash.
The fraud protection makes it easier to shop online, which more people are doing every day. At this point, there is no product you can buy in person that you can’t get online, often cheaper. How would you order something without a credit card? Even the prepaid cards you can buy and fill at a store will often fail during an online transaction because there is no actual person or account associated with the card. The “name as it appears on the card” is a protective feature for the credit card processors and they dislike accepting cards without it.
If you’re going to use a credit card, you need to make a good choice on which credit card to get. There are a few things to check before you apply for a card.
Annual fee. Generally, I am opposed to getting any card with an annual fee, but sometimes, it’s worth it. If, for example, a card provides travel discounts and roadside assistance with its $65 annual fee, you can cancel AAA and save $75 per year. A good rewards plan can balance out the fee, too. I’m using a travel rewards card that has a 2% rewards plan. That’s 2% on every dollar spent, plus discounts on some travel purchases. In a few months, I’ve accumulated $500 of travel rewards for the $65 fee that was waived for the first year. The math works. A card that charges an annual fee without providing services worth several times that fee isn’t worth getting.
Interest rate. This should be a non-issue. You should be paying off you card completely every month. In a perfect world. In the real world, sometimes things come up. In my case, I was surprised with a medical bill for my son that was 4 times larger than my emergency fund. It went on the card. So far, I’ve only had to pay one month’s interest, and I don’t see the balance surviving another month, but it’s nice that I’m not paying a 20% interest rate. Unfortunately, as a response the CARD Act, the days of fixed rate 9.9% cards seems to be over.
Grace period. This is the amount of time you have when the credit card company isn’t charging you interest. Most cards offer a 20-25 day grace period, but still bill monthly. That means that you’ll be paying interest, even if you pay your bill on time. To be safe, you’ll need to either find a card that has a 30 day grace period, or pay your balance off every 15-20 days. Some of the horrible cards don’t offer a grace period of any length. Avoid those.
Activation fees. Avoid these. Always. There’s no card that charges an activation fee that’s worth getting. An activation fee is an early warning sign that you’ll be paying a $200 annual fee and 30% interest in addition to the $150 activation fee.
Other fees. What else does the card charge for? International transactions? ATM fees? Know what you’ll be paying.
Service. Some cards provide some stellar services, include concierge service, roadside assistance, and free travel services. Some of that can more than balance out the fees they charge. My card adds a year to the warranty of any electronics I buy with it, which is great.
Credit cards aren’t always evil, if you use them responsibly. Just be sure you know what you’re paying and what you’re getting.
What’s in your wallet?
Money Problems – Day 7: Paying Off Debt
Today, I am continuing the series, Money Problems: 30 Days to Perfect Finances. The series will consist of 30 things you can do in one setting to perfect your finances. It’s not a system to magically make your debt disappear. Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.
I’m not running the series in 30 consecutive days. That’s not my schedule. Also, I think that talking about the same thing for 30 days straight will bore both of us. Instead, it will run roughly once a week. To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.
On this, Day 7, we’re going to talk about paying off debt.
Until you pay off your debts, you are living with an anchor around your neck, keeping you from doing the things you love. Take a look at the amount you are paying to your debt-holders each month. How could you better use that money, now? A vacation, private school for your kids, a reliable car?
If you’ve got a ton of debt, the real cost is in missed opportunities. For example, with my son’s vision therapy being poorly covered by our insurance plan, we are planning a much smaller vacation this summer–a “staycation”–instead of a trip to the Black Hills. If we didn’t have a debt payment to worry about, we’d have a much larger savings and would have been able to absorb the cost without canceling other plans. The way it is, our poor planning and reliance on debt over the last 10 years have cost us the opportunity to go somewhere new.
The only way to regain the ability to take advantage of future opportunities is to get out of debt, which tends to be an intimidating thought. When we started on our journey out of debt, we were buried 6 figures deep, with a credit card balance that matched our mortgage. It looked like an impossible obstacle, but we’ve been making it happen. The secret is to make a plan and stick with it. Pick some kind of plan, and follow it until you are done. Don’t give up and don’t get discouraged.
What kind of plan should you pick? That’s a personal choice. What motivates you? Do you want to see quick progress or do you like seeing the effects of efficient, long-term planning? These are the most common options:
Debt Snowball
Popularized by Dave Ramsey, this is the plan with the greatest emotional effect. It’s bad math, but that doesn’t matter, if the people using it are motivated to keep at it long enough to get out of debt.
To prepare your debt snowball, take all of your debts–no matter how small–and arrange them in order of balance. Ignore the interest rate. You’re going to pay the minimum payment on each of your debts, except for the smallest balance. That one will get every spare cent you can throw at it. When the smallest debt is paid off, that payment and every spare cent you were throwing at it(your “snowball”) will go to the next smallest debt. As the smallest debts are paid off, your snowball will grow and each subsequent debt will be paid off faster that you will initially think possible. You will build up a momentum that will shrink your debts quickly.
This is the plan I am using.
Debt Avalanche
A debt avalanche is the most efficient repayment plan. It is the plan that will, in the long-term, involve paying the least amount of interest. It’s a good thing. The downside is that it may not come with the “easy wins” that you get with the debt snowball. It is the best math; you’ll get out of debt fastest using this plan, but it’s not the most emotionally motivating.
To set this one up, you’ll take all of your bills–again–and line them up, but this time, you’ll do it strictly by interest rate. You’re going to make every minimum payment, then you’ll focus on paying the bill with the highest interest rate, first, with every available penny.
DOLP
This is the plan promoted by David Bach. It stands for Done On Last Payment. With this plan, you’ll pay the minimum payment on each debt, except for bill that is scheduled to be paid off first. You calculate this by dividing the balance of each debt by the minimum payment. This gives you an estimate of the number of months it will take to pay off each debt.
This system is less efficient than the debt avalanche–by strict math–but is better than the snowball. It give you “quick wins” faster than the snowball, but will cost a bit more than the avalanche. It’s a compromise between the two, blending the emotional satisfaction of the snowball with the better math of the avalanche.
Snowflaking
For each of these plans, you can give them a little steroid injection by snowflaking. Snowflaking is the art of making some extra cash, and throwing it straight at your debt. If you hold a yard sale, use the proceeds to make an extra debt payment. Sell some movies at the pawn shop? Make an extra car payment. Every little payment you make means fewer dollars wasted on interest.
Paying interest means you are paying for everything you buy…again. Do whatever it takes to make debt go away, and you will find yourself able to take advantage of more opportunities and spend more time doing the things you want to do. Life will be less stressful and rainbows will follow you through your day. Unicorns will guard your home and leprechauns will chase away evil-doers. The sun will always shine and stoplights will never show red. Getting out of debt is powerful stuff.
Your task today is to pick a debt plan, and get on it. Whichever plan works best for you is the right one. Organize your bills, pick one to focus on, and go to it.
Assuming you are in debt, how are you paying it off?
First Steps – Ramsey was Wrong
Baby Steps” width=”180″ height=”240″ />- Image by bonnie-brown via Flickr
Fixing a lifetime of financial mistakes can be an intimidating process. Scratch that. It’s always an intimidating process. Where do you start? You’ve got a pile of bills, a dozen messages from bill collectors and two bi-weekly paystubs. What next?
Traditionally, and according to Dave Ramsey, the first step to fixing your finances is to make a budget, but he and tradition are wrong. The first step is to get everybody involved in your finances on the same page. If your spouse isn’t on board with paying off the debt and spending responsibly, nothing else will work.
Once you have that out of the way, you can move on to the traditional first step, making a budget. I’ve gone over my process to build a personal financial plan in quite a bit of detail, so I’ll just hit the highlights this time.
First, make a list of all of your expenses. Include all of your utilities, debt payments, tax payments and absolutely everything else. You need to know the amount of the payment and the frequency. If a bill is due quarterly, divide it by three and you’ll know what you need to set aside each month. Round up in all cases so you can build an automatic cushion.
Next, make a list of your income sources. For most people, this is far easier than tracking their expenses. Figure out your monthly income. If you get paid weekly, that that amount times 52, then divide by 12 to get your monthly income.
Finally, subtract your expenses from your income. If your total is a positive number then you are golden. If you total is negative, you have been a bad monkey. You need to make some cuts, and they may be painful. If your outgoing money is more than your incoming money, it is not possible to get ahead.
Once you have your income and expenses recorded, and you have made the cuts necessary to have a positive balance at the end of the month, you have a successful budget. Congratulations!
