Recently, I had the distinct privilege to join Sheinelle Jones on the Today show, discussing some rapid-fire personal finance issues in Simple Money style. Is now a good time to buy stocks? Is it a good time to buy, sell, refinance or renovate a home? We even discussed a version of the Simple Money Portfolio and my top two picks for cash flow apps that can improve your financial situation. Click HERE or on the image below to view the segment.
We don’t know yet, but it’s quite possible that the answers will be illuminated in retrospect because Equifax waited more than a month to announce the breach.
What can you do at this time to ensure that you are shielded from the worst possible outcomes of this–or the inevitable next–mass identity theft?
First, specifically regarding the Equifax situation, you may consider taking two steps they have recommended (all while keeping in mind that this is coming from the entity that let the identity of as many as 143 million Americans slip through their fingers):
1) You can go directly to the dedicated Equifax website to determine if you were likely hacked, like I did. Hit the “Potential Impact” tab and then the “Check Potential Impact” button:
You’ll be asked to put in your last name and the last six digits of your Social Security number. Then, you’ll get the verdict on whether or not they think your information may have been hacked. When I completed this process for the four members of my household, three of them were (apparently) spared while I got the undesirable response that my “personal information may have been impacted by this incident.” Awesome.
Many, however, have found this online device lacks reliability. In at least once instance, the name of a colleague’s dog and a fabricated Social Security number returned positive results. [Insert contemplative, curious emoji.]
2) Regardless of whether your information was hacked, Equifax then gives you the opportunity to sign up for their TrustedID Premier credit monitoring system–free for a year to all Americans. There initially was some controversy over whether agreeing to receive the freebie would result in waiving your right to be part of a prospective class action lawsuit against Equifax in the future. They’ve since clarified that it will not.
But signing up for their credit monitoring service also seems convoluted, or perhaps my enrollment message appears clearer to you:
If your journey to secure your identity continues beyond what the leaky Equifax has to offer–and it probably should–please consider these additional steps:
3) Monitor your credit. You can pay someone to do this, but I’ve yet to be convinced that it’s worth it, especially because you can get most of the promised benefits for free.
You can obtain a free copy of your credit report from all three credit reporting agencies at annualcreditreport.com. Order all three at once for the most comprehensive review or spread them out throughout the course of the year. But to be fair, reading a credit report can be like drinking from a firehose.
Therefore, you may consider a growing number of free online resources, like CreditKarma.com or Mint.com, that aggregate credit information in a more understandable and practical form. Personally, I’ve used CreditKarma for years and found it to be very helpful as part of the following simple process:
- Regularly glance at the homepage, which displays my current credit score from two of the three credit bureaus. Only if there’s been any significant movement in this score will I then…
- Review any of the warnings that might explain the volatility in my score. If so, I might…
- Review reports in full and take any necessary action.
This process has more than once served to alert me to activity that required follow-up.
4) You may consider taking the additional step of “freezing” your credit. It’s a process that looks different in each state, and I’d only recommended it if you don’t intend to use your credit in the near future. Otherwise, you’ll have to “thaw” your freeze to give prospective creditors the necessary access to your info.
One step, however, that I can’t see any downside to taking is freezing any existing credit reporting for your minor children. (Um, why do they even have credit reports, major credit bureaus?) If you decide to go this route, Clark Howard’s credit freezing guide is helpful.
5) Only use credit cards–not debit cards–for purchases. Despite Dave Ramsey’s objections, this way, it won’t be YOUR money that is stolen if you’re hacked. It’ll be the credit card company’s job to reclaim their funds.
This is advice that I’ve received first-hand from Frank Abagnale, the fraudster turned FBI consultant made famous by Leonardo DiCaprio in the movie Catch Me If You Can.
We can trust him now. I’m pretty sure.
6) Lastly, change your passwords to online financial accounts. If you were one of the 143 million people affected by the Equifax hack, you may wonder if hackers could gain immediate access to your bank and securities accounts. But you still hold some very important cards that they can’t see–namely, your password and any PIN numbers attached to online financial accounts.
It’s probably a good time to update and strengthen those.
But here’s the scariest news that has been highlighted by this new mass hack:
Unfortunately, we now live in a world where it’s not a question of if, but when, we will deal with having all or part of our identity stolen.
Sure, you could try to go “off the grid,” like Psycho Sam, the bush-man. But for most of us, the benefits to be derived by the online economy simply outweigh the risks. That means personal credit monitoring is a habit we must build into our lives.
But what exactly does he mean, and how does he justify this bold statement?
First, let’s separate the work of financial planning into two different elements–let’s call the first quantitative analysis and the second qualitative analysis.
Quantitative analysis is the more tangible, numerical and objective. It’s where planners tell clients what they need to do and, perhaps, how to do it. For example:
- “Your asset allocation should be 65% in stocks and 35% in bonds.”
- “You need $1.5 million of 20-year term life insurance.”
- “Have your will updated and consider utilizing a pooled family trust.”
The qualitative work of financial planning is the intangible, non-numerical pursuit of uncovering a client’s more subjective values and goals, and, hopefully, attaching recommendations like those above to the client’s motivational core–their why.
If quantitative work is of the mind, qualitative is of the heart.
Qualitative planning often has been dubbed “financial life planning”–or simply “life planning.” It is defined in Michael Kay’s book, The Business of Life, as the process of:
That may seem like an odd observation, unless you consider the fact that I had the privilege of spending a couple days recently with life planning luminary George Kinder. Among other benefits, I was able to reacquaint myself with his famous three questions, elegantly designed to progressively point us toward the stuff of life that is the most important–to us.
The final question invites us to explore what benchmark life experiences we would leave unaccomplished if we only had one day left on this Earth. And as you may suspect, even in a room filled with financial planners, achieving a more aggressive portfolio posture was, perhaps, the farthest from anyone’s mind.
Meanwhile, most of the items that people did list represented experiences (not things) that, individually, were outside of their to-date unarticulated–but now evident–comfort zones.
Participants almost universally wished they’d have taken more risks in life–personally, educationally, relationally, experientially, professionally and vocationally.
Similarly, those most meaningful experiences they had enjoyed thus far in life were the ones that pushed the boundaries of their comfort zones, expanding their personal risk tolerance.
But what about financial risk tolerance?
My favorite discovery in the field of behavioral economics confirms what we already knew deep down, even if it contradicts “common sense”–that experiences are more valuable than stuff. I recently put this finding to the test:
Concert of a Lifetime
Those were my wife’s words when I called her from the road, rushing to discuss what I termed “the concert of a lifetime.”
I’d just learned that living legends U2 were touring in support of the 30th anniversary of their most celebrated album, “The Joshua Tree.”
The greatest live band of a generation playing the soundtrack of my youth from start to finish.
Andrea was on board with going to the show–she’s a big fan, too. But what invited her claim of insanity was my insistence that we take the whole family to Seattle to see the show. We live in Charleston. South Carolina.
I fear that I’m going to miss the proverbial wheat because of all the darn chaff overstuffing my inbox. You, too?
Well, apparently we’re in good company. As a student of behavioral economics and finance, my ears always perk up when behavioral economist Dan Ariely has something to say. He struggled so much with managing the daily email harvest that he decided to create two apps, one that helps people send him better emails and another that helps him prioritize the emails he receives.
This inspired some colleagues and me to ask: “What are the ways that we might be contributing to the chaff in the inboxes of our business associates and friends?”
What are the often unspoken rules of good email etiquette? Here’s what we came up with…
The 10 Commandments of Business Email:
1. Thou shalt not gratuitously “cc.”
You’re on it–they know.
Parents have sacrificed their financial futures on the altar of their children’s education. Fueled by easy federal money and self-interested colleges, the result is a student loan crisis that appears already to be eclipsing the catastrophic proportions of mortgage indebtedness leading up to the financial collapse of 2008.
Please allow me to disclaim a few things:
- I’m not anti-education. In fact, I valued my college education so much that I went back to teach at my alma mater, Towson University, for seven years.
- I believe that a college education is a) inherently valuable, b) an enhancer of career prospects and c) fertile ground for unforgettable life experiences beyond the classroom.
- I’m a parent. I’ve encouraged my two sons, 13 and 11, to strive for a college education, and I’ve also offered to share in the financial burden.
- I’m not a prognosticator. Therefore, I’m not predicting an imminent crisis akin to the Great Recession, led by student loan defaults. Crystal balls don’t work, and anyone who claims to have one is selling something.
I’m also not a conspiracy theorist, but the facts, according to a new Wall Street Journal article, are indisputable:
Just for fun, Google the words “market pullback.” There are over 2.2 million results–most of them market predictions–and the first page of results is dominated by calls for an imminent market reversal that the simple desk calendar has already proven false.
However, despite their worthlessness, market predictions remain as predictable as market opens and closes. (And I predict no end in sight.)
First, there’s a clear profit motive. Apparent urgency leads to activity, and activity is still how most of the financial services industry makes its money.
“Bullish predictions encourage investors to pour fresh money into the markets, helping asset management companies to enjoy rising profits,” the New York Times reported, noting that the Wall Street forecaster’s consensus since 2000 has averaged a 9.5% increase each year. They accidentally got it (almost) right in 2016, but in 2008, the consensus prognostication missed the mark by 49 percentage points (an outcome that makes your local weatherman seem like a harbinger of accuracy)!
But not everyone’s positive either. My colleague and the co-author of the new book “Your Complete Guide To Factor-Based Investing,” Larry Swedroe, analyzed Marc Faber’s perpetually cataclysmic proclamations and rendered the good doctor “without a clue.”
It’s old news that we’re busy and that we wear our busyness as a badge of honor. But a new study found that Americans, in particular, are actually buying it. Specifically, the study concluded that Americans who always say they’re “busy” are actually seen as more important. Unfortunately, it’s all a charade.
Numerous studies have shown that busyness isn’t actually good business, and here’s the big reason why: It makes us less productive. We’re all susceptible to it, but If I’m saying to myself (and I have), “Woo, I’m busy; really busy,” I’m likely being distracted from the most important, most productive work that I could be doing. I may feel like I’m doing more, but the net result is actually less. And it often feels like it.
But not everyone wears busyness as a status symbol. In response to the research and their own well-informed gut feelings, many are finding enjoyment in more productive work at a less busy pace. I wanted to know how these people recognize when they’re devolving into busyness and what they do to stop the downward spiral, so I asked 12 thought leaders who’ve inspired me two simple questions:
- How do you know when you’ve gotten too busy?
- What is a technique that you use to “unbusy” yourself?
Here’s what they had to say:
In 1967, the Beatles released the song, “When I’m Sixty-Four.” The lyrics are a preemptive plea to secure a relationship even when the realities of old age set in. Now, as the nation’s largest generation whistles this tune into retirement, the question seems less rhetorical:
Who is going to take care of us in retirement?
Not everyone will need long-term care insurance (LTC), but everyone needs a long-term healthcare plan. Your long-term care plan should incorporate the following: facts about you (and your spouse, if applicable), your age, your personal health, longevity of lineage, your retirement income and assets, your tolerance for risk, the costs and demographics of long-term care in your geographic area and information about any long-term care insurance that you own or have considered owning.
This post is the second in a two-part series. You can read the first on Long-Term Disability (LTD) by clicking HERE.
Long-Term Care Insurance
One very important thing to remember is that Medicare does not cover the costs of most long-term care needs. Allen Hamm, in his book, Long-Term Care Planning, shares the following statistics:
- 71 percent of Medicare recipients mistakenly believe Medicare is a primary source for covering long-term care.
- 87 percent of people under the age of 65 mistakenly believe their private health insurance will cover the cost of long-term care.
As an educator in the arena of personal finance, I generally avoid matters of public policy or politics because they tend to devolve into dogma and division, all too often leaving wisdom and understanding behind. But occasionally, an issue arises of such importance that I feel an obligation to advocate on behalf of those who don’t have a voice. The issue of the day revolves around a single word: “fiduciary.”
At stake is a Department of Labor ruling set to take effect this coming April that would require any financial advisor, stock broker or insurance agent directing a client’s retirement account to act in the best interest of that client. In other words, the rule would require such advisors to act as a fiduciary. The incoming Trump administration has hit the pause button on that rule, a move that many feel is merely a precursor to the rule’s demise.
Why? Because a vocal constituency of the new administration has lobbied for it—hard. They stand to lose billions—with a “b”—so they’re protecting their profitable turf with every means necessary, even twisted logic.
The good news is that informed investors need not rely on any legislation to ensure they are receiving a fiduciary level of service. Follow these three steps to receive the level of service you deserve: