My New Shoes, And An Important Conclusion

Yesterday, I made a purchase that I’ve been considering for about a month. I bought a new pair of shoes. These aren’t just any shoes, either. We’re talking about the most expensive pair of shoes I’ve ever bought.

I paid $85 for my new footwear. I realize that doesn’t sound like that much for shoes to some people. But I’m used to buying my shoes at Target. My feet are small enough that I routinely buy my shoes from the kids’ aisle, an area with even lower prices than than the already cheap options such a store provides.

My last pair of shoes are pretty much unwearable now. I paid $15 for them a year and a half ago. The bottom of my shoes are now broken in half, the padding in side the shoes has worn away and I need to replace the shoelaces, again. Looking at these broken down shoes, I finally understood the idea of paying for quality. Sure, I only paid $15 for my shoes, but I pay $15 every year.

For my new pair of shoes, I chose a brand name that is known for durability: Dr. Martens. This isn’t an endorsement for the brand in particular, but I know people who have worn the same pair of Doc Martins for the last decade. I only need to wear mine for a little more than five years to beat my current shoe expense.

I’m more than willing to admit that I get caught up in short-term frugality. I’ve bought cheap shoes, rather than investing in a good pair that will last me. But that short-term frugality isn’t always the best solution for my long-term financial success. Even setting aside the question of long-term cost, there are other factors that I really ought to take into consideration:

• How much time have I spent over the years shopping for new shoes?
• How bad for my feet are walking in these cheap shoes, especially after they get broken enough that I start worrying about buying a new pair?
• How poor of an image do I put forward with shabby shoes?

I’ve approached other purchases in the same way. I’ve gone to the dollar store to pick up all sorts of things, only to have to replace them a few months later. Even if you don’t consider the environmental issues that go along with treating durable consumer goods as disposable, I’ve probably spent a lot of money over the years just so that I could save a few bucks immediately.

For the sake of my finances, I’m working on choosing better long-term options when I need to make a purchase. From apparel to appliances, I’ve discovered that doing a little research helps me make sure that my purchases will last past the end of their warranty. There are a few cases where I still feel okay about buying the cheapest option available, but, in general, I’ve come to the conclusion that quality is worth the price.

The Nigerian Scam

One of the most prevalent and copycatted scams on the internet (and indeed even in postal mail) has got to be the Nigerian Money Transfer Scam. Many people have heard of this con, but few know it has been around since the 1980’s in various forms. Today it has grown exponentially with the invention of email and the internet, and has seen countless variations.

The Nigerian Scam (otherwise known as a Money Transfer Scam) has very old roots, dating back to the early 1900’s as a scam called the Spanish Prisoner. In this version, a letter was sent to a victim stating that a rich prisoner in Spain would share his vast wealth if the victim would send money to the prison to bribe the guards to free him. Obviously there was no prisoner, and any money sent was pocketed and the victim never heard from their prison-bound partner again.

Obviously this sounds bogus to us today, but witness this email I received not too long ago, and see if you can detect the similarities to our Spanish Prisoner friend. (The link will take you to a different website).

Sound kosher? It shouldn’t. Although it doesn’t ask for cash up front, the new version of this scam uses bank policies to its advantage. If you accepted the transfer of money from these ‘colleagues’ in Africa, you would indeed receive a wire in your account. However here is where things get tricky. Wires work similarly to checks. It takes a certain amount of time to make sure the wired funds are good, and if they aren’t, they bounce. The Africans request that their portion of the funds be wired back to them no later than two weeks after you get the money. It just so happens that the bank may take up to three weeks or more to validate the first wire transfer to make sure that it is good. If you wire funds back to Africa immediately, then learn later that the first wire they sent you bounced, you now have to pay back all that money you sent out. This usually is in the amount of several million dollars.

Banks are aware of this scam and many of its variations, and many take steps to monitor any suspicious activity. However banks are limited in what they can do to protect you, often it is the victim themselves who are convinced that the transaction is legitimate. The promise of quick, easy money often blinds many to the obvious signs of fraud. If you decide, despite your banks warnings, to go ahead and wire the funds, you will be responsible to re-pay all the money.

So buyer beware! We often say a fool and his money are soon parted, but often it isn’t foolish people who are scammed by this approach, but those who are in financial trouble already. Often people won’t see the suspiciousness of the situation, they will simply see how many debts can be paid off with the money they have been promised. So the lesson learned? Take everything with a grain of salt, and if something seems fishy, it probably is. If you have doubts about it, take it to your local bank, or talk to a financial advisor. Often they will have heard of something similar and will be able to tell if it is a legitimate transaction or not.

5 Ways To Up Your Earnings

While most personal finance gurus suggest cutting back on your spending to make your paycheck go farther, you may reach a point where your paycheck just won’t stretch any more. That doesn’t mean that you’ve reached a personal finance dead end, though. It just meants that it’s time for a new strategy. Rather than trying to make your dollar buy just a little bit more, why not try to get a few more dollars in your pocket?

1. Your Day Job — There’s one simple (although not always easy) way to up your earnings. You can ask your boss to give you a raise. This tactic works best if you can point to something you’ve done recently that is desrving of a raise. It can be a bit easier if you remember that a raise doesn’t always have to mean that your boss is handing you a bigger salary. Perhaps you can convince your employer to cover more of your health insurance, or provide reimbursement for the gas you use to get to work.
2. Sell Your Stuff — A lot of people don’t necessarily want to get rid of their stuff, and that’s understandable. But it’s worth considering if there really is nothing in your home that you wouldn’t like to be rid of — I try to take a look around once a month and check if there’s something that isn’t really worth dusting. A movie that I don’t watch, a shirt I don’t wear… they can all be sold. Consider eBay or a garage sale. If you have a hobby that involves creating something (knitting, wood carving, etc.), you might also consider selling a few of your creations. After all, Junior can only wear so many sweaters. Etsy can often provide you with customer right away.
3. Start A Side Business — In high school, one of my teachers hired a couple of students to trim lawns in the summer time and shovel snow in the winter. My teacher supplemented his salary, my fellow students got some cash and great recommendation letters and everyone was happy. Maybe you don’t have a ready made work force, but there’s probably a side business that you’ve been thinking about starting ’some day.’ Why not today?
4. Build Passive Income — If you create a project that brings in money long after you finished working on it, with very little continuing effort from you, you have a source of passive income. If you write a book and receive royalties — that’s a passive income stream. So is renting out an apartment or investing in stock. Passive income tends to take more effort (or money) up front but can save you from have to spend tons of time trying to earn more money in the long run.

The great thing about these options is that, if you dedicate some time and effort to them, it’s very possible that you’ll make a significant amount of money from them. There are tons of stories about people who started out selling their DVDs on eBay and then started going out to find more to sell. It’s possible to turn any of these projects into a full-time job, if you want. At the same time, though, you can get just a little money for a little effort, which can be enough to make your finances more comfortable. It’s up to you.

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FDIC: What You Need To Know

If you’ve been reading the news lately, you may have heard of the recent failure of Indymac Bank. After facing a liquidity crisis by making too many high risk loans, Indymac has been officially taken over by the FDIC. This is the second largest bank failure in United States history, and it is expected that the FDIC will have to disburse 4 to 8 billion dollars to the former customers of Indymac, or 10% of the total FDIC fund. The past few days have seen lines of angry people trying to withdraw their funds from the failed bank, but what many of them don’t know is they may not walk out with all their money.

What Is the FDIC?
Most people aren’t fully aware of exactly what the FDIC is, much less what their rights are under it. Most know that a bank with an FDIC seal is a good thing, but not why. The Federal Deposit Insurance Corporation was created after the stock market crash and massive bank failures of the Great Depression. During that time, people were simply out of luck if a bank failed. Once the bank closed, the customers usually were broke (hence the tendency of many of our grandparents to stuff money under the mattress). To counteract the devastating effect this had on the rest of the country, the government created a corporation to insure depositors money.

Account holders are now insured for up to $100,000 on regular deposit accounts, such as checking, savings, or CDs (A recent change to law in 2005 changed the coverage of IRAs from the standard $100,000 to $250,000). Because the FDIC has taken over Indymac, each customer is only allowed to withdraw up to that $100,000 limit. Customers who had more than that in their accounts will have to sue Indymac for the balance, which could take years and never result in a payout. So does this mean you’re screwed if you have more than $100,000 in your bank? Not necessarily, if you know how the system works.

The Breakdown
The FDIC has a few rules that, once you know how they work, can cover every penny you have.

- Each depositor is covered for up to $100,000 for accounts held in their name at a financial institution that is a member of the FDIC.
- If the depositor has accounts at another institution in addition to the first, the depositor is covered for $100,000 at the second institution as well. Therefore the depositor will have $200,000 of coverage between the two banks. Have accounts at eight banks? You have $800,000 of coverage, as long as you don’t exceed the $100,000 limit at any one bank.
- Accounts held in a different title are considered separate. Joint accounts, trusts, or beneficiary accounts are all considered to have their own $100,000 coverage.

The rules get a little more complicated the more spread out the money gets, but these are the basics that would apply to most people. Remember that banks aren’t guaranteed to be around forever, so you should take as many precautions as you can to protect your hard earned cash.

5 Ways to Use a Windfall

It’s always nice to get a little cash. Maybe you got a bonus at work, maybe Grandma sent you a birthday present or maybe you won the lottery. Once you’ve got the money in your hands, though, you have to decide just what you’ll do with your windfall. I’d suggest sending it my way, but I think that these five tips will help you more in the long run:

1. Set up an emergency fund. Emergencies do happen, and it’s always good to have a little spare cash on hand. It can be hard to build up a rainy day fund when your paycheck barely covers your day-to-day bills, but unexpected cash can build up your fund quickly.
2. Pay down debt. Debt costs more than it’s worth in the long run. The more that you can pay now reduces the interest you’ll have to pay later — and that holds true for ‘good’ debt like student loans and mortgages.
3. Save towards a goal. Big goals, like retirement and college for your kids, take plenty of savings. Every penny you can add bring your goal a little closer. The same holds true for smaller goals, like that big-screen tv you’ve been eying.
4. Spend it. While one of the easier ways to build wealth is reducing spending, sometimes there really are things that you need to buy. It’s better to spend your windfall than put it on your credit card, at the very least. And if you get good value for your money, spending it is a perfectly respectable plan.
5. Use it to earn more. If you’ve got a windfall that you don’t need for anything else, consider putting it to work for you. If you have your own business, you might be able to invest in some new equipment. You might also be able to invest it in other companies through stocks and other earning instruments.

Out of these suggestions, I’d like to recommend my personal approach. Any time I have a bit of a windfall, I like to handle it in the following manner: I set aside 10 percent as ‘fun money.’ Depending on how much I have, it may not be enough for much more than a paperback at the local bookstore, but I do feel it’s important to reward myself for my hard work. I might also put my fun money towards a bigger purchase — it may go into a savings account earmarked for a vacation, for instance.

I know that many people will set aside 10 percent for some sort of charity. While I don’t always do so, I think it’s a decision worth considering. I would also recommend setting aside enough to cover taxes. Whether or not you think the IRS should get a chunk of your windfall, the IRS is the one that gets to decide — and they always decide in their favor.

This pie does start feeling like it’s been sliced kind of thin at this point. I always decide on one — and only one — place to put the rest of the money. I might put it in my emergency fund, I might put it towards my student loans. But I don’t try to divide it up into little chunks for each of my goals.

CreditKarma Offers Free Access to Credit Scores

Keeping an eye on your credit score is crucial for making sure you can get the credit you need. It can also be an early warning system in cases of identity theft. But the three main credit bureaus — Experian, Equifax and TransUnion — are only required to give you a free credit report once a year. Anything beyond that, you have to pay for.

There is a new website that offers to provide you with your credit score for free at any time, though. CreditKarma helps users track their credit score. If you sign up with their website, you will not need to pay a single cent to access your score. However, you will be asked to look at some advertising for companies that target your credit score. It is, I think, a reasonable trade off, especially since CreditKarma must pay the credit reporting agencies for your credit report.

The signup process is fairly simple. CreditKarma does ask you for a lot of personal information, including your Social Security number. However, after a careful look at their privacy policy (and their certifiers), I’d say that giving CreditKarma your Social Security number doesn’t put you in any more danger of identity theft than receiving a credit card application in the mail.

Once you’ve finished  putting in your contact details, CreditKarma immediately delivers your credit score. They also provide you some interesting information, like how you measure up to both the national average and other CreditKarma members. There’s also some specifics on just how a credit score works. In addition to your credit score, you’ll immediately see a number of offers, from credit cards with special deals for your range of credit score to free trials. Personally, I’m pretty happy with my current cards. I skipped over them. If you’re looking for something in particular — like a 0 percent introductory rate on a credit card — you might be able to find a good deal through Credit Karma.

I was especially interested in the Current Rates listing that Credit Karma also offers. Essentially the website lists out the rates you’d be offered on mortgages, HELOCs, etc. if you headed down to the bank right now. Of course, this number is just an estimate. It’s still worth keeping an eye on, though: watching estimated interest rates drop can be a great motivator to help you raise your overall credit score, especially if you’re working towards a new house or other goal.

Overall, CreditKarma is a good website to have in your personal finance toolbox. There is no limit on how often you can check your credit score — although it doesn’t change on a daily basis. I don’t intend to log in to CreditKarma every morning, but I am planning to make it part of my monthly financial routine, along with paying bills and thinking about my goals for the next month.

Consider Your Credit Union Options

In some ways, credit unions are virtually identical to banks. They provide a whole list of financial services and generally help people protect their money. But there are quite a few ways in which credit unions differ from banks. And while credit unions aren’t the best choice for everyone, some of those differences can improve your finances.

Consider mortgages: both credit unions and banks will act as lenders if you’re looking into buying a house. But the terms of a mortgage from a credit union are often significantly better for home buyers than those offered by banks. The reason a credit union can get away with offering lower interest rates and other benefits is the fact that banks are for-profit institutions. While they’re out making money, credit unions are non-profit organizations focused on helping their membership.

For most credit unions, membership is limited. For instance, there is are credit unions catering specifically to federal employees, others for teachers and still more that operate in conjunction with a church. When a credit union is formed, the founders can chose pretty much any criteria they wish to limit membership. Why would they want to limit the number of customers their credit union could eventually serve? Because credit union members aren’t clients in the same way that bank clients are. Instead, credit union members actually have some amount of ownership in the overall union.

Beyond the fact that most banks don’t really approve of the credit union system and try to portray such non-profits as unstable, there are a few documented drawbacks to depositing your money with a credit union. A crucial issue is the size of the average credit union. Most banks are significantly larger and have a national, or even international, reach. Most credit unions work hard to ensure their members have the same ability to access their money from far off locations — and some credit unions rival the size of their banking counterparts. However, some credit unions simply don’t have the infrastructure to handle some members’ needs.

It is always worth looking at your credit union options, though. As a general rule, you’ll get much better interest rates — higher interest as your deposits earn money and lower interest on loans that you need to pay back. Getting those great interest rates if you can just makes financial sense.

Financial Questions In A Disaster

People in the Midwest have been facing torrential downpours for days. Many have been forced to evacuate, leaving their homes and most of their possessions behind. Many have also opted to stick it out — to fight off Mother Nature with sandbags and pumps. Making decisions in this sort of situation is hard: you have to balance the emotional and financial, decide whether to stay or what to take.

There are a few points that can help speed up the decision-making process — crucial in a natural disaster when time is of the essence.

Think first of your own needs.

You decisions should be made on the basis of your ability to take care of yourself and the people who depend on you. Deciding whether (and when) to evacuate isn’t simply a matter of how much stuff can you cram into your car: it’s a question of whether you’re likely to get hurt if you stay. In a natural disaster, there may be very little you can do to protect your property — but you certainly don’t want to face doctors’ bills on top of the financial losses you may face.

As long as you are healthy, you can find work and build back up. In my experience, it’s more important to protect yourself and your family than stuff that you can replace.

What is truly irreplaceable?

You can buy a new computer or replace the floors in your home. You can’t go back in time and take new pictures of your children as babies. As you pack for any sort of evacuation, always remember that there are more stores down the road. While you should take some spare clothing and food, focus on taking those things you can’t pick up at the first Wal-Mart you pass.

It’s worth taking a look at your insurance policy every once in awhile, as well. In an emergency, you aren’t going to have time to go down the list of what items your insurance company will replace. You don’t want to waste car space on the property that you’ve been paying the insurance company to cover in just this situation, though.

Don’t forget your paperwork.

No matter whether you stay or leave, you are probably going to need that insurance policy you’ve been paying for all these years. Make sure you know exactly where that paperwork is and keep it safe and dry. You’ll want to do the same with your personal papers (birth certificate, ID, etc.), as well as phone numbers for the insurance company. No one wants to have to deal with filing a claim — especially when plenty of the neighbors will be doing the same thing, but making sure that you’re prepared will make it easier to replace all your replaceable stuff.

Financial Privacy: You Have A Right

When you get mail from your bank, it seems like it always either a statement, an offer for a new service or a privacy notice. I always wonder why my bank feels the need to change their privacy policies so often. Despite how boring the average privacy policy is, though, I do make the effort to look over each one I get.

A privacy policy tells you:

1. the personal financial information your bank, lender or other financial company collects
2. what parts of your personal information your company shares with other companies
3. how you can limit the amount of information your company can share
4. how your company protects your private information

Your personal financial information is valuable — your bank may make a pretty penny by selling the information that you keep quite a bit of liquid cash in your checking account. It’s up to you to decide whether you want them selling that information, of course, but, personally, I want as little of my information to be known as possible. A lack of privacy doesn’t just open you up to annoying ads. It also increases your risks of identity theft and other types of fraud.

You can’t entirely stop some companies from sharing your information, but you can often opt out. When you receive a privacy notice, it’s often information on how to opt out of the most recent plan to share your personal information. Banks and other financial companies are required by law to tell you how to opt out of such plans. But you want to read your privacy notices right away. Don’t let them build up, because you can have as little as 30 days from the date the company mailed the notice to stop them from handing out your financial information.

A wide variety of companies that handle your financial information have privacy policies in place. although not all may send out notices. Companies that may set privacy policies — which, in turn, may include selling your private information to other companies — include:

• Banks
• Credit unions
• Insurance companies
• Securities and commodities brokers
• Retailers that issue credit cards (Gas stations, department stores, etc.)
• Mortgage brokers
• Automobile dealerships
• Check cashers
• Payday lenders
• Financial advisers
• Credit counseling services
• Money order sellers
• Travelers check sellers
• Credit card companies

Pretty scary to think about how many companies have your personal financial information and how many of them can just sell it off if they want, isn’t it? And, like most of us, you’ve probably just been throwing all those privacy notes away, haven’t you?

Keeping your information private doesn’t take a whole lot of effort, though. Whenever you receive a privacy notice, skim it looking for contact information. When you find it, information on how to opt out of whatever current plan to share your information your bank has should be in the same general section. If you don’t have time to read the whole notice, reading just that section can help you protect your privacy.

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Beware the ‘Look-Alike’ Website

What’s a Look-Alike?
Certain websites, particularly eBay, have been targeted for an unusual form of identity theft, look-alike websites. This scam exploded around 2002, but the technique is still in effect today. Essentially the scam uses a website that looks very similar to a legitimate one (like eBay.com), and then asks you to ‘verify’ your personal and financial information by filling out a form on the bogus website. When you hit submit, it sends your info straight to identity thieves.

How Do You Spot One?
Identity thieves will send mass emails to people who use a particular website, like eBay. The email will use the same logo as eBay, have the same formatting as valid emails from the company, and will often seem fairly benign. Often when you are asked to ‘verify’ your information, the link you click on will actually have ‘eBay’ in the address, adding to the perceived validity. However if you look closely, you’ll notice that these addresses also have other words, like ‘www.change-ebay.com’ or ‘www.verify-ebay.com.’ These are domain names that are purchased (often with stolen credit card numbers) for the sole purpose of stealing your information. These websites often will only exist for a few days before they are found and shut down, but they stay up long enough to snare a few unwary people.

What Do Thieves Do With Your Info?
Websites like eBay are vulnerable to this type of fraud, mostly because they require almost all of their users to input personal and financial information in order to use the service, as well as repeatedly asking users to input their username and password. Often the bogus websites will simply have a login page, where you enter your username and your password, like you do every time you login to the real service. With access to your account, not only can thieves get your credit card info, but they can post fraudulent sales and collect money from other users (while never delivering any goods, of course). All of this activity, by the way, is under your name. The identity of the fraudster is almost never discovered.

How Do You Prevent It?
Pay very close attention to unsolicited emails from online services. The reason why this type of fraud works so well is because eBay and other websites will send you (valid) unsolicited emails about services or your account. Discerning the real from the fake often takes a critical eye and a cautious hand. Make sure you look at the address of any link in the email, valid eBay links always start with ‘www.ebay.com/.’ If the message is talking about a sale or a purchase you didn’t make, verify it by going to the website itself (don’t click links from the email) and contacting people through the links there. If anything looks questionable, question it! Websites like eBay have set up hotlines for emails that may be fraudulent. You can forward the message itself to their offices, and they will respond and let you know if it is valid or not.

Insist On Fair Value For Your Money

When I was in college, I watched a friend of mine buy a copy of a movie I knew for a fact he had just a copy of last week. When I mentioned the fact, his response just about floored me. He had bought another copy, he told me, but that one had a big scratch across the DVD. He had thrown it out, but still wanted a copy of it. He didn’t try to take it back or exchange it. He just paid for the same movie twice — and trust me, the movie was barely worth buying in the first place.

I’ve seen plenty of people doing the same thing — deciding that putting up a bit of a fuss isn’t worth the effort. A surprising number of people seem to feel that it’s better to pay to fix a problem themselves rather than asking a seller to take responsibility, whether it’s a leaking roof on the house they just bought or a hole in a sweater from the local retailer. “It’s too much effort…it’ll take too much time…it’s out of my way.” These excuses don’t justify giving up on getting equal value for your money, though, even if you decide to never shop at the store selling faulty products again.

These excuses just don’t hold water. If you have a legitimate complaint, practically every store will do what is necessary to correct the matter. Companies don’t want to lose you as a customer — and they certainly don’t want you going around telling other consumers that they sell shoddy merchandise. Furthermore, if they do something wrong and don’t fix it, you do have some legal recourse. The same holds true for less official sellers — if you buy a house, for instance, and something goes wrong that was not disclosed when you bought it, many sellers will try to accommodate you. If they don’t you do have some legal recourse.

I know that the words ‘legal recourse’ made dollar signs appear in your head and you’re headed back to “It’s not worth the effort.” Hear me out, though. I’m not talking about hiring some fancy-pants lawyer to sue the seller in question. While there are some situations, when large sums of money are involved, that the effort and expense is worthwhile, in most cases we’re talking about sums of money that even a small claims court judge would laugh at. But there are a whole list of consumer advocacy organizations that you can file a complaint with, from the local Better Business Bureau to the Federal Trade Commission. In most cases, you can file that complaint with a ten minute phone call. ConsumerAction.gov offers in-depth information on the topic.

The squeaky wheel gets the grease, after all. Just mentioning a problem can be enough to ensure that you get your money’s worth. Speak up, rather than throwing your money away on the same product twice.

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Banks: Your First Line of Defense

So, you’ve been reading up on all the latest schemes and plots that thieves use to steal your money. You’ve read about devices that grab your passwords out of thin air, people who will dig through your leftover spaghetti for a bank statement, and all sorts of other frightening things. Well, I’m here to tell you to relax for a moment. There’s a difference between being vigilant and cowering in a corner of your room, afraid to leave the house. Banks are your first line of defense, and they’re working very hard to make sure thieves don’t get past them.

It used to be that a banks main concern was keeping its money safe. Bigger locks, thicker doors, better alarm systems, all to make sure those dollars in the safe were just that, safe. Now the focus has shifted. Stealing cash from a bank is as simple as asking for the money. Tellers are trained to follow directions of any robber and give up money without protest, even if there is no weapon. They’re told to wait until the robber has left the bank before hitting alarms or even telling supervisors. Robbing a bank is the easiest thing in the world (it’s getting away with it that poses a problem).

So if the bank isn’t trying to keep your cash safe, what are they doing? They’re working very hard to keep your identity safe, which is even more valuable. From high tech online banking security, to simply training employees, banks are focused almost entirely on keeping your information private. Although there are federal regulations in place to keep you safe, most banks go above and beyond this and hire private security firms.

So the next time you’re asked for your identification at the bank, don’t be insulted! They’re doing their best to make sure that your information is safe. Being asked for ID is one of the major complaints I have heard from customers of my bank. They find it rude, and are upset that the bank doesn’t trust they are who they say they are. However at the same time they are extremely upset if an unauthorized transaction happens on their account. You can’t have it both ways, so banks have chosen to ask everyone for ID. It’s simply the world we now live in.

Generally speaking, the only information you will get from a bank will be about accounts you own. Banks are particularly sensitive to people “fishing” for information. Therefore you won’t be told balances on accounts, status of accounts, or even if an account exists unless you’re a signer on them. This might be frustrating to some people, who may have legitimate reasons to ask, but overall the bank will take no risks.

Banks are there to protect your money, and even more importantly your identity. Believe it or not, it is much worse to be the victim of identity theft than to have all your money stolen. That’s why banks are doing everything they can to keep your information safe, but you still have a part to play. Make sure you’re not leaving your bank statements around, don’t give out your pin number to your card or your online banking, and make sure that your checkbook is secure and doesn’t get lost. If you think that any of these things are compromised, tell your bank immediately. If you work together with your bank, your identity will be as safe as your money is behind that big steel door.

The Art of Financial Discourse

People like to talk about money — whether they’re gossiping about Wesley Snipes’ tax bill or bragging about the new house they just bought. At a certain level, we’re all pretty comfortable talking about money. Beyond that surface level, though, money discussions get complicated, and fast! We’re uncomfortable sitting down with a loan officer at the bank, telling our girlfriends and boyfriends just how much we’re making, or even demonstrating that we’re trying to save money.

But, sooner or later, no matter your financial situation, you’re going to have to talk to someone about money. Even if you’re in great financial shape, you might need to take out a mortgage to purchase a home, and no lender will hand over cash without some discussion of your finances.

You can make these discussions easier, though. They don’t need to be equated with a trip to the dentist or a visit with the in-laws. It’s simple, as well.

Know your financial situation inside and out. That’s all that it takes to be more comfortable with money discussions, generally. One of the reasons we get uncomfortable in that loan officer’s chair is the fact that we’re not sure what he’ll say: will he agree to our loan? or turn us down? And it takes more than knowing our FICO scores to be able to predict the answer.

Go beyond paying attention to what’s in your checking account. To have a really good idea of what your money can do for you — or can’t — you need to have an idea of what’s going on with everyone else’s finances. Getting an idea of the local and national economy can help you figure out where you’re at, along with what you should discuss with that loan officer. A few people seem to have missed the news that the U.S. economy isn’t as strong as it was a few years ago — and are trying to buy homes in this market. It’s definitely doable, but those people will be in for a surprise when they look at the terms of the mortgages available to them. They’ll be having one of those uncomfortable discussions at the bank.

But you won’t. You’ll do a little checking up on your financial situation and be ready to start the conversation on your own terms. Once you’ve gone through the basics of understanding your own finances — reading blogs like this one can help you understand just what those numbers on your bank statement mean — you’ll need a few other resources:

• Read the business section of your local paper. It’s one of the best sources of information on what’s going on in your immediate area — and it won’t be written in technical information.
• Keep an eye on CNN Money. CNN’s site includes information on everything from the national economy down to personal finance help.
• Research the industry you work in. Whether you work for an employer or you run your own business, having an idea of how the economic situation is affecting your industry can give you some ideas on your future money situation.

Three Unusual Ways to Become a Victim of Identity Theft

Alright, so you’ve heard the talk around the water cooler about identity theft and the ways that criminals are committing it. But how much do you really know? Are all the stories you hear true? Let’s take a look at some examples of some not so common techniques criminals use.

Mailbox Diving

While not particularly common, theft of your postal mail can be very damaging. If you’re old school and pay your bills by check and receive paper statements, you’re the most at risk. Essentially putting all that information in a box in front of your house without a lock is asking for it to be stolen. But what if you live in an apartment or condo and you do have a locked mailbox? Believe it or not, you’re still at risk. Those large banks of mailboxes have a big door on the back that opens like a trunk hatch, exposing every mailbox inside. It only takes a crowbar and a few moments for a thief to get to every mailbox in your apartment complex. One stop shopping.

Using Computers

Some of us are from the generation that remembers never having computers, much less the internet. Once upon a time computers were safe and the internet was a novelty to be played innocently with. No longer. Your computer is now the gateway for hackers who make a very nice living stealing your money. These days going on the internet (or indeed, even plugging into the modem at all) without anti-virus software or firewalls is like shaking the hand of an Ebola patient. You don’t even have to use your credit cards online to become a victim. Virus writers now are targeting your passwords and your online banking websites. Even worse than using your own home computer is using a public one. The terminals at a library are no place to be checking your balance. Want to buy something online? Doing it at the library is like giving that Ebola patient a nice big kiss.

ATMs

It’s Sunday at 5 o’clock, you’re about to go out to dinner with some friends and you don’t want to pay with your debit card (want a good way to tick off your waiter? Tell him to split the bill among five cards all with different amounts). You go to one of those stand-alone ATM booths (more secure than the ones at the gas station, right?), and swipe your card through the reader on the door to get in. The light doesn’t turn green, and the door doesn’t open. Frustrated and late, you decide to frustrate the waiter instead and leave. What’s the problem you ask? You just became an identity theft victim.

A technique criminals sometimes use is the fake card reader. Sometimes these are placed directly on some ATMs, but most often they’re installed on bank doors or those stand-alone booths. The thief will remove the card reader that opens the door, and attach an identical one that they have modified. Instead of reading the card number and sending a signal to open the door, this new reader sends a signal to a wireless device or a memory card, storing your card number. You just think that the door isn’t working, when in reality you just gave your card number to a thief (in fact, you probably gave it several times as most people will try three or four times to open the door before giving up).

These are the more unusual ways to become a victim, but the lesson here is the same in general. Vigilance and knowledge are your best defenses. The only thing you can count on from identity thieves is ingenuity, they are constantly thinking up new and devious ways to get your cash. But if you stay up to date on the latest scams and arm yourself with the know-how to avoid them, you’ll be safe and sound.

Down is Good

This might sound obvious, but did you know that one of the best ways to reduce your debt is to simply not add to it? It is amazing how many people agonize over their debt and continue to use their credit cards and take out loans! Sure, using a credit card and paying it off every month can be a fabulous way to raise your credit score butI’m going to guess that if you are scared of your debt then you aren’t exactly in a place where you can pay off your credit card every month.

Here are a few quick ways to make sure that you don’t add to your debt.

1. Take the credit cards out of your wallet. One woman I know was so serious about not using her credit cards until they had been completely paid each of her credit cards in a Ziploc bag full of water and then stored those bags in the freezer. I’m not saying that you have to be that extreme, but you are far less likely to buckle under impulse buying pressure if your credit cards are at home.

2. Only buy something if you have the cash on hand to pay for it. There is nothing wrong with buying something small if you already have the cash in your wallet—as long as that cash isn’t earmarked for something else.

3. Consolidate wherever possible. Is it possible to pay off two smaller debts with high interest by using a third credit account that has a lower interest rate? This won’t necessarily get rid of that debt, but it will keep it from growing quickly. If you own two cars, consider selling one car and sharing the second. Use the money from the sale of the car to pay down your debt!

4. Shop only when you need to. There are tons of people who like to simply “go shopping.” It’s a hobby instead of a necessity. If this is you, find a different hobby! There are plenty of things to do that do not involve spending money (or involve a very small amount of money)! Hobby shopping is one of the easiest ways to rack up debt.

The basic idea is this: when you keep spending money or taking out loans, you aren’t going to reduce your debt. You are simply going to keep it in limbo—especially if you add the same amount to your credit cards that you pay on them each month. Paying cash, consolidating your expenses and shopping only as a necessity are great ways to keep your debt going in the right direction: down. When it comes to debt? Down is good.

Making Confetti

Shredding financial junk mail is probably one of the easiest and most effective ways to prevent identity theft. Many people might perceive identity theft to be a crime committed by technically savvy, intelligent, and cunning thieves. While in some cases this is true, in most cases this crime is committed by people who are not above diving into dumpsters and looking through your leftover spaghetti.

Credit card companies are the main concern in combating postal identity theft. While these companies are trying to make things easier for you by pre-filling all your information on those applications, they’re really just making it easier for thieves to open those accounts in your name. If you’re anything like me, you get tons of credit card offers and applications, with a fair amount of “pre-approved” cards sprinkled in for good measure. These are red flags and should be ripped up immediately. It is entirely too simple for someone to reach into your garbage and pick out these envelopes, sign your name, and send them off.

Another piece of mail you should be cautious of is your bank statement. These hold a lot of information about you, your name, your account number, and balance. Some statements might even have images of your signed, cancelled checks that people can use to create forgeries. A quick search of recent news stories will bring up plenty of instances where people went from mailbox to mailbox taking statements. One that occurred in my neighboring town involved a woman and her daughter delivering the local newspaper. They drove down the street stopping at every house, dropping off the newspaper, and taking peoples bank statements. They then used this information to make withdrawals from their victim’s banks.

One of the best defenses against this kind of fraud is vigilance and shredding. Having a small shredder in the home is now an essential piece of equipment. If you don’t have one or cannot buy one, some banks or institutions have “Shred Days,” where you can bring all your saved junk mail (don’t throw it out!) and give it to them to shred in the same industrial shredders they use. Another solution is to convert all your paper statements to an online format. Many banks and credit card companies offer this service, and oddly enough it is more secure than paper in your mailbox. It is much harder to hack a secured website than it is to walk up to a mailbox and take out an envelope. These online services archive your statements for a long time, but you can also print them out and hold on to them as a backup.

Debit Card Fraud: Recovery

Ok, the unthinkable happened. You wake up one morning and get a cup of coffee on your way in to work. You swipe your debit card, there’s a pause, and DENIED flashes across the screen. Denied for a $2 coffee? How can that be? Embarrassed, you leave the coffee and slink out of the shop. You get into work and check your account online, only to find that you now have -$83.65 in your bank. You’ve been hit with debit card fraud.

Many people are surprised to learn that most debit card fraud occurs when the card owner still has the card in their possession. I certainly was surprised when I had to leave the coffee steaming on the counter and found that someone in California bought an X-Box with my money. Follow the tips in the Debit Card Fraud Prevention article to make sure this doesn’t happen to you. But if you’re like me and this has happened to you, keep reading to see how you can get your money and life back on track.

Do Some Detective Work
The best weapon you have against fraud is information. Check your bank account online to see what is going in and coming out. As soon as you see something weird, note the date it happened and the exact amount, and most importantly, where. If something was bought in New Jersey and you live in New Mexico, you might want to take a closer look.

Tell Your Bank
As soon as you think you’ve been defrauded, tell your bank. Each bank has different methods for dealing with fraud, mine had me fill out an affidavit stating that I did not authorize the transaction. This may be a long and tedious questioning process, but you have to realize the bank is going to end up paying you back your money and taking the fraud as a loss, instead of you. Therefore they want to make absolutely sure you’re telling the truth, and not just trying to get out of paying a big bill. This process can take up to 10 days while the bank researches the transaction to make sure that it was fraudulent.

Do it Fast
There is a limited amount of time between when a fraudulent transaction occurs, and when you can get reimbursed for the funds. Federal law states that a customer is liable for a maximum of $50 if they report the fraud within two business days, $500 if reported within 60 days, and unlimited amounts if reported after 60 days. Most banks, if the fraud is obvious and the customer is in good standing, will cover all funds that were stolen, but only after an investigation period.

The keys to recovering from fraud are information and communication. You have to arm yourself with knowledge not only of the comings and goings of your own accounts, but also the laws governing fraud. Once you are conscious of these things, getting in touch with your bank and staying in touch with them will expedite your recovery immensely.

Debit Card Fraud: How to Prevent It

Debit card fraud is sometimes lumped into the same category as credit card fraud, but the two are very different. Debit cards link directly to your money, your real cash, and recovering those funds is a long and tedious process. Here are a few simple things you can do to shield yourself from debit card fraud.

Use the internet or automated phone service to keep tabs on all your accounts.

Checking the balance in your checking account every other day will arm you with the best defense against fraud: information. The more familiar you are with the comings and goings of your account, the quicker you can spot something fishy.

Don’t use your debit card for purchases at places you don’t trust.

If you’re unsure about the security at a place of business, use your credit card or cash to pay. A credit card doesn’t suck the funds from your bank account immediately like a debit card, so it gives you some time to check and make sure everything is alright before paying off the balance. This applies for online purchases as well. Treat websites the same way you would treat brick and mortar businesses, if it looks untrustworthy, don’t trust it!

Hold on to your card

Most restaurants are fairly trustworthy places, however it is an ideal environment for a devious waiter to make off with your card number. When you give them your card to pay the check, they take it back to the register, usually out of sight, and run the transaction. This gives them plenty of time to copy your number, your signature, even the little security code on the back.

Spread out your money

Don’t link all your accounts to your debit card! If someone gets hold of the number they can completely clean you out. Instead, have a small savings account that can only be accessed by the old fashioned human teller at a bank branch. That way if your checking gets wiped out, you still have some cash in your savings. This is important, because the bank could take up to 10 days to investigate your claim, and they won’t refund you until that time is up.

While using debit cards may sound insecure and dangerous, the reality is that with a little precaution and knowledge, they can be excellent tools. Banks are starting to emplace more safeguards on debit cards, such as transaction amount limits. These limits can be lifted for certain authorized transactions if you contact your bank, but in case your card number falls into the wrong hands, the thief can only take a certain amount out in a 24 hour period.

Are Your Affairs In Order? Personal Finance And Wills

It may sound morbid, but it’s true: if you’re working on getting your personal finances in order, it’s time to make a will. And every time your personal finances go through a major change, you need to update your will. If you buy a new house, if you have a child, if you pay off all your debt (and that does include mortgages and student loans) — your personal finances are the key constraint to what sort of documents you need to protect your estate.

I’ve heard people — especially young people — ask what a will has to do with personal finances. Odds are that you’re not entirely alone in life: you may be married, have parents, siblings, children, none of whom are going to know where to start tying up your affairs. Furthermore, depending on what you plan to do with your assets in the long run, personal finance and estate planning go hand in hand. If you plan to help out specific family members — usually children, but the laws allow for other relatives as well — you may want to consider setting up a trust or other vehicle to reduce taxes or other personal finance issues.

Having a conversation about estate planning can feel a bit strange — after all, most personal finance gurus tell you to focus on earning money so that you can enjoy life, not think about everything that can go wrong. But talking with your loved ones about how you want to handle your estate is a good first step. You may also want to talk to a financial planner or a lawyer — the laws involved are fairly complicated. Even if you feel competent in doing your own taxes, you may want professional help for estate planning.

There are some issues to consider when planning your estate, beyond how you choose to handle your assets. Decisions that are going to affect your finances, such as your health care and which family members should receive power of attorney if something happens to you, should also be considered. Think about a situation in which you were temporarily incapacitated: do you want a judge to pick one of your relatives to handle your finances, or do you want to pick that individual? If you care, you should take care of that issue sooner rather than later.

I know that the entire thought of planning in the extreme long-term seems morbid at best, but it’s worth taking care of in the near future. And there are ways to make long-term planning pay off in the short-term, if you’re willing to investigate your options.

Economic Stimulus Scam

Around tax time all kinds of fraud are reported, mostly people posing as the IRS on the phone and phishing for personal information to “confirm the information disclosed on your tax filing.” The new twist this season is using the Stimulus refund to gain access to your personal information.

Because this is not the usual refund most people expect, they are more susceptible to fraud surrounding it. Scammers will make calls to people, posing as the IRS and asking them to confirm their information so they can receive their Stimulus checks. Usually they are asked for their bank account information. When people hesitate, they are told that the only way they will receive their check is to disclose their account number. People might also be asked to disclose their social security numbers, addresses, driver’s license numbers, loan information, health insurance information, and more. These scammers will then take this information and open up credit cards, clean out bank accounts, or even file fraudulent tax returns in your name.

The same precautions that will save you from other tax scams will save you here as well. The IRS never sends unsolicited e-mails or phone calls, so treat any with caution. Call the IRS at 1-800-829-1040 to confirm any correspondence you receive. E-mails from the IRS might seem unusual, but now that more and more people are filing electronically, and having their refunds directly deposited into their bank accounts, e-mails asking for confirmation of your routing number and bank account are more believable.

These emails can be more dangerous than you think. They often look very official, with IRS seals and fine print on the bottom of the message, all in an attempt to lend credibility. These messages often have a link that you click to find out more information about “special rebates.” Clicking on these links at all, even out of idle curiosity, will download malicious software that allows hackers access to your computer and any personal info you have on it. So if it seems too good to be true, don’t click on the links “just to see.”

The cousin of the refund email scam is the audit email scam. This method uses scare tactics instead of the promise of money. The victim receives an email saying that they are being audited, and they must follow a link to a “secure” site to provide information. This of course instantly downloads the same software as before, and as a bonus any information you input into their website is now theirs to do with as they please.

Taxpayers have received more than 33,000 of these scam e-mails, reflecting more than 1,500 schemes. If you receive one of these emails, forward it to phishing@irs.gov to report it.