By Jim Beall
Beall Financial Planning
My son is in elementary school and participates in Cub Scouts. In the last two years, he will have made two significant transitions in his young life. In school, fourth grade is where students generally transition from “learning to read” to “reading to learn.” It is a difficult transition for many but a necessary one.
In scouting, fifth grade is when he will make the transition from Cub Scouts to Boy Scouts. In Cub Scouts the motto is “do your best,” and in Boy Scouts, it is “be prepared.”
With the New Year quickly upon us, the urge to make a transition and start the new year off on the right foot is often accomplished by a New Year’s Resolution. I am recommending you make a transition in your financial life from passively managing your financial affairs to actively controlling your money and being prepared for your future.
The first step in getting control of your money and being prepared for your future is to start securing your information. To do this, I recommend you begin using a password manager for all your online accounts. I use nLast Pass and have used RoboForm and Dashlane to name a few of the services available. Find the one that works best for you and your devices. Whichever service you use, it allows you to remember one complex password for the password manager and the rest will be handled by the password manager. Then begin the process of upgrading your passwords for all of the online businesses that have your credit card information on file. If the website also offers two-factor authentication make sure you enable that as well. Two-factor authentication is where the website sends you a code to your phone to ensure it is you logging on and not someone trying to hack you.
Why is a financial planner talking about passwords and password managers and not about the best stock to buy right now? It is because if you haven’t secured your login information to your bank, brokerage, and retirement accounts, then they can be hacked and your money can be stolen as easily as if you had given the thieves the PIN to your debit card.
Speaking of debit cards, if you are using one, please stop. I personally know too many people who have had their bank account drained, and even their linked savings account hit because someone stole their debit card information. They got the cash back, but not before a mortgage payment was missed and other payments bounced. Avoid that hassle and use a rewards credit card that you pay off every month.
The next step is to freeze your credit reports at the credit reporting agencies. This will limit the ability of identity thieves to use any of the stolen information about you to open up new credit card accounts and other nefarious activities in your name. If you are curious as to whether your information has been stolen, harvested, or collected by people you wouldn’t trust the answer is YES. Freezing is now free, although the credit reporting agencies will try to nudge you into not doing a credit freeze because selling your information is very profitable for them. They will want you to set up fraud monitoring or a credit lock or a credit guard. These are different services and usually have a cost involved or allow the credit agencies to continue to sell your information.
To file a freeze, consumers must contact each of the three major credit bureaus online, by phone or by mail. Here’s the contact information for the big three:
Online: Equifax Freeze Page
By phone: 800-685-1111
By Mail: Equifax Security Freeze
P.O. Box 105788
Atlanta, Georgia 30348-5788
By phone: 888-397-3742
By Mail: Experian Security Freeze
P.O. Box 9554, Allen, TX 75013
By Phone: 888-909-8872
By Mail: TransUnion LLC
P.O. Box 2000 Chester, PA 19016
For a complete list of consumer reporting companies from the Consumer Finance Protection Bureau, visit https://files.consumerfinance.gov/f/201604_cfpb_list-of-consumer-reporting-companies.pdf.
Next, get a copy of your credit report for free at AnnualCreditReport.com. This is the government mandated site and not one that will offer you other services you don’t need. If you find any errors or discrepancies in your report, go through the process to fix them.
It may seem like none of what I recommend has much to do with financial planning or getting better with finances and handling debt better. Instead, compare it to securing your house from a thief. What I covered is simply the financial equivalent of locking the door, turning the alarm on, and making sure the home is insured. In this case, it is your money that you are securing.
The biggest obstacle you will face to implementing what I recommend is that having your identity stolen, or your bank account hacked, is an event that may not happen in the future. Meanwhile, the time it takes to do what I recommend is immediate, not really fun, and will take at least an hour of your time that you would rather spend doing something else. The problem is that if you fail to do these tasks, when you do get compromised, it will take hours or weeks to get made financially whole and you will still feel violated once it is over. Avoid that future pain by going ahead and taking care of these few tips today. Then reward yourself with a quick pat on the back for no longer being the average American. You will have taken steps to secure your finances that few others have done.
My go-to resources for what I presented here today are:
Brian Krebs at https://www.krebsonsecurity.com
Federal Trade Commission:
Credit Freezes https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs
Identity Theft https://www.identitytheft.gov/
The Consumer Financial Protection Bureau https://www.consumerfinance.gov/
Next month: Developing Good Financial Habits