Always Use Protection

Financial Fitness 2015 tip number 2:



 Always use protection. 

Identity theft is a fast growing crime and is particularly common around and after the holidays. One of the things that makes identity theft such a major problem is that often people don't realize that their information has been compromised until well after the fact. In some cases, it can take years to discover that something is wrong. 

Don't let this happen to you. Check your credit annually at  annualcreditreport.com and sign up for identity theft protection from your financial institution. Do it now, before it is too late. 

Identity theft protection might cost you a little bit monthly at the bank (my customers pay 12.99 a month) but the fee is well worth it. Included is a copy of the credit reports, credit monitoring, and assistance in fixing your credit report. With as many things that your credit report effects, you can't afford to be without protection.

52 Week Challenge

It's a new year! Welcome to 2015!

If you are ready to get serious about your financial life, come take a journey with me this year. Let's work on getting back to the basics; making money management easy, convenient, and effective.

With the new year, people across the world are resolving to better their lives in some way or other. Many are making unrealistic resolutions that they will keep for a week or two. I am about to propose a resolution that you can and should make.

I want you to save $1378 extra this year.

And we are going to do it together. Here's how.

First, open a new savings account. I personally use American Express for this for a couple of great reasons. First, the interest rate is about as high as you can find out there right now. At the time of this writing, the rate is 0.85% APY, 85 times what I am making at my local bank. Second, keeping this money away from my local bank makes it harder for me to raid the account when I think I need it. That severely cuts down on the temptation.

After you have an account set up, start scheduling transfers. Every week, on Friday, transfer an amount equal to the week into your new savings account. For example, this Friday, the first of 2015, transfer a single dollar. Next Friday, the 9th, is the second week of 2015, so transfer 2 dollars. and so forth until the end of the year when on the last Friday you are transferring 52 dollars.

At first, this is going to seem easy. And it is. In January you will have put in only $15. But you may be thinking of December. How are you going to swing over $50ish a week? Especially when there is Christmas shopping to do?!

Well, we are going to work this year to put ourselves on a stronger financial footing. As the weeks pass, our situation will, hopefully, improve. And by the end of the year, the habit will have become so normal that you will have learned to live within your means.

So give it a shot. Let's start saving and taking care of our financial futures.

Your Dating Life and your Money

It shouldn't come as a shock that when you become involved in a relationship there is a real and substantial impact on your personal finances. And I don't just mean that you now have to buy anniversary and birthday gifts (or, in the case of my ex-wife, she demanded "monthiversary" gifts. Ouch).

Your partner's spending and saving habits are going to affect you directly. One of my favorite quotes from the Wall Street Journal is:

"Whether you wind up with a nest egg or a goose egg depends on the kind of chick you married."

 Sorry ladies. The quote is obviously geared towards men, but the principle is the same either way. Having a serious talk about finances before things get too serious may not be the most romantic of conversations, but it is vital to your own financial health.

Don't compromise your financial future. You will both be happier with that nest egg when you need it than with a monthly bauble that she'll soon forget.

A Look at Checks: The Back of the Check

We looked at the front of a check several weeks ago, it is time to look at the back. At first glance there isn't really much to see. Usually, the only relevant thing on the back of the check is the signature line.

The signature line on the back of the check is extremely important, and often handled incorrectly. It is deceptive in its simplicity, it is one of the most important parts of the check. Signing the back of the check, or "endorsing" it transfers ownership of the check. When you sign the check, you are assuming responsibility for the check as well.

Assuming responsibility. What exactly does that mean?

Recall that a check is, in essence, a contract between you and the person that wrote it out to you. They are agreeing to transfer funds to you. By signing the back of that check you are agreeing to receive those funds, take possession of them, and be completely responsible for those funds, even before you receive them.

If that check is no good, you are liable for the check. You took ownership and responsibility for the check. If you deposited the check in your bank account, the bank will subtract the amount of the check from your account and charge you a fee for depositing a bad check. If you cashed the check, the bank will take money out of your account for cashing a bad check, and also charge you a fee.

The reason for the fee? Essentially, the bank gave you an unsecured, short term loan when they let you use that money while the check was still out and had not yet been returned unpaid.

Now that we have talked about the importance and significance of endorsement, let's look at how the endorsement should be done.

The back of the check should be signed exactly the same way as the front of the check is made out.

But that's not MY signature, I don't ever sign with my full name! You might be thinking.

In that case, sign your name as it appears on the front of the check and then resign like you normally do underneath it.

But they misspelled my name! Same as above, sign it wrong then sign it right.

If the front of the check is made payable to you AND someone else, you both need to sign the check.

If the check is made payable to a minor, the legally responsible guardian can sign the back of the check as follows:

The name on the front of the check
the words "A minor by"
The guardian's signature, followed by the relationship of the guardian, aka, "mother"

Generally, this is all there is to signing the back of a check. Writing the words "For deposit only" is NOT an endorsement, the check still needs to be endorsed. Although, writing "for deposit only" restricts what can happen to the check and it often done for security.

There are other ways to endorse a check, but don't do them. I won't even go into them here. Any financial institution paying even a little attention will invalidate the check if you try to endorse it using another method and you will have to go back to whoever made the check out to you and get a new check.

Handling Identity Theft

Perhaps you went to get the mail just like any other day and among your mail is a notice saying you are overdue on your Disney credit card. The only problem is that you don't have a Disney credit card. The name on the letter is obviously yours, the address is yours, but the numerous and expensive  charges are definitely not yours.

Maybe you applied for a mortgage for that dream home you've always wanted. The price was right, the rates looked good, the house is perfect. Then the loan officer tells you that you are declined. Your credit report is riddled with collections and no pays.

No matter how you find out, identity theft is tragic and destructive. It can easily destroy your credit and may even land you in jail. So now that you know about it there are some immediate steps that you need to take to address the theft

Immediately contact the big three credit bureaus. Request a free copy of your credit report. You are entitled to a free copy once a year from each at www.annualcreditreport.com. Review the reports to see just how extensive the theft is. Brace yourself, this may have been happening for years. If not, then you are truly one of the lucky ones.

Contact the bureaus and dispute the items that are not yours. Further, place an alert on your report.
After contacting the credit bureaus themselves it is time to contact the individual companies that have items on your report. Each company that appears on your credit report that is not a legitimate entry of your own needs to be contacted.

Inform them of the crime and dispute the transactions. They will have paperwork for you to fill out. Especially if there are many companies to contact this step may take a long, long time. Complete the paperwork as quickly and thoroughly as possible and get it back to the company.
United States law protects you in some cases in this, but your time is limited and short. If you are only catching this after many years you may not have much recourse.

After completing all of this, and immediately, for time is a major factor, take the appropriate steps to prevent it from happening again and to prevent the situation from escalating even worse.
Sign up for a credit monitoring service to keep an eye on your credit. This will alert you whenever anything happens on your credit, allowing you to know if the thief is trying to use your identity again. You may even be able to catch the thief in the act, if not, at least you can limit the damage that the thief does to your identity.

Identity theft is scary and damaging, if it happens to you your best bet is speedy action.

Using a Personal Loan to Help Repair Your Credit

Credit repair can be a long and difficult process, often showing little result for a lot of time and hard work. Depending on the extent of the damage that you are trying to repair one option may be to consolidate your loans and credit cards into a single, lower monthly payment with a lower interest rate.

Finding a low interest personal loan typically means that it will have to be a loan secured by some manner of collateral. A home equity line of credit typically allows the flexibility necessary to consolidate multiple debts and provides a very competitive interest rate. Other forms of collateral may include a vehicle, a bank CD, a savings account, or even securities (like stocks and bonds).
By offering collateral the risk to the lender is lowered and they will offer you a lower interest rate.

The key here is to secure a loan large enough to cover all of your debts and with a rate lower than what your other debts offer.

Then use the new secured personal loan to pay off your other debts. The thing to remember is that you never get out of debt by taking out more debt. Just because you have paid the loans off with another loan doesn't mean that these debts have disappeared, you do not suddenly have extra money.

The danger is that people often think it is now acceptable to go out and charge up their credit cards again. Doing this means that the method of credit repair they are attempting actually adds to their debt and puts them in a worse position than where they started.

Provided that you pay off all your loans and that the interest rate is lower now, after consolidating, than it was before means that you will now be paying less money to pay your debts. Any debts that were overdue have now been paid off. If the temptation is too great to start charging again call and cancel the paid off credit cards.

Consolidating your debts into a personal loan can help you to begin repairing your credit but it needs to be done responsibly. If you cannot provide collateral and the only loan that you can secure for debt consolidation increases your rate it most likely is not a good idea. For more severe credit problems seek professional help. If you do not have the personal discipline to keep from going more deeply into debt this method may not be right for you.

Five Mistakes that First Time Homebuyers Make

You have decided that the time has come to purchase your first home. Congratulations, you are taking a major step on your way to living out the American dream. The euphoria that overtakes you when you enter that perfect home, that home that you want to make your own, is incredible, overpowering, even life-changing. That rush, however, could be quickly dashed and dampened if you make any of these common 5 mistakes that of first time homebuyers.

1. You're mother might have told you to shop around; this is the time to thank her for that bit of wisdom. Failing to do enough shopping when looking for a home can lead to serious problems. Your excitement can make even a poor choice seem like an ideal one. Shop around and get help from a professional. Carefully consider the neighborhood and the market.
Nothing is worse than finding that perfect home and then discovering that it is well out of your means. Three of the five most common mistakes first time home buyers make involve poor planning concerning their financial condition.

2. Mistake number two is failing to know the condition of your credit. I've seen people in the office with their mortgage lender receiving the news that their identity had been compromised and they were ineligible for a mortgage. The devastating possibilities of not keeping track of your credit report can cost you your first home. Fortunately, thanks to the FACT Act you are entitled to a free copy of your credit report annually from the three major credit-reporting bureaus. Visit www.annualcreditreport.com right now and see what is being reported about you. Make sure that it is accurate.

3. Once your credit report has been verified for accuracy secure that mortgage! Research lenders and programs (remember that failing to shop is mistake number 1), choose a lender and apply for pre-approval. See what the lender is willing to lend to you. Knowing how much you can borrow will help narrow your search to homes within your range and help you avoid the disappointment of finding that your home of choice is outside what a lender will lend you.

4. A startling fact to keep in mind is that 100% of foreclosures are on loans that the lender felt the borrower could repay. Just because the lender will lend you all that money does not mean that you can necessarily afford that much home. Remember that with that home comes bills that you may not have paid before, taxes, and various expenses, like lawn care. Budget for all of these and more. A general rule of thumb is that your housing expense, i.e. your mortgage, should be around 30% of your monthly income. Calculating the true cost of that home is crucial if you want to be sure that you can afford to keep that home.

5. The final big mistake that first time homebuyers make is failing to get the house inspected. There are thousands of things that can be wrong in that house that you think is so perfect. Hire an inspector to make sure the house is sound. Do not assume that since the bank is having the house appraised that you do not need an inspector, that is not what the appraisal is for. Also do not assume that because the seller has done an inspection everything is OK, that inspector was working for the seller, not you. Get the house inspected!

There are many things that can go wrong when looking for your first home. Don't let any of these five mistakes be one of those things that go awry. Buying your first home should be euphoric, do everything you can to keep it that way.