Credit Cave

Every day hundreds of thousands of people have their identity stolen by criminals who then go on to use it to purchase goods and services fraudulently. In some cases the first time you learn about it is when your credit card company calls to ask why you just purchased a new computer in Jakarta.

What types of identity theft are there?
We will be mostly focusing on financial identity theft in this piece; however, it is widely accepted that there are 4 main and distinct types of identity theft:

1. Financial Identity Theft - thief steals and uses another person’s SSN, credit card.
2. Criminal Identity Theft - criminal identifies himself as another when arrested for crime.
3. Identity Cloning - a criminal assumes another person’s identity.
4. Commercial Identity Theft - a new business could use the trading name of another business to get credit.

What qualifies as a security breach?
In the broadest sense a security breach can be defined as an instance when a secure server or computer is compromised by illegally surmounting or bypassing existing security measures, exposing the data stored on the computer to those without permission to access it.

When are you told about a breach of security?
Many security breaches are made public long after they occur simply because the perpetrator has been capable of gaining access to a system without detection. Therefore, it is imperative that you keep a close eye on your accounts and credit cards and be ever vigilant for fraudulent activity.

Sadly this list is only scratching the tip of the financial identity theft iceberg; nearly every day there are more cases of large scale financial security theft made public. Those cases listed below are just a few of many.

(more…)

Many people do not build a budget. They receive bills in, make payments and maybe check their bank account to be sure they have enough to cover the payment. They might push some money into a 401k or an IRA. Too many people do not plan and never get around to making improvements in their financial situation. In essence they are living from paycheck to paycheck and probably dipping into their arranged bank overdraft in the interim.

Why is a budget necessary?

Some of us are not blessed with the natural ability to manage our finances while others are gifted with it. If you have not been managing yourself like a business then you are most probably wasting money on things you simply have no need for. Developing your own budget should be a priority that will help you become much more financially stable in the years to come. It will help you identify what you spend on, what you need to spend on and what you shouldn’t spend on. Even the best finance bloggers out there have problems, JD over at GetRichSlowly has identified his comic book spending as a problem!

How do you build your budget?

You have to look at building a budget as continual cycle of improvement. It can be similar to physical training. You picture what you want your body to look like, make some assessments of your current state, make a rough plan, analyze it, start to work out, and then review your results and make adjustments as necessary.

Set a Goal

For instance, I want to pay off my debt in 3 years and save up $500,000 in 5-10 years. Or perhaps you would like to pay down your outstanding mortgage faster than you currently are in order to increase the amount of money you are left with every month. Another goal could be repaying debt. Whatever you do, get a goal.

Collect Financial Facts

I owe $50,000 in credit cards and loans and $100,000 on a mortgage. I earn $50,000 per year. Your next port of call is working out what your monthly expenses, as well as monthly incomings.

Build the Budget

List out in a timeline fashion the order that your expenses and income will occur over the period you want to consider. A spreadsheet is the best way to do this as many of the items will be very repetitive. You can easily copy and paste the first months details into the next 3 and 6 months and year. Add the quarterly and yearly expense details and then copy the year to the next 3 and then 5 and ten years. Make smaller changes for the events that will occur further out and you will have a budget.

So three years at $50k per year paid entirely to debt (with no interest) will pay off debt. $50k to savings will total $500k in 10 years etc. Here is a list of bills you should include in your budget:

• Electricity
• Heating - how much does it cost for oil, coal and wood to heat your home?
• Food - what do you spend on groceries and dining out?
• Entertainment - what do you spend on TV, magazine subscriptions etc?
• Communications - how much do you spend on phone call and mobile phones?

Analyze the budget

If I had no other expenses at my current rate of earnings I could pay off my debt in three years, but I have other expenses so I need to change my goal or find a way to earn more money. Plus, I pay interest on my debt, so that is another expense. In addition, I will need to replace my car in 4 years. So I will need to earn an additional $25k per year for the first three years to achieve my first goal or find more ways to save money. That higher rate will get me to my savings goal in approximately 8-9 years after my debt is paid so in those years I will need to earn an additional $25k.

Implement the Budget

Now you start to execute. You pay down the debt one month at a time. You earn money each month. You take the opportunities to insure that you come in on track to realize your goal. You do not deviate from the path as much as possible. Whatever happens, keep yourself motivated on the end goal!

Review and Improve

Then you compare your actual checking/savings and investment account activity to your simple spreadsheet with your budget. Ideally type in the actual numbers in the spreadsheet each month as they happen so that you can compare the progress and trends.

Each Quarter you should sit down and note any items that came up in the last three months that created positive results and negative results. Every 6 months you should make adjustments to accommodate those opportunities and challenges, and every year you should entirely review and redraft your budget to stay on track.

According to a study by Moneyextra, Britons can save on an average £4,678.60 every year, if some of the less worthy financial products are replaced with more competitive ones. If consumers are able to get good deals on debt management products they can actually make some worthwhile savings. Alliance and Leicester claim that a staggering £285 million are lost because borrowers end up choosing uncompetitive loans. The study by MoneyExtra revealed that by simply choosing the right credit card, the average Briton could save up to £825 every year.

In this modern age, we are all busy people. We run around at a hectic pace and few people find spare time. Computers and the internet are making it possible for all of us to accomplish more, but at the same time, we have to take on more work to keep up with everyone else.

This makes is all the more important for each of us to value our time and make wise decisions about our time allocation.

In business we look at decisions from the perspective of will it make a profit or not first. Then we evaluate whether or not a chosen action will cost us the opportunity of pursuing a different action that may be more lucrative or worthwhile. We also look at marginal opportunities. Maybe we can create 50 widgets in an 8 hour day, but how many widgets can we make if we put in an extra 30 minutes? an hour? or 5 hours? This would be considered the marginal cost of doing more.

In our personal lives we can apply the same principles. We should evaluate whether something is profitable or not for us to proceed. We should insure that we are doing the most financially profitable opportunity over less profitable ones, and we can always look at the benefit of doing a little extra work.

Now, I’m not saying that we should give up the non-monetary things in life or that everyone should work 40, 50, or 80 hour weeks. However, we should have a good understanding of what our time is worth from each of these perspectives as we attempt to make the optimal decision about what we are going to do next.

Too often, especially at work we get caught up in business and getting the job done for our employer. We need to take a step back and make sure that we are getting the job done for ourselves as well. So as we head into the weekend, when hopefully your job and career are less amplified, take some stock of your self and your situation and consider what opportunities are presenting themselves to you and which ones will reward you the most effectively. Also, do not neglect to look for those marginal opportunities. Sometimes these opportunities can turn into new jobs, promotions, a new business and more. If we keep tunnel vision working that prevents us from seeing the world around us, we may miss something that could make all the difference in the world!

I read a great article the other day in Entrepreneur magazine.  A CEO of a burgeoning company made the statement that he never throws away anything.  Its a concept straight out of the old days in the US straight out of the depression.

But its also a very practical suggestion.

When you keep all the stuff that you buy, make, build, acquire, inherit and more, you have a constant reminder of all of things you possess.  To control clutter, you build up a natural incentive not to buy more things that you do not need.  Plus, by keeping all of this stuff, you have lots of potential material to solve future problems or challenges with tools already in your possession.  That saves you money, it saves you from spending your cash and its very useful.

In this modern day and age, many people recycle a great number of items, from cardboard, newspapers, plastic, and aluminum cans to cell phones, cell phone batteries, clothing and more.  From the perspective of the global economy and environment this is good.

From the perspective of your personal finances however, why should you give this stuff away?  Take some time to find recyclers that reimburse you for these items as opposed to giving it away for free or paying to have it recycled.  The stuff usually has value.  If you find out how to extract this value, you might earn a little extra money.  Might pay for the fuel in your car a couple times of year.

Set it up as a chore for your children, let them learn the lesson of saving for financial reasons, and then these funds can offset their allowance or supplement it.  The price of aluminum along with many metals is very healthy right now, so don’t just kick the cans to the curb in a recycling bin.

Some paper can be recycled, but much of it can not.  Don’t just throw it away, if you have a wood burning stove, save it for the winter months and burn it.  Its going to be better for the environment to turn the paper to ash, than it will be to fill of a massive landfill with paper that will not biodegrade quickly as its mixed in with lots of other non-degradable garbage.

Plus, you will be helping the environment by using just a little less electricity or heating oil and reducing your heating bill too!  I find that a short fire during the winter months will take the chill off the house, and this decreases my motivation for notching the thermostat up an extra degree on those extra chilly days and nights.

So remember keep it for yourself, don’t throw it away and if you are going to recycle it, make a buck or two for your family in the process!

This article continues the series on Controlling Cash Flows and sets up the simple theory and practices you can utilize to compete head to head with entire corporate sales teams run by retailers like Wal-mart to entice you to spend more than you intend, want or can afford. This second segment in this series can help you to level the playing field with corporate retail marketers.

There is a key to shopping that can make a major difference in the results you achieve. The key is extremely simple to understand, implement and benefit from for just about anyone. It does not require technology, but technology can help make it work more efficiently. Its a simple tool that delivers reliable results.
Its a Simple Shopping List.

It may sound almost too simple to be true, but when applied correctly it can make a huge difference in maximizing your savings when shopping especially from a cash outflow perspective. A shopping list is not just a memory jogger to help you not to forget the eggs or milk.

A shopping list is an action plan, a strategy that includes a list of objectives to obtain. Your strategy should include an objective to minimize cash expenditures. As an example,

• Eggs
• Milk
• Butter
• Save Money
• Don’t spend more than necessary
• Don’t buy anything not on the list

Shopping Lists can do even more for you than remind you to buy the right things, it can help remind you not to buy all those useless, frivolous extras that you never intended to buy when you left the house for the store.

In our next article we will take this simple concept one slight step further and apply the use of lists to managing our purchases at multiple stores for a wide variety of needs. Stores are setup to cross sell you many products that you may not normally associate with that specific store. This is a great bonus for the store. They increase their revenues and that means you have increased your spending so we will look at ways to make sure that this works in your favor next!

Controlling Cash Outflows Series

Today we pick up where we left off yesterday running down ways that you can avoid maxing out your credit card. To revisit the First part of this series see How to Avoid Maxing Your Credit Line Part 1.

Controlling Cash Outflows Series

Yesterday, we discussed our intent to help people learn how to control their Cash Outflows. There is no genie in the bottle of the Credit Cave that will fix all of your problems however we will now start to empower you to tackle or prevent credit issues.

As a credit card holder or borrower you never ever want to Max out your credit, your credit lines and not even a single credit card. Having the ability to access a line of credit is extremely valuable and can definitely help you when you need it, however this resource can also be squandered and too often get very good people into a lot of trouble. When you max out your line, your credit rating will go down, your interest rates will go up, you will be more likely to default on payments and get into serious financial trouble and more.

Here are some tips to help you avoid this situation:

• Do not go shopping with your credit card
• Take Cash, Take your check book, take a debit card for your bank account, you can even take your PayPal Card - DO NOT TAKE YOUR CREDIT CARD!
• If you absolutely must take your credit card, do not use it, use something from point 2 above.
• Leave all of your other cards at home, preferably locked up safe in a safe or vault or secure location. If you are not carrying the cards, you will not be able to succumb to temptation.

. . . To be Continued tomorrow!

There are many components to your personal finances that are important areas to monitor and manage. Typically, it is best if you can treat your finances like a business and focus on your Cash Inflow and your Cash Outflow.

Many of us have fixed incomes whether it is in the form of a salary or even if it is an hourly rate, there are only so many hours you can work and multiply it by that rate. We typically have a limited capability to increase our cash inflows unless your boss is a push over and will give you a bonus on demand!

Our Cash Outflows are usually much more flexible. In the age of credit cards, it can be extremely flexible. An average consumer can spend everything they have in the bank and everything they will earn in disposable income over the next couple of years if they max out a couple credit cards in one shopping venture. Fortunately, not too many people fall victim to this kind of spending.

That doesn’t mean the rest of us might not fall victim to Binge Shopping habits. Often if we go shopping for items, we will buy a product at the spur of the moment (usually enticed by something the savvy retailer has done to sell us on it.) We may not max our credit cards out in one shopping spree, but it is all too common for people to max their cards out over a couple year period and much of this comes from buying more than they set out to buy and more than they need.

This week I will cover a series of articles on Controlling Cash Outflows to help you control your cash outflows and find ways to:

1. Avoid maxing out your credit cards
2. Maximize your savings when shopping
3. Learn how to recognize a truly good spontaneous deal
4. Recycle your extra stuff not only for the good of the environment but for the good of your pocket book!

We may not be able to directly and rapidly impact our Personal Earnings, however we often have a great deal more control over our Cash Outflows. By the end of the week, we will work to empower you to maximize your ability to control your Outflows and maybe just in time to make for a more enjoyable holiday!

Widespread check fraud has forced banks to adopt stricter postures with respect to cashing checks. The number of checking accounts that have been “closed for a cause” has been increasing at the rate of 20% per annum. Other reasons for banks being forced to close accounts include sudden financial difficulties that can leave people with little money to withdraw and their checks may bounce. The increased use of debit cards is another reason why checking accounts are being closed.

Go here for an in-depth review of the situation.