Have you ever stopped to consider the amount of time, energy, and, yes, even intelligence, that is expended every day around the world with the sole intent to scam someone out of money or property? Further, have you ever considered how productive those resources could be if redirected to a positive goal? Wishful thinking. Period.
We have reported on hundreds of scams over the years, but they rarely directly affect people we actually know. That changed (again) this past week, when I was notified that a scammer had attempted to write a large check against our own personal Home Equity Line of Credit (HELOC). Fortunately, in this case the financial institution was alert, noticed an unusual spending pattern, and contacted me immediately. We were able to immediately stop the transaction from clearing our account.
Where do scammers get the information, and how do they apply it to their sinister plans? We would all be foolish to believe that most of our personal data is not available to a dedicated scammer. Remember the recent data breaches everywhere from the Internal Revenue Service (IRS) to the credit card companies, and even to the credit monitoring companies? Hundreds of millions of confidential data bits are now in the wrong hands.
No one can stop every possible hack, but we are constantly reporting on methods everyone can use to protect themselves. For people in Florida, Georgia, and Washington, D.C., IRS offers a free Security PIN Number for anyone who asks for one. This PIN number will be required every time the taxpayer communicates with IRS. We have used one for a long time. We know many people who have been victims of identity theft at IRS. Restoring your identity is a long, painful process, and a Security PIN will prevent the problem from ever happening at IRS.
This week’s problem was with my credit union, and involved using information that would be difficult to obtain. A bogus check was printed and written as payment to a “contractor,” then presented for deposit at another financial institution. The account information was almost perfectly printed, and would easily have passed a cursory perusal. Also, my signature had obviously been studied and copied, and while imperfect, it would have passed a quick look. Figuring out what methods were used to create the check is a topic for law enforcement. Our reporting is aimed at helping our readers and listeners prevent similar breaches in their accounts.
As with IRS, we have learned that local financial institutions will also allow Security PINS, in the form of security Code Words. These are words that are required to transact business in your accounts. If you have open credit or significant cash at a financial institution, why not establish this simple security procedure?
We have been impressed with the professionalism shown by our credit union. It is comforting to know that they are monitoring and can ask pertinent questions in a timely manner. However, as an old saying goes, “An ounce of prevention is worth a pound of cure.” Taking preventive action may not be 100% effective, but it is better than what most people have now. And it won’t cost you anything to take these simple actions.
I am proof that security breaches and financial fraud can happen to anyone. Be vigilant and protect yourself.
Van Wie Financial is fee-only. For a reason.
For many people, the biggest hurdle to saving is getting started. Looking at a zero balance and trying to picture how that could become a much bigger number can be a huge obstacle. No matter where you are financially, there is usually a lot of concern and self-doubt around saving; whether it’s how much you can afford to save, if you need to save more, if your savings invested properly, if you’ve saved enough, or if it’s going to last.
Recently, there was massive backlash on Twitter after an article ran on Marketwatch stating that you should have twice your yearly income saved by the time you are 35. The reasons given ranged from emotional to completely ridiculous. This backlash got us thinking about the practicality of this advice. Was this goal even possible, and what would it actually take to accomplish it? As Certified Financial Planners™, we felt that we were in a position to answer this question with some solid analysis. We wanted to take a look at what it would actually cost, per month, to accomplish this goal.
Yes, twice your yearly salary sounds like a lot, especially when you are thinking about how much you are saving – or how little you are saving – now. If it sounds overwhelming, don’t worry, you’re not alone. You are with thousands of others who read the article and said that there is no way this could happen. We have some good news for you.
Let’s take a newly graduated 22-year-old, we’ll call her Jenny. Jenny is just starting out and has landed an entry-level position in her degree field with a $25,000/year salary. She even has a guaranteed annual raise of 2% if she passes all her quarterly evaluations. She’s super excited and wants to start saving immediately to reach the twice her salary goal by 35. Jenny doesn’t know much about the different savings vehicles there are out there so she just transfers money from her checking account into her savings account each month. To have twice the salary that she will have at 35 in her savings account (assuming she gets all of her 2% annual raises), she will need to start by saving $337 of her monthly pay of $2083, which is 16.2% of her income. That only leaves about $1750 for all her monthly expenses! For this exercise, we assumed that her savings account had no rate of return.
Now, let’s say that Jenny knew a little more about investing, so she set up a brokerage account. She invested in a decent balanced mutual fund and was able to generate a return of 6% over those 13 years. With this plan, Jenny was able to reduce the amount she needed to save monthly to $229 per month (in the first year), or about 11% of her salary. That is much better even though it still only leaves about $1850 per month for expenses. Is there a better way for Jenny to save?
As it turns out, Jenny is eligible for her company’s 401(k) program, and the company matches 50% up to the participant’s first 6% contributed. If Jenny takes advantage of this 401(k) match, she only has to put in about 8% of her salary, or $167 per month (in the first year), to reach her goal! This leaves Jenny with $1917 per month to cover her expenses, or $167 more than just putting the money into a savings account.
There are other benefits to utilizing a 401(k) plan, including the tax deduction and the fact that the money is deducted from your paycheck, meaning you won’t even have the opportunity to spend it. The truth is, saving for retirement is hard, and it takes discipline and sacrifice to accomplish it. However, setting goals, planning, and taking advantage of all the programs available to you can greatly increase your chances of success
Adam recently volunteered to man the phone bank for Wi$e Money Week, an event put on by the local non-profit Family Foundations. During the phone bank, Adam was interviewed by Channel 4 about a variety of topics.