It’s a good thing I practice what I preach. In late May, my husband, Tom, received a call from Nordstrom saying someone was trying to use his credit card number at their Chicago store. Thankfully, they require a password if you do not have your card in your possession and declined the charges because the imposter did not. The scary thing was that he did have Tom’s social security number. Chase Bank soon called to say a suspicious-looking charge was being attempted on our Visa. I called American Express to make sure there was no suspicious activity on that card. There wasn’t.
I immediately logged onto each of the three credit bureau’s web sites and put a credit freeze on Tom’s credit report as well as my own. I also went to Annualcreditreport.com and ran a credit report from one of the three credit agencies. I noticed Macy’s had just made an inquiry into his report and when Tom called them, a new card had been opened in his name to the tune of $2,000 in charges. Next, Sears was calling to verify whether Tom had recently reactivated an account we closed several years ago.
Over the next few days we received mailings from Target and Victoria’s Secret that accounts had been applied for in Tom’s name, but were rejected because his credit had been frozen. Victory!
While it was definitely an inconvenience to deal with this, it could have been much worse. We each check our credit reports every four months using Annualcreditreport’s free site. Because we use our Visa and American Express to pay all of our monthly expenses, I download our transactions into Quicken daily. While both helped contain a situation that could have quickly gotten out of control, the fraud departments at Nordstrom, Chase and Sears are to be commended for not allowing any unauthorized activity. We were not liable for any charges at Macy’s.
In the past, I did not think it was necessary to have a freeze on our credit. Although the cost is minimal ($5 with each of the three credit bureaus to lock and subsequently unlock your account), it does add an extra step when you apply for credit, change jobs, insurance or anything else that requires a credit check. You must contact each credit bureau and thaw your account for a specific time period or for a specific lender. If you find out which bureau the lender uses, you can request the thaw at just that agency.
I now realize this is a small price to pay for peace of mind. While I’m not advocating a credit freeze if you do monitor your accounts and credit report regularly, you should definitely consider it if it you do not. Another option is the free version of Identity Theft services that are now becoming available. A recent blog in the New York Times described a few of them.
The worst part of this whole fiasco is that we do not know how Tom’s social security number and two of our account numbers were acquired by someone else. We shred all sensitive documents and mail the few bills we pay by Pony Express directly through the post office or our office drop box. With all of the recent data breaches in the headlines, I’m not really surprised. This has only reinforced what I have learned from our Identity Theft Lunch and Learns, which Chip blogged about last year. It’s not a matter of if, but when, your identity will be stolen. Do your best to be prepared.
Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/
Wednesday, June 29, 2011
Wednesday, June 22, 2011
What Do We Really Know?
Many times in conversations I am presented with a concern that begins with ‘well we KNOW that….’ What follows is usually a statement that has been made and repeated enough times in the media that it is now accepted as fact. But sometimes what we think we know to be true may not be true forever.
For example, many people express concern that the US has lost manufacturing jobs at a rapid pace over the last decade, and believe we will no longer be a significant, global economic player. In the past, the strong US dollar made it difficult to export our products at favorable exchange rates, and lower wages in China and other countries made our labor costs uncompetitive, so the number of manufacturing plants in the US did decline; but that may no longer be the case.
The booming Chinese economy, which created a middle class whose population is an attractive target market for companies like P&G and McDonalds, has also had the consequence of raising labor rates in the country. According to the May 12 issue of The Economist, pay for factory workers in China soared by 69% between 2005 and 2010. This wage growth in China, combined with the relatively slow growth of wages in the US, may no longer make locating factories in China the savings ‘slam dunk’ that it once was. Caterpillar, a heavy equipment manufacturer, is moving production back to Texas, while NCR is moving its ATM machine manufacturing to the state of Georgia. Several other examples are cited in the article.
It’s a great lesson to learn. Every negative cited in the news – falling housing prices, the decline in the US dollar, the high US unemployment rate – has a corresponding impact in other areas of the economy we may not even be aware of today. There are too many forces at work on the market for us to know for certain what will happen next, so don’t accept conventional wisdom at face value. What you ‘KNOW’ to be true may already be changing.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
For example, many people express concern that the US has lost manufacturing jobs at a rapid pace over the last decade, and believe we will no longer be a significant, global economic player. In the past, the strong US dollar made it difficult to export our products at favorable exchange rates, and lower wages in China and other countries made our labor costs uncompetitive, so the number of manufacturing plants in the US did decline; but that may no longer be the case.
The booming Chinese economy, which created a middle class whose population is an attractive target market for companies like P&G and McDonalds, has also had the consequence of raising labor rates in the country. According to the May 12 issue of The Economist, pay for factory workers in China soared by 69% between 2005 and 2010. This wage growth in China, combined with the relatively slow growth of wages in the US, may no longer make locating factories in China the savings ‘slam dunk’ that it once was. Caterpillar, a heavy equipment manufacturer, is moving production back to Texas, while NCR is moving its ATM machine manufacturing to the state of Georgia. Several other examples are cited in the article.
It’s a great lesson to learn. Every negative cited in the news – falling housing prices, the decline in the US dollar, the high US unemployment rate – has a corresponding impact in other areas of the economy we may not even be aware of today. There are too many forces at work on the market for us to know for certain what will happen next, so don’t accept conventional wisdom at face value. What you ‘KNOW’ to be true may already be changing.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
Wednesday, June 15, 2011
Forecasts from the Best
In an industry that has no shortage of soothsayers and crystal ball holders more than willing to go on record as to what will happen in the market, why do we feel so strongly that this is such a waste of time?
The easy answer is that no one, not even those viewed as the best of the best, seem to be able to make good predictions over and over again.
Bill Gross, the renowned bond investor and Founder of PIMCO, has been in the headlines the last few weeks for missteps that have created significant losses in their funds. It seems that Gross, who was touted for some of his moves during the 2008 market downturn, was also loading up on Lehman Brothers debt over the same timeframe. Losses from this poorly timed investment have cost investors more than $3.4 billion.
His current bet is against U.S. Treasuries, for which he is under some scrutiny as they continue to rally. His explanation is that he’s not wrong, just not right yet. Not the comforting explanation you want to hear from someone you’ve paid handsomely to supposedly outguess the market. As the saying goes, even a stopped clock is right twice a day.
This reminded us of another guru we talked a lot about in 2009, Legg Mason’s Bill Miller. Miller was another manager held out to have these powers of intuition, only to have a few emotional reactions to the initial market downturn backfire on him spectacularly.
The point is not to drag out these experts and disparage them every time they’re wrong. These are smart people who are very good at what they do. It’s simply to suggest that the crystal ball is a fairytale, that no one has the ability to continually outguess the market time and time again.
The one expert whose investment prowess often gets held out above all others is Warren Buffet. In most cases, truth be told, we couldn’t agree more. However, what Mr. Buffet does is quite different from the average investor. In fact, it would be more correct to call Buffet a venture capitalist. His company, Berkshire Hathaway, often buys very large stakes or controlling interests in companies giving them significant say over day to day operations, management and other company functions. Even when they don’t have direct involvement, he is often able to set very attractive terms for his investments, such as his investment in GE in late 2008. The average investor obviously doesn’t have this kind of control over their holdings.
While thinking about Warren Buffet, consider his quote from a Berkshire shareholders’ meeting a few years ago. Buffet said, "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees."
Ultimately, we believe that you need to work with someone that can help you put a plan in place and then stick to that plan, helping you make the sound decisions that you do have control over to help meet the financial aims surrounding your life’s goals.
In the end, the best investment forecast is to make no forecast at all.
The easy answer is that no one, not even those viewed as the best of the best, seem to be able to make good predictions over and over again.
Bill Gross, the renowned bond investor and Founder of PIMCO, has been in the headlines the last few weeks for missteps that have created significant losses in their funds. It seems that Gross, who was touted for some of his moves during the 2008 market downturn, was also loading up on Lehman Brothers debt over the same timeframe. Losses from this poorly timed investment have cost investors more than $3.4 billion.
His current bet is against U.S. Treasuries, for which he is under some scrutiny as they continue to rally. His explanation is that he’s not wrong, just not right yet. Not the comforting explanation you want to hear from someone you’ve paid handsomely to supposedly outguess the market. As the saying goes, even a stopped clock is right twice a day.
This reminded us of another guru we talked a lot about in 2009, Legg Mason’s Bill Miller. Miller was another manager held out to have these powers of intuition, only to have a few emotional reactions to the initial market downturn backfire on him spectacularly.
The point is not to drag out these experts and disparage them every time they’re wrong. These are smart people who are very good at what they do. It’s simply to suggest that the crystal ball is a fairytale, that no one has the ability to continually outguess the market time and time again.
The one expert whose investment prowess often gets held out above all others is Warren Buffet. In most cases, truth be told, we couldn’t agree more. However, what Mr. Buffet does is quite different from the average investor. In fact, it would be more correct to call Buffet a venture capitalist. His company, Berkshire Hathaway, often buys very large stakes or controlling interests in companies giving them significant say over day to day operations, management and other company functions. Even when they don’t have direct involvement, he is often able to set very attractive terms for his investments, such as his investment in GE in late 2008. The average investor obviously doesn’t have this kind of control over their holdings.
While thinking about Warren Buffet, consider his quote from a Berkshire shareholders’ meeting a few years ago. Buffet said, "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees."
Ultimately, we believe that you need to work with someone that can help you put a plan in place and then stick to that plan, helping you make the sound decisions that you do have control over to help meet the financial aims surrounding your life’s goals.
In the end, the best investment forecast is to make no forecast at all.
Wednesday, June 8, 2011
When Television Feeds the Urge to Trade
(from Carl Richard's New York Times' Bucks blog, 6/6/2011 - click here for the original post. Carl is a Certified Financial Planner in Park City, Utah. His sketches are archived on the Bucks blog and on his personal Web site, www.BehaviorGap.com.)
Traveling last week, I shared some workspace where CNBC played all day on television. For most people, I realize that it’s often comforting background noise. However, since I almost never watch television, I found it amazing how bipolar I felt as they shifted from one commentator to another.
Given how wild the markets were last week, I imagine that there were many people tuning in trying to figure out what to do. And that’s the problem.
Watching CNBC might be entertaining, but unless you fancy yourself some sort of day trader, it will not help you figure out what to do with your life savings.
This won’t apply to all of you, but I’m going to make some assumptions here. I assume that for most of us the purpose of earning money, saving it and actually doing financial planning is to hit some sort of goal. I’ll also assume that those goals are typically things like getting out of debt, establishing a rainy-day fund and saving for retirement or college for kids.
If that’s true, what are you going to learn from watching hours of endless chatter about new-home sales or the jobs report that will be helpful in meeting those goals?
Things change so fast, and on television the reactions in the markets are amplified by the need to have something to talk about to keep everyone watching so they don’t miss the latest breaking news. This constant stream of information makes us feel like we should be doing something.
But the question is, what?
What should we be doing? What changes should we make based on the latest breaking news? Do you see the potential problem? If we’re tuning in to figure out what the latest news means for our investment plans, and we make changes based on what we hear … well, that’s an awful lot of changing.
Doesn’t it make much better sense to design our investment plans based on our goals, and then make changes when those goals change, instead of trying to react to the minute-by-minute updates? The only thing we know for sure is that things will change. Does your financial plan help you weather these changes or are you tempted to jump every time a new headline pops up on television?
Traveling last week, I shared some workspace where CNBC played all day on television. For most people, I realize that it’s often comforting background noise. However, since I almost never watch television, I found it amazing how bipolar I felt as they shifted from one commentator to another.
Given how wild the markets were last week, I imagine that there were many people tuning in trying to figure out what to do. And that’s the problem.
Watching CNBC might be entertaining, but unless you fancy yourself some sort of day trader, it will not help you figure out what to do with your life savings.
This won’t apply to all of you, but I’m going to make some assumptions here. I assume that for most of us the purpose of earning money, saving it and actually doing financial planning is to hit some sort of goal. I’ll also assume that those goals are typically things like getting out of debt, establishing a rainy-day fund and saving for retirement or college for kids.
If that’s true, what are you going to learn from watching hours of endless chatter about new-home sales or the jobs report that will be helpful in meeting those goals?
Things change so fast, and on television the reactions in the markets are amplified by the need to have something to talk about to keep everyone watching so they don’t miss the latest breaking news. This constant stream of information makes us feel like we should be doing something.
But the question is, what?
What should we be doing? What changes should we make based on the latest breaking news? Do you see the potential problem? If we’re tuning in to figure out what the latest news means for our investment plans, and we make changes based on what we hear … well, that’s an awful lot of changing.
Doesn’t it make much better sense to design our investment plans based on our goals, and then make changes when those goals change, instead of trying to react to the minute-by-minute updates? The only thing we know for sure is that things will change. Does your financial plan help you weather these changes or are you tempted to jump every time a new headline pops up on television?
Wednesday, June 1, 2011
Do You Know Who Will Inherit Your Money?
When you start a new retirement plan at work or roll your money into an IRA account you will not only need to decide what investments to buy, but you also need to name a beneficiary for your account. If there is not a beneficiary named, your account will be distributed to your estate which could cause your heirs to have a much larger tax burden.
Many people do not realize the importance of their beneficiary designation. I was just reading about a court case where a man’s first wife passed away and he named his three children as beneficiaries of his 401(k) account at work. He eventually remarried and died just six weeks later. His new wife ended up inheriting the 401(k) even though his children were the intended beneficiaries. This is because a spouse is automatically the beneficiary in a workplace retirement account unless he/she has signed a waiver of spousal rights AND a new beneficiary form is completed.
This is a two step process. You cannot simply change the beneficiary form without the waiver and you cannot have the waiver signed without a new beneficiary form. This is also the case in a divorce. Your former spouse might indicate in the divorce decree that they are waiving their rights to your retirement account, but if you have not changed the beneficiary form as well, they can still inherit your assets.
Once you roll your account into an IRA, you are free to name anyone as a beneficiary and there is no need for spousal consent. It is good practice to review the beneficiary designations on your life insurance policies, annuities, and retirement accounts at work or held elsewhere on an annual basis. When you do this, make sure that they match the estate planning you have done. If you have a trust account, has your attorney recommended naming the trust as a primary or contingent beneficiary? If you have any questions about whether your accounts are set up properly, don’t hesitate to ask your advisor.
Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/
Many people do not realize the importance of their beneficiary designation. I was just reading about a court case where a man’s first wife passed away and he named his three children as beneficiaries of his 401(k) account at work. He eventually remarried and died just six weeks later. His new wife ended up inheriting the 401(k) even though his children were the intended beneficiaries. This is because a spouse is automatically the beneficiary in a workplace retirement account unless he/she has signed a waiver of spousal rights AND a new beneficiary form is completed.
This is a two step process. You cannot simply change the beneficiary form without the waiver and you cannot have the waiver signed without a new beneficiary form. This is also the case in a divorce. Your former spouse might indicate in the divorce decree that they are waiving their rights to your retirement account, but if you have not changed the beneficiary form as well, they can still inherit your assets.
Once you roll your account into an IRA, you are free to name anyone as a beneficiary and there is no need for spousal consent. It is good practice to review the beneficiary designations on your life insurance policies, annuities, and retirement accounts at work or held elsewhere on an annual basis. When you do this, make sure that they match the estate planning you have done. If you have a trust account, has your attorney recommended naming the trust as a primary or contingent beneficiary? If you have any questions about whether your accounts are set up properly, don’t hesitate to ask your advisor.
Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/
Subscribe to:
Posts (Atom)
Posts
