Thursday, July 28, 2022

How to Keep Personal Information Safe

Widespread data hackings are increasingly common, whether it is a credit bureau (Equifax in 2017), a hotel (Marriott in 2018), an online game producer (Zynga in 2019) a federal government agency (OPM in 2015), or an Internet media company (Yahoo! in 2016). Another common scam is phone calls and e-mails claiming to be from a bank...or Social Security...or the IRS. 

In each of these cases, customers’ personal data including e-mail addresses, log-in credentials, credit card numbers, birth dates, and Social Security numbers can be compromised. There may also be fraudulent requests to wire transfer money, reveal computer login credentials, or purchase gift cards and give fraudsters the numbers above the bar code.

What to do to avoid falling prey to scams? Below are seven suggestions to protect private information and reduce your chances of becoming a fraud victim:


Practice Cyber Hygiene- Successful fraudsters successfully reach victims through their “weakest link.” It might be something as simple as a weak password or someone revealing TMI (too much information) online. Consider your potential fraud exposures (e.g., reusing the same password/user name combination). While nobody is 100% immune from fraud, the objective is to make yourself a harder target so fraudsters find victims elsewhere.


Mix Up Your Log-In Credentials- Fraudsters know that most people use the same username and password in multiple places. When they obtain personal information from a data breach or the Dark Web, they try to exploit it in multiple places using automated scripts, a process known as “credential stuffing.” It will probably take several hours to create a multitude of unique passwords. Once you are done, be sure to record them in a digital assets inventory.


Click Cautiously- Some people are tricked into clicking on links, or even photos, that take them to a website that requests personal data or installs malware on their computer that can be executed later to obtain sensitive data. Often, this happens as a result of a phishing e-mail. A good cyber hygiene practice is to not click on any link if you do not know the sender and/or you receive a cryptic message (e.g., check this out!) and do not know what the link is for. Another hygiene practice is using strong passwords with a variety of types of characters.


Set Up Two-Factor Authentication- Every personal website of consequence (e.g., bank and investment accounts, pension, Social Security) should have a two-factor (a.k.a., two step) authentication process where a unique one-time password is sent via e-mail or a text message and is necessary to access an account. Some accounts also have challenge questions that must be answered for account access. Typically, two-factor access is a very simple process to set up through the “settings” and “privacy” functions on a website. Again, it’s all about not being an easy target.


Freeze Your Credit- A credit freeze blocks access to credit reports to prevent fraudsters from opening credit in a potential identity theft victim’s name. It, therefore, provides an extra layer of fraud prevention protection. Freezes must be done with each of the “big three” credit bureaus (Equifax, Experian, and TransUnion) individually. They do not affect a person’s credit score and there is no cost to freeze credit or to “thaw” (unfreeze) it for a short time to apply for a bank account, line of credit, or utility service. A PIN or password is typically provided for this purpose.


Update Your Computer- Another piece of cyber hygiene is keeping an operating system current by installing updates as they become available. Ditto for anti-virus and anti-malware programs. Some experts also advise using a password manager program with two-factor authentication as well as strict privacy settings for social media. Another common recommendation is text alerts or e-mails from financial institutions when changes are made to an account.


Stay Current- Many pundits are predicting a future without passwords. Instead, there will be new authentication protocols such as facial biometric scans and fingerprint swiping. Another promising protocol is behavioral monitoring of users’ typical spending patterns to identify “out of the ordinary” behavior. “Keeping current” also means paying attention to scams that feed off current events such as COVID-19, tax season, wars, and natural disasters.


For more information about keeping information safe, review this Consumer Financial Protection Bureau website.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


Thursday, July 21, 2022

Inflation-Fighting Ideas: Round Two


Almost a year ago, in August 2021, I wrote a blog post for the OneOp Personal Finance team about inflation-fighting ideas for military families. At that time, many experts predicted that inflation would be “transitory” and subside quickly as supply chain “issues” related to the pandemic got resolved. The post included inflation-fighting ideas such as lower-cost product substitutions, time-shifting, and changing habits such as consolidating errands and turning down the thermostat.


In March 2022, after the then- highest inflation rate in 40 years, I wrote a Money Talk blog post about inflation and suggested additional inflation-fighting hacks including postponing purchases (e.g., a car) unless absolutely necessary, reviewing the rate of return on an investment portfolio (to see if it was staying ahead of taxes and inflation), buying “gently used” versus new items, and reviewing budgets to “claw back” the amount of money that inflation has “stolen.”

Sadly, historically high inflation is still with us. The latest annual CPI rate is 9.1% for the year ending in June 2022. Many supply issues remain unresolved and the impact of the war in Ukraine has had significant global economic impacts. Therefore, I am revisiting the topic of inflation once again to share additional information about inflation impacts and inflation-fighting ideas. Below are some thoughts to consider:


Inflation Time Comparisons


¨    Historical Perspective- To better understand the impact of inflation on prices in the past, check out the CPI Inflation Calculator from the U.S. Bureau of Labor Statistics. The calculator uses historical inflation rates as measured by a Consumer Price Index called the CPI-U. Users enter two dates to compare the relative buying power in each time period, For example, $7,978 in February 2022 has the same buying power as $5,000 twenty years earlier in February 2002. This is an almost $3,000 (and almost 60%) increase in prices and decrease in purchasing power.


¨    Future Perspective- The Inflation Calculator from Smart Asset also uses historical inflation rates (i.e., the CPI-U) and assumes an average inflation rate in its analysis. With this calculator, users can make projections to estimate the buying power of a dollar at a future date. For example, $100 in 2022 is projected to be worth $164 in 2042 using an average inflation rate of 2.5% and cumulative inflation of 63.86%. Calculator users can change the inflation rate in the calculator, however. If a 4% inflation rate is assumed from 2022 to 2042, $100 this year will be worth $219 in 2042.


Five Inflation-Fighting Hacks


¨    Increase Income- Most inflation-fighting ideas suggest ways to reduce expenses. That’s all well and good, but cash flow can also be improved with increased income. Like investment returns, if household income increases at a higher percentage than the official inflation rate (CPI-U), purchasing power increases. Conversely, if the inflation rate exceeds an increase in income, purchasing power decreases and people can afford fewer goods and services. Specific ways to increase income include a new job, a promotion, overtime, a second job, and a “side hustle” (freelancing).


¨    Brace Your Budget- Higher-than average inflation appears to be with us for a while due to increased costs for materials and labor. Therefore, it is smart to assume a reasonable inflation rate when preparing a household budget and build price increases into anticipated expenses. Examples include regularly budgeted amounts for heating and cooling (i.e., utilities such as electricity, oil, and natural gas), food, rent, gasoline, and auto insurance.


¨    Automated Payments Review- Payments for gym memberships, streaming services, cell phone service, and discretionary expenses that many people pay through automatic payments have been rising. Review each one and consider dropping payments for products or services that are not used regularly. Plan B is to check if there are cheaper plans or substitute products or services or special “deals” offered to stay with a particular company and not leave.


¨    Do Things Yourself- The more tasks you can do yourself, the less you’ll have to spend on inflated prices to pay others. This, of course, assumes you have the time and skills to do so. Examples noted in recent media reports include having a low-cost catered buffet event (e.g., wedding) versus a high-cost sit-down meal (lots of postponed weddings in 2022 are pushing up prices!), eating at home more often, and weatherizing your home to reduce energy costs.

¨    Negotiate Better Prices- Reach out to every company you pay regularly where there might be some “wiggle room” (e.g., cell phone provider, insurance company, credit card issuer). Ask if there are any discounts or “value plans” that you qualify for. Many consumers who ask for price concessions are successful. Bottom Line: It never hurts to ask!

    Additional inflation-fighting ideas can be found in my recent webinar:

 This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.



Wednesday, July 13, 2022

A Mid-Year Financial Check-Up for Older Adults

I recently wrote a blog post about doing a mid-year financial check-up in early July so you have six months to work on planned action steps. In this post, I continue the conversation with specific action steps for older adults.

Below are ten additional action steps, in addition to those shared previously, that specifically apply to people age 60+:

¨   RMD Withdrawals- Required minimum distributions (RMDs) are required starting at age 72. If you are “of age” and have not yet taken your 2022 RMD, consider doing so soon- in one or more “installments”- to avoid the year-end rush. Simply divide the December 31, 2021 balance in each of your tax-deferred accounts by the appropriate age divisor in the Uniform Lifetime Table to determine the minimum amount (which is taxable income) that must be withdrawn. 

   Some affluent taxpayers age 60 to 71 may decide to start taking withdrawals from their tax-deferred accounts before age 72 to avoid having to take larger taxable withdrawals from larger account balances later. 

¨   RMD Planning- As I wrote in my book, Flipping a Switch, there are three things that older adults can do with RMD withdrawals: spend the money, re-save or invest the money (minus income tax payments) in a taxable investment account or Roth IRA (if qualified), and make gifts to people and/or charities. Also be sure to adjust tax withholding for RMD withdrawals using quarterly estimated tax payments to the IRS or tax withholding by the retirement plan custodian. Before RMD money is withdrawn in 2022, develop a plan for what to do with it.

¨    Annual Cash Withdrawals- Many older adults use RMD calculations as a default metric to determine annual cash withdrawals from retirement savings accounts. Whatever the math calculation says is the amount that they withdraw. Other people have a specific “number” based on the 4% rule or household cash flow and budgeting projections. Whatever method is used to determine withdrawals, mid-year is a good time to make sure that everything is on track.


¨    Philanthropy Planning- According to Philanthropy Roundtable, “people are generally more philanthropic toward the end of their lives, when they tend to have more savings, time, and motivation to help others.” Giving peaks at ages 61 to 75. Mid-year is a good time to assess 2022 giving to date and remaining planned gifts for the year. Use the Charitable Giving Budget Worksheet to identify high, medium, and lower priority charities and planned gift amounts.


¨    Medicare Planning- Open enrollment for Medicare is October 15 to December 7 each year. Older adults who are unhappy with their insurance coverage should start the planning process now. While specific information about next year’s plans will not be available until October, the next three months can be spent learning more about Medicare coverage and perhaps consulting with a SHIP (a.k.a., SHINE in some states) representative to answer questions.


¨    Fraud Safeguards- It is an unfortunate fact of life that older adults are scam targets. On average, they have more accumulated wealth than younger generations. In addition, they are often more reachable and trusting and diminished capacity is a factor for some. Take the next six months to set up fraud safeguards such as two-factor authentication on all of your financial accounts, text notifications for account withdrawals, and a digital assets inventory.


¨    Deals and Discounts- In these inflationary times, everyone needs all the price breaks they can get on goods and services. Older adults may be leaving some money on the table by not taking advantage of deals and discounts that they qualify for and are unaware of. Take the time to review this list of “senior discounts.” Then, make a list of planned purchases for the remainder of 2022 and discounts available for each one.


¨    IRMAA Tax Avoidance- Project 2022 income now to see if it is- or could be- close to income ranges for income-related monthly adjusted amount (IRMAA) tax, a Medicare premium surcharge for higher-income older adults. There are five different tiers of IRMAA tax with a two-year look-back period (i.e., 2022 income will determine 2024 IRMAA). If you are close to one of the income range breakpoints, consider strategies to reduce adjusted gross income (e.g., Roth IRA conversions, postponed capital gains, and qualified charitable distributions).


¨    Downsizing and Simplification- If this has been on your financial “to do” list for a while, now is a good time to get started. While the summer and early fall weather is nice, hold a garage sale or two or sell items at a neighborhood flea market. Another option is to gather up items and donate them to a thrift shop. If financial records need some organization, pruning, or shredding, start now so they are good shape by year-end.


¨    Tax-Saving Strategies- Certain tax-saving moves require time and a series of process steps. Don’t wait until the end of the year when you, and the financial professionals who will assist you, are rushed and pressed for time. Start planning now at mid-year. Examples include qualified charitable distributions (QCDs), donor advised funds, Roth IRA conversions, and tax loss harvesting to mitigate capital gains on investments.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.



Thursday, July 7, 2022

Key Take-Aways from the 2022 AAFCS Annual Conference

I recently attended and presented at the 2022 annual meeting of the American Association of Family and Consumer Sciences (AAFCS), a professional association whose members help individuals, families, and communities achieve an optimal quality of life.


Below are ten of my key take-aways from this meeting:


Customer-Focused Education- Educators must always prepare content with the “customer” (i.e., student) in mind. Information provided must be realistic and relevant to the lives of audiences. The best way to teach others is to “meet them where they are” and co-create content with them. Information, no matter how helpful, can never be “force fed” to people. Educators, themselves, can also never stop learning about the topics that they teach to others.


Social Media Influencers- People connect with people- not brands, companies, or organizations. Therefore, content creators must be real and relatable, and their materials must look “fun” with attractive photos, graphics, and other visuals. Effective methods to reach people electronically are podcasts, videos, and social media. Two Cooperative Extension educators described how they dropped their academic personas and increased outreach by showing their “personal side.”


Language Make-Overs- A workshop about substance abuse recovery described an 8-unit financial education course called Recovering Your Finances. The speaker described the proper “language of addiction.” Instead of words like “addict,” “alcoholic,” “drunk,” and “user,” more positive terms are “person with a substance abuse (or alcohol) disorder” and “person in recovery.” By reframing descriptions this way, the focus is on people rather than their problems.


An Amazing Non-Profit- The Orlando, FL-based nonprofit, Clean the World, has a truly life-changing mission. This social enterprise organization recycles discarded soap and toiletries from hotels that generate large volumes of solid waste. In addition to helping the environment by keeping waste out of landfills, they assemble hygiene kits for distribution through charities worldwide, which saves lives. Clean the World also provides mobile showers for homeless people.


Advocacy Basics- Advocacy is speaking up for others and identifying, embracing, and promoting a cause. It can happen at many levels: social settings, meetings and events, workplaces, and with policymakers. Sometimes, even one person can make a difference in decisions made by companies and lawmakers. In other situations, positive action on an issue takes a collective voice with others. The three stages of grassroots advocacy are real people, real stories, and real impact.


The Power of Story-Telling- To persuade people, you need to know where they are coming from and engage with them through listening and empathy. The best way to do this is through powerful stories. Good advocacy stories captivate the hearts and minds of others and successful storytelling for the purpose of advocacy includes setting the stage (background), describing a conflict or struggle and a successful resolution, and making a short and simple “ask” (i.e., the specific outcome that an advocate wants to have happen or a simple “we need your help” request).


Focused Messaging- Successful advocacy for anything (a cause, social justice, a new job, a promotion, new clients) is best done with three key messages of nine words or less for a total of 27 seconds. The three key messages are 1. Who you are, 2. What you do, and 3. What you want. The AAFCS conference audience was given time to develop a personal advocacy pitch, so I decided to write one for my business: 1. I’m a financial education entrepreneur and Money Talk owner/CEO. 2. I write, speak about, and review personal finance content. and 3. Reach out to me if I can assist you.


Adjectives Have Power- The advocacy presentation encouraged the audience to use words like “experienced” and “seasoned” to sell themselves as an advocate. For example, “I am a seasoned financial educator” or “I am an experienced online instructor.” Just one extra word can make a difference and convey a person’s competence to others.

When Helpful Becomes Harmful- Prescription drugs that are given for a good reason (e.g., pain relief after surgery) can sometimes become addictive. Opioid addiction increases the likelihood of mental health issues. Individuals, families, employers, and governments (taxpayers) bear the cost of addiction, the greatest of which is lost productivity. Family members of a person with a substance abuse problem need to guard money and medications. Other strategies are third party monitoring of financial accounts, cutting off online access to financial accounts, and cash-only transactions.

Nutritional Trends- Scientific techniques used to predict future consumer culinary trends were described. One in particular, called chaos analytics, identifies today’s “parents” that give birth to tomorrow’s trends. Example: interest in weight control and obesity is growing as workers return to offices and can’t fit into pre-COVID wardrobes. Interest is also high in simplification. People want food that is quick to prepare, healthy, and full of nutrients. That said, flavor is still a much stronger driver of food purchases than health. Consumers have become increasingly skeptical of health claims.


Looking Ahead to Your 2024 Tax Return

  With the 2023 tax filing deadline in the rear view mirror, now is a good time to look ahead to 2024 taxes that you will owe in April 2025....