Five lessons I’ve learned from having my credit card hacked

One morning when I was in a hurry to get to work, everything went wrong in an instant: an SMS message alerted me to an $80 charge to my credit card for a purchase that I never made.

What did I do next? I blocked my card, filed a claim at the bank, and got a new card issued. I must say that in the end, all the troubles were resolved and I got my money returned to me. Mostly, thanks to my prompt reaction. However, how it all ended is not the purpose of the story — it is about the lessons that I’ve learned.

Lesson #1. Promptness is what matters

It applies to any bank in the world: the faster you react and prove that there was a hack, the better the chance that you will have to get your money back. In order to succeed, you need to be notified of unsolicited transactions ASAP, ideally via SMS notifications.

Daily e-mails on an account status are also OK. Scrupulous tracking of monthly bank reports is a last-resort measure if you’ve got no better options. I had SMS notifications enabled, so it took me just 5 minutes to block the card and claim the unsolicited transaction in question that same day.

Lesson #2. All types of insurance will do

Each extra level of protection makes it harder for scammers to reach their goal, and ultimately minimizes your losses. For this reason, you should enable 3D-Secure (MasterCard SecureCode, Verified by Visa) for all online payments and two-step authentication in your online banking tool, choose terminals with chip and PIN support and say no to those requiring only a swipe and signature.

Do online payments only on secure Wi-Fi networks and install a robust antivirus solution on your PC. Additionally, insurance would also help: such products can be activated together with any banking card.

I approached all of these measures together. So maybe there had been attempts by scammers to steal money from my card before, but I never noticed because these attempts had been fruitless.

Lesson #3. Precaution is not a cure-all

Unfortunately, scammers’ wellbeing directly correlates to their ability to bypass all security measures that may be in place. That’s why all of the measures I described above cannot fully protect you. The most effective way to say goodbye to your hard-earned money is by withdrawing cash in ATMs with scamming software installed by culprits, or by executing online payments on a compromised machine. In the first case, the criminals would duplicate your card credentials to withdraw cash. In the second case they will spend your funds online.

I have been very cautious with my cards, so I likely fell victim to a more sophisticated approach. As we have learned this year, paying with your credit card at large retailers can be potentially dangerous, if a special Trojan has infected their systems. This specifically applies to American retailers because often they use outdated POS terminals. My card used to be frequently used in the US and there it is likely to have fallen victim to such a scam.

There is one more option that cannot be ignored — a leak of payment data from one of the online merchants. I have 3D-Secure enabled on my card, but a criminal could have somehow managed to track down the shop, which used an outdated processing system with no support of 3D-Secure, and therefore charged my card.

Lesson #4. Using credit card scams is an organized crime precedent

I came across the answer in a curious way. After having successfully blocked my credit card, I had no reason to worry for about a week. But then I received a text message alerting me to a new attempt to charge my card in some other American online marketplace, and another some days after that. In a week’s time there was another, notifying me of an attempt to execute an offline payment at a store in Mexico.

All attempts were, ultimately, unsuccessful due to the fact that the card was blocked. That meant that someone who stole my card credentials resold it to various people (presumably in the form of a database with thousands of other card credentials), and each of them tried to use it again and again.

Lesson #5. Always have a plan B

And plans C, D and E also would be useful. In my case, the hypothetical loss was not that significant, and no serious harm would have been inflicted even if I were unable to regain my money.

July 24, 2017April 26, 2020

Top 10 Financial Freedom Self-Help Books

There are numerous informative and well-written books that can help you with financial management. Here is a look at the ten top finance books you should have on your shelf.

1. The Millionaire Next Door by Stanley and Danko

Based on an extensive research on the spending habits of millionaires, this book tells you how to earn and save money. The book discusses ‘next door’ millionaires, who have worked their way to riches in less than glamorous businesses such as pest-control services, rice-farming, contracting and planning weddings etc.

What separates them from today’s millionaires is their lifestyle and spending habits. These businessmen value their money, invest a minimum of 20% from their incomes and don’t spend extravagantly on clothes or accessories. This book also teaches you how to plan a budget and stick to it.

2. The Automatic Millionaire by David Bach

This book tells you how to plan your finances using simple common sense. You can learn to make a better use of available financial tools to earn more money. The idea given by the author is about automating your finances by changing your spending habits and making wise investments. The “Latte Factor” that he discusses in the book tells you how you can save money for a financially secure life post retirement by making a commitment to reduce debts and cutting down unnecessary expenditure on cigarettes and lattes.

3. The 4-Hour Workweek by Timothy Ferriss

The 4-Hour Workweek is about the “New Rich”, who speed up their retirement plans to start living their dreams now, when they are younger. It is an easy-to-read book offering practical tips on how to work for just 4 hours a week and use the remaining time to do all that you want to.

If you are an employee, you can use the ideas in the book to negotiate a work-from-home arrangement with your employer, or plan a ‘mini’ retirement every year. The book provides a lot of ways on how you can outsource your business to enjoy the mobility and freedom to work from anywhere you want. The main point the author drives home is about spending less time to earn money and more time on pursuing your dreams.

4. Your Money or Your Life by Joe Dominguez and Vicki Robin

Your Money or Your Life offers a different approach to money management. Like The 4-Hour Workweek, this book also talks about the importance of pursuing your dreams. It discusses how to manage your money and time to spend more time on doing what you like to do and less on what you don’t. It gives you specific tips on monitoring your spending habits, identifying exactly what you want to do and contributing money towards achieving your goals.

5. Yes, You Can… Achieve Financial Independence by James E. Stowers

Written by the founder of Twentieth Century Mutual Funds, this book offers you basic finance lessons and teaches you the concept of investment using illustrative cartoons and images. To understand what kind of mutual funds can get you better returns and to make the most of your mutual funds investments, read this entertaining, informative book.

6. Secrets of the Millionaire Mind by T. Harv Eker

In ‘Secrets of The Millionaire Mind’, the author focuses on your subconscious thoughts and believes that you cultivate your monetary habits right from the day you are born. He writes, in a humorous way, that you are rich or poor based on how you imagine yourself to be.

According to him, thoughts that make you feel you are not good enough to have money or that you will remain poor because of your ancestry are small thoughts that the poor have whereas the rich are committed to creating wealth and optimistic about their finances. The point that the author, Harv Eker, wants to stress on is that your mind should be ‘set’ on success if you want to achieve anything in life.

7. You Call the Shots by Cameron Johnson

‘You Call the Shots’ is a book for young entrepreneurs who want to learn all about personal finance and entrepreneurship. This book is for anyone who has a passion for life and is committed to pursuing their dreams. A successful young entrepreneur himself, the author’s story tells you that the best way to achieve what you want in life and enjoy incredible success is by being an entrepreneur, who calls all the shots.

Cameron believes that with the internet making it easy to start and develop a business, you don’t have to work for an employer. He also gives you a thorough sketch of the strategies necessary to remove obstacles in your path and taste entrepreneurial success.

8. The Total Money Makeover by Dave Ramsey

The author of this book, Dave Ramsey, compels you to look at rather extreme measures to remove all your debts. He tries to break the myths created by the credit industry and provides something known as ‘the debt snowball’ to solve your debt problems. If you are motivated to live a debt-free life, it may be wise to listen to what the author, who has a personal finance empire, has to say. The author tells you exactly what to do when you are free from debt and when is the right time to invest money. Though the book may be all about managing your debts, it is also a great motivator, encouraging you to stay debt-free.

9. Rich Dad, Poor Dad by Robert T. Kiyosaki

The book tells you how you can achieve financial independence and make money through investments, real estate and other earning strategies. The ‘rich dad’ and ‘poor dad’ discussed in this book have different approaches to wealth creation and spending. The book simplifies the complex world of finance by illustratively explaining the flow of money from your source of income towards your expenditure. It advocates that whether you become rich or poor depends on the way you spend your money.

10. What Color is Your Piggy Bank? by Adelia Cellini Linecker

A small and easy to understand financial guide for kids who want to learn all about money and financing, this book is filled with fundamental lessons for kids aged between 10 and 14. It gives wonderful ideas to kids about identifying a passion or interest, like party planning or after-school arts and crafts lessons, which they can take up to earn some cash. The author has kept the chapters short and the content straight-forward catering well to her young readers.

These top 10 finance books not only offer a great reading experience, but also provide valuable financial advice. See if you can find these books at your local library or buy one that seems interesting from the above list from a bookstore.

July 23, 2017April 26, 2020

Liability Insurance Is Like Mafia Protection!

What does auto liability insurance cover?

Auto liability insurance covers the damage to other vehicles and injuries to other people that result from an accident caused by the insured individual.

There are two kinds of liability coverage:

1. Bodily injury coverage

Bodily injury liability, which covers medical costs, funeral expenses, lost income and pain and suffering of people injured by you.

2. Property damage coverage

Property liability, which reimburses accident victims for the repair or replacement of belongings damaged by you. This covers both someone else’s car or property; for instance, if you hit a sign or house.

Both types of liability insurance cover you only up to your limits, and that is why it’s important to make sure you buy enough coverage for the protection you need. Use our coverage calculator to find a recommended liability coverage level.

Your insurer is obligated to defend you if you are sued following a motor vehicle accident.

Liability insurance does not cover damage to your own vehicle if you are at-fault in an accident, you need collision and comprehensive coverage to pay for those damages. Nor does liability insurance reimburse you for medical expenses if you are at-fault in an accident, your personal health insurance plan may be able to cover unreimbursed medical costs. It also does not cover claims that exceed the limits of your coverage, and it may not extend to legal defense exceeding your policy limits. Higher liability limits can help you to avoid paying out-of-pocket when damages exceed minimum limits, and an umbrella policy can offer limits of $1 million or more once your auto insurance limits are reached.

Liability car insurance coverage limits

States set their own minimum liability coverage requirements for property damage and bodily injuries. Requirements are usually expressed as a group of numbers. For example, California’s requirements are 15/30/5. This means that in California, you must purchase a policy that provides at least:

· $15,000 of bodily injury coverage per person injured in an accident caused by you.

· With a maximum of $30,000 for everyone injured in that accident.

· In addition, you must carry insurance covering at least $5,000 of property damage.

How much does auto liability insurance cost?

Depending upon where you live and what coverage limits you purchase, your annual premium for liability car insurance can vary significantly. Insurance.com acquired Quadrant premium data indicating the average annual liability premium for a driver purchasing minimum coverage limits to be $723.26 in California, versus $890.72 in New York.

You may obtain the cheapest insurance rate if you buy a minimum liability policy. However, minimum coverage levels are not recommended because it can leave you financially exposed in an at-fault accident. Increasing your limits above state minimums should give you better coverage and doesn’t cost much more – averaging approximately $5.00 per month above the cost of minimum coverage.

Penalties for driving without liability insurance

According to the latest Insurance Research Council (IRC), 29.7 million U.S. car owners do not carry legally-required auto insurance. Driving without insurance could save money in the short run, but it can result in serious penalties.

In most states, if you cause an accident, you will be forced to cover the resulting damages. This may drain your savings, and it is possible that a lien could be placed on your home and other assets. Up to 25 percent of your future wages could be garnished.

The Insurance Information Institute (III) reports that in 2014, the average auto liability claim for bodily injury was $16,640 while the average cost for property damage was $3,290. Without insurance, you’d have to cover this out-of-pocket. If you’re taken to court and lose, you could be forced to pay for your victim’s legal fees as well as your own. And you’d still have to repair or replace your own car.

If you don’t cause an accident but are pulled over and caught driving without insurance, you may face:

•   Driver’s license suspension
•   Registration suspension
•   Fines ranging from $600 to $5,000
•   Additional lapse fees due to your DMV
•   Vehicle impoundment
•   Jail time or community service
•   Points on your license
•   A requirement to carry SR-22 insurance

By driving without insurance, you’re gambling with your future.

Shopping for liability car insurance

It can be smart to review your policy once a year or so and make sure that your assets and income are fully protected. Even if you don’t need to increase or decrease your auto liability insurance, it’s useful to compare auto insurance quotes to make sure that you’re getting a good deal. Make sure the quotes you receive all include the same coverage so that you can make a valid comparison.

When you have a life-changing event during the year – such as adding a teen driver, marriage, divorce, moving, adding or removing a vehicle – it’s particularly important to comparison shop. Your current insurance company may not have the cheapest rates and you could miss out on saving hundreds, or even thousands, of dollars each year by not taking 20 minutes or more to shop around.

July 22, 2017April 26, 2020

7 Easy Ways To Improve Your Credit Score

If you need to boost your credit score, it won’t happen overnight.

A credit score isn’t like a race car, where you can rev the engine and almost instantly feel the result.

Credit scores are more like your driving record: They take into account years of past behavior you can find on your credit report, not just your present actions.

1. Watch those credit card balances

One major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating.

The optimum: 30 percent or lower.

To boost your score, “pay down your balances, and keep those balances low,” says Pamela Banks, senior policy counsel for Consumers Union.

If you have multiple credit card balances, consolidating them with a personal loan could help your score.

What you might not know: Even if you pay balances in full every month, you still could have a higher utilization ratio than you’d expect. That’s because some issuers use the balance on your statement as the one reported to the bureau. Even if you’re paying balances in full every month, your credit score will still weigh your monthly balances.

One strategy: See if the credit card issuer will accept multiple payments throughout the month.

2. Eliminate credit card balances

“A good way to improve your credit score is to eliminate nuisance balances,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. Those are the small balances you have on a number of credit cards.

The reason this strategy can boost your score: One of the items your score considers is just how many of your cards have balances, says Ulzheimer. He says that’s why charging $50 on one card and $30 on another instead of using the same card (preferably one with a good interest rate), can hurt your credit score.

The solution to improve your credit score is to gather up all those credit cards on which you have small balances and pay them off, Ulzheimer says. Then select one or two go-to cards that you can use for everything.

“That way, you’re not polluting your credit report with a lot of balances,” he says.

If you can’t afford to pay these small balances off at once, moving them to a balance transfer credit card might help.

3. Leave old debt on your report

Some people erroneously believe that old debt on their credit report is bad, says Ulzheimer.

The minute they get their home or car paid off, they’re on the phone trying to get it removed from their credit report, he says.

Negative items are bad for your credit score, and most of them will disappear from your report after seven years. However, “arguing to get old accounts off your credit report just because they’re paid is a bad idea,” he says.

Good debt — debt that you’ve handled well and paid as agreed — is good for your credit. The longer your history of good debt is, the better it is for your score.

One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible, says Ulzheimer. This is also a good reason not to close old accounts where you’ve had a solid repayment record.

Trying to get rid of old good debt “is like making straight A’s in high school and trying to expunge the record 20 years later,” Ulzheimer says. “You never want that stuff to come off your history.”

4. Use your calendar

If you’re shopping for a home, car or student loan, it pays to do your rate shopping within a short time period.

Every time you apply for credit, it can cause a small dip in your credit score that lasts a year. That’s because if someone is making multiple applications for credit, it usually means he or she wants to use more credit.

However, with three kinds of loans — mortgage, auto and more recently, student loans — scoring formulas allow for the fact that you’ll make multiple applications but take out only one loan.

The FICO score, a credit score commonly used by lenders, ignores any such inquiries made in the 30 days prior to scoring. If it finds some that are older than 30 days, it will count those made within a typical shopping period as just one inquiry.

The length of that shopping period depends on the credit score used.

If lenders are using the newest forms of scoring software, then you have 45 days, says Ulzheimer. With older forms, you need to keep it to 14 days.

Older forms of the software won’t count multiple student loan inquiries as one, no matter how close together you make applications, he says.

“The takeaway is, don’t dillydally,” Ulzheimer says.

5. Pay bills on time

If you’re planning a major purchase (like a home or a car), you might be scrambling to assemble one big chunk of cash.

While you’re juggling bills, you don’t want to start paying bills late. Even if you’re sitting on a pile of savings, a drop in your score could scuttle that dream deal.

One of the biggest ingredients in a good credit score is simply month after month of plain-vanilla, on-time payments.

“Credit scores are determined by what’s in your credit report,” says Linda Sherry, director of national priorities for Consumer Action. If you’re bad about paying your bills — or paying them on time — it damages your credit and hurts your credit score, she says.

That can even extend to items that aren’t normally associated with credit reporting, such as library books, she says. That’s because even if the original “creditor,” such as the library, doesn’t report to the bureaus, they may eventually call in a collections agency for an unpaid bill. That agency could very well list the item on your credit report.

Putting cash into a savings account for a major purchase is smart. Just don’t slight the regular bills to do it.

6. Don’t hint at risk

Sometimes, one of the best ways to improve your credit score is to not do something that could sink it.

Two of the biggies are missing payments and suddenly paying less (or charging more) than you normally do, says Dave Jones, retired president of the Association of Independent Consumer Credit Counseling Agencies.

Other changes that could scare your card issuer (but not necessarily hurt your credit score): taking cash advances or even using your cards at businesses that could indicate current or future money stress, such as a pawnshop or a divorce attorney, he says.

“You just don’t want to do anything that would indicate risk,” says Jones.

7. Don’t obsess

You should be laser-focused on your credit score when you know you’ll soon need credit. In the interim, pay your bills and use credit responsibly. Your score will reflect these smart spending behaviors.

Are you getting ready to make a big purchase, such as a home or car? At least a few months in advance, have a look at your credit score, Consumer Action’s Sherry says.

While the score that you get through your bank or a service may not be the exact same one your lender uses, it will grade you on many of the same criteria and give you a good indication of how well you’re managing your credit, she says. It will provide you with specific ways to improve your credit score — in the form of several codes or factors that kept your score from being higher.

If you are denied credit (or don’t qualify for the lender’s best rate), the lender has to show you the credit score it used, thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Another smart move is to regularly check your credit reports, says Sherry.

You’re entitled to one of each of your three credit bureau reports (Equifax, Experian and TransUnion) for free every 12 months through AnnualCreditReport.com.

It’s smart to stagger them, Sherry says. Send for one every four months, and you can monitor your credit for free.

July 21, 2017April 26, 2020

What Is The Difference Between Term & Whole Life Insurance?

Many people want life insurance for the peace of mind it provides, but shopping for policies can get confusing. While there are more specialized types of life insurance than I could name here, the two main varieties you’ll find are term and whole life — and there are many differences between the two. Here’s what you need to know, so you can make an informed decision for you and your family.

Term life insurance can protect your family — for now
You can think of term life insurance as temporary coverage, while whole life is permanent.

Essentially, your premiums stay fixed for a set number of years (the “term”), during which time your beneficiaries will receive a lump sum of money in the event of your death. If the policy runs out and you’re still alive, you have the option to continue coverage, but the premiums can increase rapidly. Many people find that continuing a policy beyond its term can become unaffordable quickly, so don’t plan on being able to keep it forever.

Perhaps the most attractive aspect of term life insurance is the cost. Term life policies usually come with much lower premiums than whole life. I ran a quote for myself (mid-30s, non-smoker) through State Farm’s website. For a 20-year term life policy with $250,000 in coverage, my premium would be just $22.85 per month. A whole life policy would cost $261.65 per month, or more than 10 times that amount.

For this reason, term life policies are a popular option for younger individuals and families, who may not have much savings yet but want to make sure their loved ones are financially secure. In fact, 85% of the life insurance policies TIAA-CREF issues are term life.

Whole life insurance protects you forever and builds cash value
As the name implies, a whole life policy protects you for your entire life. It’s also much more expensive for a number of reasons.

For starters, whole life premiums stay the same forever — even if you’re 100 years old. Unlike a term policy’s premium that can increase dramatically after the initial term runs out, a whole life premium is guaranteed for life. The premiums may seem steep to insure a 35-year-old (and they are), but they’ll seem like a bargain for $250,000 in coverage on an 80-year-old.

Don’t forget about inflation, either. While the $261.65 premium in the previous example may sound ridiculously expensive when compared with that of a term life policy, a dollar when you’re 80 won’t be worth the same as a dollar today, so your premiums will seem cheaper as time goes on.

Plus, whole life provides a living benefit. That is, as you pay your premiums, your whole-life policy accumulates cash value. Your premiums are invested and grow and earn dividends as time goes on, and this value builds on a tax-deferred basis, similar to an IRA or 401(k). You can also borrow against your policy if you choose to do so, or you can cash out some or all of its value.

To recap, here’s a summary of the reasons you might want each type of life insurance:

Term Life Insurance	Whole life insurance
Cheaper	Builds cash value
Straightforward, easy to understand	Premiums will never increase
Just provides a death benefit; no extras	You can borrow against the policy
	Eligible to be paid dividends

An alternative to whole life
Before you decide which is best for you, consider whether you’ll need life insurance in 20 or 30 years after a term policy expires. After all, the main attraction of a term life policy is that it’s an inexpensive way of providing financial security before you have enough savings and other assets. Well, if you’re saving and investing responsibly, this may not be the case in 20 or 30 years from now.

Looking at my example once more, you’ll notice that the monthly difference in premiums between the whole and term life policies is $238.80. If I simply buy the term life option and invest the difference, it could build up quickly. Based on the S&P 500’s historical average returns, after 20 years my investment could be worth nearly $155,000. After 30 years, it could grow to $428,000. Bear in mind, this would be on top of whatever other investment accounts I have, such as a 401(k) or IRA.

The point is that if you have $428,000 or more in savings, do you really need a $250,000 life insurance policy? I tend to lean in favor of carrying a term life policy and maximizing my investments, and this is in fact what I do for myself and my own family. The goal is that by the time my term life insurance policy expires when I’m 55, the death benefit won’t be nearly as necessary as it is now.

It’s all about your peace of mind
While I completely agree with the assertion that term life insurance is sufficient for most people, it’s still important to do what makes you comfortable. If you like the idea of having a fixed premium for your entire life and the ability to borrow from or cash in your policy, there’s nothing wrong with shopping around for whole life if it’ll help you sleep more soundly at night. However, I believe those extra dollars could be put to work elsewhere.

The $16,122 Social Security bonus you could be missing
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.

June 18, 2017April 26, 2020

The 6 Different Types of Insurance Policies That Should Be A Part Of Your Financial Plan

Earlier this year, when the hubs and I reviewed our spending from last year and set up our 2016 budget, we talked about incorporating more (and better) insurance into our financial plan.

Now, 6 months later, we’re finally putting the final touches on all 6 different types of insurance policies that we determined were necessary to protect us from every sort of situation, and I’m really proud of it.

Why?

Because often people our age (mid-twenties) neglect insurance until they’re much older, or just neglect certain types of insurance, which causes those policies to be much more expensive when they do finally incorporate them into their budget and long-term financial plan.

All told, there are 6 different types of insurance policies you should have:

Health Insurance

Health insurance is, far and away, the most important type of insurance you should have.

Everyone will need medical care at some point, and since medical debt is the largest cause of bankruptcy in the United States, I cannot stress the importance of health insurance enough. Before the Affordable Care Act, health insurance was not mandated, but for most people was available through their job, and expected in the budget.

But now, with the Affordable Care Act, health insurance is mandatory, and you will receive a fine (gradually growing larger each year) if you do not have it.

The best place to find health insurance at an affordable rate, and with the best coverage, is usually through your employer. However, not every employer is required to provide health insurance, the plan doesn’t cover much, is very expensive, or you have a special circumstance, such as you’re self or unemployed.

If this is the case, try the Government Healthcare Marketplace, or eHealthInsurance.com to compare rates, coverages, and prices.

Key Questions to Ask:

What Is The Deductible? Is is per person, per family, per year?
Are there any copays?
What is your yearly maximum out of pocket?
When does the insurance cap out?

Auto Insurance

Also mandated in your state, auto insurance protects you and other driver’s from the huge financial costs of causing/being in an accident.

After all, even if you’re a perfect driver, acts of God like deer, hail, and storms happen. You can’t control everything, and auto insurance protects you from suffering financial ruin should something go horribly wrong.

Key Questions to Ask:

How much property damage will this cover?
What portion of medical bill will this cover?
What is the deductible?
Are there any perks like free glass, accident forgiveness, etc?
Does it meet the requirements for your state’s minimum coverage?

Homeowner’s Insurance

Your home is important to you, above and beyond your car, even.

It’s where your family lives, where you brought your children home to, and where you’ve made a lot of memories, so it makes sense that you would want to protect it in case of fire, storm, floods, or other disasters.

It is also probably the most valuable asset you own.

As a result, your homeowner’s insurance is incredibly important – and probably mandated by your mortgage company – and can be quite pricey. Shop around for homeowner’s insurance, and be sure to factor this cost into your budget every month.

Key Questions to Ask:

What is the deductible?
What is the total cost to rebuild?
Have you added flood coverage (if in a flood plain)?
Will your policy cover the cost of a hotel or rental while the house is being rebuilt?
What about all the belongings inside the home? Does this policy cover them as well?

Life Insurance

Life insurance is a budget line that everyone needs, but hopefully not for some time.

In a nutshell, it protects those that depend on from having to make large life changes if you should pass away. It protects them from things like having to assume your debts without a way to pay them off, requiring your spouse to get a job outside the home (if they stay home with children), or going from 2 incomes to one.

It also ensures things that have more than a financial connotation.

For example, if you were to pass away tomorrow, would you want your family to have to move out of your home? Would you want your children to have to switch care providers or schools? And how about activities? Would you want your family to have to break away from everything they’ve ever known?

Chances are, you would want your family’s life to stay relatively constant to make the time of mourning that much easier on them.

There are several different types of life insurance, the most common of which are Whole Life Insurance and Term Life Insurance, and you’ll need to decide which is right for your family.

Whole Life Insurance does not expire at a set age, and generally has a small rate of return, like an investment account. You can also “draw” on your whole life insurance policy if you need cash for a large or unexpected expense. As a result, Whole Life Insurance coverage is more expensive than it’s counterpart, Term Life Insurance.

Term Life Insurance costs less, but expires at a certain age, depending upon your policy. It was designed as an affordable alternative to Whole Life Insurance, since the insurer is betting that you won’t pass away at a young age, therefore it is less likely they will have to pay out before the policy expires. By contrast, the policy saves you money because you’re betting that you won’t have large debts, you’ll own your home, and that your children will be out of the house by the time you pass away.

Key Questions to Ask:

Who are my beneficiaries?
Have I set up my insurance to take care of my children if both my spouse and I pass away?
What is the death benefit? Will it cover my debts and my family’s needs comfortably?
Is there a cash benefit to the policy?

Disability Insurance

Now, before you go all “not another one!” on me, hear me out, because some of your disability insurance may already be taken care of.

Many employers provide some sort of disability insurance for you, and although coverage varies from employer to employer, the standard is 60% coverage at not cost to you. Alternatively, you may be required to pay for this coverage, or have no coverage at all, it just depends upon your employer.

But, in the case of 60% coverage, what this means is that if you were to have a long-term disability, 60% of your salary would be covered by that disability insurance.

That sure is a nice perk, but for most people 60% isn’t going to cut it to keep the bills paid and food on the table, which is why you should at least consider purchasing an additional 30% salary coverage, which would bump your salary replacement level up to 90% – a lot better than 60%.

The best and first place you should look for this coverage is through your employer. Often, it can be purchase at an additional, but minimal cost. If your employer doesn’t provide disability coverage, or you need more than you can get through them, check with your insurance agent for recommendations.

Think you won’t use Disability Insurance? Think again:

A pregnancy puts you on bed rest? Use your disability insurance.
An injury/surgery unrelated to work requires some recovery time? Use your disability insurance.
Come down with an illness that requires hospitalization? Use your disability insurance.

Key Questions to Ask:

How much of my salary will this coverage replace?
What is the annual (or monthly) premium?
Will taxes be taken out of the replaced salary?
How many weeks of coverage will this policy replace?

Long-Term Care Insurance

I know, getting old isn’t something you want to think about, and believe me, I’m with you.

I mean, I just turned 25 and it kind of hit me that the first half of my 20’s was over. It wasn’t the best birthday, to say the least.

But the bright side of realizing I’m getting older is that it made the hubs and I think about our insurance, specifically insurance that will cover the costs of a nursing home, whether we use it as we age, or because of a serious injury that leaves one of us needing intensive care in a nursing home.

If you purchase it while you’re young, Long-Term Care Insurance is insanely cheap. Yes, you’re paying for the cost over the course of many years, but with the rising costs of senior care and the likely hood that you will live longer than ever, this coverage is super important.

Key Questions to Ask:

What is the maximum payout for the policy?
Does the policy adjust for inflation?
Does it expire at a certain age?
How much will it pay out per day?
What is the qualification to start coverage?

One Last Option

While this last point isn’t one that I would recommend to everyone, but since this is a personal finance blog, it does have a place here.

Rather than opting to purchase 6 policies with different premiums and coverages, you also have the option to self-insure in a few instances.

Health Insurance and Auto Insurance are mandated by laws, so you will have to purchase those policies, but the others are somewhat negotiable.

Just be warned, the costs to self-insure can total in the millions, and a mistake could cost you and your family more than just money.

Homeowner’s Insurance

It’s very important to be protected in case of a tragedy, but if your mortgage is paid off, you’re not required to carry homeowner’s insurance. Cancelling the policy will certainly save you money, but where will that leave you if your home is destroyed?

Homeless, that’s where.

Rather keeping a policy, if you’ve saved above and beyond the requirements of retirement, you could self insurance. Basically this means that you have enough money in the bank to cover the cost of rebuilding, replacing everything inside, and paying for a place to live during the rebuild – that is not already slotted for a specific purpose such as retirement.

Life Insurance

Self-Insuring is also an option for life insurance, especially if you have very little debt, own your home, and have significant savings not required for retirement.

I don’t recommend this, not because of the massive amount of money you would have to save, but simply because landing on your perfect number to self-insure with is so hard.

You have to ask yourself questions like “What does it cost my family to live for 1 year, comfortably?” and “For how many years do I want them to live off the insurance money?”

It’s a very hard number to come by, so proceed with caution.

Disability & Long-Term Care Insurance

You can also skip the Disability and Long-Term Care Insurance if you’ve saved aggressively, and this number is even harder to come by than the Life Insurance amount.

Insurance isn’t the most fun item in your budget, that’s for sure.

But it’s absolutely necessary.

And, although you may never need it, planning your finances requires thinking through every possible contingency, even those that aren’t entirely pleasant.

June 18, 2017April 26, 2020

The Complete Guide To Paying Off Credit Card Debt With A Balance Transfer

Fighting fire with fire.

More than once, I’ve heard that phrase used to describe completing a balance transfer for the purpose of paying off credit card debt, and the people that said it were right.

Credit cards are a dangerous thing when used incorrectly. For most people, credit cards are easy to get, easy to use, and tough to pay off. The high interest rates (usually 15% – 23%) leaves you drowning in interest, barely touching the principal, paying thousands of dollars in interest each year.

But, if you’ve gotten yourself into some credit card debt, and are committed to paying it off, you have options. After all, paying off a credit card while still paying exorbitant interest rates is like trying to swim upstream, against the current. You can make progress, but it’s unbelievably hard.

Here are the most common ways to refinance credit card debt:

A personal loan
With home equity
A Balance Transfer

Today, we’re going to fight fire with fire and talk about balance transfers: who they’re right for, what you need to do it successfully, and what to watch out for. Done correctly, regardless of you feelings about credit cards, you can save yourself a lot of time and frustrating by paying off debt after a balance transfer, rather than going the more traditional routes of a home equity loan or a personal loan.

How Much Is Your Credit Card Debt Costing You?

Credit card debt carries some of the highest interest rates of any type of debt, and is the undisputed “worst” type of debt to have. The average American family has more than $15,000 in credit card debt, and at a low estimated interest rate of 15%, a minimum payment of $400 and paying $400 extra each month towards the debt, that family would pay $5,367 in interest over the 51 months it would take to pay it off!

In order to understand just how advantageous a balance transfer can be for you, you need to first understand just how much that debt will cost you in interest, and how long it will take to pay it off.

You might be surprised at just how much interest you’ll be paying on your credit cards alone + how long it will take you to get out from underneath that credit card debt!

What Is A Balance Transfer?

A balance transfer is when you take the balance from one credit card (usually bearing a high interest rate) and transfer it to a newly opened credit card in exchange for a 0% interest rate for 12-15 months. This cuts down on the interest payments by hundreds or even thousands of dollars, and give yourself a set time frame to pay off the debt within.

Why Is A Balance Transfer a Good Option?

Utilizing a balance transfer over a route with a traditional bank is advantageous for several reasons:

You don’t have to fill out tons of paperwork
Very little income information required
Instant, or very quick decision
Huge interest rate deduction

As long as you have good or excellent credit, you can apply for and be approved for a new credit card within a few minutes, all online, without ever having to set foot in a bank. Credit card companies are required to be VERY transparent about the terms of the credit card, not only the interest rate, but any an all fees, the balance transfer terms, as well as any associated fees.

You can also get an interest rate advantage by completing a balance transfer, with most balance transfer interest rates hovering around 3%. Some may be larger, and you can even find some that are 0%, but 3% is pretty common. Let’s use $15,000 of credit card debt as the example and assume that you’ll be approved for the balance transfer credit card with a credit limit large enough to accommodate the $15,000 of debt.

In this case, you would pay a $450 fee for transferring your balance, well below the $5,367 in interest you were looking at.

If you choose the correct card, you can pay as little as 0% interest for 15 month, putting your payment right at $1,030 a month.

This is larger than the $400 minimum payment + $400 extra you were paying each month, but chances are you can find an extra $230 each month to put towards the payment! If you can’t, you should seriously look for ways to cut your budget for a few months, or put a few hours each week into making extra money. The other alternative is to transfer your $15,000 balance, continue to p pay $800 a month towards it, and then transfer the remaining $3,450 to another balance transfer credit card for a few months to continue paying off the debt without racking up interest!

The ease of application, ease of use, and lower interest make transferring a balance to pay off a credit card faster a really good option if you have systems in place to keep from falling into credit card debt again (I’ll get into those in a minute).

The Best Balance Transfer Credit Cards

There are some truly great offers out there right now to help you pay off credit card debt – even though that’s not what they’re designed for. These 0% for 15 month offers are supposed to entice you to open up a card and rack up large amount of debt on it so that the credit card company can make a killing charging you hundreds in interest each month.

But you can outsmart the system using these great balance transfer credit cards:

Barclaycard Arrival World MasterCard: 0% APR for 12 months on each balance transfer made within 45 days of account opening

Chase Slate: 0% APR for 15 months on balance transfers made within 60 days of account opening. $0 annual fee.

Citi Simplicity: 0% APR for 21 months on balance transfers made within 60 days of account opening. $0 annual fee, but a 3% balance transfer fee applies

Discover It Card: 0% APR on balance transfers for 18 months, $0 annual fee, and 3% balance transfer fee.

June 18, 2017April 26, 2020

THE MIND TRICK I USED TO CURE MY CREDIT CARD DEBT

I used to think I’d be in credit card debt my entire life. I started young in my debt journey. I was 18 years old when my bank sent a pre-approved credit card in the post. The limit was $2500 – a heck of a lot more than I had ever had in my life. To a spendaholic 18-year-old with a new-found love for bars and nightclubs, it could only end badly. If you’ve ever been in credit card debt you know that it’s not really about the money. Credit cards allow you to inflate your lifestyle to a level you can’t sustain. I took full advantage of my card and purchased lots of vodka & diet cokes and taxis home. As you can imagine I quickly maxed it out.

My parents offered to bail me out, by allowing me early access to the funds they had saved for me since I was born. I paid that card off and tried to be better. But I’d learned nothing. I’d spent money I couldn’t see, and then eliminated my debt with money I didn’t have to work for. Not to mention being so wasteful with the money my parents had eked together while I grew up.

As my earnings increased and I moved to a new country, my bad habits crept back. It got to the stage where I had maxed out credit cards to the value of about $10,000 and no idea how I spent the money. Each weekend I’d go shopping and come home with a new handbag or a new pair of shoes. It never occurred to me to pay with my own cash. I always got out the plastic, swiped and was on my merry way with my new purchase.

After a few years of running up balances on multiple credit cards and transferring between cards in order to access more cash I finally came to my senses when I had to fill in a loan application to purchase an investment property. It had never really occurred to me that banks wouldn’t look favorably upon credit card debt. I figured since I could manage the monthly payment I was doing OK. The truth is my credit card debt was stopping me from making important moves towards my financial future – my credit cards were managing me.

I knew it was going to take something drastic to change my credit card habit.

I realise that for me (and a lot of people) using credit cards doesn’t feel like you are using real money. There’s only one thing that feels like real money: cash. The feel of notes and coins in your hand really brings to life the amount you’re spending. There’s a very good reason many personal finance gurus advocate using cash. So I had to find a way to translate in my mind that the cute little piece of plastic which let me buy cool things I couldn’t afford was actually a bunch of cash that I was literally burning each weekend.

The idea came to me when I was late in making my minimum monthly payment by internet banking and had to pay in cash at the branch. First I had to leave my office at lunchtime and head to the ATM of my bank to withdraw enough cash to make the payment. I then crossed the road to the bank that issued my credit card, took my place in the line and waited. I stood in line, clutching my minimum payment in notes, waiting for the bank teller to call. As I handed her the card and my cash I had a strong realisation that I was giving this woman (technically, the bank she worked for) money. For nothing. The penny dropped.

After that time I vowed to always make my credit card payment in cash. Every week on payday I would deposit whatever I could afford. Sometimes it was $20, $30, $150. It depended on my earnings. The amount wasn’t important. It was the repetitive act of paying my debt in cash. That constant reiteration finally started to make an impact, and within a few months I’d cut up my credit card. I still had a balance to pay so I’d bring the paper statement with me each week to make my payment. It took me a year, but I finally paid that card off and then applied the same principles to a personal loan I had. Within 4 years I was completely free of all consumer debt and cured of my addiction to spending on the plastic.

If you’re struggling with credit card debt, I urge you to hold that cash in your hand. Really feel it and think how lovely it is to physically hold the money you’ve earned. Then hand it over.

It stings, but you’ll feel it. Which is the main thing!

Note: It took a few years but I now use credit cards as a life tool. I appreciate some people need to cut up the plastic permanently to get their life back on track, but I couldn’t forgo all the rewards that credit card users benefit from. I needed to train myself to be a smart user of cards and I’ve finally got there. I’m constantly aware of my history, so I track each purchase then I’m not in for a shock when the statement arrives each month.

June 18, 2017April 26, 2020

Here’s What I Recommend for a First Credit Card

There are hundreds of credit card options out there, so how does someone pick their first credit card?

“What should I get for my first credit card?” is a question I’ve heard from many people. What I’ve learned over the past few years is that most people are not looking for a bunch of options. They just want to know which card I recommend – and why.

Most people realize that even if they don’t like their first credit card they can always sign up for another one. But they obviously prefer to sign up for a solid first credit card that they will continue to use for years to come.

I’ve actually been meaning to write this blog post for over a year now because my answer has remained consistent for a long time now.

The Best First Credit Card

The card I recommend for a first credit card is the Discover it® Card.

Coincidentally (or perhaps not), Discover was my first credit card. I opened my Discover card about a decade ago and have been using it ever since.

Here’s some reasons I think the Discover It credit card is the ideal first credit card:

1) No Annual Fee

When it comes to a first credit card, having no annual fee is the most important feature I look for. If a card has an annual fee, it’s not a good first credit card.

Your credit score is, in part, based on your credit history. If you open a card with no annual fee you can keep it open forever even if you decide to stop using it. If you open a card with an annual fee you will likely end up closing it, perhaps even within a year of opening it.

The Discover it® Card does not have an annual fee and this is by far the most important feature of the card.

2) Solid Rewards

While it’s true that there is no huge sign-up bonus for the Discover it card that will allow you to travel hack your way to Europe, it does have some solid rewards that I think you should take full advantage of.

These include:

1% Cash Back The Discover it® Card has always offered 1% cash back, regardless of where the purchase was made, what was purchased, etc. No matter what you will always get 1% cash back.

Dollar for Dollar Cash Back Rewards the First Year While the Discover it® Card does not offer the lucrative sign-up promos that some of the top travel rewards credit cards offer, they do offer a special incentive to those signing up for the first time.The incentive is this: for each dollar in cash back rewards you get throughout your first year, they will give you an additional dollar. So if you racked up $150 in cash back rewards, you’d get an additional $150. Essentially you get 2% cash back your first year.

5% Revolving Cash Back Each quarter of the year Discover offers new 5% cash back offerings. For example, you can earn 5% cash back bonus on up to $1,500 in purchases made at Home Improvement Stores & at Amazon.com July through September 2016. Last quarter it was a 5% cash back bonus on up to $1,500 in purchases at restaurants and movies.If you take advantage of these revolving 5% offerings you can rack up cash back bonuses quick.
Partner Gift Cards One of my favorite benefits of the Discover it® Card is the partner gift card program. My wife and I have used this for years and it’s always nice to get a “free” gift card.It’s a really simple program. If you use your cash back rewards to redeem a gift card, you will get the gift card at a discounted rate. For example my two personal favorite gift cards to get are $50 Starbucks and Chipotle gift cards. You can get either of these for just $45 of cash back rewards, another free $5 on top of the $45 you already accumulated through cash back rewards.There are currently 140 participating stores/brands and some have even better deals than what I described for Chipotle and Starbucks. For example, a $50 Gap gift card can be had for just $40 in cash back rewards. A $60 1-800 Flowers gift card can be had for just $40 in cash back rewards, and so on.

3) Good Dashboard & Customer Support

The design of the online dashboard and customer support are definitely less important features than having no annual fee and having a good rewards program, but I still think it’s worth noting.

The online dashboard that Discover has is my favorite of any credit card I’ve used – and I’ve signed up for a lot of credit cards the past few years. It’s clean, easy to navigate, and I’ve never had problems with it. Other dashboards can be clunky or overly simplistic to the point where it’s difficult to navigate.

I thankfully haven’t had to interact with customer support that often with Discover, but I did talk to them prior to going on a cruise so that they were aware of the countries I’d be visiting and potentially using my Discover card at. They were kind, courteous, and overall I just got the feeling that if anything went wrong with my Discover card they would quickly resolve the issue (with a smile on their face!).

Tips for People Getting their First Credit Card

While I could easily write a whole post (or series of posts) on tips for people getting their first credit card, I figured it would be worthwhile to briefly touch on the topic in this post.

Here’s 3 tips for people getting their first credit card:

Treat your credit card like cash The fact that you are getting your first credit card means that you haven’t gotten into credit card debt. You have an opportunity to never get into credit card debt, but it requires you to immediately get in the mindset of treating your card like cash.If you don’t have the money, don’t charge it, and make sure you pay off your credit card in full each month.

Only use 1/3 of your available credit at any one time Using only 1/3 of your available credit may not seem like common sense, but your credit score is impacted by how much credit you utilize. So if you were approved for $1,000 in credit you should keep the balance on your card below $333 at any one time.There is no penalty for making multiple payments towards your credit card throughout the month, so consider taking that approach if you are worried you will go above the 1/3 “utilization” threshold.

Request a credit increase after 6-12 months Along the same lines of only using 1/3 of your available credit, you will also want to consider requesting a credit increase after 6-12 months. If you have been consistently paying off your card you are likely in a good position to have your request approved.How do you request a credit increase? With Discover it’s an option within the online dashboard. If you aren’t approved, don’t sweat it. You can wait another six months and submit the request again.

To summarize, I recommend the Discover it® Card as a first credit card. It has no annual fee, solid rewards, and a good online dashboard and customer support.

June 18, 2017April 26, 2020

How to Close Credit Cards Without Damaging Your Credit Score

Paying on your credit card accounts and maintaining good credit often results in a credit limit increase and additional credit card offers. There is nothing wrong with having credit card accounts, as long as you use these accounts responsibly. What’s more, bad credit cards have helped many people re-establish their credit and build strong scores – but what if you’re ready to decrease your number of credit cards?

Closing credit card accounts that you no longer use may seem wise, especially if you’re looking to simplify your finances. However, there is a wrong and a right way to close down your accounts. Credit scores are based on numerous factors, including the length of your credit history. The longer you’ve had a credit card (or any type of credit) in your name, the higher your personal FICO credit score. {Also read Why Cancelling a Credit Card Hurts Your Personal Credit Rating}

Whether you have unsecured credit cards or bad credit cards, closing your accounts can possibly reduce your credit score. This is because canceling the account can reduce your overall credit history. The actual damage varies, but your score can drop 15 or 20 points after closing an older account. This single move can damage your prime rating and result in a higher interest rates on loans.

Cancel the Youngest Card to Reduce Credit Damage

Closing or canceling an older card will cause some credit damage, however, you can minimize the damage by keeping your oldest account open and closing your newer accounts. Closing the oldest account can greatly reduce your credit history, but if you were to keep this account open and cancel another account, the length of your credit history remains the same. Thus, helping keep your credit score intact. Read your statements or call your credit card company for information regarding the date that you opened your account.

Lowest Credit Limit

It also helps to close the account with the lowest credit limit. The wider the gap between your balance and your credit limit, the better. Accounts with low limits ($300 to $500) increase the risks of having a high utilization ratio, which can damage your credit score. However, if you have a credit card with a higher $1,000 credit limit and you maintain a balance of $200, your utilization ratio is less than 30 percent, which helps improve your score.

Close Accounts Slowly

Don’t close multiple accounts within the same day, week, or even month. Take your time. Close one account, wait six months, and then close another account. Canceling several accounts within a short period can cause a huge decrease in your credit score.