Identity Theft Takes a New Turn

by Terry Savage

If you think your finances are safer now that you use a chip card, think again. The latest Javelin Identity Fraud Study reports the number of identity fraud victims increased by 16 percent in 2016 to more than 15 million consumers. And the amount the thieves took grew by $1 billion to more than $16 billion in the past year.

A large part of the increase came from “card not present” fraud in the first year since chip cards became widely used. Fraudsters are resorting to more invasive ways of getting your identity details than simply counterfeiting mag stripe cards.

So-called “phishing” schemes have become far more sophisticated. Gone are the days of the misspellings and clumsy grammar that made fraud emails obvious. Fraudsters have gotten better at tricking you into clicking on a link in one of these emails. Once you do that on your computer or smartphone, these links deploy malware called “bots” to collect all your data, including PIN and CV authentication numbers as you shop online.

There’s also a growing trend of identity fraud crimes enabled by victims’ social media posts. Harmless items on your pages, including celebrations of your birthday, or a college graduation or reunion, give thieves information they use open new accounts in your name. Fraudulent new credit accounts for more than half the increase in identity theft crime last year.

So what should you be doing to guard your identity? Here are some suggestions, which mostly involve common sense and a commitment to regularly review your finances.

—Check online accounts regularly. Visit your bank or credit card website at least once a week to make sure that no withdrawals or unauthorized charges have been made. Yes, you’re protected from fraud, but there’s no way to avoid the hassle of getting a new account number when you’ve been attacked. At least you can minimize the trauma by catching fraudulent purchases immediately.

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Help With Health Insurance Choices

by Terry Savage

Making decisions about health insurance is complicated and potentially very costly. It’s no surprise that Americans don’t do a great job of it. It takes work to figure out the best health insurance options. And few people take the time to do it right.

Alegeus Healthcare, a provider of platforms for corporate insurance plans, compiles an annual Healthcare Consumerism Index that measures the “degree of engagement … exhibited during healthcare spending and saving decisions.” It reports that the index this year jumped to 54.4 from 48.3. So, we’re doing better.

But, to put that in perspective, consumers score 78.9 on the index when considering the purchase of a television and 76.2 when evaluating the purchase of a cell phone!

Everyone faces choices. Medicare recipients know that basic coverage is simple, though the monthly premium depends on their income. But they must also choose a supplement plan and a Part D prescription drug plan.

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The Stock Market: What Should You Do Now?

by Terry Savage

The stock market is just plain scary these days.  What should you do when market gyrations make headlines?  The simple answer is:  Do Nothing! 

Never make investment decisions based on emotion. And the two most dangerous emotions are running rampant right now:  Fear and Greed.  The only way to overcome them is to have a sensible investment plan – and stick to it.

That’s the kind of discipline that comes from experience. And experience is an expensive teacher.  So if you can’t do it on your own, this is the time you’ll appreciate having a financial advisor.  There are three key ingredients involved in disciplined investing:

1.   You Need Perspective.   All historical context seems to fly out the window when markets go wild.  You’re influenced not only by emotion, but by your recent investment experiences. 

Right now, those experiences are in conflict.  You remember the three years in a row of double-digit gains in 2012, 2013, and 2014.  (Last year was basically flat.)  But you also remember the market crash of 2008-09, which literally cut market averages almost in half, wiping out your previous gains. 

And now you search frantically for a clue as to whether this is just a temporary decline – or the beginning of another bear market. No one can give you that answer definitively — in advance!

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Mortgages Made Easy

by Terry Savage

Your home is likely the most expensive purchase you will ever make – and the largest amount you will ever borrow. Yet, the mortgage loan documents have always been shrouded in mysterious legal language and complicated financial percentages. Now, that’s a thing of the past.

Starting October 3rd, lenders must present borrowers with two streamlined, easy-to-read documents that allow them to understand costs and compare mortgage products. For a quick tour of those documents go to Bankrate.com. Here’s what homebuyers (and realtors) need to know about the two new consumer friendly mortgage documents:

1. The Loan Estimate. The new Loan Estimate form allows you to easily see the facts of your loan – including the amount of the total loan borrowing, the monthly payment, all of the closing costs, individually broken out. It also clearly shows any unusual features of the loan –such as if it has an adjustable interest rate (with disclosure of how much the payment can rise over the life of the loan) or any prepayment penalty. And, it clearly displays the total amount of interest you will pay as a percent of the loan amount over the life of the loan.

2. Five Year Comparison. One of the most interesting new features of the Loan Estimate is the simple comparison of costs and payments over the next five years, and how much those payments have reduced the principal of the loan. That is the easiest way to compare loans side by side. Your goal is to pay out the least total amount over those five years – and reduce the loan principal by the greatest amount.

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Fall Is the Real Start of the New Year!

by Terry Savage

Summer flew by again, and the school year has started. Remember when “back to school” signaled the real start of a new year? Back when you moved into a new grade, got a new teacher, a new fall wardrobe and made new friends? Fall is still the most efficient time to get organized. Why wait until the calendar year turns. Start now and avoid the rush!

Here are five financial steps you should take now, ahead of the crowd:

1. Assess your retirement plan asset allocation. Even if the market weren’t volatile, this would be a good time to make adjustments, before the year-end rush to lock in gains and harvest losses. If you can’t do it alone, seek advice from a fee-only financial planner — or from the management services at major mutual fund companies. Or go to www.TerrySavage.com and click on the link to Financial Engines, which will get you a year’s free advice from this investment adviser to major company retirement plan participants.

2. Check your credit report and credit score. Do this before the holiday shopping rush. Go to www.AnnualCreditReport.com for your free report from each of the three major credit bureaus. (It’s not necessary to sign up for a credit protection service.) You can get a free credit score at www.CreditKarma.com (or on your Discover card monthly statement, among other places.)

And if you don’t plan on shopping for a major purchase, such as a home, a car or life insurance, you might want to pay a small amount to “freeze” your credit, so that scammers can’t open a new account in your name.

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Home Prices, Sales Up — But Don’t Get Carried Away!

by Terry Savage

The housing industry is starting to boom again. The latest reports show that sales of existing homes rose to their highest level in eight years, and the median price for an existing home sold in June rose to $236,400 — the highest ever recorded by the National Association of Realtors — and surpassing the July 2006 peak. The Case-Shiller 20-city home price index rose 4.9 percent in May.

Home builders also report their sales of newly built homes have reached a seven-year high. Only sales of existing homes disappointed, with many analysts saying the problem has been a shortage of inventory.

While the surge in home buying started with investors looking for bargains to flip, the most recent sales have been to individuals, based on mortgage statistics showing a much higher percentage of purchases being made to homebuyers using low down payment FHA loans.

The American dream of home ownership is coming back in a big way, as the nightmare of the 2008 mortgage crisis fades from memory. But before you jump in to buy, here are five things to consider:

1. Your home is your residence, not a trading investment. Now you know that home prices can go down as well as up. Don’t speculate with the roof over your family’s head. In fact, when counting your assets, don’t even include your home equity.

2. The family home is not a liquid asset. If you think you might move in the next few years because of your job, think twice about buying vs. renting. While homes might be moving quickly now because they are in short supply, builders are rushing to build new, more desirable homes, adding to inventory. It could take months to sell your existing home — and you’ll be paying costly commissions on both sides of this transaction.

3. Pre-check your mortgage qualifications and costs. Get written confirmation from a mortgage lender about the amount you will be able to borrow. As well, check the interest rate you would be paying if you closed today. Of course, rates could move higher, but you want to know if you will be paying a higher rate than other borrowers because of past credit problems.

4. Check insurance costs. Yes, the cost of homeowner’s insurance may also depend on your credit score. But the big unexpected cost would come if you are required to take out private mortgage insurance (PMI), which is designed to protect the lender in case you default. Typically this is required if you put down less than 20 percent of the value of the house — unless you have a special deal like a VA mortgage.

5. Don’t get caught in the middle. It’s easy to fall in love with the next house. But put your current house on the market first. There may be enthusiastic buyers who don’t qualify for a mortgage. Even worse, your house may not appraise for the selling price. I’d you get caught owning two houses you could be very vulnerable when interest rates start to rise.

The easy part of buying a home is the hunt. That’s where optimism always overcomes financial common sense. Remember that remodeling always ends up costing twice the estimates, not only because of the problems you uncover but because of the three most expensive short words: “as long as….” Projects only come in on time and on budget on HGTV!

If you plan realistically, your home could be your best investment, especially with today’s low mortgage rates. Just don’t count your profits before you sell, and don’t withdraw them in a home equity loan. That advice will let you sleep well. And that’s The Savage Truth.

Message to Washington: Stop Scaring America

by Terry Savage

A spending cut of $85 billion is just 2% of our $3.6 Trillion in annual Federal spending.  Every American family with a job has just taken a 2% cut — as payroll taxes rose in January.  We survived — and Congress can too.

Especially since they’re getting our 2% to spend!

When American families face higher taxes, or higher gasoline prices, we make adjustments to our other spending.  We can’t “print” the money.

As reality sets in that there might be some limits to our ability to borrow and spend, Washington is insulting the American people with stories of impending collapse of government services because they need to cut 2% from their increased spending.

Here’s a roadmap to the “March Madness” that is upon us if Congress — both parties — don’t start talking about a serious deal that includes the entire budget:

Sequester

The “sequester” — a 10 percent budget cut in “discretionary” spending is upon us — with dire warnings of cutbacks in unemployment benefits, “head start” programs for children, air traffic controllers and TSA workers at airports. On the plus side, there will be fewer IRS agents!

The picture is painted in such stark terms because both parties agreed that they needed this discipline to force themselves into taking action with regard to the budget, an idea endorsed and signed into law by President Barack Obama.

Budget

Speaking of budgets, the United States hasn’t had an official budget for more than three years. Instead we are funding our government with a set of “continuing resolutions” that merely authorize ongoing deficit spending — with no oversight or judgment of which programs might be appropriate to cut.

In mid-March the president will send his budget message to Congress, a delay of about one month from the traditional budget message. Once again, it is likely that nothing gets done on a budget agreement.

Government shutdown

And without a budget deal, the government must shut down. That’s the next potential crisis coming at the end of March.

We lived through a shutdown back in 1995, when the first budget stalemate took effect under President Bill Clinton. The federal government shut down, starting in mid-November, and continuing through the winter holiday break, until everyone came back to their senses, and back to work — on Jan. 6, 1996. The world didn’t end. People even started wondering what we needed some parts of government for, anyway.

If we don’t have a budget — or agreement on another continuing resolution — the government will shut down March 27.

Spring break

Yes, put spring break on the calendar, too. From March 25 through April 7, our elected representatives will go home to celebrate Easter and Passover — right in the midst of this likely “no-budget-so-we’re-shutting-down-the-government” crisis. Just like they did in December for the holidays, in the midst of the debt ceiling crisis.

Congress will come back to “work” the week before all of us must pay our taxes on April 15. Funny how they force us to meet deadlines, while they “kick the can . . . .”

No budget, no pay

Maybe this time it will be different. Realizing that their joint committees, and self-imposed deadlines were not forcing them to do their jobs, both parties passed the “No Budget, No Pay” bill, which the President signed.

This new, and hopefully, persuasive law was passed as part of the negotiations over extending the debt ceiling. And, speaking of the debt ceiling, that’s the next oncoming crisis — again.

The debt ceiling

The No Budget, No Debt Act simply pushed the Debt Ceiling issue to May 18th , when Congress must consider it again. In the meantime, any new Treasury borrowings above the current $16.4 Trillion will push the country above its official limit. No word on how they’d deal with that issue, if Congress fails to lift the debt ceiling again. And no word on how the Treasury would stave off default to its creditors if the ceiling isn’t increased.

And so March Madness is but a prelude to another crazy spring and summer in Washington, D.C. How much of this can Americans take, without totally destroying respect for our system?

Does anyone seriously believe that Washington couldn’t find a sensible $85 billion to cut out of a $3.6 trillion government spending plan?

Somehow the American family manages to cope, to do more with less money in their pockets. But government will have more money in their pockets — from the tax increase they’ve taken from us.

We know how to set priorities. Why can’t government learn that lesson? It’s because they have no process for talking to each other about actual spending plans.

We will have our own March Madness if Congress can’t find a 2 percent budget cut — as every American family must. And that’s The Savage Truth.