Saturday, January 18, 2020

Identity Theft Protection

If you have ever had your identity stolen or know someone who has, you know its a lot of work to unravel what happened and clean up the mess that's left behind in your credit history.  Identity thieves move quickly and by the time you figure out what happened, they are long gone and you are left with the credit card bill.

Credit card companies, banks and other financial institutions have gotten smarter with verification of identity and other protections, but criminals are always ahead of the game.

It's best to protect yourself and make sure it never happens to you.  There are several things you can do to protect your identity, and many of them can be done at little or no cost.

Tips for protecting your identity:
  • If you have an account at a major bank like Wells Fargo or Chase, they now offer free credit monitoring and post an updated credit score weekly or monthly; any changes in your credit report show up there as well with alerts, so you can see inquiries, new accounts added or other changes to your credit file in a timely manner;  you can also sign up for a service like LifeLock, TrustedId or any of a variety of other credit monitoring programs - each of the major credit bureaus has one if you are interested in that option.
  • Put a fraud alert on your credit file; this should result in a phone call to you with some challenge questions based on your credit history before a new account can be setup in your name, but not all financial institutions remember to do this; these are free and easy to do online at each of the three major credit bureaus and you don't have to be a victim of fraud to use them:
  • Lock or "freeze" your credit; this will make it impossible for anyone to run your credit or open an account in your name, but it can be a hassle to manage if you are planning on opening new credit accounts, renting an apartment, buying or leasing a car, or refinancing (pretty much everything that requires a credit check) - this service is offered free by all three major credit bureaus and you will need to do it at each one to fully protect yourself - you also don't need to be a victim of fraud to use these; they can be unlocked for a period of time if necessary to complete a transaction and then re-locked again:
  • Be careful with old tax returns, loan applications and other documents that include your social security number and other personal information; always shred when disposing of these documents
  • Be alert to "phishing" attacks either by phone, mail or email - urgency should be a warning sign that something is not right
  • Watch your paper mail and shred credit card offers that you don't need
  • Use credit cards versus debit cards for better fraud protection, especially for big ticket items and set alerts in your mobile app to alert you about unusual credit card or debit card activity (like gas station charges, charges over a certain dollar amount or international charges)
  • Be careful where you store your credit card data online;  using PayPal or other third party payment service can be more secure when making online payments
I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2020.

To see all my books on investing and leadership, click here.

Disclaimer:  I use affiliate links where I get paid a small amount if you buy the service or product. This helps support my blog.

Saturday, January 11, 2020

Best Online Savings Accounts - January 2020

If you have a good sized emergency fund and / or idle cash you have been saving but are not yet ready to invest, it's important to earn the highest interest rate you can.  Traditional bank savings accounts generally pay extremely low rates of interest, as you have probably seen. 

I did a quick search for online savings accounts.  Nerdwallet has a pretty good summary here.  But the best summary I was able to find was on  Here are Bankrate's selections for the best savings account rates from top online banks:

  1. Best Rate: HSBC Direct - 2.05% APY
  2. Runner-up Rate: Vio Bank - 2.02% APY
  3. High Rate: WebBank - 1.95% APY
  4. High Rate: Comenity Direct Bank - 1.90% APY
  5. High Rate: Popular Direct - 1.90% APY
  6. High Rate: Citibank - 1.85% APY
  7. High Rate: CIBC Bank USA - 1.85% APY
  8. High Rate: Citizens Access - 1.85% APY
  9. High Rate: MySavingsDirect - 1.80% APY
  10. High Rate: Synchrony Bank - 1.80% APY
  11. High Rate: PurePoint - 1.80% APY
  12. High Rate: CIT Bank - 1.80% APY
  13. High Rate: FNBO Direct - 1.75% APY
  14. High Rate: Discover - 1.70% APY
  15. High Rate: American Express National Bank - 1.70% APY
  16. High Rate: Goldman Sachs Bank USA - 1.70% APY
  17. High Rate: Barclays Bank - 1.70% APY
  18. High Rate: Ally Bank - 1.60% APY
Charles Schwab's money market account didn't make the list, but it currently yields 1.51%, which isn't too bad.  You can also invest directly in 4 week US Treasury bills that yield about the same rate at TreasuryDirect.  

I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2020.

To see all my books on investing and leadership, click here.

Disclaimer:  I use affiliate links where I get paid a small amount if you buy the service or product. This helps support my blog.

Sunday, January 5, 2020

10 Ideas to Get Your Financial House in Order For the New Year

Here are 10 ideas to get your financial house in order in the New Year.

  1. Make sure your emergency fund is fully-funded - This is pretty common advice given by financial advisers, but so often we forget to set aside enough cash for emergencies (3 to 6 months of living expenses is usually the guideline) and end up having to go into debt on credit cards to cover an unexpected emergency, whether a job loss, car breakdown, home repair, uninsured medical / dental costs, etc.  If you don't have the emergency fund at all or if you aren't at an amount you are comfortable with, now is the time to set aside some money to build that up!  As I have written previously, don't be lured into thinking a home equity line of credit is an emergency fund - it's not!  Here are some ideas where you might want to park that cash.  I plan to update this research in the near future for 2020.
  2. Increase your retirement savings - If you are contributing to your workplace 401(k), congratulations, that's a great start!  If your employer matches your contributions, you always want to contribute at least that amount to take advantage of the "free money" available from your employer.  After that, try increasing your contribution rate in small increments each year, maybe 1 percent at a time.  I have found over the years that the money taken out of the paycheck is the best because it's out of sight and out of mind and there's no temptation to spend it.  Some people advocate saving a portion of your raise each year by increasing your contribution rate.  Eventually, you will get to the point where you contribute the annual maximum ($19,500 in 2020, plus an additional $6,500 if you are over age 50).  You may also want to consider contributing to a non-deductible IRA even if you are participating in a 401(k) at work.  I like contributing to a traditional IRA (nondeductible) and rolling over immediately into a Roth - this is called a "back door" Roth because it's a compliant way to circumvent the income limits imposed on a direct Roth contribution.  As long as you keep the money in cash prior to roll-over there should be no tax hit and you get to enjoy appreciation, income and ultimately distributions tax free in the future from the Roth.  IRA limits for 2020 are $6,000 ($7,000 if you are age 50 or older), unchanged from 2019.
  3. Increase your taxable investing - Especially if you are maxing out your retirement savings at work and with your IRA, but even if you aren't, it's important to build your taxable investing portfolio.  I really like buying stocks that pay a good, steady and growing dividend - "qualified" dividends also have a distinct tax advantage over "non-qualified" dividends and you pay a lower tax rate than on ordinary income.  See some of my past ideas in Building a Strong Dividend Portfolio and More Dividend Investing Ideas.  You can either opt to reinvest the dividends and buy more shares in the stocks, which will allow your investment to compound, or you can take the dividends in cash and reinvest them in money market for emergencies or to buy additional dividend stocks as the opportunities arise.  I have also learned that you don't need to go crazy on diversification.  A good portfolio can consist of maybe 5 or 10 different stocks as long as the selection criteria are appropriate (i.e., long history of steady and increasing dividends, strong business fundamentals and outlook, etc.).  If the market tanks, don't panic and just hold and enjoy the dividend income stream that you have built.  Use the extra cash you have built up to buy more of your favorite stocks at a bargain!
  4. Build more passive income - In many ways this is related to #3 above.  Dividend stock investing is an excellent way to build passive income, where you don't need to do anything other than setup the initial investment and you just collect the money every month or quarter.  There are other ways to build passive income as well, which I laid out in this post.  It's a good idea to have multiple streams of passive income.  Some that I like are buying music royalties, owning investment real property, and self-publishing.  It may not seem like much individually, but with multiple streams of passive income, the money can add up over time.  Also, working on these "side hustles" can also be really engaging, fun and you can learn a lot about business and investing in the process.  You might even become so successful that you don't need to work your day job anymore!  
  5. End the side hustles that are a lot of work and aren't making you any money - I have observed that often in the rush to make more money, people plunge themselves into multiple side hustles that are a lot of work and really aren't worth it.  Usually, it's the ones that require a lot of your personal time like driving for Uber or Lyft, delivering for DoorDash or GrubHub or UberEats, and the list goes on.  With the new year, do yourself a favor and look at these side hustles to see whether or not your time is being adequately rewarded.  In particular, look at the after-tax income you are getting from all that work.  If you are doing well, then by all means keep doing it.  But if there's one or two things that you are doing that just aren't worth it, then quit and put your energy into something more productive that leverages your mind and not your personal labor.  
  6. Review your household budget for opportunities to save / cut expenses - This is an annual tradition in my house and actually happens more often than that, but the new year offers a great opportunity to review all your spending and look for places to cut back.  I have found over the years that credit cards tend to be a big challenge, especially after the holidays and birthdays.  Some tricks I have learned over the years include limiting the number of cards used, keeping them usage specific (i.e. one card used only for travel, one card for kids' stuff), using debit card for most of day to day spending on groceries, food etc., set up a monthly maximum budget per credit card and configure alert settings to let you know when you are getting close to that and of course, paying off the balance in full each month to avoid paying huge interest charges.  Keeping your credit card balances low relative to your limits also really helps out your credit score, I have learned, which is really important when you are ready to buy a car or home.
  7. Check your insurance to see if you can get same or better coverage for a lower price - A lot of insurance companies give you good discounts for "bundling" all your coverage together, including car, homeowners/renters, personal umbrella (which I highly recommend having), personal articles (i.e., wedding rings), etc.  If you find yourself with multiple insurance companies, look at getting a quote from a few of the large insurers to see if there's any advantage to switching.  Even if you can't bundle, it still makes sense to shop around for insurance and the new year provides an opportunity to do so, especially for car insurance.  
  8. If you are buying a car, buy a used one - A new car is nice, but as we all know, cars depreciate in value the minute you drive them off the lot.  Why not use this to your advantage and buy instead a used car (maybe one that is only a few years old and in great condition just off of lease)?  The savings can be substantial and the cars, especially the ones that are dealer certified, are like new and many still have warranty or extended warranty can be purchased for a relatively small amount.  If you have to get a loan, pay it off as soon as you can.  You'll be happy to enjoy at least a few years before your next car with no car payments!
  9. Ask for a raise from your boss - If you are doing a great job and the job market is tight, and especially if your research shows that you are "under market," you should think about talking to your boss about a raise.  You don't have to threaten them with "I'll be quitting if you don't give me a raise," but you can say "I have been checking the market and it looks like my pay is below market, could you please check into that and get back to me?"  If you are branded as disloyal for doing that, you probably aren't working in the right place anyway.  If you are doing a great job and they find you are underpaid, you might be getting a raise!
  10. Update your estate plan - No one ever wants to think about this or talk about this, but we all have a limited amount of time here on earth and we never know how or when our time will be up.  Only God knows that.  Having a good estate plan prepared by a qualified attorney is really important, not only for you and ensuring your wishes are carried out after you are gone, but it also makes things easier for your grieving family to execute those wishes with less hassle.  Revocable living trusts are typically used to hold all your assets and avoid the probate process, which can be expensive and also very time consuming to go through.  If you don't have a will, the courts decide who gets your stuff.  You don't want that, obviously.  Also, things like having a durable power of attorney for if/when you are incapacitated and you need someone to make decisions for you and an advanced healthcare directive to help determine your healthcare wishes when you are unable to are also really important parts of a comprehensive estate plan.   Also take a fresh look at your life insurance and make sure you have enough to take care of your family should you pass.  I prefer term life policies since they are cheap and do the job of covering you - often you have these available through your work benefits, but it's also good to have one outside of work just in case you lose your job.  Term life policy premiums increase as you get older, but are still cheaper than whole life.  Whole life policies have a high, but flat premium and part of the money grows (called "cash surrender value") over time and can be withdrawn tax free as a loan in retirement.  Whole life policies might interest you for the retirement planning benefits.  Take the new year opportunity to create or update your estate plan.  You'll be glad you did!   
I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2020.

To see all my books on investing and leadership, click here.

Disclaimer:  I use affiliate links where I get paid a small amount if you buy the service or product. This helps support my blog.

Saturday, December 28, 2019

What Really Matters

In coping with the loss of a loved one recently, I was reminded of not only how fragile life is and how quickly it can end, but also what really matters.  It's not all the things you have - investments, money, cars, homes, clothes, etc.  It's cliche, I know, but you can't take it with you.  Life is all about the people who care about you.  It's also about treating them with the love and respect they deserve.  All the people we love and who love us back - family, friends, work family:  they are our true wealth and our greatest strength.

Having a career and a good job or successful business, being a great investor, growing your portfolio and building a solid retirement nest egg - these things are nice and certainly fill you with a sense of accomplishment, are important to live a comfortable life and lay the groundwork for an equally comfortable retirement.  But the reality is, we don't accomplish very much in life on our own without any help.  This is particularly true in leadership.  Our relationships are what sustain us and help us achieve success in life.

Also, what good are all the accomplishments if not for the people in your life to share your journey, to lift you up when you fall and to celebrate your successes?  In the Seven Habits of Highly Successful People, the author talks about how you should "Begin with the End in Mind."  That means living your life in a way that you want to be remembered when your life is over.  What a powerful guiding principle to live by!  What will they say about you when you are gone?    A great investor?  Or a great person? 

I came across this quote that I think lays it out really well, and since I grew up in Hawaii, it really resonates with me.  Indeed, it was how my wife chose to live her life, and what she taught all of us who knew her and loved her:

Best wishes to you, your friends and your family this Holiday Season and have a Happy and Prosperous New Year.

As we begin a new year and a new decade, let's not forget what really matters.

In loving memory of Zena - 1970-2019.  You lived Aloha.

Friday, November 29, 2019

Simplify Holiday Giving For the Kids

For several years now, we have had a holiday tradition in our family of giving each of our kids an equal amount of cash for the holidays and then we let them buy what they want.  This works pretty well from pre-teen on up.  They receive their cash gift normally before Black Friday, so they can take advantage of the holiday deals.  After that, when we celebrate the holidays, we just have a few small things to open (mostly small stocking stuffers) without all the stress and hard work of finding and purchasing gifts, hiding them, wrapping and then putting them out.  We can also avoid a lot of the mess we used to have to clean up after opening all those gifts.  That may not sound like a lot of fun, but it works for our family - especially since we celebrate both Hanukkah and Christmas (so the kids get a few small things to open on each holiday in addition to the main cash gift). 

This has really helped reduce the amount of money we spend each year on gift giving for the kids, so it's been terrific from a household budgeting standpoint.  Also, the kids really like it because they can get what they really want at the best prices.  Any gifts of cash from other relatives for the holidays are immediately deposited into the kids' savings accounts.  This teaches the kids not only how to be smart shoppers, but to also save some of the money they receive.  This year, the kids did most of their shopping online and made very limited ventures into stores.  The online shopping favorite is Amazon of course, especially with free one or two day shipping. 

If you are looking for ways to control your holiday spend and simplify your life, you may want to try this cash approach next year.  Have a Happy Holiday season and a healthy and wealthy 2020!

I hope you find this post useful as you chart your investing course and Build a Financial Fortress this year.  

To see all my books on investing and leadership, click hereA perfect gift idea for the holidays!

Disclaimer:  I use affiliate links where I get paid a small amount if you buy the service or product. This helps support my blog.

Saturday, November 23, 2019

Year End Tax Planning - 2019

Soon it will be the end of 2019 and 2020 will be here before you know it.  If you haven't already done so, now is the time of year to start tax planning.  If you have to file a 1040 tax form, your taxes are probably complicated enough to require a tax accountant.  I used TurboTax for many years and only recently began to use a tax accountant to help me with my taxes.  Although it costs a little money, it's a lot less stressful and my estimated payments are way more accurate now.  Whether you have a tax accountant or not, here is a checklist of things that you may want to think about to lower your 2019 taxes:

Expenses to accelerate into 2019 (do this if you expect to make the same or less money next year and you are otherwise eligible to take the deduction this year to lower this year’s tax bill):

  1. Pay your January mortgage payment in December (you'll get to deduct the interest in 2019)
  2. Pay all your property taxes in December (be careful if you are subject to the Alternative Minimum Tax, since this may not help reduce your taxes and you may be better off paying the second half in 2020)
  3. If you are eligible to make an IRA contribution ($6,000 for 2019, with no change in 2020), you have until April 15, 2020 to make your contribution and get the deduction for your 2019 tax return; if you are 50 or older you can make an additional catch-up contribution of $1,000.  You can make an IRA contribution regardless of whether you participate in a retirement plan at work, but your ability to deduct the contribution may be limited.  You can also convert a traditional IRA into a Roth IRA at any time, even if you can't contribute directly to a Roth because of your income level.  This is called a "backdoor conversion."  Roth's are great because you don't have to pay taxes on the contributions or earnings when you withdraw the money and the withdrawal rules are more flexible than a traditional IRA.  You just have to make sure you don't roll over traditional IRA with gains, since you'll pay tax on that (keep in cash until you convert).
  4. Sell investments that have lost money and you no longer want to keep by December 31;  the limit is $3,000 of (net) capital losses that you can offset against your ordinary income.   Losses in excess of this amount are “carried forward” to future tax years, which means you can't use those losses until you have gains to offset or up to $3,000 against ordinary income per year.
  5. Good news for RobinHood traders:  your trading losses can be used to reduce your taxable income, but if you have gains be prepared to pay taxes.  Most stock option trading activity is considered short term capital gains or losses and are generally taxed at ordinary income rates up to 37%, depending on your tax bracket (vs long term capital gains rates which are taxed at 0%, 15% or 20%).  Be careful when you have trading gains at year end and you have significant losses on unclosed positions - it might make sense to close all your positions at year-end and avoid the tax hit, if they are not likely to turn around in the new year.  Also, make sure you pay estimated taxes if you made money on your trading this year!

Delay income from 2019 to 2020 (similar to expenses, if you expect to make the same or less money next year and you are otherwise able to delay the income):

  1. Delay sale of investments with capital gains that you no longer want to hold until January or later
  2. Defer cash bonus payments until January or later
Have your tax accountant check your estimated taxes paid and withheld to make sure you have paid enough so that you won’t be subject to underpayment penalties when you file your return in April.  If you have significant investment or other non-wage income like fees, royalties and other passive income, you will likely need to pay estimated taxes.

I hope you find this post useful as you chart your investing course and Build a Financial Fortress this year.  

To see all my books on investing and leadership, click here.

Disclaimer:  I use affiliate links where I get paid a small amount if you buy the service or product. This helps support my blog.