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Family Member Opened an Account in My Name-Now What?

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family member opened an account in my name

When people envision identity theft, they picture some stranger masquerading as them. But that isn’t always what plays out. During one year, about 550,000 victims of identity theft said that a person they knew took their information, not a stranger. While getting your identity stolen is always a difficult situation, when a family member is responsible, it’s even more complex. So if you have the question, if a family member opens an account in my name? Here’s what you need to know.

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How to Succeed this Year

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A New Year often brings lofty goals. I want to get in shape or I want to get that promotion, but how often are our yearly goals about our finances?

In this post, we’re going to talk about some of the things you can do to set yourself up for financial success this year.

Put your credit cards away

For the vast majority of people, credit cards hurt more than they help. If you’re financially responsible and pay off your balance right away, they’re an extraordinary tool. For everyone else, credit cards often come with financial pain.

Don’t close your credit card (more on that in this post, here). Take it/them out of your wallet and delete them from your “payment options” on Amazon and/or any other online retailers you frequently visit.

The easiest way to avoid temptation is to take it away. Avoid using your credit card(s) this year.

Pay yourself first

Before you spend a single dollar, set some money aside for yourself.

What you do with that savings will vary. Everyone should have an emergency fund. Ideally, 3-6 months’ worth of expenses.

At the very least, have $1,000 set aside for emergencies, and then build up from there.

Once the emergency fund is set, start building an account for short-medium term goals. A new car or a down payment, are two examples of short-medium term goals.

Last, but not least, you need to save for retirement. This should be its own line item on your budget (more on that below), but it’s something that requires intentional savings each month.

Savings

Your saving methodology, or how you save, deserves it’s own section because often times, we save after we spend.

We need to flip that around. You need to save BEFORE you spend. When you budget (make a spending plan), there are several line items.

What you pay, in order, should be necessities, savings, and then excess spending.

Additionally, your savings rate shouldn’t stay stagnant. It should constantly be adjusted. At the very least, on an annual basis.

Run the numbers. Do the math and figure out if you can spare another percentage of your salary, or another $5/month.

Invest in yourself

There’s no better way to improve your year than to improve yourself!

Put healthy habits into practice. Read, exercise, meditate, hang out with friends, go for a walk. The list is endless.

Some of those activities have compounding benefits. Walking is great exercise and is also meditative.

“An investment in knowledge pays the best interest” – Benjamin Franklin

Audit your spending

Figure out where all of your money is going. I typically look back three months, but Holiday shopping is there, so that will distort your spending a little.

If you can, audit October, November, and December, and remove any item that isn’t normal (i.e. gifts/presents).

Once you have a good grasp on how much you’re spending and where you can develop a budget.

Make a spending plan

My term for budget, as the word “budget” has negative connotations tied to it. Using your spending audit, create a spending plan.

  • List your necessary expenses – rent, utilities, groceries, travel, insurance, debt payments, savings
  • List discretionary spending – fun money. Give yourself an allowance here, but keep it reasonable.
  • Monthly income – What do you bring in each month.

Once you have these items listed (debits and credits, respectively) compare the two. The resulting number should be positive. Make adjustments accordingly.

A financial plan isn’t something that’s set in stone. It’s a living organism that’s constantly changing.

Be generous

If there’s one thing that’s been proven (time and again) it’s that helping other people makes you feel good. However, the reason for being generous shouldn’t be the dopamine rush that follows, it’s to help someone/something that needs it.

Whether that’s a stranger at the store or a cause that you strongly identify with, do what’s right. Live to serve.

Holiday Savings

Start saving now! December sneaks up quickly, and before you know it, you’re spending hundreds of dollars on things you didn’t budget for.

Save a little bit each day, week, or month. Whatever you’re comfortable. I encourage you to figure out what you think you’ll need for the Holidays and break it down.

Discern what is manageable for you and put it into practice.

Related Reading:

Holiday Spending and Saving

Your Go-To Budget Guide

How to Cut Your Spending

Different Ways To Think About Money

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Your money philosophy and how you think about your finances make a big difference in the decisions you make.

Whether you’re just starting your financial journey or you’re well into it, it’s a good idea to take a step back and define that philosophy.

Money is a tool

Sure, there are monetary goals you would like to achieve. For example, $1 million nest egg has long been touted as the number you need to hit for a comfortable retirement, but hitting, somewhat, arbitrary numbers aren’t everything.

Money is a tool. If used properly, you really can achieve financial success. Taking the money you’ve saved and putting it to work for you is a very simple, yet effective way to use it.

Another monetary tool is a credit card. Credit cards offer a variety of reward programs, like travel miles, cashback, among others. Additionally, it enables you to build and strengthen your credit report.

It is important, however, that if you are using a credit card, you must do so responsibly. Accumulating credit card debt can really set you back, financially.

Related reading: A Deep Dive Into Credit Cards

Focus on the solution, not the problem

Often times, we focus too much on the issues with our finances. I have too much debt, I have too little saved for retirement, or my expenses are killing my ability to save.

Instead of focusing on the problem, focus on what can be done to fix it.

If you have too much debt, develop a plan to pay it down. If your retirement savings are low, figure out how you can increase your savings rate. Expenses hurting your ability to save, cut your expenses.

“Whatever the problem, be part of the solution. Don’t just sit around raising questions and pointing out obstacles.” Tina Fey

Related reading: How To Cut Spending

Money using emotional bandwidth

It is true that money is relatively important. I say relatively to try and redirect to my first point when I mentioned that money is to be used as a tool.

It affords you food to eat, clothes to wear, and a place to live, among other things. If your basic needs are met and future goals are being worked towards, you have to try and stop worrying that you don’t have enough.

This is extremely challenging to do because we, as a society, are so fixated on money and material items that money can buy. It also doesn’t help that comparing ourselves to others is essentially baked into our DNA.

Believe me, I know that learning to stop worrying is incredibly difficult, but retraining your brain to view your finances differently can be extremely liberating.

Related reading: The Psychology Of Money

Think long-term

To be a successful investor or to be able to financially plan effectively, you have to think long term.

The market is going to have its ups and downs. As an investor, it’s important to ride out those down periods and continue to invest. If you have 15+ years until you need that money, you should be able to recoup your losses.

With regard to saving, I typically take the “bucket” approach. I have three buckets, short-term, medium-term, and long-term. Be advised: the following is how I define these time horizons.

  • The short-term bucket is for items under 5 years away. For example, when I want certain debts paid off or a down payment for a house.
  • Medium-term is anything 5-15 years away. The main one in this category is my son’s college savings.
  • Long-term is retirement savings, exclusively.

Related reading: How To Make Long-Term Investing Decisions

Buying experiences versus buying stuff

Money to a certain extent can buy happiness. As long as it’s being spent on experiences rather than stuff.

Memories with family and friends, visiting different destinations and attractions are the things we’ll cherish most.

Stuff breaks and toys are outgrown. What people won’t forget, however, is the time you spent with them.

Make that a priority. I know, as a fairly new parent (my son is almost 2), that I am constantly aware of how finite time is and that I need to make the most of those moments I spend with him.

The way you think about money pulls weight in how you use it. When creating a financial plan, I would prioritize figuring that out. How you think can lead to how you act.

Your Wealth: What You Shouldn’t Do

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Establish an emergency fund, pay down debt, save for retirement, and grow your wealth! Much of your financial life is focused on the things you should do.

However, what I think to be more important are the things you shouldn’t do!

Educational Debt

There’s been a lot of literature/news over the last few years about how much of a problem student loan debt is. As of 2018, total student loan debt was $1.47 trillion. With a T! (Source)

That said, here are some things you should avoid.

  • Taking on too much – Some degrees/professions require a lot of schooling, which can lead to large amounts of student loan debt. And I don’t mean to speak ill of any degrees/professions, but if your desired career requires a “basic” 4-year degree, it’s probably best to find an in-state university to cut costs. Better yet, start at a local 2-year university or tech school until your Gen. Eds. are complete, then transfer.
  • Not having a plan for after – I think this is a common fear for Millennials and Gen Z, but you have so much time to figure things out. Don’t just go to college to get a degree. If you need time, take time. Once you figure out what you want, determine what you need to do to get there.
  • Not researching options – There are SO many student loan options. Depending on what type of loan you choose (private or public), you could have a wide range of payback methodologies. I wrote about student loan options and payback options in two previous posts. Check them out!

Credit cards

There are two BIG problems with credit cards. People who use them irresponsibly and people who don’t use them at all.

  • Using irresponsibly – This one pretty much speaks for itself. This pertains to people who spend way more than they ought to. A good rule of thumb is to only buy something using a credit card if you have the funds readily available to pay the balance off. Don’t have the money, don’t put it on the card. Doing so will cost you in interest and can really set you back.
  • Not using at all – Better than the first point, but still not great. Using a credit card can help your financial situation if you use it correctly. Most of them have rewards of some sort. It’s another credit account on your report. Charging and paying off right away establishes a good payment history. All good things for your credit score.

No emergency fund

Establishing an emergency fund is Step 1. If you don’t have money set aside for unexpected expenses, you’ll have to charge it. This leads to the point above about irresponsible use.

Save $1,000 for emergencies, turn your attention to high-interest debt (credit cards), and then shift your focus back to your emergency fund once that debt is paid off.

Spending

  • Paying bills late – Not paying your bills on time, especially ones shown on your credit report is a big mistake. The #1 factor in calculating your credit score is payment history. Paying ONE bill late will knock your score down. Just one. Don’t do it.
  • Spending too much – (See irresponsible credit card use) This is especially harmful if you frivolously spend BEFORE taking care of important “budget items”. Things like saving, debt payments, and bills.
  • Being too frugal – Though frugality is helpful in building wealth, it can also hurt you. There comes a point when you are too frugal. A vital life skill is doing things in moderation. If you pinch pennies and forego rewarding yourself, you run the risk of breaking the bank on a “bender”.

Investing

  • Waiting – I cannot stress enough the importance of investing early. What helps you make the most of your retirement savings is compound interest. The more time you have to invest, the more compound interest works in your favor.
  • Panic selling – This is a timely point since the market dropped almost 5 percent in the last week. Selling out of fear is always bad. More often than not, when you “panic sell,” you’ve already experienced the majority of the drawdown. Now, this depends on your particular situation, but it behooves you to stay invested during that period.
  • Using generalities when setting up an investment plan – Your investment plan needs to reflect your goals, risk tolerance, time horizon, and behavior. Using generalities is good for someone who writes about this stuff, but it’s not good for YOU. Your plan has to be tailored to YOU.

Life and Wealth

  • Sticking with a job you hate – Sometimes money and comfort makes us do things we don’t want to do. Being unhappy at your job is not worth it. It’s important, however, to thoroughly think through this decision. Quitting is tough, but if your family counts on you for income, you need to have a plan in place before you jump ship.
  • Comparing yourself to others – I’m going to encourage you to develop a new mindset because society taught us that wealth looks like fancy cars and big houses. I want you to think about stealth wealth. It’s probably my most favorite phrase/term. Someone with stealth wealth lives within their means. They live in a modest home, drive a car for transportation only, but saves more than the average person. They don’t “look” wealthy, but their retirement account says otherwise.

Further reading:

What it takes to be a successful investor

How to pay off credit card debt

Creating a financial plan you can stick to

Strategies For Improving Your Credit Score

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Your credit score is extremely important, nowadays. It determines whether or not you qualify for other credit accounts, and if so, what terms. It plays a factor in where you live, and it can even impact job opportunities.

That said, it’s crucial you do everything you can to improve and keep your score high.

What impacts your score?

There are five factors that play a role in calculating your credit score. They are listed below with percentages to discern how big of a role each one plays.

  1. Payment history (35%) – How frequently do you make on-time payments. This number should be 100%
  2. Credit utilization (30%) – How much credit have you used compared to how much you have available. For example, if you have $20,000 of credit available and used $5,000, you have a utilization rate of 25%. Credit rating agencies want to see it below 30%, but the lower, the better.
  3. Credit age (15%) – How old are your current credit accounts? The older, the better. This means that every time you open a new credit account, your credit age drops.
  4. Types of credit (10%) – Credit cards, loans, student loans, etc. Variety helps here.
  5. Number of credit inquiries (10%) – Hard credit inquiries negatively affect your score. Like the utilization, low numbers are better.

(Source)

What hurts your score

There are a few things that negatively impact your score. I’ll list the bad things from the list above, then I’ll list a few others.

  • Poor payment history – If your payment history is below 100%, you’re already starting from behind. Anything under 100% gets notched down.
  • High utilization rate – As I said, rating agencies want to see utilization rates under 30%, so anything over that will bring your score down.
  • Low credit age – Older accounts are better for your score
  • Only one type of credit account
  • A large number of credit inquiries
  • Bankruptcy – Negatively affects your credit score and stays on your credit report for 10 years.
  • Liens and judgments taken out against you – Negatively affects your score and stays on your report for 7 years

Starting from a low score

If you are starting from a lower score, it could be from past experiences (bankruptcy or liens), and if that’s the case, you can only improve. Unfortunately, time is your enemy right now until those drop off.

The first place I would start is to pay off your current debt. If you don’t have any open credit accounts, the next step is to open one.

Individuals with low scores will have trouble opening credit accounts, so I would start with a secured credit card.

A secured credit card is like a regular one, except you establish the credit limit with a deposit. The amount of your deposit is the amount of your limit.

This is a slow and steady way to improve your payment history and show the credit rating agency that you’re responsible.

Current credit accounts

Speaking generally, I advise people to keep their credit accounts open. The one exception is you do plan on closing a credit account, make it one you recently set up.

Getting rid of a new account will increase your credit age, which should increase your score.

New credit accounts

If you’re looking to increase your score, I’d recommend abstaining from opening any new accounts, unless you’re someone that needs to open that secured credit card to rebuild your score.

The other two exceptions would be opening an account for a credit card balance transfer or a personal loan for debt consolidation.

Opening new accounts hurt twice. One, you effectively lower your credit age. And two, when you apply for a credit account, it counts as a hard credit inquiry.

Don’t do it unless you have to, and if the long-term benefits outweigh the short-term penalties.

Pay down debts

Paying down debt is a slow way to improve your credit score, but it’s a tremendous way to improve your finances overall.

Less debt means less money needed to service that debt. Less debt means a lower utilization rate (number 2 factor).

Also, when you make debt payments [on time], you’re strengthening your payment history (number 1 factor).

I recently wrote an article, linked here, about paying down debts. Give it a read. In that article, you’ll also find helpful resources on similar topics.

Utilities

The last thing I would do is check to make sure your utility provider (for me, my local municipality has its own utility company) is listed on your credit report.

My previous utility company (WE Energies) did come up on my credit report. It’s another “credit type” and another way to strengthen your payment history.

Further reading:

How To Pump Up Your Finances

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By “pump up,” I mean to do something that improves your financial situation in any way. Reduce expenses, start a rainy day fund, invest for the future, etc.

With that said, let’s take a look at some simple strategies to pump up your finances.

Cut the fat

I’d start by creating a budget. Look at the past three months of income and expenses. Total the expenses, total your income and compare the two. This will give you a clear picture of how much you are spending versus how much you make.

After that, you can go back with a magnifying glass and see exactly where your money is going, and stop spending money where it is necessary, or at least reduce it.

You can also reduce the fees you pay to invest. Mutual funds and ETFs are the most popular vehicles used today, but they come with a cost. It’s listed as an expense ratio. That ratio should be as low as possible. Ideally, it’ll be under .20%.

A quick tip to cut your expenses – get rid of cable/dish. There are too many services available now. You don’t need to spend $100+ on TV anymore.

Increase savings rate

Hopefully, you are saving something. If you are having trouble setting money aside because of limited resources, give this article a read for some help.

You should be saving in at least two places. An emergency fund and a retirement plan.

  • Emergency fund – Say you are contributing $20 per month. This is a good place to start, but you’re going to want to save more so you have enough in case your car breaks down or you lose your job. After three months of saving $20/month. Increase that amount by $5. After another three months, at which point you’ll have gotten used to not having that extra $5, increase it again. Rinse and repeat.
  • Retirement plan – If you have a retirement plan with your employer and they match, you’ll want to contribute at least enough to get that match. That’s your starting point. Then you’ll follow the same steps as the emergency fund. After a few months, increase the contribution percentage. If you don’t have a plan with your employer, set up an IRA, start contributing what’s comfortable for you, and follow those same steps.

I mentioned you should have AT LEAST these two accounts. Personally, I have several savings accounts. They are set up for different reasons. I have one for holiday spending, one for car repairs, and one for travel expenses. Giving your money a “job” makes it more likely that you’ll use that money for that “job.”

Switch to an online bank

Most online banks have higher interest rates on savings accounts. They also, typically, have lower rates on loans (based on credit score).

If you are saving money for a rainy day and putting it with a brick and mortar bank, you’re most likely earning next to nothing. Better to put that money in an account where you’ll earn a little interest.

Refinance high-interest rate loans

I’m going to dedicate this section to credit cards because that’s what most people think of when they hear high-interest rates.

There are three strategies you can use.

  1. Balance transfer – Many credit card companies offer a 0% APR on balance transfers for a certain period of time. Some have terms for 21 months. The interest rate will jump after the 21st month, though, so make sure your balance is paid off before then.
  2. Personal loan – If you have credit card debt and don’t, or can’t, utilize a 0% balance transfer, then a personal loan is your next option. You get a loan for the total amount of outstanding credit card debt. Then the institution will send a payment to each credit card company and pay off your credit card debt. You’ll be left with one payment. Be advised, credit matters here (also for balance transfers) so if the interest rate on the personal loan is higher than the average interest rate of your credit cards, don’t do it.
  3. The last option is to call the credit card company and ask for a lower rate. More often than not, if it’s available, they’ll give it to you. It won’t lower your payment a whole lot, but it’ll definitely help.

If you want to learn more about credit cards, click here.

Improve your credit

Your credit score makes a difference. It can impact what loans you qualify for, the interest rate, where you live, and where you work.

If you want to start making moves in your financial life, you need to improve your credit.

There are three really simple ways to do this.

  1. Pay more than the minimum on your outstanding debt and pay on time – on time payments is the #1 factor when calculating your score.
  2. Call your utility company and see if they report to the credit agency. It’ll count as another credit account (a factor) and it’ll influence your on-time payments.
  3. Open a secured credit card – You open this type of card with a deposit. The deposit will act as your credit limit. If you deposit $500, you’ll have a credit limit of $500. Make regular, small purchases and pay the entire balance right away. Credit agencies like to so activity and, as I’ve said, on-time payments.

If you want to learn more about improving your credit, click here.

Conclusion

If you want to improve your financial life, it’s actually pretty straight forward. Spend less than you make, save money for the future, pay down debt, and improve your credit. If you do these four things (obviously, easier said than done), goals that once seemed far fetched, can be within reach.

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Harvesting Credit Card Reward Points

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Manufactured spending is on the rise, but what exactly is it? Well, it’s the buying cash equivalents with a rewards earning credit card. And the rewards earned are more than the fees incurred. You can use it to meet a minimum spend requirement or if you just want to earn frequent flyer points for travel.

If you’re just starting out, it’s best to use some of the easiest techniques, but you can get into more difficult ones as you start to figure out how it works for you. Here are some of the best techniques for manufactured spending:

Amazon Payments

This is one of the easiest methods for manufactured spending. You can send money to friends and family, just like PayPal and you can fund your account with a credit card without incurring fees. There is one limitation though, you can only send a maximum of $1,000 in a month.

Here’s how to do it: Find somebody you trust to send your money back to you then fund your Amazon Payments account with up to $1,000. Send the money to your trusted friend and have them withdraw it from their Amazon Payments account and send it back to you.

You can also use it like PayPal and send money to a friend you owe for dinner or to pay someone for work done.

Bluebird + Vanilla or Visa Gift Cards

This one is a little more complicated, but still manageable. Bluebird is a reloadable online checking account from American Express so it’s a trusted brand. You can use different prepaid cards to load your account. With Bluebird you can load up to $5,000 per month.

The most popular method for loading is with Visa Gift Cards. There is a fee ($6.95 for $200 card) but you can buy them from stores where you receive higher than usual rewards like grocery stores and office supply stores; earning as much as 5% cash back or points.

Bank Accounts

Another option is to fund your bank account, but most banks only allow you to use your credit card to fund the initial, opening deposit and the maximum allowance is anywhere from $100 to $1,000. Of course, you also incur monthly bank account fees unless you have a minimum balance or receive direct deposit. But some banks offer bonuses and rewards of their own so you can earn extra by opening these accounts.

Another thing to look for with manufactured spending is opportunities to increase your bonuses by earning reward points for more than one program at a time. These programs allow you to earn points with their programs and with your rewards credit card at the same time.

Manufactured spending is a great way to quickly earn points with your credit card rewards. By combining some of these methods and adding funds to reloadable cards or accounts that earn points, you can increase your points balance faster and easier. It just takes a little practice so start slow with just one account until you figure out how it works best for you.