June 2015 Newsletter

The Empty Nest Syndrome

Understanding Your Bank's Account Policies

To get the most ‘bang for your buck’ at your financial institution, you need to understand how your bank makes money off of you. With technology changes and the way people manage their money, not being informed and utilizing the technology available may cost you more. Even if you’re a ‘traditional’ account holder and believe writing checks is the way to go, understand your liability by not utilizing the technology safeguards in place. Researching the following can save you money and help you manage your money better.

1. All banks need to make money. They make money off of interest and fees, so when a bank says ‘no fees’, what does that mean? Are you charged a fee to transfer money online or automatically? Going into the bank to transfer account to account is always free, but you need to be aware of what your bank can charge you for their service.
2. Use mobile banking to track your spending and check your account online every day. When your account goes below a certain balance, you receive a notification which can save you in overdraft charges. Realistically even automatic deposits can be delayed due to system errors. If you’re tracking spending and balances, it may prevent you from spending when you assume a deposit was made (Remember when the Social Security Administration payments were delayed a few years ago? Understand your bank's fee schedule and utilize the technology your bank has in order to effectively manage your accounts.
3. Use your ability to transfer funds immediately if your balance is low through a mobile banking. You are limited on how many times a month you can transfer out of an account due to banking's Regulation D. Not knowing your limits can result in fees or your account being closed.
4. Understand your account liability if you use checks or your debit card. Every bank has rules on how they pay fraudulent charges on your account. The rules are not the same bank to bank. Sometimes using your pin number on your card is covered, other times not. Check fraud involves a number of steps to prove it was fraud, including signature comparison which can take time to recover the loss if covered at all.
5. Keep your account at a required balance in order to avoid the fee to have the account open. Some banks require a specific monthly balance, others require automatic deposits of a certain amount in order to keep the account free.

Identity Theft and Children: IRS Form 14039

This is the time of year where you either paid in to the IRS, received a refund, or received a letter regarding that one or more members of your household have had their Social Security number compromised. Unfortunately, the victims that are experiencing this more and more are minor children. When you file your taxes and list your minor children as exemptions, the IRS system will not process your return if your child’s social security number has been compromised. This means that someone else has used your child’s number on a tax return.One of the most common ways a child’s Social Security number is used is through an acquaintance or family member. It usually starts by someone needing to get insurance or start receiving credit because they can’t use their own number without being declined. Because Social Security numbers are not verified by age at issue (birth date in the US), there is no cross referencing the age of the Social Security number itself. Over time the fraud continues to grow to the point that someone is using the number to file a tax return or the number has been sold. In some cases, the individual using the number has lied on employment documents triggering a W2 connection and requiring a tax return to be filed.If your child's Social Security Number has been compromised, start with a call to the IRS center closest to your area and file IRS Form 14039 to start the process of obtaining a new number for your child.With the growing number of people having access to the number, the younger generation is at more risk. Schools, medical facilities, and investment companies holding investments in the child’s name all use this identifying information. As a parent, you can request a credit report using your child’s social security number. There are steps involved to requesting this information and you will need to investigate the best option for you. Utilize the Identity Theft Resource Center guidelines as you start your investigation to see if your child’s number has no reporting (which is what you want). If you find your child’s number has been compromised, start with a call to the IRS and filling out IRS Form 14039.

Debt Pitfalls

A little debt never hurt anyone, right? Debt isn’t a bad thing, especially when it is controlled and you prepare yourself for not being able to pay it off. Life happens and things can quickly get out of control leaving you a mess to clean up. Consider avoiding the following:

1. Refinancing your home in order to access the equity to consolidate debt or make improvements. Are you taking out debt to pay off debt? At some point, this can make you have ‘negative equity’ leaving a mess if you have to sell your home. Remodeling or improving beyond the value of your home can also happen. Talk to a realtor prior to making improvements to determine if you can get your money out of the property and cover your house debt if you needed to sell.
2. Buying a car or something else with ‘no money down’. You have now financed something 100% and if you make the minimum payments, you just paid 105% or more on 100% of the cost. Use Credit Karma's Credit Card Payment Calculator to help you calculate payments to pay off any debt earlier.
3. You aren’t funding your retirement 100% because you’re funding your credit card company each month with interest charges. That extra money should be going to you for your future.
4. You’re spending more each month than you have coming in. Or, you’re spending more each month than your payment.

By thinking about what you can comfortably afford (having left over money each month) before you buy or refinance can help you avoid the debt pitfall if you lose your job or other income. If you take time to think, some of your old spending mistakes make no sense.