A provision in the Fair Credit Reporting Act gives everyone access to a free report once per year -- be sure to get yours and discover 6 potentially valuable chunks of information:
#1 - a snapshot of your credit profile
While this one may be the most obvious value proposition in your credit report, it also perhaps the most practical. Businesses and agencies access our credit reports all the time to gather insights into our financial conditions; I once worked a job that ran a credit check on me at least once a year to make sure I wasn't under significant financial pressures. When viewing your own report, take a minute to consider the information from the perspective of a potential employer or loan underwriter -- does anything stand out as particularly troubling?
#2 - a quick test for identity theft
The three different reporting agencies that participate in this program all represent the data in their own way, but each report will summarize open lines of credit as well as offer details specific to each line. If you are concerned with the possibility of being a victim of identity theft, these reports should be a shortcut to finding evidence of such theft. Accounts that are listed as "delinquent" or as having "issues" may represent lines of credit opened in your name by someone else. Just skimming through the report may also reveal loans that you do not recognize -- a sign that something is likely amiss.
#3 - a jog for the memory
This one surprised me: your credit report includes data about your current and previous addresses, phone numbers, and employers. For some of us who have moved around a bit, this reference may be a useful reminder of the particulars of those pieces of history (seriously, can you remember all of the phone numbers used in your adult life?)
#4 - loan specific info
Similar to number 3 above, your credit report can also be useful in remembering specifics of important loans that may be a little old now. For instance, did you open that car loan in 2002 or 2003? What did you pay for it back then?
On my own report, I was excited to find the actual Fannie Mae account number for my mortgage -- perhaps a random bit of trivia for most people, but if you get really interested in the life of your particular loan, this info is crucial.
#5 - drags on your credit
People with a long history of credit may find accounts on their report that have been long unused, maybe a department store card or a credit line opened to buy furniture that no longer carry a balance but represent a claim on their overall credit capacity. In these cases, people may wish to formally close those unused accounts to "free up" credit for other uses, and to prevent future fraud on those unnecessary credit lines.
#6 - insights on your rights
The fine print following my data on one report included this information on our rights as consumers:
"You may limit "prescreened" offers of credit and insurance you get based on information in your credit report. Unsolicited "prescreened" offers for credit and insurance must include a toll-free phone number you can call if you choose to remove your name and address from the lists these offers are based on. You may opt-out with the nationwide credit bureaus at 1-888-567-8688 (888-5OPTOUT)."
Sneaky Budget Tip #7
Don't Go Shopping
Before you say "Well, duh...", bear with me. My daily routine on the web includes checking some sale sites like Woot.com. Occasionally, I will see things that match up with my household wishlist; sometimes I see things that I know a friend has been looking for a deal on for a while. And in those cases, maybe, just maybe, it was worth me taking a look. But more often, what I find is that whatever is on sale suddenly looks appealing to me.
Sure my drawer is full of socks, but that 12 pair pack seems so cheap!!
The sneak budgeteer knows that the best way to avoid a severe case of the Wants is to simple skip the step where you see the deals. A more responsible approach to spending may be to collect, over time, a list of things that your family really needs and then do a bit of targeted shopping for a deal.
The Question of Cash
Economic decisions revolve around cash: companies concern themselves with consistently producing cash in excess of their operating costs; non-profits need regular infusions of cash to provide the service or content they organized to provide; households have to keep an eye on cash reserves to manage the flow of bill payments and to maintain a comfortable level of "cushion" against unexpected demands on the checking account.
The investing world is similarly concerned with cash in a few specific ways:
As an investment adviser, I am constantly confronted with the decision to hold or invest cash on behalf of my clients. Today, as of this writing, approximately 3% of the funds under my management are held in interest bearing money markets, but as mentioned above the current interest rates are very low vs historical averages.
Is 3% too much or too little to hold in cash? Is there an "ideal" level for all investors?
The decision making process from my perspective is complicated by the fact that individual investors exhibit considerable variability in their particular situations. For some clients, the assets invested with my firm represent a small portion of their overall wealth, and those clients may very well be holding considerable cash in their personal bank accounts (or even in cash management accounts with another adviser or broker). In other cases, a client household may work with me very carefully to dial in to a targeted amount of money to hold on hand in the bank (typically a cash "operating" balance plus an emergency fund) and direct me to keep the rest invested in (potentially) productive assets for them. Still other clients fall along the spectrum, and may be using brokerage assets as a piece of their emergency fund, or have a stated objective of maintaining a target liquidity.
My approach is to consider each client (or client household) individually and try to balance their desire for return (in line with their risk and objective profile) with practical requirements related to liquidity, expense management, opportunity costs, and on and on.
David R Wattenbarger, president of DRW Financial
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