This Week In Your Wallet: The Markets & Your Financial Security
Yesterday, the Dow Jones Industrial Average opened down about 800 points, fell another 200, rebounded until it was down less than 300, and proceeded to trade choppily all day — closing down nearly 600 points. I missed it all. At about 7 a.m, I hit the road to drive four hours to move my daughter into her dorm for freshman year of college. I wish you had been able to do the same — minus the making of the bed, the sweaty moving of the dresser left, then right, then left, then, no, right was better, and definitely minus the last minute trip to the nearest Bed, Bath & Beyond. Why? Because on a day like yesterday, taking a breather from watching the markets is the best thing for your long-term financial health.
History has a lot to teach us — and where investing is concerned, what it has taught us best is going to cash in periods like this just doesn’t work. Inertia sets in (or fear takes over) and you inevitably remain on the sidelines too long. If you miss the rebounds — particularly just the few days in which the market makes its biggest moves back in the right direction — your portfolio will suffer longterm. That’s why you’re better off buying continually — through a retirement plan that you fund with paycheck deductions, for instance — and turning the other cheek to the sort of roller coaster ride the market is experiencing right now.
The New York Times’ Ron Lieber wrote of six things to consider at times like this. Among them: If you’ve been investing regularly whether through your 401(k) or another retirement account, or by other means, over the past half decade then you are already a big winner despite the past week. If you are in it for the long term (and even if you’re recently retired, you still likely have decades to go, which constitutes the long term), you have time to ride out this storm. What money doesn’t belong in these choppy waters? Money that you need to use inside of the next three to five years, whether for life, college, a downpayment on a home, or anything else, that money shouldn’t be in stocks, but in a safer place.
So as I tweeted yesterday (and if you’re on twitter, please follow me @jeanchatzky): Breathe. And if you can’t, walk away from your devices.
And now for the other news of the week.
As For Things You Can Control? Your Credit
While you’re taking that breather from things you can’t control (i.e. the market), spend a little energy focusing on those you can — including your credit if it needs work. New research from insuranceQuotes.com reveals people with poor credit-based insurance scores can pay twice as much for homeowner’s insurance as people with excellent scores. Those with credit that’s just middling pay 32% more. Three states — California, Massachusetts and Maryland — prohibit insurers from using credit in premium calculations, but according to FICO, roughly 90% of home insurers use credit in pricing decisions in states that give the green light.
Your insurance score measures your insurance risk (i.e. how likely you are to file a claim); the lower your score, the riskier you look to insurers. Frustratingly, this score isn’t the mirror image of your regular credit score. While both scores pull information directly from your credit report, they look at different criteria and use different numerical scales.
What we do know is that insurance scores move in the same direction as credit scores. That means you can typically raise your insurance score the same way you’d raise your credit score (e.g. pay all of your credit card bills in full and on time, keep card balances low, don’t apply for new credit unless you need to). Of course, you’ve been doing those things all along. 😉
Your First Line Of Defense
ICYMI: The IRS announced that its data breach in May, which was originally said to have impacted about 114,000 accounts, actually hit more than twice as many with hackers gaining access to some 330,000 households. (Cyber thieves used stolen Social Security numbers and other data to access past tax returns.) The breach occurred through the IRS “Get Transcript” program, which allowed people to access their prior-year return information. Letters went out last week to the 220,000 additional victims. If you or someone you know received one, then this MONEY article is a good recap of what he/she should do next.
Even if this doesn’t apply to you, this breach serves as yet another reminder to check your credit report and to strengthen your passwords — your first line of defense when it comes to maintaining your privacy and protecting your identity. According to a September 2014 AARP report, 45% of Americans admit to using the same password for more than one online account and 49% have not changed their online banking password in the last six months. Not good. This week on Bankrate, I outline three ways to build a stronger password. The first: use a passphrase. Use the first letters of a sentence and mix in numbers and symbols like: “My Cousin Susan Makes the Best Spaghetti and Meatballs” = Mc$mtbs&m. If you want to change it up for different websites, put the first letter of the site on the front of the phrase and the last on the back. So at Amazon, for instance, that password becomes AMc$mtbs&mn. Get it?
Lunch Specials
Back to school also means back to packing lunches. This week Credit.com serves up 10, $2 lunches you can make for your kids (and for yourself, really). Outside-of-the-box ideas include peaches and cream baked oatmeal (we love breakfast for dinner at my house, so I’m down with breakfast for lunch), ham and cheese kabobs and fruit and cheese plates (with a nice white grape juice, of course). The meals were created by Erin Chase, aka the “$5 Dinner Mom,” and Coupons.com’s savings expert (and fellow mom) Jeanette Pavini. To save time and money, they both advise planning ahead, taking advantage of sales and combining sales with coupons. Happy packing!
Have a great week,
