Welcome back. It’s the latest edition of Planning for your Purpose, Telos Financial’s blog where I discuss different financial related topics. Dennis LaVoy is Ann Arbor’s financial advisor serving clients across the country. The purpose of the blog is to introduce financial concepts and questions I receive from clients that I believe are important. I want to start discussions about that will educate, benefit, and improve your financial life. Ultimately, to help you focus on your telos!

What’s the deal with all these breaches?

We just passed the one year anniversary of the Equifax hack. Marriott’s recently purchased hotel chain, Starwood, was hacked. The IRS was hacked a few years ago. I’ve had several clients who’ve been victims of identity theft. It seems to be a regular occurrence that an organization is hacked and sensitive data about past clients is stolen.

The recent Starwood hack was a shocker to me for a few reasons. First, the data that was stolen included passport information, some of the most sensitive information. It was encrypted, but they can’t say if the encryption codes were taken as well. Second, the mild reaction from the hacked customers. The public attitude seems to be that this is normal. People didn’t really seem bothered by it. 

I suppose after the IRS and Equifax were hacked, two institutions I would expect to have the highest levels of security, it’s natural to assume anyone is susceptible. It just doesn’t seem right.

What can I do?

In my opinion, there are basically three moves you can make.

First, do nothing. This is the new normal, you can assume the information is going to be everywhere in the next few years anyway and surrender.

Second, sign up for a monitoring service. My software of choice right now is credit karma (https://creditkarma.com). These services are available paid and free (credit karma is free). They generally offer the same or similar services. They offer free credit scores, they keep track of any credit you’re using, notify you of any new credit taken out, and other related services. This doesn’t prevent anyone from defrauding you, but if someone took a loan or credit card in your name, you’d know right away and be able to stop it in a fairly quick time frame. 

The benefit to this strategy is it’s free, even if your information was hacked, it doesn’t guarantee you’ll be a victim of identity theft. This helps quickly resolve any fraudulent activities that may occur. 

As a step up from this strategy, you can use a paid service. In my mind, these aren’t worth the cost, but if it helps you sleep at night, it’s worth it. I think the companies that provide guarantees to make you whole if you are victimized are the best, but it is a personal decision depending on what you’re most concerned with.

The third strategy is freezing your credit. This is the safest method and with recent legislation enacted, it’s now fast and free. At the time of the Equifax hack, it was a clunky, cumbersome process and had a twenty-something-dollar charge to freeze. As of September 2018, it’s free and happens pretty quickly. 

The greatest benefit to this strategy is if a fraudster tries to take credit in your name, the frozen status will prevent them. It doesn’t prevent a hacker from electronically stealing funds, physically taking a card and using it, or utilizing some other method of taking your money that doesn’t require a credit freeze. 

The downside to this is if you plan to use credit, you need to unfreeze it prior to applying. If you are the type of person to get a store credit card on impulse for a discount or maybe a remodeling project on credit, you need to plan ahead. Bigger concerns would be a car or home purchase with a loan. Those require longer term planning and with frozen credit, it adds one more step. 

How do I get out of this situation? 

I believe freezing your credit is the single biggest step you can take to prevent identity theft. Again, not a perfect solution, but it would provide a big hurdle to thieves that doesn’t currently exist. The reality is there is no panacea to fix this. I believe that eventually there will be some biometric or third step verification requirement to obtain any sort of credit. 

A best practice is to be proactive. Monitor your credit report. Check your scores. Check your accounts. Review your statements. It will take some more of your time, but pulling your credit report once per year is a pretty minor inconvenience in the grand scheme of things.

To Sum Up

The bottom line is there will continue to be data breaches and baddies around the world who are trying to take your stuff (including your identity). You should be educated about this and make an informed decision about how you want to mitigate the risk or understand and accept it. I recommend at least using a credit monitoring service to watch over you and regularly checking your credit to make sure everything is in order. 

If you’d like to discuss in more detail or to review your personal financial situation, don’t hesitate to reach out to me for a free consultation. Please visit my website for more information https://telosfp.com.

Telos Financial is Michigan’s financial advisor for Millennials, Xennials Generation Xers, & young professionals. It is a fee based, holistic financial planning firm located in Plymouth, Michigan serving young professionals and families. Dennis LaVoy, CFP®, CLU® founded Telos in his tenth year as an advisor and uses his experience, knowledge, and expertise to help families and individuals in Ann Arbor, Detroit, surrounding areas, and across the country achieve their financial objectives.

The views expressed are my own opinions and do not apply to every situation. Your situation may vary so make sure to consult a professional for advice prior to making any decisions.