Personal Banking E-Newsletter - August 2010

Building a Financial Plan

In a bad economy, the general consensus is to cut back on spending and follow a good budget. Unfortunately, that’s about the only time many people monitor their spending and cut back. It doesn’t matter how the economy is, you should always follow some sort of financial plan.

What is a Financial Plan?
It is exactly as it sounds. It is a plan for your finances, now and in the future. It should include financial goals and a good budget to help you complete those financial goals. Financial goals can be things like getting out of debt, buying a house, retiring, paying for your kids college, etc. They can be long term goals and short term goals.

To put a plan behind these goals, you must have desired dates of completion. For example, you might want to retire by age 65 and pay off your house by age 50. Determine how much money you need to put towards each of these each month in order to complete these goals.

Financial Planning Software can Help
If you are a bit financially challenged and are having trouble crunching the numbers, you can ask for help from an accountant or financial planner, or you could try using financial planning software designed for such activities. If it takes some time to figure out how to use formulas and software, it’s worth the time you put into it. Knowing that you’re on track with your financial goals is a good feeling. Without planning, there is a slim chance it will happen for you.

Follow your Budget
Your budget is probably the most important part of your plan. You need to include everything, but you need to follow your budget consistently to get the progress and results you are hoping for. Plan a budget out, telling yourself how much money you can spend in each area of your life. You don’t need to cut out all fun expenses when you have a budget. That is part of why a budget is so great. You can plan to save and plan to buy the things you really love, too.

Over time, you will need to modify your budget. That goes without saying and is fine. You might incur new expenses, and you will make more money as time goes on. Modify your budget wisely. Use increases in pay to reach your goals faster and to have fun.

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The New Kind of Identity Theft

Why your child may be at risk

When was the last time you checked your child's credit report? Never, right? Not much reason to check a credit report for someone who doesn't have credit.

But that's exactly the reason kids are such easy targets for identity thieves, says Adam Levin, founder of Identity Theft 911, which provides identity theft remediation services to businesses and consumers. ID thieves know children are an easy target because they likely won't check their credit reports until they're adults and need to apply for credit. So they can run up debt for years without being detected.

About 400,000 children a year are victims of identity theft, Levin says. They become victims when criminals get their Social Security numbers from medical records, mail tampering, computer searches or a stolen wallet with the child's card in it.

How to protect your child's ID
Guard his or her Social Security number. Don't carry your child's Social Security card in your wallet. Don't give out your child's number on the phone unless you trust the recipient and never send the number in an e-mail. And don't give your kid his or her number until he or she is old enough to understand what it is.

Be careful about posting information about your child. If you want to let your Facebook friends or Twitter followers know that it's your child's birthday, don't tell them the child's age. ID thieves can use that information to figure out what year the child was born, in addition to the info you already provided about the day and month. (For that matter, don't ever post your complete birth date on a social networking site, either.) Talk to your children about the importance of protecting their personal information online.

Be careful with the birth certificate. More and more sports teams are asking parents to present a birth certificate for proof of a child's age. Don't hand over an original. If the team needs your child's birth certificate on file, make a copy of it and show it to the coach. Then put it in a sealed envelope and write your name across the flap so it will be broken if the envelope is opened. Let the coach know that you expect to get the envelope back unopened at the end of the season.

Check your child's credit report. Go to, which lets you get a free report from each of the three credit bureaus once a year. If you enter your child's information and no report comes back, you'll know that no credit has been taken out in your child's name.

Signs that your child's ID has been stolen:

  • Your child receives unsolicited credit offers.
  • Your child receives letters from debt collectors.
  • The IRS send you a letter stating that the Social Security number listed for your child on your tax return (or the child's) is a duplicate number.
  • The bank tells you, when you go in for the first time to open an account for your child, that an account with your child's Social Security number already has been opened.
  • Your health insurer says it won't cover a procedure for your child because it covered that procedure before (even though your child never had that procedure).

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Credit Card Debt at an 8-Year Low

Which states are putting away the plastic

The amount of credit card debt consumers are carrying dropped to an eight-year low and delinquencies continued to decline in the second quarter as consumers looked to shore up their savings.

Credit card debt fell 4.1% to an average $4,591 during the quarter, according to credit bureau TransUnion. That marks the fifth straight quarter of declines and the first time credit card debt has dipped below $5,000 since the first quarter of 2002, according to TransUnion.

"Consumers continue to pay down their credit cards in response to economic uncertainty and high unemployment," said Ezra Becker, director of consulting and strategy at TransUnion's financial services unit.

Credit card delinquencies, which measure the percentage of debtors who are at least 90 days late in making payments, also continued to slide, to a mere 0.92%. That's down a whopping 21.3% from the prior year and 17.1% from the prior quarter. Both are the biggest decreases since the recession began at the end of 2007, said Becker.

State by state
The state with the highest average credit card debt was Alaska, at $7,148, followed by Tennessee, at $5,654, and Hawaii, at $5,594.

Alaska was one of the few places where credit card debt increased quarter over quarter, along with Washington, D.C., and Oklahoma.

Alaska was also the only state to show an increase in credit card delinquency, with a gain of 7.4%. But Nevada had the highest incidence of credit card delinquency, at 1.5%.

Iowa and Alabama fared the best, with Iowa logging the lowest credit card debt in the nation, at $3,792. But Alabama took the prize for the biggest decrease in quarter-over-quarter credit card debt, with a decline of 22.4%.

While the nation's capital saw an increase in credit card debt, it also saw the largest quarter-over-quarter drop in delinquency rates, with a decline of 28.2%.

Secrets of Extreme Savers
In another sign of consumers' distaste for credit card debt, fewer people are signing up for new cards. The number of new credit cards declined 6.5% year-to-year, according to TransUnion.

TransUnion's report comes just days after Synovate, the market research arm of Aegis Group, announced that credit card interest rates are on the rise.

The average interest rate on existing cards jumped to 14.7% last quarter, up from 13.1% a year earlier, said Synovate.

The increase in rates has been partly attributed to the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. The legislation, which placed new restrictions on credit card interest rates and fees, gave credit card companies a limited time to hike rates.

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