The cool winds of fall remind me that it's time to dig into my personal finance bag of tricks and treats to help you steer clear of scary money problems.
Tricks
Fraud, pandemic style. Costume parties aren't the only places where alternate identities lurk. Crooks disguised as you can steal your identity and open new accounts in your name before you can say, "Boo!" According to TransUnion's Global Consumer Pulse Study, one in three consumers across the globe has been targeted by digital fraud since the pandemic began.
How can you protect yourself?
- Check your credit report at least quarterly.
- Safeguard your personal data, usernames and passwords by shredding or safely storing the information.
- Avoid using public WiFi to access online accounts or sites.
- Monitor your accounts vigilantly.
While you probably don't check your long-term investments daily, you may need to adopt a vigilant approach with your bank and credit accounts. If you see any discrepancies, notify your financial institution.
Credit-card debt. Americans are back to ringing up credit-card debt. Earlier in the pandemic, revolving debt had been on the decline, but this summer, the Federal Reserve reported a 6.7% increase of this type of debt over the same time last year. And at $956 billion, revolving debt appears to be on the way back to the $1 trillion mark hit in 2017. Don't fall into this dangerous trap. Develop a plan to knock out your debt and get help if you need it.
Car loans. After encountering a dozen or so ghosts and ghouls on Halloween, you can become numb to the spectacle. That's how I feel about the length of car loans. They seem to keep getting longer. Experian's State of the Automotive Finance Market (Q2, 2021) put the average new-car loan length at just over 69 months -- almost six years. If you can't afford the car you want with a loan of 60 months or less, look for a more affordable option.
Treats
Wages are growing. This is like reaching into your goody bag -- especially as we rebound from the pandemic -- and finding all your favorite treats. In July, the Atlanta Federal Reserve's Wage Growth Tracker put wage growth for people ages 16-24 at a year-over-year clip of 8.3%; for ages 25-54, it was 3.7%. While a bigger salary can mean a better lifestyle, it also can help you pay down debt, build savings and invest for the future.
Savings rate nears 10%. Americans saved 9.6% of their disposable income in July, according to a report from the Bureau of Economic Analysis. That's significantly lower than some of the sky-high savings numbers we saw last year, but still in line with the 10% USAA recommends folks sock away for retirement early in their careers. I still think this belongs in the "treat" category. Under the military's Blended Retirement System, participants will need to put at least 5% into the Thrift Savings Plan to receive the maximum government contribution. So, while 5% shouldn't be your goal, it should be the minimum if you're part of the BRS.
Credit scores on the rise. In its 2021 State of Credit, Experian reported that the average VantageScore increased to 695, the highest point in 13 years.
According to nerdwallet.com, that is on the low end of what is generally considered a “good credit score” by most lenders.
This is a good trend though, despite the challenges of the pandemic. But don't let it lull you into a false sense of security. Just because you can borrow doesn't mean you should. After carefully reviewing your finances, make borrowing decisions in the context of what you know makes sense -- not what some financial institution offers.
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