The Center For Debt Management
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Practical Advice For Everyone
On How to Save and Manage Money

... Continued From Previous Page

Be cautious when borrowing against the "equity" in your home. If you have property valued at $300,000 and you owe $100,000 on your mortgage, your equity is $200,000. Home equity loans and lines of credit are ways that homeowners can borrow money using their home's value as collateral and gradually pay it back.

Home equity products are relatively low-cost ways to borrow money, but they must be repaid like any other loan. Especially important to remember is that if you cannot pay a home equity loan, you risk losing your home.

Prepare for the unexpected. Have adequate insurance, especially for life, health, disability, personal liability, and coverage of property. Review your coverage annually to ensure that it is up to date.

Consult an attorney or another trusted advisor about having a will and/or establishing a formal "trust" to specify how your bank accounts, property and other assets should be distributed upon your death. Periodically review your life insurance policies and retirement accounts — especially after a birth, death, divorce or other major life event — to ensure that the named beneficiaries are correct.

Also build an emergency savings fund, preferably of about three to six months of living expenses, so you have ready resources you can tap to pay your mortgage, insurance or costly home repairs or medical bills. The safest place for emergency savings is a federally insured deposit account.

Simplify your financial life. Have your pay and benefit checks deposited directly into your bank account. Arrange to automatically pay for recurring expenses, such as a mortgage loan, insurance premium or utility bill. Banking and bill paying online or by phone also can be good options.

These and other ideas can help you save time, reduce stress, eliminate clutter, lower the fees you pay, and maybe help you earn a little extra on your savings and investments.

Protect against fraud. Here are basic precautions against identity theft, check fraud and other financial scams:

  • Be wary of requests to "update" or "confirm" personal information — especially your Social Security number, bank account numbers, credit card numbers (including security codes), personal identification numbers (PINs), your date of birth or your mother's maiden name — in response to an advertisement or an unsolicited call, letter or e-mail. Your bank won't call or e-mail you to confirm account numbers or passwords it already has.

  • If you want to find out if a company is legitimate, look it up using a reliable source. Don't rely on the contact information that was provided to you on a Web site or in an unsolicited call or e-mail.

  • Assume that any offer that "sounds too good to be true"
    — especially one from a stranger or an unfamiliar company
    — is probably a fraud. Example: You receive a call or letter announcing you've won a lottery or other prize you don't remember signing up for, and you are told to pay "taxes"
    or "fees" before you can claim your (nonexistent) prize.

  • Beware of transactions in which another party sends you a check for more than you are due and then asks you to wire back the difference. "If the check is fraudulent, you could lose a lot of money," said Michael Benardo, manager of the FDIC's financial crimes section.

  • Look at your bank statements and credit card bills as soon
    as they arrive and report any discrepancy or anything suspicious, such as an unauthorized withdrawal or charge.

  • Keep bank and credit card statements, tax returns, credit and debit cards and blank checks out of sight, even at home. Also shred sensitive documents before discarding them. Why? Because dishonest relatives, neighbors, workers around the house and other people could use these items to commit identity theft or other crimes.

  • Periodically review your credit reports to make sure an identity thief hasn't obtained a credit card or loan in your name. Experts suggest that, to maximize your protection, you request copies from all three credit bureaus but spread out the requests during the course of the year.

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