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Protecting Yourself from Identity Theft

Identity TheftAre you being paranoid?

Some people consider being paranoid is normal if they deal with anything that involves the share of personal info.

That is particularly a case in online shopping and financial service applications.

Regarding online shopping – although sometimes considered as technophobia – the fear of technological advances, including the Internet – the paranoid of stolen private information is more often reasonable than not, particularly today.

Identity theft

One of the reasons people being paranoid about anything involving the share of personal info is identity theft.

According to Wikipedia, Identity theft is basically a term used to refer to fraud that involves stealing money or getting other benefits by pretending to be someone else.

This fraud causes damages beyond money – your reputation, both online and off line.

There are four type of identity theft, according to Wikipedia:

  • Financial identity theft: using another’s identity to obtain goods and services.
  • Criminal identity theft: posing as another when apprehended for a crime.
  • Identity cloning: using another’s information to assume his or her identity in daily life.
  • Business/commercial identity theft: using another’s business name to obtain credit.

All causing reputation damage, and most cause financial problems for the victims.

What identity thieves can do to you

Most commonly, they will use your identity to buy goods and services, as well as applying for credit.

The latter often causes severe problems, because your identity is linked to your credit report – when identity thieves apply for a credit (and of course, they will not pay when it’s due), it’s your name linked to the credit; Not paying the credit will not only cost you money, but also problems with the collection agents and ultimately, leaving ‘red marks’ in your credit report, decreasing your credit score.

Being paranoid, on lesser extent, actually helps you to deal with the risk of identity theft

Although being paranoid is obviously unhealthy, it does arguably help you being cautious is a good way to protect yourself from identity theft.

Many people who are victims of identity theft thought that it would not happen to them – unfortunately, they realise it when it strikes them.

There are ways to help you deal with identity theft, some of them available online.

Stop being paranoid, start being cautious

You can actually start a simple measure to protect yourself from identity theft – never, ever share your personal information with non-trusted and questionable third-parties, either in online shopping or financial service applications.

However, to ensure your reputation and credit report protected, you might want to consider the help of identity theft protection service providers. They are more than ready to help you protect your identity, both online and off line.

Some of the big names providing such services are Lifelock and TrustedID.

Which one is the most suitable solution for you? You can learn about Lifelock VS TrustedID from the Net.

I also suggest you to read Lifelock Reviews and other identity theft protection reviews to learn others’ experience with the service provider.

Last but not least, don’t apply for any credit cards or credit applications on sight! Managing your personal finance closely will naturally decrease the potential of identity theft.

Image by CarbonNYC.

Money Market: For People that Always Looking for Something More

It is common that people always look on ways for their money to grow more in speed and value.

While expecting their money to grow in speed and value, people always consider and weigh between risk and yield. Naturally, higher risk yields higher result. On the contrary, lower risk yield lower result.

The battle of risk and yield always present in one’s mind, and often attributed to one’s personality traits – for example, in outdoor activity, do you like bungee jumping or strolling in the park? Your answer will be one of the indicators of your risk tolerance toward investing your money.

How much do people want more?

As people always look for something more, the quantity of ‘more’ in people’s mind is widely different, depending on the personality traits, investment outlook and personal finance budgeting and planning.

There are investment instruments that allow you to choose the investment type that best suited to your situation.

Investment in stocks, mutual funds, money market, certificate of deposits, etc. along with the macroeconomic trends will determine how much you will get out of your investment.

Money market

I would like to focus on one of the most common investment option, but not many people aware the benefit of – money market.

According to Wikipedia – In finance, the money market is the global financial market for short-term borrowing and lending. It provides short-term liquid funding for the global financial system.

Normally, investing in money market by opening a money market account yield more return than the conservative saving account.

According to M&T Bank eMoney Market website, the Annual Percentage Yield (APY) of money market is 3.25 per cent, compared to the 2.25 of national savings average.

Just like other forms of investing, you can open an online money market account, such as M&T Bank eMoney Market Account.

Money market might have the right compromise between risk and yield for some person. I personally recommend money market account (and do not recommend savings account) as part of diversification in your personal finance budgeting and planning to achieve your financial goal.

The Need to Protect Your Income

The issue of income protection has been in everybody’s mind for long, especially in tough times. It is obvious that people always looking for a form of save haven for their hard-earned money.

A question that often being raised is, “if anything happened to me, will my family or others that depend on me be able to survive?”

Nobody can deny that sometimes we forget about what is best, not only for us, but also for our loved ones. Some people has a motto of ‘work hard, play hard.’ Even though everybody’s life is his/her own to decide, people often forget the priorities in life. People need to secure the fruit of their labour first, then ‘play hard’ on the remaining, later on.

Sadly, people do love tarrying – ‘I will do it tomorrow’ seems to be the norm in society. People realise their true priorities after misfortunes or unfortunate events happen – bankruptcy, downsized, disability, sickness and even death. Then, people start panicking and taking any advices they can get from, that unfortunately, not always the best advices you should receive.

Consider the following statement about protecting your income.

…a recent survey …found that 25 per cent of Americans are worried about losing their jobs within the next six to 12 months because of weakening economic conditions, while 28 per cent are concerned about losing their income because of an accident or illness that would make them unable to work. The study also revealed that 41% of employees with 401(k) or similar retirement accounts would be willing to borrow from such accounts to cover lost income.

The survey does describe the economy outlook today, and people do have all their right to be worried. A form of income protection, such as income protection insurance, is needed to minimise your worry and turn your energy to seek other income alternatives, such as starting out businesses, instead.

I would like to recommend you to start protecting your income and your asset more sooner than latter, and set a plan of action to be implemented for, at least, 6 months period. This will create a physical and psychological safety net that let you prepare for the worst.

If you looking for ways to protect your income, look to the people you trust or income protection specialists for advices. A word of advice, though – always look for a second opinion. Do your homework, and doing the right thing will eventually ‘save’ yourself and your loved ones.

Again, stop worrying and start acting today, before you regret that it is all too late.

Yoga for Financial Peace

Have trouble with controlling your shopping impulses?

As bizarre as it may sound, it just might be crazy enough to work. If we want to look at the background on it, we can compare financial health to physical health. Yoga has been cited as a beneficial action for weight loss and health maintenance. Not only does it help as an exercise, but through the movements of yoga you help to calm and focus your mind, promote inner contentment, reduce stress and anxiety, and promote a greater awareness.

Yoga is already being used as a contributing treatment for depression and anxiety (click here to be taken to an article from Psychology Today on the topic). As the very nature of this site suggests, how we handle our money is very much related to our state of mind. We can use shopping as a tool to feel better (such as retail therapy), we can avoid dealing with our financial situation (a cause of stress and anxiety for most people) which then compounds the situation further, or we can just not be aware of how the way we think can influence the way we spend money.

We are encouraged by the media to find the solution to our problems through “stuff”. However, if you can find that peace and satisfaction that we all crave WITHOUT spending your money, isn’t that a stronger position to be in?

Brent Kessel wrote an excellent article on this topic called “Can Yoga Make You Rich?” that was published on MSN Money (click here to be taken to the article). In it, he discusses how yoga can help you understand how you think, which is usually the first and most important step to regaining control of your finances. I highly recommend reading the article.

The neurobiology of risk: the posterior cingulate cortex

The cingulate cortex sits on top of the corpus callosum, the thick cable that connects the two halves of the brain. It’s connected with the amygdala, which coordinates perceptions of feeling and emotion, and divided into the anterior and posterior parts. The anterior cingulate cortex has been implicated in effortful decision-making (Mulert et al., 2008, Neuroimage), and the posterior cingulate cortex (PCC), relatedly, in decision-making and risk.

Decision-making and risk are important parts of the animal world; any organism needs to know whether a particular activity is going to get it killed, and decide whether that activity is worth it. Watson (2008, Annals of the New York Academy of Sciences) suggests that sensitivity to risk helps animals survive. The PCC hasn’t been studied much until recently, but it’s possible that it’s the center for risk-related brain activity.

Watson found that the PCC in monkeys showed sensitivity to risk, and its strength, in decision-making tasks. McCoy and Platt (2005, Nature Neuroscience) found that PCC in monkeys activated when monkeys made risky choices, and became more active with more perceived risk.

This article describes how the PCC judges value of rewards as circumstances change. Researchers (Platt et al., 2003) trained monkeys to do a task and rewarded it with juice, so that the monkey learned to expect the juice when it delivered. When the monkey performed the task but got no juice, the PCC fired very strongly, giving what the researchers described as a large “reward-prediction error,” a comparison of a predicted reward with the actual result. This isn’t specifically risk-related, but it does demonstrate that awareness of rewards and their absence is important–otherwise there wouldn’t be a segment of the brain devoted to it. And risk is all about evaluating reward.

Perhaps the main thing to take away from the neurobiology of risk is that it’s inextricably tied into emotion. The PCC, like the ventral striatum, contains dopamine-releasing neurons, and it’s also part of the limbic system, which regulates emotion and motivation. And fear, which may be particularly important in the PCC–learned fear may be stored there–regulates risk-taking behavior and perceptions of risk in general. This, too, makes sense; it doesn’t really matter what the objective risk of a given activity–darting into the open to get that delicious plant, say, or using $100 to buy stock in Google rather than putting it in the bank–actually is if you don’t have some emotional investment in the outcomes.

Investing: Can you take the pain?

On a day at the stock market like today we almost all feel the pain. As I write this the Dow Jones Industrial Average (the Dow) is down 130 points for the day and off 450 points in the last 4 trading days. So when the value of your mutual fund or stocks are moving strongly to the down side what are you tempted to do? Sell to stop the hemorraging or buy more because of the value. Some psychological studies can tell us which way we probably lean.

Studies done in the 1970’s have shown we feel twice pain or distress for the financial loss than we feel happiness for a gain. Let us see if I can engender some pain and gain in you. Imagine you have a mutual fund account with a value of $100,000. You get your quarterly statement and the account value has fallen to $90,000, how do you feel? A little (maybe more than a little) pain there, heh? Now you open the statement and see a $10,000 gain to $110,000. Feels pretty good, but definitely not a strong as losing that $10 grand! Leave it to psychologists to figure a way to measure phychological pain and pleasure, but the double the pain makes sense to me.

So how does this affect us as investors? From the question in the first paragraph, I think when our investments start falling in value, we are strongly tempted to sell to just stop the pain. It gives us a good idea why so many investors are so good at buying high and selling low. I know personally when a stock I have invested in goes down I start to mistrust my judgement and search the news for clues I might have missed that this was a bad investment. Doing this research will, hopefully, help me hang on to good investments when the overall market does not think much of them.

One last point we need to remember so we do not let the pain of less lead us to the poor house. A recent article submitted to Seeking Alpha did a pain vs. gain calculation. First, the average return of small cap stocks over the last 60 years is 16.3% per year and the average return for large cap stocks is 12.76%. The author used monthly returns to record a positive point for each percentage of positive months and 2 negative points for each percent negative return in negative months. The more volatile small cap stocks racked up a score of minus 788 (-788) points even as an investment would have grown to 13 times the original investment (using rule of 72). The steader large cap still gave us minus 482 (-482) pain points in spite of a 10 fold gain.

Bottom line: If you want to be a stock market investor, you must figure out a way to handle the negative emotions of negative returns. Markets go up and down, but the research shows it is much harder for us to live with the down part.

Take a psychology test on your relationship with money!

What in our psychological makeup makes us good at investing or earning money? Or losing and spending money? Do you or I have the mental tools to be a good investor or trader? If you are reading this site you probably want to act smarter with your money and investments and I have discovered some tools that I think can help us learn more about our psychological makeup in relation to money and hopefully choose financial options that fit our personal profiles.

I have discovered a host of psychological tests relating to money and investing at The site is managed by Richard L. Peterson, MD. They are experts on the psychology of markets, investors and traders and provide speeches and workshops for many of the leading money managers and brokerage firms. On their website they offer free psychological tests on a variety of financial subjects. I have discussed with Dr. Peterson why they give away these valuable tools for free, and he told me that the tests allow them to collect data to further their studies in market psychology. At one time, they charged for the tests but were not getting enough test takers to build a good data base. I find the tests to be of excellent value and have learned a lot from the couple I have taken.

I would like to start some discussion here on personal results from some of the tests offered by Market Psych. Every two weeks or so, I will select one of the tests, provide the link, take the test and share my results here. I would like you, our avid readers, to take the same test and provide some comments on your results. For our first test let us take the Success Psychology Test. Registration is required to get your results which will arrive almost instantly by email or you can read them online.

OK, here I go testing……….. Finished.

Results: I score an A- overall with A- being my score in the categories of Abundance, Drive, Efficiency and Optimism. I scored a B+ on Discipline.

I find my results interesting in that I would rate my success to date at barely average. However, I recently have started a couple of new ventures that I am very optimistic about, so that may be reflected in my relatively high grade.

Now you take the test and let us know how you did or what you think. As I said earlier, I will put up another test for results and feedback in a few weeks, so try to hold off doing more of the tests. They are fun and interesting, just ask my wife who really was interested in her results and quickly took several of the tests.

The neurobiology of risk: the ventral striatum

The ventral striatum is a relatively small area tucked deep inside the brain near the basal ganglia. Until recently, not much was known about it. But it’s recently been linked to reward, decisions, and risk, and as a result is getting much more press than it used to. It’s important in what we perceive as rewarding (such as status and keeping up with the Joneses) and how rewarding it is. It’s been linked to pathological gambling, and it matters when you’re thinking about what to do next with your portfolio.

The ventral striatum consists of two portions, the nucleus accumbens and the olfactory tubercle. Its most important neurotransmitter–to our current knowledge–is dopamine. Dopamine is associated with pleasure and with motor functions. (Dopamine-increasing drugs are used to treat Parkinson’s disease.) The ventral striatum is closely linked with the limbic system, which involves emotion and motivation: it receives input from it and sends output to it, mainly inhibitory. It’s thought that the ventral striatum helps to suppress certain mechanisms in the limbic system, thereby selecting the appropriate ones and silencing others.

When you consider all that, it’s a natural nominee for the reward center of the brain, and that seems to be its function. There have been several studies recently that look at different kinds of reward, and they all light up the ventral striatum. As described in the Society for Neuroscience, anticipating financial gain increases dopamine in the ventral striatum, which increases pleasure. Thinking about loss, on the other hand, decreases dopamine. It turns out that most people are more sensitive to decreases of dopamine than increases, which is where risk aversion comes from. The ventral striatum tells your limbic system that the behavior you’re considering is risky or that the loss you’ve just suffered is a bad thing, and the limbic system tells your conscious mind that it feels bad about what just happened, which affects your decision-making.

The ventral striatum is a tiny structure with big effects on our behavior. Most of decision-making, including financial decision-making, includes processing risk, which includes weighing rewards and losses. The ventral striatum is instrumental in modulating those behaviors and processes.

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