Tag: Risk Management

How To Avoid Being A Victim of Scams and Other Online Threats

Have you ever received an email like the one below?

This is a real email that I received.

These “foreign money exchange” schemes typically start with an email from someone overseas who claims to be royalty or businessperson. The fraudsters lure you in by offering a share of a huge investment opportunity or a fortune they can’t get out of the country without your help.

Then they ask you either for your bank account number so they can transfer the money to you for safekeeping, or for a small advance payment to help cover the expense of transferring the money.

You may laugh at the insanity of falling for such a fraud but the FBI reports that potentially millions of dollars are lost each year to these scams.

How To Protect Yourself

There a few ways online criminals access our money, by relying on our emotions and ignorance or by stealing it directly using technology.

The first line of defense against scams is to question everything. Also, be confident to say no.

If you get an email from Dr. Gilberto Churchill offering a large sum of money, it’s probably not real. The old adage “if it sounds too good to be true it probably is” comes to mind.

Or if you receive a call from the Social Security Administration saying that your Social Security number is going to be suspended unless you take immediate action. Would the Social Security Administration make a call like that? Not likely. If you think there might be some legitimacy, refuse to give any personal information to them, hang up and call a number that you know.

As for the technology side of things, the first thing we can do is regularly update our operating system and applications. The companies who create the software recognize holes in their security and periodically release updates to combat it.

Avoid clicking on pop-up windows or attachments unless they are from a trusted source and you are expecting them. You’ll also want to make sure your security software (antivirus, spyware, firewall) is running and up to date in case you accidentally click on a malicious link.

Don’t use public Wi-Fi unless you have a VPN (virtual private network). It’s a lot easier for criminals to access your information if you use a non-secure network.

I recommend using a secure password system to manage your various online accounts, email, and other online services. A summary of these services can be accessed at this link, Password Managers. If you are not comfortable with online technology tools, ensure your various passwords are complex, secured, and accessible to family members.

Experts also recommend backing up your files to an external hard drive every few weeks, especially since malware can be incredibly difficult to remove. In the case of ransomware, even if you do successfully remove it, your files may still remain inaccessible.

If You Become A Target

If you realize that you fell for a scam or fear that your computer is infected with malware, you’ll want to act as quickly as possible to prevent any further damage.

Do NOT pay the scammer any more money and contact your bank to see if they can reverse what has been paid. You’ll also want to notify your state consumer protection office and report it to your local police too.

If your computer is being held ransom with malware, do not pay the hacker. These are not legitimate business people. Once they have your money (and the ransom is usually pretty expensive), they have no incentive to follow through on any promises to unlock your machine or files. This is where always backing up your files to an external hard drive will come in handy.

Although a scam can be financially devastating if you become victim to one, you can drastically reduce your vulnerability by educating yourself, practicing good online habits, and keeping your devices up to date.

How Long Should I Retain Financial Documents For?

Some financial documents are worth holding on to, but many of us are not sure how long to retain them for.

I’ve included a list below of some common financial documents and how long I generally recommend holding on to them before it’s okay to discard them.

PRO TIP: Instead of keeping paper files, scan the following items and organize them on your computer. Make sure you back up your computer to an external hard drive or the cloud often so the files don’t get deleted or destroyed!

Tax returns and supporting documents

The IRS has six years to challenge your return if you underreported your gross income by 25% or more. Keep all your supporting data with your returns (i.e., W-2s, 1099s, 1099-Rs, receipts, etc.) for at least seven years in case the IRS comes knocking.

This information can also come in handy if your Social Security earnings history is incorrect or incomplete, so it may be worth hanging onto longer than seven years.

You, your employer and Social Security share responsibility for the accuracy of your earnings record. Since you began working, Social Security has recorded your reported earnings under your name and Social Security number.

The agency updates your record each time your employer — or you, if you are self-employed — reported your earnings. But you are the only person who can look at the earnings chart and know whether it is complete and accurate.

Normally, you cannot correct your earnings after three years, three months and 15 days from the end of the taxable year in which your wages were paid, according to the Social Security Administration.

However, you can correct your record after that length of time if you have proof of your earnings such as a tax return, a W-2 form showing wages earned and taxes paid or a pay stub.

Retirement Plan and Brokerage statements

Most financial institutions will retain a digital copy of your statements for up to seven years by default, so you really don’t need to. Once you get a notification that your statement is available, look at it for accuracy and then forget about it.

If you still receive monthly paper statements, think about keeping them until your annual statement comes and then save the annual statements for 3 to 7 years.

If you make non-deductible IRA contributions, you’ll want to keep the statement with that transaction(s) with your tax documents. You should be including Form 8606 with your tax return every year if you have basis in your IRA, but it’s always nice to have the statements in case you switch tax preparers one year and the Form 8606 is forgotten.

Home improvement and other real estate records

These records establish your cost basis in the home and could help lower your capital gains tax on the property when you decide to sell.

Retain the records until you sell your home, plus another seven years for tax purposes.

Utility bills & CREdit card statements

You can shred these documents once you have received the next statement showing that you paid.

Bank records

Keep monthly statements for one year.

Hold on to bank records related to your taxes, business expenses, home improvements and mortgage payments for seven years.

Insurance policies

I recommend keeping insurance policies until the policy has lapsed (in the case of life insurance) or the property that the policy covered has been sold.

Household inventory of valuable items

Detailed records of what you own can be invaluable for both insurance and estate planning purposes.

I recommend keeping the list in an Excel file (or something similar) that can be updated on the fly and with little effort when items are bought, sold, or gifted.

Share this running list with the executor of your estate — or at least let them know it exists and how to access it — so they have it in the event you pass away. They’ll need it!