Risk Tolerance & Wealth Building

Learn why knowing your “risk-tolerance level” can help you build your wealth more effectively and efficiently in the coming years…

 

As the year of 2017 comes to an end in what seemed like a very rapid pace, many visitors to this site are contemplating ways that they can reduce their risk and achieve more in the coming year(s).

 

For those who desire to build wealth more effectively and efficiently it is important that you have a comprehensive view of your future and it is also important that you know the risks that you face in the current marketplace and you know your “risk personality” as you move along in the future and choose from an array of investment choices.

 

In this discussion TheWealthIncreaser.com will show you areas of concern that you should have in mind as you build wealth.  At the same time don’t let any of the risks paralyze or delay you toward getting started or continuing to move toward your wealth building goals in a way that best serves you and your family.

 

However, you must be aware that various risks exist—and it is appropriate that you plan in advance to help mitigate the risks or reduce the risks to an acceptable level so that you and your family can achieve more in the coming years.

 

Identity Theft Risk

 

With the Equifax breach in the spring of 2017 fresh in your mind, you now fully realize that identity theft is a real concern as over 100 million people in the United States alone was affected with identifying data of various types floating around in the hands of who knows who!

 

It is important that you know your current credit profile at this time so that you can make corrections and better protect your identity in the future.

 

You can go to annualcreditreport.com and get all three of your credit reports at once and see if they are accurate and a true reflection of your credit usage at this time as you can get the free report from each agency once per year.

 

After one year you can use a staggered approach and pull your credit report every four months from TransUnion, Exquifax and Experian to further keep a handle on your credit.

 

You can also visit innovis.com to check on your free annual credit report as well.  A free report will normally be received by you through the mail in 5 to 7 days.

 

If after viewing your credit report(s) you believe you are a victim of identity theft you can:

 

1)    Visit identitytheft.gov  (part of the FTC or Federal Trade Commission) to determine the steps that you can take, and

2)    Call the identity theft resource center at 888-400-5530 for free help

 

You can also take preventive measures to stop or at least slow down potential theft of your identity by signing up for services that “regularly scan” your credit reports and will alert you by text or e-mail when certain changes to your credit report occur.

 

Keep in mind that some services will only scan one of the three credit bureaus, however you want to choose a company that analyzes all three or at a minimum will notify the other two if certain changes occur!

 

You have until January 31, 2018 to enroll in Equifax TrustedID Premier product that scans all three credit bureau reports for free for one year or you can choose another company—just realize that there will normally be a monthly fee.

 

CreditKarma is a free service, however it utilizes TransUnion and Equifaxbut not Experian and you can get account activity and a VantageScore credit score from TransUnion and Equifax if you choose to utilize this service.

 

Many credit card companies, banks and insurance companies also have services that monitor your credit so keep that in mind as well.  However, they may not monitor your reports from all three credit reporting agencies.

 

In addition, you can consider a credit freeze (new creditors cannot view your reports to evaluate your eligibility (or shall I say the eligibility of those who desire to commit fraud against you) for a credit card, loan or other product such as insurance that requires a credit check and you are given a PIN number to unfreeze at time of your choosing and the freeze time frame is unlimited but is regulated by your state and a small fee is charged to freeze and unfreeze) or credit lock (bar new creditors from using your reports for as long as you are enrolled in the program.

 

If you are a victim of identity theft a credit freeze is normally free (police report normally needed).

 

In addition, “fraud alerts” could be of possible benefit to you.   A “fraud alert” notifies lenders that they should take extra steps to verify your identity, however lenders are under no legal obligation to comply.

 

You can place a free “initial fraud alert” on your credit report even if you are not a victim of identity theft.  An initial alert lasts just 90 days, so you would have to keep renewing the fraud alert.

 

If you are an identity theft victim you would qualify for a free extended fraud alert, which lasts seven years!

 

A credit freeze also prevents others from opening an SSA account online and you can unfreeze “only” your Equifax report to create an online Social Security Administration account online at www.ssa.gov/my account.

 

In addition to traditional lenders, landlords, utility companies, insurance companies and wireless phone companies among others may require a credit check—therefore use caution with who your provide your personal information and verify that they are who you think they are.

 

Market Risk

 

Whenever you invest in a particular sector of the economy you will face market risk.  Whether, stocks, bonds, real estate, currencies etcetera, you will have to expect that there will be some risk that you will have to accept—yet you must balance that risk against your personality and your future goals.

 

Investment Risk

 

You must know that investment risk will exist whether you invest in stocks, bonds, mutual funds, oil and gas and/or other more exotic type of investments, therefore it is important that you know your investment personality so that you can create an appropriate investment strategy that will take you toward your goals.

 

  • Conservative (for example 40% cash/money market and rest in market activities)

 

  • Aggressive (for example 20% cash/money market and rest in market activities)

 

  • Moderate (for example 60% cash/money market and rest in market activities)

 

  • Middle of the road (for example 50% cash/money market and rest in market activities—TheWealthIncreaser.com terminology)

 

Does your investment style represent any of the above or are you unsure if you even have an investment style?

 

Keep in mind that in this discussion market activity refers to stocks, bonds, mutual funds, real estate including REIT’s and direct investment in rental properties or purchasing real estate to turn a profit, currencies, options,  oil and gas investment and other market investments and activities.

 

Do you know what you take in and pay out on a monthly basis as far as your income and expenses are concerned?

 

Do you know how to manage your credit in the best manner possible throughout your lifetime or is it a mystery to you?

 

Do you have a properly funded emergency fund and have you looked at and planned for your financial future in a comprehensive manner based off of the above analysis?

 

By doing all of the above you put yourself in position to choose among the options available in a manner that best serves your long-term goals and at the same time you make life more enjoyable along the way.

 

Political Risk

 

Which political party best serves your interest as far as your finances are concerned?  Regardless of the party in charge you must balance your future goals against the political risks that you face and know that what is in effect now to your benefit or disadvantage—does not mean that will be the case in the future as there is an ebb and flow in the political arena as it is in all areas of life.

 

What will affect you and your family at the local, county, state and federal level as it relates to your finances regardless of party or who is in charge and how can you best plan for what will affect you?

 

Regulatory Risk

 

How are the markets being regulated in the areas of most concern to you?  Are there environmental concerns, financial market concerns, housing related concerns (and many others) and how will the regulation or lack thereof affect you and your family?

 

Economic Risk

 

Is the market rising or headed toward disaster?  No one knows the exact timing of market activity that can be a great help to you and your family or can cause great hardship for you and your family, however you can plan for the uncertainty that lies ahead in the current economy by approaching your finances in an intelligent, consistent and proactive manner so that you can guard against economic uncertainty.

 

Social Risk

 

The society in which you live in will also present you with risk.  Even if you are in the same country or state—risk will vary based on how the society in which you live operate as it relates to financial and other activity that you take part in on a daily basis.

 

Are you in a consumer driven society—or are you in a society in which saving and planning for tomorrow is not only stressed, but also acted upon by the majority of the population.

 

If you are in a consumer driven society you must be more disciplined and you must know that it is you who must take responsibility of your finances and not let marketing, what others are doing and other societal factors take you in the wrong direction as you move toward making life more enjoyable for you and your family.

 

Technological Risk

 

With technology advancements moving along at breakneck speed it can often lead you to wanting to buy the newest and more expensive technology products on the market.

 

As it relates to risk, technology has hurt as well as helped in the financial arena as time-saving on labor intensive activities have been a major success. 

 

The signing of contracts and other documents that once took weeks using the postal system can now be done in hours.

 

On the other end of the spectrum, identity thieves and other unscrupulous players can now perform their activities from a distant and in many cases get away with their mischief.

 

Be sure you are aware of scammers, identity thieves and others whether by technological means or face to face.

 

At the same time be sure to use the technological advances to your benefit—keeping security in mind at all times.

 

Legal Risk

 

You must be aware of the tax code and how it will affect you and your family.  In addition you must be aware of your rights as a consumer as it relates to credit and all of your financial affairs.

 

If you are or will be a victim of identity with the filing of your federal tax return the IRS may issue you an IP PIN (Identity Protection Personal Identification Number) that will in most cases protect your from the fraudulent filing of your federal taxes by identity thieves in the future.

 

If your social security number has been compromised or you suspect that you are a victim of tax related identity theft, there are steps that you can take including the following:

 

 File a report with local police

 File a complaint with the Federal Trade Commission (FTC) at www.identitytheft.gov or

the FTC Identity Theft Hotline at 1‐877‐438‐4338

 

 Contact one or more of the three major credit bureaus to place a fraud alert on credit  records

 

o Equifax.com    1‐800‐525‐6285

o Experian.com   1‐888‐397‐3742

o TransUnion.com  1‐800‐680‐7289

 

 Close any accounts opened fraudulently

 Respond immediately to any IRS notice(s) by calling the number provided

 Complete IRS Form 14039, Identity Theft Affidavit, then mail or fax it according to the  instructions

 Continue to file your return and pay your tax if needed; even if it is necessary to paper‐file returns.

 

Always keep in mind the fact that:

 

1) the IRS will never initiate contact with you by email messages to request personal or financial information

2) the IRS will never initiate contact with you by text messages to request personal or financial information

 

In addition, you must know your legal risks in other areas as you must know your rights to sue, arbitration clauses as opposed to your right to sue that may be found in some agreements, how to use the consumer finance protection bureau and other entities that will allow you to make legal maneuvers that can reduce the risk of loss to you and your family when you are being taken advantage of–or otherwise feel you are being dealt with unfairly!

 

Conclusion

 

There are many risks involved along the way as you build wealth.  This discussion has hopefully opened up your mind to some of the risks that may be present as you build wealth.

 

However, you must not take to heart the risks that lie ahead and not move to action in a manner that takes you toward your wealth building goals.  Your inaction at this time guarantees that nothing or little will happen as you move forward.

 

Be sure you take precautions against identity thieves by creating strong password for your accounts and consider using password organizers to generate and store passwords as remembering passwords can get out of hand if you have a large number of accounts and online activity.

 

It is important that you are aware of the risks that you will or might face in the future, however you don’t want to suffer from paralysis of analysis and not take the necessary action that will move you closer toward your future goals.

 

You must be aware of how you “allocate your investment activity” among the various financial sectors and markets to help reduce your risk.  Or another way of looking at it is you must be properly diversified among the various sectors of the economy and in particular the markets and types of investments that you now make or will make in the coming years.

 

All the best as you reduce your risk and achieve lasting wealth building success…

 

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