For years, LifeLock has aggressively advertized that they will protect your identity like no other. They even offer a $1,000,000 guarantee. What they don’t tell you is that they are simply putting fraud alerts on your credit files which have been shown to work 75% of the time. Now, anyone can put fraud alerts on their credit reports. They are designed to alert you if anyone is attempting to take out credit in your name. They are temporary in nature and have to be renewed. LifeLock would take it upon themselves to automatically add these to your credit reports and then renew them for you. However, what they are doing was never the intent of the Fair and Accurate Credit Transactions Law written by Congress.

Bold and high-light – if possible can you yellow highlight may be in the following paragraph?

The law states:

‘‘(2) FRAUD ALERT; ACTIVE DUTY ALERT.—The terms ‘fraud
alert’ and ‘active duty alert’ mean a statement in the file
of a consumer that—
‘‘(A) notifies all prospective users of a consumer report
relating to the consumer that the consumer may be a
victim of fraud, including identity theft.”

The law states that a consumer can add a fraud alert in the event that the consumer “MAY BE” a victim of fraud. It doesn’t say that you can add one just because you feel like it. Credit reporting agency Experian felt the same way. Back in 2008, they filed a lawsuit for deception and fraud. According to a MSNBC article, LifeLock CEO Todd Davis called the lawsuit baseless and said that Experian is simply upset that his firm is challenging its business model.

Actually, it has nothing to do with the model. It is the law that Congress wrote and expects people to follow. LifeLock recently sent this out to its customers:

“LifeLock is pleased to announce we are beginning implementation of a new and innovative identity protection system that provides you even better and broader protection. This new system, which replaces fraud alerts, is better because it offers you the benefit of real-time protection in some instances, and broader because it identifies identity risks beyond the scope of fraud alerts.

As you may know, as a result of litigation with the credit bureau, Experian, a Court has ruled that LifeLock must soon end the practice of setting fraud alerts on behalf of consumers. The placement of a fraud alert on a member’s profile is just one of the many tools LifeLock uses to protect our members from the growing threat of identity theft. We have been planning for the possibility of this ruling by developing even better ways to help protect you, and are excited about the broader protection we will roll out in the coming weeks.”

So now that they cannot do what they should not have been able to do in the first place, they have to come up with a real identity theft protection service. With all of the influence that this company has developed through their marketing (which I will have to admit is one of the most brilliant marketing campaigns -deceptive, but brilliant), it is my hope that they come up with a plan that can stand up to their aggressive marketing plan.

At the end of the LifeLock e-mail, he states that “At LifeLock, we never take your trust in us lightly, and consider it an honor to protect your good name.” Even if they come up with the greatest identity theft program available, can you really trust a company that has its business model built on doing something in a way that the law never intended on individuals to do in the first place?

Tags: Bob Brooks, Congress, credit reports, Experian, Fair and Accurate Credit Transactions Law, fraud alerts, identity, Identity Theft, Prudent Money

Bob is out of the office today and tomorrow but will have a new post Monday August 31, 2009.

Tags: Bob Brooks, Deceptive Money, Prudent Money

Q:
I’m sure this has been asked of you before, but I wanted to know what Biblical rationale can I use to invest in the stock market? I was just thinking this morning about my 403(b) plan and how it is very aggressive with stock. Stocks are risky and that means taking a gamble. How is investing in the stock market any different from going to Vegas and gambling?

A:
I think that stock market investing done the wrong way could be the same as gambling. As managers of what God has given us, He has charged us with the responsibility to be prudent when it comes to what He has given us and what He still owns.

Let’s start off by looking at the definitions of gambling and risk and then see how they are two different things.

Gambling, according to Wikipedia, is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. Typically, the outcome of the wager is evident within a short period.

Risk can be defined as the probability that an action or event will negatively or positively affect a person’s financial goal. When you take risk, there is either a high or a low probability that you will make or lose money.

When you gamble with God’s money, you are taking high risk because in most cases you put yourself in a situation where the probability is high that you will lose it all. More importantly, we have to look at why we gamble in the first place. We gamble because of greed. We want to get as much as possible for doing as little or nothing in a short amount of time. The Bible doesn’t specifically address gambling. However, Christ warns us about the chief reason we gamble which is greed. “Beware and be on your guard against every form of greed” Luke 12:15.

So, you have to look at why you are investing. If your motivation is to make as much money as quickly as possible and you are willing to use God’s money to do so, you have to stop and check your motivation. Is this about greed (earning something for nothing in a short-time period with the potential to lose it all) or is this about taking care of future financial goals for you and your family (1 Timothy 5:8).

It is all about how you approach risk when it comes to investing. Remember, we take risk because we want to make our money work harder for us. At the same time, we have to be prudent about taking risk. If we had all of the money in the world, you would not need to take risk. You could have the luxury of putting your money in riskless investments. If you are going to take risk, you can gamble or approach it like a prudent steward and understand, learn to invest and manage for risk.

Tags: Bob Brooks, Deceptive Money, gambling, God, Investing, Prudent Money, risk, stock, Stock Market

The politicians can bail out banks, big business, and make sure that their campaign contributors are all taken care of. They can provide 3 billion dollars for the Cash for Clunkers Program and help bail out the automakers. They can send out checks to American families through the form of tax rebates. They can debate the irresponsibility of a second stimulus package. However, they are failing miserably by not taking care of our senior citizens who depend on Social Security benefit checks.

According to Social Security, seniors will not get a cost of living allowance increase for this year and likely not for the following year. Annual cost of living increases started in 1975 and for the past 33 years, Social Security recipients have always received a benefit increase. This will be the first year since the program started that the benefit increase will not happen.

To add insult to injury, the premium for the Medicare prescription drug program will increase. By law, Social Security benefits are never supposed to decrease. Since those prescription drug premiums come out of Social Security payments, we will see a decrease, which the law never intended to happen.

Is it ironic that the new healthcare proposals seem to devalue life during the later stages of life and Congress sits still as our seniors struggle with Social Security? They can print money for all of their earmarks and irresponsibility that makes up the stimulus package. However, they cannot do the right thing and take care of our seniors. Just more of the same out of Washington.

Tags: automakers, Bob Brooks, cash for clunkers, Congress, Deceptive Money, healthcare, Medicare, politicians, Prudent Money, Social Security, Stimulus package, tax rebates

“We are God’s partners in matters of life and death.”
President Barack Obama – August 20, 2009

A friend of mine sent me an e-mail with this quote and his reply – a new low. It came from this article. Everyday something unbelievable comes out of Washington. Let’s dissect this statement. We (you and I but mainly the Government) are partners (make decisions together – are equals) in matters (all situations) pertaining to life (killing babies) and death (determining who lives and who dies).

According to this article and many others that verify the statement, President Obama was on a phone conference with a group of rabbis yesterday morning. He was trying to get support for his healthcare plan. This is a frightening statement if he truly believes it.

Tags: Bob Brooks, death, Deceptive Money, God, Government, healthcare plan, life, President Barack Obama, Prudent Money, rabbis, Washington

Can you just imagine the Government trying to run something as complicated as a health system? If they cannot run something as simple as the cash for clunkers program, they certainly aren’t qualified to run something complicated.

It appears that the CARS program is in real trouble. So far the Government has received 412,000 applications for roughly 1.7 billion dollars and has only processed a fraction of that money. That leaves car dealers being owed a lot of money. US News and World Reports stated that some car dealers are waiting for as much as $200,000 in payments. Thus far 80% of the rebates have been rejected. There is the Federal Government at work trying to do the car industry a favor.

The Government originally hired a little over 200 people to process all of the applications. They are in the process of hiring nearly 1,000 more people to speed up the process. Of course, that is after the delay of the hiring and training process occurs.

Then you have the Honorable Politician Barney Frank who was shown on television in a Town Hall meeting belittling and insulting the very people who unfortunately put him in office. Hopefully, this country will wake up and get rid of all of these politicians that are up for re-election. Barney Frank has nothing to do with the CARS story. However, like most in Washington, he kind of has something to do with ineptitude. The good news is that we don’t have to put up with these politicians as long as we are still allowed to vote.

Tags: Barney Frank, Bob Brooks, car dealers, car industry, CARS Program, Cash for Clunkers Program, Deceptive Money, Government, politicians, Prudent Money, Town Hall, US News, Washington

Three Misconceptions about Working with an Advisor

Misconception #1: “My Advisor has the answer and it always works.”

If there is a magic solution that works 100% of the time, I would love to know it. By knowing this magic solution, I can reduce my workload tremendously and assure that all my clients reach their goals 100% of the time.

Run for the hills when you come across someone that states they have the answer or have it figured out. If that person has the answer, demand to see how that strategy worked 100% of the time in all circumstances. Financial services marketing is notorious for this type of message.

Use the “too good to be true” test. It usually works.

Misconception #2:”My Advisor is managing my money.”

There are two main components to the investment process. First, you invest money. Second, you manage the investments for changes in the stock market, economy and mainly for risk.

Unfortunately, most advisors stop after the first step. In my book, that is where the advisor should start. The traditional commission based financial services industry is not a business that encourages investment advisors to manage money. Truth be told, the industry doesn’t want advisors trying anything other than a buy and hold strategy.

Think about it for a second. Commission sales are always about closing deals. Money management takes time. If an advisor was managing money, when would they have time to close deals? After all, advisors need to make a living and sales managers have quotas.

The client assumes that the money is being looked after and managed. Unfortunately, in most cases that is not the case.

I can attest to the fact that the traditional buy and hold investing, does not allow an advisor to effectively manage money. This was one of the primary reasons I went independent and away from the industry.

Misconception #3: “My Advisor is qualified to Handle My Needs.”

There is a big difference between a good sales person and a competent financial advisor. Anyone can be trained to say the right things and appear competent. In fact, I have argued that some of the biggest money managers on Wall Street probably don’t truly understand how markets work.

It takes a lot of time and dedication to be effective. Unfortunately, the sales people greatly outweigh those who are qualified to be advisors.

Degrees and certifications don’t always mean that someone is qualified. It really depends on the area of expertise. I have had many clients come to me with big financial messes that were created by very educated and certified individuals.

Take your time when choosing an advisor. Make sure they are qualified by checking references and checking performance and track records. If an advisor sounds like they are reading script when answering questions, head for the door. Someone who is qualified to be a sales person and setting sales records might not be the one you want making recommendations for one of the more important areas in your life.

Tags: Advisor, Bob Brooks, Buy and Hold, commission, Deceptive Money, financial services marketing, managing money, Misconceptions, Prudent Money, Wall Street

Ask Bob Comment

I wanted to make a comment on the “cars” program. I went to a dealership the first weekend that the program was on. We went to a Nissan dealer looking for a great deal. I did my homework online, my car qualified and the car I wanted to purchase qualified. I found what a good market price for the car was and off I went. The dealer came back with a deal and this was his best offer. With the “cars” program money included he was $3,000.00 over what the going market price was. He claimed they didn’t have any cars in stock or at the stockyards. I did go to another brand and they said about the same thing. Deal or no deal? No deal. I will keep my old car 99 Pontiac Montana and keep fixing it up. Since I do all the work myself it doesn’t cost much.

This is something that you need to know about buying a car. If they are offering you a rebate, interest free loan, special deal, or a Government subsidy, you probably are not going to get anything off of the price of the car. This listener was very smart to do his homework before going to the dealer. It is always smart to do your homework prior to going car shopping. That way you will know the going price of the car you want to buy.

Tags: Bob Brooks, Clunkers Program, deal, dealership, Deceptive Money, Government subsidy, interest free loan, loan, market price, Missan, no deal, Prudent Money, rebate

New Debt Tip: How do You Pay off a Debt Collector?

New Market Outlook: Financial Hurricane Getting Stronger

A syndicated columnist interviewed me about my views on budgeting and why I don’t believe in them. I developed a new system called the boundary system which I write about in my book, Deceptive Money. In his article, which was in the Chicago Tribune, he quoted some of the interview and hit on the one big problem that I believe exists with budgets – their lack of flexibility.

In his article he wrote:

“Flexibility: With budgets, you’re in control. If you want to dine out more and buy clothes less, revise your budget categories. You control the budget, not the other way around.

I think that there is a reason that many personal finance people don’t like the word. The word has negative connotations. The system as outlined in most books doesn’t give you systems to accurately account for every dollar spent or tell you what to do when the budget fails. I would argue that the boundary planning system is very different from traditional budgeting and not ‘a budget in sheep’s clothing.’”
The boundary planning system gives you options based on your value. It brings reality to your spending. Regardless of what system you use, tracking your spending is the key to financial success. I am always amazed at how many people don’t know where their money is going. I would also suggest that today it is more critical than ever to be on top of your spending.

Tags: Bob Brooks, boundary plannng, budgeting, Chicago Tribune, Deceptive Money, personal finance, Prudent Money

A key to being a successful investor is the ability to tell the difference between the marketing and reality. Investors make the biggest mistakes when they make a decision based on the marketing pitch.

You have probably heard the pitch made by insurance companies on equity indexed annuities. They claim that you will get to participate in market gains while the market goes up and never lose any money when the market goes down. You can get a great return without taking risk. Basically, it is an insurance product that is marketed like an investment program. Due to this irresponsible marketing, the federal regulators are cracking down on this industry. The insurance industry says that equity indexed annuities are not investments. However, the federal regulators say that it is an investment contract and should be regulated like one.

Many of the marketing pitches for these guaranteed investments have several elements that make them irresponsible.

First, the marketing is full of big claims with little details that intentionally attempt to create an impression that is not altogether true but isn’t necessarily a lie. It is just a marketing message that intentionally and conveniently leaves out the details.

Second, the marketing pitch creates the illusion that there is no risk and no downside in the investment. Remember, there is always risk of some kind when investing money.

Third, these marketing pitches use a play on numbers. You can take a set of numbers and make them say anything.

On paper, these equity indexed annuities will perform as advertized. In other words, you will see your account value go up with the market and stay steady when the market falls. So the illusion plays out for a long time. Unfortunately, reality will surface down the road. When you are ready to take the money out, you will realize that you are taking the money out on the terms of the insurance company and not on your terms. Thus, that great marketing pitch doesn’t seem so great anymore.

Tags: Bob Brooks, Deceptive Money, equity indexed annuities, insurance companies, investments, investor, irresponsible marketing, marketing, Prudent Money

Q: My husband and I have not been very good stewards with regards to our money in the past. At this point, I am planning to take over the finances in order to get us on a budget that includes covering monthly expenses, tithing, saving, and debt repayment. I also intend to bring my husband and I together on a regular basis in prayer with regards to our finances.

Please help me understand what the right thing to do is.

A: I appreciate your question on tithing. The great thing is that your heart is in the right place. Keep in mind that there are a lot of opinions on this topic. This is what I believe. God wants us giving back 10% of what we earn. Many will debate the 10% as an Old Testament commandment and not relevant to the New Testament church. However, I believe that we should tithe, which means a tenth. If you are not tithing, you might be in such a situation that you cannot just start giving 10%. This might be a gradual process to get a plan in place where you are giving a tenth.

I look at what we do with our paychecks each month from 3 different areas: God’s portion, non-negotiable items, and discretionary spending.

The non negotiable items are items that if not paid would cause you harm. That would be electricity, food, mortgage, debt payments, etc. If you don’t make these non-negotiable payments, things are turned off or taken away from you or you don’t survive.

Discretionary spending is spending money on everything else. These are all expenditures that we could do without.

I don’t believe that God ever wanted us to not live up to the responsibilities that we have created in our life. The goal is to decrease those responsibilities as much as possible. We have a responsibility to pay back debt, make car payments, pay mortgages, etc. So when you are just starting to tithe you have to look beyond the non-negotiable responsibilities to get the money to start. This can be a tough choice.

Keep in mind that discretionary spending is cable, telephone, kid’s expenses, and everything else that is not tied to a commitment.

Start building up to the 10% until you get it to that level. With every percent that you increase your tithe, make that non-negotiable.

Some say have faith and tithe 10% then trust God to take care of the mortgage and the debt payments. God gave us common sense not to put ourselves in harms way. Being diligent in this process will require a lot of faith. Just be honest with yourself and with God about what you are doing without in order to make the tithe. When starting out on this journey of obedience, you are going to have to sacrifice. If you start out giving $50 a month and you find it easy, I think that the point is being missed.

The good news is that God will bless you in ways you never dreamed…and no I am not specifically talking about money. It is enough that God will bless you and show you a part of your relationship with Him like never before.

We all make mistakes with money and it is easy to get ourselves in these situations. The steps that you take going forward are the ones that make the most difference. It is where your heart is today and tomorrow and not about where it was yesterday.

Tags: Bob Brooks, Debt, debt repayment, Deceptie Money, expenses, finances, God, income, money, New Testament, Old Testament, Prudent Money, sacrifice, saving, tithing

I received this e-mail and wanted to share it with you.

I am an attorney in California helping consumers with bankruptcy and loan modification issues. I want to get the word out about some problems I am seeing with the loan modification applications.

Contrary to the recent news, banks are offering loan modifications. However many of the applications are not accepted for these reasons:

1. The application is incomplete. In contrast to the past, banks require perfect documentation. For example, if a person is self employed they will be required to provide a current year to date P&L. Bank statements and payroll records must be current (past 60 days). Oftentimes the banks won’t review a file without current information even though they are only reviewing the file 90 days after it is submitted. Customers should continue to submit bank and payroll records to the bank until the application process is complete. The banks will not remind clients or call them to let them know their applications are incomplete or their information is outdated.

2. Parts of the file are lost by the bank or servicer. Banks and servicers are receiving thousands of applications per day (most by fax). When submitting an application to the bank, homeowners should write the loan number on each and every document, so that the banks can put the documents in the correct file. Methods of submitting applications through web portals are available to attorneys. These are not currently available to homeowners.

3. Homeowners are not using the bank’s forms. Most banks now have websites with preprinted forms to use for the application. If homeowners use other forms for hardship letters or financial statements, the reviewer may not recognize it as such, and deny the application without review.

4. Homeowners are trying to make themselves look as impoverished as possible to qualify. The goal of a homeowner should be to explain to the bank why they can not make the current payment. If the homeowner exaggerates expenses or underreports income, he or she may make themselves ineligible for a modification, when they might otherwise be eligible.

5. Homeowners are giving up. The banks are expanding their programs weekly. Even if a homeowner was denied an application last year or even last month, they may be eligible for a program now. It doesn’t hurt to resubmit an application with updated information.

Tags: attorney, bankruptcy and loan modification, Bob Brook, Deceptive Money, homeowner, loan modification applications, Prudent Money

I feel better knowing that our politicians will fly in the comfort that they deserve. The House of Representatives added $330 million to the defense budget to purchase 4 brand new planes for the Air Force “VIP” fleet. These planes are used to fly White House Officials and Generals around the world. They are also used by politicians on trips that need to be taken.

Of course, this is necessary. The House of Representatives state that they need to replace those “aging airplanes.” You know, the leather isn’t quite as comfortable. The planes are not as fast as the new ones. They are “last years” model. Plus, I am sure spouses (who get to fly for free) are just not as comfortable as they could be. I can completely understand the need to spend $330 million when Americans are suffering during the worst recession since the Great Depression.

Ok, politicians will be politicians and spend this type of money. However, it is the sheer arrogance of spending this type of money ($330 million – well I guess it isn’t a trillion) on a luxury item when this country is struggling. That should have every American in an uproar.

So, I have an idea. I think that the problem in Washington is simply that they are out of touch. Maybe given a dose of reality of how the common folk live might make them better lawmakers. It costs $6,100 an hour to fly these planes. How about saving taxpayers some money and make the politicians fly commercial with the rest of us peons. They can wait in long lines and endure air travel with the rest of us. They can even fly their entire entourage first class and still save money. Better yet, they can get to know the common folk while waiting in airports. After all, it is the common folk who put them in office. Surely, they are not so important that they need special air travel.

My second dose of reality is to remove all of the special medical serves that they have at their disposal 24 hours a day and make them use the healthcare program that they are ramroding down the throats of America.

Politicians need a dose of reality. The entitlement attitude is destroying this country.

Tags: Air Force, Bob Brooks, Deceptive Money, Generals, Great Depression, House of Representatives, politicians, Prudent Money, recession, taxpayers, Washington, White House Officials

New Stock Market Alert : Unemployment Reports Better than Expected – Are we in the clear?
New Debt Tip : Debt Collectors Tricks

Congress could learn a lot from the American consumer. Last week it was reported that consumer debt decreased for the 5th straight time last month. Consumer debt declined 2.5% to $2.5 trillion. This is the longest decline in consumer credit since 1991. In addition, the consumer savings rate increased over 5% marking the largest jump since 1998. Let’s see, if you want to get out of debt, you just decrease spending, start saving money, and pay off debt.

Then there are the politicians. Treasury Secretary Tim Geithner is asking Congress to increase the federal debt limit. Said another way, the credit limit of 12.5 trillion dollars is just not going to cut it. Geithner sent politician Harry Reid a letter stating:

“It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations.”

Mr. Geithner, do you really think that getting Congress to raise America’s credit limit is going to keep investors and the rest of the world confident? Do you think that a consumer who is in over their heads with debt is going to keep his creditors confident by getting one of the credit card companies to raise the credit limit, giving him access to more credit?

This is a continuation of financial irresponsibility in Washington. Take a look at this chart that was posted by Michael Panzner at www.financialarmageddon.com/.

That graph doesn’t inspire confidence.

Tags: Bob Brooks, Congress, consumer debt, credit, Debt, Deceptive Money, federal debt limit, Financial Armageddon, investors, Michael Panzner, politicians, Prudent Money, saving, Treasury Secretary Tim Geithner, Washington

A close friend sent this to me and I wanted to share it. It really does sum up the problem.

“Yesterday, on the radio they had a lady from Oregon, a state which has a form of state run healthcare. She has cancer and had a letter from the state bureaucrats that denied coverage on a very common drug for chemotherapy and the letter highlighted that the assisted suicide option was covered. The local TV station had the bureaucrat on air trying to explain but he was not doing a good job of it.

For years Medicaid and Medicare, government run programs, have cost shifted. This means they underpaid physicians and the costs were shifted to private pay (us). It’s one reason healthcare costs have been rising so much. The other reasons are massive fraud and malpractice lawyers. Great, government creates the problem, then says costs are rising too fast, and then offers to fix the problem they created (sounds like the housing bubble?).

There is also not a word about tort reform in the legislation. It just goes to show that the lobbying pays off in Washington. Government has done a fine job bankrupting Medicare and Medicaid and now they intend to create this new “public option” where are they going to go to cost shift? There won’t be another deep pocket…oh yeah, taxes are going way up.

Guess who is exempted from this new health plan? Congress! I was in a hospital board meeting just yesterday and one of the members said they did a tour of Washington and they have a full pharmacy and an MRI machine under the Capital building. One of the participants (wasn’t sure if it was a congressman or a member of the board) of this tour had chest pains and in minutes was getting an MRI. Sweet deal, for them.”

Yes, it always comes down to the politicians. They are the problem. I must confess it is entertaining to see them react at these Townhall meetings. They don’t know how to respond when they have to actually face the voters.

Tags: assisted suicide, Bob Brooks, coverage, Deceptive Money, Government, healthcare, healthcare costs, legislation, malpractice, massive fraud, Medicade, Medicare, Prudent Money, taxes, tort reform