What to Do If You Lose Your Wallet

Some time ago, I lost my wallet, and within the hour that I realized my wallet had been lost, I was able to do the most important “damage control” tasks like:

  • notifying credit card companies to cancel existing cards and issue new card numbers
  • downloading a duplicate health insurance card
  • figure out how to replace driver license
  • putting a “freeze” on opening new lines of credit

Other than knowing an exciting day of waiting at the DMV (Department of Motor Vehicles) is in my future, I am glad I haven’t lost anything I cannot replace.

Since my credit card transactions all come with email alerts, if anyone had tried to buy anything with the cards, I’d be notified immediately via email.

In terms of lines of credit being opened, this is where putting a “credit freeze” is critical. In the U.S. the 3 major credit reporting agencies will get a record “pull” anytime when anyone inquires about your credit or someone (hopefully yourself) is trying to open up a line of credit: maybe this is applying for a new credit card, or apply for a store card, trying to buy a car, trying to inquire about a mortgage or line of equity loan etc…. by putting on a “freeze” it forces the inquirer to call a number before any data can be pulled. This way you will know if someone is trying to use your identity and take a loan in your name.

The “credit freeze” is new for me this time around when I lost my wallet, but I’m not actually worried about my credit cards being used in appropriately because of the email alerts and also because I acted extremely quickly, and have online access to all my credit card transactions.

While it’s very disturbing to have lost my wallet — I forget to appreciate how much having a method of identification factors into daily financial transactions — I also appreciate how technology lets me minimize financial damage in a quick and timely manner. Of course I’m still hoping a kind-hearted person will turn in my wallet to the police and I have filed a police report.

Do you have a “lost wallet” action plan?

Value of Money

Depending on situation, money buys:

  • stability
  • security
  • choices
  • freedom
  • influence

I am under no delusion that most of what I enjoy today in my life: stability, security, choices (to work or not to work, to do certain types of work, to work only certain hours), and freedom (being able to immigrate and stay in this country) were supported by a level of financial means.

Read some personal accounts on Quora of why people have to go to “cash advance” gouge-level interest services or why they have to line up to renew food stamps, and I appreciate all the more how “money-supported stability” makes the difference between maintaining life in the middle class versus becoming a member of the working poor.

Thus, I can’t in my good conscience talk down money like I’m holier than needing a currency. All the other stuff like bartering and in-kind services are simply other currencies that “money” represents as the de-facto symbol.

Behavioral Economics in Personal Finance: How to Stop Over-Spending

Step 1: Control Your Purchasing Impulse By Removing Your Purchasing Ability.

Stop using all credit cards and use only cash. When you run out of cash, you don’t have money to buy anything anymore. You can be a major shopaholic: shop only in cash.

There are behavioral economics studies that have been done about what happens when your money is too far removed from cash. As soon as you abstract actual cash into a different form like tokens (as close to cash as you can get short of the actual coins) and then credit cards, your willingness to spend on impulse increases.

I’m not saying you shouldn’t use credit cards ever, but until you are disciplined enough to buy only what you can afford and you can pay off your entire credit balance every month for at least 6+ months… then cash-only will build the kind of habit that can help you manage your personal finances better. How about trying cash-only system for 1 month? It’s only 30 days but is incredibly powerful at showing you what you can actually afford and how expensive the “cheap little purchases” begin to add up.

A preferable behavioral outcome of Step 1 is for you to look for creative ways to cut costs where you can, such as buying used items, shopping for bargain items, and selling items you no longer use.

Step 2. Track Every Single Dollar into and out of Your accounts to Maximize “Pain of Paying” Reminders

I don’t use fancy programs — a simple Excel spreadsheet works for me. You can use online sites like Mint.com and Bundle.com to track your bank accounts and credit card spends once you know you have the discipline to spend only within your means, or if you are absolutely unwilling to go all-cash-only for the next 30 days.

Being able to see and track every single purchase will continue to create “salience” of every dollar that is leaving your bank account, or every dollar you are borrowing at astronomical interests rates from credit card companies. I have my credit card email me every single time a charge over $1 is registered to my account. This means I will be reminded again of what amount I spent when I check my email, and it puts “the pain of paying” at the forefront of my mind. I also have the kind of credit card that requires full-balance payoff, so I can never hold a credit card balance that incurs any interest.

Step 3. Create Budget Projections for Next Quarter Spending.

Once you have 3 months worth of data, you start tracking trends. At this point I only track certain budget items (utilities mainly) on a monthly basis because I’m so familiar with the “typical” spending caps that any abnormal fluctuations will catch my attention. Having a budget will make you feel empowered. Since I’ve been doing this for a while, I begin to make adjustments based on major life events, such as how the household utility budget will change when we moved from an apartment to a house, and new costs that having a child will incur.

All this stuff may be a pain in the butt to make habitual early on, but once you do this and get used to it, you will make use of this every year for the rest of your life.

Part of Step 3 is also the Creation of, and Insurance for, a Financial Buffer. Some people call this an emergency fund, and it is basically a pad of financial security you save up for yourself for emergency situations to prevent yourself from spiraling into (too much) debt.

In order for this to work, you need to make sure that you insure yourself against events that will put you into debt. In the U.S. these costs tend to be accidents and medical/healthcare, which means people in the U.S. must insure their healthcare costs as well as insure against certain accidents or liabilities relating to their property or their lives (especially if they have dependents).

How do you set spending limits to ensure you save toward your future?