But for most individual investors, that dream of getting in on the IPO action will never be realized. And that's not necessarily a bad thing.

For every fairy-tale stock that takes off like a skyrocket following an IPO, there are cautionary tales of many more IPOs that post lackluster results. Some even crash and burn.

3 Reasons You Can't Join the IPO Club

First, understand the process: When a company goes public and issues stock, it wants to raise capital and make shares available to the public. The IPO is underwritten by an investment bank, broker dealer or a group of broker-dealers. They buy the shares from the company and then distribute the shares to investors.

"The brokers find a home for the largest pieces. If there is a lot of interest, the shares go very easily into the hands of institutional investors," says Rob Lutts, president and CIO of Cabot Money Management in Salem, Mass.

Reason No. 1: Big buyers easier to find. Selling a million shares to an institutional investor is much more efficient than finding 1,000 individuals to purchase shares.

But even big institutions often don't get as much of the action as they would like because the initial public offering may be quite limited.

"Especially with a smaller IPO, nobody really gets 100% of their fill. In fact, no one gets more than 10% of their interest in the allocation," says Kathleen Shelton Smith, principal at Renaissance Capital, a global IPO investment adviser, research and management company.

Reason No. 2: One hand washes the other. Institutions that get to participate in the initial public offering often do a lot of business with the brokers underwriting the deal.

"It's stacked in favor of large asset managers, but it is a money game and everyone is in it to make a buck and that is where it goes -- it goes to the best customers of those brokers," Lutts says.

Reason No. 3: Your broker perceives you as poor. Management, employees, friends and families of the company going public may be offered the chance to buy shares at the IPO price in addition to investment banks, hedge funds and institutions. High net worth clients may be rewarded with IPO shares from time to time as well.

If you have an account with the broker bringing the company public and happen to keep most of your vast fortune with that broker, you may be able to beg your way into a hot IPO.

"That still doesn't mean you're going to get in. For LinkedIn's (IPO), for instance, unless you were friends or family, you were probably out of luck," says Jeremy Carpenter, portfolio analyst with Investor Solutions in Miami.

Lutts agrees. "I manage $500 million and I can't get the really hot ones."

Lucky to Lose Out

Once the stock is trading on the exchange, small-fry investors and big-time professionals have plenty of opportunity to buy shares. In fact, waiting for this opportunity can be a smaller investor's best strategy when it comes to new public companies.

"So far this year, over 40% of the IPOs are trading below their IPO price. It may be smart for the individual investors to look at IPOs, but maybe they shouldn't feel that they're missing a whole lot," says Shelton Smith.

In fact, investors may be lucky to lose out. Case in point: In 2005, Refco, a global clearinghouse for derivatives that served more than 200,000 customers, went public. Within months, it fell into bankruptcy.

"It was a financial company that did futures, and everyone thought that they were the greatest company ever and there was a big hoopla when they decided to go public," says Carpenter. "Three months later they have accounting fraud and their CEO is hiding money and debt. You just never know who is going to make it or who isn't," he says.

Also, the discount offered at the initial public offering generally is not that great. According to Shelton Smith, the IPO price should be, on average, a 13% to 15% discount from what might be the regular trading price.

How to Buy New Stocks

New IPOs often have limited histories and their valuation can be somewhat mysterious. This is particularly true when a company is in a nascent industry, as dot-com companies were in the 1990s and social media companies are today.

To get some insight into how the company works and how the stock is valued, investors can look at the massive registration document required by the Securities and Exchange Commission for all new securities.

Known as Form S-1, or the Registration Statement Under the Securities Exchange Act of 1933, the offering document must contain specific information for investors, including financial information, the business model, risk factors and information about the industry. These documents can be found on the SEC's website, and they are normally loaded with caveats and disclaimers.

If investors can wade through the document, they can glean enough information about the new company to make a call about the valuation -- is it worth buying at the price people are selling?

Buying individual stocks requires a lot of homework, and they can be incredibly risky. Most individual investors should consider very new companies carefully, and experts recommend devoting no more than 2% of your portfolio to any one stock.

Like 1 IPO? Buy a Bunch

An alternative may be investing in one of a handful of mutual funds that invest in IPOs, such as Renaissance Capital's Global IPO Plus Aftermarket.

"We're really looking at investing in these companies that are not well-known yet by the market and that have an ability to get us gains very early in the price discovery," says Shelton Smith.

According to Morningstar, a couple of other prepackaged options are available to investors interested in IPOs, including a long/short fund from Direxion Funds and an IPO ETF from First Trust.

And in July, UBS launched a pair of exchange-traded notes focusing on Internet IPOs.

Ultimately, the way to get rich isn't with one successful investment, but by growing a diversified portfolio over time. Just ignore the fairy tales.

Causation and correlation

Don't use this as an excuse for skipping each morning's pre-school meal, but that research didn't actually reveal a causal link between eating breakfast and academic achievement, at least when it comes to children who aren't clinically malnourished. According to Stats.org, subsequent studies revealed that it's tardiness and absenteeism that tend to cause poor learning experiences. In fact, the breakfast/good grades link is just a correlation: turns out that the sort of parent who packs his or her kid off to school hungry is also the sort of parent who doesn't much care about lateness or playing hooky.

This distinction plagues statisticians. You can often show that there's a statistical link, a correlation, between A and B, but it's much harder to prove that A caused B. For example, advocates for family values often point to research that suggests that children usually do better in households with two parents. But might it be that the sort of people who make good parents are also the sort of people who get married and stay together? Or is it the marriage ceremony and certificate that affect behavior? There's no way I'm going to get involved in that argument.

Financial literacy and financial continence

I am, however, happy to put my two cents into a discussion of the link between knowing about financial matters and managing one's finances well. I'm not suggesting that there's absolutely no causal link. Clearly, those Amish teenagers on "Rumspringa" (a period when Anabaptist Christian adolescents are encouraged to explore the pros and cons of modern America) who have been sheltered from the more predatory inclinations of our financial sector might fare badly as a result of their naiveté and ignorance.

But don't most people who screw up their finances know the "rules" even as they break them? On April 19, ACA International, which is basically a trade body for debt collectors, issued a press release containing tips for consumers for National Financial Literacy Month (April, since you ask). There were six of them:

1. Plan and budget
2. Track your spending
3. Protect your identity
4. Communicate with creditors
5. Communicate with the debt collector (Can't think why ACA would include that one.)
6. Consumers have rights (This made a good point, namely: "Consumers deserve to be treated respectfully and have rights under federal and state law. For more information about consumer rights in debt collection or to ask questions, visit www.askdoctordebt.org.")

Who, among your family, friends, neighbors and colleagues doesn't know this stuff? Who do you know who needs to be told by ACA: "Keep in mind that purchases on credit will need to be repaid at some point in the future?" Anyone? Really, anyone?

Credit card debt and stupidity

Few people run up credit card debt because they're financially illiterate. They do so because they're wildly optimistic about their ability to pay it back easily, or because the prospect of having to do so seems so distant that they don't care.

If you're one of those lucky people who are naturally good at managing your money, then this is your cue to condemn their stupidity. But it's not only stupid people who get themselves into financial trouble.

Clever people struggle too

Twenty years ago, I was living in London, England. One of my best friends at the time was Tarquin (yeah, like I'm going to give you his real name), a 40-something law school professor, and about the most clever man I've ever met. He had two master's degrees from Cambridge, was at the time doing a London University part-time degree in Pure Math (because he "wanted a challenge"), and "for fun" used to read ancient Greek classics. In the original ancient Greek.

One day, Tarquin (still not his real name) called me to say that he was moving out of his apartment and needed somewhere to stay for "a few days." Could he use my partner's and my spare bedroom? That was no problem, and he moved in 48 hours later. Nearly three months after that, my partner suggested, somewhat forcibly, that I should explain to Tarquin that it was time for him to move on. A week later, I was driving him to his next residence, and he said: "Thank you so much for putting up with me for so long. I was totally broke, and would have had nowhere to go if you hadn't helped out."

Honestly, I had no idea he was desperate, and he would have been welcome to stay with us for as long as it took him to get his life back on track if only he'd explained his predicament. But that car journey included a revelation, an epiphany: the cleverest man I'd ever met was arguably worse than dumb old me at managing financial matters. And it certainly works the other way. Many very ignorant and stupid (and tasteless; just Google "McMansions") people become extremely rich.

Credit card problems and empathy/sympathy

So this is a plea. Don't automatically equate unmanageable credit card debt with ignorance and stupidity. Tarquin is far from the only example of someone who's supremely well educated and brilliant who's found himself struggling with his finances.

Maybe your friend, grandchild, cousin or colleague isn't as clever as Tarquin, but that doesn't mean you should despise him for finding himself up to his eyes in debt. Or her eyes; actually, it may be women who are more likely to face credit card debt problems, according to a recent study from the FINRA Foundation.

There may be correlations between problem debt and financial illiteracy, but there may not necessarily be all that many proven causal links. So don't be too quick to judge. However, do, no matter what the evidence says, keep providing breakfast for your kids. They may not do better at school, but they'll probably love you more.

The original article can be found at IndexCreditCards.com:
Making a financial mistake doesn't make you stupid

A: Whoa! Despite all good intentions, you both could get into some sticky situations if you decide to go that route.

Here's a fact you probably won't know unless you work in the retail industry or you spend lots of time on a credit card bulletin board like CardRatings.com's:

Signatures don't matter.

More to the point, what you sign on a receipt only matters to the extent that it looks vaguely like the signature on the back of your credit card. Under merchant agreements with all four major payment platform providers, retailers can't ask for photo ID or challenge a customer about the name on the credit card they present for purchase. All they can do is verify that the signatures match.

I've seen otherwise well-balanced individuals work themselves up into a foaming-at-the-mouth frenzy when discussing this facet of credit card security. Store owners and many customers would love to see the banking industry support checking photo IDs against credit cards at time of purchase. While it's fair game to check identification for certain contractual transactions, most of the time, merchants can lose their charging privileges for this kind of activity.

If you think you're protecting yourself by writing the phrase "SEE ID" on your signature strip, think again. Retailers, under contract, still can't ask for your photo ID unless your signature strip is completely blank. In those cases, they're instructed to refuse the transaction at their discretion. Meanwhile, under today's credit card agreements, all you've done is make a signature that looks like the words "SEE ID."

Instead of letting your sister run around town with your card, which can get you both into trouble with your bank, just issue her a secondary credit card with authorized user privileges. You're not taking on any of her debt or negative credit, and you'll add some significant security features that you won't enjoy if she's just pretending to sign your name. That way, if "someone" starts running up the bill again, you'll both have the power to dispute those charges.

The original article can be found at CardRatings.com:
Should I lend my sister my credit card? Does she sign her own name on the bills?

But that's just not the case. In fact, there are more payday lending storefronts (20,600 according to Community Financial Services Association of America) in the U.S. than there are McDonald's fast-food restaurants (12,804 according to NationMaster.com). The sign in the window might advertise "cash advance loans," "post-dated check loans" or "deferred deposit check loans." It doesn't matter -- they all work the same.

Why is the industry still thriving? Two words: fast cash.

"A payday loan can be approved within a matter of hours and there is typically no credit check," says Theodore W. Connolly, author of the "The Road Out of Debt." "Usually, you write a personal check payable to the payday lender for the amount you wish to borrow plus a fee.  The check is dated for your next payday or another agreeable date within the next couple of weeks when you figure you'll be able to repay the loan."

When you get paid, the lender gets his money. That's the plan, anyway.

What can go wrong? For many people, a lot. Connolly, as counsel at the Boston law practice of Looney & Grossman, had an elderly client who had recently lost her husband. She borrowed based on her paycheck as a concession person at a movie theater. "By the time she came to me, her $250 loan was over $1,000 and the lender was relentless, even though she now only had Social Security as her income and was judgment proof," says Connolly.

Consumer groups have been pushing for limits on fees and interest rates, databases to prevent payday loan rollovers and other measures. In 13 states, payday lending is illegal or made not feasible by state laws. Twenty-one states have pending legislation in the 2012 session to date regarding payday loans, according to the National Conference of State Legislation. The federal Consumer Financial Protection Bureau, with broad power to regulate 'nonbank' financial entities, is also expected to increase regulations of payday lending stores.

You don't need to wait for legislators to help you stay out of trouble with payday lenders, however. All you have to do is read the fine print, calculate the real cost of getting stuck in a payday lending cycle and find some other way to get by until next payday.

Here are six ways payday loans can make you wish you'd found some other way to raise money or wait until you get paid:

1.  Payday loans are incredibly expensive. Your most expensive credit card may have an interest rate of 28% or 36% -- tops. How does an interest rate more than 10 times that high sound? If a $100 payday loan costs you $15 for 10 days, that's an annual percentage rate of almost 400%. Payday lenders are most prevalent in neighborhoods where a significant number of residents cannot qualify for mainstream loans. It's easy money, but Connolly cautions, "accepting money with no credit check has its price, and it's called interest."

2. You can get stuck in a repeat cycle. Some of the more reputable short-term lending operations try to prevent this by maintaining a database of customers to help prevent rollovers, according to Stephen Altobelli, who represents Financial Services of America. "There are good payday loan operators and bad operators," he says.

Nonetheless, according to Center for Responsible Lending research, 76% of payday loans are to pay off old payday loans. The nonprofit consumer group also reported that even though most payday loans are to be paid within two weeks, on average the borrower stays in debt for more than half a year.

"When the day arrives that you have to pay the loan, you usually have two options: pay off the loan or pay a fee and roll over the loan for another two weeks," says Connolly.

3. Debt grows fast at these rates. "You will most likely end up paying three, four or even 10 times the amount you originally borrowed. Debt created by payday loans will often quadruple in just one year," says Connolly. "One tiny mistake can mean lifelong debt."

4. Payday loans are too easy. It takes time to apply for most other loans or credit cards. You can get a payday loan on your lunch hour -- giving you little time to think it over or consider other solutions, including not spending the money at all.

Payday loans carry no right of recession, either. That means if you change your mind shortly after you sign the papers or if your spouse convinces you to call it off, that's too bad. You can't back out.

5. Many payday loan companies require access to your bank account. As a "customer service," they say they will take the money right out of your account. You don't even have to write them a check! Good luck trying to get that stopped, however, when the balance has grown and you can't afford to pay it back and still afford your basic living expenses. If they just keep trying to shove their payment through, you'll get overdraft fees from your bank, too.

6. The day of reckoning, when you owe more than you can repay, can be unpleasant. Some payday loan companies have a reputation for horrendous debt collection practices. The Fair Debt Collection Practices Act should protect you from late night calls, threats of criminal prosecution, harassing you or your neighbors in person and other egregious violations of your rights.

Remember, however, that payday loan companies deal mostly with people who can't get loans through mainstream channels. According to Kristen Hagopian, radio talk show host and author of "Brilliant Frugal Living," payday loans also carry substantial risk to the lender with a default rate of 10% to 20%. These lenders are used to dealing very, very aggressively when people don't pay loans back as they promised.

If you write a check to be deposited later, and you don't have enough funds to cover it when it gets to the bank, both your bank and your payday lender will probably charge you bounced check fees.

Connolly's client was fortunate. Connolly was able to convince the lenders that she had no money or property they could attach. They held off on their threatened lawsuit, she moved to Pennsylvania, and as far as Connolly knows, she has not heard from them again. Not every case is resolved as easily.

"Given the high risk environment, not to mention the higher interest rates, it's obviously preferred for a household to avoid these loans like the plague," says Hagopian. "Do whatever possible to put a small amount of cash aside on a regular basis so as to avoid regular usage of payday loans. Using payday loans on a regular basis -- and paying them off with high interest come the following payday -- is basically throwing good money away."

Actually, there's no such thing, but for a few seconds, before I realized I had stumbled onto the satirical fake news website, The Onion, I completely bought into its fake press release.

The Onion "reported" that Visa held a press event earlier this week to introduce "Visa Voice," a new series of credit cards that talk to the cardholder. They quoted Visa president John Partridge (a real person) saying, "Whenever you're near an item you're hesitant to purchase, Visa Voice offers words of encouragement, such as 'Come on, just go for it!' and 'Trust me -- you're not gonna regret this."

If the cardholder didn't make a purchase, The Onion went on to say, the card would start whispering, "You know you want it."

Almost too close to home, it was this hilarious faux news item on The Onion that got me thinking that the humorists there might actually be on to something. Why? Because with some talking phones already possessing the capability to double as a credit card, and cardholders increasingly using mobile devices to make purchases, it probably won't be too much longer before our credit cards do actually start talking to us.

So to take The Onion's idea a little further, here are some of my ideas for what our credit cards could start helping us with in the future. Credit card technology innovators, take note.

Credit cards that offer financial advice

Say you're about to buy something big, like a 65-inch 3D plasma TV. Wouldn't it be nice to have a credit card that could advise you on how much it'll cost you if you take 6 or 12 months to pay it off? Yes, I know there are old-fashioned devices like calculators that can help you figure that out, but if it's an impulse buy, it's unlikely you're going to do something responsible like that.

But what if you're paying with the Sage from Chase card? Your credit card could point out the true cost of paying for that TV over time, or perhaps offer context-sensitive voice prompts like: "You might want to consider buying the 51-inch TV over there that's $700 less. It's a smaller TV, but it would still transform your living room into an impressive home theater."

Credit cards that help you shop smarter

Mark my words. One of these days, your Insider by Discover Card will cheerfully tell you, "We're running a promotion in three weeks where you get triple reward points on buying groceries, so you may want to wait until next month to really stock up."

Credit cards that tell you when you're about to max out

It's going to happen someday. You'll wave your Citi Headroom Card in front of an item to see its cost, and you'll hear a voice that will say, "Dude, are you kidding? You're six dollars from going over your credit limit." Of course, you'll want to have your volume on low, otherwise you could end up sharing your financial woes with half the store.

Credit cards that remind you when payment is due

Yeah, that's what calendars are for, but with the melding of credit cards and phones that talk, the technology is already in place. But, of course, right now, you still have to prompt your phone to prompt you when your bill is going to be due. I'm thinking it would be nice for your Tickler Card from American Express to speak up on its own, and let you know on, say the 22nd or 23rd, "Hey, your bill is due at 5 p.m. on the 24th."

The future of credit cards

Far-fetched? I think it's actually quite likely that someday we will engage in conversation with our credit cards. After all, bank executives may enjoy seeing their profits rise from late fees and higher interest rates, but they also want customers who are happy with their credit cards and thus, continue to use and spend on them.

The Onion may have been kidding about Visa Voice, but I'm not. Consumer loyalty is a challenge for corporations and marketers these days, and credit cards that act like an ally and confidant might be the way to get cardholders to stick around and not look for some other shiny plastic new pal.

The original article can be found at CardRatings.com:
If your credit card could talk, what would it say?

I'm 24 and have one credit card that I've had since March 2011. I pay it off in full every month, and only have it as a way to establish a good credit history and earn a little cash back. It has no annual fee, gets some cash back and has a credit limit of $1,500. At the beginning of the month between the statement and the payment for that statement being processed, it often has a balance of $500-$600. I'm considering applying for an Amazon rewards card with no annual fee. I don't need it, but it would earn better rewards than my current card, comes with a $50 gift card, and having both cards would decrease my credit utilization. Would getting a second card be good for my credit score? If not, should I make more charges to my debit card to keep my credit card balance lower?

- Person 

Dear Person,

I wonder if you know how unusually well you're doing with credit, especially at such a young age. Your account is excellent, as the fees appear to be minimal, and it comes with a rewards program that allows you to earn cash-back points. Even better, you're charging hundreds of dollars on a regular basis, but consistently paying the entire balance off every month. That's very impressive. In theory, the steps to getting a great card and using it advantageously are simple, but doing it can be tougher. So give yourself a pat on the back for a job well done -- you deserve it.

Now you can consider adding another card, because I think it's a fabulous idea. You may not need the extra plastic for more purchases, but you're right in that it can help build your credit rating even further.

So far you're covering the most crucial aspects of a FICO score: paying on time and keeping balances down to well below the amount you can charge. The next most important factor is the length of time you've had and used credit, and there's nothing you can do about that but continue to borrow and repay responsibly.

What you can do, though, is add to your credit collection. Owning a variety of credit instruments is a relatively minor scoring factor, but it's still a move in the right direction. Therefore, a retail card such as the Amazon credit card that you're thinking about will work in your favor.

Other benefits of that account are the perks. I don't think a gift of $50 ought to sway you, but if you shop on the site quite a bit, then you'll accumulate plenty of points that you can cash in for books and things. As long as you continue to be balance-free, you'll come out ahead.

For these reasons, I say go forth and apply for the Amazon card -- but only after you check your credit reports and FICO scores first to be sure that you qualify. Go to AnnualCreditReport.com to pull a free copy of your credit report once a year from each of the three credit bureaus. And for about $20, you can order your credit score online at MyFICO.com. If you don't check, and Amazon turns you down due to a low credit score or bad information on your credit report, you'll incur a minor ding on your credit score due to the hard inquiryhard inquiry. The impact will be minor, but why go down when you want to go up?

Assuming you're approved, though, start shopping with it so you can maximize your rewards. Keep your other account active and use it occasionally as well. If you charge only what you'll send when the bill comes in, you don't have to worry about your balance before you make a payment. Interest won't be applied and your score should rise like the sun.

Stay awesome, Timothy!

They got me as I headed for the train to the airport, taking a little over $80 and other wallet contents. (Also my peace of mind.)

Afterward I did a mental inventory of what I'd lost. It wasn't easy, given that I hyperventilating on adrenaline and rage. For days I had  “Oh, crap” moments as I realized what else had been taken: debit and credit cards, bank deposit slip, loyalty cards, library card, Mensa card and a check from my brand-new business account. (I'd planned to reimburse my roommate, who'd already paid for the hotel.)

This isn't an article about avoiding street crime but rather about reducing its impact, from minor aggravation (hello, friendly folks at the Division of Motor Vehicles!) to the potential for credit-card and identity fraud. I'd like for you to learn from what I did right and especially from what I did wrong.

What's in your wallet?

Quick! Name everything in your billfold. No peeking.

Nope, I couldn't do it either. (See “Oh, crap,” above.) Among other things, I was carrying a gift card and a loyalty card to a local burger joint, my Seattle library card, and bread-outlet and teriyaki-joint punch cards. The wallet also held a card for a department store I rarely enter. Why? Inertia. I left it in there after using it once.

Why was I carrying that stuff to a business weekend in Chicago? My only excuse is that I was up to my hairline in deadline, working right up until 10 minutes before I headed for the light rail. Thus I skipped my usual pre-travel routine, i.e., paring down my wallet and putting my driver's license in a pants pocket for easy airport security access.

Right now, before you put it off for another six months, make a list of what's in your wallet. Should you meet your own trio of thieving knuckleheads, you'll know which calls you need to make.

List only the 800 number for each card, obviously, rather than the card number itself. The customer service rep can verify your identity through security questions.

Some options for storing your oh-crap list: with a service like Wallet Garden, on a thumb drive, as a Google doc, e-mailed to yourself, or on your phone, tablet or laptop.

As noted, paranoiacs like me do paper versions, on the theory that muggers might find a smartphone or tablet awfully attractive.

Just don't keep the list in your wallet.

Set up a perimeter

Use that list immediately. Don't wait until the next morning or the next business day. Less than 15 minutes after the wallet left my possession those punks were using my credit card to buy sandwiches.

Within an hour of the mugging I'd canceled several credit and debit cards and  frozen four bank accounts (personal and business). Upon returning to Seattle I closed the bank accounts on the off-chance the thieves were organized enough to print fake checks.

Here's an example of the aggravation factor mentioned earlier: Closing those accounts meant I had to re-do automated transactions. Those included PayPal, utility bills, automated savings at an online bank, a monthly charitable contribution, and payments for health and life insurance.

Corollary aggravation: I neglected to re-establish every account promptly. It's downright irritating when a cell-phone company not only gives you the electronic stink-eye, but is justified in doing so - after all, the payment didn't clear because you forgot to give the new credit card number.

I canceled my library card, too, lest someone borrow and keep a ton of books and DVDs in my name.

Please remove anything with bank routing numbers from your wallet, bag or briefcase. If you have automatic payments, list which entities are connected to which account. After a couple of years you might forget you even have life insurance, let alone which credit card covers the monthly tariff.

What's NOT in your wallet

As noted, there was no reason to carry that department-store credit card. Lesson learned: The replacement plastic is stored in a locked cabinet.

When I'm home, my wallet holds one credit card and very little cash, and I keep my debit card in a coat pocket. While traveling I carry some cash in my wallet but most of it gets divided between a front pants pocket and a coat pocket. I also put a second credit card in another coat pocket.

My theory/fondest hope is that a thief would be satisfied with the cash and card in my wallet. If he asked me to turn out my pants pockets, he'd get only some of my money. He's less likely to have me empty all four coat pockets, too. (And one of my jackets has a fifth, hidden pocket.)

Guard your ID

As noted, my driver's license usually isn't in my wallet when I travel. Not this time, dammit. Fortunately, I was able to order a new one by mail.

I recently learned that a relative stored his Social Security card in his wallet. I suggested he take it out. He's lucky that he never got robbed, since that card is gold to an identity thief.

However, the SS number is part of his Medicare card ID. Here's a solution: Photocopy the card, then black-Sharpie-out the last four digits. Carry this in your wallet, bringing the actual card out only for medical appointments.

If you get hit by a bus, the hospital will at least know you have Medicare. The billing office can get the last four digits when you wake up.

An ordinary health insurance card is potentially damaging, too, due to the possibility of medical identify theft. (Liz Weston wrote an interesting and scary article about this for MSN Money.) If someone uses your insurance card to get emergency-room care, his medical conditions become yours. Suppose you're turned down for life insurance on the grounds that you're riddled with hepatitis?

Think that's alarmist? It isn't. Rebecca Busch, the author of “Healthcare Fraud: Auditing and Detection Guide,” notes that one victim nearly got the wrong blood during surgery because “her” records showed a pregnant meth addict's blood type. And for horrifying extra credit: After the addict gave birth and skedaddled, the state tried to take custody of the identity theft victim's kids.

Consider doctoring (so to speak) your health-care card a la the Medicare Sharpie maneuver. In my case, I arranged with the HMO to require photo identification; I don't carry the card in my billfold any longer, either.

Be careful what you carry in yours. Getting robbed is bad enough. Frantically trying to remember what you've lost just adds to the trauma. Please take a few minutes now to do a wallet audit. Make that list, too - and believe me when I say I hope you never need it.

The original article can be found at GetRichSlowly.org:
How to Do a Wallet Audit

This post is from GRS staff writer Donna Freedman. Donna writes the Frugal Cool blog for MSN Money, and writes about frugality and intentional living at Surviving And Thriving.

Credit and debit card transactions leave a trail -- a very revealing and detailed trail that is constantly being exploited for retailers' gains. A record of your purchases, combined with demographic data and crunched by statisticians, tells retailers personal details about you that you may not have shared with your closest friends. But there are some things you can do to limit your exposure.

This kind of analysis, called data mining, has been going on for years, but came to prominence earlier this year after an irate father complained loudly to the retailer Target about his teenage daughter receiving coupons for diapers and other baby products. A few days later the man retracted his complaint. Target had hired a statistician to analyze its customers' purchase records and his algorithm had -- correctly, it turned out -- calculated that this man's daughter was pregnant.

This story, recounted in Charles Duhigg's book "The Power of Habit" and in an article appearing in "The New York Times Magazine" set off a debate about privacy and consumer rights. It also exposed a central dilemma of modern life: Purchase records, combined with publicly available demographic data, gives statisticians and the retailers who employ them a surprisingly detailed view of who their customers are, and reveal information those customers might prefer to keep secret. Short of paying cash for every transaction and perhaps moving to an underground bunker, there's little consumers can do about it.

"Tracking purchases is the most significant way retailers gather information," says Jacob D. Furst, director of DePaul Information Assurance Center, which conducts research, workshops and courses on privacy and security issues at DePaul University in Chicago. "Bringing you into the store is always the most important thing," he says. "Rarely do shoppers go into a store and buy specifically the items they went there for. We almost always buy others."

Furst says most retailers don't concern themselves with individual shoppers. "They're not going to look at one or two shoppers or one or two consumers. They look at patterns, and based on these patterns, they will make strategic decisions."

"The most important thing that data is used for is to determine which products consumers prefer, and to make sure what's on the shelf is what they want to buy," explains Kurt Jetta, CEO of TABS Group, a consumer analytics company in Shelton, Conn. "For example, we're doing one project for a retail chain where we found that in areas with high African-American populations, not only do they buy African-American hair care products and cosmetics specifically, but they buy grooming products in general at a very high level. With that kind of information, the retailer can make sure all those products are stocked and available for them."

Where's the harm?

If the only purpose of gathering personal information is to sell shoppers the products they need and want, is there any harm in it? "Every quarter we have a discussion about privacy with my students, and there's always a debate," Furst says. "For me, the key thing is that people be informed."

As he and others point out, there is often a trade-off between information shared and a benefit received, usually in the form of a discount or special offer. The most obvious case is the reward card or other retailer loyalty program that collects consumer data and tracks spending habits, but offers special discounts in exchange. "You have to love the people who request not to be tracked, but still want relevant ads served to them," says Justin Miller, search engine marketing consultant at DaBrian Marketing Group. "Sorry, people cannot have the best of both worlds."

Convenience is another benefit consumers gain when they're willing to share information, beginning with the ease of using a credit card for purchases, rather than cash (since most cash purchases can't be tracked). "I love the feature in online shopping where I enter my password and all my credit card information is filled in," Furst says.

Not all consumers are comfortable with the thought of having their personal information tracked, even if the only purpose is to send them special offers. "Omniscient retailers are like stalkers, but without a probable threat of physical jeopardy," says Joseph Ohler Jr., a Web developer in Black Earth, Wisc.. Adds Mark van de Hoek, an engineer at Clearwire, "I make it a point NOT to deal with retailers who invade my privacy in that fashion."

Other consumers believe it may be worth it. "If I get enough benefit out of it -- discounts, targeted offers, etc. -- it's a trade-off that I might be willing to make," says Traci Lee Chu, vice president of marketing at UpStream, which provides marketing performance software. "Some retailers take 5% off your total bill, but you know your purchases are being tracked."

Your data in perpetuity

If today's uses for customer data are benign, it's not hard to imagine more-sinister scenarios in the not-too-distant future. "Let's say you buy a lot of unhealthy products," says Marilyn Prosch, associate professor at the Arizona State University's W.P. Carey School of Business, and cofounder of a data privacy lab. "Can that information be used when you later apply for health insurance?"

It's even more disturbing to consider what credit card companies might do with your data. In addition to such information as your employer, income and other information gathered when you applied for the card, they also have more complete data on your spending than any individual retailer.

"If a person buys a new TV at an electronics shop and furniture at a furniture store and linens and towels at a bed and bath store -- and is still at the same address as the previous 10 years, it may mean that person is getting a divorce," says Howard Dvorkin, founder of ConsolidatedCredit.org. A credit card company may keep close watch on this account, since the financial pressures of divorce can cause people to default on their debts.

So far, he says, this is how credit card companies are using the data they gather, and in many cases, their own agreements limit how much of your information they can share with third parties. But, Dvorkin says, both things can change. "They're legally obligated to provide privacy policies that tell you what they will do with your data. But there's a school of thought that says if they've disclosed that they're going to share your information and you don't object, they have permission to do it. The devil is in the details of the credit card agreements -- and 90% or 95% of credit card holders never read them." You can opt out, he adds, "But opting out might mean they don't offer you credit."

He believes that in time, credit card companies will sell the information they have about their customers to other companies to make up for fees they can no longer charge. "The Credit CARD Act limited how much they can make, and they're sitting on all this valuable data. And today's slogan is that data is the new oil," says Dvorkin. Companies that purchase such information will likely use it mostly for marketing, but it could be used for other purposes, such as making employment or insurance decisions.

4 tips to minimize data sharing

Given the potential for retailers to invade your privacy, and possibly use data in ways you don't want, the logical choice would seem to be to withhold all personal information when making purchases. There's only one problem: It's virtually impossible to do. "It's really hard to imagine a situation in which you never give out personal information," Furst says. "That would amount to staying inside all the time behind locked doors."

Nevertheless, here are four techniques for at least reducing the amount of personal information you share with retailers, although they come with varying amounts of inconvenience:

1. Use cash or prepaid gift cards. These can't be tracked back to an individual, so they don't produce any information for data miners to use. One strategy is to use cash or prepaid cards when making purchases you might want to keep private, such as hangover pills, cigarettes or certain medications. This approach can help you protect your privacy, but don't expect that protection to be absolute. Even if the only purchases you make with credit or debit cards seem completely innocuous, statisticians may be able to infer personal information from them. Target, for example, found one strong indicator of pregnancy is the purchase of unscented lotion.

2. Don't give up information willingly. "If a retailer asks for your phone number or ZIP code, you can ask 'Why do you need to know?'" Jetta says. "My dad does that all the time." And if you don't like the answer, you can politely refuse to provide that information.

3. Don't overshare online. Stop and think before filling out membership forms at online stores, since most offer the option to complete your purchase as a "guest." By the same token, unless you're completely comfortable sharing all your Facebook information, don't log into online stores using your Facebook membership.

This is good advice even if you think sharing your Facebook info is no big deal. "Keep in mind that 80% of people in this country can be identified with only three pieces of information: Their birth date, gender and ZIP code," Prosch says. "Once a company has that, it can get your name and address and start sharing your information."

4. Opt out -- if you have the patience. Reading a retailer's privacy policy is no one's idea of fun, but it's useful to know whether and how a company will share your information with others, and sometimes instructions are provided for opting out of data gathering or sharing. Check the Privacy Rights Clearinghouse for up-to-date information on which companies are gathering your information and what, if anything, you can do about it. Google, which many people use for searching the Web, storing photographs, email, shopping, and more, can pose a particular privacy concern. There are instructions for opting out of much of Google's tracking that you can find by clicking the "privacy and terms" link on the Google home page.

Ultimately, though, there's nothing you can do to fully prevent retailers from learning a lot about you. "If I took the voter roles and census data for a neighborhood, I could go to Google Earth and look at how many houses have jungle gyms and overlay census income data and identify the average square footage of the houses, and I could identify which houses have kids," Jetta says. "I could identify when they were born and understand the probability that within the next three years another one's going to be born. The combinations are infinite. Those are publicly available sources of information that you can't shut down, and there will always be a statistician like me to figure it out."

I have a 30-year loan on my townhouse with 6% interest. I paid $72,500 and three years later I owe about $70,000. My only other debt is a six-year new car loan with 11.6% interest. I paid $24,000 and have not made my first payment yet.

If I have extra money each month to pay toward one of these debts, say, $400, which one should it go to? Things to factor in: Property values seem to have dropped the value of my house by about $10,000. I don't know how long I'll live there. I wanted to calculate an answer, but wasn't even sure which numbers to include. I want to get these debts paid off so I can start seriously saving for retirement.  

- Kylie

Dear Kylie,

Congrats on your new car. Hope you enjoy it! Your plan for paying off debts and then saving for retirement is a good one. Let's see if we can't find a way to maximize the value of that $400 per month.

Let's begin with the obvious. There sure are a lot of numbers involved. You could spend days designing a spreadsheet to try to figure all the combinations. So the first step, and perhaps the most critical one, is to decide which variables are important to getting the right answer.

To find the right ones, we need to refine the question a bit. What I think you're asking is, "Where can I put that $400 each month that will provide the most value to me in the future?" Or, to put it another way, "Where will this money add the most to my future net worth?"

With that in mind, we can eliminate some variables. We'll begin with the townhouse. Who knows whether the value will go up or down in the next few years. It really doesn't matter. Prepaying your mortgage won't increase or decrease the value of the townhouse. And the value of the townhouse won't affect the amount still due on the mortgage. So we can focus our attention on how prepayments will affect the balance on the mortgage and forget about the value of the townhouse.The same thing holds true for the car loan. The car will depreciate whether or not you prepay the loan. Your only concern is how prepayments affect the balance of the loan.

There is one exception. Before you prepay a car loan, you need to make sure that prepayments go to reducing principal. Some nasty loans don't allow for principal reductions. Prepayments just go to your next scheduled payment and there's almost no benefit to prepaying. Dig out your contract and check it for the section on prepayment.

Now let's compare the two loans. That will be fairly simple. All we need to do is to look at the interest rates. You get out of debt faster by paying down the loan with the highest rate first. So if you're going to pay off a loan, put the auto loan first in line.

But let's take this one step further. Could you be better off paying debts on schedule and use the $400 to begin saving for retirement now? To answer that question, we need to estimate the return on a retirement investment.

You don't say where you would invest your retirement savings. We'll assume that you'd use an individual retirement account or 401(k) plan to avoid taxes. You also don't say what you would invest in. We'll assume that you choose a balanced mutual fund that has been earning in the 7% range.

Before we can compare that 7% return to the cost of borrowing, we need to consider two factors that could affect how much your investment/savings earns. The first consideration is taxes. If you were investing/saving outside a retirement plan, you'd need to subtract any taxes from your return. But, in this case that's not applicable.

The second consideration applies to many 401(k) accounts. That's any employer matching funds. For instance, if your employer matches 50% of your entire contribution, that's just the same as if your $1 earns 50 cents the first year and then 7% for every year after. In the short term, that's a 57% return!

So, if you have an employer match, you'll be wise to use that $400 for retirement savings, even if that means delaying paying off debts. Do this at least to the point that the match runs out. If your employer caps its match, after you've reached the cap, you'd compare the savings 7% to the car loan's 11.6% -- and use money to pay off the car loan first.

It's possible that other considerations would take priority over the return, but that doesn't happen that often. One example would be if you were trying to pull up your credit score. In that case, paying off debts could be more important than savings.

You're in a great situation, Kylie. Your frugal lifestyle has allowed you to begin paying down debts and accumulating wealth.

See related: Repaying early on a loan, Transfer car loan to a low-rate credit card? Yes, but carefully

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