I can’t tell how my portfolio is doing today, because somebody stole my laptop!

Investors are always asking me about the different risks they face. They regularly ask me about investment risk. They occasionally ask me about the risks associated with their data being online. In order to help address these items, we launched the “Let’s talk about risk” series, and the “Online security for investors” series of articles. They rarely ask me, or anybody else, what they could be doing to mitigate other risks in their lives, but I think they should. We are adding another layer of articles to these different discussions, a discussion of both physical security and digital security best practices, of which this is the first example. If people like it, we will add more, and some articles that are even more granular.

First a word about why we think this is worth including in the discussion. Financial advisors seem to prefer a narrow definition of risk management, to keep it easy to talk about. The reality is far more complex. In our industry, it is commonplace for us to skip past fundamentals and into complexities. We add hedging strategies before we talk about good practices. At PFYT, we prefer to cover these things in order. Exhaust the best practices for a situation before you add more levels of sophistication. When we look at the kinds of risks we are exposed to every day, there are things that can kill us, things that can hurt us or make us sick, things that can make us poorer, and things that can inconvenience us. I have many friends and clients that are really concerned about using non-GMO eggs, yet drive without their seatbelts on and leave a key permanently under the front door mat. This is not a statement about the possible effects of modified food. That is not my field. All I am trying to point out is that most of us see certain risks in the world, which we identify with cognitively. We acknowledge those risks, and protect against them, but we are blind to others. The actual exposure we have to the risks doesn’t always figure in our perspective. Car wrecks affect far more people than terrorists or home invaders (5 million or so in 2013 for car wrecks, and about a million a year for home invasions, and something between 15 and 50 per year for terrorism, depending on the study and criteria used…) , but we worry about the more striking risks more. A lot of the risks that we overlook can be mitigated somewhat by more situational awareness, and slightly better personal security practices. This is where eyes start to roll, generally.   Part of the problem is that we don’t really see ourselves as potential victims. Over the last year or three, I personally know at least a dozen people that have been victims of some sort of crime, and they are all just like you and me. Like you and me, many of them had a pretty relaxed view of personal security. I never really talked with most of them about this, but two of them laughed at me at some point when I brought the subject of personal security up to them.

Sadly, security is no laughing matter. We tend to think about the headlines relating to identity theft, and worry about becoming an identity theft victim, because we can picture it happening to ourselves, whereas other kinds of crime seem more remote. Statistically this may be true. Certain people might be more likely to be victims of one crime than another, depending upon how we look at the numbers. However that doesn’t necessarily mean that luck (or its lack) might not play a role, sometimes crime is opportunistic, and unlikely candidates are at the wrong place at the wrong time. We could all take steps to make ourselves less appealing to criminals, or take steps to make it harder for criminals to victimize us. Rather than getting angry at the big companies that have data breaches, leaking our personal information like a rusty sink, we should pause and look at what we ourselves can do to make ourselves safer from crime every day. After all, Anthem doesn’t take my advice about security, and I doubt that Target would listen to me either, so let’s focus on what we can influence.

First, we should take a look at the most common crimes, and see what we need to protect ourselves against. For each type of crime, there are steps we can take. The Bureau of Justice Statistics publishes the National Crime Victimization Survey, which collects information of crimes both reported and not reported on persons twelve and older. It is a decent data set. The results are published HERE. I recommend anybody interested in the topic check them out. All of the methodology is there, and the prevalence figures and lots of other good stuff. For our purposes today, we can do with some generalizations.

* Theft is different from Burglary in these figures in that a Burglar has no right to be in the house, a thief is a person who has a right to be in the house, but steals something. (A guest, a maid, a delivery person, etc…)

If we assume that there are about 318 Million people in the United States, the above table would mean there would be about 6.36 Million incidents of violent crime, 7.34 Million Burglaries, 1.3 Million car thefts, and almost 29 Million thefts (generally from the home). Feel free to check the math. We don’t have Identity theft figures in for 2014 yet, but I think we can use the last released data, which was 2012 to make some judgments. In 2012 it is estimated that 16.6 Million people were victims of identity theft, and about 14% of them suffered out-of-pocket losses as a result. Of those, about half of them suffered a loss of greater than 99 dollars.( http://www.bjs.gov/content/pub/press/vit12pr.cfm). So doing the math, that means that the odds of having identity theft cost you are a lot lower than the headlines might lead you to believe. There would be roughly 1.16 Million individuals that were damaged by this crime.

I do not mean to minimize identity theft. The estimates are that the financial losses in 2012 were about $24.7 Billion. What I am saying is that the legal structures and the nature of the crime mean that we share this burden amongst us all far more than it is borne by the individual victim. Of course there are very tragic cases where people are severely damaged by identity theft, so we will include this in our list of things to protect against, I just want to point out that other kinds of victimization more frequently have far more direct consequences.

So what do you do to keep yourself safe? For one thing, download our “Personal Security Audit.” The audit is a checklist of best practices, which we will talk about here.  Mostly this comes down to thinking about where the gaps are.   Look around yourself. We mostly go through life without looking around us that closely. We are on the phone, or thinking about a big meeting, or late for little Jenny’s soccer practice. We are rarely present at the times when we are at risk. That is a significant contributor to how con artists and predators and burglars get into our lives. I am as guilty of this as anybody. I multitask. I am on the phone, or listening to news (or an audiobook or podcast) on it. I can’t even begin to describe the number of times I get startled looks as I wander through the grocery store at night seemingly talking to myself, while I talk on my cellphone headset.

When you are at home look around at where you might be vulnerable. Could a thief break in and cart off your computer and steal you blind? Well if that is so, I think a properly encrypted hard drive is your solution.   Look at your doors and windows, could someone open them easily or kick them in? Do you never lock them, or leave keys around? These are the kinds of things you can fix.   If you have a key floating around under a rock or in a potted plant…please go collect it now. Lock your garage when you are away, or thieves will happily back a furnace repair truck in and clean you out. Is all your precious heirloom jewelry in the top drawer of your dresser, along with a firearm that could be stolen and cause harm to others? Are they sitting on top of your passport and social security card? Ok. That is fixable with a safe or two.

In terms of the kind of crime we are all statistically most likely to face, there is no doubt that it is theft. The numbers we reviewed earlier clearly show that it is by far the most likely problem. There were theoretically 29 Million or so thefts in the US in 2014, and about 16 Million identity thefts, of which about 1 Million or so people suffered a loss. There were 7 million or so burglaries and 6 or so million violent crimes. That means our first priority, viewing our protection regime strictly from the incidence perspective, is to protect against theft.

Theft is an insidious crime, because it is about the trust we place in the people around us.*   It is about the worker that steals money from a drawer in our house, and the friend of our kids who steals a prescription painkiller from the medicine cabinet, or the gun from our nightstand. It is the kind of crime that seems so unlikely, because we cannot imagine that the people that we allow into our lives could do something like this to us. About 8% of us find out that we were mistaken.

The good news is that (according to the NCVS “Crimes Against the Elderly” study) theft, like most categories of crime, has an incidence that seemingly declines as we age. On Average from 2003-2013, there were 192 thefts per 1000 households amongst “under 24’s”, 136 in the 24-49 age group, and 102 for folks 50-64, and only 51 for people 65 and older. However that still means that a 65 year old is twice as likely to have something stolen by someone they know than to have their house burglarized. Burglary statistics, by the way, drop off more slowly. Burglars seemingly know that older folks make good targets.

By that logic, you should go through the following process. First, think about who has access to your valuables. Do you regularly have crowds of people in your home? Think about how well you really know those people. I once had a reasonably significant sum of money stolen by a cleaning service. I couldn’t prove it, so all I could really do was fire them. I complained to them, somebody probably got fired eventually. I got apologies from their management. They were not bonded. I was younger then and didn’t know better. Now I ask a lot more about the hiring practices of anybody I let into my home. I think about surety bonds, and the like. In the end, the problem could have been prevented if I just didn’t leave the money in a drawer. In another case, someone I know was having renovations done on her house, and awoke from a nap with her dog to the sound of an intruder’s footsteps in her kitchen. The police postulated that one of the workers had left a door unlocked to come back and rob her, and her ferociously barking German Shepherd scared them off before they could get well into it. Do you leave things in your car, so that somebody might take them, or do you leave money around the house where nimble fingers can get at it? Easy to fix, and your statistics just probably improved. Consider whether you have your prescriptions mailed to your home where people can get them out of the mailbox. My father once found a neighbors prescription bottles scattered on his front lawn. The man had them delivered by U.S. Mail, and they were rifled by a passing thief, possibly somebody who knew about the delivery. Unfortunately, the contents of this particular delivery must not have been very interesting, or the “good stuff” got taken and the other stuff got tossed. The moral of these stories is that some fairly simple habits can go a long way. Get a safe, have it properly installed and keep your valuables locked. Encrypt your computer, and keep track of who has access to your house.  Keep your valuable papers in a locked filing cabinet. This will not stop a burglar, but it will prevent an opportunistic thief.   Don’t leave valuables laying around in the car. For more tips, refer to the Personal Security Audit.

The next step, once you have protected loose valuables is to secure the property and yourself when you are within it. Better locks, more light, a security system. Limit keys. When you are not around, have somebody check the house.   A professional will always get in, but hopefully you have already limited the amount of damage they can do by locking your valuables into a safe and encrypting your computer. You can also make their life difficult with strong doors, with double keyed deadbolts and reinforced doorframes and a garage door that cannot be opened when you are away. Most garage doors can be security locked on the inside. It really slows down a burglar when they can’t easily load things into the truck behind a closed garage door. Slowing down the burglar is worth more than it seems. The more ways that a burglar is slowed down on the way into your home, in the process of rifling through your possessions, and trying get out with your possessions, the more time they are exposed to being caught. Even with a burglar alarm, there is response time.  Even when you are home, stronger security will protect you from home invasions, which are basically burglaries when you are home, sometimes with added violence. At the very least the security measures will slow an intruder down and get help there faster. At the more extreme end of this spectrum, a structurally reinforced doorway to a bedroom or other accessible room creates a safer place to which you can retreat and wait for help in the event of a home invasion. Again, there are more ideas in the audit handout.

Identity theft, unlike traditional theft and like burglary, does not fundamentally drop with the age of the victim. At the moment it looks like seniors experience fewer incidents of identity theft than do the other classes of adults over 24, but they experience more than the “younger than 24” group.   This makes sense when you consider the dynamics of that group statistically. It includes twelve year-olds, which do not make a useful identity theft target. Let’ just say that identity theft is a crime with mechanisms that are constantly changing, and it is such a fast growing category in the big picture that it is hard to generalize about it. We do know that some basic practices make a great difference. First, be mindful about how you handle your papers. Anything with “Personally Identifiable Information” should be shredded or burned. A good cross-cut shredder that can handle a larger volume than you suspect you need can handle this task. Most office supply stores charge by the pound for secure shredding, but be careful about the temptations to let your papers pile up.  Keeping your personal papers secured in the house, as mentioned before, is also important. With your social media, email and other online activities, be thoughtful about what information you give out. Consider InPrivate browsing and the other similar settings on your browser. Don’t share information with anybody that doesn’t have a good reason for needing it. I personally avoid surveys. Aside from a privacy intrusion, they are really annoying. I would go to our privacy resources page and get myself opted out of every possible robo-call and mailer in the world. I have a ruthless junk mail filtering system on my email. Never, EVER click on a link in a dubious email. If you get an email that looks like it is from a trusted source, but is unsolicited and obviously a form letter, I wouldn’t click on any links. If it is from a web site you use, go their directly instead to deal with anything that is needed. Have good anti-spyware, and anti-virus on your computer. If you do all of these things, and some other that are in our Security Audit, I think you radically reduce the odds that you are the next victim. Remember, you don’t control what they do at your favorite online retailer. You can’t protect them from being hacked, or prevent the information they have about you from leaking. You can do something for yourself. Follow these tips, and also consider getting a good password manager so you can make solid passwords and use different ones everywhere. At the very least, make better passwords yourself, for password tips, check out our Password articles.

The last item on our agenda is your physical safety when outside the home. This is candidly too big a topic for a paragraph. From a financial planning perspective, I would say that you are statistically more likely to be in a car crash than be assaulted or robbed while out in the world. I would also say that you are way less likely to be a victim of violence where the perpetrator is a stranger than when the person is known to you. This is interesting because Robbery has the highest incidence of all the violent crimes.   All this data is in the Elder Crime study I referenced. It breaks this down by all age groups, and as hard to believe as it might be, this what the numbers say. It also seems that violence perpetrated on younger victims has a higher weighting on incidence away from the home, and as people get older the odds increase that any violence will happen in or around their home, and therefore the odds decrease that the violence will occur away from the home.  

Going back to our basic model for this piece, the best things that you can do involve paying attention to your surroundings, listening to your instincts if you feel uncertain, and making wise decisions about where you go, and how you go there. Pay attention to the people around you, and be prepared. I am not talking about a severe case of hypervigilance, simply a deep breath and a little observation.   In fluid situations, where you might feel like you are being driven by circumstances take a mental step back and review your situation. A deep breath. For example, a common method of robbery and kidnapping is to create an intentional fender bender, preferably on a dark lonely road, and to snatch the party when they get out to exchange information. This generally works because the driver is flustered. Pause, breathe and think about what is about to happen. Are you about to get out of your car in a dark deserted place, to face off with a complete stranger? Consider how that could go… Also people are victimized getting into and out of their cars, because they are focused on finding their car, and/or retrieving their keys. We list some best practices in the guide. There are lots of other sources around, take a survey of them all and figure out what works for you. All best practices boil down to common sense and awareness.

We work in the world of financial planning, and at the behest of our clients we plan for lots of scenarios, some of which are statistically less likely than possibilities discussed in this article. I am not a scaremonger, and I am not on a soapbox about the decline of western civilization. I couldn’t really be on that soapbox even if I wanted. All indications are that these crime rates have been declining steadily for years and years, and show no indication of reversing at this point. This is great news for all of us.   If we are helping people develop a plan for how they would cope with their house burning down, we should probably deal with things that are statistically more likely, and I hope this article, and any related articles I decide to do as follow-ups will help in that process.

Here are a few other things that come out of their studies. First, violent crime against people with disabilities is more than twice as high as the rate for their able peers. (For the data, click HERE.) If someone in your world has a differing ability, you should think about ways to help them to stay safe. Second, the younger you are (at least in this context) the more likely you are to be a victim of one of these crimes (except perhaps ID theft). That means you need to be even more cautious, and candidly it is pretty unlikely that you will be. Developmentally, these are risk-taking years, and accurate risk perception hasn’t really settled in yet. The world can be a bit of a jungle as the saying goes, and we want you to be safe. If you are in one of the older groups, and you have somebody in the highest risk group in your life…we want you to help them to be more safe. We each have limitations on how much we can influence others, but every bit counts.

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* There are a number of different kinds of crime that are committed by the people around us. This article is not going to tackle the issues surrounding acquaintance rape, domestic abuse, or other violent crimes committed by people that we are supposed to be able to trust, except to say that someone in these circumstances should seek help. There are lots of resources online and in most every community for these situations. We encourage anybody who needs them to seek out these resources.   These kinds of situations are well beyond our expertise.