No, it’s not a budget.
It’s not a checking account.
It’s not a 401(k).
Those are all good tools, but what I’m talking about is something most people have never heard of and is incredibly vital to protecting yourself from identity theft. It’s also an instrumental part of a good estate plan.
It’s called a password manager.
In this post, I’ll talk about what a password manager is, why you need one, and how to get one. I’ll focus mainly on how a password manager can help protect you from identity theft online.
After covering the “what, why, and how” as it relates to financial security in this post, I’ll take part two of this series to talk about how a password manager is a vital component to an estate plan in today’s digital age and how to include it in something I’ve referred to in another post as your I.C.E. (In Case of Emergency) folder (along with the other items to include in that folder).
What is a password manager?
In today’s digital age, it seems like every time I visit a new website, I need to create a user account and password. I actually counted the other day and I have something like 237 accounts and passwords that I need to keep track of.
And that’s where a password manager comes in pretty handy.
Before I discuss what a password manager is though, let’s talk about what a password manager is NOT.
A password manager is NOT a Word document or Excel file with a list of login IDs and passwords.
I admit, I used to do something similar to this until I learned the weaknesses inherent in this “system.” For example, I learned that even if you password protect this document, it could easily be “hacked” (i.e. broken into) by a hacker with just a basic level of skills and knowledge. Literally, a child could do it.
So, what is a password manager? Let me use an analogy to illustrate.
Imagine for a moment that you’re looking at an apartment building. In this apartment building, there are dozens of individual apartments. Each apartment has at least one lock that has to be unlocked in order to gain entry into that apartment.
Correspondingly, each of these locks has their own individual key.
If it’s like most apartment buildings, there is also a “master key” that the owner or landlord usually has access to. This master key will typically work on every lock throughout the building. If you have the master key, you can get into any apartment, room, office, or closet that you want.
For the sake of the analogy…
- The apartment building is like a password manager
- Each apartment is like a different online account
- The key to each apartment is like the password to each account
- The master key is like the password to your password manager (i.e. your “master password”)
If you know the master password to your password manager, you can access any online account ID and password that you have stored in the password manager.
Why do I need a password manager?
You might be thinking, “OK, great Tyler. But why should I care?”
Well, I’m glad you asked!
I think anyone who uses a computer needs to strongly consider using a password manager for two reasons…
- To increase the security of your online financial life
- To help your loved ones deal with digital and financial matters in the event of your death
I’ll wait until the next post to talk about the estate planning implications of a password manager, but let me touch for a moment on item number one.
To continue with our apartment analogy, the problem for most people is that their keys (i.e. passwords) are all the same, or at the very least, strikingly similar to one another.
Let’s say you live in apartment 4A.
If the key that opened up your apartment was the same key that opened up a majority of the apartments in the building, that would pose a huge problem. Hypothetically, someone could steal the key to your apartment, and in doing so, that person could not only gain access to apartment 4A (your apartment), but could also gain access to apartments 2B, 6A, 9C, and any other apartment that uses the same key.
Maybe your apartment in this analogy (apartment 4A) is equivalent to your email account.
Although it would certainly be an inconvenience if someone hacked into your email account and started sending spam email about a little blue pill to your friends and family, odds are you could change your password fairly quickly and survive this devastating act of “digital tyranny” before it caused too much personal and professional damage.
But maybe apartments 2B, 6A, and 9C are equivalent to your checking account, credit card, and 401(k) accounts.
And if you use the same password(s) for many of your online accounts, all someone would have to do if they gained access to your email would be to start trying your login ID and password on various popular websites to see if they could get it in.
Oh yeah, and since they’re already in your email account, all they’d have to do would be to check and see what financial institutions and other internet businesses you receive emails from.
Kind of scary isn’t it?
So, how do you fix this problem?
Well, a good password manager allows you to generate an incredibly difficult and unique password for each online account you have.
For example, you might generate a password like qw!et3tisu7@oe&fnxhas which would be very difficult, if not impossible, for most people to remember on one website, let alone if you had dozens or hundreds of different unique passwords like this for your different online accounts.
But if you have a password manager, it doesn’t matter whether or not you can remember all of the individual passwords. As long as you can remember your master password, you can easily access all of your other login credentials.
The key (pun intended) is to pick a secure master password.
I’m sorry, but “ilovemygrandma1979” doesn’t qualify as a secure password.
Luckily, the folks over at a popular password manager called LastPass wrote a blog post on how to create a secure (but still memorable) master password and I highly recommend reading it before picking one for yourself.
How do I get a password manager?
Typically, a password manager will come in the form of a downloadable program or internet browser plugin. And the nice thing is that most password mangers are incredibly inexpensive ranging from completely free to $30-40/year or so. Even for the paid versions, that’s a pretty small price to pay to heavily increase your online security and decrease the chances of being a victim of digital identity theft.
Below are some of the features that a good password manager should offer…
- Test the strength of all your passwords (including your master password)
- Suggest ways to increase the security of your online accounts
- Generate strong, random passwords in one click
- Alert you if one of your login IDs is involved in a known internet security breach
- Offer form filling features to save time entering personal information online
- Store other highly sensitive information like credit card and financial account information
- Automatically login to websites with the click of a button
- Offer additional security for your password manager account such as multi-factor authentication
- Allow you to access your passwords and information on the go via a smartphone app
As you can see, these programs can offer a lot more than just securely storing your passwords.
But this list is obviously not all-inclusive and every password manager is a little bit different, so make sure to check out all of the features and go with the password manager that has the features that are most important to you.
So there you have it. The one financial tool you need, but probably don’t have.
In the next post, I’ll talk a little bit about how this tool can help you in estate planning. I’ll also cover another important financial tool in detail that you probably don’t have, but should strongly consider adding to the rest of your financial and estate planning documents.
Now, if you’ll excuse me, I need to go change my passwords.
All 237 of them.