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avatar You are viewing an archive of articles by Luke Landes. Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View 's Google Profile.

Luke Landes

While I’m generally happy with my Capital One 360 account for a good portion of my savings, I’m looking to spread the money around to take advantage of some higher interest rates. One of the banks I’ve targeted is FNBO Direct, the online arm of First National Bank of Omaha, currently offering 0.95% APY as of March 2017 (subject to change).

FNBO savings

FNBO Direct is a member of the FDIC, so deposits at the bank are insured. As long as balances stay below the limits set by the FDIC, I won’t have to worry about the safety of my money.

Banking Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays.

Opening my account at FNBO Direct

Opening a savings account at any bank takes several days from start to finish, and FNBO Direct is not an exception.

Step 1: Visit FNBO Direct and fill out an application [click to continue…]

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No investment is without risk. You may feel safe when you do what financial advisers consider the “right thing” — invest in a broad stock market index fund with a long-term view — but there is risk there as well.

invest risk

Unfortunately, to build wealth over time, investors need to accept a significant amount of risk. Leaving money in risk-free investments, such as high-yield savings accounts, isn’t really investing at all. By taking on very little risk, keeping the bulk of your wealth in a savings account practically guarantees you’ll lose purchasing power over the long term due to the rising costs of goods that you might buy with that money.

Most middle class investors will need to grow wealth, rather than just preserve it, if financial independence is their end goal. So, just know that if you’re interested in growing your wealth over long periods of time, you’ll need to consider riskier investments than savings accounts.

Different Products, Different Risks

There is a dizzying selection of investment types scattered across the entire risk spectrum. These range from money market funds (low-risk investments, similar to savings accounts) to complex financial derivatives (risky financial moves often best left to professional investors).

Anyone who has ever invested in a 401(k) plan has had the opportunity to be familiar with risk profiling. To help you design your retirement portfolio, most 401(k) managers allow you to select your investments based on your appetite for risk. By asking the investor several questions about how they would react to different levels of investment performance, these 401(k) tools will categorize the investor based on their own, personal risk tolerance: usually low, medium, and high.

Measuring and evaluating the risk involved in any investment is a little more complex, though. While an investor’s risk tolerance can be categorized or marked on a scale, an investment’s risk should be plotted using several dimensions. To evaluate an investment, you should consider the different types of risk that could affect its performance in order to determine whether the investment is appropriate for you.

Resource: How to Evaluate an Investment Portfolio

Market risk

Market risk considers a broader picture. If you are invested in stocks, particularly if you choose the less expensive (but not necessarily safer) route of investing in a broad stock-based index fund, you have to accept that the overall economic condition of the country — or even the world — will cause your investment’s value to fluctuate. Market risk is relevant also for investments in single companies, bonds, or other products.

A market crash or decline could crush this investment’s performance, even if the quality of your investment remains the same. Investments also follow trends. For several decades, real estate could appear to be a “good” investment, encouraging more people to buy real estate and driving up prices for everyone else. Once the overall sentiment of investors switches to the belief that real estate is overpriced, your property could lose potential value… even though the structure hasn’t changed.

Learn More: 3 Keys to Deciding If Your Real Estate Is a Good Investment

Default risk

Default risk is related to the quality of the underlying investment, and is more apparent when investing in a single company through stocks or bonds. If you invest in a company’s or municipality’s bond, you generally expect a guaranteed return. The promised return is usually higher than what a savings account would provide, but you face the risk of default. If the company files for bankruptcy or if the municipality is mismanaged, it’s possible you won’t receive the return you were promised.

Pensions, thought to be stable investments for retirements, are also exposed to default risk. Today, your company may be promising all retirees access to free health care, but if your company later restructures, that promised benefit might disappear. The government offers a type of insurance for companies that offer pensions, but sometimes that insurance isn’t enough to ensure all pensioners receive exactly what had been promised.

Inflation risk

Financial planners like to assume that inflation runs about 3 or 4 percent a year over long periods of time. This allows planners and investors to calculate the expected “real” returns for an investment. If you assume inflation is 3 percent and your savings account earns 1 percent APY, your real return is a loss of 2 percent a year. This real return takes the effect of inflation into account.

There is a chance, however, that during any particular time, the measure of inflation — or for a more accurate description in this case, the increase of the cost of goods — is significantly more than 3 percent. If the country were to enter a period of hyperinflation, investments in your savings account would result in devastating losses when compared to consumer prices. (At least until banks began to offer more appropriate interest rates.) When a gallon of milk costs $25, a gallon of gasoline costs $30, and a movie ticket costs $75, it will be much harder to get by on the same income you had with today’s prices.

Mortality risk

Consider mortality risk when you have or are considering investments in pensions, insurance contracts, annuities, or any investment with a long-term horizon.

Skydiving

Annuities are the best examples. If your annuity payments or distributions to you continue only as long as you’re alive, you run the risk of dying before you receive enough of your benefit to make the premium payments and fees worthwhile. If your investment strategy focuses solely on the long-term, there is a chance that you will never live to enjoy the benefits.

Life is short. It’s almost always shorter than you would like for it to be. But realize that mortality risk runs in the opposite direction, as well. If you live longer than expected, and you have tried to plan your financial life so you fully expend your wealth during retirement, you run the risk of running out of money.

Related: Should You Take a Lump Sum for Your Pension?

Spend some time to think about the risks of your investments. You may discover that your tolerance for risk is lower or higher than you expected. Perhaps you’ll need to adjust to accept more risk in order to meet your financial goals.

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So, you think you want to leave your job. Now what?

Job dissatisfaction is a worldwide experience, and the occasional desire to quit is universal. When unemployment is high, however, employees of all types can be wary about leaving one job. Employers have all the power in the relationship, and people often feel that staying in a mediocre job or career is a better option than taking a risk with a new position — or worse, with unemployment.

This is an especially valid concern for those who are merely skating by or have failed to really stand out in their existing positions. For these folks, a competitive employment season can be too risky to warrant walking away from the paycheck they steadily receive.

There are always exceptions

Great employees do not need to fear the unknown, though, as they tend to thrive in any situation. Even during periods of competitive job markets, a person for whom excellence is a thread woven into his or her psyche will find employers willing to open doors. The opportunities are out there and ripe for the picking, no matter the market.

Because these successful individuals typically outperform in all situations, though, self-evaluation can sometimes be difficult. 8 Questions Before You Quit Your JobThey are not necessarily those who are the best team players or who follow the company rules, but those who have the desire and skills to strive for excellence in all endeavors they pursue. This is a rare and valuable quality, and it’s a type of work ethic that needs to be instilled early in someone’s life.

It’s difficult to put your best effort into everything you do. If you don’t feel that your life is physically, emotionally, or mentally draining, you are probably operating at less than your full capacity. While I don’t necessarily advocate wearing yourself thin from dedication to your job, it is a trait that bodes well in the workplace.

Even still, these extreme efforts can cloud the perspective of some. If you’re putting in 110% for your job, day in and day out, it can be difficult to take a step back and see whether you’re really where you need to be. Ask yourself the following questions as you, as a high-functioning individual, are considering whether to leave your work behind in favor of new opportunities.

1. Is the company rewarding me for my work?

Reward takes a variety of forms, and the best situation is where your desires match what the company has available. For example, if your only sense of reward comes from financial compensation, working for a non-profit organization with a tight budget could be problematic. Look at the whole picture. If you are passionate about the work you do, your reward may be intrinsic in the work itself. If you are working at your position more out of necessity than desire, your reward should take other forms, as something that is meaningful to you.

You need to let your company know what types of rewards are acceptable, as long as your performance warrants. If the company can find no way to reward you for excellent work, you should look to move on. Employees who seek excellence will almost always be in demand. Mediocre employees, on the other hand, are more susceptible to market forces.

2. Do I have good relationships with co-workers and managers?

Mutual respect is an important aspect of a fulfilling lifetime experience. You may spend eight plus hours a day with the colleagues and managers in your workplace. If you don’t believe them to be good people or if they don’t believe you to be worthy of respect, the time you spend working with them will be unfulfilling.

Beyond respect, you should expect to feel comfortable and at ease. That doesn’t mean there can’t be a sense of urgency, if necessary, within your workplace environment. Respect is the base and, above that, good relationships contain trust. You should expect your co-workers to be just as reliable as you. You shouldn’t need to micromanage others, and they shouldn’t be micromanaging you.

You can’t expect that everyone in your office will be your friend, but you can expect an environment in which there isn’t a pervasive sense of negativity.

3. Is there enough variety in my day?

While excellent performers can certainly function well in daily, repetitive tasks, this isn’t the best use of someone’s time and efforts. Most employees feel under-utilized with their set of responsibilities and authority, but this can be a significant problem for people who strive to excel. Great employees might be willing to put up with limited activities for a while, but it might be better to leave than stick around if there’s no sign of this improving.

Related: How to Prepare With a Flexible Career Plan

The best position for a high-functioning employee is one where you have the opportunity to use as much as your skill set as possible. This is one reason excellence-focused individuals pursue their own businesses; this type of start-up work requires use of all mental faculties.

4. Can I continue to learn from my managers?

Education is a life-long endeavor, particularly if you work in, are interested about, or are passionate for an industry that continuously evolves. Excellent employees know that they should rarely (if ever) be the smartest person in the room. Constant self-improvement is a need, not just for career advancement but for a sense of worth and value. If you are going to spend a large chunk of your day working with people, you want to ensure there are opportunities available for you to continue building your skills, not just from a technical perspective but from a philosophical perspective as well.

Large companies with resources generally understand that employees have a need to continue learning but struggle to learn anything from managers. Taking the place of these learning opportunities, you may find mentoring programs, tuition benefits, company-sponsored seminars, and other programs designed to allow employees to expand their minds. These are good, but not the best replacements for having a mentor who is interested and able to provide the insight you need to improve.

5. If I resolve my dissatisfaction, will I be happy?

Imagine yourself continuing to work at your current company but with all of the above concerns resolved. If this scenario still leaves you wanting more from your employment, it’s a great indication that it’s time to seek other opportunities. Even if you can’t put your finger on the cause of your dissatisfaction, you deserve to be happy. The danger is chasing an unrealistic dream.

The solution is to realize that happiness is a choice. You can simply choose to be happy with what you have. This isn’t “settling,” it’s analyzing your situation and concluding that your needs are being met. If your company is doing a good job of listening to your concerns and willing to place you in the best working scenarios, there is little more you can ask. If you can’t be happy with this, consider whether you would be happy anywhere. If so, consider moving on; if not, choose to be happy.

6. Do I have another opportunity lined up?

A standard piece of advice is never to quit one job until you have another opportunity ready to go. People who strive for excellence might have some trouble with this concept. Someone for whom excellence is an important personal virtue will likely work hard until the day they quit, leaving little time for aggressive job hunting or soul searching. Excellence transcends job market conditions, though, so demand for you will still be high.

As a valuable contributor to your organization, you might not need to be concerned about your company knowing you’re seeking other opportunities. If you’re considering leaving, you should have already had discussions with your managers during which you’ve made them aware of your disappointment. So, this should not come as a surprise to them. The organization is not going to fire you if you are still a great asset, and they might even be willing to help you find your next opportunity.

You will need to dedicate some time to self-marketing. Many people who strive for excellence don’t need external acknowledgment of their virtues for self-satisfaction. To find a job, however, you’ll need to be less humble and more willing to sell yourself as a desirable product. If, however, you are interested in making your own opportunities, you don’t need to wait for a job offer. There’s no time better than now to start your own endeavor.

7. Is my emergency fund ready?

People often stay in jobs they don’t like because they don’t want to risk losing the income. Households have debt to pay, whether from student loans, the expansion of a household, or overspending. Debt traps people into a situation where a strong percentage of every paycheck is destined elsewhere. This isn’t much different than indentured servitude. Even people who strive for excellence can be unprepared financially.

An emergency fund is the answer. Take some time to build an emergency fund from the ground up. Start by taking a small percentage of every paycheck and automatically transferring the amount into a high-yield savings account. You’ll want this account to be able to cover your living expenses for several months to prepare for a potential loss of income. Since you strive for excellence, consider expanding your emergency fund into a multi-layered emergency plan, which offers more flexibility and possibly less time to put into effect.

An emergency fund lets you take more career risks without hurting your family’s finances. You could take a more interesting and rewarding job for less pay, or you can start a new business without worrying about the immediate loss of income.

8. Will my decision affect my family’s stability?

Single people have more flexibility. They can take chances, move from location to location, and put up with less stability than people who have the added responsibilities of caring for a family. With a spouse and children, every decision you make affects more than just one person — and it’s important to keep this in mind.

The emergency fund mentioned above can help smooth financial rough patches when you make your decision to quit your unfulfilling job, but you need to worry about more than just the financial concerns. If your dream requires you to move away from Kansas and set yourself up in California, you can’t make such a decision without considering the needs and desires of the rest of your family.

Learn More: Resigning on Good Terms

The reality of the economy is that most people cannot afford to consider quitting a job without a solid plan in place for replacing the income immediately. Job satisfaction is a luxury at a time when most people feel that they’re lucky just to have a job. If you are someone who strives for excellence in all that you do, you have more options open because you’ve done quite a bit to improve your measure of human capital. Regardless, it’s always a good idea to seek out solutions for improving your current situation before making a significant career move by quitting.

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Ah, taxes. They’re unavoidable, often painful to think about, and take a nice chunk out of everything that we earn. (Thanks, Uncle Sam.) If you are a W-2 employee, your employer skims your taxes off of your paycheck, so you never even see that money — but what if your income sources are more, ahem, unconventional?

In general, if you have to ask whether you need to report certain income to the IRS, the most likely answer is, “Yes.” Here are some less-than-typical (we hope) examples where you’re going to need to pony up, courtesy of MSN Money.

Q. I hosted a party to sell products to my friends (using my social circle for multilevel marketing for some corporation), and the company’s representatives brought me gifts. Do I have to report this?

A. Yes.

If you host a party at which sales are made, any gift you receive for giving the party is a payment for helping a direct seller make sales. You must report it as income at its fair market value.

See Publication 463.

Q. My sugar-daddy (er… loving husband) died and I had to pay to collect the reward (er… life insurance). Do I have to report this?

A. Yes.

Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract.

Learn More: How to Avoid Estate Taxes on Life Insurance Proceeds

Q. This year, I’ve been taking bribes to keep the caviar smuggling ring off the FBI radar. Do I have to report this?

A. Yes.

If you receive a bribe, include it in your income.

Q. I ran for office this year and used campaign contributions to pay for my second cousin’s bodyguards and my daughter’s wardrobe. Do I have to report this?

A. Yes.

These contributions are not income to a candidate unless they are diverted to his or her personal use. To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns… Excess campaign funds transferred to an office account must be included in the officeholder’s income on Form 1040 in the year transferred.

Q. Instead of buying a Hummer for $70,000, I paid $80,000 for the vehicle and received a $10,000 rebate. Do I have to report this?

[click to continue…]

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The Latte Factor: Your Spending Reflects Your Priorities

by Luke Landes
latte

The concept of the Latte Factor is one of the most divisive in personal finance. Money gurus get so worked up over whether the Latte Factor is a valuable lesson in money management, that one might think the issue were as important as the national debt. Most of the time, passionate responses pertaining to the […]

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Getting Out of Debt: Make That New Year’s Resolution Work

by Luke Landes
CLIMB DEBT

Along with losing weight, getting out of debt is the most popular New Year’s resolutions in the United States. This resolution, like all others, unfortunately tends to be forgotten within weeks. Well, if you resolved to get out of debt this year — and haven’t yet abandoned that idea now that we are at the […]

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H&R Block Online Tax Filing Review

by Luke Landes
hrblocka

With W-2s and other tax forms now appearing in our mailboxes (or inboxes) daily, chances are that taxes are on your mind. If you believe you’ll owe money to the government, it makes sense to put off filing as long as possible, up to this year’s filing deadline. If you expect to receive a refund, […]

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Would You Rather Receive a Refund or Owe More Taxes?

by Luke Landes
owe-more-refund

If you haven’t noticed, it’s tax time. I have noticed, not only because of the endless emails I receive reminding me of this grand celebration, but also because of the people with whom I interact. As those I know complete their tax returns, I observe their pure joy as they realize they’ll be receiving a […]

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Year End Reminder: Change Your 401(k) Contribution Level Now

by Luke Landes
Winter Snow

At the end of the year, most people in the United States are thinking about the holidays and the potential credit card bills for gifts and family visits. One good way to control this potentially stressful month is to take some time to breathe and get your own finances in order. There are several actions […]

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Will a Bonus Make You Pay Higher Federal Taxes?

by Luke Landes
bonus

With the holidays approaching, many companies are preparing their bonus checks. However, some employees who are looking forward to their bonuses are also concerned about tax consequences. I gave up this “extra” part of my corporate pay, in exchange for the benefit of working for myself, when I left my day job a few years […]

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