1. Personal Finance for Everyone …60 mins that will change your future

2. Would you rather…. Have 3.5 million dollars up front? Start with a penny and have your balance double every day for one month? or Text your answer to 37607 333917333924

3. Why we need an automatic plan… People are not rational with financial decisions (susceptible to framing, prospect theory, anchoring, choice architecture, & the default option) Study: the more often you check your portfolio the worse you do Google’s anchoring experiment (3% increase) “Save More Tomorrow” (12% vs 4%) Allocation decisions & 1/n: Scenario 1: Fund A: Stocks Fund B: Bonds 54% allocation to stocks Scenario 2: Fund A: Stocks Fund B: ½ Bonds ½ Stocks 73% allocation to stocks Scenario 3: Fund A: ½ Bonds ½ Stocks Fund B: Bonds 35% allocation to stocks

4. Topics Behavioral Finance Understanding your current situation Credit Scores Retirement, the time value of money, & 401k / 403b Investing 101 Savings accounts & fees Love & Money Home ownership, mortgages, refinancing, & renting Tax strategy Life insurance / Health Insurance Tactical next steps

5. Disclaimer Although I have a passion for these topics, the views expressed are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities. This should not be interpreted as tax advice and please consult your personal tax advisors if you have any questions. Where my approach/advice comes from Housekeeping

6. Prior to the talk 20 mins - capture your “Net Worth” (all assets & debts) Use Mint.com; connect banking & investment accounts, student/car loansMint.com Include property (homes & cars) Homes: zillow.com Cars: edmunds.com 10 mins - understand your credit score Signup for CreditKarmaCreditKarma Pull a free credit report from annualcreditreport.com; Experian in Jan, TransUnion in Apr, Equifax in Augannualcreditreport.com 15 mins – analyze your current investments and get free advice: www.FutureAdvisor.com www.FutureAdvisor.com (optional) 30 mins - create a spending plan (aka budget) Can be in Mint or even Excel Savings must be a part of your plan

7. Understanding your current situation Check Mint often Spend < make Save xx% of your income “Pay yourself first” – schedule savings Debts Credit Cards & student loans BT offers Understand your current allocation & fees

8. Credit Scores Credit Scores have 5 components: (300  850 scale, >720 is good) 1. On Time Payments: 35% (Use Auto-Pay) 2. Credit Utilization: 30% (use < 10%) 3. Length of history: 15% (keep old cards!) 4. Types of credit used: 10% 5. Recent inquiries: 10% (hard vs soft pulls) Credit Scores affect mortgage rates, auto insurance, credit card rates, student loans, apartment rentals

9. “I’ll worry about retirement later…” Time Value of Money is HUGE! Frick & Frack brothers The “Rule of 72” $$ saved from 25-35 > $$ saved 35 on Everyone should have a (ROTH) IRA & 401k! Are you on-track? ~75% of ending salary per year See handout 

10. Retirement Accounts IRA 2014 Limit: $5,500 No matching Hold at any institution Thousands of investment options Only contribute cash Income limits Different for Roth vs Trad Jan 1 – Apr 15 (of following year) open period 401(k) / 403(b) 2014 Limit: $17,500 May get matching Hold at company’s choice firm Limited choices Only contribute from payroll No income limits May get a Roth option Jan 1 – Dec 31 open period

11. Uncle Sam will always get paid Roth After-tax contributions (pay tax now) Earnings grow tax-free Roth IRA’s have no RMD’s Roth IRA income limit: < $114k “Backdoor Roth” option Traditional Pre-tax contributions (get a tax break now) $120k salary, contribute max amount of $17,500 Taxable income now $102,500 28% x $17,500 = $4,900 Taxed on the way out Traditional IRA’s have RMD’s Really depends on tax bracket now vs. retirement Beliefs on long-term tax brackets / code / law Solution: have some in each

12. Investing 101 & active vs. passive Stocks, Mutual Funds, ETF’s, Bonds Write down your financial principles / guidelines 20-25% for “fun” if you must Active vs. Passive Investing: research shows ~80-90% of active funds underperform their benchmark 8,000  2,000  500  125 20% most actively traded accounts performed much worse -men worse than women Past fund performance has very little predictive power to future performance! In fact, expense ratios are the best predictor

13. Expense Ratios (the enemy) Industry average (0.80%  2.50%) Low cost options (0.06%  0.50%) Get angry…it’s your money! Use the calculator “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” – Upton Sinclair

14. Asset allocation & rebalancing With proper allocation, you should reduce risk (volatility) and outperform the S&P 500 Rebalancing: meeting long-term policy target weights Use it as a disciplined way of buying low and selling high “..shunning the loved & embracing the unloved. Most people do the opposite.” (Swensen) “Contrarian behavior lies at the heart of most successful investing programs.” (Swensen) Example: 1990-2012 portfolio: +0.5% difference in return, -2% difference in volatility My target allocation:

15. Savings accounts & fees ATM reimbursements Never pay monthly service fees for savings/checking CapitalOne 360: doubled-ended bonus emergency fund “Direct deposit” & ACH pushes

16. “Love & Money” Talk about money & spending habits before you get married Many marriages fail because of finances Prenuptial agreements Child support & alimony “Community property” clauses Having a child? (consider HSA & 529 plan) Discuss changes with your partner Vets: Post 9/11 GI-Bill & transfer

17. Home ownership & mortgages Up to a $300/month because of credit score Real estate is a key component Consider NOT holding your mortgage with the same bank as your investments Typically 20% down, qualify for a home 3x your annual gross income Closing costs, points Refinancing Being a landlord can be tough!

18. Rent Rent : Income < 30% (rule of 36) Impact in high-rent markets (SF / NYC) Have rental package ready Credit pull Ask for a copy of credit report Security deposit & interest Zillow’s “zestimate”

19. Tax strategy Look for ways to reduce your taxes Traditional TSP/ 401k / IRA Mortgage interest (& property management fees) Education expenses Consider capital gains (realize gains if you ever find yourself in the 10 or 15% tax bracket. 0% long term gains) IRA conversions Donate to charity with appreciated stock Hire a professional – taxes are “grey” – ask questions!

20. Life insurance Typically don’t need it until you have a family, but some people “lock” it in while they are healthy Term vs. Whole $500k for $42/month Nice way to leave a gift Auto & Health

21. Other random advice… Never go without health insurance! “Exotic” or “alternative” asset classes Careful with your contracts Always look for discounts Cell phone bills (15%-20%) AAA, movies, restaurants, museums, parks Driving habits Avoid buying a new car Remember: smart investing is not very exciting, but it is very rewarding! Fatwallet Cash Back

22. Tactical next steps Automate your savings (pay yourself first) Open a (ROTH) IRA Enroll in your company’s 401k Stick to low-cost index funds Help a friend (ER) or 19 yr old cousin Company stock plans

23. Student loans vs. saving Paying down student loans vs. saving for retirement Max matching contributions Consider interest rates loan rate: 10%  pay down 2%-10%  calculate Both are urgent! Save some to build the habit Consider tax deduction Windows are closed for good! Grandma’s inheritance

24. My favorite personal finance resources Fatwallet Finance Forums Bogleheads Blogs: Mr. Money Mustache, Oblivious InvestorMr. Money MustacheOblivious Investor Networth IQ | Investopedia Networth IQInvestopedia *Bonus Material* Tax Loss Harvesting the Credit Card game

25. Readings / Books Planet Money - NPR http://www.forbes.com/sites/quora/2013/05/01/personal -finance-for-young-professionals/ http://www.forbes.com/sites/quora/2013/05/01/personal -finance-for-young-professionals/ http://www.irs.gov/Retirement-Plans/Plan-Participant,- Employee/Amount-of-Roth-IRA-Contributions-That- You-Can-Make-for-2014 http://www.irs.gov/Retirement-Plans/Plan-Participant,- Employee/Amount-of-Roth-IRA-Contributions-That- You-Can-Make-for-2014 The Missing Link – Personal Financial Management (geared towards college students and young adults) The Missing Link Random Walk Down Wall Street

26. Questions?