1. Market Turmoil: Why You Shouldn’t Care While we wait for folks to log on, try looking up the “expense ratios” of the funds you are currently invested in.

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

3. Where my approach/advice comes from 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. Housekeeping @FutureAdvisor Who I am Who I’m not (Disclaimer)

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. Happiness & Wealth Wealth Happiness

6. 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 We don’t like losing! (Prospect Theory) (DMR) Commitment devices! Google’s anchoring experiment (3% increase)

7. Why we need an automatic plan (cont.) “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

8. “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 Share this! See handout 

9. 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) / TSP 2014 Limit: $17,500 May get matching Hold at company’s chosen firm Limited choices Only contribute from payroll No income limits May get a Roth option Jan 1 – Dec 31 open period

10. 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 Better inheritance options 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

11. Cash Bonds Debt instrument Corporate, government, municipal Value fluctuates based on demand and interest rates Stocks Underlying ownership in a publicly-traded company Value fluctuates based on demand in the marketplace All research shows stock picking does not work! Mutual Funds A pooled basket of cash, bonds, and/or stock Can be actively managed or track an index (called index funds) Exchange-Traded Funds (ETFs) Also a pooled basket of cash, bonds, and/or stock More tax-efficient than mutual funds Typically cheaper Trade & settle quicker than mutual funds Exchange Traded Fund (ETF) Mutual Fund Cash Bond Stock Investment Types

12. INVESTING 101 Cash Bond Stock Mutual Fund Exchange Traded Fund (ETF) Investment Types Account Types Checking Taxable Account (Individual, Joint, Trusts) Traditional IRA Roth IRA 401(k) (Can be Roth or Traditional) Goals Expenses and Emergency Savings Expenses prior to retirement: house, college, wedding Expenses in retirement Investing 101

13. INVESTING 101 Cash Bond Stock Mutual Fund Exchange Traded Fund (ETF) CheckingTaxable Account Traditional IRA Roth IRA401(k) Expenses and Emergency Savings Expenses prior to retirement: house, college, wedding Expenses in retirement Investment Types Account Types Goals Investing 101

14. Cash Bond Stock Mutual Fund Exchange Traded Fund (ETF) CheckingTaxable Account Traditional IRA Roth IRA401(k) Expenses and Emergency Savings Expenses prior to retirement: house, college, wedding Expenses in retirement Investment Types Account Types Goals Investing 101

15. Investing 101 & active vs. passive 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

16. 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 Why “Rollover” “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” – Upton Sinclair

17. 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:

18. You Can’t Control the Market, But…. You can control: 1. Your asset allocation 2. Your reaction to the markets 3. Your expenses Never underestimate the value of doing nothing! Why does Warren Buffett hate dancing? Peter Lynch, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

19. Precedence of Saving 1. Matching 401(k) or 403(b)– Max it! 2. Emergency fund (~6-9 months) 3. Pay down debt(s) 4. Roth IRA / Roth 401(k) or TSP 5. Taxable account 6. Alternatives (exotics) Invest in yourself too!

20. 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 Don’t let inaction win! Schedule a call w/ FutureAdvisor

21. My favorite personal finance resources Fatwallet Finance Forums Bogleheads Blogs: Mr. Money Mustache, Oblivious InvestorMr. Money MustacheOblivious Investor The Coffee House Investor *Bonus Material* Tax Loss Harvesting the Credit Card game

22. Questions? What is FutureAdvisor? Free product – analysis & advice Premium product – does it all for you + Tax-Loss Harvesting – for 0.5% How do you differ from the competition? We are holistic – they are not! Where you have to hold your $$ Why would I pay 0.5% for this service? Because it’s 1/2 to 1/3 the price of a traditional advisor Because it will actually get done! (80% fact) Tax-loss harvesting can recover > 0.5% What funds do you use & are there commissions? A free analysis takes two minutes: www.FutureAdvisor.com