The Business Bonus Employment / Ownership Empowerment Health Insurance 401(k) Education Flexible Spending Deferred Compen- sation The Business Bonus

A Dollar in Income vs. A Dollar in Net Worth Ernst and Young Center for Business Innovation Harvard Business School Press Builder of the HUMAN ASSET A Quantifiable HUMAN VALUE HUMAN CAPITAL HUMAN EQUITY The Business Bonus

1.A Dollar in Income vs. A Dollar in Net Worth NETWORTH LIABILITIES ASSETS – A Dollar in Income vs. A Dollar in Net Worth The Business Bonus

Financial Assets $1,000 Income Expenses $ 100 Savings / Investment(Increase in Net Worth) $100 Investment (Net Worth)Required $1,000 of Income EMPLOYER ADDS $100 to 401k Employer Benefits $100 Investment (Net Worth)Equivalent to $1,000 Pay Increase! Focus Income Net Worth - Liabilities = Net Worth _______________ 1.A Dollar in Income vs. A Dollar in Net Worth The Business Bonus

Financial Assets - Liabilities = Net Worth _______________ 1.A Dollar in Income vs. A Dollar in Net Worth ONE MILLION DOLLARS INCOME NET WORTH $1,000,000 x.01 =$10,000 x 2 = $20,000 The Business Bonus

The Pre-Tax Equivalency Formula 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula The Business Bonus

Savings 1 – Tax Rate 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula The Business Bonus

Pre-Tax Equivalency = Savings 1-Tax Rate Assumptions 25% Federal Income Tax 8% State Income Tax 7.5% FICA Tax 401K ContributionHSA Contribution Contribution$1, = $1, =$1,500 Earnings$1,500 Tax$500 $1,000Spend 33% Taxes Taxes 50% of Spendable Income Taxes on Earnings = 33% Taxes as a % of Spending = 50% $1, = $1, =$1,681 $681 $1, % Taxes Taxes 68% of Spendable Income Taxes on Earnings = 40.5% Taxes as a % of Spending = 68% Taxes: Federal = 25% State = 8% Total = 33% Taxes: Federal = 25% State = 8% FICA = 7.5% Total = 40.5% The Business Bonus

The QRP Multipliers 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers The Business Bonus

The Qualified Retirement Plan Multipliers QRPa.k.a. 401(k) 1 st – Million Dollar Choice Contribution$2,000,000 2 nd – Tax Match $3,000,000 50% 3 rd – Employer Match $6,000, % 4 th – Salary Index Match $10,500,00075% 5 th – Future Million Dollar Choices The Business Bonus

The Behavioral Realities of QRPs 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs The Business Bonus

1 - The work is all done by someone else 2 - Money withdrawn from a paycheck is not missed 3 - There are substantial penalties for early withdrawal 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs The Business Bonus

Health Savings Accounts 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts The Business Bonus

13 HSA Benefits 1 Save Taxes 2 Provider Discounts (Debit Cards) 3 You Care 4 Younger People – Better Benefit 5 Insurance for Life (Portable) 6 Individual Premiums Less Than Group 7 Preventive Health Care 8 Doctors Prefer Fee-For-Service Plan 9 More Policy Options 10 Employer Bankruptcy – No employee impact 11 Personal Medical Information is Private 12 Non Traditional Expenses 13 Medical Payments with Non-HSA Dollars 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts The Business Bonus

Cafeteria Plans / Flex Spending Plans 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans HSA Cafeteria Plan CONTRIBUTIONS Use it... Or lose it! The Business Bonus

Health expenses deductible not covered by health insurance Employer Sponsored Cafeteria / Flex Spending Plans Employee projects and contributes health expenses No taxes paid on contributions Annually USE IT or LOSE IT Less than 2% of contributions are lost Taxes Saved compensate for potential contributions lost Immediately elect to invest Taxes saved GREAT R.E.S.I.R.V. ! 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans The Business Bonus

Stock Options / ESOPS Employees OWN the Company 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS Profit Sharing Plans Warrants Bonus Plans The Business Bonus

GROUP INSURANCE Group Life Group Disability Income Caveat: Only less expensive if employee less than a preferred risk 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance red = pre-existing medical condition The Business Bonus

Education Benefits 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits The Business Bonus

Provides an ongoing Education Benefit EDUCATION BENEFITS The Employer: pays down a Student Loan 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits The Business Bonus

Start a Business That Builds Net Worth 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits 10.Start a Business That Builds Net Worth The Business Bonus

Is your business a way to ‘make a living’ or a way to ‘build Net Worth’ 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits 10.Start a Business That Builds Net Worth The Business Bonus

Businesses that Enhance Your Probability of Success 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits 10.Start a Business That Builds Net Worth 11.Businesses that Enhance Your Probability of Success The Business Bonus

Franchises 95% chance of 5 year success Multi-Level Marketing 99% fails to meet expectations 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits 10.Start a Business That Builds Net Worth 11.Businesses that Enhance Your Probability of Success The Business Bonus

The Eight Engines of Net Worth 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits 10.Start a Business That Builds Net Worth 11.Businesses that Enhance Your Probability of Success 12.The Eight Engines of Net Worth The Business Bonus

1 - Investment Contributions / Savings 2 - Investment Growth 3 - Real Estate Contribution 4 - Real Estate Growth EIGHT ENGINES OF NET WORTH Leverage 5 - Debt Reduction 6 - Increasing Value of a Business Net Worth 7 - Being Born in a Family of Wealth On Financial Assets 8 - Actors, Athletes, Artists, Lottery Winners Winners 1.A Dollar in Income vs. A Dollar in Net Worth 2.The Pre-Tax Equivalency Formula 3.The QRP Multipliers 4.The Behavioral Realities of QRPs 5.Health Savings Accounts 6.Cafeteria Plans / Flex Spending Plans 7.Stock Options / ESOPS 8.Group Insurance 9.Education Benefits 10.Start a Business That Builds Net Worth 11.Businesses that Enhance Your Probability of Success 12.The Eight Engines of Net Worth The Business Bonus