HIGH SCHOOL OF BUSINESS™ WEALTH MANAGEMENT Topic 3: Earning Your Money

Topic 3.01 How do you get the money you need Wage – compensation for work. Salary – wages received on a regular basis, usually weekly, bi- weekly, or monthly. Sometimes the term is used to include other benefits, including insurance and a retirement plan. Rent – payment, usually monthly, for use of space or property. Dividends – portion of a corporation's after-tax accounting profit that's paid to shareholders or owners. The companies that offer dividends are most often companies that have progressed beyond the growth phase, and no longer benefit sufficiently by reinvesting their profits, so they usually choose to pay them out to their shareholders. Transfer payments – money given by the government to its citizens. Examples include Social Security, unemployment compensation, welfare, and disability payments.

Topic 3.01 How do you get the money you need Distinguish between earned and unearned income.  Income derived from active participation in a trade or business, including wages, salary, tips, commissions and bonuses.  Any income that comes from investments and other sources unrelated to employment services.  Examples of unearned income include interest from a savings account, bond interest, tips, alimony, and dividends from stock

Topic 3.02 What financial paperwork do you complete when hired On-boarding – process including activities that prepare an employee for their first day. For example, there may be insurance forms, tax forms, personal information forms that need to be completed so that the new hire can begin work and be compensated. W-4 Form – a tax form prepared by an employee for an employer indicating the employee's exemptions and Social Security number, and enabling the employer to determine the amount of taxes to be withheld for the employee. Personal allowances – exemptions from withholding for the taxpayer, spouse, and dependents, used in calculating the amount of income tax to be withheld from periodic wage payments. The employee/taxpayer completes Form W-4 indicating the number of allowances to be considered for purposes of withholding.

Topic 3.02 What financial paperwork do you complete when hired Exemption – a direct reduction taken from taxable income for a specific reason, as allowed by the IRS. I-9 Form – the Immigration Reform and Control Act of 1986 (IRCA) required employers to verify that all newly- hired employees present "facially valid" documentation verifying the employee's identity and his or her legal authorization to accept employment in the United States. The I-9 form is provided by the federal government for that purpose. Every employee hired after November 6, 1986 must complete an I-9 form at the time of hire. Employees must complete Section 1 of the form within three days of starting work.

Topic 3.02 What financial paperwork do you complete when hired Identify types of on-boarding activities.  There are two high-level goals of the onboarding process:  To make new employees feel welcome and comfortable in their new surroundings.  To minimize the time before new employees are productive members of their new workgroup.

Topic 3.02 What financial paperwork do you complete when hired The high-level objectives of a good on-boarding program include:  Helping the employee to identify with their new employer.  Allowing the employee to understand some of the company's values and priorities.  Building an optimistic attitude towards the company.  Avoiding misunderstandings.  Helping the employee feel valued.  Encouraging socialization and creating a sense of belonging.  Reducing new employee anxiety.  Setting of performance expectations.  Decreasing the learning curve.

Topic 3.03 How much money will you take home Pay period – length of time employee works before being compensated; weekly, bi-weekly, or monthly are popular pay periods. Gross income – all income except as specifically exempted by the Internal Revenue Code. For example, an inheritance is specifically excluded from gross income. Net income – In business, what remains after subtracting all the costs (namely, business, depreciation, interest, and taxes) from a company’s revenues. Net income is sometimes called the bottom line. For an individual, gross income minus taxes, allowances, and deductions. An individual's net income is used to determine how much income tax is owed. Deduction – An expense subtracted from adjusted gross income when calculating taxable income, such as for state and local taxes paid, charitable gifts, and certain types of interest payments.

Topic 3.03 How much money will you take home Pension – Post-retirement benefits that an employee might receive from some employers. A pension is essentially compensation received by the employee after he/she has retired. 401(k) – A defined contribution plan offered by a corporation to its employees, which allows employees to set aside tax-deferred income for retirement purposes, and in some cases employers will match their contribution dollar-for-dollar. Taking a distribution of the funds before a certain specified age will trigger a penalty tax. The name 401(k) comes from the IRS section describing the program. FICA – The federal law which requires employers to withhold a portion of employee wages and pay them to the government trust fund which provides retirement benefits. An acronym for Federal Insurance Contributions Act. More commonly known as social security.

Topic 3.03 How much money will you take home Discuss reasons for interpreting a pay stub.  If you need further explanation on any portion of your paycheck or if a particular calculation doesn't seem correct, consult your Human Resources Department for assistance.  Don't procrastinate! Exercise good money management skills by being proactive. If a calculation is incorrect, the issue may reappear on every paycheck.  Also, you may not be making the best choice for a retirement plan contribution, or losing money if your earnings are not calculated properly.  It is ultimately your responsibility to ensure that you are being properly compensated.