1. The YOLO Effect On Finances & What You Should Know
RM-Jul17

2. Agenda Introduction Understanding Debt Protect First
Saving & Investing
Budgeting
Wrap-Up

3. What is YOLO? In the real world: Carpe Diem; You Only Live Once
In the financial world: Carpe diem for today, financial ruin for the future
Poor planning now can have disastrous consequences in the future

4. Agenda Understanding Debt Introduction Protect First
Saving & Investing
Budgeting
Wrap-Up

5. What is DEBT? What is debt?
“Something owed, such as money, goods or services”
Two types of debt: Non-Toxic and Toxic
Source: dictionary.com

6. The 2 Types of Debt Non-Toxic Debt Debt that provides future value
Produces more wealth in the long run
Source: bankrate.com

7. The 2 Types of Debt Toxic Debt
Debt which imposes harm on the financial life of the holder. It may be debt that provides no future value, has interest rates higher than a reasonable, conservative gross earnings rate, or debt with which the interest rates of the obligation are subject to discretionary changes, adding a future interest rate risk to those monies. 
When you buy something that goes down in value immediately = TOXIC DEBT

8. Types of Debt What types of debt are we incurring? Non-Toxic Debt
Student Loans
Business Loans
Mortgage
Reasonable Transportation
Real Estate Loans
TOXIC Debt
Credit Cards
Depreciating Assets
High Interest Loans
Bail bonds
Tax liens

9. Building Strong Habits – Understanding Debt
NOW WHAT?
Control & Curb TOXIC debt
Total personal debt should not exceed 36% of your income
Ratios any higher than this can lower your credit score
Missed/delinquent payments can also lower your credit score
Source: bankrate.com

10. Agenda Protect First Introduction Understanding Debt
Saving & Investing
Budgeting
Wrap-Up

11. Protection What does “PROTECTION” mean, and why should we care?
Indemnity
Security of protection against a loss or other financial burden; to make whole again

12. Protection Property Property + Income Property + Income + Life
What types of protection are offered?
Auto
Property
Liability/Umbrella
Property
Disability
Medical/Health
Social Security
Property + Income
Wills & Documents
Trusts & Ownership
Life
Property + Income + Life

13. Agenda Saving & Investing Introduction Understanding Debt
Setting Up an Emergency Fund
Protect First
Saving & Investing
Budgeting
Wrap-Up

14. Saving & Investing Pay down debt, or pay yourself?
Set up an emergency fund
Pay yourself 15% of your paycheck
Pay down TOXIC debt
Be LIQUID
Liquidity: the ability to convert an asset to cash quickly

15. Setting Up An Emergency Fund
What is an emergency fund?
Cash that you’ve saved up for the sole purpose of helping you maintain your normal life through the emergencies that life hands you
Money not only for emergencies, but also OPPORTUNITIES
Source: investopedia.com

16. Setting Up An Emergency Fund
Where to stash this extra cash?
Money Market Accounts
Checking/Savings Accounts
CDs
Banks/Credit Unions
EASY ACCESS

17. Why Saving & Investing is Important
Manage debt, while building your bank
Leveraging Capabilities
OPM
Debt
Savings

18. Savings Plan Types: 401(k)
401(k) Plans
Congress passed Revenue Act of 1978, which allowed employees to avoid being taxed on a portion of income they decide to receive as “deferred compensation” (Knows as IRC Section 401(k))
Current Limitations: Age 49 and under: $18k; Age 50 and older: $24k

19. Savings Plan Types: 401(k): Historical Tax Rates

20. Savings Plan Types: IRA
IRA – Individual Retirement Account
Accounts that you open on your own, not through employer
Several types: Traditional, Roth, SEP, Simple
Contribution restrictions include:
Age 49 and under: Up to $5,500
Age 50 and older: $6,500

21. Savings Plan Types: LIRP
LIRP: Life Insurance Retirement Plan
If structured correctly, the distributions are tax-free and do not contribute to the income thresholds that trigger taxation of SSI
Assets grown tax-deferred in the LI policy, any residual benefit pays directly to beneficiary TAX FREE
No income or contribution limitations

22. Tax Advantages of Plans
Traditional IRA
Roth IRA
Traditional 401(k)
LIRP*
Contributions
Made with pre-tax dollars : $5500, if over 50, $6500
Made with after-tax dollars : $5500, if over 50, $6500
Made with pre-tax dollars, $18k for 49 and under; $24k for 50 and over.
Made with after-tax dollars, limitations are what your cash flow will allow.
Eligibility
Anyone can participate
Income limitations:
AGI of $191k/couple; $129k/Individual
Contributions can be made at any age
You must work for an employer that provides a 401(k)
Must be insurable
Taxes on Withdrawals
All withdrawals taxed at federal and state income tax rates
None for qualified distributions
All withdrawals are taxed at federal and state income tax rates
Income tax free withdrawals/loans
Penalties
10% penalty on withdrawals before age 59.5
10% penalty on withdrawals of earnings prior to 59.5, withdrawal contributions anytime
10% penalty on withdrawals on distributions made before age 59.5
None, if structured properly
RMDs
Must be taken by age 70.5
None during your lifetime
*When structured properly, non-MEC

23. Agenda Budgeting Introduction Understanding Debt Protect First
Saving & Investing
Budgeting
Wrap-Up

24. Budgeting Live below your means Pay yourself 15%, live off of 85%
Save to be able to spend guilt-free
Create a budget!
If you’re born poor, it’s not your mistake.
If you die poor, it’s your mistake.
- Bill Gates

25. Budgeting Necessary components to a good budget Net income amounts
Include emergency fund (potential expenses)
Pay yourself first (savings)
Realistic written goals (monthly/quarterly/yearly)
Monthly review
Track EVERY expense (credit cards, utility bills, car payments, Starbucks)
Monitor closely
Be disciplined!

26. Agenda Wrap-Up Introduction Understanding Debt
Setting Up an Emergency Fund
Protect First
Saving & Investing
Budgeting
Wrap-Up

27. Budgeting YOLO: NOT a sound long-term financial plan
What does your financial future look like?
How do we better prepare?
Take a holistic, macro-economic approach to finances
All elements are related, and can work together to create a strategic financial plan
Schedule an appointment with us to find out how

28. Wrap Up
Any questions?

29. Thank You Fatema Qassimyar – Qassimyar.Fatema@pennmutual.com
John Randle –