The Business Bonus

Employment / Ownership Empowerment

Health Insurance

401(k)

EducationFlexible Spending

Deferred Compen-

sation

The Business Bonus

A Dollar in Income

vs.A Dollar inNet WorthErnst 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 inNet Worth

The Business Bonus

Financial Assets

$1,000 Income- 900 Expenses$ 100 Savings / Investment

(Increase in Net Worth)

$100 Investment (Net Worth)

Required $1,000 of IncomeEMPLOYER ADDS $100

to 401k

Employer Benefits

$100 Investment (Net Worth)

Equivalent to $1,000 Pay Increase!

Focus IncomeNet 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$10,000$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 =

Savings1-Tax RateAssumptio

ns25% Federal Income Tax8% State Income Tax7.5% FICA Tax

401K Contribution HSA ContributionContribution

$1,0001 - .33

=$1,000

.67=$1,50

0Earnings

$1,500Tax $500

$1,000

Spend

33% TaxesTaxes 50% of Spendable IncomeTaxes on Earnings = 33%

Taxes as a % of Spending = 50%

$1,0001 - .405

=$1,000

.595

=$1,681

$1,681$68

1$1,000

40.5% TaxesTaxes 68% of Spendable IncomeTaxes 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 MultipliersQRP a.k.a.

401(k)1st – Million Dollar Choice Contribution

$2,000,0002nd – Tax

Match$3,000,000

50%

3rd – Employer Match

$6,000,000

100%4th – Salary Index

Match$10,500,000

75%

5th – 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 Multipliers4. The Behavioral

Realities of QRPs

The Business Bonus

1 - The work is all done by someone else2 - Money withdrawn from a paycheck is not missed3 - 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 Multipliers4. 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts

The Business Bonus

13 HSA Benefits

1 Save Taxes2 Provider Discounts (Debit Cards)3 You Care4 Younger People – Better Benefit5 Insurance for Life (Portable)6 Individual Premiums Less Than

Group7 Preventive Health Care 8 Doctors Prefer Fee-For-Service Plan9 More Policy Options10 Employer Bankruptcy – No employee impact11 Personal Medical Information is

Private12 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 Multipliers4. 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans

HSA

Cafeteria PlanCONTRIBUTIONSUse it . . . Or lose it!

The Business Bonus

Health expenses deductible not

covered by health insurance

Employer Sponsored

Cafeteria / Flex Spending Plans

Employee projects andcontributes health

expensesNo taxes paid on contributions

Annually USE IT or LOSE IT

Less than 2% of contributions are lost

Taxes Saved compensate for

potential contributions lostImmediately elect to invest

Taxes savedGREAT

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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans

The Business Bonus

Stock Options / ESOPS

EmployeesOWNthe

Company

1. A Dollar in Income vs. A Dollar in Net Worth

2. The Pre-Tax Equivalency Formula

3. The QRP Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS

Profit Sharing PlansWarra

ntsBonus Plans

The Business Bonus

GROUP INSURANCEGroup

LifeGroup Disability IncomeCaveat:

Only less expensive if employeeless than a preferred risk

1. A Dollar in Income vs. A Dollar in Net Worth

2. The Pre-Tax Equivalency Formula

3. The QRP Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. Education Benefits10. Start a Business That

Builds Net Worth

The Business Bonus

Is your businessa 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. Education Benefits10. 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. Education Benefits10. Start a Business That

Builds Net Worth11. Businesses that

Enhance Your Probability of SuccessThe Business

Bonus

Franchises95% 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. Education Benefits10. Start a Business That

Builds Net Worth11. Businesses that

Enhance Your Probability of SuccessThe 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 Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. Education Benefits10. Start a Business That

Builds Net Worth11. 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 Contribution4 - 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

1. A Dollar in Income vs. A Dollar in Net Worth

2. The Pre-Tax Equivalency Formula

3. The QRP Multipliers4. The Behavioral

Realities of QRPs 5. Health Savings

Accounts6. Cafeteria Plans / Flex

Spending Plans7. Stock Options /

ESOPS8. Group Insurance9. Education Benefits10. Start a Business That

Builds Net Worth11. Businesses that

Enhance Your Probability of Success

12. The Eight Engines of Net Worth

The Business Bonus