The document provides an introduction to personal finance topics including savings, debt, investing, insurance, and taxes. It discusses the importance of spending less than you earn and saving money. It also covers investing in retirement accounts, the differences between traditional and Roth IRAs, building credit, types of insurance, and health savings accounts. Tips are provided on paying off debt, comparing investment options, and understanding personal risk tolerance when investing.

1. The Unique Alternative to the Big Four®
© 2013 Crowe Horwath LLP 1Audit | Tax | Advisory | Risk | Performance
The Unique Alternative to the Big Four®
Introduction To Personal Finance
By Erez Harosh

2. The Unique Alternative to the Big Four®
© 2013 Crowe Horwath LLP 2Audit | Tax | Advisory | Risk | Performance
EVERYTHING YOU NEED TO KNOW ABOUT FINANCE
 Spend less money than you make.
 -The end

3. The Unique Alternative to the Big Four®
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Agenda
 Savings & Debt
 Personal
 Government
 Investing
 Credit Cards & Credit Scores
 Insurance
 HSA vs FSA’s
 Your new job and where to move
 Buying a House
 Q & A

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Personal Savings & Debt

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Some not so fun facts about America’s saving problem…
We’re right back where we started before
the crisis…. at a 2% savings rate!
• Switzerland 13.9%
• Germany 10.3%
• Australia 10.2%
• Sweden 12.4%
Other OECD Countries 2013
Personal Savings Rates

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US Government Savings & Debt
 Since 2008, the government debt has nearly
doubled.
 Deficit= Annual Spending – Annual Revenue
 Debt = Cumulative Deficits
 Harmful effects of high government debt:
 Reduced private investment in productive capital
 Federal spending on interest payments rises
 Higher taxes are needed to cover interest
obligations
 Risk of fiscal crises
www.brillig.com/debt_clock/

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US Government – A Going Concern Problem
 Why don’t we feel the pain of the US debt doubling over
the last ~5/years?
• Historically low interest rates
• The gov’t is currently rolling over their debt in short term
>5/yr maturities (although the trend is to lengthen maturities
in the future)
• No current fire sale
• Here’s a hypothetical; if interest rates on the 2
year went up to what they were in 2000,
interest expense would be $1 TRILLION, up
from $416 billion! (using the current $16.7T
outstanding debt) – Larger than the Social
Security Administration
• Currently, the FED gov’t takes in $2.7T in gross
receipts, that would mean 37% of our
taxes/fines/etc would go to servicing the debt
alone! (currently 15%)
http://www.usgovernmentrevenue.com/fed_revenue_2013USrn
http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

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Once you’ve got the savings down, now the fun part… Investing!
• Rule of 72 (doubling time)
• Ex, if you were to invest $1,000 with compounding interest at a rate of 9% per annum,
the rule of 72 gives 72/9 = 8 years required for the investment to be worth $2,000.
• “Compound interest is the eighth wonder of the world. He who understands
it, earns it ... he who doesn't ... pays it.”
― Albert Einstein
• How to invest?
• 401k: $17.5k for 2013 annual limit
• IRA & Roth IRA: Lesser of earned income or
• $5.5k for 2013 annual limit
• Be careful of expense ratios…
• Start your own business!

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Traditional IRA vs. Roth IRA
 Traditional IRA- money contributed is pre-tax and will be taxed when it is distributed
 “tax deferred” earnings & current year deduction on page 1 of your 1040
 Qualified distributions begin at age 59½.
 Required minimum distributions begin at age 70½.
 No AGI limits on who can contribute
 Beneficiaries pay taxes on inherited IRAs.
 After 5 years, up to $10k can be withdrawn penalty free to cover first time homebuyer
expenses, but tax will be due on the distributions.
 Roth IRA- money contributed is post tax and will not be taxed when distributed
 “tax exempt” earnings because the principal was taxed, and now will grow tax free
 Single people- Modified AGI< $125k
 Married people- Modified AGI< $183k (this is an example of a marriage penalty)
 Qualified distributions begin at age 59½.
 No required minimum distributions
 wealth can be transferred without beneficiaries owing income tax
 After 5 years, up to $10k can be withdrawn penalty free to cover first time homebuyer
expenses, no tax on distribution
http://www.rothira.com/traditional-ira-vs-roth-ira

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What should I invest in?
• This is ultimately your decision and based on risk tolerance, however someone
under 40 typically should be in high risk assets
• Small cap stocks (Russell 2000) (2012 returns of 17.28%) – Source Russell.com
• Using the rule of 72, your investment will double in 72/17.28 ~=4.2/years!
• Mutual Funds
• An investment program funded by shareholders that trades in diversified holdings and is
professionally managed
• Exchange Traded Fund (ETF)
• ETFs seek to track an underlying index’s performance over time
• A mutual fund that is traded on a stock exchange
• Emerging market or foreign stocks through an ETF
• What’s an index?
• An imaginary portfolio of securities representing a particular
market or a portion of it
• It’s a group of stocks, bonds, or both!
• Ex. Vanguard Total World Stock Idx Fd (Symbol VT)
• 2012 performance of 15.55% - Source Google Finance

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ETF expense ratio comparison
Similar ETFs 

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Personal Risk Tolerance
 There are several risk tolerance calculators on the internet
 These help you decide how to invest
 For example, a young professional with no children and a full time job probably has
a higher risk tolerance than an older person who is not working and is dependent
on social security.
 Investments for people with low risk tolerance tend to be value stocks/mutual
funds/ETFs and short/medium term bonds.
 Investments for people with high risk tolerance tend to be growth oriented
stocks/mutual funds/ETFs

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Diversification
 Stocks
 Bonds
 Commodities
 Crops
 Steel
 Precious metals
 Timber
 REITS
 Cash
 Personal Home
 Rental Properties
 Collectables

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Credit Cards
• These can be a blessing or a curse depending on how you use them, here
are some things you should know:
• Is there an introductory rate? When, and by how much, will it increase?
• Is there an annual fee? How much is it?
• What is the grace period?
• Is online banking available?
• What is the credit limit?
• No interest if you pay the full bill every month
• What other fees are attached to the card and how are they assessed? (ex:
transaction fees foreign exchange fees)?
• Are there any offers or rebates associated with the card (ex: frequent flyer miles)?
• What type of offers/rebates are relevant to you? (e.g. do you travel, like to shop, need
0% intro APR)

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Typical Current Interest Rates
 Student Loans- about 6%
 Credit Card Debt- about 19% - 25%
 Cash Advances (such as AMSCOT)
10% - 250%
 Checking Accounts 0%
 Short Term CDs .25%
 Long Term CDs 1.1%
 Car Loans- about 2% - 9%
 House Loans- about 3% - 7%
 Savings Accounts .1%-.25%
 Money Market .2%
https://partnersfcu.org/everyday-banking/rates/#certificates

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How to Get out of Debt…continued
 Do a balance transfer to a 0% balance transfer credit card to buy yourself time to
pay off credit card debt with little or no interest (there usually is a 4% fee for this.)
 Absolutely do not take PayDay loans or cash advances. These typically have
interest rates of 10%-250%!
 Be weary of things like Angie’s List:
 Automatic credit card charges & renewals
 Almost impossible to get out of
 Bad reviews all over the internet
 Allegations of “rigged” ranking of vendors
 You can get the info you’re looking for from the Better Business Bureau for free
 Learn how to cook & buy groceries. It’s cheaper and healthier than restaurants
 Consolidate/Negotiate debt down
 Alternative methods
 Pay off lowest “total debt” first to feel accomplished that you have less debts.
 This is less rational than the methods above, but it may give you an emotional boost.

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Your Credit Score
 DO NOT SIGN UP FOR “FREE CREDIT REPORT
SERVICES” or any kind of credit monitoring
• Can pull your credit once a year from each of the 3
bureaus
• I pull mine once every 4 months
• FICO score doesn’t matter as long as you pay your
credit card off each month and use less than 50% of
your credit card limits
• Check out www.creditkarma.com for free account
monitoring and FICO score
• Worried about identity theft? Freeze your credit!

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Building Credit
 Start building credit by getting a credit card- preferably one with no annual fees
and some sort of rewards.
 Open credit accounts with stores you love- Macy’s, Rooms to Go etc.
 Have things in your name such as apartments, utilities and phone contracts
 Don’t carry high balances on lines of credit.
 Buy a car (if you need one)
 Get a job and keep it
 Don’t get evicted
 Pay your bills in full and on time.
 Open a savings account if you don’t already have one
 Avoid bankruptcy- “the credit equivalent of poison”
 Mars your credit report for 10 years
 Don’t get arrested
 Criminal convictions stay on your credit report forever

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Insurance
• Remember that the goal of insurance is solely to mitigate risk
• Only buy the coverage you absolutely need
• When you need life insurance
• If no one is depending on your income (children/spouse) then you probably don’t need
life insurance.
• Most accounting firms give life insurance to workers as one of their benefits.
• Whole vs term
• Whole
• Can access up to 2/3 of value while still alive if there is a terminal illness
• More expensive
• Cash surrender value
• Guaranteed rate of return
• Term
• Cheaper
• For specified time
• Only pays out if someone passes
• How much do you need and why?

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HSA & FSA
• Health Savings Accounts (HSA) and Flex Spending Accounts (FSA) are becoming
more common health insurance plans.
• HSA details:
• Contribution limits- Individuals $3,250 & Families $6,450
• Requires a HDHP (high deductible health plan) and minimum required
deductibles
• Deductibles- Individuals $1,250 & Families $2,500
• Lower premiums and much higher deductibles than a traditional health plan.
• Also called catastrophic illness plans, great for young people due to low premiums
• Contributions to HSAs can be carried over year to year, and they can be invested.
• FSA Details
• $2,500 employee cap
• Allows you to contribute money to the FSA for costs not covered by insurance:
deductibles, co-pays, and coinsurance. In addition, you can use your FSA to
pay for health care costs that health insurance doesn’t cover.

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HSA & FSA continued…
• Compare/Contrast
• Unlike HSA’s, funds in FSA’s that are unused over $500 when the plan year is
over are lost and cannot be carried over to the following year. (updated
11/1/13)
• Neither allow expenses for over the counter drugs except insulin or if
prescribed
• Unlike health savings accounts or health reimbursement accounts, FSAs are
more commonly offered with traditional medical plans
• Contributions to HSAs can be
made for the 2013 tax year up
until April 15, 2014.
• Contributions to traditional and
Roth IRAs for the 2013 tax year
also can be made up until April
15, 2014.

22. For more information, contact:
Erez Harosh
Direct 416-633-2408
http://xcash.ca/
Xcash Financial Service offer a variety of loans for people with good credit, bad credit, and no credit history.
We don't have hidden or upfront fees, and your loan is open for you to pay off at anytime. Out of our area? No
problem, we provide loans to people living anywhere in Ontario, Canada. We can have your loan directly
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