Personal Finance & Investments: Topics & Tips for Today’s Economy

1. Personal Finance & Investments: Topics & Tips for Today’s Economy , Presented by Bill Villanueva Registered Investment Advisor CA Credentialed Teacher National Indian Education Association Convention October 8, 2010

2. Welcome…ehem

3. Caveats • Information presented is generalized and not meant as specific advice to anyone • This presentation addresses two items: • Audience diversity (something for everyone) • Age vs. K-12 students & young adults • Subjects/areas touched upon today meant to give only a quick overview

4. Agenda • Introduction & Background: Who is this guy? • Pop Quiz: What do we already know?(Teachers, what’s our schema?) • Investments: Jargon & Things to Consider • Tips: Best & Worst Money Moves • Credit Issues & FICO scores • Insurance • 401(k) or 403(b) • Other savings & investments options • Tips for School Boards and/or Tribal Governments • Home Buying & Foreclosure Fighting • Services: From the classroom to the boardroom • Questions

5. Background • Husband and father of three • CA Credentialed Teacher • Largest middle school in US (3,900+ ADA) • Small Native American School (50+ ADA) • Economics, personal finance, business & investment strategies, SPED • UCLA, Princeton, UCSD, CSUDH • Speak four languages • KPMG, LLP Economic Consulting Services • Lowered the global tax base of multinationals • Registered Investment Advisor (IARD# 154067) • FINRA, SEC & California Securities Regulators Go Bruins

6. Need for Personal Finance Education • Stats, stats, and more stats…42 examples of losing all • P.F. and Consumer Ed. is a key to daily life • From the underprivileged to those with 18-money, if for very different reasons, everyone equally has a need for personal finance education and skills. • Three real-life examples why it is necessary: • 1) 25% interest car payment • 2) $27,000 lost down payment on a home purchase • 3) Hanger’s-on business schemes

7. Need for Personal Finance Education in Indian Country • We MUST provide our kids/adults with the knowledge, skills, and tools necessary to make informed economic/financial decisions • Start in grade school so that it may become normalized and second nature • Currently, my students are exposed to: • Realistic budgeting exercises • Home and Car purchasing walk-through’s • Investment/portfolio management & tracking • Business planning and negotiation mock-ups

8. Pop Quiz: Did we Ace it? • B: False 9. B: False • B: False 10. B: False • A: True 11. A: True • A: True 12. B: False • B: False 13. A: True • A: True 14. A: True • B: False 15. A: True 8. B: False

9. INVESTMENT VEHICLES Equities (Stocks) Bonds: Gov’t vs. Co. issued CD’s 401(k), 403(b), 529’s Roth/Traditional IRA’s Annuities Mutual Funds (Index, Managed) Life/LTC insurance Options/ForEx Commercial Paper THINGS TO CONSIDER Time Horizons Risk Tolerances Investment Style Tax Consequences Interest Compounding Emerging Markets Large, Median, Small Cap Asset Allocation Fiduciary Compounding Investment Vehicles & Considerations What’s all this jargon? Anyone care to pick one to discuss? Otherwise, let’s take: Compounding

10. QUESTION… Power of Compounding ….BE QUICK NOW… A genie gives you a penny that will double in value at the end of every day for a month. How much money will you have in 30 days? Credit card companies LOVE compounding, but you can make it work to your benefit too

11. TIPS Best and Worst + Do’s and Don’ts • Credit Issues & FICO scores • Insurance • 401(k) or 403(b) • Other savings & investments options • 10 Steps to Successful Investments • Tip for Tribal Government & Administrators • Tip for School Board members & Trustees • Buying a Home & ForeclosureFighting • Find Help • Financial Advisors vs. Broker/Dealers

12. Credit Issues & FICO score Good Moves • www.annualcreditreport.com (Free) • Review at least once/year, add comments • Pay on time and low balances: 65% of FICO weight • Pay more than the minimum: ‘09 CARD legislation • Switch from credit to debit cards • Don’t close old accounts, the older the better • Benefits: Lower costs of goods, job seeking, house buying or rental, car payments, more money for investing…shoot for a 750

13. Credit Card Mistakes • Minimum payments = handcuffed to company • Using plastic for everyday items: 23.5 year pizza • Going for the card bonus while carrying a balance: 2% versus 14% plus. Why pay a quarter for a nickel? • Cash Advances: 2-4% fees, higher rates, while paying 13%+ • Ignoring and/or carrying high balances (1/3 rule) • Not destroying all discarded information with your card number and name, and giving info over the phone, or e-mail. Mail raiders.

14. Insurance Protection OMG! SOOO boring • Think of it as a rainy day fund (like a monsoon) • LTC: Long Term Care, swimming in Waikiki • Life: Not only smart, but also frees up money too for your own retirement • BUT, don’t let ‘em scare you into annuities

15. 401(k) or 403(b) Please Do • Max out Contributions! • If employer matched = Raise • Review & Rebalance Do Not • Wait to start plan participation • Remember the power of compounding? • Borrow against your plan • Never seen anyone recover, and the costs are enormous

16. Savings & Investments Must Do • Decide to pay yourself first • Dollar Cost Averaging is a good starter strategy • Open a Roth IRA account (If possible: fund it early in the year) • Determine your Time Horizon & Risk Tolerance • What does this mean and how to do I do it? • Diversify: Proper asset allocation is key • Review your portfolio at least once peryear • Always pay higher interest debt first

17. Savings & Investments Do not… • Do not carry debt higher than other interest earned • Do not follow the herd -or its opposite- run for safety • Do not think of your “home” as an investment • Not paying close attention to net expenses in M.F. • Look first at No-Load M.F. or Index Tracking Funds • Do not be lured by “Annuity Investments” • Do not be ruled by emotions and short term fear • Not harvesting losses or gains

18. 10 Steps to Successful Investing • Get your finances in order • Credit card, mortgages, investment, bank statements • Learn the basics • Read and use the internet before starting out • Set proper goals • Goals for a 25 year old are very different from a 65 year old • Determine Risk Tolerance • Sleep at night • Determine your Style • Aggressive, Moderate, or Conservative • What’s your Style Box?

19. Ten Easy Steps…(he says) • Find out the Costs • Passive v. Active investors • Hire an Advisor (RIA) • Broker/Dealers are not there to look after you • Diversify and Allocate • According to your Style Box • Keep emotions at bay • No herd mentality or hot tips • Review & Adjust • Quarterly, at least annually

20. BIG Tip for Tribal Administrators • The law under ERISA provides for fiduciaries under section 3 (21) to administer 401(K) (and now 403b) plans • HOWEVER, a close reading reveals that their obligation is only to make prudent considerations & “recommendations” • Often, plan administrators are kept in the dark regarding the true costs with hidden 12b-1 and “transaction” costs running rampant • TEST: Ask for a letter where they will legally bind themselves to the 3-38 standard of an RIA. Don’t let them hide behind lobbyist lang. • If everything is Kosher, they will agree; otherwise, expect a song and dance as to why they cannot because they are not RIA’s, etc. • Find yourself an independent fiduciary under Section 3-(38) • Hands off the cookie jar

21. Tip for School Board Members Payment of Grants & Investment of Funds Treatment of Funds & Permissible Investments U.S. Code, Title 25, Chapter 27 §2506(b)(2)(A)&(B) • Effectively, the Code compels the investment of BIA funds into secure US backed vehicles aimed at capital preservation • Currently, many SB’s opt for CD-only laddered investment strategies • However, these strategies generally earn minimal returns which may inadvertently leave SB’s with significant downside exposure • Yet, strategies can be devised for investments that meet the Code and audit scrutiny, and may significantly provide higher upside potential

22. Home Buying Get Prequalified before starting to shop Use a buyer’s real estate agent, challenge fees Avoid ARM’s (if necessary no lower than 5/1) Decide on what you need & don’t fall in love Max out at 32% of gross income Budget maintenance & try to send in 1/12 extra Don’t over remodel for the neighborhood. May not recover investment if it is too far out of norm Home Buying & Foreclosure Fighting

23. Foreclosure Fighting • Trends: Banks tend to wait for borrowers to be delinquent. Be proactive when trouble looms: • Call your lender and ask for default prevention dept. and keep track of names, times, and dates • Short sale option, no more end year tax hit • Chapter 7 or 13 bankruptcy protection • Once default notice is filed, immediately request them to PRODUCE THE NOTE, by certified letter. • Do NOT use non-HUD approved counseling • NEVER sign over the property to a counselor!

24. Who Can Help Registered Investment Advisors vs. Broker/Dealers • Turns out: broker/dealers get to call themselves “Financial Advisors” and have zero obligation under the law to be your fiduciary. • Registered Investment Advisors are obliged to be true fiduciaries by force of law.

25. Example close to my heart • Step one: Need a car? • Step two: Have an idea of which type? • Step three: Visit a dealership • Step four: The salesperson will sell you a vehicle, however… • Step five: No expectation you’ll get the best deal, without: • Negotiating • Knowing the true costs • Knowing the products available • Step Six: Salesmen’s obligation is to get the most bang from the client (and gets to say he is an “official” advisor) • Step Seven: If the car turns out to be a clunker…well, caveat emptor.

26. How May I Help? • Registered Investment Advisor & Trained Teacher • www.adviserinfo.sec.gov • Fiduciary under ERISA rule 3-38 • Provide personal finance and investment planning services to Tribal members, School Boards, and Tribal Governments • Provide on-going personal finance seminar series to Tribal schools & all adult membership

27. INVESTMENT VEHICLES Equities (Stocks) Bonds: Gov’t vs. Co. issued CD’s 401(k), 403(b), 529’s Roth/Traditional IRA’s Annuities Mutual Funds (Index, Managed) Life/LTC insurance Options/ForEx Commercial Paper THINGS TO CONSIDER Time Horizons Risk Tolerances Investment Style Tax Consequences Interest Compounding Emerging Markets Large, Median, Small Cap Asset Allocation Fiduciary Investment Vehicles & Considerations What’s all this jargon? Let’s pick a few of these to discuss further. You choose.

28. Need More Info? Reach out at: bill@grindingrockfinancial.com www.grindingrockfinancial.com (916) 627-5187 PS: If you later have questions, feel free to email me

29. Thank you for granting me your time. QUESTIONS? I’ll be available after the presentation too. Cheers.