Personal Profitability

Personal finance for hustlers and entrepreneurs

Posts from Eric Rosenberg

Eric Rosenberg is a finance, travel, and technology writer in Ventura, California. When away from the keyboard, Eric he enjoys exploring the world, flying small airplanes, discovering new craft beers, and spending time with his wife and little girl. You can connect with him at Personal Profitability or EricRosenberg.com.

My Automated Plan

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I keep telling you how you should invest, stop spending, and do more for yourself financially. I can not justify doing so without doing so myself. I want you all to see how I am doing it today.
That is my breakdown. You might note that I did not include a budget for my living, fun, and other savings. That is for next time. I did want you to see, however, that I do put 10% into investments first. The trick to automating your investing is that you can live on what is left. If you are feeling a crunch, make a lifestyle adjustment.

A very rich man once told me that the trick to being happy is living below your means. This multi-multi-multi millionaire drove the same Toyota Corolla he bought in the 1980s over twenty years later.

Now that you have seen how I do it, it is time to do it yourself.

Intro To Investing

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Warren Buffet, possibly the most savvy investor in history, makes more sense than just about any other investor I have heard speak. He looks for companies that are under priced that are poised to go up in value in the long term. He said that you should be afraid to invest when people are greedy, and you should be greedy when people are afraid.

That said, it is time to start buying. The markets are going crazy. No one knows what will happen in the short term. In the long run, however, stocks always go up. Time to open your investment account.

There are two types of investment accounts everyone should have. If you think you don't have enough money to start investing, stop going to Starbucks. Everyone can invest. Everyone has enough money, you just have to pay yourself instead of paying someone else.

The first investment account you need is a retirement account. This can be in one of several forms. The standard for employees of large companies is a 401(k), or a 403(b) for non-profits. This account is a pre-tax investment, meaning that you do not pay taxes on the money that goes it. Most companies match your investment (mine matches 100% of up to 3% of my pay). I invest the full 3%, which is equal to 6% of my pay. In this type of investment, you probably have a handful (about 10) of investment fund options. I am in a “destination” fund. This is a fund with volatility tied to my retirement year. As I am about 30-45 years from retirement, I have a lot of volatility. As you get closer to retirement, you want less volatility.

Retirement accounts can also be an IRA, or Individual Retirement Account. The traditional IRA is a pre-tax investment. A Roth IRA is an after-tax investment. In 401k, 403b, and traditional IRA investments, you pay taxes on withdrawals. In a Roth IRA, withdrawals (capital gains) are TAX FREE! If you are not going to retire for about 7 years or more, this is a great investment choice.

The other investment account you should have is one that you manage for yourself. I have a 401(k), a Roth 401(k), which is a Roth IRA managed through my 401(k) company, and will soon be opening a personal investment account. I will talk about that process in a future post. Don't miss it, subscribe.

When making investments for your future, you have to make it a priority. Set a goal. Set somewhere to start. I started with only that 3% (pre-tax) which turned into 6% with the company match. Next I added 2% more (to make 8% total) in company stock at a discount. I then started my Roth (2 weeks ago) with another 2%. My goal was to invest 10% of my pay into retirement. I am there. If it is a priority for me and I am in my twenties, it should be a priority for everyone.

My goal after completing my MBA is to raise this number to 15%. Set a goal as a percentage, not as a total amount. A percentage means that with every raise, your retirement savings will grow. Don't think about this as money spent, think about it as paying yourself for your future.

I want to retire at 40. To me retire doesn't mean stop working, it means stop having to work. At 50 I want to be a recreational entrepreneur. To do it, I need money in the bank. To do that, I am saving today. I have a 25 year retirement goal, I will keep you all up to date as I go using the Net Worth widget on the top right. Click on it to see the detail. It is small now, but I am persistent.

If you invest like Warren Buffet today, you can relax like Jimmy Buffet in the future.

The Benefits of Insurance

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As someone who cares about their financial situation, which all Narrow Bridge readers surely are, you probably care about your stuff too. As a stuff owner, it is important to have stuff insurance.

If you are a twenty-something renter like me, you do not own a home or have considerable assets. However, if you add up the value of your TV and electronics, DVD collection, laptop, shoes (for the girls), and other odds and ends, you probably have a lot of value in your house/apartment. How should you protect your stuff? Renters insurance.

Renters insurance is fairly cheap (most plans are about $20 a month). Considering the price of replacement in case of a break in or fire, this is a small price to pay. Make sure to take pictures of everything you own so it can be quickly and easily replaced.

If you have a car, insurance is probably required by law. This insurance will protect your car, other cars, and anyone in those cars in the event of an accident or vandalism. My car was vandalised this week (and inspired this post). The cost of repairs was over $3000. My deductible (the part I have to pay) was $250. Either way it sucked. However, I was protected for all costs over my deductible. This coverage costs more, and will depend on age, gender, where you live, and the car you drive. As a 23 year old male in Colorado with a nice, new car, I pay about $120 per month. This is a small price to pay for the big “what ifs” on the road.

If you own a home, you are generally required by the lending bank to have insurance. So, your homework today is to get renters insurance if you do not already have it.
P.S. That is not my car
Image by Tommy and Georgie.

First Step To Getting Rich: Stop Using Credit Cards

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In times where our investments are shrinking and inflation may be an issue, what can we do to make sure we can get rich? Stop spending on things we can't afford.

In my time working in a bank, I had access to privileged information on people's spending habits. I only looked at this when customers were flagged as “problem” customers. This happened when people were late on their credit cards or regularly overdrew their checking accounts.

What I found would not shock you. Most people who had problems did not have income problems. They had spending problems. Live within your means and you will be happy. Live beyond them and you will be stressed. Live beyond them with a partner and your relationship will be stressed.

You might say, “Well, you think its easy to spend less.” No I don't. But I know that it is vital if you are having spending problems. Anyone with over 50% of available revolving credit used has a problem. At the rates cards charge, you spend far more paying off that trip to the mall than you gained from it.

How do you spend less? Just stop. You don't need Starbucks. You don't need new shoes. You don't need to go to the liquor store. You don't need to go to a casino. You don't need new clothes when you have a closet full of perfectly good clothes. You don't need to buy lunch every day.

Those things alone would have saved so many people so much trouble while I was in banking. I am sure the problems faced today are similar. I am not saying to never do these things, but cutting them out can save a lot of money. If you do a Starbucks breakfast and go out to lunch every day, you are spending an extra $300 per month (conservatively) that you don't need to. Put that toward credit cards and they will be paid off in no time.

My First Step To Stop Worrying About Money: Stop Using the Credit Cards (If you are not paying them off in full every month)

Image by Smithcam.

My Net Worth, What’s The Deal?

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In October 2008, the first month this website existed, I started publically tracking my net worth. I made updates here every month, which eventually included and led to my popular monthly income reports. These began as a monthly series, but in the spirit of a better navigation and reading experience, I merged the early versions into this single article. Now you can browse and watch my net worth develop over time as I went from a near zero net worth in grad school to the $500,000+ net worth I enjoy today.

[Read more…] about My Net Worth, What's The Deal?

My Narrow Bridge Adventure Begins

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Rabbi Nachman Me'Uman wrote a beautiful, inspiring song. Kol Ha'Olam Kulo, Gesher Tsar Me'od. The whole world is a very narrow bridge. Veha'ikar – veha'ikar lo lefached klal. The most important thing to remember is not to be afraid at all.

It is true, this world is a narrow bridge. We all have something that scares us. We all have something that excites us.

Something that scares a lot of people is money. I happen to know a lot about it. I graduated with a finance degree as an undergraduate. I spent time working as a bank manager. I spent time (and still work) as a financial analyst. I am an MBA student. Needless to say, I have some training.

What do Rabbi Nachman and money have in common? Not much. However, while living on my narrow bridge, I am trying to get by one day at a time. Part of that is dealing with my money.

I use a system of budgets, auto-payments, auto-deductions, and more to manage my money. All the while I am accumulating student loans (private school). Making money, spending money, it can be stressful. What is important is not to be afraid.

This is my journey. Enjoy!