Welcome to the first episode of the Personal Profitability Podcast. I am you host Eric Rosenberg. I have been planning this launch for nearly a year, and I’m thrilled to bring you the first episode. This episode lays out the framework of the Personal Profitability Project, the new concept this site is all about. Here we will discuss the four main tenants of personal profitability.
In this episode you will learn:
In this first episode of the Personal Profitability Podcast, I give you an intro to the core tenets of Personal Profitability: Spend Mindfully, Earn More, Grow Your Wealth, and Living Better.
Spending Mindfully: Focus on what you really value when you spend your hard earned money. Why waste on cable or coffee if you are not a TV fan or you can get free coffee at work? You can save enough for a plane ticket to Europe each year by cutting cable.
Earn More: Earning more on the side can cover your beer tab, your rent, and eventually may lead to a full time income. I try to make at least $2,500 per month on the side every month.
Grow Your Wealth: Neglecting investments and putting your assets to work for you will cost you big in the long-run. Wealthy people know how to leverage their cash flow and savings to become even wealthier in the future.
Living Better: Your money should help you live a better life, not restrict you. Take control and live your dreams through thoughtful personal finance management.
Each episode, I encourage you to join me in having a beer. This week’s beer is Ninkasi Total Domination IPA made in Eugene, Oregon.
Links and resources mentioned in this episode:
Eric Rosenberg First Episode Full Transcript:
Hello my friends and welcome to the very first edition of the Personal Profitability Podcast. My name is Eric Rosenberg and I’m your host in this journey to personal profitability. There’s so much ahead, I’m so excited to get started. I’ve had this idea to start this Podcast for many months now and today is day one, so welcome to the journey!
Before we get started, I just wanted to tell you a little bit about myself and the backgrounds. So first off, we’re coming to you live. I’m recording this myself at Narrow Bridge Media Studios. Today we’re in the downstairs studio, which means we’re in my dining room so, I wanted to find a nice quiet place I could talk to you, we could just have some one on one time. But I wanted to bring up that I’m recording it at home because personal finance starts at the home. It’s something that’s very personal to all of us, that’s why it’s called Personal Finance, not just finance.
So when you’re working through all these stuff, remember, it’s about your family, it’s about your home, and it’s about living a better life. That really means a lot to me that each and every one of you are here. I see all the stats, I know how many people are listening and I’m doing this for all of you. It’s not for my own health, though it does stroke my own ego a little, which I enjoy, but I couldn’t really do this without any of you, my finance partner, Bridge finance has been around now for six years and I couldn’t have done that without all the readers and all the great friends that I’ve developed along the way.
So, one of the only things that I ask of you, for me, when you listed to this Podcast and experience at all is please share it with a friend if you enjoy it. Or go on to your favorite reading site, whether that’s if you listen to this through iTunes or Stitch or anywhere else. If you have the opportunity to give me a good rating, please do and again, please share it with a friend. It only takes a minute but it means the world to me and that’s the only advertising I have so, but it’s the best kind cause it comes from you guys and you’re- as my friends and fans and best supporters – that they’re the ones that I care about the most.
So one thing that I want to encourage all of you to do if you are able, if you’re listening to this at work or in the car, this is not possible, but I think personal finance should be fun and it’s something that should be relaxing and to me those things are synonymous with beer. So every single one of these episodes, whether I’m interviewing someone or doing it myself, I’m going to make an effort to have a beer. So today I wanted to share that I’m having a Ninkasi Brewing Company Total Domination India Pale Ale. That’s a local beer made here in Oregon. It’s made in Eugene, about two hours South of where I am sitting right in my dining room in Portland. So here’s a cheers, I’m going to have a gulp here. If you are at home and able, this is your moment to pause, go to your kitchen, grab your favorite beer and join me in a toast. That’s good, it’s really good.
So anyway, now that you’re having your drink, let’s dive in and hear about what this Podcast is really going to be all about and why it’s worth your time. So one of- when I came up with the idea of the Personal Profitability Project and personal profitability, it’s kind of a synthesis of years – as I said I’ve been doing this online writing thing about finance for more than six years now and it’s the synthesis of all of the ideas that I’ve evolved with over time. So when I started writing, it was at a time when online banking was a pretty new thing to a lot of people. Some of my older posts were all about getting into financial automation and making things easy for you because a lot of people had no idea you could even do your banking online, let alone come to where we have today where you can just plug your phone and snap a picture or a check and it’s deposited in the bank. So we’ve come a long way in that and as I’ve evolved over time, so has my writing, I’ve gone through different relationships. Now I’m married and have two dogs and on my way to the American dream. I have bought a condo and sold it. I’ve been a home owner. I have moved across the country. I quit a job that was comfortable and I enjoyed in the Denver area and moved halfway across the country here to Portland. So I’ve gone through all these life experiences, and I thought, what is the whole point of all of these? What’s the whole point of spending time thinking about your money and your finances all the time and you know, it can be intimidating to a lot of people just like it’s a time suck, like it’s taking away energy that you could do, you know, fun things like playing Xbox or, you know, football in the backyard with your friends or hanging out with your kids or riding your bike to your favorite brewery, whatever you like to do. Why would you spend your valuable time, which is a limited resource on your finances? And I find that if you actually spend the time upfront, you will spend less time now to- or you spend more time now to spend less time later so you’ll enjoy your finances in your whole life a lot more if you plan and you think out your finances from the beginning. So that’s a lot about what personal profitability is about. It’s about making that effort now so you can have a great financial life in the long term and you’ll reach every goal you want.
So I have put together some Pillars of Personal Profitability. That’s a lot of P’s right there on the Personal Profitability Podcast, you can’t expect any less on that. So the Pillars of Personal Profitability that I’ve put together are just kind of a guide posts that we will use on our journey to live a better life through our money rather than let our money hold us back from living the life that we want.
So the first pillar is one that’s kind of easy to get negative about and you hear about it a lot from lots of different finance experts and people who talk about this but it’s spending less. And a lot of people think, you know, budgeting and saving and, you know, going and it means all these like bad stuff that you can’t have what you want in life and I think that is totally the wrong approach to think about budgeting and spending less. So when I spend less, I think about it as something I do every day and not making decisions on purchases and of course yeah you can go blow money really quickly and easily on new computers and tech gadgets and things that I like or you know some people might be into shoes and purses and accessorizing. I looked at some cufflinks that I thought were pretty cool at Nordstrom but I saw they went for $200 and I don’t really need $200 cufflinks that I probably wouldn’t really wear all that often. So to that, that’s a piece of this puzzle and what it’s all about is spending only on things that you value and the things that you love. So I’ll get into that a little more in a few minutes
The next piece of the Pillars of Personal Profitability is earning more. You can always try to save and spend less and spend less and spend less but eventually you can’t spend less anymore. There’s a limit to how much you can cut your spending. But your earning potential is unlimited. There’s no limit in how much money you can bring and earn if you work hard and do great at your job.
So next Pillar is growing your wealth. While we’re spending less and earning more, we have to do something with this money that we’re hopefully saving up and the key to not being in debt they’ll say is spend less than you earn so as you do that though you’ll build up wealth and assets and we need to figure out what to do without wealth and those assets so they grow over time and it can eventually sustain our life and an idea that is commonly called “financial independence”.
And the last Pillar is living better. And that’s the whole reason we’re doing all of these. And again, it’s not for our health. I mean, there are healthy things to not being stressed about money. But really, we want to live a better life and do whatever we want to do. You know for me, living a better life means having a great relationship with my wife and hopefully kids in the future, means traveling the world, it means having the time and resources to do the things that I want to do which are more experience-based than material-based. So for me, it’s you know, weekends away and traveling and seeing the world and spending time with family and friends. That, for me, is living better. Some people aren’t into travel. They don’t want to leave their comfortable home and area and there’s other things that they care about and make their life better. So whatever makes your life better, that’s really what this is all about and that’s why we’re here.
So for the next few minutes, I’m going to grab another gulp of my beer then we’re going to talk a little bit about each of these four pillars in some more depth so here’s another cheers to my IPA and whatever you may be drinking. IPA is still really, really good.
Pillar 1: Spending Mindfully
So next up, we’re going to talk more about spending mindfully. So I scratched the surface on this for a moment there. I got a little farther ahead of myself than I probably should have for an intro but now let me get on the details on spending mindfully. So the first thing you should do when you spend mindfully and try to spend less is cut spending on the things you don’t really care about in life. You know it’s really, really easy to go out and blow a ton of money. That’s the whole way the retailers and the merchandisers of the world work is to make it easy for us to spend money and we are inundated with advertisements all the time. There’s new ways to pay for things, you know, Apple Pay and things are coming up that make it- so you don’t even need to use cash or credit card, you can just tap your phone on the counter which is pretty cool, I’ve done it myself at that with my android phone using Google Wallet. They’re making it easier and easier and easier to spend money so we want to spend mindfully and not just waste money because it’s easy to do so.
So for me, one of the first big steps that I took to spend mindfully was about four years ago when I was living as a single bachelor in my old apartment in Denver, I cut my cable. A lot of people think, “How could you live without cable and football games and basketball games?” That was- the sports fan are the ones who are always the most baffled that I would cut cable. That, you know, honestly, it saved me $70 a month on something that was really just a time suck of my life, you know. I sat there and would zone out after work in front of the TV and I would pay Comcast $70 every month so I could just sit there and zone out and be stupid in front of my TV and I thought, “You know what? For me watching TV is no longer priority. It’s not something I want to spend my money, or really even my time, doing.” So I cut the cable and that $70 a month adds up, you know. It’s eight hundred and something dollars a year that you are saving if you spend what I spent on just what was kind of the expanded basic cable package. And when I cut that, not only did it save me this, you know, $800 a year which I could use for saving in my emergency fund or towards a new car or, $800, depending on where you live that could be a flight to another country or another part of this country easily. So $800, that’s a weekend away or two weekends away. So that’s life experiences that I couldn’t necessarily have had had I had TV and I care more about those experiences than I care about the TV.
But I also found that when I didn’t have TV, I started going out and being social more with people and that’s how I met my wife. That’s how I’ve got to know so many of my friends, by going out, you know, happy hours and events and meet ups and networking things and I think all that stuff’s kind of fun so cutting my TV was a way to do that and I saved $800 a year. But once again, some people, a few, are a huge sports fan and you don’t want to miss a Broncos game ever because they’re the best football team in the NFL and they’re going to win the Super Bowl this year. You know, I respect all my friends who are big Broncos fans and want to watch that happen and if you’re a fan of another team, I’m sorry, this year is not going to be your year depending on when you are listening to this.
So, there are people, and good friends, who’d never ever give up their TV and I respect them for that but that’s not the right choice for me. But I challenge them, or if you’re one of those people who could never think of giving up your TV, that’s totally fine, but I challenge you. What can you give up in your life that you spend your money on? Think about that for a second. Let it sit in. What could you give up that you spend money on recurring every month of your life?
Now, you know, one thing that’s easy to pick on is Starbucks. You know, there’s one of the first finance books I ever read and one of the ones that actually started getting me into personal finance is the Automatic Millionaire by David Bach and through that book, he talks about what he calls “the latte factor” where he picks on people who go to Starbucks all the time. Now, you know, I’m not going to pick on you if you go to Starbucks all the time. I enjoy the, depending on the season I ran out, if it’s the fall and I really do enjoy a salted caramel mocha as much as the next guy or maybe a pumpkin spice latte but I’m not going there all the time and I know people who go to Starbucks, you know, five times a week or even more.
Now if you get a four dollar coffee, let’s say, each time you go into Starbucks and you go five days a week, that’s $20 a week that adds up to $80 a month, that is eight hundred and something dollars a year. That is about as much as cable TV. So whoa, if you think about it, what do you care more about? Do you care more about going to Starbucks every day or do you care about watching TV? Cause those pretty much have an offset in cost. Or what if you could cut both of those out and all of a sudden you have $1,600 a year. That’s enough for quite a chunk of change to go into a savings or retirement account or maybe even a round trip flight to Europe.
Take that in for a second. If you cut your cable and your Starbucks and you’re a heavy user of both, you can all of a sudden take a trip to Europe or Asia or wherever else you want to go in the world. I mean, that’s pretty incredible if you think about it. But even better if you save that money rather than spend it. You’ll have more money for later on. So remember, don’t spend money based on what other people think. Don’t spend based on what I think. You know, it’s not my job to judge you for watching TV or going to Starbucks or spending a ton of money going to Vegas a few times a year, you know. It’s your money. Do what you want with it. But if you don’t find value in something then don’t spend the money on it and think, it’s all about what you care about and your money should go to what you care about and yeah, you can never cut your, you know, water and power bills, you can never live without either rent or a mortgage of some type unless you’re, I don’t know, some kind of freeloader living in your parent’s basement or at your friend’s house or a sibling or whatnot. But generally we have certain expenses we will always have to have, but other than that everything’s discretionary and there are ways to save even if it’s some things like food you can go to the grocery store instead of going to restaurants all the time or cut back a little bit. If you cut back a little on coffee and a little on restaurants and a little on a few other places, all of a sudden, there’s another $800 here. So you don’t necessarily have to eliminate things that you enjoy but if you cut back on some things, you have more money for things you will enjoy more. So that is my shtick on spending mindfully. Time for another cheers to saving more and budgeting better for the long run.
Pillar 2: Earning More
So next I want to talk to you about earning more. Now this is something that a lot of people really struggle with and don’t think is an option for them. To earn more money. But you really, really can. So let’s start with the root of this, about your, you know, I call it – my “air quotes” are up – my day job, or my primary job. The place that I go spend nine or more hours every day, five days a week, to bring home the bulk of my pay check. And a lot of people think, you know, they have their job, they get their hourly rate or their annual rate and they just have to live with what they make and that is- that’s just how it works, you know. That’s how it’s worked for a long time. Your boss chooses how much money you make and that’s how much money you make. But that is 100% not true and I can tell you my own stories about how I gotten many raises and make as much as I make today and that does come back to you and your choices.
So at this point in your life, I’m assuming you’re out of high school. Probably went out of college. You can’t go back in time and change your major or your grades. You can’t go back if you messed around a lot in high school and got a 2.0. That does impact your life for a long time. You can’t go back and fix that but you can fix things going forward in your education. So for me when I finished my undergrad, I got a finance degree, I worked for about a year before I went back to school and got an MBA and I know other people who’ve gone back to get MBA. Some people right after college, some people dwell into their career, but for me that was a huge benefit to how much I make and I actually – from the time that I started making my career – started my first job at a school to now, I’ve about doubled my annual pay and I’m not talking doubling from like twenty thousand to forty thousand, I had a finance degree so I did okay out of school, but I’ve doubled almost exactly how much I made when I started out of school in just seven years ago to what I’m making today. And you know, that’s a pretty dramatic increase and if you can think about what that will mean for me over the course of my career, which I’m still a pretty young guy, I’m just about thirty. So if I have, I don’t know, let’s say, cut it down though, let’s say twenty more working years, let’s say I want to retire at fifty, over that next 20 years, I will make twice as much money as I would have made had I not gotten all these raises. Now some of those raises, I may have been able to get on my own merits, but I really think that a huge factor was that MBA and, you know, it cost me an arm and a leg. It was a ninety thousand dollar private school degree that was the estimated cost of the year and a half I had there. But if I look and say how I doubled my pay, I know exactly how fast that degree pays off and the rest is just profit to me, to my own personal business of Eric Rosenberg. So that’s all money in my pocket that I get to save and earn and have for my family and my future and depending on how you do that and how you save.
Let’s say you double your pay and you stick with that first pillar and spend mindfully and don’t let your expenses rise very much. All of a sudden you can save half of your income. If you can save half of your income, let’s say it was going to take you thirty years to retire your current income but now you can save half, you just cut that time in half. You can retire in 15 years if you save that half of your income. And that’s a pretty dramatic change in your lifestyle. And for me that happened from education. Now, not everybody wants to sit in a cubicle or office doing finance all day, I totally get that. That is a pretty small portion of the population that I ended up in. But whatever you do or whatever you’re passionate about, you can get your own, you know, personal MBA that would make you qualified to advance in that career path.
So let’s say you are an entry level computer programmer and you do some basic HTML and PHP type work for some web developers and you want to really take it to the next level. You can go get that master’s degree in computer science. All of a sudden, you are helping build the coding languages that the internet is built on. You could, then you know, instead of working for a small company’s website, you can start working for companies like Google or Facebook or Oracle or you know, any of those big tech powerhouse companies and they will pay you a hell of a lot more than the smaller- medium-sized company will around their website or whatever. So, you know, they’re for engineering. There’s a place to move up. If you – for really any kind of job, there’s always the boss or the manager or the person who is the head of everyone else and they didn’t get there on accident. They got there through hard work and being smart about their job and with your job being your primary source of income, I urge you to look at that first as a way to earn more money.
So now that we’ve talked – and we’ll talk more about that later on too, I’m going to bring on some friends and people I know interviews later who’ve gotten big promotions and moved up in their career because – I know it sounds easy for me to talk about it cause I’ve done it. You can listen to this and say, “Well yeah, but that’s just you because you’re special.” I want to show you that I’m not special. Every single person has the ability to work hard to improve their career. Everybody, without almost any exception. So think about that over the next little bit, about how you can maybe improve your education or your skills or take a class or just do better at your job everyday you’re sitting there for eight, nine, ten hours a day, you know. Do good work when you’re there and you’ll be the first one to be promoted, not the last one on the list.
So the next place to earn more is to earn more on the side. Now, this is something that a lot of people never even thought about as an option and I had up until just, I don’t know, I guess six years ago, I started this blog, seven years ago, I started making money online for the first time. You know, it’s easy to – we all work our primary jobs, it’s kind of the American dream, the thing that we are supposed to do, you know, we work, we go to school and if you do well you go to college, and if you do well you get a good job, and if you do well you get promoted and so on. No one ever really talks about the making money outside of your day job. People think you either have to be a full-time worker working for a big company or a full-time small business owner entrepreneur where you work for yourself but, you know, there’s a huge risk and cost of doing that, you could lose everything. So kind of the new third route is to work on your own side businesses and your side income streams. So the easiest way to think about this that you can think about making your first couple of dollars on the side – you know this isn’t sustainable forever – to look around your home and see if you have any stuff that you haven’t used in more than a year. You can, you know, look into your garage, your closet, that junk drawer, your desk, anywhere in your house. If you have something you haven’t used for more than a year, you probably don’t really need it anymore. That’s probably just taking up after space in your home. Why not sell it? You know, there’s value in everything and there’s a reason you bought it or someone bought it for you in the beginning, nothing is free really. So think about selling it. You can sell things on either eBay or Craig’s List to make a few bucks. I’ve actually done that a few times myself. I’ve sold, actually I couldn’t tell you how many furniture items and things especially when I moved in with my now wife. We got rid of a lot of stuff. We sold all that stuff, we didn’t just like give it away because – and there was value. And each of those sales, whether it was $10 or $200, that added up to thousands of dollars of stuff that we sold and that’s thousands of dollars that we didn’t have before. So now, look around your house. You can pick up your beer and take it with you or your glass of wine or your scotch, whatever you’re enjoying with me. Walk around your house and look and see the things that you might be able to sell. Maybe it’s a little piece of art work or figurine that someone gave you that you don’t really care about and maybe it’s an old sporting equipment, you know. There’s tons of stuff that you have that has a ton of value and the first and best place to sell is usually Craig’s List because there’s no shipping costs and someone local, they’ll just come to you or you can meet them at the local store, a bank, I don’t know, wherever it makes sense to you, you can meet them there and sell it. There’s no shipping cost, no transaction fees. They give you cash, it’s done, it’s over and you have the money. eBay is another option that’s best usually for more collectibles or hobby-type items that there might not be a ton of people in your hometown want but around the country and around the world, there are. And there’s a ton of value in that and there’s some fees and costs for like shipping and credit card processing transactions and the listing fee from eBay itself. But that’s still a lot of money to be made potentially. So first just start with that and think about ways that you can turn your junk into cash cause that’s, you know, money in your pocket.
So next, think about starting a more sustainable business you could grow on its own organically. So for me that was blogging and writing which in now I’ve been doing as I said for – my first blog actually started in around 2006 so it’s been about eight years since I started my very first blog but it’s my main money maker I’ve had for about six years. But how that worked for me, you know, it started out just as a blog that I was so excited to make, you know, a couple of hundred bucks, a couple thousand bucks a year. I remember the very first time that I made enough money on my blog in a month that I could pay for my beer tab for a month which, you know, I was in my mid-twenties, I spent a lot of time downtown at the bars with my friends, it’s like, “Holy crap, I’m making like $2oo a month. That covers all the cost of my beer and a little more.” That’s like – blew my mind. Then it wasn’t too much farther down the road, I realized for the first time that I made enough money online in a month to pay for my mortgage for a month. I was like, whoa, now that’s a serious chunk of change, it wasn’t just like a couple of hundred bucks and that all started from me picking a hobby that I knew I could make money on and build on that and that’s actually grown to this point where I’m making more – not from this blog or Podcast or anything – but freelancing became something I do because of my blog. Freelance writing and freelance web design and other projects like that that I do on evenings on weekend and that now makes up about 30% of my income. And that’s after I doubled my income by, you know, advancing my education, my career. So from where I started working, I’m almost making as much online now per year as I did in my first job but because I make so much more on my regular job, I’m not just going to walk away from that at this point and go online full time though. If I really wanted to, I probably could. There’s a lot of benefits about lifestyle. This point for me, there’s a lot more benefits to having this security, this stability of a day job, that doesn’t mean I can’t make a bunch of money on the side.
So think about some kind of hobby or anything you really like to do that you might be able to turn into some sort of business or people might pay you for. I know there’s a couple of different ways to do that so, one I could think about – maybe making a product that you could sell if you are, let’s say you’re a photographer, you have a nice camera, you like taking nature pictures and pictures around the city. Things that aren’t just like, you know, your kids and your pets and things like that cause no one’s going to pay you money for pictures of your dogs and sorry guys, even if you think your dogs are cute, no one’s really going to pay you for pictures of your dogs. But if you take good nature photos or city scenes or landscapes or things that people might want to buy, you can list those on – there’s websites all over the internet that you can list those photos for sale as stock photos. Many times someone downloads one they have to pay and you’ll get a portion of that.
So one example, there’s a place called the Envato Marketplace that I’ve actually created a WordPress plug-in, I use WordPress a lot. That’s how this Podcast is getting viewed, through WordPress, and I’ve built many WordPress sites for people and I had one WordPress annoyance that I just couldn’t get through. Sorry that was my dog, there was some noise around here. So, there was some kind of annoyance that I had that there was no way to solve, so I created a WordPress plug-in to do that and I sold it on the Envato Marketplace and I’ve actually, I paid someone to make the plug-in for me and it has sold enough times that it’s paid for that cost so it solved my problem and has turned into a profit but you could do that on that marketplace with either WordPress plug-ins or WordPress themes if you are a computer-minded person or you could do the graphics if you have any kind of graphic design background, you could create custom graphics and so on there or photography. Or if you are a musician or even let’s say laptop music composer, you can create songs on your, you know, like DJ songs, like the intro song for this Podcast, you can sell those online. And Envato is just one place you can sell things, there are a ton of places. The reason I mention that is there’s a huge built-in audience who will already be searching that to buy, you know, graphics or music or video clips or stock photography, things like that. So you can build that into a business.
And the last step would be to have like a service business like what I’ve done. Or you can take that hobby or skill and teach it to someone else and sell it on your own so you could, let’s say if you’re a great photographer you can maybe make a photography course that you can sell digitally online. There’s a marketplace called Udemy which is like academy but for you, so Udemy and you can create courses and list them on there and people will pay to learn from you as a service that can create a, you know, a passive recurring income or you could build up your own website like I do, bring on clients and customers, you’re doing a service for repeatedly. Like you could be doing consulting work or some sort of writing or video production or you could even find people’s kids to tutor and people willing to pay a lot of money if you’re really good at math or science or writing or something like that to help their kids succeed in school and what they’re doing. So there’s lots of different kinds of businesses that you could create.
But what’s really cool is imagine doing a little combination of all of those. Like I’m actually developing a course right now on how to make a Podcast that I’m going to release on Udemy and my own website. So there’s two places people could buy that and that’s an income stream and I’m continuing my freelance writing other projects. That’s another income stream. And if you add things up overtime, that could be a good chunk of change. That could be enough – you could live on that like as your full time income or you could do like what I’m doing and supplement your income quite a bit and make your life a little better.
Pillar 3: Grow Your Wealth
So the next thing I want to talk about is growing your wealth. Now as I said when we started off, you can – as you save and spend less and earn more, there’s going to be that increasing gap. As business, we call it your net income. That’s your personal profit that you can do what you want with. And as we grow our personal profitability, we can invest that and grow your wealth. So there’s two ways to grow your wealth. One is just by socking away money as fast and as much as you can so I’m putting away 6% from every paycheck into my 41k, half of which is matched by my employer. There’s 9% of my income going into a 401(k). Next, I’m maxing out my own Roth IRA and so is my wife so each putting away $5,500 a year on top of that, which is another big percent of our income. Then beyond that, I’m actually putting even more money into a savings account, into some taxable investment accounts. Through a stock brokerage account you can buy and sell stocks and mutual funds, so we’re putting money in those as well and as that balance builds up and we invest, it grows us even more from those investments.
So there’s, again, the two parts of your growing your wealth. Number one, putting money away and number two is growing it through investments. So you’re putting money away with – I’m not going to beat the dead horse with a stick, we’ve already talked about it quite a bit here about how to spend mindfully and cut what you’re spending, how to grow your income and as you do that, just keep putting money away. If you don’t have one right now, I would highly suggest starting an emergency fund. I’m just thinking like maybe, I don’t know, $5,000, that’s what I put away. You might want to put more or less depending on your situation. But enough money to replace or put a big down payment on a car or a car repair if you’re, I don’t know, if your transmission goes out next week. Do you have enough money in the bank right now to fix that transmission? Or what if your furnace goes out at home if you’re a home owner; do you have enough money in the bank to pay for that without putting it on a credit card?
Your credit cards and debt, I haven’t talked about much yet, we’ll talk about that more in the future. But that is a huge expense and it totally against spending mindfully cause interest costs are huge and add up over time and don’t give you any benefit at all so avoiding putting money on a credit card you can’t pay off in full each month which – you know, I put everything on a credit card and pay it off in full because of the great rewards and benefits but for that to work, you have to have enough money in the bank right now to pay for all of those expenses that might come up. And I can say comfortably that I do, but I did not always. And it’s important for you to put your savings there first in a like easy to access bank account, like a savings account or something.
From there, you want to look at those investment accounts that I talked about a moment ago. That retirement accounts which have a tax benefit or the just regular taxable accounts that you can open through any broke reg and when you invest there, you want to invest smart for the long term. So for most people, that is investing and what Warren Buffet says S&P 500 index funds is the best way for most, you know, young and new investors to invest cause there’s very low fees and over time the market has always gone up. Always, under – any time period – yeah, there’s been a short time periods like in 2008, the market took a big crash. But if you sold then, you would have missed the roller coaster ride back up to just, you know, recently there were week after week after week, we were hitting a new high for the stock market and a new high for the stock market and if you have an S&P 500 index fund, every time the market hits a new high, your investments hit a new high. And if you do that over decades, and the average return is something like – I’m going on memory right now – something like 7% per year. Compound annual return on S&P 500, so if you have $100 put away, you’ll make $7 in profit on that every year recurring, so the next year you’ll make the profit around the $107 so it’s more than $7 profit. It grows big and again and again and again, it compounds. And that’s for every hundred dollars, so if you have a thousand dollars put away instead of making $7, you’re going to make $70. If you have $10,000, that’s $700. If you have $100,000 put away, you keep adding zeros to that, that’s why it’s very important to put so much money away as we were talking about you want to sock money away as fast as you can so it can grow overtime and eventually that 7% maybe rather than reinvesting, you take that out and that’s your cash flow to live on. That’s your Personal Profitability Project coming to conclusion, that you can live on all those profits that you’ve generated over your life.
So investing is very important and there’s lots of way to do it. You can read more about that on the blog narrowbridgefinance.com or just keep listening to future episodes cause I will definitely get into a lot more on, you know, all of these topics but a lot about investing for sure. That’s my background, you know, finance guy. So here’s a toast to your investments. Cheers! May they always be successful and rising.
Pillar 4: Live Better
So the last big topic I want to hit on before we wrap it up for the day is the last of the Personal Profitability Pillars, that’s living better. That’s the whole reason that we’re doing all of these, putting in any work to save money and soft that away and invest it and grow it. What’s the point of having more money? I mean, I think anyone could turn on the TV and look and see what rich people do with their money but we’re not in this to get rich, we’re in this to get wealthy and wealth is different than riches because if you win the power wall and you blow all that money, that was being rich and foolish. If you save and grow your wealth over time, you’ll become wealthy and live a richer life. And you don’t have to have ten million dollars in the bank to live a rich life. Right now, I have enough miles saved up through things that I’ve done. I have a trip that I’m working on planning to go to Spain next year with my wife and fly business class round trip for both of us, have this great trip ahead of us. You don’t have to be a millionaire to do that trip. I’m not a millionaire, I don’t have all that money put away in the bank so I can pay for that trip, just, I mean I could pay for this one out of pocket but I couldn’t do it many times over. But through thoughtful planning and whatnot, I’ve been able to arrange a way to do the travels I want and live this rich life. And my wife right now is on a plane on the way back from Los Angeles, visiting family. If being with family and friends, it’s just such an important thing for all of us that it makes her life so much better so other – your priorities are traveling or whatnot – it’s about living and getting the experiences you want. And I’ve been to concerts and I’ve gone on trips with friends. I was with a friend this morning, we were talking about a trip we took to Seattle together. It is such a great memory, a great experience. Just not even that expensive of a trip. It’s just a weekend away, shared the hotel room with two guys, the three of us, my old roommates. And it just makes me happy to look back on those memories or thinking back to a concert I went to in high school with a friend that I paid for it with my own money that I’d worked hard to earn. Or so many experiences in life and, into live music or if you’re into, again, travel, it’s just something that’s huge in my life and a big priority. Whatever you want to do, you should be able to do it and baring the thing you want to do being flying around in private jets or million-dollar sports cars, there’s no reason money should get in the way of you living your dreams. There are always ways to make things you want to do attainable and affordable and part of your life. You don’t have to wait, have to work for forty years until you’re into your sixties or seventies for retirement to enjoy your life. You should be able to enjoy it while you’re young and you’re able to do the things that you want to do. And that’s the whole point of all of these. That’s what personal profitability is all about. And why I’m trying to share that idea and spread it with all of you because I do try every single day to live a rich life and it would be my greatest pleasure and my greatest dream if we could all do that together as part of the Personal Profitability Project.
So, thank you everyone. That is all I have today for the very first episode. If you’re not already, I wanted to share a couple of things with you. First I have an email list, you should definitely be a part of it if you’re not already. On that email list, you can sign up and join the first seven days of the Personal Profitability Project that I call the Personal Profitability Boot Camp and that comes if you sign up for the email list to get a free Personal Profitability Playbook. It’s a piece that I’ve put together that will help get you through the beginning steps of your Personal Profitability Project and the Boot Camp is a video series for a week. You get a new video every day that will take you through everything that you need to, again, to get started. This is the beginning of it. Later on there will be a course you’ll be able to buy that will take you the whole way through it and a ton of actionable detail but I will never charge for this Podcast and I will never charge for the email list and I will never charge for the Narrow Bridge Finance blog. That is always going to be free to all of you. You can support me by buying that product or clicking through any purchase you make on the links on my website, some of those I get a little commission if you buy through. Again, you don’t have to but if you do, it helps keep this pirate ship afloat, as I like to say. So thank you. Please, please, if you enjoyed this, give me a good rating and share it with a friend. If not, I won’t hold it against you but I love you anyway for listening to this point. So here’s a last cheers for the very first episode of the Personal Profitability Podcast and have a great day, my friends.