030: Focusing on Long-Term Financial Success with Freelancer Eric Rosenberg

Eric Rosenberg is a finance, travel, and technology writer originally in Ventura, California. When away from the keyboard, Eric he enjoys exploring the world, flying small airplanes, and spending time with his family. Eric blogs and podcasts at PersonalProfitability.com.

In this episode, Eric talks about building a long-term mindset and how that’s helped his financial life. He also shares how he paid off his graduate school debt of $40,000 off in 2 years, and how he plans to put down more than 66% on his next home purchase in California.

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I hope you enjoyed that. A big thank you to Eric for giving us the gold today.

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Focusing on Long-Term Success

Eric believes that the main thing he does that has contributed to his financial success so far is having a long-term vision. Rather than just focusing on today or next week or even the next 6 months, Eric also focuses on 10, 20, 40 years from today. What does that look like in everyday decisions?

While some financial gurus advise monitoring literally every penny that comes in and goes out, Eric takes much more of a global approach. Yes, spending $5 on your fancy coffee is $5, but over the course of 40 years, what will matter more? That $5, or changing your entire approach toward your finances? Changing your money habits and focusing on big wins is what will have a bigger impact on your money in the future.

Big wins are things like real estate; if you can live in a home that costs $10,000 less than the one you prefer, you buy the less expensive home. Another place to look for big wins is in your monthly recurring expenses. As an example, how much are you paying for cable? In the past 7 years, Eric has saved over $4,000 by not having cable. Nobody can say that $4,000 is not a big win. And while cable may not be your financial downfall, we all have something that we spend money on every month that doesn’t actually enhance our life in any way. We each just have to find our own personal “cable bill”, and then we are ready to score one of those big wins.

Getting a Financial Education in Real Life

A birthday gift of a ledger book when he was 8 years old gave Eric his first taste of financial accountability. From that gift from his grandpa to having the ability to take business classes in high school to a finance degree in college, Eric has spent his life learning about finances. Those lessons, combined with knowing what he wants for his future self have propelled him to be as wise as possible with money now in order to be successful with money later in life.

It is a truth that retirement savings in this country are almost nonexistent for most people. Because quality of life is so important to Eric, he is willing to work hard and make sacrifices now so that Eric in the future will not have to make such huge sacrifices. Whether it’s college for his kids or a personal life decision, he doesn’t want money or the lack of it to be the deciding factor.

“You can’t afford everything, but you can afford anything.”

A Lifetime of Financial Lessons

Finance bloggers, in general, seem to have come to the place they are by hitting rock bottom and then climbing their way out only to use the lessons they learned to teach others how to avoid the same pitfalls or how to climb out of those pits too. But not so for Eric. From that solid foundation that began as an 8-year-old with a ledger book and a fairly financially secure family life, Eric hadn’t experienced that same types of financial strain that others have. That is until he began graduate school. An estimated $90,000 to get his MBA had him nervous about how he would pay off more money than he made in a year.

He also had dreams of raising his own children in a home life that was as secure as he had experienced as a child. His desires to give his children a childhood similar to his and to be able to afford a home comparable to his parents’ home led him to work a full-time job while also pursuing his MBA full-time.

Knowing that debt would get in the way of accomplishing his goals for his family caused Eric to become laser focused on getting that school debt paid off. Two years and six days after graduating, he did just that. He literally funneled every extra dollar he had during those two years toward the debt.

The Difficulties of an Irregular Income

Leaving a full-time secure job with an employer and moving into self-employment brings about a lot of changes when it comes to personal finances. Eric has seen his savings go down, his taxes go up, and a need to get serious about getting things back on track.

When you are self-employed, your taxes are double what you had taken out of your check as an employee, due to the simple fact that your employer paid the same amount that was being taken out of your pay. Now you are responsible for all of it. And no more company match on your retirement. 100% of your retirement is up to you.

Automatically sending part of your regular paycheck to retirement accounts or savings accounts isn’t happening anymore either. Eric puts it like this, “The house of cards didn’t fall down…I just needed to build a new house.” You have to learn how to build the infrastructure necessary to get that new house up and running.

Accomplishing Financial Goals

Eric’s first experience with consumer debt was a car loan that he took on a month after he started his first job. His hand-me-down car from his parents had just broken down and wasn’t worth as much as it would cost to repair it. He bought a $17,000 car with $5,000 down. Because he was living at home with his parents, he was able to double his payments on that loan and pay it off in half the time the loan was set for.

He did the same thing when it came to paying off his MBA. At the time he began paying on it, the total was around $40,000. He had been giving a scholarship from serving as staff at a Boy Scout camp, and that along with some savings from his parents, along with working full-time had allowed him to pay off a large portion of the school costs while he was attending. He was throwing every single penny he got a hold of toward his debt, from gifts to tax refunds.

Saving for Retirement While Paying off Debt

During the two years that Eric was paying off his student loans, he was not contributing the maximum to his retirement savings, but he did continue to put money in his Roth IRA. He chose the Roth because of his age and the number of years until retirement age. (If you are closer to retirement, a traditional IRA might make more sense for you.)

Eric was also setting money aside for a down payment on a house during this time. He took advantage of his company’s 401K match. When he eventually left that job, he was putting 12% of his income into that 401K and investing some into his company stock.

Putting 66% Down on a House

Eric and his wife have been saving for a sizeable down payment on a house since they sold their home in Portland, but sticker shock is still something to deal with when you are moving from Portland to Southern California. Saving over 66% of that down payment has taken time and dedication.

Eric doesn’t worry too much about the housing market when it comes to when to buy. His advice is to take your time, understand the market where you are moving to and what the housing costs are doing there. Because he isn’t planning to flip the house anytime soon, he is willing to buy when others might not think the market is best.

So how does a person come up with 66% down for a house in a neighborhood where houses are going for between $600,000 and $1 million? Eric says it has been a years long process of saving; saving from houses sold and general savings that he and his wife have added to their accounts.

Developing a Plan for Growth

Eric shares his income reports on his website, and it’s a great checkup for him of where he is and where he’s going. As an example, he noticed that while he spends about 80% of his time on web development, he only makes 20% of his income from that. So he can see that he needs to bring those hours down a little bit, even though he enjoys it.

Some advice from a family member helped Eric to get a better handle on his business and become both a better creator and a better salesman. His current focus is on scaling his business. He has also begun building things like plugins for WordPress websites and offering customizations.

Show Notes

• 02:15 How having a long-term vision for financial success can contribute to your current success
• 05:40 How a birthday gift set Eric off on his financial education
• 13:25 When you want to give your kids an even better life than you had
• 18:00 The difficulties of managing an irregular income
• 23:40 How Eric paid off his $40,000 in student loans in 2 years
• 34:00 Did Eric sacrifice retirement savings in order to pay off the debt faster?
• 38:05 Saving more than 66% for a down payment on a home in Southern California
• 42:55 Buying a house vs, buying rental properties
• 46:30 Does the banker really have your best interest in mind?
• 51:55 What are you putting your money into?
• 57:20 How Eric plans to grow in the future
• 1:00:05 Do 9 out of 10 businesses really fail?

Show Sponsor

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Links/Terms/Concepts from the Show

Eric mentions the following in the show:

• Gusto.com – HR services for your small business.
• ForUsAll.com – Small business 401k.
• MoneyMola.com – Eric’s startup that helps you manage loans to family members.
• David Oreck
• FinCon
• Ignite FinCon
• MBA
• S Corp
• SEP IRA
• Solo IRA
• LLC
• John Madden, Denver
• Boy Scouts Scholarships
• Roth IRA
• 401K
• Vanguard

He also references Dave Fuente, the former CEO of Office Depot, who’s also Eric’s uncle. Dave always asks Eric, “are you making something or selling something?” And Dave adds, “if so, does it scale?”.

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This show is part of the FinCon Podcast Network and was produced by Steve Stewart.