063: Personal Finance for Business Owners with Jeff Rose from Good Financial Cents

Welcome to episode 63 of the Food Blogger Pro podcast! In this episode, Bjork talks with Jeff Rose from Good Financial Cents about making sound decisions about your finances for your business and your personal life.

Last week Bjork interviewed Mike Morrison from The Membership Guys about successfully launching a membership site. To go back and listen that episode, click here.

Personal Finance for Business Owners

If you’re serious about this blogging stuff, you’ve may have already created a business for your blog – or at minimum, you’ve thought about it. However, registering as a business isn’t the only decision you need to make. Running a business means dealing with your money properly to secure for both your business and your personal financial future.

Jeff Rose is both a certified financial planner and a blogger, and he does both in support of his business. He’s made his living by helping others manage theirs, and his wealth of information will help you plan for a secure financial future.

In this episode, Jeff talks about:

  • How to financially transition into working for yourself
  • How to organize your time for business success
  • The first thing you need to do to prepare for working for yourself
  • What your savings are actually good for
  • Where you should be investing your money as a small business owner
  • What types of insurance you should have

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Bjork Ostrom: Welcome to Episode Number 63 of The Food Blogger Pro podcast. Hey there everybody, this is Bjork Ostrom coming to you from Saint Paul, Minnesota. Today we are chatting with Jeff Rose. Jeff Rose is two things and both of those are going to be important and relevant for this podcast. He’s many things but two things that I want to let you know about. Number one, he is a certified financial planner. We’re going to be talking about some of the things that you need to consider in general but also as you make that transition into building your own business. Maybe it’s a blog. Maybe it’s an e-commerce site or just business in general. What are the things you need to consider that normally an employer would provide for you but now because you are self-employed that you have to provide for yourself?

We’re going to be talking about some of the mindset shifts that occur as well, where you might not just be investing in other companies and mutual funds or stocks or things like that. One of the considerations you might need to make is investing in your own company. That’s a really important mindset shift as well. The other thing that Jeff is, he’s a Blogger. He gets it. He knows this world. He’s been blogging since 2008 at Good Financial Cents, all about personal finance and financial planning and things along those lines. I’m really excited to have Jeff on. He’s going to share a lot of insightful and helpful information all around finance but also connected to blogging as well. Without further ado lets jump in. Jeff, welcome to the podcast.

Jeff Rose: Should I have eaten before I came on? I’m not sure what the rules are.

Bjork Ostrom: Yeah. I was going to ask, how many food blogger podcasts have you been on now?

Jeff Rose: You’re like the number one and most likely the only one.

Bjork Ostrom: Fist and last. All right, good. There’s a first time for everything. This will be your first time on a podcast about food blogging. I wanted to have you on number one, because I enjoy talking to you. We are internet friends. We’ve never met in real life but we have chatted over the internet. You just have a wide experience, a breadth of experience in terms of blogging. Also on the personal finance side. You’ve kind of merged those two things. I’d love to dive in and talk to you a little bit about each of those. First I want to start with your story. I would love to hear…Take me back, roll back the tape a little bit and tell me about how you got started in this world of blogging and online content creation and all that? Did you always know it’s something you wanted to do?

Jeff Rose: Absolutely not. I had not clue. I think to kind of take a step back even further, I started as a financial advisor first. That was my job out of college. I’ve been doing that for fifteen years and didn’t start the blog until 2008. At that point in time I’d been in the financial planning business for about six or seven years at that point and time. When I launched the blog…For those that know our industry, basically I left la big firm and I started my own thing. When I did that I had this excitement because I thought, “Wow, now I can actually market myself differently than every other advisor out there.” At the time though I wasn’t on Facebook. I did not have a MySpace account. Twitter was just coming out I think. I had no idea what a blog was. I associated blogging with having a MySpace account. I thought they were synonymous.

Bjork Ostrom: Did you ever get a MySpace account to promote your…?

Jeff Rose: No. Never did. Could proudly say that. I remember just reading this magazine and it was talking about advisors trying to stand out from the crowd. It said if you want to be different you need to start a blog. I remember reading that article and saying out loud, “I have no idea what a blog was but I’m going to find out and I’m going to start one.” Fast forward to present day. That led me to starting goodfinancialcents, C-E-N-T-S.com. That initially was…Like I said, I didn’t know anything about blogging so all it was was a marketing tool for my practice and then ended up becoming basically its own separate business. We’ve shared some fun stories about that. Brings in a very hefty revenue right now. I feel myself actually being pulled away from working with clients one on one to focusing on working with the masses just because of the reach and the message I can have with the blog and with online.

Bjork Ostrom: We actually have a friend who was in law and he was a lawyer or an attorney and is making the same shift. It’s interesting as we…As I observe people that I know making that shift….The thing that you said I think is so true is that you have this reach, right. If you’re practicing, a practicing attorney or if you are doing financial management, in some ways you are kind of restricted to the area that you are. Obviously you can do remote sessions via Skype or things like that but in general you’re going to be in this little smaller community. The great thing with anything web based is you have this super far reach, right. It’s like anybody that has an internet connection. A follow-up question just because I know you’re deep in the space and I’d be interested to hear what you have to say about it.

We talk about blogging, we’re Flood Blogger Pro but I also feel obligated to have this conversation around what is blogging now. You’ve been doing it for eight, nine years. Do you feel like blogging in and of itself is the same thing? Do you start to feel that segmenting into more of social media with blogging being this nice kind of icing on the cake? Do you still feel like it is the cake? I’m just curious to know your take on blogging and how it stands right now because you’ve seen it change?

Jeff Rose: The funny thing, when you were saying that I was trying to think of what has changed now versus when I started eight years ago. I think for the most part like content…Content is king. I hated to even say that. I almost want to just pinch myself for saying that. The content that has changed for me is that I used to do much shorter posts. Very like five hundred wordsish. Now it’s anything that we publish is going to be at least fifteen hundred, usually in that two to three thousand word limit. With that you just go deeper.

Bjork Ostrom: Which is interesting because that’s a switch that you had but I feel like the majority of the internet is going the other way. I would assume BuzzFeed is switching from…Not switching but is doing like very short form or Sports Illustrated or Bleacher Report. You see a lot of these short form things so why long form? Why the switch to long form for you?

Jeff Rose: Maybe it’s just with the financial space. I think that when you’re looking for a financial question and you’re going to a five hundred word post, you’re just going to get very surface level. You’re not really getting into it. By taking something like the Roth IRA or something that’s investing specific, if you’re going to two or three thousand words on this thing, you’re going to basically cover everything. You basically wrote like a mini e-book as a blog post. The one thing that has changed which is social media, before it was sign up for my RSS feed and get that into your feed. Now it’s giving these little short tidbits on Twitter or Facebook and then driving people back to your blog. I think that’s the biggest thing that has changed. I think the other aspect and this kind of gets overwhelming…I don’t know if this is totally necessary. I know for me it’s worked out really well is that having different typed of content to distribute. Like you have the podcast for example, blog post. I have a podcast, I also do a lot of video. Having kind of that three prong approach I feel has really helped separate me from my competition a lot.

Bjork Ostrom: I think that’s a huge take away. I would assume that most of the people that listen to this have the blog post part down. That’s the core of what they do. Adding on to that, we talk about video a lot. People probably roll their eyes a little bit when they hear it. I think it’s because it’s true. It’s just become you think of Instagram stories or you think of Snapchat or obviously YoTube. There’s all these different video components. Facebook, they talk about how they’re going to be video driven moving forward. The podcast piece I think is another interesting one. We found that to be such an interesting addition to our content strategy. What’s interesting is that we don’t have massive numbers of people that would download a podcast every week. What we do have is super high engagement. I talk to people and oftentimes I meet them for the first time but they feel like they know me. I think video does that as well.

Maybe a good little tidbit there for people that are listening and thinking about building their content, to not just think about the blog post as the sole thing but to also create those additional content streams whether it be a podcast or video channel. Not in replacement of the blog post but to support that and the overall brand which I think is great. I want to go back to something you had said way before and just dig into it a little bit. Some people are thinking about making the jump and you had talked about a little bit switching to focus on the blog side of things or like your personal brand online. Before that you made the jump from a really big firm to your own financial management company. Can you talk me through that process and what the mental process was like as you made that jump? A lot of people listening are processing through that right now.

Jeff Rose: I guess to be fair I…I guess I did have a choice. I almost said I didn’t have a choice. We were bought out by a regional bank that no longer exists. It was Wachovia Bank. They bought us out and they basically lasted for about nine months. Then they had to get bailed out by Wells Fargo. I had a job. One thing being and advisor, I was paid a retainer bonus if I stayed with the company. It’s like hey we’ll give you a bonus if I stayed with the company, so it’s like, “Hey we’ll give you this much more money on top of what you’re already making if you stay.”

Bjork Ostrom: The common piece of acquisitions is like some type of bonus to get people to stay on so they don’t get acquired and then just leave like, “We don’t want to be a part of this other company.”

Jeff Rose: Exactly.

Bjork Ostrom: Yeah.

Jeff Rose: I had that choice or I had the choice of going somewhere new, and we just didn’t like Wachovia, we just didn’t feel like it really jived with what we stood for. I was very lucky in a sense that I had three other advisors and we were all in a similar situation, so we actually joined up and formed a firm together. Basically what that meant was you had three other people to look for a building space and share rent and hire an office manager and share all your monthly overhead. That was a huge benefit, because I’ll be honest, at that point in time I was pretty clueless on what it meant to run a business. I’m the big idea guy, I go out and I get clients, I can do all the high level stuff, but when it comes to actually organization, or taking the time to do the research to find out what phone system that you’re going to buy, I’m just going to go to Google and pick the top thing. That might be the best thing, it might be the most expensive thing.

That was a huge help for me in the beginning. I have since then actually branched off from those guys and I did start my own firm, and I felt like having that … How long was that? That was two or three years of working with them, and that gave me just the experience I needed to really go at it. Now would have I survived without them? I think that I would, but I don’t think it would have been as fruitful as it was. It made things a whole lot easier, but nonetheless it was a scary time, and you want to tight it to financially, there was definitely a lot of conversations that my wife and I had. It was basically the day that we decided that, “Okay we are going to leave,” I think we still took six to nine months of just working through those different scenarios, and making sure that we had everything lined up before we actually left and turn in our resignation. It definitely was not a, “Oh, I woke up one morning …” “I’m going today,” and it was like, “All right, here we go.” There was a lot of research we had, and just to be prepared to make that transition.

Bjork Ostrom: I think that’s wise council, and it’s something that we occasionally hit on in the podcast, and it’s the idea of really being intentional and being slow in that transition. Some people would be of the opinion of burn your bridges and then you’re forced to move forward and do the new thing that you’re doing, but I think there’s so much wisdom in saying, “Okay, let’s be intentional about this, let’s take six months, let’s take a year, let’s see if we can live on just a salary of the job that you’re switching to see if that works.” Or in the case of people that listen to this, “Let’s see if I can live on the income from the blog that I have while saving the money from the salary that I have.” Another thing that I want to ask you a question on, that I’m interested in is, I know that you’ve done all of this while raising a family, and that’s not an easy thing to do. You have three boys, you recently went through the adoption process, and have a new daughter, which is awesome, congratulations.

That’s a lot of stuff to juggle, and do you have any advice for people that are building their thing while at the same time wanting to dedicate time for their family? I know that that’s something that’s important to you, so what would you say to those people?

Jeff Rose: Yeah, I’ll have to call myself out. I know in the first couple of years of building the blog, I was basically working two fulltime jobs, not because I had to, because I just got really obsessed with wanting to figure this online marketing blogging thing out. Also too, I know this about myself know, I don’t think we’ve ever talked maybe about Kolbe scores, which is a personality test?

Bjork Ostrom: Sure, yeah.

Jeff Rose: I am a very high fact finder, which tends to mean that I over research everything.

Bjork Ostrom: Do you enjoy the process of discovering new information and learning about things?

Jeff Rose: Somebody asked me about blogging, I don’t want to repeat a two or three sentence description, I want to be able to write a book on it. I feel like if I don’t have all those answers, I just feel like I’m inadequate, which is really good in the financial planning profession, because if there is a complex strategy, I want to make sure that I understand every possible scenario that can happen. Unfortunately when it came to the blogging side of things, I wanted to absorb everything. Now I can recognize like, “Jeff, do you really need to know that right now? Do you need all that information to take that first step?” Having a high fact finder, putting a lot of time in, I’m not saying I neglected my family, but I know that there was a lot of times when I should have been going to bed with my wife at the time that she was going to bed to have those meaningful conversations before we go to bed. Instead I was on my laptop reading about blogging and SEO and all these kind of things.

It took me probably until our second child to recognize, “Crap, I need to figure things out.” It became basically the point of just making things a priority, and just recognizing those things about myself, like, “Okay, you don’t need to know everything about SEO. You don’t have to know all that stuff, you just need the bare bone stuff to do that, and then find the right people, build that team, start building that team around you that can support you in those efforts.”

Bjork Ostrom: What was the change, was it a mindset shift that you had, and then obviously a mindset shift has to result in also an action shift. What was the mindset shift and then what did you change in order to continue building and growing, which you’ve done, and you’ve done an incredible job of doing that, while also then being able to focus on family?

Jeff Rose: I think the defining moment for me was I joined this coaching program, it’s called the Strategic Coach. I remember one of the first meetings that we had, they were introducing us to this entrepreneurial time system of having your three days, your buffer days, your free days and your focus days. Your focus days, those are the days that you’re doing everything that you love, you’re getting paid to do it, everything is great. Buffer days are in between your free and your focus. Your free day is defined as a 24 hour period where you do nothing work related. That means no email, that means nothing on social media. Yeah, you can maybe go on Twitter, but you’re not going on Twitter to promote your blog, you’re going because you just want to read the news or what’s going on. The question posed to the group and to myself was, “In the last year how many free days have you taken?”

Bjork Ostrom: Yeah, and it’s a group big gulp like, “Ooh.”

Jeff Rose: For me it was a big fat zero, and it wasn’t from the financial planning practice, I didn’t work weekends anymore, it was easy to unplug from that business on the weekends, but on the blog I was always in it, I was always in it. I think I would have had a Blackberry all the time, but I just remember notifications, emails going off, wanting to answer comments, everything. I think that was that start of … When you’re not taking time away, when you’re still working on your blog on the weekend, and I know there is a time to hustle, there is a time to put that time in, but it made me recognize that I wasn’t unplugging from that business, which meant that I wasn’t giving my family the attention they deserved. That for me was the start of recognizing when I need to shut it off.

Bjork Ostrom: Yeah, that’s interesting. I think that there is a very real … We’re not at that point yet, we don’t have kids, but we will someday, and we’re super excited about it, and I know that when we do there’ll be this shift, where I’ll feel tension in a way that I don’t right now when I am working in the margins or the weekends. I’m always interested to hear that and I think that I appreciate you, number one your honesty, and being like, “Well, I didn’t do a great job of it here.” Number two, your intentionality in saying, “I want this to be a priority and to focus on it,” and I think that’s a cool thing.

Jeff Rose: One little recent thing, I don’t know why it took me this long, but I just committed to no longer is my laptop allowed in the bedroom.

Bjork Ostrom: Yeah, for sure, I think that’s great. We do that with cellphones, it’s like, “We’re just going to draw this hard line,” which is crazy, or even there was one period where I was like, “I’m not going to do anything computer related after 10:00 PM,” which sounds like such an easy thing, it’s so weak, but at the same time it wasn’t easy to do that. It was hard to say, “I’m just going to go check this real quick, or respond to this,” or, “I’m not doing anything, I’ll just pull it up,” but it’s like oh just to draw that hard line I think is good. Cool. Well, I’m always interested to hear a little bit of people’s origin story, to hear where they come from, and I think it helps people to hear, whether it’s related to the industry or not, to hear how people have transitioned into doing what they’re doing now. Obviously a big part of what you do, whether it’s Good Financial Cents or your practice that you have locally, or some of the courses that you do, all revolves in some way, shape or form around this personal finance piece.

That’s what I’d really love to focus in on for this podcast and to talk a little bit about because I think it’s a really important concept, for people to understand across the board, right, whether they have a traditional nine to five, whether they’re stay at home parent, and whether they’re building their own business. All of those things are really important, but I’d love to talk to people that are interested in making that transition, maybe taking the step into doing their own thing. To talk about some of the things that they can be doing to help secure them long term. When you’re with a company, maybe they have a 401k or different options. Maybe there’s some health insurance that comes along with it, life insurance or things like that. When you branch out on your own, you are your own boss which means that you make the decisions for what the company retirement plan is, if there is one, or how you’re going to invest. You are your own retirement plan. I think that’s kind of a scary thing for people and one of the many facets that are involved with starting your own company.

Just from the get go, let’s start and do kind of a high level overview. If somebody is currently … They have a 9 to 5 right now. Maybe they’re doing their blog on the side as kind of a side hustle. What would be the advice that you’d give to those individuals in order to start the process, like to get the ball rolling?

Jeff Rose: I think the two things you have to do, and this first one, when I say this word, I cringe. I hate this word, because it’s so basic. It’s used all the time. Personally, I hate doing it, but the reality is that if you don’t, you will never ever succeed, and that word is budget. I hate it because it brings out so many negative connotations.

Bjork Ostrom: There should be a better word, shouldn’t there?

Jeff Rose: That’s actually a goal of mine. I need to create something, and I’ll share that in step number two, but the reality though, is that if you don’t know where your money is coming from, and you don’t know where it’s going, then you’re never going to be able to know where you’re at in your life financially. If you’re wanting to make that step of going out on your own, and you have no idea how to run your own finances, then you’re trying to start a business, and you can’t run your own finances, then you’re not going to understand how to run the finances of a business, and you’re just setting yourself up for failure.

The way that I was able to work this out in my own life was, I … I want to say got lucky, but I married up. My wife loves to budget. That is her thing. Even though I’m actually the financial planner, she’s actually the CFO, the chief financial officer of our family. She takes care of all the budgeting, all the bills. She got to the point where she does this. She has this little checklist she does every single month just to pay the bills, but any time we came across a major life event, having a child, having our second child, having our third child, adopting our fourth child. I’m trying to remember. It was our third son where she had some paid leave for our first two sons, but then our company got bought out.

Our third son was the first time that she had time off, but it was unpaid. We used that as our test to see, hey, can we make this work? Can we survive? Every time any of those major life events happened … the other big event for us was building our first home … we had that sit down. We’re going to talk about the budget and just look at our finances. Okay, where are we at right now? How much money do we have saved? How much have we made here in the last six months or so? What’s going to happen if that doesn’t continue, and just try to have plan A, plan B, plan C, and just have that really important money discussion.

You have to have some sort of budget, not saying you have to know every single penny, but you’d better have a rough idea where your money is coming from and where it’s going.

Bjork Ostrom: What would you recommend in terms of a system for that? Is that using whatever comes along with your bank, or is it using an automated tool like mint.com, or Every Dollar, or do you have any favorites or suggestions?

Jeff Rose: Yeah. I think it really just comes down to the person. My wife, for example, she would never ever use any sort of app. That’s just not her. How she does it is, every single month … Actually, no. She has a blank word document that has a list of every single bill that we have for the month, and if she needs to add it to new things, she will, and she just prints it off each month and just lists the amount and crosses it off as she goes along. That’s how she’s been doing it since day one. A simple Word document, Excel spreadsheet, some of the apps that you mentioned. Mint.com is very popular. Another very popular one is youneedabudget.com, or YNAB. They have such an amazing community of budgeters. I don’t get it. They have a podcast too, and this community of people, they just talk about budgeting.

Bjork Ostrom: It is a weird world. It’s a weird niche. A bunch of fanatics.

Jeff Rose: Those are two great … I think Mint, obviously is free. I think YNAB, I think they’re a subscription service now, but I think it was maybe $50 or $60 a year. Every one I’ve talked to that’s started using YNAB has loved it. We don’t use it, but we’ve heard a lot of good things about it.

Bjork Ostrom: We use Mint. I have a personal Mint and then a cumulative for both of the businesses, and for the personal one, it’s a little bit easier to keep track of, and we’re a little bit more attention on the budget side, and so I go through and categorize everything, and that’s been a morning routine, where it’s like “Okay, from the past day, what did we spend on?” And then categorize that. It’s amazing when you get in there. I’m applying this across multiple things because this is just what I’m interested in, but when you get information, it’s so interesting how it impacts your behavior.

I just installed this thing on our car called Automatic which hooks into the diagnostics panel, and it gives me little warnings if I break hard, or accelerate too fast, and then it gives you a little score. I feel like a budget is equivalent to that, where you look in, and it’s like, “Oh, I spent $100 at Caribou Coffee.” Do you guys have Caribou in Illinois?

Jeff Rose: I’m familiar with it, but no we do not.

Bjork Ostrom: It’s like a Starbucks comparable. It’s like, “Oh man. I spent $100 at Caribou last month,” and that information in and of itself impacts the decisions that I make. I think that’s really important both on the business side and on the personal side. I think on both ends, it’s so helpful to have both of those. That information kind of feeding into your decisions.

Jeff Rose: Right, and first thing is the B word, which I’m not even going to say it again, and the second thing, and this is actually where I kind of change the name. We often hear the term emergency fund, rainy day fund. What I refer to it as is your freedom fund.

Bjork Ostrom: Sure.

Jeff Rose: I’ll give an example. I’m trying to think. I had a gentleman who had a job, a very good paying job, but he just didn’t like the corporate. He wanted to go on his own. He wanted to basically be a consultant and do his own thing. He’s asking me, “Do I need to invest? Do I pull my 401k, Roth IRA?” At the time, he didn’t have a lot of cash savings. I told him, “Honestly, what you need first is, you need to build up your cash and build up your freedom fund. That way, whenever you are ready, you get that fund where you need it, then you’re not dependent on your day job. That should give you that flexibility you need to chase your own business or do whatever you want.”

Hindsight, looking back on our own life, the times that I left the old firm to co found the investment firm, we were like, “What happens if your clients won’t follow you? What happens if you don’t make any money? How much cash do you have?” I can’t remember the exact number, but I know that we had at least about 9 months worth of emergency funds, all our expenses that we needed. Looking back at that, it wasn’t for an emergency. That was for freedom. It gave us freedom from the stress that happens if you don’t have enough money. I see so many people that are tied down either to a house that they don’t want to live in, a job they don’t want to be in, a career they have a boss that just treats them like crap. Because you don’t have that flexibility, because you have all these payments, and you don’t have enough cash on hand because you don’t have your freedom fund where it needs to be, I think that’s so important.

For me being my other score of Colby Score as a very high quick start. Not only do I like to research a lot, but I also like to just-

Bjork Ostrom: Jump.

Jeff Rose: Start things. As I mentioned, it took 6 to 9 months for us to leave. If I didn’t have those other advisors with me, I probably would have left after 2 months. I don’t know what the story would have been. I know that my wife would have had a heart attack. She would have stressed out. It would have just caused all this unnecessary stress on our lives. Recognizing that, we had that cash that my wife needed a certain amount to make her feel comfortable. I want to make sure that we had that. We’ve had that every single time that we’ve had some major … Like as I mentioned, building our house, or as far as the adoption process, adopting our daughter. There was a very large monetary commitment for that. We wanted to make sure that our savings is where it needed to be minus what the cost was for adopting her was going to be so that we didn’t get too far set back. We’ve always kind of had that freedom fund in the background. That has given us so much, just peace of mind, knowing it’s there.

Bjork Ostrom: For sure. Would you say those two play together, so the idea of the budget and then the freedom fund. First step, obviously, being budget as you talked about knowing where you are spending and how you are spending, and then adjusting that accordingly in order to funnel some of that into what you would call the freedom fund?

Jeff Rose: Yeah, absolutely and because I know the only thing that I would always … Every time my wife and I would have these conversations about some major big idea that I was going to do, or some major transition in our life, she always made me … I actually love this, she would always make me write down … She knew our expenses for our household, but if I’m being quite honest, she would say, “Well, how much are you spending at your business?”

Bjork Ostrom: Yeah.

Jeff Rose: I’d give her, like, the shrug of the shoulders. I’m like, “Well, we’re making money. We’ve got money in the checking account.” It would always force me to look at, what was I investing in my business, different tools, different resources, and then on the blog I started looking at the different things I was paying for and I just had to ask myself, like, okay, I bought this tool, it’s 20 dollars a month. Am I still using it?

It just kind of forced … That’s the same thing, you’re looking at your budget when you start looking at all of the things that you’re paying for. It’s like, I’m paying 250 dollars a month for DirecTV, do I need the package or can I call and reduce it? Or just cancel it and go to Hulu or Netflix or something like that that’s going to be far cheaper?

Bjork Ostrom: Yeah, and that’s … We do the monthly income and business reports on Pinch of Yum. That’s been a huge part for us. Literally for me going through and copying and pasting over different expenses and being like, wow, do we use this? So often those things can become like little holes in the bucket that slowly or quickly leak out. It feels really good to go in and to patch those up so you don’t have as many leaks, whether it’s on the personal side or business side. I think that’s a good place to start.

Let’s say you’ve gone through the process of creating a budget using a software like Mint or maybe you’re doing something a little more manual and you’re writing it down and going through and tracking along with that. Then you start this process of building up a freedom fund. Let’s say it’s 6 to 9 months, would you say that’s a good place to start or what would you recommend for that?

Jeff Rose: So I think for the normal person that has like the 9 to 5 job and husband and wife both work, that 6 to 9-month realm – that range I think is appropriate. When you are talking about leaving your job and starting your online business or something like that, I think you got to have more than that. We’ve always stayed in that at least a 12-month range. When we were building our first home we actually go into the 18-month range.

What did that mean? It means we had to cut back on some other things that we recognized we were spending our money on. So we made some sacrifices in the short term but we know that’s what we wanted. I think at least 12 months is where you want to be just because it’s so unpredictable. Trust me, it might sound like a lot of money, and it is, but the reality is that, I promise you, you and your spouse, if you have one, will thank me for it later on, I promise you.

Bjork Ostrom: For sure. If nothing else, I think you make better decisions when you’re not having those decisions impacted by the need to immediately create an income. For example, if you leave and you know that you need to pay rent next month, you can do things that are potentially damaging to your brand or to your blog if you feel like I just have to do this because I need to make rent. Obviously, everybody’s position is a little bit different and sometimes life is what life is and you have to do that, but if you have a choice, I think it makes total sense to stick it out like you said a little bit longer in a position that’s not ideal in order to build up that security blanket, that freedom fund that will allow you to have a little bit of breathing room and margin.

So let’s say somebody starts to make that transition, they’ve saved up, they have that freedom fund and don’t feel this intense pressure once they do leave their traditional 9 to 5. Then they’re starting to do their own thing. They have their own business; maybe it’s around a blog or maybe they have an e-commerce site. But whatever it is, they are transitioning into being their own boss. Suddenly, they don’t have these company plans where somebody from HR is coming and saying, all you need to do is pick one. They have to figure out what they’re going to actually do.

What are your recommendations for people as they’re just getting started out, in terms of, let’s start first with investing? Where do people go for that?

Jeff Rose: For me to answer this question, I’m going to put on two different hats. We have our traditional financial planner hat that’s going to have that typical advice that you’re probably going to find on line. Then you’re also going to have the online business owner hat as well.

Bjork Ostrom: Yeah, for sure. It’s interesting.

Jeff Rose: Let’s say you rewind to 6 years ago pre-blog and you asked me that exact same question, I would say, okay, you’re working for yourself, do you have a ROTH IRA yet? A ROTH IRA is a retirement account that you can set up for your own. You can set that up at a bank or online at places like Betterment or even ScottTrade or TD Ameritrade or anywhere. There’s a local Edward Jones office, you could do that as well. That allows you to invest into investments that you choose. You can do individual stocks, ETF’s or mutual funds and then as that grows over time, that’s going to grow tax-free. When you retire, now you have the retirement fund tax free for you.

Bjork Ostrom: Can we pause there. I just want to dive a little bit into that for those that didn’t totally process all of that. So an IRA is an individual retirement account. You can put a certain amount in every year. Anybody, regardless if they have a traditional job or if they are self-employed, is that right?

Jeff Rose: That is correct. There are two different types of IRA’s, not to add any more confusion to it. You have a traditional or a ROTH. The CPA is probably going to like the traditional because it is a tax deduction, so it’s a deduction on your business. But, I don’t really care about the business deduction. I would rather have tax-free money later on because it’s going to be such a larger amount and have a larger impact. That’s what the ROTH represents.

Bjork Ostrom: Got it. The CPA, meaning if you have an accountant that you’re working with, they would say, hey it’s really important for you to get a tax deduction because we want to minimize your taxes; so you should do a traditional IRA. What that means is, as that grows, let’s say it grows for 30 years, then after you were to take it out, then you would get taxed on the growth, which is potentially a big tax. Whereas with the ROTH IRA, you don’t get a deduction. It grows, but then you’re not taxed on the growth, which is a really big benefit, especially if the stock market performs as it historically has, which it probably will.

Jeff Rose: To quantify that, I usually show people like, would you want a $1500 tax deduction today or would you rather have a $50,000 tax free distribu…money waiting for you later on? Is it the short term or the long term? Most CPA’s or tax accountants would tell you to do the ROTH, but with the ROTH, it’s a lot of grey area. We’re putting money into this investment and it could grow but we can’t guarantee it. But we can guarantee is if we put…

Bjork Ostrom: Deduction.

Jeff Rose: Deduction, this is how much you’re going to save, so it’s very black and white. In this case, I’m much more a fan of the grey.

Bjork Ostrom: But that was previous you.

Jeff Rose: Correct. And I still think that makes sense, right? I still think that plays a part of it. I still have a ROTH IRA and I still invest in traditional investments, but being a business owner now, I also recognize that investing into your business, the ROI, is going to be so much greater than you’re going to see in the stock market.

Bjork Ostrom: Potentially.

Jeff Rose: Potentially. You have the same risk. Making sure that you have good counsel and you don’t just dive into things. Not being afraid to invest into your business, especially if a blog, investing into Facebook ads or investing into a web design or a graphic design that’s going to make your pdf look nice verses something that you bought off Fiver.

I can look back in my life and when I invested into my site redesign, which actually I’m now getting ready to do another site redesign, and I’m not sure which one they’re going to see by the time this is recording, but I think I bought a thesis theme for fifty bucks and paid somebody $50 to do a logo and maybe paid another $200 to do a custom design of the header. This was over the course of 2 or 3 years, so I didn’t have a lot of money into it. By the time, I had a book coming out and I just remember my wife saying, you’re blog really doesn’t give you justice with everything that you’ve accomplished with your career.

I stumbled upon a designer, actually it was on a random plane trip to world domination summit in Portland. I ended up hiring this guy and the amount that I paid for my site, this new site, was more than the first two cars that I ever bought in my life. Now granted, that was like a ’96 Chevy Lumina, or ’98 Chevy Lumina and ’96..yeah.

Bjork Ostrom: I use the Ford Escort ZX2 analogy in my mind a lot. I’m like, this could buy me like 3 Ford Escort ZX2’s. My first car, it was just so terrible. Two hundred thousand miles on it.

Jeff Rose: You’re not going to do that in your first year. So that was, trying to think now, that was after the blog had been around for at least four years or so, maybe five years. But, I just remember thinking to myself, like you just said, like your Ford, that I’m going to spend more on a website than I did on my first two cars.

Bjork Ostrom: Yeah.

Jeff Rose: Just trying to digest that. But I will say that, within three to six months, not only did I make it back and then some, that was a great investment. So in other ways I’ve invested in myself. I already mentioned the strategic coaching program. That was a huge investment for me. And at the time, that was a huge leap of faith. But now I can look back and that’s paid off almost tenfold. What it’s been able to do, not just for my business, but for my personal life. So I think not being afraid to invest in your business, but being sensible.

Once again, I’m a high quick-starter. I recognize that about myself now. In the beginning, I would just go, “Oh yeah, I need that course! Two thousand dollars! Yeah, give me that. That’s the magic pill. That’s the magic ticket.” So I had to kind of recognize that. And there’s a few times that I got burned. And I learned. I just call that a very high-priced education.

Bjork Ostrom: Yeah, for sure.

Jeff Rose: On those very valuable life lessons. Don’t be afraid to invest back into yourself and your business as well, because I can see the return on those investments have definitely outpaced what my traditional Roth IRA and mutual funds have done.

Bjork Ostrom: I think that’s a really interesting observation and something that’s so important to point out because it’s business owners or people that are self-employed that are in this unique niche where investments don’t look like they would if somebody is working a traditional job, where they know that their income is what their income is, and that you can probably get a raise year-to-year; but in general, it’s going to be smart to put that into investments that are growing, whatever it would be, 5–10% over 30 years. And that that, in general, is a smart thing to do as opposed to putting it into a savings account or a checking account or something. Or spending it on random things that you don’t need.

But as a business owner, there’s this reality that investments, in some way, it’s like putting it into its own little stock. Like you’re raising the value of the company that you own. And that’s what investing oftentimes is: you’re putting the money into a company and then that company grows. But what you’re saying, what I think is so fascinating, is that as a business owner, in some ways, you can just invest straight back into your own business and use that to grow and to build your business.

So one of the questions that I’d have for you is at what point do you know, should this go into the business? Should I first put this into investments? Does it depend on personality? How would you divide that up year-to-year? Let’s say that somebody has started their blog or brand or website, and they’re at a point where they’re making the equivalent of a full-time salary from it. Would you have recommendations on where to put that and how to focus that income?

Jeff Rose: Yeah, I think that the first thing is that we’re assuming at this point in time that your freedom fund is where it needs to be to offer you and your spouse comfort, if a spouse is in the equation.

Bjork Ostrom: And that would be the checklist. It would be budget, freedom fund, and then it would be working on getting your thing to a point where you’re able to sustain it as something that you can say, “Yes, this will reliably pay off the bills.” So let’s assume those three things have been accomplished.

Jeff Rose: I think that I would actually start with the Roth IRA, but not a large amount. Let’s say that we’re in the position that we have several hundred dollars a month that we can invest somewhere.

Bjork Ostrom: Sure.

Jeff Rose: Instead of taking that full $200, as an example, let’s instead take $50 of that and open a Roth IRA, maybe go to Betterment. For those who don’t know, Betterment is an online investment company. I’m not saying they’re the greatest company, but as far as the easiest place to open up an investment account online in a very sexy interface. It’s really very recent.

Bjork Ostrom: Yeah, they’ve kind of swept in and dominated it.

Jeff Rose: Correct. They are technically a direct competitor of me, so for me to say them, to refer to them on this podcast, just shows that they definitely have my respect. Just starting off with $50 a month into something like that, especially a Roth IRA. And the reason being is that for those that have never really invested before, or those that invested in their 401K when they had their 9–5 job …

I’m going to take a wild guess here and say that many of them had no idea what they were investing their money into. They had no clue. There was something, maybe it was an automatic enrollment program, maybe a co-worker suggested, maybe they just filled out the sheet real quick and all of a sudden they had money deducted out of their account. Probably never even checked their balance. And if they did check their balance, they had no idea what it was. So what I love about having to go open your own Roth IRA is that you can’t really outsource that. You can’t delegate it. You have to go do it, whether that’s online or going somewhere local to you.

And anytime you do that, as you mentioned, like doing your budget, you’re going to be more exposed to what’s going on. You’re forced to learn about it. So opening that Roth IRA, you’re going to know a little bit more about the investments that you have to choose, what you’re actually investing into, and you just get more familiarity with what’s going on. I think that’s kind of the first part because compounding interest is huge, and just by doing $50 a month, that can grow to a very large amount over the next 10, 20, 30 years. Actually, more 20, 30 years. Not so much 10 years.

But nonetheless. $50 a month. You could easily have $50,000-$150,000 in 30 years by investing in the stock market inside a Roth IRA. Plus you get into that disciplined routine, that habit, of saving money. It’s automatically coming out; there’s nothing you have to do, it’s there. But you had to go set it up, so there’s some work involved in that.

Bjork Ostrom: Yeah.

Jeff Rose: I think that’s kind of the first step.

Bjork Ostrom: Sure.

Jeff Rose: And we can pause there if you want.

Bjork Ostrom: No, that’s great. So the idea being that you’re taking the first step, you’re saying, “I have a reliable income from this thing that I’m doing. Now I’m going to start to take some of that, and each month I’m going to get in the habit of having that going to an investment, Roth IRA. To have a good understanding of what that would be, Betterment would be a great example. We have one set up. We do that through Vanguard. And to get the ball rolling with that. After that, would you take anything above and beyond that, and start to focus that in on putting back into your business? Or it is kind of like, ”Meh, it depends.”

Jeff Rose: I think at that point in the game it depends. I think at this point in time, it’s so helpful to have a community for a food blogger, for example. Wink, wink. But just have a community of, “Hey, I’m thinking about doing this to my business. Is it worth it?”

Bjork Ostrom: Yeah.

Jeff Rose: And that could be a mastermind group, it could be just some mentors. Something. But I would definitely encourage you. And there’s so many different ways to invest. We talked about web design. That could be attending a conference in your niche. In my space, we have FinCon, which is a financial blogger’s conference. And I go there every single year because I have learned so much from these people and that community’s given so much back to me. And I contribute a lot of my success to a lot of those people in that community. So wherever that conference is, I’m going every single year. That is a guaranteed investment back into myself and my company, just to go there.

It could be a course. It could be some sort of membership community. It could be a lot of different things. But just trying to figure out what’s the first thing that I need. Sometimes it’s hard to figure that out. But it could be, like I said, Facebook ads or an upgrade on your site design or anything like that.

Bjork Ostrom: I think that’s great. And I think that the community piece is such a good reminder wherever you are. And it could be just a group of people that are close to you in the area that you live. And maybe it’s not in the same niche. Like in Minneapolis, St. Paul area here, they have this thing called Bootstrappers Breakfast. And once a month, Bootstrapping businesses get together and just talk about what the process has been like. And that’s so helpful for me.

What is the cost? It’s like $5 for a coffee and a muffin. There isn’t that much of a cost. There’s a cost of time: it’s 2–3 hours of my time. But it’s been such a huge piece for me. And also conferences: being able to go meet people, connect with people. Obvious cost associated with that, but it’s a beneficial thing as well. I think just in general, that idea of investing back into the business as well as the real personal finance side, whether it’s a Roth IRA or a traditional IRA, or something like that, is helpful.

But there’s also this other side that I wanted to make sure to hit, that maybe it’s not as fun to talk about, but is really important. And it’s this idea of, number one, health insurance. I don’t know if you have a ton of experience or background with that, but I think it would be important to talk about. And then the other thing is life insurance, and knowing that that’s an important thing to set up, whether you are with a company or not. Especially if you’re not, then it’s guaranteed that, if you don’t have it previously set up, then you’re not going to be covered. Sometimes with companies that will come along with an employment agreement. Can you talk about life insurance a little bit, why that’s important? And what people should consider as they’re thinking about doing that, especially if they have a family and if they have their own business, or they’re running their blog as a business?

Jeff Rose: Yeah, actually, thanks for mentioning that because a life insurance is something I’m very passionate about, and I see a lot of people that either don’t have any life insurance or they have a $50,000 policy. They think that that’s fine. I wrote this in a blog post. There was a … I’m glad I can kind of share this story more because there was kind of like, I sound like a life insurance salesman when I first presented this for the first time. I was at a wedding reception and I was handing out my business card trying to sell life insurance. (laughs) No. I was-

Bjork Ostrom: The end, that’s the story. (laughs)

Jeff Rose: I was talking to… it was my wife’s … she was a bridesmaid, I was talking to her husband. We’ve hung out several times before, so we knew each other. I can’t remember how it got brought up. I promise I didn’t bring it up, but he started talking about life insurance and he knew I was into investments and what-not. I just remember … I don’t know who brought it up, or who asked, but I asked how much life insurance do you have. He says, “Oh, I’ve got a $10,000 policy through work.” I’m like, “Dude, you’ve got two kids. And your wife doesn’t work; you’re the sole provider for your family. What happens …? He’s like, ”Oh, I’ve got enough to bury me.“ I’m like, ”What about your kids? What about your wife?“ When I heard that, I was … I had to quickly … I’m like, ”Dude, I don’t care if you buy life insurance through me, but you need some.” That’s really how I looked at it. As you mentioned, I’ve got three, now four kids. When I first got married, you know, I got some term life insurance and I’m definitely a big proponent of term. You can Google term versus whole. I think whole life can make sense in certain situations, but for 98% of the population, term life is going to be just fine.

Bjork Ostrom: Can you explain the difference, for those that aren’t familiar? Just kind of at a high level?

Jeff Rose: Sure. Term life insurance. Basically it is a term. Most people would get a longer term, like 30 years is pretty standard.

Bjork Ostrom: That’s what we have, yeah.

Jeff Rose: You can do 10, 20, or 30 years. Basically once that term is over, it’s done. You can always reapply for it, but now you’re going to be reapplying at a much older age and it’s probably going to cost 100 times more than when you started, whenever you were 20 years of age. But the cool thing about term, too, is that if you don’t need it, you just stop paying on it. You don’t have to pay it for 30 years, like a contract that you’re signing. It’s kind of like, you’re locking in a rate today that you’ll be able to pay for the next 20, 30 years; whatever the term that you lock in.

With whole life insurance, basically it is how I described. It’s whole life. You’re going to have life insurance for your entire life as long as you pay it. The other aspect of it is that with term life insurance, there is no cash value at the end. It’s an expense. It’s a bill. You’re paying for it for protection, kind of like your car insurance. If you pay off your car insurance for 30 years, you don’t get some rebate check at the end. Same thing with term life insurance.

With whole life, there is a cash value component, so you can accrue some sort of cash value at the end. In my experience, that cash value that you could accumulate is not a significant amount and plus … Just to put this in perspective, I have a $2.5 million term life policy on myself. That’s larger than most people have, but once again, I’ve got kids and my wife doesn’t work. I don’t want her to ever have to work and I want our kids’ college taken care of. I went big, we’ll say. I spent, I think my premium is $1,800 a year that I pay. I took this out, I think, four or five years ago. I’m going to have that amount of coverage on myself and my wife knows that and I’m not fearful that she’s going to try to take my life or anything. That’s good. (laughs)

Just for curiosities sake, I actually got a quote on myself for a whole life policy. For about, I think it was $700 more per year, so it was about 2,000 or 2,500 dollars a year, I would have $250,000 of coverage. One-tenth of the coverage for either the same or more. Even $250,000 – that seems like a lot of money, but when you factor in a mortgage, when you factor in replacing your salary for however many years, when you factor in paying off debt, factor in kids’ college if that’s something you want to help pay for – $250,000 is really a drop in the bucket.

Bjork Ostrom: I think it’s good to compare and contrast those. The biggest idea is, I’ve heard it explained too that whole life insurance, if you’re going to be putting that money in, it’s above and beyond. It’s probably worth it just to put it somewhere else, like into a Roth-IRA. Then to have that smaller monthly fee going to a term policy. Can you explain the idea of, let’s say for you, $2.5 million. How does that work in terms of continually covering you for, let’s say, God forbid that something happened to you, how would that continue to provide, as opposed to just one lump sum. Obviously you talked about kind of replacing your salary. How does that work?

Jeff Rose: The way that I kind of went with that amount was, I thought, “Okay, how much does my wife need per year to live off of?” If I wasn’t around, not maybe the exact lifestyle, but you know, to where she didn’t have to go to work and she could provide for us. I thought, you know, $100,000, that’s a pretty good number so that she could take care of herself and our entire family. Then I thought, “Okay, if I had … She needs $100,000 a year, how much does she need, lump sum, to get her to $100,000 a year? I just did $2.5 million a year at 5%. Assuming that she could find an investment combination of stocks and bonds, nothing too aggressive, nothing too conservative, that she could draw 5% a year that really wouldn’t hurt the principle. 2.5% or 2.5 million, 5% equals 100,000. That’s the math that I used to derive at that amount.

Bjork Ostrom: I think it’s an important concept, because I think it’s something that people normally don’t think about, or maybe they do occasionally, and it’s never anything that’s super fun to talk about, but I think it’s so important as a legacy piece to have that in place. If something does happen to you, it’s while it regardless of the situation, which is obviously going to be huge and life-changing and probably a terrible situation, but that it wouldn’t also require huge changes. Like you said, like for Mandy having to go back to work while also caring for four kids. That would be obviously such a legacy piece, to be able to provide in that situation. Is the same, would you advise that even if the spouse was staying at home, that they would have a similar situation where they would have a policy as well, or does it depend, or what does that look like?

Jeff Rose: Usually the stay-at-home spouse, I suggest they do have some life insurance. Like my wife, she doesn’t have as much as me. I think we took out enough just to pay for our mortgage. I just figured, I still have my income. Financially I’m going to be okay, but just enough to so I’m not going to stress out about things. I think it definitely makes sense, because I think the other reality is that, when you think about, if there’s a stay-at-home mom and then you factor in the cost of daycare and maybe hiring a nanny and all that cost, that’s a huge expense that you now have to pay for. Just to kind of dismiss it as, “Oh, they’re just a stay-at-home spouse – parent – they don’t need life insurance.” The reality is, that’s saving a ton of money that you’re going to have to pay for it somehow. I don’t think it’s as much as the working spouse, but I think having some definitely makes more sense.

Bjork Ostrom: Yeah. Absolutely. Cool. Then, while I’m thinking of it, you have, if people are looking for quotes or anything like that, you have a dedicated site for that. Is that right?

Jeff Rose: Yeah, I do. It’s Life Insurance by Jeff.

Bjork Ostrom: I have a running joke where I give you a hard time about your “By Jeff” sites. We’ve talked about before where I’ve kind of picked up every other “By Jeff” site. Like Food Blogs By Jeff I need to pick up after this call.

Jeff Rose: I know. (laughs). You know, actually, I hate it. I still hate that name. I don’t know why I did that.

Bjork Ostrom: No, it makes sense. Right?

Jeff Rose: I know. That’s why I have Retirements be Jeff and Annuities by Jeff. I don’t know. (laughs) Food Blogger Pro by Jeff. (laughs)

Bjork Ostrom: That’s good, I wanted to mention that because I know a lot of people will look around for what they can do and I know you have a solution for that. The last thing I wanted to touch on, that I think would be important, not that you have experience with this – maybe you do- but as people branch out into doing their own thing, there’s this idea of health insurance. The basic idea of how that works. Do you have any recommendations for people as they get into that?

Jeff Rose: That’s where I actually have to defer to my CFO of the household. My wife actually is the one that she’s the one that’s taken care of that. What I can tell you is that we looked around and we found a really good independent insurance agent that specialized in health insurance. Just with having that, because in the last three … I mean, every, yeah, the last three years, I think every single year it’s changed. Not for the good. Our premium is probably triple from three years ago. Super expensive, but just understanding what that is and … I tell you, my wife has been on the phone, not just with our insurance agent but also just the different health insurance companies and she knows the system now, probably more than she probably needs to, but it got so annoying. When you’re dealing with pregnancies and any other health, doctors appointments that we’ve had. I mean, we just had to battle, unfortunately.

I would definitely say finding a good insurance agent, independent, that does specialize in health insurance. There are, for example, I know of an insurance agent that does auto from home and health, he just doesn’t touch it. No, he doesn’t. Because it changes so much now. You almost have to find a specialist in that space.

Bjork Ostrom: In order just to keep up with it. It’s crazy.

Jeff Rose: Yeah.

Bjork Ostrom: Yeah. Cool. Those are the things I wanted to make sure to hit on. The fun is, I think it applies both to people that are working a traditional job or people that have their own business or their own blog and they’re running that as an entrepreneur, or if they’re building a company. All of these things can be applied, whether it’s investing into a an IRA, whether it’s the life insurance piece, health insurance, all those things that I think are so important. I appreciate you chatting through that and hitting on those things. If nothing else, it’ll be a little spark for people to move on them. We are coming to the end and I want to give you a little chance to talk about where people can follow along with what you’re doing online. Where are the different places people can find you?

Jeff Rose: My main hub is Good Financial Cents – C-E-N-T-S – dot-com. That’s where I produce my podcast, and my video called GFC TV. That’s my main hub and then as you mention, I also have LifeInsurancebyJeff.com. And then, those that are interested in making their marriage more, my wife and I also have a joint podcast; you can check that out at Marriage More dot-com.

Bjork Ostrom: That’s awesome. Cool. Hey, Jeff, thanks so much for coming on the podcast, really appreciate it.

Jeff Rose: Awesome, thanks for having me.

Bjork Ostrom: Bye. That’s a wrap for episode number 63. One more big thank you to Jeff for coming on the podcast and sharing all of the insights that he’s gained over the years, as well as some stories. I think that’s really helpful to have that context as we think about making the switch to being self-employed, to being our own employer. One of the things we need to consider, everything from life insurance to health insurance, to investing. That’s not necessarily the stuff that people think of right away when they think of building a business, but it’s really, really important. If nothing else, I hope this is an encouragement to take that next step to learn some more about that and to move forward on some of those really important things. Thanks so much for tuning in. I think it’s so cool that I can sit here in my little home office and record this and then send it out every week, and where ever you are, that you’re able to download it and process through. It’s really incredible. I just feel like I want to take a moment here and to say thank you for following along, because we really appreciate it. It means a lot to us. That is a wrap for this episode. We will be back here same time, same place in exactly seven days. Until then, make it a great week. Thanks, guys.

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