Bogleheads® 2022 Conference – Accumulators Session – Chris Mamula on Finding Financial Independence

00:00:00.000 | (audience applauding)

00:00:03.160 | All right, thank you all for coming.

00:00:06.600 | This is something new for the Bogleheads,

00:00:08.160 | this accumulator track,

00:00:09.360 | and I think we really want to grow

00:00:11.240 | this part of the conference.

00:00:12.840 | So tell all your friends how great the conference is

00:00:15.440 | and get them all to come.

00:00:16.640 | Because this is really important for us

00:00:19.180 | to grow this part of the Bogleheads.

00:00:20.760 | You are all the future, I am the past.

00:00:25.440 | Anyway, today I am very happy to have Chris Mamula with us.

00:00:30.440 | Chris is the lead author of the Choose FI book,

00:00:35.960 | which is a great book.

00:00:36.840 | I did a podcast with Chris on the book,

00:00:39.520 | a lot of great information on the Choose FI book.

00:00:43.240 | He's a financial writer for Can I Retire Yet?

00:00:46.560 | And personally, after poor experiences

00:00:49.680 | with the financial industry in his professional life,

00:00:52.120 | Chris educated himself on investing and tax planning

00:00:54.840 | and now draws on his life experience

00:00:56.760 | to write about wealth building, do-it-yourself investing,

00:00:59.920 | financial planning, early retirement, and lifestyle design.

00:01:03.640 | And of course, my screen just went out.

00:01:05.640 | Ladies and gentlemen, let me introduce Chris Mamula.

00:01:10.040 | (audience applauding)

00:01:10.720 | Thanks, Rick.

00:01:11.560 | Thanks for all.

00:01:19.400 | Thank you for coming to listen.

00:01:21.080 | And I want to just start by thanking Rick

00:01:23.520 | and also Christine Benz for having me on their podcast

00:01:27.240 | to kind of talk about FIRE and to bring me here

00:01:30.000 | to share the message of FIRE with the Bogleheads,

00:01:33.040 | because I think it's important

00:01:34.280 | to be able to share this message,

00:01:35.400 | 'cause in general, in the personal finance community,

00:01:38.520 | as far as like prestige and respect,

00:01:40.160 | I think FIRE is somewhere around like the GameStop people

00:01:43.080 | and like this guy who's making TikTok videos

00:01:46.680 | on how to get rich in three easy steps.

00:01:48.760 | So don't let the Hyatt hear this,

00:01:50.520 | but he tells you to steal your hotel soap,

00:01:53.320 | step two, it's gonna save you $45 a month,

00:01:55.880 | which you can then invest in the S&P 500,

00:01:58.280 | and you will be a millionaire.

00:01:59.800 | There is a lot of bad ideas and always new ideas

00:02:04.640 | in finance and in personal finance in particular,

00:02:07.360 | and many of them can be dismissed

00:02:09.320 | and some of them should even be laughed at.

00:02:11.680 | But it is important to note that occasionally

00:02:14.000 | there is an idea that's based on really sound,

00:02:16.160 | solid principles, and those ideas do tend to stick around.

00:02:20.240 | And I was kind of thinking,

00:02:21.640 | what would be an idea that may resonate with Bogleheads

00:02:24.240 | that I could use as a parallel example

00:02:26.000 | to how I look at FIRE?

00:02:27.600 | An idea that maybe was initially laughed off and ridiculed,

00:02:31.320 | and it stood the test of time.

00:02:34.760 | And if you take a look at the headline,

00:02:36.480 | if you're not familiar with the history of John Bogle

00:02:39.000 | and Vanguard and index funds,

00:02:41.400 | this kind of gives you the CliffsNotes version,

00:02:44.440 | but it says, "40 years ago,

00:02:45.560 | "the thought of buying a stock index fund was ridiculed.

00:02:48.000 | "Why would anyone be satisfied with an investment

00:02:50.080 | "that promised nothing more than the same return

00:02:52.800 | "as the market?"

00:02:53.720 | Well, I think the reason that this stuck around,

00:02:57.320 | there's a number of reasons,

00:02:58.720 | but I think the biggest one is

00:03:00.840 | this whole Bogleheads philosophy

00:03:02.320 | and the things that John Bogle taught,

00:03:04.320 | it was based on sound principles.

00:03:06.800 | It was based on just simple math.

00:03:09.920 | And something that I kind of learned after reading the,

00:03:13.680 | this is the first book I ever read about investing,

00:03:15.480 | was "The Little Book of Common Sense Investing."

00:03:17.480 | And something I learned after reading this

00:03:19.400 | is I started to find other people

00:03:20.840 | in this Bogleheads community.

00:03:22.520 | And I found it was this organic community that grew up

00:03:25.680 | just 'cause the ideas were so sound

00:03:27.360 | and it was impacting people's lives.

00:03:29.080 | So it wasn't like he had to go hire a marketing team.

00:03:31.720 | This community grew around him.

00:03:33.880 | And I think there's a lot of parallels

00:03:35.160 | between this community and the FIRE community.

00:03:37.440 | And that's what I wanna share today.

00:03:38.480 | So I really have two goals.

00:03:40.360 | The first is I wanna challenge some misconceptions of FIRE

00:03:43.800 | and really change that perception

00:03:45.120 | of what it means to pursue it,

00:03:46.840 | how it applies to people who embrace

00:03:48.400 | the Bogleheads investment philosophy.

00:03:50.720 | And I think it applies to a bigger group

00:03:52.400 | than many people think.

00:03:53.760 | And then I wanna demonstrate just the common sense principles

00:03:56.280 | and the simple math that backup FIRE

00:03:59.400 | and why I think this is an idea that has the potential

00:04:01.320 | to still be around in another 40 or 50 years as well.

00:04:03.960 | So I'm gonna start with a couple of misconceptions

00:04:06.960 | 'cause I really think it's important

00:04:07.880 | to make people understand the why of FIRE.

00:04:11.800 | Because if you don't start there,

00:04:14.200 | the how is really not very hard,

00:04:15.440 | but nobody's gonna ever try it.

00:04:17.160 | So I think we need to address some of these misconceptions.

00:04:19.520 | So the first one, the first myth that I came up with is

00:04:23.560 | it requires an extreme lifestyle.

00:04:25.280 | And there's a couple of versions of this.

00:04:26.720 | One is sure you can achieve FIRE,

00:04:28.960 | but you have to have a massive income

00:04:30.920 | or better yet just be born into wealth

00:04:32.480 | and have your parents give it to you.

00:04:35.080 | The second is you have to deprive yourself

00:04:36.840 | and in practice extreme frugality.

00:04:38.480 | And you see this term thrown around everywhere.

00:04:40.400 | And for whatever reason,

00:04:41.600 | this one really rubs me the wrong way

00:04:43.360 | 'cause I just don't feel that that represents it at all.

00:04:46.320 | And then the third one is you must have

00:04:47.680 | some kind of special investing prowess

00:04:49.600 | or maybe you just got lucky with investing.

00:04:52.040 | And so that's how you would get there.

00:04:53.720 | But it's really not for the average everyday person.

00:04:57.080 | What's the reality?

00:04:58.320 | I can share my reality.

00:04:59.600 | My wife and I, we were both first generation

00:05:01.640 | college graduates in our family.

00:05:03.240 | For my family, I did at least have,

00:05:06.800 | my parents gave me a solid foundation.

00:05:09.320 | My mom was able to stretch a dollar

00:05:10.720 | and she gave me that sense of thrift.

00:05:13.200 | For my wife's family,

00:05:15.200 | money was really a source of stress and anxiety growing up.

00:05:19.360 | And I think having talked to many people

00:05:22.480 | in the fire community and knowing a lot of them,

00:05:24.840 | I honestly think her experience

00:05:27.160 | is even more representative of mine.

00:05:28.880 | And I think honestly, if you came from wealth

00:05:31.240 | and that's what you knew growing up,

00:05:33.280 | it's actually harder.

00:05:34.120 | And the key to fire is to live below your means,

00:05:36.360 | whatever that means for you,

00:05:38.920 | and to develop a high savings rate.

00:05:40.640 | And so if you're used to growing up in a certain lifestyle

00:05:44.560 | and you have to take a step back,

00:05:45.760 | that can actually make it harder.

00:05:46.680 | So I think that's a big misconception

00:05:48.600 | and it's available to many people who are natural savers.

00:05:52.240 | The second, as far as income,

00:05:54.440 | my wife started working at about $35,000 a year

00:05:56.880 | and I started a year after her at 40,000.

00:05:59.160 | And at those salaries,

00:06:00.440 | we started living off of her salary and banking mine,

00:06:02.560 | just 'cause again, it gave us a feeling of security.

00:06:05.320 | Neither of us ever made $100,000 in a single year.

00:06:09.480 | To be clear, we did grow our salaries over time

00:06:11.600 | and I think we would have hit that.

00:06:13.160 | But when my wife had our daughter,

00:06:15.040 | she was 35 years old and she decided

00:06:16.800 | she didn't wanna go back to full-time work,

00:06:18.040 | so she never has.

00:06:19.360 | And at 41, I left my career as a physical therapist.

00:06:21.640 | So we never really made it to that point

00:06:23.320 | where we were entering our peak earning years.

00:06:24.840 | So you don't have to have a massive salary.

00:06:27.280 | And as far as being a genius investor,

00:06:30.360 | the reason I'm standing here

00:06:31.280 | is because I had a horrible experience

00:06:33.080 | with the financial industry,

00:06:34.320 | as Rick alluded to in my introduction.

00:06:36.800 | And just after doing a deep dive,

00:06:40.520 | I got into FIRE blogs and these FIRE bloggers really helped me

00:06:43.640 | and through them, I found the Bogleheads

00:06:45.480 | and the Bogleheads helped me.

00:06:46.760 | And it was just a lot of people who weren't in the industry,

00:06:49.040 | who weren't necessarily experts,

00:06:50.680 | who were just giving freely of their time.

00:06:52.160 | And so I started writing as a way

00:06:53.440 | that I thought maybe I could give back and pay that forward.

00:06:56.120 | So again, I think all of those myths

00:06:57.800 | are just that, they're myths.

00:07:00.000 | And so how did we get to this point

00:07:01.800 | where we achieve financial independence

00:07:03.720 | and we achieve FIRE?

00:07:05.600 | I like the term being a valuist.

00:07:07.480 | And you might look at that term

00:07:08.560 | and say you never heard of that before.

00:07:09.840 | And that's 'cause I'm pretty sure we made it up.

00:07:12.440 | When I was writing the book,

00:07:13.520 | we crowdsourced it from the FIRE community.

00:07:16.280 | And I wrote this book in conjunction

00:07:17.760 | with two guys that do the Choose FI podcast.

00:07:19.800 | And somebody sent this in as a voicemail.

00:07:23.240 | And it really resonated with me 'cause it really made it,

00:07:26.400 | it really felt like what we were doing,

00:07:27.880 | even though I'd never heard the term,

00:07:29.320 | it really felt exactly like my wife and I were doing.

00:07:32.400 | And so throughout our accumulation phase,

00:07:34.720 | we were actually, and in my opinion,

00:07:36.760 | and in contrast to the idea of suffering and sacrificing

00:07:39.680 | and extreme frugality,

00:07:41.680 | I felt that we were living better than most of our peers

00:07:44.920 | 'cause we were spending money really freely

00:07:46.200 | on the things that mattered.

00:07:47.240 | But at the same time,

00:07:48.760 | the reason we were able to save so much

00:07:50.080 | is we were cutting pretty relentlessly

00:07:51.400 | on the things that didn't matter.

00:07:53.040 | So I've shared my story in a bunch of podcast interviews

00:07:57.640 | and print interviews,

00:07:58.480 | and some things kind of raised people's eyebrows

00:08:00.120 | that could be perceived as extreme frugality.

00:08:02.880 | Even among the FIRE community,

00:08:05.080 | we are extremely anti-debt in our house.

00:08:07.000 | So like I said, we started living off my wife's salary

00:08:10.480 | whenever she was only making $35,000 a year.

00:08:13.000 | And she had about 25,000

00:08:15.040 | from putting herself through school and a small car loan.

00:08:17.760 | And so we managed to do that in about 18 months.

00:08:19.680 | We wanted to be debt-free before we were married.

00:08:21.800 | And since that time,

00:08:22.640 | the only debt that we've ever had in our lives

00:08:24.400 | is a small mortgage, and we pay that off in eight years,

00:08:26.800 | and we've never had debt again, and we still don't.

00:08:29.080 | Never had a car payment,

00:08:30.000 | never paid a penny of credit card interest

00:08:31.400 | in our whole life.

00:08:32.640 | Part of the reason we didn't have car payments

00:08:34.240 | is 'cause we kind of drove crappy cars.

00:08:35.480 | We just don't care about that.

00:08:36.480 | And so that was what we did.

00:08:38.480 | Clothing and jewelry.

00:08:39.440 | I mean, I'm not a great dresser by any means.

00:08:41.600 | I don't even own like a watch or a wedding ring.

00:08:44.480 | Presents.

00:08:45.320 | This one really raises people's eyebrows,

00:08:46.360 | but my wife and I, we just decided one year that,

00:08:48.560 | you know, shopping,

00:08:50.200 | and for like birthday and Christmas presents,

00:08:51.760 | it was more of a pain in the butt, and we didn't enjoy it.

00:08:53.520 | And we had everything we truly wanted.

00:08:55.240 | So we just made an agreement to not exchange gifts,

00:08:57.520 | and that works for us.

00:08:59.080 | And technology, I don't care about that stuff.

00:09:00.880 | So I don't have the newest phone

00:09:02.120 | or any of those types of things,

00:09:03.120 | and I never have, and probably never will.

00:09:05.720 | So that slide might turn you off a little bit and say,

00:09:07.760 | well, maybe this does sound like extreme frugality.

00:09:10.120 | But there's other areas where we absolutely were not frugal.

00:09:13.600 | We always chose to live where we wanted.

00:09:15.080 | And our first year out of school,

00:09:16.640 | we were living in the Pittsburgh, Pennsylvania area,

00:09:19.240 | and we kind of moved to the suburbs and bought the house

00:09:21.320 | and do the things like you're supposed to do.

00:09:23.400 | And so my wife was commuting into downtown Pittsburgh.

00:09:26.160 | It was about a 40-minute commute every day.

00:09:28.200 | For me being a physical therapist,

00:09:29.360 | it made sense to get away from the city.

00:09:31.480 | There was better work opportunities.

00:09:32.640 | But it was about a 50-minute one-way commute every day.

00:09:35.600 | And within a year, I think we were living the American dream,

00:09:39.080 | where we had the degree and the nice house and everything

00:09:41.600 | that you were supposed to want.

00:09:42.800 | And we just realized this is not our dream.

00:09:44.600 | So we kind of blew it up, and we sold our house

00:09:46.560 | after only 18 months, which is not a great financial move,

00:09:49.240 | but it was great for us.

00:09:50.880 | We focused on that next phase of our life

00:09:52.680 | of what did we want it to look like.

00:09:53.840 | So we focused on places where we could enjoy our work.

00:09:56.200 | We focused on optimizing our commutes

00:09:57.740 | so we weren't spending the whole day sitting in the car

00:10:00.240 | and kind of building the lifestyle we wanted.

00:10:02.160 | And then when we reached this point of where we were kind

00:10:04.160 | of reaching financial independence,

00:10:05.360 | we thought, what do we want our life to look like?

00:10:07.560 | And at this point, it wasn't built around work.

00:10:09.160 | It was built around the activities we wanted to do.

00:10:11.200 | So where was a place we can get outside and enjoy

00:10:13.240 | our lives every day, which is what we like to do?

00:10:15.180 | And where was a great place to raise our daughter?

00:10:16.980 | So we up and moved across the country,

00:10:18.680 | and we now live in Ogden, Utah.

00:10:21.520 | Other things that we really spent freely on

00:10:23.280 | is experiences.

00:10:24.200 | Like we love outdoor adventure activities, sporting events,

00:10:26.720 | music.

00:10:27.680 | And we never skimped on any of that stuff

00:10:29.880 | and travel, and just to kind of give you a look at what

00:10:32.520 | our life looked like.

00:10:33.720 | This is a much younger me.

00:10:35.240 | We were in our 20s, and we went to Australia.

00:10:38.160 | We climbed Kilimanjaro, and we did an African safari.

00:10:41.400 | We got into mountaineering.

00:10:42.760 | This was us in Ecuador, the highest we've ever

00:10:46.040 | been, over 21,000 feet.

00:10:47.920 | I want to kind of pause on this one, because to me,

00:10:50.000 | this is the antithesis of extreme frugality.

00:10:52.040 | But growing up in Pittsburgh, it's

00:10:54.000 | a really religious community, and the religion

00:10:55.920 | is steel or football.

00:10:56.800 | And so like every Sunday of my life, that's what we did.

00:11:00.240 | We watched the Steelers.

00:11:01.480 | And like I was born as they were entering this dynasty

00:11:04.160 | phase of one of the greatest teams ever.

00:11:05.880 | Yeah, I don't remember it, because I was too young.

00:11:07.200 | So what I remember is them stinking or being

00:11:09.280 | average for like a good decade.

00:11:10.980 | And so finally, when I was in college,

00:11:12.520 | they made the Super Bowl.

00:11:13.840 | And I was a sophomore at the University of Pittsburgh,

00:11:16.600 | and I was working at a pizza shop because I needed the money,

00:11:19.560 | and that was about 60% of my calories.

00:11:21.360 | And I also traded the extras for beer.

00:11:23.800 | So I needed that job.

00:11:26.240 | And when you work at a pizza shop

00:11:27.680 | in the host city of the Super Bowl on Super Bowl Sunday,

00:11:30.060 | everybody wants off, so they said nobody could have off.

00:11:31.820 | So after watching this all my life, I couldn't watch them.

00:11:34.440 | And I always said if they made the Super Bowl,

00:11:36.400 | it was something I was going to do.

00:11:37.840 | And fast forward 10 years, they did make the Super Bowl,

00:11:40.320 | and they played in Detroit.

00:11:41.160 | So my wife and I drove up and scalped tickets

00:11:43.320 | in the bathroom of a bar in downtown Detroit

00:11:45.400 | for like $5,000 a couple hours before the game.

00:11:47.560 | And we went to the Super Bowl.

00:11:48.800 | It was like a once in a lifetime experience.

00:11:50.280 | And if you notice the picture, that's not Detroit.

00:11:52.360 | So three years later, we ended up going again in Tampa

00:11:54.660 | and we saw one of the greatest games in NFL history.

00:11:57.000 | So for some people that might sound frivolous,

00:11:59.280 | but to me it had meaning.

00:12:00.240 | And again, that's what being a valuist means.

00:12:02.500 | Fast forwarding again, we have our daughter.

00:12:04.920 | We kind of brought her into our active lifestyle.

00:12:06.960 | And it's not about dragging her to stuff that we like,

00:12:08.880 | but as a little kid, she's been on Disney cruises.

00:12:11.560 | Somehow during the pandemic,

00:12:12.780 | she's become the world's biggest Dolly Parton fan.

00:12:14.960 | So we've managed to make it to Dollywood with her.

00:12:17.460 | But so what I would kind of just ask you to do

00:12:21.800 | is kind of reframe that idea of suffering

00:12:23.780 | and sacrifice and extreme frugality.

00:12:25.640 | 'Cause I find that it just does not ring true.

00:12:28.000 | And the question I would say is, are you a valuist?

00:12:30.200 | And are you lining up your spending with your money?

00:12:32.820 | Because just from a practical standpoint,

00:12:35.760 | most people, I mean, fire, yes,

00:12:37.360 | it's quick compared to a standard 40 to 50 year career,

00:12:40.200 | but you're still talking about 10 to 20 years

00:12:42.040 | of having to go to work every day.

00:12:43.200 | And if you're miserable,

00:12:44.160 | you're not gonna stick with that.

00:12:45.080 | So you have to find a way to make it enjoyable for you.

00:12:47.520 | And it can't be sacrifice.

00:12:49.040 | And so for me, that's kind of what fire is all about.

00:12:51.360 | And that's how you're going to develop a savings rate

00:12:53.320 | and be able to stick with it.

00:12:54.780 | The second fire myth is that fire people

00:12:58.420 | don't really retire.

00:12:59.340 | It's kind of a Ponzi scheme.

00:13:00.820 | And we're all just selling the dream.

00:13:02.120 | So we can't really retire.

00:13:04.460 | We aren't really financially independent.

00:13:05.820 | So we just sell the idea of the next person

00:13:08.900 | who then buys our books and listens to our podcasts

00:13:12.260 | and whatever.

00:13:13.100 | And then it keeps going down the line.

00:13:15.580 | I included a picture of Bertie Madoff.

00:13:16.940 | That's who I actually think of with a Ponzi scheme,

00:13:18.520 | but he's not in the fire community.

00:13:22.780 | My fire reality,

00:13:24.240 | I did quit my job on December 1st of 2017

00:13:28.320 | and walked out the door

00:13:29.400 | and I'm no longer a physical therapist.

00:13:31.580 | I will say since then, I've published a book.

00:13:33.760 | I've partnered on and taken over one of my favorite blogs.

00:13:37.600 | This past year, I completed the CFP curriculum

00:13:39.720 | and I'm currently preparing to take the CFP exam

00:13:41.800 | in about a month.

00:13:43.080 | And as you can see, I'm here, I'm publicly speaking

00:13:45.160 | and I've been on many podcasts to promote my ideas.

00:13:47.640 | So there is some truth,

00:13:49.880 | AKA I do still work even though I say I retired.

00:13:52.740 | Also my fire reality though,

00:13:55.560 | my income is about 80% less than what it used to be.

00:13:58.340 | I also left behind paid vacation, sick leave

00:14:00.860 | and pretty nice healthcare benefits.

00:14:03.380 | These days, instead of my schedule being controlled

00:14:05.660 | by an employer, I have complete control over my time.

00:14:08.160 | I rarely have ever worked more than three

00:14:09.740 | or four hours a day.

00:14:11.100 | Like I said, we moved to the mountains

00:14:12.360 | and I'm generally outside four or five days a week.

00:14:14.940 | And I'm extremely involved in my daughter's life,

00:14:17.380 | volunteering at her school.

00:14:18.340 | I coach her soccer team.

00:14:19.500 | We typically travel five or six weeks a year as a family.

00:14:22.560 | But I think even maybe more important than the big things,

00:14:24.700 | the things you see in the pictures,

00:14:25.620 | is just every day we eat breakfast together.

00:14:28.060 | We spend like that first hour of the day,

00:14:29.740 | we talk to my parents on FaceTime

00:14:31.100 | 'cause they're kind of shut in

00:14:32.420 | with everything going on in the world.

00:14:33.580 | And my mom has some health issues.

00:14:35.180 | I would get everything I need to get done during the day

00:14:37.460 | and I pick her up and again, I'm present.

00:14:40.060 | And that's something that I think a lot of people,

00:14:41.940 | they look back and they regret

00:14:42.900 | that they didn't have that time with their kids.

00:14:44.180 | And that's something I'd never wanted to regret.

00:14:45.980 | So again, I'm kind of lining up with my values.

00:14:48.980 | So I think I kind of retired.

00:14:50.540 | So the second question though, it really doesn't matter.

00:14:53.900 | Like when you read these fire stories

00:14:55.340 | and that's a common criticism

00:14:56.580 | and they didn't really retire.

00:14:58.260 | It doesn't really matter if you think I retired

00:14:59.860 | or anybody else did.

00:15:00.980 | I think the second question that's really important

00:15:02.740 | is how do you want to define your retirement?

00:15:04.580 | And that was kind of a perfect segue

00:15:07.180 | to end the last segment to bring us into here

00:15:09.580 | because the whole idea of retirement,

00:15:12.540 | it's kind of a quaint and dated idea

00:15:15.100 | and retirement is evolving.

00:15:16.780 | So if you look at what happens to people

00:15:18.540 | when they do retire, many people do walk away.

00:15:20.660 | They view it as never working again.

00:15:22.300 | And many people struggle with purpose and meaning

00:15:25.220 | and they end up with depression and anxiety.

00:15:27.300 | The rates increase significantly.

00:15:29.540 | Many people, they save money their whole life

00:15:31.900 | and they turn around and because they're such,

00:15:33.460 | they become accustomed to being savers,

00:15:36.900 | it's hard for them to spend.

00:15:37.980 | And if you look at the data,

00:15:39.660 | many people spend way less than they could

00:15:41.220 | and they don't actually enjoy their retirement.

00:15:43.380 | Many people save for this time in the future

00:15:45.660 | where it's going to be so great

00:15:46.860 | and they don't have their health

00:15:47.860 | to do the things they actually desire.

00:15:50.020 | And they miss their kids growing up

00:15:51.660 | and their kids are gone

00:15:52.500 | and now they have all this free time,

00:15:54.020 | but what are you going to do with it?

00:15:55.460 | And so just remember,

00:15:56.780 | if you want a traditional retirement,

00:15:58.140 | by all means do it.

00:15:59.780 | But just because that's how most people picture retirement,

00:16:02.780 | it doesn't mean that's what it has to mean for you.

00:16:04.700 | And so I really kind of write

00:16:06.140 | and like to talk a lot about the whole idea

00:16:07.420 | of just redefining what retirement means.

00:16:09.420 | And our third fire myth,

00:16:12.180 | this one you kind of hear a lot

00:16:13.260 | like when I talk to more sophisticated people

00:16:15.580 | in the financial industry

00:16:17.260 | and it says fire relies on the 4% rule,

00:16:19.220 | which is either naive and/or uninformed.

00:16:22.180 | And this is actually,

00:16:23.100 | I had a great conversation about this with Christine

00:16:25.740 | when I was on the Morningstar podcast.

00:16:27.660 | So if you're not aware of what the 4% rule is,

00:16:30.980 | maybe we should start there.

00:16:31.980 | And that's just a rule that tells you

00:16:35.380 | how much you can spend in retirement.

00:16:37.460 | And so basically the idea is,

00:16:38.980 | if you have a portfolio on day one of your retirement,

00:16:42.180 | you can take 4% of it

00:16:43.540 | and then you're going to spend that same amount every year,

00:16:45.620 | whether the market's up 50% or down 50%,

00:16:47.820 | adjusting only for inflation

00:16:49.060 | so your lifestyle can stay the same forever

00:16:51.260 | and you're not going to run out of money.

00:16:53.540 | This is a common rule.

00:16:54.380 | We talk a lot about this in the fire community.

00:16:56.940 | And we also talk about the inverse of that then

00:16:58.860 | is that if you can take 4%,

00:17:00.380 | then you know that you need 25 times your annual spending

00:17:03.300 | to know if you're financially independent.

00:17:06.020 | What's the reality though?

00:17:07.780 | I don't follow the 4% rule.

00:17:09.580 | I know almost everybody in the fire community,

00:17:11.500 | I don't know anybody that follows the 4% rule

00:17:13.500 | or traditional retirees for that matter.

00:17:15.420 | And I don't even really know anybody

00:17:16.900 | that would argue that it's a rule.

00:17:18.500 | But what we do is we use it,

00:17:19.500 | we call it the 4% rule of thumb or the 4% guideline.

00:17:23.220 | And there's a couple of reasons

00:17:24.060 | I think this is a great thing to learn and to understand.

00:17:27.100 | Number one is that it makes you kind of focus

00:17:30.420 | on what you're spending.

00:17:31.420 | And many people don't pay any attention.

00:17:33.180 | Most people don't budget or track their spending.

00:17:35.100 | And so it's a requisite

00:17:36.980 | to know what 25 times your annual spending is.

00:17:39.100 | You have to know what your annual spending is.

00:17:41.140 | So it gets you to start focusing on that

00:17:42.580 | and know where your money is going.

00:17:44.540 | And also it just gives you a place

00:17:46.020 | where you can create a goal.

00:17:48.500 | And yesterday, if you were at the Bogleheads University,

00:17:50.940 | that's something that Jim Dahl talked about

00:17:53.100 | is having these smart goals.

00:17:55.740 | And so if you have a defined goal,

00:17:57.660 | what we found is people start to take action.

00:17:59.540 | So people that weren't saving at all,

00:18:01.020 | they learn this principle and it really turns things around.

00:18:03.260 | And that's fine.

00:18:04.100 | This goal is gonna change over time.

00:18:05.140 | You're gonna discover that you may wanna spend

00:18:06.700 | more or less than you initially thought.

00:18:07.940 | Maybe healthcare is more expensive.

00:18:09.380 | And you're gonna learn these things and adapt,

00:18:10.740 | but at least you have a place that you're starting from

00:18:12.860 | and you have a goal in sight.

00:18:14.300 | But I think there might even be a bigger

00:18:17.420 | and more important point about the whole idea

00:18:19.460 | of the 4% rule.

00:18:20.900 | And that's it.

00:18:21.740 | In the FIRE community,

00:18:22.580 | I think we're asking kind of hard questions

00:18:23.940 | and we're having big conversations

00:18:25.220 | that are kind of rare in our society

00:18:26.660 | where everything is just more, more, more,

00:18:28.380 | bigger, bigger, bigger.

00:18:29.860 | And it's a question I really hope resonates

00:18:31.540 | with a room full of Bogleheads,

00:18:32.860 | especially if you've really kind of dove

00:18:35.420 | into all of John Bogle's work,

00:18:36.580 | not just what he's written about investing.

00:18:38.940 | And that's a question is enough.

00:18:40.500 | And I think it's a question we don't ask enough

00:18:42.540 | is how much is enough for you?

00:18:44.380 | And then once you have enough, what comes next?

00:18:47.140 | So I wanted to really kind of start with the why,

00:18:51.900 | but now I wanna kind of get into a little bit of the how,

00:18:54.100 | because I do think FIRE is based

00:18:55.500 | on some pretty solid principles.

00:18:57.740 | Again, just based in common sense

00:18:59.260 | and some very simple math.

00:19:01.180 | I will say, and I kind of really appreciated

00:19:04.020 | the conversation again in the Bogleheads University

00:19:05.700 | yesterday, I think Rick brought this up

00:19:07.420 | and he might not use the exact terminology,

00:19:09.740 | but I always talk about tactics and principles.

00:19:12.300 | And so again, I think a lot of people,

00:19:13.660 | they learn a FIRE 'cause they read like one story

00:19:16.700 | of one blogger or one person

00:19:18.220 | that's featured in some article.

00:19:19.580 | And they say, well, I could never do that.

00:19:21.220 | And they miss the bigger picture

00:19:22.500 | that all the FIRE people,

00:19:24.340 | we kind of are all following the same basic common principles

00:19:28.540 | but the tactics are gonna look wildly different within that.

00:19:31.100 | And so I wanna focus on the principles

00:19:32.460 | and that's what we kind of focused on

00:19:33.420 | when we wrote the book.

00:19:34.380 | And that's what I wanna focus on in the talk.

00:19:38.140 | One thing I'll say is the Boglehead investment philosophy

00:19:40.900 | that we're gonna learn about here this weekend

00:19:43.700 | or this week, it's really endorsed and embraced

00:19:47.420 | by almost everybody in the FIRE community.

00:19:50.100 | We talk about using that investment philosophy,

00:19:52.580 | you can achieve FIRE reliably in 10 to 20 years

00:19:55.740 | if you follow these principles.

00:19:57.660 | If you look at a typical career,

00:19:58.820 | it's gonna take you about 40 to 50 years

00:20:00.700 | till you reach financial independence

00:20:01.980 | and you're able to retire.

00:20:03.260 | And if we're being honest,

00:20:04.180 | most people in our society

00:20:05.580 | do not ever reach financial independence.

00:20:07.100 | They're highly reliant on social security

00:20:08.980 | by the time they reach retirement age.

00:20:10.820 | So I think it's worth looking at

00:20:11.940 | what does the FIRE community do so differently

00:20:14.260 | than most people and what can we learn from it

00:20:16.420 | even if we're not gonna go all out

00:20:17.700 | and be trying to say 50% and then retiring early.

00:20:20.820 | Well, there's only three levers that any of us can pull

00:20:25.700 | in the world of personal finance

00:20:27.220 | if we wanna achieve financial independence quickly.

00:20:29.300 | And we can spend less, we can earn more

00:20:31.140 | and we can invest better.

00:20:32.180 | And I think number three is kind of the sexy one.

00:20:33.860 | That's the one we like to talk about

00:20:35.080 | is how do we invest better?

00:20:36.880 | But if you want to achieve financial independence,

00:20:39.020 | again, it's about creating this large spread

00:20:40.780 | between what you earn and what you spend.

00:20:42.620 | And so we really need to focus on numbers one and two,

00:20:45.340 | spending less and earning more.

00:20:47.020 | The reason for that, again, this isn't my opinion.

00:20:51.660 | This is just based on, again, simple math

00:20:53.580 | and the rules of arithmetic.

00:20:56.140 | So there's only really three factors

00:20:57.660 | that impact your compounding.

00:20:58.660 | So if we go back to our friend,

00:21:00.100 | our soap stealing TikToker friend

00:21:01.740 | at the beginning of the presentation,

00:21:03.740 | he got a lot wrong in his little idea.

00:21:07.680 | But one thing he did really well

00:21:08.840 | is he was obviously playing with a compounding

00:21:11.200 | or a time value of money calculator.

00:21:13.040 | And it's something that I think,

00:21:15.260 | I wish a lot more adults knew how to do,

00:21:16.920 | let alone kids his age,

00:21:18.020 | and we'd be a lot better off as a society.

00:21:20.120 | But you know, there's only three factors

00:21:21.480 | that impact compounding.

00:21:22.380 | And again, this is something

00:21:23.220 | Christine talked about yesterday,

00:21:24.120 | but the first is the rate of return.

00:21:26.080 | If you are a bogal head, if you are a passive investor,

00:21:28.440 | you know that you're gonna get the return

00:21:30.240 | that the market gives you.

00:21:31.400 | We can maybe, at the edges,

00:21:33.580 | kind of tweak that a little bit

00:21:34.580 | with our asset allocation or whatever,

00:21:35.940 | but essentially you're gonna get what the market gives you.

00:21:37.860 | So there's not a whole lot you can do there.

00:21:39.980 | The time to compound is a big factor.

00:21:41.980 | So a traditional retirement,

00:21:43.740 | you have 40 to 50 years for money to work for you.

00:21:47.860 | By definition, if you're pursuing FIRE,

00:21:50.140 | you're cutting that down to one to two decades.

00:21:52.220 | You're cutting that in half or less.

00:21:53.780 | And so we actually have time working against us.

00:21:56.500 | So that only leaves us one lever to pull,

00:21:58.620 | and that's to focus on increasing the amount

00:22:01.260 | that we save and we add to our investments.

00:22:03.480 | So after the 4% rule,

00:22:07.400 | another favorite topic in the FIRE community,

00:22:09.120 | we talk a lot about savings rate.

00:22:10.920 | And savings rate's really simple.

00:22:12.400 | It's just how much you save divided by how much you earn.

00:22:15.200 | And so there's really only two things you can do

00:22:16.760 | if you want to improve your savings rate.

00:22:18.240 | You can either spend less or you can earn more,

00:22:21.200 | and either is valid and either is okay.

00:22:23.340 | But in the FIRE community, we talk about frugality a lot,

00:22:26.400 | and I think that's maybe where some of the idea

00:22:28.000 | of this extreme frugality comes from.

00:22:30.320 | But I do think it's worth starting with frugality

00:22:32.400 | for a couple reasons.

00:22:33.240 | One, it just tends to be a little bit faster.

00:22:35.560 | You can tend to cut your spending quicker

00:22:37.440 | than increasing your earnings,

00:22:38.600 | although it's fine and you should be working on both.

00:22:41.960 | But I think there's a second reason

00:22:44.400 | that it's far less obvious

00:22:46.400 | why you should focus on your spending.

00:22:47.960 | But if you can learn to be happy living on less,

00:22:51.200 | then that just equates to needing less

00:22:52.980 | to be able to be financially independent

00:22:54.660 | and to retire if that's what you choose.

00:22:56.680 | And so going back to that 4% rule and the inverse,

00:22:59.500 | the rule of 25, if you want to live off $100,000 a year,

00:23:02.600 | that's perfectly fine, but that's gonna take,

00:23:04.880 | as a starting point, we'll say $2.5 million.

00:23:07.520 | If you can learn to be happy living on half of that,

00:23:09.360 | $50,000 a year, then you need half of that

00:23:11.780 | to retire, a million and a quarter.

00:23:13.080 | So that's a much lower bar to save towards

00:23:14.920 | if you want to hit financial independence quickly.

00:23:17.420 | A lot of these ideas, when we talk about savings rate,

00:23:22.880 | it comes from a really popular blog post

00:23:25.320 | from a really popular blog, Mr. Money Mustache.

00:23:28.000 | And the article's called the Shockingly Simple Math

00:23:30.300 | Behind Early Retirement.

00:23:31.900 | And in that, he uses some assumptions

00:23:34.980 | to kind of tie your savings rate

00:23:37.540 | to how long it's gonna take you

00:23:38.620 | to be financially independent.

00:23:40.140 | And the assumptions he uses is that you're gonna get

00:23:41.820 | a 5% real return during your accumulation,

00:23:44.580 | and you're gonna utilize the 4% rule in early retirement.

00:23:47.020 | And we can argue around the edges about that,

00:23:48.340 | but I think it's a really good place to start.

00:23:50.640 | He came up with this slide that shows,

00:23:53.900 | like in 5% increments, your savings rate

00:23:56.540 | and how long it's gonna take you.

00:23:57.380 | And that's obviously a really busy slide,

00:23:58.900 | so I'm gonna zoom in.

00:24:00.740 | So standard financial advice

00:24:02.420 | is you save 10 to 20% of your income.

00:24:05.220 | And standard career is about 40 to 50 years,

00:24:07.420 | like we talked about.

00:24:08.240 | And if you look at that,

00:24:09.080 | that lines up really nicely with that.

00:24:10.820 | So if you want a standard career, follow standard advice,

00:24:12.900 | and that should get you there.

00:24:14.820 | The problem, I think, for a lot of people,

00:24:16.300 | people say, well, saving 10% is hard.

00:24:18.860 | Well, I think, how am I gonna save 50%?

00:24:20.980 | And I think a lot of this is a psychological game.

00:24:22.820 | So I think a lot of the reason saving 10% is hard

00:24:25.260 | is because you're gonna see results really slowly,

00:24:28.020 | and you're not gonna notice any progress for a long time,

00:24:30.220 | 'cause it takes a while to get compounding working for you.

00:24:32.260 | And so a lot of people get frustrated,

00:24:33.660 | and they end up not saving anything at all.

00:24:35.580 | Whereas, again, if you have this goal,

00:24:37.220 | and you have this plan to work towards your goal,

00:24:40.420 | it's actually not all that hard for many people.

00:24:43.500 | And so in the FHIR community,

00:24:44.500 | we talk about starting thinking about a 50% savings rate.

00:24:47.700 | And again, that can seem drastic

00:24:48.900 | if you don't have these other things in line first.

00:24:51.980 | But if you have a 50% savings rate,

00:24:54.060 | or in that ballpark there,

00:24:55.580 | now you see where we're getting down

00:24:56.540 | to that one to two decades that we talk about,

00:24:58.300 | that you can reliably achieve FHIR

00:25:00.100 | following these principles.

00:25:01.460 | I think, before we move on from that,

00:25:05.500 | I think it's important to zoom in.

00:25:07.180 | And again, we talk about, with John Bogle,

00:25:09.540 | he always talked about the relentless rules

00:25:11.340 | of humble arithmetic.

00:25:12.620 | And I kind of am even more simple,

00:25:14.540 | and I say, just say the math is the math.

00:25:15.940 | And so a lot of people, they'll maybe hear my story,

00:25:18.540 | and they'll say, you know, that's kind of cool.

00:25:19.700 | I wish I would have thought of that when I was 25 or 30,

00:25:22.620 | but I'm already 45 or 50.

00:25:24.740 | But guess what?

00:25:25.580 | The math is exactly the same

00:25:26.740 | if you're saving aggressively

00:25:27.740 | for one decade early in your career,

00:25:29.760 | or one decade late in your career,

00:25:31.200 | or 15 years early, or 15 years late.

00:25:33.300 | And so this is a message that could help a lot of people

00:25:35.560 | who are late savers and behind the game.

00:25:37.660 | And why is that important?

00:25:40.540 | Well, we see that there's a lot of people behind the game.

00:25:42.420 | So this is a very recent study

00:25:44.920 | from Vanguard's How America Saves 2022.

00:25:47.580 | I'd say these balances are probably pretty bloated,

00:25:49.740 | being from the end of 2021,

00:25:51.540 | compared to what we have today.

00:25:52.380 | But if we look at people,

00:25:53.380 | those last two lines is what I want you to zoom in on,

00:25:56.420 | the 55 to 64 and the 65 plus.

00:25:59.380 | This is a kind of a skewed sample,

00:26:01.580 | 'cause it's people that have retirement accounts

00:26:03.060 | with Vanguard, so they're probably better

00:26:04.640 | than the average person.

00:26:05.480 | Many people don't have any retirement account,

00:26:06.940 | and some that do have ridiculous fees,

00:26:09.220 | and they're not maybe getting the same advice.

00:26:11.340 | But even in this crew, at that retirement age,

00:26:14.440 | we're looking at about a quarter of a million dollars.

00:26:16.300 | So if we go back to that 4% rule,

00:26:18.220 | these people can take about $10,000

00:26:20.200 | from their portfolio in retirement,

00:26:21.780 | less than $1,000 a month.

00:26:23.540 | So they really need help catching up to,

00:26:26.020 | if they wanna do anything more than just supplement

00:26:28.180 | social security and live on a pretty bare bones existence.

00:26:31.980 | And the average tends to be skewed up,

00:26:33.740 | 'cause you're gonna have people with two

00:26:34.860 | or $3 million in their account.

00:26:35.980 | So if we look at the median,

00:26:37.420 | that's even more representative, I think,

00:26:39.020 | of the average person.

00:26:39.940 | And again, this is already a kind of a privileged sample,

00:26:43.580 | like above average sample compared to the general society.

00:26:47.140 | And we're looking at people that have less than $100,000

00:26:50.140 | if you look at the median.

00:26:51.220 | So again, if you're looking at 100,000, 4%,

00:26:53.660 | you're talking people can take $4,000 for the entire year

00:26:56.540 | to supplement their social security,

00:26:57.980 | and that's what you have to live on.

00:26:59.340 | So again, people need a lot of help.

00:27:01.140 | Now, while the math is the same,

00:27:03.660 | what's really important to understand

00:27:05.060 | is if you're a late saver,

00:27:06.780 | or if you know somebody that's a late saver,

00:27:08.300 | and you can get them to kind of buy into

00:27:09.980 | some of these principles and take them to heart,

00:27:12.340 | there's actually a lot of advantages that you have

00:27:14.300 | if you're saving late versus the typical fire person.

00:27:17.340 | I would say, I'm gonna acknowledge off the top,

00:27:18.900 | the one big disadvantage, if you haven't been saving at all

00:27:21.700 | or haven't been saving much for 20 or 30 years,

00:27:24.660 | it may be challenging to change that habit,

00:27:27.860 | but if you can accept these principles

00:27:31.260 | and you can start down this path,

00:27:32.220 | there's a lot of advantages.

00:27:33.620 | If you're early in your career,

00:27:34.580 | if you just think about where you're at in the life cycle,

00:27:36.700 | you tend to be early in your career

00:27:37.900 | where you're making less money.

00:27:39.060 | Maybe you're forming your family,

00:27:40.260 | so you're still paying for diapers and daycare

00:27:42.300 | and saving for college.

00:27:43.500 | When you're later in your life,

00:27:45.620 | you tend to be entering your peak earning years,

00:27:47.300 | like we talked about, my wife and I,

00:27:48.380 | we left before we ever got there.

00:27:50.260 | You may have a mature family

00:27:51.460 | that you have all these expenses in the rear view mirror,

00:27:54.580 | or the kids are starting to go to college and moving out,

00:27:56.660 | and you can redirect that money to retirement savings.

00:27:59.420 | And if you have kids moving out,

00:28:00.780 | it might be a time to downsize,

00:28:02.020 | and one of the biggest ways you can save

00:28:03.500 | when you're spending is to cut your housing costs,

00:28:05.380 | and this could be a perfect time to do it.

00:28:07.420 | There's also greater tax advantages.

00:28:09.420 | One of the best, simplest things you can do,

00:28:11.380 | Mike Piper talked about this yesterday,

00:28:13.260 | is just utilize your retirement accounts to the max

00:28:15.420 | and utilize your HSA, and get as much tax advantage

00:28:17.860 | from your investments as you can.

00:28:19.380 | Well, as you get older, you have catch-up contributions,

00:28:21.180 | so those contributions get even bigger,

00:28:23.020 | and it gives you a little more space to work with there.

00:28:26.020 | And then you just have less,

00:28:27.180 | it's just less hard to plan for a traditional retirement.

00:28:29.780 | Still not an easy task, still 30 years,

00:28:31.540 | a lot of uncertainty, but compared to 60 years,

00:28:34.780 | it's a lot easier to plan for that.

00:28:36.660 | You also have a floor under you

00:28:38.500 | with your Social Security income,

00:28:40.060 | so you may not need to save 25 times,

00:28:42.580 | because you have that Social Security

00:28:45.140 | supplying some of your spending.

00:28:46.660 | And you also have Medicare, which it's not free,

00:28:48.700 | and it's not perfect by any means,

00:28:49.940 | but compared to what we have to deal with

00:28:51.980 | to bridge that gap from working to traditional retirement,

00:28:56.980 | for somebody like myself, I have 25 years,

00:28:58.540 | and the laws change every couple of years,

00:29:00.140 | and it's really hard to plan

00:29:01.220 | when you don't know what the rules are.

00:29:02.980 | So, I wanted to kind of leave some time for questions,

00:29:07.180 | so I want to kind of go through, fairly quickly,

00:29:09.820 | we talked about spending less, earning more,

00:29:12.100 | and investing better, and so I want to kind of close on that.

00:29:14.980 | And so, what are the things you can do

00:29:16.860 | to develop a high savings rate?

00:29:19.100 | So, probably our third big topic

00:29:20.740 | that we love to talk about in the FHIR community

00:29:22.340 | is the big three.

00:29:23.260 | So, we always start by focusing

00:29:24.660 | on housing, transportation, and food.

00:29:26.860 | And this isn't because FHIR bloggers

00:29:28.660 | love to tell you what to do.

00:29:30.180 | Again, it comes down to simple math, okay?

00:29:32.260 | So, for the average American household,

00:29:34.420 | 50% of your expenses is going to come from these big three,

00:29:37.460 | housing, cars, and food.

00:29:39.420 | So, I kind of like to picture this as like a big pie chart,

00:29:42.020 | and it fits a big circle,

00:29:42.940 | and you just cut it down the middle.

00:29:44.260 | And on one side, you have housing, cars, and food,

00:29:46.260 | and on one side, you have everything else.

00:29:48.140 | And some people will say,

00:29:48.980 | "Well, I don't want to cut on my housing, cars, and food."

00:29:50.740 | And if you want to have a high savings rate,

00:29:52.180 | that means you essentially cut everything else,

00:29:53.940 | and I don't think that's a good idea.

00:29:55.340 | To me, that's the definition of extreme frugality.

00:29:57.500 | But if you can optimize on those big three

00:29:59.300 | and develop a reasonable savings rate,

00:30:01.260 | that sets you on your way,

00:30:02.580 | and that's where you want to focus your energy to start.

00:30:05.700 | And again, for some people, this is going to feel like,

00:30:07.620 | this is going to feel like frugality and sacrifice,

00:30:10.260 | because I think we've been sold

00:30:11.260 | that the American dream is to have

00:30:12.620 | the biggest house you can have

00:30:13.940 | and the most expensive car you can drive,

00:30:16.060 | and a lot of people have bought into that dream.

00:30:18.460 | And so it does require a mindset shift.

00:30:21.940 | If that slide got you down,

00:30:23.180 | I think everything gets a lot easier

00:30:25.460 | once you have a pretty decent savings rate,

00:30:28.380 | because now you're just throwing gasoline on the fire.

00:30:30.980 | I have never met anybody who said,

00:30:32.560 | "My life would be so much better

00:30:34.180 | "if I could just pay a few more dollars in investment fees,

00:30:37.000 | "if I could pay a little bit more in taxes,

00:30:39.180 | "if I could pay some extra insurance premiums,

00:30:41.580 | "or I love to travel, but if I could just spend more on it."

00:30:44.580 | But all those things, once you master your finances,

00:30:47.340 | you can really cut dramatically.

00:30:49.220 | A lot of people, and again, in the Bogleheads,

00:30:50.820 | this is something we talk about a lot, is investment fees,

00:30:53.500 | but it really doesn't matter if you don't have much invested.

00:30:55.860 | But as your investments grow,

00:30:57.600 | if you have a million dollars

00:30:58.700 | and you cut that from a 1% fee to a 0.05% fee,

00:31:02.140 | you're talking about saving almost $10,000 a year.

00:31:04.380 | I mean, that's massive.

00:31:05.800 | Taxes.

00:31:06.640 | Mike Piper talked about this a little bit yesterday.

00:31:09.800 | Some of the simplest things you can do

00:31:11.200 | are also the most effective.

00:31:12.080 | Just max out your retirement accounts

00:31:13.960 | and defer those taxes in your high-earning years.

00:31:15.960 | And by definition, you have a high savings rate

00:31:18.000 | and you have a lower cost of living.

00:31:19.560 | And if you retire early or even semi-retire or whatever,

00:31:21.800 | and you can spread that out over 20 or 30 years,

00:31:24.740 | you can pay much lower taxes.

00:31:26.720 | Early retirement lifestyle is just,

00:31:28.880 | and this whole financial independence lifestyle

00:31:30.320 | is just generally very tax-friendly.

00:31:32.560 | If you kind of like, again,

00:31:34.160 | I'm not really truly fully retired.

00:31:36.060 | We still have some income, but our income's low enough

00:31:38.180 | where now our capital gains are tax-free.

00:31:39.800 | So we don't have any of that tax drag

00:31:41.080 | even on our taxable accounts.

00:31:43.060 | Just having a lower consumption lifestyle,

00:31:44.640 | you'd cut out all those sales taxes.

00:31:46.900 | If you don't live in as big and expensive a house,

00:31:48.960 | you tend to have less property taxes.

00:31:50.400 | So if you don't like paying taxes,

00:31:52.320 | this is a great way to cut them, all these things.

00:31:54.520 | Again, insurance.

00:31:55.640 | If you don't have any savings,

00:31:57.640 | every little thing that happens can kind of be an emergency.

00:31:59.480 | And so you need a lot of insurance in your life.

00:32:01.720 | But as you have a couple of years of savings,

00:32:04.240 | paying for a short-term disability policy

00:32:05.880 | maybe doesn't make sense anymore.

00:32:07.280 | If you're getting to 20 and 30 years of savings,

00:32:09.160 | having a long-term disability and having a life insurance

00:32:11.200 | doesn't make much sense anymore.

00:32:13.080 | If you have enough money to cover expenses,

00:32:16.640 | you can start raising your deductibles

00:32:18.060 | and lowering your premiums on everything from auto

00:32:20.480 | and house and healthcare insurance.

00:32:22.800 | And so again, insurance gets a lot cheaper.

00:32:25.160 | And then travel expenses.

00:32:26.440 | I kind of put this at the end.

00:32:28.840 | This is kind of one that excites people.

00:32:30.280 | And again, this is something in the FHIR community

00:32:31.480 | we like to talk about, but using travel credit cards

00:32:34.920 | and their credit card companies know

00:32:36.960 | that they charge an outrageous fee

00:32:38.360 | and most people are not gonna benefit by that.

00:32:40.600 | And so they're willing to give some pretty outrageous bonuses

00:32:43.480 | to sign up for their cards

00:32:45.160 | because most people are gonna end up paying 15 or 20%.

00:32:47.240 | But if you can master your finances,

00:32:48.960 | you get in a position where,

00:32:50.320 | even if you have to put things on a card,

00:32:51.660 | you have the money to easily pay it off

00:32:53.480 | and you're not gonna be paying these fees,

00:32:55.120 | you can collect a lot of rewards.

00:32:56.480 | And I typically, our family,

00:32:57.880 | just signing up for four or five cards a year,

00:32:59.480 | we collect about four to $5,000 of free travel

00:33:02.320 | in the course of every year.

00:33:04.720 | The other side of the equation,

00:33:07.080 | again, we talk a lot about spending less,

00:33:09.280 | but it is important to earn more.

00:33:10.880 | And again, I think it all comes down to that.

00:33:13.200 | Still, it's a value proposition.

00:33:15.120 | So yes, a lot of people say everybody should go to college

00:33:18.040 | at any cost and there's no other investment in the world

00:33:21.200 | that we say that about.

00:33:22.120 | We wouldn't say, is a house a good investment?

00:33:23.640 | We would say, at what price?

00:33:25.040 | Is a stock a good investment?

00:33:26.520 | We were talking today about valuations.

00:33:28.720 | Everything is what price.

00:33:29.720 | But with college, we just kind of throw our brain out

00:33:32.200 | and just take these big loans on

00:33:33.360 | and then this ends up in the position

00:33:34.800 | that we're stuck in as a country right now.

00:33:36.560 | So in the FIRE community,

00:33:37.440 | we've talked a lot about different ways

00:33:39.520 | to get your education for less.

00:33:40.880 | And I can tell you in my story, again, my wife and I,

00:33:43.560 | between us, we have six college degrees

00:33:45.240 | and plus a bunch of different certifications.

00:33:46.720 | We're like education junkies.

00:33:48.520 | And again, we've never had any debt

00:33:50.840 | except for my wife's initial bachelor's.

00:33:53.000 | So it is possible and it is doable.

00:33:55.200 | Then you wanna kind of just grow your earning power

00:33:56.920 | through your career and build a network

00:33:58.600 | and all these things just to kind of allow you to make more.

00:34:02.440 | And then the final step.

00:34:03.320 | So once you grow your savings rate,

00:34:05.480 | you do have to do something to grow your investments

00:34:08.040 | and how do you invest better?

00:34:09.800 | I would say on this whole panel of speakers

00:34:12.040 | at this conference this weekend,

00:34:12.920 | I am the least qualified person.

00:34:14.760 | The other people here speaking

00:34:15.880 | are the people whose books I read,

00:34:17.640 | their blogs I read, their podcasts I listen to.

00:34:19.960 | So what I would say is just enjoy

00:34:21.160 | the rest of this conference, suck up as much as you can,

00:34:23.640 | and then take it out and pay it forward to your community

00:34:25.360 | and help people out.

00:34:26.400 | And that's really what this is all about.

00:34:27.760 | And I wish you all the best

00:34:30.040 | on your journey to financial independence.

00:34:31.480 | And if anybody has questions,

00:34:32.800 | I'm happy to stay and talk as long as you need.

00:34:35.160 | (audience applauding)

00:34:39.280 | - And I appreciate the slide you put on at the end

00:34:49.360 | about earning more.

00:34:51.040 | I see a lot of people in the FIRE community,

00:34:53.240 | FIRE bloggers, authors, et cetera,

00:34:55.920 | that are just crazy about saving,

00:34:58.600 | saving, saving, saving, saving.

00:34:59.960 | And very rarely do they ever talk about earning more.

00:35:04.240 | And in my experience, people dramatically overestimate

00:35:07.840 | the difficulty of doubling their income.

00:35:10.200 | Why doesn't the FIRE community talk about earning more,

00:35:13.640 | more than they do?

00:35:14.600 | - You know, that's a good question.

00:35:17.840 | I can't speak for other people,

00:35:18.920 | but it is something that, I mean, in the book,

00:35:21.320 | we devoted a section to each of those three levers

00:35:24.000 | of spending less, earning more.

00:35:25.800 | So in my own personal story, I do focus on that.

00:35:28.680 | And again, in my own personal story,

00:35:30.600 | like it would be hypocritical,

00:35:31.920 | like I know a lot of people get anti-college or whatever.

00:35:35.240 | I absolutely benefited from having three degrees,

00:35:37.640 | and my wife has three degrees.

00:35:38.520 | But again, you have to look at the cost benefit.

00:35:41.280 | And so even when you are focusing on earning more,

00:35:43.200 | it's all kind of the same thing.

00:35:44.400 | You have to look at the value proposition,

00:35:45.720 | and you still have to look at what you're spending.

00:35:47.080 | But I absolutely agree with you,

00:35:48.480 | and I wouldn't argue with you.

00:35:49.880 | I think maybe the only thing I would argue is,

00:35:51.920 | I think a lot of people think that if you earn more,

00:35:54.480 | it'll get easier to save.

00:35:56.240 | And in theory, I agree with that.

00:35:58.480 | But if you look at the data,

00:36:00.040 | what most people do is they earn more,

00:36:01.480 | and they just inflate their income.

00:36:02.840 | And their spending grows right with their earnings.

00:36:05.440 | So most people don't save more.

00:36:06.960 | And you can look at like professional athletes,

00:36:09.000 | you know very well with doctors, you know the statistics.

00:36:12.240 | So that's just the reality.

00:36:14.160 | So there is a practical reason too, I think.

00:36:17.040 | But I think it's worth working on both,

00:36:18.280 | but that's why we focus on spending first, at least I do.

00:36:21.200 | - Hello, hello, yes.

00:36:26.320 | My question is regard, how do you know emotionally

00:36:31.160 | transition from accumulation to, you know,

00:36:37.160 | spending your portfolio?

00:36:39.680 | My wife and I, we were thinking,

00:36:41.360 | we reach our FI number this year.

00:36:44.280 | And, but we don't know, you know,

00:36:46.880 | we were now scouting, you know, where to retire,

00:36:49.680 | where to go, but inside of us,

00:36:52.240 | we are a little bit afraid if, you know,

00:36:54.480 | if this doesn't work, you know,

00:36:56.880 | and what we are going to do, you know,

00:36:59.040 | we still have about 25, 30 years

00:37:01.760 | until we get hit our social security, you know, benefits.

00:37:06.360 | So how was, in your experience,

00:37:08.600 | that transition from working

00:37:10.960 | and just to, you know, living the FI, the fire life?

00:37:15.960 | - Yeah, that's a great question.

00:37:17.680 | In my personal situation,

00:37:19.640 | it really wasn't a question of like,

00:37:21.400 | we didn't look at, did we hit some target number

00:37:23.680 | and were we ready to retire?

00:37:25.680 | My wife and I, we kind of always wanted to move West

00:37:27.800 | and just do something different.

00:37:28.680 | I'm from Pennsylvania, but like I said,

00:37:29.800 | we live in Utah now.

00:37:30.720 | And so we had a daughter and she was turning five

00:37:32.880 | and she was starting kindergarten.

00:37:34.400 | And for us, it was really a lifestyle decision of

00:37:37.320 | once she starts school and making her friends

00:37:39.160 | and getting involved in activities,

00:37:40.120 | it's going to be a lot harder to shift gears

00:37:41.560 | and to change to that.

00:37:43.440 | So that was kind of our initial decision.

00:37:46.200 | And we always, I mean, originally,

00:37:48.280 | I think just like most people,

00:37:49.960 | I had that same vision of retire is don't work at all.

00:37:52.840 | You live off your investments.

00:37:54.080 | But then as you kind of get closer

00:37:55.400 | and you start thinking about it,

00:37:56.720 | what are you going to do for purpose?

00:37:58.400 | What are you going to do to just fill your time?

00:38:00.960 | Like my daughter's in school.

00:38:02.000 | And so what am I going to do all day?

00:38:03.800 | And also it's just a psychological component.

00:38:05.680 | Like you don't save 50% of your income

00:38:08.360 | because you are suffering and sacrificing for 15 years.

00:38:11.040 | You save because it feels good.

00:38:12.520 | And so imagine like you're driving down the road

00:38:14.280 | at 80 miles an hour,

00:38:15.120 | and then you're just going to slam it in reverse.

00:38:16.880 | That's basically what you're doing,

00:38:17.800 | going from like a 50% savings rate

00:38:19.440 | to spending for your portfolio.

00:38:20.960 | So our plan was always to be very gradual and cutting back.

00:38:23.600 | So my wife has a remote job.

00:38:26.000 | She works for a company out of Washington, D.C., part-time.

00:38:28.040 | Like I said, after having our daughter.

00:38:30.040 | Shortly after that, she started with that company.

00:38:31.880 | And she was the seventh employee.

00:38:33.680 | It was a startup.

00:38:34.520 | So they kind of just give her a really sweet deal.

00:38:35.760 | And so she's able to work part-time.

00:38:37.680 | And I plan to keep my physical therapy license.

00:38:40.540 | I thought I may work part-time

00:38:41.640 | or do a travel assignment once or twice a year.

00:38:44.120 | And our investments did really well.

00:38:45.600 | I did better than I thought with our book and blog.

00:38:48.760 | And so I just kind of let my license expire.

00:38:51.480 | And I am, I guess,

00:38:52.320 | completely retired as a physical therapist.

00:38:53.640 | Now I'm not going back.

00:38:54.480 | But yeah, that was kind of always our plan,

00:38:55.920 | is to have a gradual transition.

00:38:58.840 | And so it'll be five years for us in December.

00:39:00.840 | And my wife is, again, looking to cut back working.

00:39:03.840 | This year, kind of cut back our hours again.

00:39:06.440 | But we're kind of still like,

00:39:08.360 | most months, we are just basically right about even.

00:39:12.440 | So every now and then,

00:39:13.280 | if we have expenses, we'll take from our savings.

00:39:14.860 | Every now and then, if I have a good month,

00:39:16.680 | we'll put a little bit into savings.

00:39:17.900 | But we're not drawing down much.

00:39:19.280 | We're not saving anymore.

00:39:20.160 | And it feels very comfortable.

00:39:21.200 | It's a nice transition point.

00:39:23.120 | - You didn't cover one of the observations

00:39:28.600 | I know about a fire committee I see as a downside.

00:39:31.020 | But at least the more vocal fire proponents

00:39:33.440 | really seem to hate their job,

00:39:35.360 | to the point where they will blog about it.

00:39:37.200 | And they just want to get out in 10 or 20 years.

00:39:39.800 | I'm not sure, it's like,

00:39:41.880 | do you think that's representative?

00:39:43.120 | Or maybe just the loudest, voiceless in that community

00:39:45.320 | is basically doing it that way.

00:39:47.280 | And I'm wondering if you have any thoughts about that.

00:39:49.700 | - I'll be honest with you.

00:39:53.380 | I don't read a lot of fire blogs anymore,

00:39:54.940 | 'cause I'm kind of like, I'm at that transition stage.

00:39:56.980 | So I don't know what's out there now.

00:39:59.300 | I do think sometimes the loudest, most extreme voices

00:40:01.760 | get the most attention.

00:40:02.600 | That's just natural.

00:40:03.720 | I mean, my personal opinion,

00:40:07.260 | I think if you are two to three years away from fire,

00:40:11.900 | and you, I think it's a rational decision.

00:40:14.980 | If you have a high paying job to maybe put your nose down

00:40:16.900 | and just get through it and hit your number and then quit.

00:40:19.780 | But if you're starting your career

00:40:21.300 | and you know that's not what you want to do

00:40:22.420 | to suffer and sacrifice through it.

00:40:24.700 | I mean, I think there's a lot better ways

00:40:25.820 | to go through life.

00:40:26.660 | I mean, I wouldn't recommend suffering

00:40:28.940 | for the next 10 years to reach this number

00:40:31.260 | that there's no guarantee you're ever going to get there.

00:40:33.180 | So you got to live your life and enjoy it along the way.

00:40:36.100 | - So one question of interest in this is,

00:40:43.300 | it seems like there's accumulation, accumulation of,

00:40:46.500 | and it has to be taxable investments at this point,

00:40:50.100 | if you're going to be living off of it.

00:40:52.260 | Is there a trade-off here where you're just bypassing

00:40:55.620 | 401k matches, long-term taxable income,

00:40:58.980 | or tax-free earning on those things

00:41:01.700 | to achieve this other side?

00:41:03.500 | Are you passing up those company matches

00:41:06.500 | because you're focused on being away?

00:41:09.540 | And is that a trade-off that's worth it?

00:41:12.000 | I don't know if that makes sense or not.

00:41:13.100 | - Yeah, I mean, I would say in general,

00:41:15.100 | I hate to give one-size-fits-all advice,

00:41:16.620 | but passing up a company match is one,

00:41:18.780 | unless maybe, like if you have a ton of credit card debt,

00:41:21.460 | something like maybe, but you're getting a tax advantage

00:41:24.220 | and you're getting just a free 100% return.

00:41:26.020 | So I personally would never pass that up.

00:41:28.380 | But beyond that, I mean,

00:41:29.260 | when we were in our accumulation years,

00:41:32.020 | I mean, if you're saving enough,

00:41:33.860 | again, unless you're really doing

00:41:35.140 | the extreme frugality version of this,

00:41:37.060 | I mean, for us, we maxed out both of our 401ks,

00:41:39.540 | then we maxed out both of our Roths.

00:41:41.480 | And in the one year we had the option to,

00:41:43.540 | we maxed out our HSA,

00:41:44.500 | and then we still saved a substantial amount

00:41:45.940 | in taxable investments.

00:41:48.100 | So we ended up, we have a pretty nice mix

00:41:50.340 | and a lot of diversification amongst asset,

00:41:52.980 | or amongst taxable types of accounts.

00:41:56.220 | But I think if you aren't in that position

00:41:58.860 | and you have to make a decision,

00:41:59.740 | I don't know how I would answer that question.

00:42:02.140 | For many people, I think you have to look

00:42:03.460 | at your own situation and where you're gonna be.

00:42:06.720 | (man speaking indistinctly)

00:42:10.380 | (man speaking indistinctly)

00:42:14.040 | Yeah, there is ways to get money out of your 401k.

00:42:31.100 | There's, you have to jump through some hoops,

00:42:34.380 | but like there's, you can do, it's called a 72T,

00:42:37.340 | and you could take like, kind of almost equivalent

00:42:40.040 | to RMDs, but you're doing it earlier in your life.

00:42:42.700 | So once you do it, you have to do it

00:42:43.660 | for a period of at least five years.

00:42:45.380 | And there's ways to do it.

00:42:47.420 | Also, you could just pay the penalty,

00:42:48.620 | and sometimes that still might be better than paying,

00:42:50.580 | depending what your tax rate is.

00:42:52.060 | If you're in a much lower tax rate in retirement

00:42:53.620 | and you're paying the 10% penalty,

00:42:54.620 | that still might work out in your advantage.

00:42:56.040 | So again, it's really hard to give specific advice

00:43:00.140 | to a general audience.

00:43:01.180 | You have to kind of look at your own situation.

00:43:03.540 | Yeah.

00:43:06.100 | - Hello, just a general question.

00:43:08.500 | One of the big threes that you mentioned was housing.

00:43:11.400 | Do you have any advice for people living

00:43:14.040 | in high cost of living cities?

00:43:16.840 | I'm from New York City, work in New York,

00:43:19.240 | make a good living in New York,

00:43:23.160 | but I find that the housing costs are extreme right now.

00:43:28.160 | Any general solutions?

00:43:33.000 | I mean, besides living with a roommate,

00:43:34.720 | because I'm doing that now,

00:43:36.460 | but any other advice you could give?

00:43:40.380 | - No, I mean, I think, again,

00:43:41.940 | we kind of talk about principles, right?

00:43:43.460 | The principle is you have to do less,

00:43:45.100 | but then there's the tactics

00:43:46.460 | and how are you actually going to do that?

00:43:48.480 | I think one thing in a high cost of living area,

00:43:51.420 | like I guess my question would be, why are you living?

00:43:53.460 | Like, is that where your family is?

00:43:55.020 | Is that where you want to stay?

00:43:56.240 | 'Cause like, I think some people go there

00:43:57.420 | because there's higher paying job opportunities,

00:44:00.460 | but then you can always move to a lower cost

00:44:02.700 | if that's where you want to live.

00:44:03.740 | Now, if you want to stay in the higher cost of living area,

00:44:05.840 | I think like a roommate is a great idea.

00:44:07.280 | I mean, you're kind of limited by your creativity

00:44:09.600 | once you understand the principle,

00:44:10.720 | but yeah, I mean, if it's a super,

00:44:13.000 | like if you're in the Bay Area or in Manhattan,

00:44:15.760 | yeah, I mean, it's expensive to live there

00:44:17.300 | and it's going to take up more of your,

00:44:18.680 | so it's a decision is, is that worth it?

00:44:21.680 | Is it worth it to go somewhere else?

00:44:23.480 | And that's a personal decision that you have to make.

00:44:25.720 | - Now, I grew up in New York,

00:44:28.040 | lived there and I'm working there.

00:44:31.740 | It's a little, because I'm in the insurance business,

00:44:35.380 | but I'm an attorney, so I'm practicing there.

00:44:38.300 | So, I mean, I guess looking to practice elsewhere,

00:44:41.580 | I'd have to take the bar unless it's a UBE state,

00:44:44.260 | but that's pretty much.

00:44:46.620 | - Yeah, I think again, like I think a lot of it

00:44:48.740 | is just what do you really want?

00:44:50.380 | Like, again, like my wife,

00:44:51.420 | she works for a company based out of Washington DC,

00:44:53.340 | but she worked for them when we were in Pennsylvania

00:44:55.140 | and she works for them when we're in Utah.

00:44:56.420 | And so some, like, especially now since the pandemic,

00:44:58.820 | a lot of jobs, if that's an option,

00:45:00.540 | but again, if your family's there,

00:45:02.400 | is that a sacrifice you're willing to make?

00:45:04.640 | Again, we did move away from our family,

00:45:06.240 | but it was because of other reasons.

00:45:08.320 | And those are always hard decisions

00:45:10.880 | and I can't give you a good, easy answer on them.

00:45:13.320 | - Hello, my name's Chris, I'm from the DC area.

00:45:19.880 | - Yes.

00:45:20.720 | - I just wanna start off by thanking you

00:45:22.200 | for revealing some of the particulars.

00:45:25.160 | For example, somebody who's still working their way

00:45:27.880 | up the income curve, you know, I didn't really think it,

00:45:31.700 | you know, it could be possible to achieve FIRE,

00:45:33.980 | you know, without, you know, six figure and above income.

00:45:37.420 | So that was really encouraging, so thank you for that.

00:45:40.580 | I'm curious, 'cause one of the things

00:45:41.660 | that I don't hear too often in the FIRE community

00:45:44.260 | is the discussion of how you think

00:45:46.060 | about paying for a child's education.

00:45:48.100 | I know a lot of Bogleheads will think

00:45:50.280 | that you should always put your retirement first

00:45:52.820 | because, you know, your child can always borrow for college,

00:45:55.220 | but I'm just curious if those are things you think about

00:45:57.220 | and what kind of ideas you have there.

00:46:00.160 | - Yeah, absolutely.

00:46:01.200 | So that is something when I was,

00:46:03.280 | when we were, our last five years

00:46:05.840 | of saving for financial independence,

00:46:08.520 | we were cutting those investment fees and tax fees

00:46:11.480 | because we were, I was also learning the investment side

00:46:13.520 | while I was going down the FIRE hole.

00:46:16.060 | And so I had a lot more money

00:46:17.880 | that we were already saving that was freed up.

00:46:19.880 | And so, and also I took a little, a side job.

00:46:22.800 | It was just because we couldn't get out.

00:46:24.560 | Like we, I like rock climbing and I couldn't get out

00:46:26.680 | and do stuff because it was a drive

00:46:28.040 | from where we used to live.

00:46:28.880 | So I took a job with a local university.

00:46:30.920 | So all I did was that little side hustle money.

00:46:32.480 | I threw all that into account for her.

00:46:34.200 | And in six years of teaching,

00:46:37.080 | right before we left for Utah,

00:46:38.600 | I kind of maxed out what I wanted to save for her

00:46:40.560 | for her school.

00:46:41.760 | And so we stopped saving when we stopped working.

00:46:44.040 | So yeah, we front loaded it.

00:46:45.480 | And just like we front loaded our retirement savings.

00:46:48.040 | - So I'm from Nashville.

00:46:52.560 | Shout out to Dolly.

00:46:54.240 | We like, your daughter liking Dolly.

00:46:56.600 | My question is specifically for healthcare

00:46:58.640 | because I'm a nurse and I work in a trauma center

00:47:01.160 | and we see terrible things happen all day

00:47:03.160 | for people who were retired

00:47:04.840 | and now their whole life is gonna change.

00:47:07.200 | What does the fire community say

00:47:08.600 | about getting ready for whatever particular catastrophe

00:47:11.680 | might come your way?

00:47:12.520 | You hope it doesn't, but what would they do?

00:47:14.080 | What does the fire community say about that?

00:47:16.080 | - Yeah, I mean, this is one area where I do differ

00:47:19.520 | with some people from the fire community

00:47:20.880 | who are way more risk tolerant or maybe naive

00:47:24.680 | than if I want to be not as diplomatic about it.

00:47:27.680 | But to me, health insurance is absolutely a must

00:47:30.440 | for everybody.

00:47:31.280 | I mean, it's just such a huge risk.

00:47:33.400 | And so just like any entrepreneur,

00:47:34.880 | you have to figure out how you're going to get it.

00:47:37.080 | I did do like a deep dive.

00:47:39.160 | I know some people like the health share ministries.

00:47:41.240 | For me, I just, for personal things

00:47:44.280 | with like kind of the activities we do,

00:47:46.360 | like adventure activities,

00:47:48.360 | they wouldn't cover some of those things.

00:47:49.640 | And my wife has a preexisting condition it wouldn't cover.

00:47:51.600 | So it wouldn't work for us,

00:47:52.880 | but that is an option that's cheaper.

00:47:55.160 | I think for most people, they try to optimize.

00:47:56.920 | And this is what we're going to do when my wife cuts back

00:47:58.800 | is try to optimize on our subsidies

00:48:00.560 | and just go through the ACA.

00:48:02.680 | But again, it's a big challenge because again,

00:48:04.720 | they passed the law, I guess, what are we in 2022?

00:48:07.800 | Midway through 2021.

00:48:09.680 | So it didn't do any good to plan

00:48:10.840 | 'cause you're already halfway through the year

00:48:12.840 | improving the subsidies.

00:48:14.040 | And it only went through this year

00:48:15.400 | and now they passed it again,

00:48:16.400 | but that takes us three more years.

00:48:17.560 | But again, for myself, I'm 46.

00:48:19.080 | So that still leaves me 16,

00:48:21.480 | trying to do math on the flyer, 16 years till Medicare.

00:48:24.040 | Yes, I don't know.

00:48:24.880 | We're going to, it's kind of, again,

00:48:26.560 | I think maybe a reason to over-save a little bit,

00:48:28.640 | a reason to, if you can be open to having some income

00:48:32.640 | in a way that's enjoyable, ways to pay it.

00:48:35.160 | Food.

00:48:50.760 | Yeah, it depends.

00:48:51.600 | I mean, if you have a low enough income,

00:48:54.160 | you can get your insurance subsidized to a high level

00:48:58.000 | and you can pay very low premiums.

00:48:59.400 | And also, but then you also have

00:49:00.600 | the other side of the equation.

00:49:01.600 | That's not the only uncertainty.

00:49:04.000 | You also don't know if you're going to be healthy.

00:49:06.120 | So even if you have insurance,

00:49:07.960 | you can have some substantial out-of-pocket costs

00:49:09.680 | in a given year.

00:49:10.520 | So you have to look at what your potential max

00:49:11.520 | out-of-pocket is.

00:49:12.720 | And you just, it's a planning exercise.

00:49:14.880 | You have to figure all that out

00:49:16.040 | and look at what your downside is.

00:49:17.040 | And again, the hard part is on the premium side,

00:49:19.680 | you just don't know what things are going to be

00:49:21.080 | in three or five years.

00:49:22.040 | I mean, things could get a lot better

00:49:23.080 | or they could go back to having no system.

00:49:25.480 | Who knows?

00:49:26.400 | It's such a political football.

00:49:27.960 | - Okay, thank you.

00:49:32.880 | Yeah, my name's Mike.

00:49:33.760 | I just, first of all, thank you to you, Chris

00:49:37.040 | and Rick and Dr. Dolly and everybody that's here.

00:49:40.240 | I feel like I've kind of found my tribe here, right?

00:49:43.040 | So I guess my question is more of a general one

00:49:45.240 | of how do you approach your lifestyle

00:49:49.440 | with folks that you interact with day-to-day

00:49:52.120 | as far as kids, friends, parents,

00:49:55.360 | and approaching the glide path to retirement

00:49:59.000 | and how did you approach that professionally

00:50:00.600 | with your peers?

00:50:01.760 | And then maybe more generally,

00:50:02.960 | how do you pay it forward with the folks

00:50:04.840 | that you come into contact with?

00:50:06.880 | - I'm trying to think of these questions one at a time.

00:50:10.160 | So I'll start with the last 'cause I remember that.

00:50:12.200 | As far as paying it forward, I mean, just being here,

00:50:14.040 | being a part of this conference, I really respect

00:50:16.440 | what the BOGO heads do and I was beyond honored

00:50:19.480 | and excited when they asked me to come speak

00:50:21.000 | and I was happy to do that.

00:50:22.920 | Writing my blog, again, I do monetize it now,

00:50:24.800 | but I wrote for five years and didn't make a penny on it.

00:50:26.760 | It's not like a big money maker.

00:50:27.900 | It's more to offset our costs.

00:50:29.620 | So just trying to put good information out there.

00:50:31.840 | And like I said, I just, out of curiosity,

00:50:34.360 | I went and decided to go down the CFP route

00:50:36.580 | to educate myself just to make sure that,

00:50:38.660 | you know, what don't I know and to better be able

00:50:41.480 | to educate and help other people.

00:50:42.720 | So that's that question and then I think you asked

00:50:44.800 | about like just in our life, interacting with people.

00:50:47.440 | I'm open, like I don't like, if people ask what I do,

00:50:52.120 | I kind of say I'm like semi-retired.

00:50:53.560 | I say, am I write a blog?

00:50:54.640 | Or most people don't really care to be honest.

00:50:56.940 | (audience laughing)

00:50:58.120 | As far as my child, I guess I'm a little bit like,

00:51:01.920 | I'm a little bit worried like, are we going to spoil her?

00:51:04.760 | Is she gonna not have the work ethic we have?

00:51:06.540 | I mean, I think every parent has that though.

00:51:08.060 | I mean, I don't know how you know the right balance

00:51:09.540 | and you just do the best you can.

00:51:11.160 | And then as far as like her friends and stuff,

00:51:13.200 | I mean, I think again, like with my wife and I,

00:51:17.600 | like I think more is caught than taught.

00:51:19.580 | So like when I look at the stuff we did well

00:51:21.440 | and I look at the stuff we did poorly,

00:51:23.520 | most of that came from our parents,

00:51:24.780 | but not 'cause they told us to do anything

00:51:26.380 | or not to do anything.

00:51:27.220 | Mostly just we watched and saw what they were doing

00:51:28.840 | and I think that's how kids mostly learn.

00:51:30.560 | So we try to set a good example with how we are stewards

00:51:33.280 | of our money and how we spend

00:51:36.040 | and we do have occasional conversations,

00:51:37.840 | but she's 10 and she doesn't really wanna get too involved

00:51:40.960 | in getting too deep in the weeds there.

00:51:42.860 | - Okay, so one of the biggest expenses was housing

00:51:49.520 | on your list. - Yes, yes.

00:51:50.520 | - And the way you solved that problem

00:51:52.200 | was you liked to rock climb and you wanted a better,

00:51:55.340 | you didn't want one of the long commutes,

00:51:59.200 | you wanted a quality of life.

00:52:00.560 | So you moved from Pennsylvania to Utah.

00:52:02.560 | Did your parents follow you there?

00:52:06.840 | How did the grandparents

00:52:09.000 | and your kid's situation resolve itself?

00:52:11.240 | - That is a great question and a tough question

00:52:13.800 | 'cause that's, my parents, that's their only granddaughter.

00:52:17.120 | And so it was a tough situation.

00:52:19.200 | Again, this really isn't a financial,

00:52:20.520 | like we didn't, we moved to,

00:52:22.360 | where we moved is substantially more expensive

00:52:24.640 | than where we came from.

00:52:25.480 | It was a low cost of living.

00:52:26.320 | So it wasn't a, we weren't moving to save money.

00:52:28.960 | We were moving for lifestyle

00:52:30.280 | and like the area we were at in Pennsylvania,

00:52:33.680 | I mean, if my family wasn't there, I would never live there.

00:52:36.960 | I was there because of my family.

00:52:38.840 | And also just as a place to raise a kid,

00:52:42.800 | I mean, it's a depressed area.

00:52:44.880 | There's just not a ton of opportunities.

00:52:46.600 | And also Pennsylvania,

00:52:49.000 | like the education costs are extremely high.

00:52:51.720 | So there was a lot of reasons

00:52:52.980 | that kind of factored into her quality of life,

00:52:54.720 | but that was definitely a tough thing.

00:52:56.200 | And we built that into our lifestyle,

00:52:59.040 | both in our budget to travel.

00:53:00.440 | We typically go back, we were back there this summer,

00:53:02.780 | we're gonna go back for Thanksgiving.

00:53:05.780 | My parents, we have a house with like a mother-in-law suite.

00:53:08.060 | So my mom's been pretty sick

00:53:10.020 | and unable to travel ever since COVID.

00:53:11.540 | But prior to that, they would come out

00:53:12.940 | and spend three, four weeks at a time with us

00:53:14.500 | to be around my daughter, their granddaughter.

00:53:16.620 | So, but yeah, I mean, those are always tough things

00:53:18.580 | and it's really not a financial question.

00:53:20.660 | And so I think you have to navigate that on your own.

00:53:23.620 | - I can answer that.

00:53:24.620 | So I've got three kids and eight grandkids

00:53:28.020 | and go where you want to go.

00:53:30.980 | Parents want you to be successful.

00:53:32.940 | Go where you need to go.

00:53:34.880 | If the parents follow, they chase their kids,

00:53:37.860 | then that's what they do.

00:53:38.980 | If they don't, they don't.

00:53:40.060 | But don't let that be a factor in what you do.

00:53:42.380 | Thank you, Chris, it's been wonderful.

00:53:45.500 | - Thank you.

00:53:46.340 | (audience applauding)

00:53:48.700 | - And right outside we have lunch

00:53:52.780 | and then we'll be back in here

00:53:55.340 | in a little less than one hour.

00:53:57.660 | Enjoy your lunch.

00:53:58.600 | (computer beeping)

00:54:01.520 | [BLANK_AUDIO]

Bogleheads® 2022 Conference – Accumulators Session – Chris Mamula on Finding Financial Independence

Chapters