(audience applauding) All right, thank you all for coming. This is something new for the Bogleheads, this accumulator track, and I think we really want to grow this part of the conference. So tell all your friends how great the conference is and get them all to come. Because this is really important for us to grow this part of the Bogleheads.

You are all the future, I am the past. Anyway, today I am very happy to have Chris Mamula with us. Chris is the lead author of the Choose FI book, which is a great book. I did a podcast with Chris on the book, a lot of great information on the Choose FI book.

He's a financial writer for Can I Retire Yet? And personally, after poor experiences with the financial industry in his professional life, Chris educated himself on investing and tax planning and now draws on his life experience to write about wealth building, do-it-yourself investing, financial planning, early retirement, and lifestyle design.

And of course, my screen just went out. Ladies and gentlemen, let me introduce Chris Mamula. (audience applauding) Thanks, Rick. Thanks for all. Thank you for coming to listen. And I want to just start by thanking Rick and also Christine Benz for having me on their podcast to kind of talk about FIRE and to bring me here to share the message of FIRE with the Bogleheads, because I think it's important to be able to share this message, 'cause in general, in the personal finance community, as far as like prestige and respect, I think FIRE is somewhere around like the GameStop people and like this guy who's making TikTok videos on how to get rich in three easy steps.

So don't let the Hyatt hear this, but he tells you to steal your hotel soap, step two, it's gonna save you $45 a month, which you can then invest in the S&P 500, and you will be a millionaire. There is a lot of bad ideas and always new ideas in finance and in personal finance in particular, and many of them can be dismissed and some of them should even be laughed at.

But it is important to note that occasionally there is an idea that's based on really sound, solid principles, and those ideas do tend to stick around. And I was kind of thinking, what would be an idea that may resonate with Bogleheads that I could use as a parallel example to how I look at FIRE?

An idea that maybe was initially laughed off and ridiculed, and it stood the test of time. And if you take a look at the headline, if you're not familiar with the history of John Bogle and Vanguard and index funds, this kind of gives you the CliffsNotes version, but it says, "40 years ago, "the thought of buying a stock index fund was ridiculed.

"Why would anyone be satisfied with an investment "that promised nothing more than the same return "as the market?" Well, I think the reason that this stuck around, there's a number of reasons, but I think the biggest one is this whole Bogleheads philosophy and the things that John Bogle taught, it was based on sound principles.

It was based on just simple math. And something that I kind of learned after reading the, this is the first book I ever read about investing, was "The Little Book of Common Sense Investing." And something I learned after reading this is I started to find other people in this Bogleheads community.

And I found it was this organic community that grew up just 'cause the ideas were so sound and it was impacting people's lives. So it wasn't like he had to go hire a marketing team. This community grew around him. And I think there's a lot of parallels between this community and the FIRE community.

And that's what I wanna share today. So I really have two goals. The first is I wanna challenge some misconceptions of FIRE and really change that perception of what it means to pursue it, how it applies to people who embrace the Bogleheads investment philosophy. And I think it applies to a bigger group than many people think.

And then I wanna demonstrate just the common sense principles and the simple math that backup FIRE and why I think this is an idea that has the potential to still be around in another 40 or 50 years as well. So I'm gonna start with a couple of misconceptions 'cause I really think it's important to make people understand the why of FIRE.

Because if you don't start there, the how is really not very hard, but nobody's gonna ever try it. So I think we need to address some of these misconceptions. So the first one, the first myth that I came up with is it requires an extreme lifestyle. And there's a couple of versions of this.

One is sure you can achieve FIRE, but you have to have a massive income or better yet just be born into wealth and have your parents give it to you. The second is you have to deprive yourself and in practice extreme frugality. And you see this term thrown around everywhere.

And for whatever reason, this one really rubs me the wrong way 'cause I just don't feel that that represents it at all. And then the third one is you must have some kind of special investing prowess or maybe you just got lucky with investing. And so that's how you would get there.

But it's really not for the average everyday person. What's the reality? I can share my reality. My wife and I, we were both first generation college graduates in our family. For my family, I did at least have, my parents gave me a solid foundation. My mom was able to stretch a dollar and she gave me that sense of thrift.

For my wife's family, money was really a source of stress and anxiety growing up. And I think having talked to many people in the fire community and knowing a lot of them, I honestly think her experience is even more representative of mine. And I think honestly, if you came from wealth and that's what you knew growing up, it's actually harder.

And the key to fire is to live below your means, whatever that means for you, and to develop a high savings rate. And so if you're used to growing up in a certain lifestyle and you have to take a step back, that can actually make it harder. So I think that's a big misconception and it's available to many people who are natural savers.

The second, as far as income, my wife started working at about $35,000 a year and I started a year after her at 40,000. And at those salaries, we started living off of her salary and banking mine, just 'cause again, it gave us a feeling of security. Neither of us ever made $100,000 in a single year.

To be clear, we did grow our salaries over time and I think we would have hit that. But when my wife had our daughter, she was 35 years old and she decided she didn't wanna go back to full-time work, so she never has. And at 41, I left my career as a physical therapist.

So we never really made it to that point where we were entering our peak earning years. So you don't have to have a massive salary. And as far as being a genius investor, the reason I'm standing here is because I had a horrible experience with the financial industry, as Rick alluded to in my introduction.

And just after doing a deep dive, I got into FIRE blogs and these FIRE bloggers really helped me and through them, I found the Bogleheads and the Bogleheads helped me. And it was just a lot of people who weren't in the industry, who weren't necessarily experts, who were just giving freely of their time.

And so I started writing as a way that I thought maybe I could give back and pay that forward. So again, I think all of those myths are just that, they're myths. And so how did we get to this point where we achieve financial independence and we achieve FIRE?

I like the term being a valuist. And you might look at that term and say you never heard of that before. And that's 'cause I'm pretty sure we made it up. When I was writing the book, we crowdsourced it from the FIRE community. And I wrote this book in conjunction with two guys that do the Choose FI podcast.

And somebody sent this in as a voicemail. And it really resonated with me 'cause it really made it, it really felt like what we were doing, even though I'd never heard the term, it really felt exactly like my wife and I were doing. And so throughout our accumulation phase, we were actually, and in my opinion, and in contrast to the idea of suffering and sacrificing and extreme frugality, I felt that we were living better than most of our peers 'cause we were spending money really freely on the things that mattered.

But at the same time, the reason we were able to save so much is we were cutting pretty relentlessly on the things that didn't matter. So I've shared my story in a bunch of podcast interviews and print interviews, and some things kind of raised people's eyebrows that could be perceived as extreme frugality.

Even among the FIRE community, we are extremely anti-debt in our house. So like I said, we started living off my wife's salary whenever she was only making $35,000 a year. And she had about 25,000 from putting herself through school and a small car loan. And so we managed to do that in about 18 months.

We wanted to be debt-free before we were married. And since that time, the only debt that we've ever had in our lives is a small mortgage, and we pay that off in eight years, and we've never had debt again, and we still don't. Never had a car payment, never paid a penny of credit card interest in our whole life.

Part of the reason we didn't have car payments is 'cause we kind of drove crappy cars. We just don't care about that. And so that was what we did. Clothing and jewelry. I mean, I'm not a great dresser by any means. I don't even own like a watch or a wedding ring.

Presents. This one really raises people's eyebrows, but my wife and I, we just decided one year that, you know, shopping, and for like birthday and Christmas presents, it was more of a pain in the butt, and we didn't enjoy it. And we had everything we truly wanted. So we just made an agreement to not exchange gifts, and that works for us.

And technology, I don't care about that stuff. So I don't have the newest phone or any of those types of things, and I never have, and probably never will. So that slide might turn you off a little bit and say, well, maybe this does sound like extreme frugality. But there's other areas where we absolutely were not frugal.

We always chose to live where we wanted. And our first year out of school, we were living in the Pittsburgh, Pennsylvania area, and we kind of moved to the suburbs and bought the house and do the things like you're supposed to do. And so my wife was commuting into downtown Pittsburgh.

It was about a 40-minute commute every day. For me being a physical therapist, it made sense to get away from the city. There was better work opportunities. But it was about a 50-minute one-way commute every day. And within a year, I think we were living the American dream, where we had the degree and the nice house and everything that you were supposed to want.

And we just realized this is not our dream. So we kind of blew it up, and we sold our house after only 18 months, which is not a great financial move, but it was great for us. We focused on that next phase of our life of what did we want it to look like.

So we focused on places where we could enjoy our work. We focused on optimizing our commutes so we weren't spending the whole day sitting in the car and kind of building the lifestyle we wanted. And then when we reached this point of where we were kind of reaching financial independence, we thought, what do we want our life to look like?

And at this point, it wasn't built around work. It was built around the activities we wanted to do. So where was a place we can get outside and enjoy our lives every day, which is what we like to do? And where was a great place to raise our daughter?

So we up and moved across the country, and we now live in Ogden, Utah. Other things that we really spent freely on is experiences. Like we love outdoor adventure activities, sporting events, music. And we never skimped on any of that stuff and travel, and just to kind of give you a look at what our life looked like.

This is a much younger me. We were in our 20s, and we went to Australia. We climbed Kilimanjaro, and we did an African safari. We got into mountaineering. This was us in Ecuador, the highest we've ever been, over 21,000 feet. I want to kind of pause on this one, because to me, this is the antithesis of extreme frugality.

But growing up in Pittsburgh, it's a really religious community, and the religion is steel or football. And so like every Sunday of my life, that's what we did. We watched the Steelers. And like I was born as they were entering this dynasty phase of one of the greatest teams ever.

Yeah, I don't remember it, because I was too young. So what I remember is them stinking or being average for like a good decade. And so finally, when I was in college, they made the Super Bowl. And I was a sophomore at the University of Pittsburgh, and I was working at a pizza shop because I needed the money, and that was about 60% of my calories.

And I also traded the extras for beer. So I needed that job. And when you work at a pizza shop in the host city of the Super Bowl on Super Bowl Sunday, everybody wants off, so they said nobody could have off. So after watching this all my life, I couldn't watch them.

And I always said if they made the Super Bowl, it was something I was going to do. And fast forward 10 years, they did make the Super Bowl, and they played in Detroit. So my wife and I drove up and scalped tickets in the bathroom of a bar in downtown Detroit for like $5,000 a couple hours before the game.

And we went to the Super Bowl. It was like a once in a lifetime experience. And if you notice the picture, that's not Detroit. So three years later, we ended up going again in Tampa and we saw one of the greatest games in NFL history. So for some people that might sound frivolous, but to me it had meaning.

And again, that's what being a valuist means. Fast forwarding again, we have our daughter. We kind of brought her into our active lifestyle. And it's not about dragging her to stuff that we like, but as a little kid, she's been on Disney cruises. Somehow during the pandemic, she's become the world's biggest Dolly Parton fan.

So we've managed to make it to Dollywood with her. But so what I would kind of just ask you to do is kind of reframe that idea of suffering and sacrifice and extreme frugality. 'Cause I find that it just does not ring true. And the question I would say is, are you a valuist?

And are you lining up your spending with your money? Because just from a practical standpoint, most people, I mean, fire, yes, it's quick compared to a standard 40 to 50 year career, but you're still talking about 10 to 20 years of having to go to work every day. And if you're miserable, you're not gonna stick with that.

So you have to find a way to make it enjoyable for you. And it can't be sacrifice. And so for me, that's kind of what fire is all about. And that's how you're going to develop a savings rate and be able to stick with it. The second fire myth is that fire people don't really retire.

It's kind of a Ponzi scheme. And we're all just selling the dream. So we can't really retire. We aren't really financially independent. So we just sell the idea of the next person who then buys our books and listens to our podcasts and whatever. And then it keeps going down the line.

I included a picture of Bertie Madoff. That's who I actually think of with a Ponzi scheme, but he's not in the fire community. My fire reality, I did quit my job on December 1st of 2017 and walked out the door and I'm no longer a physical therapist. I will say since then, I've published a book.

I've partnered on and taken over one of my favorite blogs. This past year, I completed the CFP curriculum and I'm currently preparing to take the CFP exam in about a month. And as you can see, I'm here, I'm publicly speaking and I've been on many podcasts to promote my ideas.

So there is some truth, AKA I do still work even though I say I retired. Also my fire reality though, my income is about 80% less than what it used to be. I also left behind paid vacation, sick leave and pretty nice healthcare benefits. These days, instead of my schedule being controlled by an employer, I have complete control over my time.

I rarely have ever worked more than three or four hours a day. Like I said, we moved to the mountains and I'm generally outside four or five days a week. And I'm extremely involved in my daughter's life, volunteering at her school. I coach her soccer team. We typically travel five or six weeks a year as a family.

But I think even maybe more important than the big things, the things you see in the pictures, is just every day we eat breakfast together. We spend like that first hour of the day, we talk to my parents on FaceTime 'cause they're kind of shut in with everything going on in the world.

And my mom has some health issues. I would get everything I need to get done during the day and I pick her up and again, I'm present. And that's something that I think a lot of people, they look back and they regret that they didn't have that time with their kids.

And that's something I'd never wanted to regret. So again, I'm kind of lining up with my values. So I think I kind of retired. So the second question though, it really doesn't matter. Like when you read these fire stories and that's a common criticism and they didn't really retire.

It doesn't really matter if you think I retired or anybody else did. I think the second question that's really important is how do you want to define your retirement? And that was kind of a perfect segue to end the last segment to bring us into here because the whole idea of retirement, it's kind of a quaint and dated idea and retirement is evolving.

So if you look at what happens to people when they do retire, many people do walk away. They view it as never working again. And many people struggle with purpose and meaning and they end up with depression and anxiety. The rates increase significantly. Many people, they save money their whole life and they turn around and because they're such, they become accustomed to being savers, it's hard for them to spend.

And if you look at the data, many people spend way less than they could and they don't actually enjoy their retirement. Many people save for this time in the future where it's going to be so great and they don't have their health to do the things they actually desire.

And they miss their kids growing up and their kids are gone and now they have all this free time, but what are you going to do with it? And so just remember, if you want a traditional retirement, by all means do it. But just because that's how most people picture retirement, it doesn't mean that's what it has to mean for you.

And so I really kind of write and like to talk a lot about the whole idea of just redefining what retirement means. And our third fire myth, this one you kind of hear a lot like when I talk to more sophisticated people in the financial industry and it says fire relies on the 4% rule, which is either naive and/or uninformed.

And this is actually, I had a great conversation about this with Christine when I was on the Morningstar podcast. So if you're not aware of what the 4% rule is, maybe we should start there. And that's just a rule that tells you how much you can spend in retirement.

And so basically the idea is, if you have a portfolio on day one of your retirement, you can take 4% of it and then you're going to spend that same amount every year, whether the market's up 50% or down 50%, adjusting only for inflation so your lifestyle can stay the same forever and you're not going to run out of money.

This is a common rule. We talk a lot about this in the fire community. And we also talk about the inverse of that then is that if you can take 4%, then you know that you need 25 times your annual spending to know if you're financially independent. What's the reality though?

I don't follow the 4% rule. I know almost everybody in the fire community, I don't know anybody that follows the 4% rule or traditional retirees for that matter. And I don't even really know anybody that would argue that it's a rule. But what we do is we use it, we call it the 4% rule of thumb or the 4% guideline.

And there's a couple of reasons I think this is a great thing to learn and to understand. Number one is that it makes you kind of focus on what you're spending. And many people don't pay any attention. Most people don't budget or track their spending. And so it's a requisite to know what 25 times your annual spending is.

You have to know what your annual spending is. So it gets you to start focusing on that and know where your money is going. And also it just gives you a place where you can create a goal. And yesterday, if you were at the Bogleheads University, that's something that Jim Dahl talked about is having these smart goals.

And so if you have a defined goal, what we found is people start to take action. So people that weren't saving at all, they learn this principle and it really turns things around. And that's fine. This goal is gonna change over time. You're gonna discover that you may wanna spend more or less than you initially thought.

Maybe healthcare is more expensive. And you're gonna learn these things and adapt, but at least you have a place that you're starting from and you have a goal in sight. But I think there might even be a bigger and more important point about the whole idea of the 4% rule.

And that's it. In the FIRE community, I think we're asking kind of hard questions and we're having big conversations that are kind of rare in our society where everything is just more, more, more, bigger, bigger, bigger. And it's a question I really hope resonates with a room full of Bogleheads, especially if you've really kind of dove into all of John Bogle's work, not just what he's written about investing.

And that's a question is enough. And I think it's a question we don't ask enough is how much is enough for you? And then once you have enough, what comes next? So I wanted to really kind of start with the why, but now I wanna kind of get into a little bit of the how, because I do think FIRE is based on some pretty solid principles.

Again, just based in common sense and some very simple math. I will say, and I kind of really appreciated the conversation again in the Bogleheads University yesterday, I think Rick brought this up and he might not use the exact terminology, but I always talk about tactics and principles. And so again, I think a lot of people, they learn a FIRE 'cause they read like one story of one blogger or one person that's featured in some article.

And they say, well, I could never do that. And they miss the bigger picture that all the FIRE people, we kind of are all following the same basic common principles but the tactics are gonna look wildly different within that. And so I wanna focus on the principles and that's what we kind of focused on when we wrote the book.

And that's what I wanna focus on in the talk. One thing I'll say is the Boglehead investment philosophy that we're gonna learn about here this weekend or this week, it's really endorsed and embraced by almost everybody in the FIRE community. We talk about using that investment philosophy, you can achieve FIRE reliably in 10 to 20 years if you follow these principles.

If you look at a typical career, it's gonna take you about 40 to 50 years till you reach financial independence and you're able to retire. And if we're being honest, most people in our society do not ever reach financial independence. They're highly reliant on social security by the time they reach retirement age.

So I think it's worth looking at what does the FIRE community do so differently than most people and what can we learn from it even if we're not gonna go all out and be trying to say 50% and then retiring early. Well, there's only three levers that any of us can pull in the world of personal finance if we wanna achieve financial independence quickly.

And we can spend less, we can earn more and we can invest better. And I think number three is kind of the sexy one. That's the one we like to talk about is how do we invest better? But if you want to achieve financial independence, again, it's about creating this large spread between what you earn and what you spend.

And so we really need to focus on numbers one and two, spending less and earning more. The reason for that, again, this isn't my opinion. This is just based on, again, simple math and the rules of arithmetic. So there's only really three factors that impact your compounding. So if we go back to our friend, our soap stealing TikToker friend at the beginning of the presentation, he got a lot wrong in his little idea.

But one thing he did really well is he was obviously playing with a compounding or a time value of money calculator. And it's something that I think, I wish a lot more adults knew how to do, let alone kids his age, and we'd be a lot better off as a society.

But you know, there's only three factors that impact compounding. And again, this is something Christine talked about yesterday, but the first is the rate of return. If you are a bogal head, if you are a passive investor, you know that you're gonna get the return that the market gives you.

We can maybe, at the edges, kind of tweak that a little bit with our asset allocation or whatever, but essentially you're gonna get what the market gives you. So there's not a whole lot you can do there. The time to compound is a big factor. So a traditional retirement, you have 40 to 50 years for money to work for you.

By definition, if you're pursuing FIRE, you're cutting that down to one to two decades. You're cutting that in half or less. And so we actually have time working against us. So that only leaves us one lever to pull, and that's to focus on increasing the amount that we save and we add to our investments.

So after the 4% rule, another favorite topic in the FIRE community, we talk a lot about savings rate. And savings rate's really simple. It's just how much you save divided by how much you earn. And so there's really only two things you can do if you want to improve your savings rate.

You can either spend less or you can earn more, and either is valid and either is okay. But in the FIRE community, we talk about frugality a lot, and I think that's maybe where some of the idea of this extreme frugality comes from. But I do think it's worth starting with frugality for a couple reasons.

One, it just tends to be a little bit faster. You can tend to cut your spending quicker than increasing your earnings, although it's fine and you should be working on both. But I think there's a second reason that it's far less obvious why you should focus on your spending.

But if you can learn to be happy living on less, then that just equates to needing less to be able to be financially independent and to retire if that's what you choose. And so going back to that 4% rule and the inverse, the rule of 25, if you want to live off $100,000 a year, that's perfectly fine, but that's gonna take, as a starting point, we'll say $2.5 million.

If you can learn to be happy living on half of that, $50,000 a year, then you need half of that to retire, a million and a quarter. So that's a much lower bar to save towards if you want to hit financial independence quickly. A lot of these ideas, when we talk about savings rate, it comes from a really popular blog post from a really popular blog, Mr.

Money Mustache. And the article's called the Shockingly Simple Math Behind Early Retirement. And in that, he uses some assumptions to kind of tie your savings rate to how long it's gonna take you to be financially independent. And the assumptions he uses is that you're gonna get a 5% real return during your accumulation, and you're gonna utilize the 4% rule in early retirement.

And we can argue around the edges about that, but I think it's a really good place to start. He came up with this slide that shows, like in 5% increments, your savings rate and how long it's gonna take you. And that's obviously a really busy slide, so I'm gonna zoom in.

So standard financial advice is you save 10 to 20% of your income. And standard career is about 40 to 50 years, like we talked about. And if you look at that, that lines up really nicely with that. So if you want a standard career, follow standard advice, and that should get you there.

The problem, I think, for a lot of people, people say, well, saving 10% is hard. Well, I think, how am I gonna save 50%? And I think a lot of this is a psychological game. So I think a lot of the reason saving 10% is hard is because you're gonna see results really slowly, and you're not gonna notice any progress for a long time, 'cause it takes a while to get compounding working for you.

And so a lot of people get frustrated, and they end up not saving anything at all. Whereas, again, if you have this goal, and you have this plan to work towards your goal, it's actually not all that hard for many people. And so in the FHIR community, we talk about starting thinking about a 50% savings rate.

And again, that can seem drastic if you don't have these other things in line first. But if you have a 50% savings rate, or in that ballpark there, now you see where we're getting down to that one to two decades that we talk about, that you can reliably achieve FHIR following these principles.

I think, before we move on from that, I think it's important to zoom in. And again, we talk about, with John Bogle, he always talked about the relentless rules of humble arithmetic. And I kind of am even more simple, and I say, just say the math is the math.

And so a lot of people, they'll maybe hear my story, and they'll say, you know, that's kind of cool. I wish I would have thought of that when I was 25 or 30, but I'm already 45 or 50. But guess what? The math is exactly the same if you're saving aggressively for one decade early in your career, or one decade late in your career, or 15 years early, or 15 years late.

And so this is a message that could help a lot of people who are late savers and behind the game. And why is that important? Well, we see that there's a lot of people behind the game. So this is a very recent study from Vanguard's How America Saves 2022.

I'd say these balances are probably pretty bloated, being from the end of 2021, compared to what we have today. But if we look at people, those last two lines is what I want you to zoom in on, the 55 to 64 and the 65 plus. This is a kind of a skewed sample, 'cause it's people that have retirement accounts with Vanguard, so they're probably better than the average person.

Many people don't have any retirement account, and some that do have ridiculous fees, and they're not maybe getting the same advice. But even in this crew, at that retirement age, we're looking at about a quarter of a million dollars. So if we go back to that 4% rule, these people can take about $10,000 from their portfolio in retirement, less than $1,000 a month.

So they really need help catching up to, if they wanna do anything more than just supplement social security and live on a pretty bare bones existence. And the average tends to be skewed up, 'cause you're gonna have people with two or $3 million in their account. So if we look at the median, that's even more representative, I think, of the average person.

And again, this is already a kind of a privileged sample, like above average sample compared to the general society. And we're looking at people that have less than $100,000 if you look at the median. So again, if you're looking at 100,000, 4%, you're talking people can take $4,000 for the entire year to supplement their social security, and that's what you have to live on.

So again, people need a lot of help. Now, while the math is the same, what's really important to understand is if you're a late saver, or if you know somebody that's a late saver, and you can get them to kind of buy into some of these principles and take them to heart, there's actually a lot of advantages that you have if you're saving late versus the typical fire person.

I would say, I'm gonna acknowledge off the top, the one big disadvantage, if you haven't been saving at all or haven't been saving much for 20 or 30 years, it may be challenging to change that habit, but if you can accept these principles and you can start down this path, there's a lot of advantages.

If you're early in your career, if you just think about where you're at in the life cycle, you tend to be early in your career where you're making less money. Maybe you're forming your family, so you're still paying for diapers and daycare and saving for college. When you're later in your life, you tend to be entering your peak earning years, like we talked about, my wife and I, we left before we ever got there.

You may have a mature family that you have all these expenses in the rear view mirror, or the kids are starting to go to college and moving out, and you can redirect that money to retirement savings. And if you have kids moving out, it might be a time to downsize, and one of the biggest ways you can save when you're spending is to cut your housing costs, and this could be a perfect time to do it.

There's also greater tax advantages. One of the best, simplest things you can do, Mike Piper talked about this yesterday, is just utilize your retirement accounts to the max and utilize your HSA, and get as much tax advantage from your investments as you can. Well, as you get older, you have catch-up contributions, so those contributions get even bigger, and it gives you a little more space to work with there.

And then you just have less, it's just less hard to plan for a traditional retirement. Still not an easy task, still 30 years, a lot of uncertainty, but compared to 60 years, it's a lot easier to plan for that. You also have a floor under you with your Social Security income, so you may not need to save 25 times, because you have that Social Security supplying some of your spending.

And you also have Medicare, which it's not free, and it's not perfect by any means, but compared to what we have to deal with to bridge that gap from working to traditional retirement, for somebody like myself, I have 25 years, and the laws change every couple of years, and it's really hard to plan when you don't know what the rules are.

So, I wanted to kind of leave some time for questions, so I want to kind of go through, fairly quickly, we talked about spending less, earning more, and investing better, and so I want to kind of close on that. And so, what are the things you can do to develop a high savings rate?

So, probably our third big topic that we love to talk about in the FHIR community is the big three. So, we always start by focusing on housing, transportation, and food. And this isn't because FHIR bloggers love to tell you what to do. Again, it comes down to simple math, okay?

So, for the average American household, 50% of your expenses is going to come from these big three, housing, cars, and food. So, I kind of like to picture this as like a big pie chart, and it fits a big circle, and you just cut it down the middle. And on one side, you have housing, cars, and food, and on one side, you have everything else.

And some people will say, "Well, I don't want to cut on my housing, cars, and food." And if you want to have a high savings rate, that means you essentially cut everything else, and I don't think that's a good idea. To me, that's the definition of extreme frugality. But if you can optimize on those big three and develop a reasonable savings rate, that sets you on your way, and that's where you want to focus your energy to start.

And again, for some people, this is going to feel like, this is going to feel like frugality and sacrifice, because I think we've been sold that the American dream is to have the biggest house you can have and the most expensive car you can drive, and a lot of people have bought into that dream.

And so it does require a mindset shift. If that slide got you down, I think everything gets a lot easier once you have a pretty decent savings rate, because now you're just throwing gasoline on the fire. I have never met anybody who said, "My life would be so much better "if I could just pay a few more dollars in investment fees, "if I could pay a little bit more in taxes, "if I could pay some extra insurance premiums, "or I love to travel, but if I could just spend more on it." But all those things, once you master your finances, you can really cut dramatically.

A lot of people, and again, in the Bogleheads, this is something we talk about a lot, is investment fees, but it really doesn't matter if you don't have much invested. But as your investments grow, if you have a million dollars and you cut that from a 1% fee to a 0.05% fee, you're talking about saving almost $10,000 a year.

I mean, that's massive. Taxes. Mike Piper talked about this a little bit yesterday. Some of the simplest things you can do are also the most effective. Just max out your retirement accounts and defer those taxes in your high-earning years. And by definition, you have a high savings rate and you have a lower cost of living.

And if you retire early or even semi-retire or whatever, and you can spread that out over 20 or 30 years, you can pay much lower taxes. Early retirement lifestyle is just, and this whole financial independence lifestyle is just generally very tax-friendly. If you kind of like, again, I'm not really truly fully retired.

We still have some income, but our income's low enough where now our capital gains are tax-free. So we don't have any of that tax drag even on our taxable accounts. Just having a lower consumption lifestyle, you'd cut out all those sales taxes. If you don't live in as big and expensive a house, you tend to have less property taxes.

So if you don't like paying taxes, this is a great way to cut them, all these things. Again, insurance. If you don't have any savings, every little thing that happens can kind of be an emergency. And so you need a lot of insurance in your life. But as you have a couple of years of savings, paying for a short-term disability policy maybe doesn't make sense anymore.

If you're getting to 20 and 30 years of savings, having a long-term disability and having a life insurance doesn't make much sense anymore. If you have enough money to cover expenses, you can start raising your deductibles and lowering your premiums on everything from auto and house and healthcare insurance.

And so again, insurance gets a lot cheaper. And then travel expenses. I kind of put this at the end. This is kind of one that excites people. And again, this is something in the FHIR community we like to talk about, but using travel credit cards and their credit card companies know that they charge an outrageous fee and most people are not gonna benefit by that.

And so they're willing to give some pretty outrageous bonuses to sign up for their cards because most people are gonna end up paying 15 or 20%. But if you can master your finances, you get in a position where, even if you have to put things on a card, you have the money to easily pay it off and you're not gonna be paying these fees, you can collect a lot of rewards.

And I typically, our family, just signing up for four or five cards a year, we collect about four to $5,000 of free travel in the course of every year. The other side of the equation, again, we talk a lot about spending less, but it is important to earn more.

And again, I think it all comes down to that. Still, it's a value proposition. So yes, a lot of people say everybody should go to college at any cost and there's no other investment in the world that we say that about. We wouldn't say, is a house a good investment?

We would say, at what price? Is a stock a good investment? We were talking today about valuations. Everything is what price. But with college, we just kind of throw our brain out and just take these big loans on and then this ends up in the position that we're stuck in as a country right now.

So in the FIRE community, we've talked a lot about different ways to get your education for less. And I can tell you in my story, again, my wife and I, between us, we have six college degrees and plus a bunch of different certifications. We're like education junkies. And again, we've never had any debt except for my wife's initial bachelor's.

So it is possible and it is doable. Then you wanna kind of just grow your earning power through your career and build a network and all these things just to kind of allow you to make more. And then the final step. So once you grow your savings rate, you do have to do something to grow your investments and how do you invest better?

I would say on this whole panel of speakers at this conference this weekend, I am the least qualified person. The other people here speaking are the people whose books I read, their blogs I read, their podcasts I listen to. So what I would say is just enjoy the rest of this conference, suck up as much as you can, and then take it out and pay it forward to your community and help people out.

And that's really what this is all about. And I wish you all the best on your journey to financial independence. And if anybody has questions, I'm happy to stay and talk as long as you need. (audience applauding) - And I appreciate the slide you put on at the end about earning more.

I see a lot of people in the FIRE community, FIRE bloggers, authors, et cetera, that are just crazy about saving, saving, saving, saving, saving. And very rarely do they ever talk about earning more. And in my experience, people dramatically overestimate the difficulty of doubling their income. Why doesn't the FIRE community talk about earning more, more than they do?

- You know, that's a good question. I can't speak for other people, but it is something that, I mean, in the book, we devoted a section to each of those three levers of spending less, earning more. So in my own personal story, I do focus on that. And again, in my own personal story, like it would be hypocritical, like I know a lot of people get anti-college or whatever.

I absolutely benefited from having three degrees, and my wife has three degrees. But again, you have to look at the cost benefit. And so even when you are focusing on earning more, it's all kind of the same thing. You have to look at the value proposition, and you still have to look at what you're spending.

But I absolutely agree with you, and I wouldn't argue with you. I think maybe the only thing I would argue is, I think a lot of people think that if you earn more, it'll get easier to save. And in theory, I agree with that. But if you look at the data, what most people do is they earn more, and they just inflate their income.

And their spending grows right with their earnings. So most people don't save more. And you can look at like professional athletes, you know very well with doctors, you know the statistics. So that's just the reality. So there is a practical reason too, I think. But I think it's worth working on both, but that's why we focus on spending first, at least I do.

- Hello, hello, yes. My question is regard, how do you know emotionally transition from accumulation to, you know, spending your portfolio? My wife and I, we were thinking, we reach our FI number this year. And, but we don't know, you know, we were now scouting, you know, where to retire, where to go, but inside of us, we are a little bit afraid if, you know, if this doesn't work, you know, and what we are going to do, you know, we still have about 25, 30 years until we get hit our social security, you know, benefits.

So how was, in your experience, that transition from working and just to, you know, living the FI, the fire life? - Yeah, that's a great question. In my personal situation, it really wasn't a question of like, we didn't look at, did we hit some target number and were we ready to retire?

My wife and I, we kind of always wanted to move West and just do something different. I'm from Pennsylvania, but like I said, we live in Utah now. And so we had a daughter and she was turning five and she was starting kindergarten. And for us, it was really a lifestyle decision of once she starts school and making her friends and getting involved in activities, it's going to be a lot harder to shift gears and to change to that.

So that was kind of our initial decision. And we always, I mean, originally, I think just like most people, I had that same vision of retire is don't work at all. You live off your investments. But then as you kind of get closer and you start thinking about it, what are you going to do for purpose?

What are you going to do to just fill your time? Like my daughter's in school. And so what am I going to do all day? And also it's just a psychological component. Like you don't save 50% of your income because you are suffering and sacrificing for 15 years. You save because it feels good.

And so imagine like you're driving down the road at 80 miles an hour, and then you're just going to slam it in reverse. That's basically what you're doing, going from like a 50% savings rate to spending for your portfolio. So our plan was always to be very gradual and cutting back.

So my wife has a remote job. She works for a company out of Washington, D.C., part-time. Like I said, after having our daughter. Shortly after that, she started with that company. And she was the seventh employee. It was a startup. So they kind of just give her a really sweet deal.

And so she's able to work part-time. And I plan to keep my physical therapy license. I thought I may work part-time or do a travel assignment once or twice a year. And our investments did really well. I did better than I thought with our book and blog. And so I just kind of let my license expire.

And I am, I guess, completely retired as a physical therapist. Now I'm not going back. But yeah, that was kind of always our plan, is to have a gradual transition. And so it'll be five years for us in December. And my wife is, again, looking to cut back working.

This year, kind of cut back our hours again. But we're kind of still like, most months, we are just basically right about even. So every now and then, if we have expenses, we'll take from our savings. Every now and then, if I have a good month, we'll put a little bit into savings.

But we're not drawing down much. We're not saving anymore. And it feels very comfortable. It's a nice transition point. - You didn't cover one of the observations I know about a fire committee I see as a downside. But at least the more vocal fire proponents really seem to hate their job, to the point where they will blog about it.

And they just want to get out in 10 or 20 years. I'm not sure, it's like, do you think that's representative? Or maybe just the loudest, voiceless in that community is basically doing it that way. And I'm wondering if you have any thoughts about that. - I'll be honest with you.

I don't read a lot of fire blogs anymore, 'cause I'm kind of like, I'm at that transition stage. So I don't know what's out there now. I do think sometimes the loudest, most extreme voices get the most attention. That's just natural. I mean, my personal opinion, I think if you are two to three years away from fire, and you, I think it's a rational decision.

If you have a high paying job to maybe put your nose down and just get through it and hit your number and then quit. But if you're starting your career and you know that's not what you want to do to suffer and sacrifice through it. I mean, I think there's a lot better ways to go through life.

I mean, I wouldn't recommend suffering for the next 10 years to reach this number that there's no guarantee you're ever going to get there. So you got to live your life and enjoy it along the way. - So one question of interest in this is, it seems like there's accumulation, accumulation of, and it has to be taxable investments at this point, if you're going to be living off of it.

Is there a trade-off here where you're just bypassing 401k matches, long-term taxable income, or tax-free earning on those things to achieve this other side? Are you passing up those company matches because you're focused on being away? And is that a trade-off that's worth it? I don't know if that makes sense or not.

- Yeah, I mean, I would say in general, I hate to give one-size-fits-all advice, but passing up a company match is one, unless maybe, like if you have a ton of credit card debt, something like maybe, but you're getting a tax advantage and you're getting just a free 100% return.

So I personally would never pass that up. But beyond that, I mean, when we were in our accumulation years, I mean, if you're saving enough, again, unless you're really doing the extreme frugality version of this, I mean, for us, we maxed out both of our 401ks, then we maxed out both of our Roths.

And in the one year we had the option to, we maxed out our HSA, and then we still saved a substantial amount in taxable investments. So we ended up, we have a pretty nice mix and a lot of diversification amongst asset, or amongst taxable types of accounts. But I think if you aren't in that position and you have to make a decision, I don't know how I would answer that question.

For many people, I think you have to look at your own situation and where you're gonna be. (man speaking indistinctly) (man speaking indistinctly) Yeah, there is ways to get money out of your 401k. There's, you have to jump through some hoops, but like there's, you can do, it's called a 72T, and you could take like, kind of almost equivalent to RMDs, but you're doing it earlier in your life.

So once you do it, you have to do it for a period of at least five years. And there's ways to do it. Also, you could just pay the penalty, and sometimes that still might be better than paying, depending what your tax rate is. If you're in a much lower tax rate in retirement and you're paying the 10% penalty, that still might work out in your advantage.

So again, it's really hard to give specific advice to a general audience. You have to kind of look at your own situation. Yeah. - Hello, just a general question. One of the big threes that you mentioned was housing. Do you have any advice for people living in high cost of living cities?

I'm from New York City, work in New York, make a good living in New York, but I find that the housing costs are extreme right now. Any general solutions? I mean, besides living with a roommate, because I'm doing that now, but any other advice you could give? - No, I mean, I think, again, we kind of talk about principles, right?

The principle is you have to do less, but then there's the tactics and how are you actually going to do that? I think one thing in a high cost of living area, like I guess my question would be, why are you living? Like, is that where your family is?

Is that where you want to stay? 'Cause like, I think some people go there because there's higher paying job opportunities, but then you can always move to a lower cost if that's where you want to live. Now, if you want to stay in the higher cost of living area, I think like a roommate is a great idea.

I mean, you're kind of limited by your creativity once you understand the principle, but yeah, I mean, if it's a super, like if you're in the Bay Area or in Manhattan, yeah, I mean, it's expensive to live there and it's going to take up more of your, so it's a decision is, is that worth it?

Is it worth it to go somewhere else? And that's a personal decision that you have to make. - Now, I grew up in New York, lived there and I'm working there. It's a little, because I'm in the insurance business, but I'm an attorney, so I'm practicing there. So, I mean, I guess looking to practice elsewhere, I'd have to take the bar unless it's a UBE state, but that's pretty much.

- Yeah, I think again, like I think a lot of it is just what do you really want? Like, again, like my wife, she works for a company based out of Washington DC, but she worked for them when we were in Pennsylvania and she works for them when we're in Utah.

And so some, like, especially now since the pandemic, a lot of jobs, if that's an option, but again, if your family's there, is that a sacrifice you're willing to make? Again, we did move away from our family, but it was because of other reasons. And those are always hard decisions and I can't give you a good, easy answer on them.

- Hello, my name's Chris, I'm from the DC area. - Yes. - I just wanna start off by thanking you for revealing some of the particulars. For example, somebody who's still working their way up the income curve, you know, I didn't really think it, you know, it could be possible to achieve FIRE, you know, without, you know, six figure and above income.

So that was really encouraging, so thank you for that. I'm curious, 'cause one of the things that I don't hear too often in the FIRE community is the discussion of how you think about paying for a child's education. I know a lot of Bogleheads will think that you should always put your retirement first because, you know, your child can always borrow for college, but I'm just curious if those are things you think about and what kind of ideas you have there.

- Yeah, absolutely. So that is something when I was, when we were, our last five years of saving for financial independence, we were cutting those investment fees and tax fees because we were, I was also learning the investment side while I was going down the FIRE hole. And so I had a lot more money that we were already saving that was freed up.

And so, and also I took a little, a side job. It was just because we couldn't get out. Like we, I like rock climbing and I couldn't get out and do stuff because it was a drive from where we used to live. So I took a job with a local university.

So all I did was that little side hustle money. I threw all that into account for her. And in six years of teaching, right before we left for Utah, I kind of maxed out what I wanted to save for her for her school. And so we stopped saving when we stopped working.

So yeah, we front loaded it. And just like we front loaded our retirement savings. - So I'm from Nashville. Shout out to Dolly. We like, your daughter liking Dolly. My question is specifically for healthcare because I'm a nurse and I work in a trauma center and we see terrible things happen all day for people who were retired and now their whole life is gonna change.

What does the fire community say about getting ready for whatever particular catastrophe might come your way? You hope it doesn't, but what would they do? What does the fire community say about that? - Yeah, I mean, this is one area where I do differ with some people from the fire community who are way more risk tolerant or maybe naive than if I want to be not as diplomatic about it.

But to me, health insurance is absolutely a must for everybody. I mean, it's just such a huge risk. And so just like any entrepreneur, you have to figure out how you're going to get it. I did do like a deep dive. I know some people like the health share ministries.

For me, I just, for personal things with like kind of the activities we do, like adventure activities, they wouldn't cover some of those things. And my wife has a preexisting condition it wouldn't cover. So it wouldn't work for us, but that is an option that's cheaper. I think for most people, they try to optimize.

And this is what we're going to do when my wife cuts back is try to optimize on our subsidies and just go through the ACA. But again, it's a big challenge because again, they passed the law, I guess, what are we in 2022? Midway through 2021. So it didn't do any good to plan 'cause you're already halfway through the year improving the subsidies.

And it only went through this year and now they passed it again, but that takes us three more years. But again, for myself, I'm 46. So that still leaves me 16, trying to do math on the flyer, 16 years till Medicare. Yes, I don't know. We're going to, it's kind of, again, I think maybe a reason to over-save a little bit, a reason to, if you can be open to having some income in a way that's enjoyable, ways to pay it.

Food. Yeah, it depends. I mean, if you have a low enough income, you can get your insurance subsidized to a high level and you can pay very low premiums. And also, but then you also have the other side of the equation. That's not the only uncertainty. You also don't know if you're going to be healthy.

So even if you have insurance, you can have some substantial out-of-pocket costs in a given year. So you have to look at what your potential max out-of-pocket is. And you just, it's a planning exercise. You have to figure all that out and look at what your downside is. And again, the hard part is on the premium side, you just don't know what things are going to be in three or five years.

I mean, things could get a lot better or they could go back to having no system. Who knows? It's such a political football. - Okay, thank you. Yeah, my name's Mike. I just, first of all, thank you to you, Chris and Rick and Dr. Dolly and everybody that's here.

I feel like I've kind of found my tribe here, right? So I guess my question is more of a general one of how do you approach your lifestyle with folks that you interact with day-to-day as far as kids, friends, parents, and approaching the glide path to retirement and how did you approach that professionally with your peers?

And then maybe more generally, how do you pay it forward with the folks that you come into contact with? - I'm trying to think of these questions one at a time. So I'll start with the last 'cause I remember that. As far as paying it forward, I mean, just being here, being a part of this conference, I really respect what the BOGO heads do and I was beyond honored and excited when they asked me to come speak and I was happy to do that.

Writing my blog, again, I do monetize it now, but I wrote for five years and didn't make a penny on it. It's not like a big money maker. It's more to offset our costs. So just trying to put good information out there. And like I said, I just, out of curiosity, I went and decided to go down the CFP route to educate myself just to make sure that, you know, what don't I know and to better be able to educate and help other people.

So that's that question and then I think you asked about like just in our life, interacting with people. I'm open, like I don't like, if people ask what I do, I kind of say I'm like semi-retired. I say, am I write a blog? Or most people don't really care to be honest.

(audience laughing) As far as my child, I guess I'm a little bit like, I'm a little bit worried like, are we going to spoil her? Is she gonna not have the work ethic we have? I mean, I think every parent has that though. I mean, I don't know how you know the right balance and you just do the best you can.

And then as far as like her friends and stuff, I mean, I think again, like with my wife and I, like I think more is caught than taught. So like when I look at the stuff we did well and I look at the stuff we did poorly, most of that came from our parents, but not 'cause they told us to do anything or not to do anything.

Mostly just we watched and saw what they were doing and I think that's how kids mostly learn. So we try to set a good example with how we are stewards of our money and how we spend and we do have occasional conversations, but she's 10 and she doesn't really wanna get too involved in getting too deep in the weeds there.

- Okay, so one of the biggest expenses was housing on your list. - Yes, yes. - And the way you solved that problem was you liked to rock climb and you wanted a better, you didn't want one of the long commutes, you wanted a quality of life. So you moved from Pennsylvania to Utah.

Did your parents follow you there? How did the grandparents and your kid's situation resolve itself? - That is a great question and a tough question 'cause that's, my parents, that's their only granddaughter. And so it was a tough situation. Again, this really isn't a financial, like we didn't, we moved to, where we moved is substantially more expensive than where we came from.

It was a low cost of living. So it wasn't a, we weren't moving to save money. We were moving for lifestyle and like the area we were at in Pennsylvania, I mean, if my family wasn't there, I would never live there. I was there because of my family. And also just as a place to raise a kid, I mean, it's a depressed area.

There's just not a ton of opportunities. And also Pennsylvania, like the education costs are extremely high. So there was a lot of reasons that kind of factored into her quality of life, but that was definitely a tough thing. And we built that into our lifestyle, both in our budget to travel.

We typically go back, we were back there this summer, we're gonna go back for Thanksgiving. My parents, we have a house with like a mother-in-law suite. So my mom's been pretty sick and unable to travel ever since COVID. But prior to that, they would come out and spend three, four weeks at a time with us to be around my daughter, their granddaughter.

So, but yeah, I mean, those are always tough things and it's really not a financial question. And so I think you have to navigate that on your own. - I can answer that. So I've got three kids and eight grandkids and go where you want to go. Parents want you to be successful.

Go where you need to go. If the parents follow, they chase their kids, then that's what they do. If they don't, they don't. But don't let that be a factor in what you do. Thank you, Chris, it's been wonderful. - Thank you. (audience applauding) - And right outside we have lunch and then we'll be back in here in a little less than one hour.

Enjoy your lunch. (computer beeping)