 Welcome to Bogle Heads On Investing podcast number 14. Today we have a special guest, Chris Mamula, author of the new book Choose Fi, Your Blueprint to Financial Independence. My name is Rick Ferry and I'm the host of Bogle Heads On Investing. This podcast, as with all podcasts, are brought to you by the John C. Bogle Center for Financial Literacy, a 501C3 corporation. Today I'm pleased to have Chris Mamula, one of the authors of a new book called Choose Fi, Your Blueprint to Financial Independence. The other co-authors of the book were Brad Barrett and Jonathan Mendonza. These young men have written a truly fantastic book for not only young people, all of us should learn from them. I am very pleased to have with us today one of the co-authors of Choose Fi, Your Blueprint to Financial Independence, Chris Mamula. Welcome, Chris. Thanks for having me and it's an honor for me to be here with so many people who I read and follow who I've seen have been your prior guests and not to mention Mr. Bogle himself, so it's quite an honor. Well you have quite a story yourself and I want to start out by you talking about your background and how you got to writing this book and also your blog, Can I Retire Yet? and all the great work that you've put into the Fi community. So why don't you start out telling us a little bit about yourself? Sure. So I graduated with a master of physical therapy in 2001 and so you know I had 20 years of formal education from kindergarten through grade 12 and my bachelor's and my master's but in that time I never had any financial education so like most people spend all this time learning to gain the skills to earn money but nobody really ever teaches you what to do with it. So I was pretty fortunate in that my parents instilled in me just a kind of a disdain for debt I guess you would say and so from day one I was a great saver. My wife had a similar upbringing to me in that she wasn't raised with a lot of money but she didn't have that foundation so she had some debt and going into our marriage we didn't want to get married with debt and that's something we talked about together. What we agreed to do was just live off of her salary and use everything I made to get us out of debt before we got married and that was working really well so it's something we just kind of stuck with and so we always lived off her salary and saved mine so we had and our careers kind of grew in parallel so we basically had a 50% savings rate our whole lives but we really didn't have a plan because we didn't know what we were doing and so I kind of always bought into this idea that investing is complicated so we invested with an advisor and we really did no due diligence and we kind of bought into this idea that retirement is at 65 and maybe early retirement was 55 or 60 if you're really lucky and you do everything right and so again we had no plan for that so we just kind of fumbled through life until around 2012 about 10 years after getting started we didn't think we could have kids my wife found out she was pregnant and so I realized I had to get serious about finance and and that's when I kind of stumbled into the early retirement the fire blogs the financial independence retire early and and they really changed my life and so that's kind of what motivated me to start writing about the topic. Chris I want to get into the fire movement FIRE what does it stand for when did it start what's the motivation behind financial independence retire early and what are the different splinter movements from that can you describe the whole culture of FIRE for us? Yeah sure so let's just start with the definition so FIRE is financially independent retire early it's kind of a catchy cute acronym but in a lot of ways I think it turns people off because people get hung up on the whole retire early and and people have perceptions of what retirement means and so in some ways we're trying to move away from that we really focus on financial independence and and really don't focus too much on the retire early I think what it's all about is just really lining up your values with your spending so typical advice is you save 10 or 15 percent of your income and that puts you on a path where you're going to retire in your 60s or 70s and basically we just kind of flip that on its head and said if you can save far more than that you can free yourself up and become financially independent much earlier in life and then if you choose to retire you certainly can but most people that I've come across in this movement choose to go on and do just bigger and better things and things that more line up with what they want to do versus what they have to do to earn an income and as far as like the origin I guess I probably have to credit Vicki Robin whose book Your Money or Your Life was published in the early 90s and it was very popular at the time but kind of like most books it kind of fell off even she didn't know that a lot of the early FIRE bloggers kind of picked up on her ideas and turned it into this FIRE movement and the early influences were kind of all looking the same like white males engineering really focused on maybe like spreadsheets and optimization and frugality and so when I got into writing in 2013 and honestly I kind of fit a lot of these stereotypes because I'm a white guy and I was part of a higher earning professionals and we had no kids and then like I said I got serious once we had one child but I was in the healthcare industry and I don't know anything about spreadsheets I didn't know anything about finance and so I was kind of at the time I think I was diversity but I think a lot of that initial perception is kind of what people still think and it's like this monolithic thing when really there are so many different stories now and I think this FIRE message is really attractive for parents looking to create space in their lives to spend time with kids maybe older adults who are way behind on retirement savings and this lets them supercharge that or just people burn out on careers who want to do something different and it gives them some leeway and some courage to do something different with their life so it's definitely a much more diverse community than I think people perceive it to be and you started the blog about this can I retire yet so actually so I started writing back in probably 2013 and I wrote a little blog called eat the financial elephant and it's based on that riddle how do you eat an elephant and you do a one bite at a time and it's because I felt so overwhelmed by finance and it was really a lot of it was to hold myself accountable and I built a little audience but nothing I wasn't having any kind of impact so as I was leaving my career in 2017 this movement this idea changed my life and I wanted to reach more people and I wanted to maybe change some of those perceptions of what FIRE looks like to people but I didn't have a platform to do it from and my idea was to start a podcast and talk to different people who influenced me and then so Brad Barrett and Jonathan Mendoza they started the choose fi podcast a few months ahead of that and so I reached out to them probably in April of 2017 and we agreed to partner on the book and then in August of that year there was the can I retire yet blog was started by a gentleman named Darrow Kirkpatrick and he had built a nice following and I loved that blog but I kind of sensed he was burning out he was a one-man show doing it and so I reached out to him and said you know would you be open to a partner and he was receptive so I kind of before I actually quote-unquote retired from my physical therapy job I had my next two projects lined up and so I've been writing with with Darrow at the blog since I guess December of eight or since January of 2018 you feature other bloggers and other podcasters all the way through the book which is extremely well written by the way you're a great writer this is a very very well written book I read it cover to cover very easy to understand very easy to follow a lot of great information in there but one of one of the things you did throughout the book was you were referencing all these other blogs and all these other bloggers and all the different points that they were talking about and you have a whole list of bloggers and podcasts and so forth in the book which is really a wonderful reference but in your site you started writing about this and you started focusing on this culture and I really want to talk about the culture of FI because it's very similar to a bogelheads culture you know the bogelheads started maybe 20 years ago first on the Morningstar forum and then we went out on our own and had our own bogelheads.org website but it is a culture and it is a community the FI community is very similar and and the goals of both communities are very similar there might be a little bit of a generation gap so could you talk about the FI community and the culture yeah sure and first off um thanks for the kind words about the book I really appreciate that especially coming from you um but I was just in Detroit promoting the book and I was staying with with a guy named Joe Saucihi and he has a pretty popular podcast called Stacking Benjamins and it's it's kind of comedy mixed with personal finance and and he and I had a really great conversation and uh he kind of pointed out to me that you know there's 300 million people in the United States and so even if you have three million people that you're reaching which even the bogelheads or even maybe Dave Ramsey and Sue Zorman uh when you get to that level we're nobody's really reaching that percent of that number of people and if you are that's one percent of the population so um overall as personal finance I think we're failing to get out and reach people and so like there's a lot of snipping back and forth between these like maybe the bogelhead community and the FI community and the Dave Ramsey community and really we need to be building upon one another and pointing out what each other is doing well so we can reach a bigger audience and with ChooseFI kind of that's what they did is they kind of uh I think a lot of personal finance is guru driven and uh what they kind of do is they highlight people who just have compelling stories and in each episode they really focus on what are the actionable steps people can take and we tried to build on that in the book and say you know how can we take the key lessons and then we kind of just put it in a more organized fashion than you really are able to on a podcast and kind of building up everyone and choosing the best of what everybody's doing versus kind of snipping and trying to kind of you know protect your little piece of the pie we really want to grow the pie and reach a much bigger audience and so I think where like you said there's just so much overlap between the FI community and the bogelheads messaging and so I think if we could kind of work together and reach a bigger audience it's way more productive and we're going to be able to help a lot more people and that's kind of where we're trying to take things right now with the culture and the community well that's great because for us at the bogelheads we are always trying to figure out how we can reach as you know more people and our push is to try to reach out to other communities like yours and and work together with you to better educate more people because that's really the goal of everyone this is so important for society and so important for our fellow citizens and make them better investors and get them away from the the hawks on wall street I mean you talk about that in your book and I think you did a great job by the way talking about your story of 10 years with the financial advisor before you finally realize what was going on I mean that happens everywhere it's a majority of the population are trapped in that and I think that by working together these different groups working together will help just make it make the message more powerful and louder because we don't have a lot of money and and you don't have a lot of money and so we're fighting against a trillion dollar industry that has seems like unlimited wealth yeah and I can't agree with that more and like I said like if you kind of look at the things that we kind of argue about in the personal finance community compared to where people are like just as we record this last week there was an article in the wall street journal about how so many people were going to now seven year car loans from five year car loans and and the average savings rate I mean I know this is something we cited in the book it's like five percent across the population so like I said I mean yes I mean there are little things each of us could do better and we can help each other improve our messages absolutely but I mean overall I think when we could be really helping people who are just missing and not getting the big picture you know we're not competing against each other we're competing against like the Kardashians and the NFL and the things that people like build their life around while they have no idea what an expense ratio is or anything like that so we're going to go through the book now and what you've done how you've organized it I think the very first thing that struck me as I was reading one of the earlier chapters was the stages of financial independence and I've never seen this before what the stages are and you list them out from one through seven and I like to quickly go through the stages because I think they were really well done and I appreciate that and again like I you said I'm you complimented my writing and I wish I could take credit for these ideas but again what we did is we built on all these ideas so this was a blogger who was on the podcast and he talked about this and I think traditional finance it focuses so much on retirement and retirements like the end goal and what we really wanted to do is reshape the conversation and so we started with just really once you get to zero if you're out of debt and and really you can define it in a number of ways but most people they're kind of trapped because their mortgage payment their car loan payments maybe they still have student loans credit card loans and so their next paycheck is already spent before it ever comes so just getting to zero however you want to define that is so powerful because it starts to let you start choosing going forward and then as you start to build on that just having a fully funded emergency fund that's a hallmark of personal finance and that's really like a Dave Wright Ramsey concept I've seen a lot like where you have six months of your expenses saved and and I think that's great advice but if you look at traditional advice they say you save 10% of your income say so if you're doing that after a year you're going to have basically a month of savings and it's going to take you about five years just to get that six months of savings built up and it's no wonder people fall off because it's so slow and and it's just you don't see any momentum so what we do is we say you know if you can build a higher savings rate and we just hypothetically throughout the number 50% savings rate for one thing that's going to lower the bar of how much it takes to save to get six months of savings by being a little bit more frugal and watching your spending and also that frees up the money to save and if you can say 50% now you can have a six month emergency fund in only six months instead of five or six years and so it's a total game changer and it lets people to start have freedom and peace of mind and we just kind of build up to you get through the phases to you get to ultimately full financial independence and then even financial independence with cushion is our last level where you're having greater than 30 times your annual expenses and you can pretty safely retire at that point and even be comfortable to maybe grow your spending depending on how the market does so really trying to reframe that conversation from an all or nothing to a conversation where your power is growing and building throughout the phases and the next chapter you get right into the whole thing isn't really about money it's about having the right way the money is just a facilitator of that so the money is just a tool that what you're really going for before you even go for the money is a philosophy and you talk a lot about philosophy yeah so kind of the framework I wrote the whole book with is that you know you have to learn the rules and you mentioned briefly like my bad experience with the financial industry but I think a lot of people they go in and they know the rules they know that you know you get a college degree so you can get a good job and then once that starts like the first things you do is you buy a house and you determine how much house you can how big of a house or how much you spend based on your income and you can spend x percent and you buy two cars and everybody knows you buy them with with loans and this kind of goes on and on you save 10 percent so you can retire at 65 and the none of these things are rules so kind of where we start is you have to unlearn the rules and just kind of get over all these things that people just blindly accept and really it's a lot of this is just about asking better questions so you can get better answers and then once you unlearn the rules then we kind of get into the rules of what is the math behind saving what is what are the rules you have to know to invest wisely what are the rules to grow your income and all these little levers you can pull but I really think unless you unlearn the rules first and break down those things that people quote unquote know you're going to really have a hard time. As we move along in the book you have a section called becoming a lifelong learner and I looked at that and I said that is perfect because I happen to be writing a book right now and I will give you the name and selfishly promote it but it's not going to be out for a little while it's called a few good funds the genius of simple investing and the last chapter is all about lifelong learning so as I'm reading your book it says become a lifelong learner because it is so important that once you have the concept once you have the philosophy once you once you get it once you set yourself up it can easily be forgotten and go by the wayside and the second thing is one thing that really not only helps you but helps a lot of other people is not only your lifelong learning and you get to this in the book very quickly is once you learn it teach other people and teaching other people helps you stay the course I thought that was fascinating and I was actually including the exact same things I was reading your book I I just saw so many things that you just did such a great job bringing out. Yeah thank you and yeah and it's kind of funny like when I talk about my background that you know five years ago six years ago I had no clue I didn't know what an index fund was I wasn't utilizing my 401k because my advisor said that he could have he had better investments for me and I totally bought hook, line and sinker I mean I was completely clueless and now I'm writing this book which is hopefully going to have a pretty large impact and be read by a lot of people and it's just that matter of you know I realized okay I'm making a lot of mistakes and it's easy to wallow in that and feel bad for yourself or get angry but what I did is said okay I need to correct course and I need to keep learning and then learning at a deeper level and then as I was doing this and seeing the impact it had on my life yeah I almost felt an obligation to share it with other people so they could do the same thing and in some ways I you know I think you get imposter syndrome that you know who am I to be qualified to write a book about personal finance and investing and on the same token I think I'm the perfect person because I know exactly how all those people that really need to get this message are thinking because I was stuck in that pattern for like I said 10 years before I finally started questioning things and figuring it out so uh yeah I mean I think that's super important. Yeah what we find is right is is in many of this stuff about personal finance and investing and taxation all of this is routine I mean these are the rules and all you're doing is figuring out how to put it all together how to link it all together and then and then writing about it I mean we're not creating any kind of a new way to invest in real estate or we're not creating any new way to invest in index funds I mean it's all out there we're not trying to recreate the tax code in any way it's all out there it's just a matter of putting it all together and and and showing how it all works together and explaining it to people in a way where it makes it easy to understand and so we know me I don't take any credit for anything I've done as far as index funds and talking about ETFs and asset allocation and all that because it's all out there it's just a way in which you explain it and and being able to explain it to people so that they understand it so in a way you know teaching people how to do it and I think that's really where you know you have a real knack and a real skill to be able to do that because your book is so good at teaching people and again I appreciate that and and a lot of that is just again because it's not really me I mean yes I'm the one writing it and putting it together and organizing it but we've taken a lot of people who were super generous with sharing their stories on the podcast with those guys and then they were generous with allowing me to take that and kind of put it together and then we kind of repackaged it in a way that just makes it consumer friendly and particularly to people who aren't you know maybe inclined to be in the Bogleheads community or to be inclined to be saving large percentage and be in the F.I. community and just take it to ordinary people who most need this message and really make it accessible and that was what we wanted to do with this book and not be judgmental and not be dogmatic but just saying look here's the different options that you have here are people with really inspiring stories that probably somebody in there is going to look a lot like you and you can kind of take their story and take the things that you like from it and then take from other stories and put together your own your own path to achieve financial independence. Yeah you wrote in here that you do not have to adopt anyone else's definition of success or failure but to gain traction on the path to F.I. you do have to determine what you value and then start spending your time and money accordingly so as you figure out what's important to you and then you start on that path. Yeah and there's a term and I'm not sure quite where that came from so I'm hoping we didn't steal this from somebody but we call it a valueist and instead of saying that you have to be frugal or you have to be a minimalist you don't have to be anything but you do have to figure out what you value and then do your does your spending reflect that and for a lot of people I think if you were being very honest and looked at it a lot of people would say no and if and if you think that you know you have to suffer and sacrifice frankly none of us including me are going to be able to save 50 percent by by scrimping and saving you do it by cutting out the things that you don't value anyway and you spend the money where you do value but a lot of those things that again people just do reflexively like buying the biggest house they could afford or the most car they can afford I mean if that's truly what you value then by all means do it but I question how many people are happier because they have a bigger house or a fancier car and and if it's not then cut it and and be honest and don't be afraid to make changes. You talk about the three big things and you just hit on them you talk about the way to get a high savings rate is to focus on the big things that you can control that are the big budget eaters if you will and that is housing transportation and food and those three things together if you can control your housing cost if you can control your transportation cost if you can control your food cost then you can bring more money to the bottom line. Yeah and I kind of talked how my wife and I just stumbled into getting a lot of those things right there was no fire movement back then and so we just kind of stumbled into it so we were getting a lot of the big things right and and so for us it was really pretty easy because if you don't inflate your lifestyle and you can live pretty comfortably and then as we had our basics with the housing and the cars kind of it was locked in and we were able to inflate our lifestyle as our careers grew so we were traveling more and doing fancier things and eating at better restaurants and things like that but because we had the key things just locked in and we were living so far below our means it was easy. Unfortunately for some people you're going to find this later in life and it may feel a little bit of sacrifice and you're going to feel a little bit of the pinch if you have to go back to get those things right but really if you don't get those things right one way or the other either by starting well or by going back and making changes it's really hard to develop that savings rate because those things if you look at the average person spending they make up such a large percentage that you know if you don't get those big things right it's going to be very hard. And one of the other things of course that's big for everybody is paying taxes and I found in talking with people that on the investing side and how to set up their accounts so that the right assets are in the right accounts and just how to structure the whole thing and even when they were doing distributions doing Roth conversions I mean the whole tax code and working the tax code to the maximum that you can for your advantage from savings to distributions to knowing where all the breakpoints are for things like Medicare charges for retirees and so forth to understand the tax code as an investor and to work that tax code gets you so much more money than trying to go out and pick any actively managed mutual fund that might outperform that it's not even a comparison you spend your time on taxes and you have a whole chapter a whole section in here about working the tax code to your advantage and I think it was a really good chapter. Yeah and I think that's where the book gets really fun so I mean some people are going to it's going to be pretty easy to housing cars and food and some people it's really going to be a struggle but you have to get those things to get the savings rate but once you can do that and you can and it's really simple things like just using your work sponsored 401k account for a lot of people that's the easiest and biggest thing you can do doing things like learning to be a index fund investor and cutting your expenses like it can be seen as a sacrifice I guess for people if you say you have to live in a smaller house or drive a less fancy car but I mean I personally I've never met anybody that said man my life would be better if I just paid a little more taxes or you know if I could just pay my financial advisor a little bit more so I mean those things I mean they add so much value to your life and you're actually spending and we're talking big dollars less like I know for me we talked about some of the mistakes I was making as I became a do-it-yourself investor and bought into the index fund philosophy I started saving about $10,000 in taxes and $10,000 in fees every single year year over year and those things were adding zero value to my life so I mean talk about something that's easy to do because it because it makes your life better and you become wealthier it's a no-brainer one of the big expenses for young people people of course is going to college and you spend an awful lot of time on talking about things like college or hacking college and how to pay for college and I think the whole hacking college idea it was really unique I had not heard it before again you know always learned something by reading other people's material and the whole hacking college idea was really new to me could you describe that yeah so I talked a lot about my mistakes but if there's one thing that I did right so my wife and I between us we have six college degrees and we did that with she had about we had we started with about $20,000 of debt from her undergraduate and otherwise we did it all without any debt and it's been such a game changer compared to most people we see coming out like the average physical therapist who I was mentoring when I was working as a physical therapist they were coming out six figures in debt so it's a complete game changer and I really think a lot of it is just I'm again talking about like just questioning the rules I think most people think that to go to college and to do it without debt you have one of two paths you get lucky and you get a scholarship or you have wealthy parents who are able to to fund you the whole way through and what we found is just I think a lot of times you know if you have a a hammer everything starts to look at like a nail and I think college just debt to finance college is so easy so if you limit that or eliminate it completely there's so many more options out there from working through college to you know to looking for different scholarships smaller scholarships that people don't bother applying for because they don't think they can get to you know doing like when you're in high school getting some credits that apply to your degree and most of the people we prof profiled use all of these and some other strategies and if you are able to do that and you get a little bit here and a little bit there you can drastically reduce the debt or eliminate the debt and come out debt-free and that's a complete game changer and it's funny that I've had a lot of positive feedback about that chapter I absolutely loved our editor and she we actually cut a couple chapters and made some big changes but she actually recommended we cut that chapter she said you know a lot of people writing about that and we that was the one place where I pushed back and we left the chapter because I think it's so important and one of my co-authors on the book Jonathan he actually came out of school $168,000 in debt and it was a big piece of his story and when you can kind of contrast and you see like it took him basically a decade of working and saving to get out of that just to get back to zero versus some of these people in the book myself included who were able to get out debt-free and again it's just a it's a total game changer so yeah hopefully we can add to the conversation and instead of making it a black and white college is good or college is bad I think for a lot of people it's very valuable but you have to approach it in the right way you talked in here a little bit about making college pay in other words well you know you want to maximize the benefit from your degree and minimize the cost and by maximizing benefit I'm glad to see that you wrote a lot about go out and get a degree that you can actually use to earn money I mean to spend $200,000 on a degree that you're going to make $60,000 or $50,000 a year on just doesn't make any sense I mean you talk about college as an investment where you expect to get a rate of return on that investment and I had not seen a lot of that and I'm glad that you brought that up yeah and it kind of ties together I mean I think any of these things in a silo they maybe don't make as much sense but when you look at the whole grand picture again we embrace being a lifelong learner and you look at like the things that I've done with learning to manage my investments and how much that's paid off and learning to write just by sitting down at a keyboard every morning and picking up some books at the library you can learn everything but I didn't need to go get a journalism degree and I didn't need to go get a finance degree to be able to do these things so there's a lot of things you can learn for free I mean we live in an amazing world where many of these things you don't have to have a degree and you can be pretty successful I mean some things like if you want to be a doctor or you want to be a lawyer obviously you have to have the paper that says you're qualified to do that but then even at that you really have to approach that decision more wisely and like you said as an investment versus a you know this is good at any cost because there's plenty of examples where that's just not the case you also provided advice for what to do at work I don't mean saving in a 401k I mean how to manage your career and there was a even a little chapter in there about how to manage your boss and I started reading that saying manage your boss what's that about maybe you could enlighten us I think a lot of people just think you know you can go and work hard and you're going to be rewarded and maybe you will maybe you're going to be lucky but a lot of times that's not the case if you can learn to add value to whatever situation you're in and learn what your employer's value and then deliver and even over deliver on those things and then sometimes this can kind of almost seem self-promotional or taking too much credit but you know you're your own brand if you're doing above and beyond work then you need to point that out to your employer and you need to maybe set up regular reviews and just things so that they're aware of what you're doing and how you're adding value and that way it doesn't guarantee you're going to be compensated for those efforts but at least you're aware and then if you're not at that employer then you have something objective to go to a new employer and say look this is what I've been able to do and again that is not my idea that was from the blogger it's called ESI Money is his blog he was the president of a hundred million dollar company and this was his framework that he laid out and we thought it was brilliant and again it's I agree it's something I had not seen anywhere and a lot of the things my wife and I did in our own career in our own house but I've not seen it really put into writing in one place so by being able to take all of these people's best ideas and to organize them into one book yeah I agree that added a tremendous amount of value. Brian Tracy talked about invest 3% of your income in yourself to guarantee your future as I read that I said that makes a lot of sense can you dig into what Brian said a little more? I think one of the things that the fire community is criticized for is being hyper frugal almost to a fault where we don't want to spend money on anything and honestly there probably is some truth by some people in this community and so what we really want to do is kind of push back a little bit and say it's not just about cutting your spending but how can you spend and how can you invest on yourself and so just some little things and we use an example in the book I know of a guy named Scott Trench who's now I believe he's the president at Bigger Pockets which is a real estate investing platform but when he was really young he had the good fortune of being invited to a mastermind group of real estate investors and he started he just kind of in his head said I'm going to buy each of these guys lunch and try to just pick their brain if they would let him and they did and it kind of led to some pretty great opportunities for him from being more comfortable to start investing in real estate competently to eventually kind of leading to the connection that got him his current job so just little things of thinking differently and investing back into yourself versus trying to save every penny it can really add up and change your life over the long home the book gets into actual investing I'm putting the money to work and of course you're an advocate for low-cost index fund investing and not trying to go out and pick funds or stocks that are going to outperform the market one of the things about this chapter though as I was reading it investing index funds and understand the 4% rule which we'll get to in a minute was as I was reading this there was so much in there that I had just was like reading my own life in many ways of all the things that I went through with figuring out what the philosophy is of investing should be and you know how indexing works and why it's better and then going to develop a strategy and then finally finding the discipline I mean you have it all in here it's it's all here and you did a great job the 4% rule though is one thing that I wanted to get to right now which is you know that this idea that you could at least initially the Trinity study from a few years ago which said gee if you withdraw 4% of your money out of your account then you can do that for the rest of your life and not run out of money so get to some level where you can withdraw 4% but that has changed recently I mean the numbers are have changed but you still talk about it in the book in the fire community I think we're maybe criticized for like oversimplifying things and so a lot of times we'll define financial independence as when you have 25 times your annual expenses meaning that you could spend 4% I agree that that's not a valid rule that if you're going to retire in the traditional sense and start drawing down and particularly for early retirees who have a 50 or 60 year potential timeframe versus a 30 year timeframe that the Trinity study was based on but I do think it's a great rule to get people started I think it's a great way to shift your mindset from people think you know to retire you have to have x percentage of what you earned in your peak earning or your later earning years and this kind of flips that whole thing on its head and it makes us start focusing on what are you spending and what is the multiple of your spending and I think that's a much healthier and better place to start from and then we have people in the fi community one that we feature in the book and he's probably the most most prominent is karsten jesky and he writes the blog early retirement now and he's done a whole series on safe withdrawal rates and it's just great work but I think it really does make you change that whole framework to get started and it also we talked about like investing fees and if you assume you can withdraw 4% a year it makes that 1 or 2% that you're paying annually in investing fees it kind of puts some I guess context to that when you say you know if you can withdraw 4% a year but you're paying 2% between your fees to your advisor and then fees to the funds that really only leaves you 2% for yourself and that makes that 4% it puts everything in the perspective you talk a lot in the book about investing in index funds and keeping costs low keeping taxes low and so forth and I want to read something you put in here because it's so true talking about how wall street tries to make everything complex and I've been saying for a long time that if you're an investment advisor or you're a broker and you make things complex for your clients you have job security you think you're building job security because they don't understand really what you're doing so they kind of throw up the hands at one point and say hey look you're the expert I'm trusting you and that's exactly what you want to hear as a financial advisor but not exactly what you should be saying as an investor and you put in here there's a tremendous incentive for the financial industry to promote feelings of inadequacy fear and confusion in investors and that is so true and that was just from first hand experience I lived it for again a decade and I felt so overwhelmed and then eventually after I took control of my own finances I talked to my parents and they kind of were in that same boat so I kind of had to help them figure things out and get through but I mean you see that over and over with everyone who I talked to that you know you feel like you know you have to go to the advisor because they are the quote unquote expert and they just foster that feeling of dependency and it's great for them but it's not it's not great for you as an individual investor so kind of goes back to you just have to learn the roles. A lot of young people now are turning towards quote unquote robo advisors to invest their money and I'm talking about Betterment and Wealthfront and now just Vanguard we heard through an article in investor news is going to be launching a true online only robo service and their fee is going to be undercut everybody of course because that's what Vanguard does how do you feel about these robo services are they a good thing for people or do they make things too simple where you end up relying on them? Yeah so I mean I'm not a huge fan just because I don't have a problem with using an advisor of any sort if they add value but for me personally I don't see the value add of a robo advisor I think what they maybe do is they give a false sense of security because they're using these algorithms that if you follow this then you're going to do better and frankly nobody knows what's going to do better in the long term and what we do know though is that they're adding a cost and they'll point out that their cost is maybe a quarter or a half a percent compared to traditional advisors maybe charge one percent and so any fee savings are good but you can just do it yourself and you know if you go in with that humble attitude that I don't know what's going to be the optimal portfolio I know why I'm choosing the portfolio I am and I'm going to stick with it for the long haul I don't know that they're going to add any value with the portfolios they're going to put you in but I do know for certain that it will cost you that extra quarter a half percent and again again that kind of sounds like a small number but if you look at it again with that concept of maybe the four percent role or like we said maybe that's not valid maybe it's a three percent role and so if you're paying a quarter a half percent that's a substantial amount of the income you could potentially live off of and again if it's adding value then great but I don't see a necessarily a great value add that they're providing. There are some advisors who point to a study or an opinion piece by Vanguard who says that advisors can add up to three percent alpha in a portfolio they call it advisor alpha and they sort of backdoor into this idea that because advisors can change your behavior because they can lower your fees somehow I guess by using index funds and because they're better at doing investing than you are that they can add up to three percent alpha to your portfolio how do you feel about that? So when I started writing we talked a little bit about my background and so I was very dogmatic that everybody should be a do-it-yourself investor and then as I started dealing with real-world scenarios my parents being a great example readers that call into the or write into the blog and ask me these questions and I've realized there's just there's a lot of complexity in people's situations and so I do think you if you have a complex situation maybe you had bad advice before and you need to get out of products that aren't in your best interest if maybe you have a unique circumstance maybe you have a special needs child or something like that there are scenarios where I'm certain that a advisor could add value and then for other people they just they're not going to do the simple things that it takes simple rebalancing and things like that so maybe they add some value there but three percent seems like seems like a lot and especially across a general population I have a hard time buying into that. It's possible that advisors might add three percent to a small minuscule number of people but in general at least in my practice and I'm just doing an hourly advisor model now the people I'm seeing are much much more ahead than that you know a good advisor might add a quarter of a percent maybe but not three yeah especially on an annualized basis I mean that that's a that's a lot of a lot of change and so one of the battles that I'm fighting is this one percent AUM fee where if advisors are charging a one percent fee on a to a million dollar client and point nine on a two million and point eight on a three million and ends up being ten thousand eighteen thousand twenty four thousand dollars to pretty much just manage a simple index fund portfolio and then maybe doing some financial planning as well I mean how do you fall on that debate so kind of getting away from the book but kind of on our blog again we have a lot of people that that write in and that's generally the advice the advice that we give is that you find somebody that's fee only and that's going to provide advice on a on an hourly basis on an as needed basis I think that gives you the best chance to have the least conflicts of interest and then we we recommend that you find somebody that is a fiduciary although I do understand that you know that doesn't guarantee anything but I think that gives you a better chance also and so that's the general advice that we give but I think in general finding good financial advice is very challenging and I think anybody that thinks that they can hand over to anybody under any model and not be a part of this I think they're just they're in for a rude awakening I think there's just so many conflicts that it's and it's just really challenging so you have to be invested in the process I think that's great advice I want to get into active management and here's where I just thought you did a fantastic job in the book because it just opened my eyes up to wow what a what a whole new way of looking at active management because when you start talking about active management in the book you're not talking about investing in index funds versus invest investing in actively managed funds you describe active management as something quite different than that yeah so I mean I think a lot of times when you go to a financial advisor they think in terms of stocks and bonds because that's how they're paid and I think it's extremely difficult to beat the market by investing in the market so I think if you're going to be a stock and bond investor you should probably be an index fund investor for the vast vast majority of people but I don't think it's impossible to beat the market by investing outside of the market so maybe investing in your own personal business or investing in real estate where you have much more control over getting into a small market where you have a competitive advantage and you can put it in some sweat equity and you can utilize leverage in a relatively safe way and I think for a lot of people if you can't develop a high savings rate like we talked about earlier in the interview but you still want to become financially independent more quickly again it kind of goes back to the learning the rules and understanding the basic math investing in index funds may not get you there on the timetable that you want to so you need to find a different path and so that's where I think investing in your own business and or investing in real estate either on their own or in combination with index funds is going to give you a that's going to give you a realistic chance to get to where you want to go and just to clarify your version of active management is invest in yourself invest in businesses that you start invest in real estate directly these are the active management things that you could be doing which would really build wealth as opposed to going out there trying to find active managers in the mutual fund space who you think might outperform the market and I just thought that was a great insight and I completely agree with you on that yeah and I think that kind of goes back to the way we framed it I think we probably will get some pushback because it kind of goes back to that definition of retirement and so we kind of we just don't really care about that definition of retirement but we kind of look at these as investments and some people will say well you're not really retired because now you're an entrepreneur you're not really retired because you're a real estate investor and you're out managing properties and and certainly there's truth to that but the bottom line is are you building the lifestyle that you want to live in alignment with your values and so if you can work a couple of hours a week on a real estate as a real estate investor or as on your own business that you know you set up as a business and not a job where you can step away from it without the business shutting down I would view that as an investment and people are certainly can feel free to we can agree to disagree on the terminology around that but I think that that's the way that you can have outsize returns on your money versus trying to you know roll the dice by taking more risk than you can tolerate or or getting into some you know hedge fund or somebody that wants to take huge fees and promise outsize returns and I just don't think that that's reliable for really anybody and and particularly for the vast majority of investors I would certainly stand behind saying that and I want to get back to something you just mentioned because it was it's a great line in the book scrap the idea of retirement completely and focus on building lives we don't want to retire from I think it was just a great line that's exactly it isn't it that's really what this fi fire movement really is about it's about this whole archaic idea of slaving away until you have enough money to tire if your employer lets you later on down the road get away from that idea and focus on building a life not just a job or not just a career but a life that you don't want to retire from yeah and I normally write at the website can I retire yet and I found that blog because I was literally asking that question it was to me it was all about retirement and it was all about escaping this career I was not satisfied with so my partner at the site Derek or Patrick I mean he's just a really smart and detailed planner and as I really kind of got into what does a traditional retirement entail I mean what I realized is yes it's going to free me from these things I don't like having my time dominated by a job as the the primary one but now it's going to introduce a whole another set of stresses where you know what is my day to day purpose where as a physical therapist I was going in every day and helping people and so how am I going to replicate that in my everyday life and we talked about we were savers because we enjoyed that feeling of abundance and if you're drawing down your investments it's going to be a whole different feeling of scarcity and every day you're stressed about money where money was never a concern so I think a lot of people just oversimplify it and think retirement is going to like fix their problems and really you're trading one devil for another and so how I approach it now is you know how can I get the things that I really wanted from retirement and so for me that was time with my young daughter time to get out and seek adventure with my wife while we're both young and healthy having some freedom to just step back and and just have some space in my life how can I create that without all the downsides of that scarcity that come with a traditional retirement and that's really what it's all about when I was getting into the last chapter now up to page 300 or so I I ended up drawing this little diagram there's something you might see on a road a sign that shows you could either go straight or you can take the sharp left hand turn and there's two arrows one arrow goes straight and the other one makes this sharp 90 degree left hand turn and I I drew that in the book and I put standard path was the straight line right that was the work till 65 get the gold watch that's what we all at least my generation you know was kind of taught and on the left hook the pivot if you will that went 90 degrees the other way I put choose fi because to me that's what it's really all about it's a changing the whole dynamics of the equation it's really funny that you say that because we so we kind of went back and forth on how we're going to title the book and it was between like your blueprint to financial independence versus a roadmap to financial independence and in my original vision of the cover was exactly that like a road sign that has like an arrow that splits in different directions so that's just it's really a that's a astute and kind of amusing observation that you that you wrote that because that's exactly where we were one of the two ways we're going to go with this well it was easy to draw that figure because it's exactly what you're talking about in the book I can see it and quite frankly when I look back at my own life this is what I did I didn't quite know what I was doing but that's what I did I took the left hand turn you know I started my own business when I was 40 years old because I didn't want to continue to work in the brokerage world where they controlled everything and controlled my destiny I wanted to do it on my own I knew it was a big risk you know my my son came up to me in the second year of the business he was a junior in high school and he comes up to me he's crying and I remember him crying and I'm like what's the matter what's the matter so he goes I can't believe you left this great paying job to start this business you know in your living room literally I was sitting in my living room at a desk in our living room where I set up shop I said you have to trust me this is going to work I you have to believe me I know what I'm doing this is going to work everything's going to be just fine and it was you know but if it is a scary thing it is a scary thing to get off that treadmill if you will though hamster treadmill and actually get off of it and take that left hand turn and and choose to do something different and choose to financial independence in a different way is it going to work uh yeah it will work you know why because you're going to make it work that's why it's going to work I had that exact experience actually so my dad started he was an entrepreneur he was a newspaper photographer and by all means he was pretty successful um but he just hated it and so he quit and started his own business and and I witnessed the struggles of an entrepreneur and one of the things again we talked about investing in your own business and kind of how these these concepts all tie together I think a lot of people don't do what you did or what my dad did because they're afraid and it's it's a healthy fear uh if again if you need that next paycheck or you're going to lose your car or lose your house but by embracing these concepts that we talked about earlier in the book with you know cutting your core expenses and by building up some cushion so you're not paycheck to paycheck even if you're not financially independent where you can retire but if you have a year or five years or now 10 years of runway where's the risk in that I mean you have a lot of time to figure things out and to get on the right path and so I think it's going to embolden a lot of people to live into that life that they want to live versus being just stuck in fear and that was really the much more of the take-home message than anything about retirement and there's an entire community out there to support you I mean it's called the fi community and which is what this book is all about it's talking about this community of people who are there to help you and they are but I went to uh fincon conferences which are financial blogging podcast conferences I went to the first one when it first came out and I've been to several and it's just a great community of a lot of young people and some older folks like me you know over 60 that try to you know make an appearance but it's a great community support community for people who are looking to do something different looking to take control of their lives and you know change their lives for the for their better for the better for the children and the better for the grandchildren as well so this community the choose fi community yet the fire community it's all good what you've done with this book is is really great and if you could just take a few minutes to talk about some of the kind of the special people who have helped you write the book and have helped you come to the messages that you've come to the book I know you talked about Brad and Jonathan and could you just go over you know your list yeah so I mean I think when I originally started writing the book um a lot of those early um thought leaders in the in the fire community so um going back to like Vicki Robin but then the I think the person that really picked it up and started this whole thing was a guy named Jacob Lund Fisker and he wrote uh it was called early retirement extreme and and it lives up to its name it's pretty extreme and it's he talks about like an extreme frugality and getting to retirement as quickly as you can but I think people started building off of his ideas and Pete who's known as Mr. Money Mustache and and his blog is it's been phenomenally successful and he's kind of taken Jacob's ideas and taken it more to the mainstream and and there was kind of that whole core group of kind of that engineer type so mad scientist go curry cracker root of good I think we're the original bloggers there that kind of grew this community and then as far as like investing and linking to the Bogleheads um there's a blogger called J L Collins um and his his blog is just called JL Collins NH dot com and he's written a book called the simple path to wealth and he was really who introduced me to the idea of index investing and he considers John Bogle one of his heroes and I started reading his stuff and I started reading Mr. Bogle's work and getting into the Bogleheads community um and so that was super valuable to me and then um there's just a couple bloggers that were kind of out there in front of me um Todd Treseter who writes that the blog financial mentor and uh and my partner now at the blog can I retire yet is Darrell Kirkpatrick and I think a lot of people don't even maybe consider those two as part of the fire community because they're a little bit older and a little bit further out ahead but Todd really was the first person I heard talking about you know it's not about retirement and and you know if you he called it the pro leisure circuit where maybe you're going to go out and um whatever it is for you hiking skiing traveling uh and you know it's going to be great for six months and then you're going to get bored and what are you going to do next and and uh for Darrell my partner now uh he just kind of was more even keeled and not extreme and not all about optimization and and forgettality but instead like about what what really matters to you and how do you design that so all of those people and many many more who've now come behind them and contributed their own stories have all really contributed to the book and uh when I started writing I thought that was the story I thought that was the book so all of those people were tremendously influential on on my journey and putting that message together in the book you're two authors uh Brad and Jonathan have a podcast called choose fi which has been extremely successful and a lot of the information in the book comes from those podcasts they've done a great job at bringing in a lot of voices and I really originally thought that the book really was kind of collecting these original thought leaders and their ideas but what Brad and Jonathan have done a great job of doing is bringing in a lot of different voices and a lot of different perspectives and learning from many different people uh and then the other thing even bigger than building the podcast um they've really built a community so like when I was starting we talked about like I was saving 50% and I knew I wanted something different but I didn't know how to find other people on a similar journey and what they've done is they've created first a Facebook community and now it's turned into these choose fi local communities so like I I'm in the Salt Lake City area and every month we get together and it's just a community of people of like-minded people who you can support one another and learn from one another and that's just so valuable when you're trying to do something that's so different from what you're seeing every day and uh I think that's just tremendously um uh life changing to have that support group and and people can find them wherever wherever they're at in the country and uh kind of build it into whatever you want it to be and having a place where people can go and meet up on a local level and support one another it's it's phenomenal the book is called choose fi your blueprint to financial independence Chris Brad and Jonathan did a fantastic job with this book highly recommended for everyone I learned a tremendous amount and and I've been around for a while and I read a lot of books and you know sometimes when you pick up a book you think you're going to read the same old things over and over again I I learned an awful lot from your book uh Chris and I really appreciate your being on the show I really appreciate you having me and those are uh that means a lot coming from you so um I'm quite honored to hear that this concludes the 14th episode of bogelheads on investing I'm your host Rick ferry join us each month to hear a new special guest in the meantime visit bogelheads.org and the bogelheads wiki participate in the forum and help others find the forum thanks for listening