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Chris Mamula retired from his physical therapist career at age 41. After poor experiences with the financial industry, he educated himself on investing and tax planning.  In this episode, he shares his journey to early retirement by saving more and investing wisely.  Tune in and find out how how he did it and how you can too!

START TRANSCRIPT

Chris Pratt: I’m really excited for our guest today. He is passionate about financial independence and talks about what retirement is and can be at his website. “Can I Retire Yet.com” He has been featured on MarketWatch, Morningstar, US News and World Report and Business Insider among other places. He’s achieved financial independence and retired from his career as a physical therapist, as of 2017 at the ripe young age of 41, that is an amazing accomplishment. His name is Chris Mamula. Welcome to the show, Chris.

Chris Mamula: Thanks for having me. It’s a pleasure to be here.

Chris Pratt: So you have a really amazing story and background. And in addition to that, you have some really great content on, you know, your original blog that you wrote. And then “Can I Retire Yet.com” that you work with your partner on as well as a book that you’ve written, “Choose FI, Your Blueprint to Financial Independence”. So we’ll get into all of that. But the first thing I wanted to do was ask you about your focus on being a dedicated husband, stay at home, dad and skiing at your home in the mountains of Utah. What is your life like today? Now that you’ve retired and you’re working on this blog and you’ve achieved what we would call financial independence.

Chris Mamula: Yeah. So I love that you start there. Cause that was really my motivation for starting down this path to financial independence, my wife and I, um, we kind of just started down a very standard path. Like most people went to school, got out, bought a house. And um, within like the first year of doing that, we realized like, what the heck are we doing? And just kind of felt like we were living for the weekends. And even that was a lot of it just taking care of our house. And we took a backpacking trip. Some friends invited us, uh, to the Grand Canyon, which we thought was honestly kind of, we were like asking why the heck are we doing this? Because we were not outdoorsy people. And we just kind of fell in love with being out in nature and being away from it.

Like I never did these things as a kid, but we started getting into like backpacking and then hiking and skiing and rock climbing and mountaineering. And that just kind of became the focus of our lives because we didn’t think we could have kids. And we kind of always dreamed about moving West. So after 10 years of being married, we were going to move in, I guess it was 2012 and we found out my wife was pregnant. And so as a shock that we could have kids. And so that’s really when we got serious about the personal finance part and we found the FIRE, Financial Independence Retire Early community. And I think kind of that, that idea of just kind of being a dirt bag or a ski bum was always in the back of our minds and we still wanted to move West. And we kind of thought like before our daughter started kindergarden, if we didn’t do it, then it would be kind of now or never. So we just up and moved from Pennsylvania to Utah. And, um, this is where we live now in the mountains and kind of our life kind of focuses around, um, just having access to these outdoor adventures. And we get out several days a week, we’re skiers in the winter and mountain bike, hike, climb, whatever in the, in the warmer months. That’s what we do.

Chris Pratt: So I want to go back to your background. You said you were a physical therapist by trade. Did you go to school for physical therapy? I imagine you did…

Chris Mamula: Yeah, I have my Master’s in Doctor of Physical Therapy.

Chris Pratt: Oh, a doctorate in physical therapy. Can you talk about what led you to get that doctorate in physical therapy?

Chris Mamula: Yeah, so, I mean, I was the first person from my immediate family to ever go to college and it was something like my parents just kind of impressed on me that that was something very important to them. They wanted me to kind of the old American dream thing. Like you want your offspring to live better than you did. And I was kind of following that traditional narrative that you go to school and you get a degree and you develop a career and that’s kind of the path. And I was an athlete as an all throughout my childhood and I was injured a few times. I went to physical therapy and I thought like, this is what I wanted to do. And I think like a lot of people you choose a career when you’re 18, 19 years old that you’re supposed to do for the rest of your life.

And you look at it through these Rose colored glasses. And when you start practicing in our American healthcare system, like I just, I felt like I just got burned out on it really quickly. So for me, I really wanted to kind of do something differently with my life. And so I viewed this whole early retirement as a way to be able to do that, to escape and to get out of this career. That really wasn’t what I wanted to be spending the next 40 years of my life doing. And unfortunately so many people in healthcare in particular, which is why I knew well and interacted with so many people were just so buried because A, the student debt, cause you have to go to school so long to get a medical, any type of degree in the medical field. And then B I think there’s just that lifestyle inflation and that keeping up with the Jones’ and impressing other people that people just bury themselves. And luckily we did not do either of those things.

Chris Pratt: Well, so you mentioned that you got out of, kind of the cycle as a physical therapist. At what point did you realize that you were getting burnt out? Like after how many years of doing it? Like what happened that you’re like, okay, this just doesn’t work for me anymore. I assume when you were in school, you know, you were hopefully at least somewhat optimistic to be, to becoming a physical therapist. So…

Chris Mamula: Absolutely. Yeah. I mean, I was, I was really into it and honestly I would say within maybe two years, three years, I’ve just started feeling like this is not what I want to be doing forever. And we talked about like that origin of just falling in love with the outdoors. Uh, shortly after when we did that trip, my wife and I kind of developed this little it’s kind of a goofy little thing, but we called ourselves being dirt bag millionaires. And like we saw these people who were dirtbag climbers, ski, bums, whatever. And like we love being around them. They were fun. Like they were living their passion every day, like getting seeking adventure. But we would also see like, you know, you have an injury, you’d have a car breakdown, something as simple as that. And it leads to disaster. Like they had no financial security.

So we like that idealism of the dirt bag, ski bum lifestyle. But we also liked having financial security and like both of us came from families where we just didn’t grow up with much money. And so being able to have just some cushion and some leeway there with our finances, uh, it was a great luxury. So we developed this idea of being a dirtbag millionaire, where we took the best of both worlds. And that was kind of our idea, like when we were talking about moving West in 2012, by that point, I still had no idea at all about any technical aspects of personal finance. And we were really just kind of gonna go wing it and just have some financial cushion. Cause we were really good savers. And then when we found out that my wife was pregnant and we are going to have a child, we were responsible for, it made me get really serious really quickly. And that’s when I learned all the technical aspects. And that’s what kinda got me started writing just to kind of hold myself accountable. And we realized we were making a lot of mistakes just to kind of share the lessons we were learning with other people

Chris Pratt: You keep mentioning that you were kind of lucky, are you, you know, you were really good savers, et cetera, et cetera. But you had said that after poor experiences with the financial industry early in your professional life, that you then educated yourself on investing in tax planning. But sounds like you also did some things right? So you talk about what those poor experiences were and then maybe in the midst of those, what did you do right. So what did you do wrong? What did you do right?

Chris Mamula: I’ll start with what we did right? Because we really did that very well from the get-go my family, my parents really raised me just thinking that debt is not an option. Like you do anything you can to avoid debt. And so when I was going through school again, I mentioned like we didn’t come from, we didn’t come from wealth. Let’s put it that way. But my parents did save some money for me to go through school. And they kind of just said, this is what we’ve saved for you when it runs out. If it runs out, then you know, you’re on your own. And if you managed to get through school or if you have anything leftover, this is your money, we saved it for you. And so, I mean, I did everything I could. It was, it was a very, uh, great way to incentivize me.

It worked well. I did everything I could to get through school without debt. So I ended up getting my bachelor’s, my master’s. I ended up going back and getting a doctor of physical therapy all without any debt. And my wife came out. She was, um, came from a similar upbringing, but her family was not savers. And they were just weren’t able to help her at all. So she worked full time going through school, but she still had a small amount of debt. And so before we got married, we just kind of developed the system that we would live off of her salary and use all of my money to get her out of debt and to start saving for a down payment on a house. And it just was working. And throughout time we were gradually increasing our incomes. So through our whole career, we always lived off of her salary and we always banked mine.

So that was the big thing we did right from day one. And so we had a substantial amount of savings, pretty quickly saving a full professional salary. And then as far as what we did wrong, like I mentioned, like, I just didn’t think the idea of early retirement was even possible for people like us and the things that we’re doing now. I would’ve never really imagined we could actually do. So we kind of went into the idea of, you know, you need an expert or advisor to help you with your investments. And we really didn’t do any due diligence. We didn’t ask any questions, basically whatever he said to do, we did. And looking back on it now with the hindsight and some wisdom that we now possess, I mean, it’s insane that we did that and didn’t ask any questions and just literally handed over throughout our, you know, twenties for a whole decade, hundreds of thousands of dollars in assets, zero questions, but that’s exactly what we did. And I feel actually kind of fortunate the advice we got. We didn’t really get ripped off. Like he didn’t take our money. What we got was actually pretty standard financial advice if you’re going with a commission-based advisor, but it ended up being quite expensive because we made a lot of mistakes in the process.

Chris Pratt: Okay. So you said two, well more than two really big things, but I wanna start with these two big things. You said one that you increased your income and two that you lived off of your wife’s salary and banked to yours. In other words, you guys saved. So first, how did you increase your income? How did you consistently do that?

Chris Mamula: So my wife and I, we had pretty parallel career paths, but we had totally different careers. So it was a little bit different. So for me, I was in healthcare. Uh, we lived in Pittsburgh, Pennsylvania. I went to the University of Pittsburgh. There’s three physical therapy schools, right in Pittsburgh and many States don’t have only maybe one or two. So like there was just a glut of physical therapists. And so what we found, um, I guess it’s kind of the popular term now is geo arbitrage, but where you move somewhere where you can make more money, but just by moving about two hours outside of the city into a more rural area, I basically doubled my income. And about two years after getting out of school and then my wife, she originally had a math degree. She was thinking she was going to be a math teacher and decided she didn’t want to do that.

So she got in and she’s just done a variety of different jobs. She’s worked for an actuarial farm, she’s done human resources, but different companies. She was with, if they offered, um, a tuition reimbursement, she would jump at that and she just continued her education. So she also now has three degrees through the process. Um, she did the last two without any debt. And so through getting an MBA and then she has a master’s in operations research. She was able to, uh, again, kind of have a similar trajectory where she had a couple of big jumps and we kind of both maxed out. Neither of us made really big money, both less than a hundred thousand, probably maxed out around 90,000, but by living in a lower cost of living area, you know, that money goes pretty far. And, uh, and again, we were living well off of her low salary. So as she was making these increases, we were allowing our spending to increase. So there was really no sacrifices involved. We were increasing our lifestyle the whole time, but still because I was up in my income, we were basically saving 50% the whole time.

Chris Pratt: So I, I want to make sure that everyone understands the distinction there is that you are able to feel like you were growing and spend more because you started from a really healthy and strong foundation. And that’s why I encourage a lot of our listeners who are in college, or maybe even in high school or who are young professionals who feel like maybe they don’t have a lot of income right now to start small because once you start spending a lot, it’s very difficult to spend less. I relate it to weight and eating right. People who are overweight have a very difficult time losing weight, but people who are a healthy weight and have been their entire lives have a much easier time, simply maintaining that way. And once you gain weight, it’s a lot harder to lose it. And in fact, our bodies tend to want to regain that weight and it becomes harder even with the same amount of food that you eat. So it’s the same idea with money. The more you are comfortable spending, even just as a percentage of your income, right? It’s not necessarily just the dollar amount, the more you will spend, uh, whether you make 50,000, a hundred thousand 200, 500, whatever. And, uh, that can be a bad, a bad story.

Chris Mamula: If I could just add one thing there. I think that’s a great point. And one of the reasons I really started writing, so I had mentioned, like, I found these FIRE financial independence, retire early blogs, and it seemed like all of them were about like extreme frugality and optimizing every aspect of your spending. And like, that was just never our experience. And I think really for us, that was because we figured out how to be happy with out, having very much early on. And then, like I mentioned, we grew into our spending and we were spending more, we were doing nicer vacations, bigger trips. We had a nicer house, things like that. But at some point, like we realized like, because we were spending more, we weren’t getting any happier. And so we actually, our spending kind of dropped back down a little bit once we kind of hit that certain point.

And I think like, if you can equate your spending with spending money on the things that truly make you happy, I don’t think you have to sacrifice. I really reject that. But for everybody, it’s going to be a little bit different and you have to kind of figure that out, but don’t assume that it takes suffering and sacrifice of any sort, because I don’t think to your diet analogy, like I’m not a very good diner and I’m also not very good at like depriving myself of things that I want. But if you kind of really think about the things you want, like, we really saved on big things that a lot of people mindlessly spend on like housing, cars. And then as we were able to get our basics down taxes, investing fees, things that don’t add any value to your life, but they take up a lot of spending for most people because they don’t live consciously and they don’t think about those things.

Chris Pratt: Yeah. So, okay. So let’s start to get into more of the nitty gritty of the details. You mentioned taxes and spending fees. So you said you had an expert advisor and how much did you pay them?

Chris Mamula: So this is the funny thing. Like we had no idea. Um, we were with them for 10 years when we first started, he talked about like commissions and commissions are on your statement if you’re, if you’re buying your investments through a commission-based investor. So our advisor. So we knew that, uh, and you, you see that if you look at them, then we also knew we were paying him like a $400 a year planning fee. So we knew that, but there’s all these back-end fees. We had no idea. So he was putting us in these really expensive funds. And like I had no idea what an expense ratio was. So we were paying about 2% of our assets on the backend, and we had no idea we were paying that part of that was in fees. Going back to him, part of that, he put us in this, it’s called a variable annuity, which if your listeners don’t know what that is, you’re probably better off for it because very few people does that investment ever really makes sense for, but we had like a hundred thousand dollars in a variable annuity and didn’t even know what it was or why we had it.

Again, I told you, we just kind of whatever he said we did and didn’t really ask questions. And so when we look back, we were paying about $8,000 a year and we really had no idea what we were paying. If I had to guess I would have guessed maybe a thousand, um, but no idea, um, because they really kind of hide these fees in totally legal and legitimate ways if you read your paperwork, but like most people we didn’t. So we were getting crushed by fees. And then we also were paying tremendously. I mean, I would consider taxes a fee if you invest in a tax inefficient way. And we were not utilizing just very simple, it would probably actually have been easier to use our 401k, but we were bypassing that on our advisor’s advice. So we’re paying all these extra income taxes. And then we were putting our money into taxable accounts where we’re paying taxes on an annual basis on money.

We didn’t need, I was generating taxes and it was actually elevating our income to a level where we couldn’t use our Roth IRA anymore because we were starting to generate so much investment income and we weren’t reducing our income by using the 401k. So, I mean, it was just things pile on top of each other. So when we really broke it all down, it was about $20,000 a year between the fees directly going to the advisor and excess taxes that we really shouldn’t have paid, but it was in his best interest to steer us to invest in this way, because that’s the only way he could charge those fees. So, yeah, it’s pretty insane when you look at it in dollars a year.

Chris Pratt: $20,000 a year. Wow.

Chris Mamula: And we never saw it. And it really never realized it was happening, which is kind of hard to believe. But, uh, yeah, I’ve broken it down.

Chris Pratt: Wow. Okay. So there’s a lot that you actually talked about here. You mentioned a 401k and that they had bypassed your 401k. And recently you wrote about Bill Begen updating his original research of the 4% rule. So can you talk about what a 401k is before we get into this 4% rule and the early retirement portfolio?

Chris Mamula: Yeah. So your 401k is just your most common, uh, work retirement plan where your, your employer sponsors the plan and you can take money directly out of your paycheck. You put it into the plan into your investments. So you don’t pay income taxes in the year that, you know, you earn the money, you pay it down the road. When you take it out where for most people, particularly people who are living our lifestyle in the, like this early retirement lifestyle, you’re going to pay less taxes later because you’re living well below your means. And you’re going to gradually recognize that income over many years versus in one year. So that’s your 401k, uh, there’s other versions. There’s like a 403B. If you’re in a, not-for-profit, there’s a thrift savings plan. If you’re a government employee, but they all kind of basically work the same for the purpose of this conversation. We’ll just call them all the same thing,

Chris Pratt: The one caveat to a 401k. And we talk about this a lot in this show, and it’s something that scares a lot of young people and holds them back from investing in a 401k or an IRA, which is an individual retirement account, which is, uh, essentially a non-company sponsored version of a 401k same idea. It’s just a tax advantage. But the caveat to those tax advantage retirement accounts is that you can’t take the money out without a penalty until you’re 59 and a half years old. And so for someone like me, who’s 22 years old, that’s a long, long ways away. That’s more than twice the time I’ve been alive. And so that’s really scary, right? I’ll spare the speech this time. I talk a lot about on the show, how you should do it anyway, regardless of whether it’s scary. Um, there are a lot of important things to do that are scarier or that might not necessarily be fun to do in the moment, but if you can’t take the money out until you’re 59 and a half, I imagine that it’s not going to be your only tool if you want to retire early.

So can you talk about early retirement and how someone who wants to do that can achieve financial independence and retire at 41 years old, which is amazing by the way, Congratulations.

Chris Mamula: Thank you. First thing. So you mentioned that there’s your IRA, your 401k, all of those accounts, they have limits. So you can’t just put your whole paycheck in there. So with 401k’s, uh, we’re recording this in 2020, and off the top of my head, I believe the limit is $19,000 a year, maybe $19,500.

Chris Pratt: Yeah, $19,500.

Chris Mamula: And then you have like IRAs, which have say a, I believe at $6,000 this year is your limit. So you have different accounts with different limits. If you’re saving, like I mentioned, we were, if we’re really looking at an extreme early retirement, you’re saving a whole salary, so you’re going to max those out and you’re still gonna also use taxable accounts. But the difference between what I mentioned with our advisor, where he was having us put everything into a taxable account, we were putting our first, let’s say for this year, if it’s $19,500, $39,000 would be coming off of our taxable income for the year.

And then we still had other money. We would invest other places. So then we would go to a Roth IRA because we couldn’t deduct any more if we use the traditional. So we’re putting money in a Roth IRA, which is another retirement account, but it’s different from your tax deferred accounts. And that you can take out the money that you invested at any time, cause you’ve already paid taxes on it. So you can take that money out and use it if you need to. And then we were also investing in taxable accounts, which you can use that money at any time you need. So there’s different accounts and, and everybody, depending on how much you’re saving and what your particular situation, you might want to use those accounts in different ways, but there’s definitely advantages to each. And so it’s worth taking a little bit of time to learn that and learn the difference between them. And the one advantage for a 401k is a lot of times they will have an employer match and I would encourage, no matter what you think is the best, whether it’s a Roth or a taxable or a 401k, if you have a match, that’s basically free money. So it’s a hundred percent return on whatever that matches because your employer is just matching whatever you put in. So there’s no risk on your part. And I would encourage everybody to at least take advantage of that. I mean, that’s, that would be crazy not to do that.

Chris Pratt: Okay. So this is really great information. It is really amazing. You talked about Roth IRA and a number of other topics. I want to make sure this is clear for everyone. So let’s say, you know, I’m 22 years old. I just graduated from college or I’m in college and maybe I just did an internship or what have you and I’m already like, I don’t know if I can work until I’m 60, 65, 70 years old. I want to start planning for an early retirement. Now, you know, I’m a banker, I’m a sales associate. I’m a, I don’t know what have you, I mean, customer service and I’m, I’m just really not feeling this. Um, maybe even a doctor or something like that. Um, what steps do I have to take to retire early? Because I imagine some people might think, well, if I have $10 million saved up, or if I have a million dollar saved up, that’s a hundred thousand dollars for 10 years or $50,000 for, for 20 years. So, you know, I could live off of 50,000 for 20 years if I have a million dollars saved up. But then there’s the concept of inflation. There’s these concepts of interest, right. Things just get really confusing and complicated. So like, could you just walk through maybe just a single example, either yourself or just a sample person, what they would have to do to be able to retire early and what they would invest in?

Chris Mamula: Yeah. So, I mean, I think the absolute first step for anybody, no matter where you’re at is I think it’s really important to know what you personally spend. There’s this rule of thumb that you need to replace like 85% of your income on the last year. That’s what you need to kind of have to retire. And that’s totally nonsense, right? Because let’s say we have two identical twins and they have the same interest and they desire the same lifestyle. And one of them went to become a math teacher and he’s making say $40,000 a year. And one went to become an orthopedic surgeon. He’s making $400,000 a year, but they have the same interest. They want to do the same thing. Why would one person need 10 times more money than the other? It’s just nonsense. So if you start with determining what you spend, what you want your lifestyle to look like, that really is going to be the determinant of everything going forward.

As far as how much you need to retire. It all comes back to that spending, which people, a lot of times, they don’t like to think about. Cause again, they kind of associate with, I can’t spend it’s sacrifice, it’s suffering, but if you line up your spending with your values, that doesn’t have to be the case. And you really have to start with spending. You mentioned before then the 4% rule, which is just this real rough, uh, I’d call it more of the 4% rule of thumb, but there’s really rough rule that in retirement, if you have a pretty standard traditional portfolio, which if you want, we can dive into that, what that means, but you can take 4% a year. So if you spend $40,000 a year, you would need a million dollar portfolio because 4% of that is $40,000. And so the inverse of that, then what that means is if you know, you’re spending, you need 25 times that enable to produce that 4% a year. So $40,000 times 25 gets you to that million dollars. So I think that is a really good place to start. It’s not the be all end all. It’s not a magic number. It’s not set in stone, but I think again, knowing your spending and then understanding that 4% rule in that inverse of that, where you need 25 times, your spending to get to that number is a really great place to start your planning.

Chris Pratt: So you mentioned this standard portfolio, you talked about bonds and how rates are really low right now. I think that really the basis of retiring earlier, any kind of financial success is saving, right? It’s putting money somewhere, right? So let’s say, yeah, I’m 22. I just graduated college. Where do I put my money?

Chris Mamula: Just to reiterate what you just said, because it’s so important. I think so many people think investing is about like, you know, having this magic portfolio, having the right answers, having the best advisor, whatever. And it’s not about that at all. Really, if you don’t have anything saved, it really doesn’t matter what your return is because you know, whether it’s 10% or 20% of the 30%, if it’s of nothing, then that’s still nothing. So the key thing early on, it’s all about savings and building your savings rate up. And once you start to do that, I think for the vast majority of people, the simplest approaches are the best approaches. So focusing on the lowest possible costs, wide diversification, and just letting your money grow over time. If you’re really young, even in normal times, bonds tend to not do as well as stocks. But right now with rates being very low, I think the more stocks that you are able to tolerate and take on the better, but you just have to understand that, you know, stocks can go up and down dramatically, but if you’re that 22 year old, just starting, uh, over time, that’s where you’re going to tend to get the most growth.

If the future looks anything like the past.

Chris Pratt: Yeah. So should I buy 10 shares of Apple? I don’t know. That might be very expensive now, but should I buy, you know, should I just buy shares about like, what should I invest in?

Chris Mamula: So I, I mean, I can’t tell anybody what to buy, but for me personally, I mean I use index funds. So what that means is basically you’re just buying small pieces of every company in the economy in proportion to their size. So you’re buying them at extreme, low costs and you’re just buying them with the idea that you’re going to hold them forever. And over time they’re going to pay you dividends, which will then reinvest. And over time, those businesses are going to grow and become more valuable, which you’re going to hold onto. And so your wealth is going to grow in that way. And I’m not trying to pick any winners or losers by buying the index. You’re buying everything, which is, if you’ve not read about this or thought about this, it’s extremely counterintuitive, but there’s just a tremendous amount of research that over time buying the index versus trying to pick the best companies is going to give you the best returns. And also it just kind of takes that mental burden away from you. So you can focus on growing your career, saving more and just enjoying your life, um, which is really what it’s all about at the end of the day.

Chris Pratt: Yeah. So of course, the reason I asked that question and played devil’s advocate is you had mentioned that this idea of, well, two things, low cost and why diversification, right? So investing in a single company, buying a stock of a single company, which means you essentially own a small percentage of that company is not diversification. So that would be in your context, narrow diversification, buying the index is quite the opposite where you’re buying pretty much every major stock. And depending on which index you buy every major stock in the U S stock market, there are indexes that track, you know, the 500 largest stocks in the US stock markets, the S&P 500 they’re indexes that track the 2000 largest companies in the US stock market. There are indexes that track global markets that track emerging markets, right. And all of those indexes put a ton of different stocks in there.

So that they’re automatically diversified. The other thing you talked about was the concept of low costs. So when I started investing, the only cost I knew anything about was the commission, right? And I think, uh, I was using TD Ameritrade and they had like a $7 commission on my $10 trades. So, uh, when I was trading back in high school, but now all of these, you know, pretty much all of the mainstream brokerages have no commissions, but there are still costs outside of just, you know, the cost of doing a single trade. So the cost of buying an ETF or buying a single stock, you talk about what those costs are, what an expense ratio is.

Chris Mamula: Yeah. So an expense ratio is just basically a fee as a percentage of the assets that you own. So I mentioned using a, uh, very low cost index funds. So if you’re, and again, I can’t recommend anything, but if your listeners just want to Google like VTSAX it’s, the Vanguard total stock market index. And that’s one of my core holdings in my portfolio, I believe it’s like 0.04%. So that means if you have a hundred dollars, you’re paying 4 cents a year on that. If you have a million dollars, you’re paying what’s that $400 a year, I’m trying to do math on my head here real quick, um, without, without coming across as being erroneous. But it’s really small as compared to the average, like I mentioned, when we started, we were paying 2% a year, which doesn’t sound like a big deal, you know, 2% versus 0.04%, but that same million dollars at 2% would be $20,000 a year in fees on a million dollars.

So it’s pretty outrageous. When you think about that, just a little bit of context, we talked about that 4% rule. So if you can take 4% from your portfolio every year, if you had a million dollars, you could take 40,000 to spend, but when you’re taking that, that does not take into account investment fees. So if you’re paying say 2%, that means the first 20,000 goes to your investment advisor and all the different funds that he’s put you into. And then the second 20,000 is what you can actually live off of. So if you can pay $400 a year versus $20,000 a year, it’s quite a difference. So, uh, it’s really important to be aware of what that fee is on your investments.

Chris Pratt: Yeah. And if you use any of the robo-advisors like Betterment or Wealthfront, they tend to invest you in Vanguard funds. And I recommend if you’re nervous about investing, use a robo-advisor for a month or two, they’ll give you a month of no fees. They have an added fee it’s pretty low. I think it’s about 0.3%, but they have an added fee on that they’ll weigh for a month or a few months, or maybe even a year. Um, and you can see what they invest in, and then you can, um, even potentially just learn about those funds and figure out why they pick those funds and then go invest for yourself. So we’re out of time. This was really amazing, Chris really great information. I wish we had more time to chat. Thank you so much for coming on the show again, Chris Mamula, he is a partner with Daryl Patrick in Can I Retire yet. That’s “Can I retire Yet.com” He’s also the primary author of the book, choose FI, your blueprint to financial independence. And he has an amazing documentation of his retirement journey @eatthefinancialelephant.com. So lots of great content there. Thank you again so much for coming on the show, Chris.

Chris Mamula: Thanks for having me, it has been a lot of fun!

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