There comes a point in a parent's life when they want to own more of their time and spend it with the ones they love the most, but financially, it's not always the easiest to accomplish.
Chris Mamula is my guest today. He faced this challenge when he became a new father and used his high savings rate and passion for his young family to achieve financial independence and retire at age 41.
Chris is the award-winning blogger behind Can I Retire Yet? A blog focused on helping others navigate financial independence and early retirement. He's also the author of the new book, Choose FI: Your Blueprint to Financial Independence.
Andy Hill: How did your daughter help inspire your financial independence?
Chris Mamula: I think for many people, the idea is you can't retire early with kids. For me, it was the reason that I was able to retire early; because we had a child.
My wife and I, we were good savers since really the moment we got out of college. We started living off of her salary and saving mine, and not with any real goal in mind, not with any idea that normal people with normal jobs could retire early, but just because it felt good.
We came from backgrounds where we didn't have a lot of money, and so it gave us some cushion. We were saving, but we had no idea what we were doing.
Our idea was to use these savings to give us some buffer, and then we were going to move West. We lived in Western Pennsylvania, and we were going to move to Utah in 2012. My wife had like her dream job opportunity lined up with a company called Black Diamond that makes skis and climbing gear.
The week that she got a job offer, she found out that she was pregnant, and so instead of this “dirtbag, ski bum lifestyle”, we were like, “We need to kind of get serious and figure out what we're doing.”
So that was like my impetus to start learning and uncovering what I needed to do to have a real plan and realizing we were making a lot of mistakes along the way.
How did you personally define financial independence as a family?
As I started wanting to learn about personal finance, I stumbled into the FIRE (Financial Independence Retire Early) Community. We went from this idea that normal people can never retire early to finding these stories.
The way they define it is you're financially independent when you have 25 times your annual expenses. When you get to 25 times that, you can take 4% a year, and it's called the 4% rule. More or less, you know that you're going to be financially independent and you can live forever off that.
We went from one extreme to the other, and we got pretty gung-ho on this whole FIRE thing, and then as we started going down that road, we realized, “Well, you get to financial independence by being really comfortable and enjoying saving.”
You can't get there by suffering, scrimping, and sacrificing, so you have to have comfort in saving. You're going from building up this big nest egg to actually spending it down, which was kind of terrifying for both of us, especially my wife, who got a real sense of security from that. Going forward, we kind of realized we need to have our own plan and come up with something a little bit better.
Why and how did you modify your financial independence goal?
What we realized is we wanted to escape the life we were living because we were feeling trapped, as if our time was totally dominated by our jobs. It was all about escaping this. But then, what we realized is retirement initially built it up as like this nirvana where everything would be perfect.
There's a lot of positive things that come from just that sense of security from having this high savings rate. You're serving people and helping people with your work.
How could we use the financial independence that we've built to design the life that we really want to live and make time for the things that are important to us?
What was your income around this time?
We both topped out around $80,000-$90,000. So above-average salaries, but never huge money.
By the time we found financial independence, we had already paid off our mortgage, so we were mortgage-free.
We had no car payments, so I want to say we were spending about $45,000 a year. That's a pretty nice lifestyle with no car payment, no house payment, so it was really pretty much all discretionary spending.
Did you decrease your expenses or increase your income?
We were at the point where we were saving so much already. We weren't really worried about trying to increase our income.
Actually, my wife cut back. Initially, she thought she was going to go back to work in 6 weeks, and that turned into 6 months, and then she realized she didn't want to go back to full-time work, so she never has. She cut back to about 30 hours, and she's never really worked more than that since then.
We never really tried to focus on increasing the income side. Once we started tracking our expenses, even though we already had this high savings rate, there was some simple stuff like our cell phones. I'm not a tech person, and so I was still using a flip phone. I was reading these bloggers talking about these MVNO plans, and so I looked into them.
I ended up like upgrading my phone, so I have a much nicer phone with much better functionality, and I pay like $10 a month where before I was paying like $40 or $50 for this crappy phone with a crappy plan.
As you pay attention to where your money is going, you can actually live better for less, and then as we started figuring out the technical side, we realized like we cut our taxes and our investing expenses by probably about $20,000 a year.
Was it your investment strategy that helped you cut the taxes?
When we started, we were investing with (what we thought was) a financial advisor. What we really realized was we were dealing with a commission-based salesman, and so we were paying upfront fees on our investments, and then we were paying backend fees on our investments, which we didn't realize.
Because of the strategies we were using, we weren't utilizing our 401k and 403b plans through our work, which was costing us. On the upfront, we were just missing on that tax deferral, which we would pay because of our low expenses at a much lower rate in the future.
Also, because we were then not using that, our investments were creating taxable income. That was feeding into the more taxes than we were paying. Then, because of that, we were creating this extra income. We actually couldn't use our Roth IRAs anymore because it was increasing our income. It was just one thing piling on top of another.
My employer enrolled me to the point where I would get the employer match, and the advisor basically said after that like he wouldn't contribute anymore because he had all these “better options” and that he could do much better than what we could do.
Again, we just didn't know what questions to ask, so we didn't ask any questions. Looking back now, I can see like, “Man, that was not very smart,” but I think that's a position that a lot of people are going to relate to, and they just feel investing is overwhelming. It doesn't have to be, but for a lot of people, that's just the perception.
Did you then take on investing yourself?
Yes, I did. I became a do-it-yourselfer.
I still had that in my head that investing is too hard, nobody can do this themselves, and so my initial question was, “Where do I find a better advisor?” As I started reading things, I started to kind of come across some things that maybe I could do this and it wasn't that hard.
One person who I read a lot that was influential is a blog called The White Coat Investor, and a quote that he has that I just absolutely love is like:
“By the time you know enough to understand what advisor you should work with, you know enough to just do it yourself.”
So I found a lot of truth in that, and I do think there are people that can use help. But again, if you're going to seek help, then you have to kind of know the questions to find good help.
Did you have enough at this point to cover your annual expenses?
We got to that point, but that implies that the future would look a lot like the past, and we weren't really comfortable with that. It implies that you're going to have to spend down some of your principal, and so if you get some bad returns early in the start of your retirement that your money could have a greater chance of running out, which we weren't really comfortable with.
We decided to get to the point where we would save 50%.
We have relatively low expenses, so what if we had this more as an insurance policy, and then we only need to produce instead of making. We topped out in the $80,000-$90,000 range. And then we thought we can cut our income and work just a small fraction of that to be able to make that $40,000 to $45,000.
At that point, you're not paying much income tax at that level, and so we could really have the best of both worlds where we can free up a ton of time without having the scarcity mentality and we could not worry about running out of money. If new opportunities arose, we could continue to give generously all the things that were important to us, so that's kind of where we settled.
What does a day look like for somebody who is financially independent and retired early?
We started off talking about being motivated by having time with my daughter. I think before we get into what it's like now, it's kind of important to know what it looked like before.
Before, I would wake up in the morning and I was writing a blog. I would try to get my workout in, so I get up like at 5:00 am, and I try to cram all that in between 5:00 and 7:00, and then I get showered.
Basically, my wife would have my daughter ready, and I would grab her hand, pick her up literally in her car seat, and carry her out. That 10 minutes between the house and the daycare was what I had with her, and then I would work till like 5:00pm until I got back to get her at like 5:30pm, and then we got home, and got her unpacked and everything.
We basically had 60-90 minutes to eat dinner and shower, and read her a book, and then that was it. That was my whole interaction, and then when the weekends came I wanted to spend time with her, but I also had my own things like I wanted to write more. I wanted to get outside and do my outdoor activities and it was like this constant decision.
Now, what it looks like, to get back to your original question. We have our routine and we go to bed together as a family like at about 9:00 pm, and I get up at about 5:00 am or maybe 4:45 am every day.
A lot of people think, “Oh, retirement. I'm going to throw out the alarm clock and stuff.” I actually don't use an alarm, but because we go to bed so early, I just get up that early.
I do my writing in the morning and get my productive stuff out of the way, and then at 7:00am, I hear her feet pattering upstairs, and I go upstairs, and we sit for an hour and have breakfast together.
Then I take her to school, and we talk along the way, and then I have basically the day to do free. Some days, it looks like going out and skiing, or riding my mountain bike, or doing whatever. Some days, it means coming home and doing some more work.
My wife still works part-time, so some days, it means me cutting the grass, and cleaning the house, and doing some of that stuff that's not super glamorous, but it needs to get done. But regardless, by 3:00 pm every day, I'm done with my day, and I pick her up, and then we have the day to do whatever.
She's actually starting to get to that age already at seven where she wants to go out and play with her buds. Some days, she still doesn't want to be around anyway.
A lot of times, we have the evening to do whatever we want, both my wife and I, our day is pretty much done by 3:15 pm, and we have the day to spend with her.
I think some people will criticize and say, “Well, that's not really retired because your wife is working part-time and you're doing this,” but the things that are important to us, we have all the time in the world for. So really, yes, we're still working, but it could not look any different.
What advice would you have for people aspiring to reach financial independence?
If you look financial independence and you hear this 25 times number, it sounds really overwhelming. I think the important thing is just starting, starting where you're at today.
Most people, they don't know where their money is going. Hopefully, if you're listening to the show, maybe you're the exception, but I think probably the most important first step is just knowing where your money is going like sit down, start tracking it, or budgeting, or whatever works for you.
Related Interview: What Financial Independence Means for a Young Father – with Jim White
I was never a budgeter, but like we talked about when we started tracking where our money was going, you start to see things that you didn't realize, and so just starting to get a sense of control, and you can start to make some changes to improve. I think that's a great place to start.
I think a lot of people think that financial independence is the goal, but what I found is that as soon as you start to get some of this control back in your life, like you can start making changes and start building a better lifestyle. It's starting to do that earlier in the process. It's something that I think we did intuitively and never really thought much about, and then we got stuck on this retirement thing. We were actually happier, and again, in some ways before we knew about it, so I think it's important to not miss that, and not overlook that, and to use your money to build the life you want.
You don't have to be financially independent by that 25 times rule by any means, but just getting maybe debt-free adds freedom to start designing your life going forward.
Starting to have a couple years of runway to leave a job where you know you're not going to lose your car or lose your house if you don't have that next paycheck coming – it gives you a lot of peace of mind. So all along the journey, you're building power and freedom, and we're still there.
We're still looking to grow, and build, and learn, and get better.