Ep690: Chris Mamula – Take Responsibility for Your Financial Situation

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community. We know that to win in investing, you must take risk but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives to join me go to my worst investment ever.com and sign up for our free weekly become a better investor newsletter where I share how to reduce risk, create, grow and protect your wealth. Fellow risk takers this is your worst podcast host Andrew Stotz, from a Stotz Academy, and I'm here with featured guests, Chris, mon medulla, I just had it written out but I didn't pronounce it right tell us how to pronounce that property. mula, mula Mamiya. Chris Mamula. Chris, welcome to the show. Are you ready to join the mission?

Chris Mamula 00:52
I am ready to roll.

Andrew Stotz 00:53
Okay. There's something behind you there, I see an arrow and I see another thing. And I see, look at that. Any significance there.

Chris Mamula 01:03
Um, so the book in the middle is my book Choose FI, your blueprint to financial independence. The arrow pointing to it is just something we picked up when we were on a road trip, it says choose your own adventure. And it kind of points to that. And that's kind of the theme in the book. And then the little other thing, that's something I think my mom got me It says the mountains are calling and I must go and I am a mountain person. That's where I love to be. That's my happy place. So

Andrew Stotz 01:27
that's great. Well, let me introduce you to the audience after poor experiences with the financial industry early in his professional life, Chris educated himself in investing in tax planning. He now draws on his experiences to write and speak about wealth building, investing, financial planning, financial independence, and early retirement offers often called Fire and lifestyle design at the blog, can I retire yet? Chris is also the primary author of the book, choose fi your blueprint to financial independence. In addition, he works one on one with those looking to improve their finances, and use them to create a better lifestyle as an advice only financial planner with a bundle of wealth. Chris, take a minute and tell us about the unique value that you are bringing to this wonderful world.

Chris Mamula 02:19
Well, Andrew, I think from the perspective of the world of finance and investing, I think I bring two things. One, why I love this topic, and I can go on about it forever. It's not my first love. And that's my first love is the outdoors and adventure. So I'm a skier rock climber and mountaineer. And that's what I love to do. And so I think the approach that I got from that is, I think, with investing and finance, people look at things as safe and risky. And the perspective you get when you're in the outdoors and seeking an adventure is you learn to manage risk. So you can come home at the end of the day. And so you have to take some risk. But also, you know, if you don't manage it correctly, you know, it can wipe you out. And the same can be said of finance. So I like to bring that same perspective. And that's what I bring to this. And then the other thing that I think I bring is, while I am now in the finance industry as a planner, and I write a blog and a book, I didn't do anything ever to monetize anything with personal finance until after I was financially independent, and I retired. So my original career was as a physical therapist, and I had some bad experiences, which is what I'm here to talk to you about today. But that's kind of what motivated me. I really wanted to just help and serve other people. So I think a lot of people in the finance industry are coming, always looking to sell you something. And while I now am again, part of that industry, I came to it from a totally different angle. And after the fact of having already reached financial independence. Yeah, it's

Andrew Stotz 03:41
good. It's good point about the risks. You know, when you're doing sports, when you're doing outside activities, when you're, you know, getting aggressive and pushing the limits you're constantly aware of risk. Whereas I think that a lot of people that come into financial world, they think I gotta get rid of all that risk, you know, and I, it's too risky. For me, a great example is putting your money in a bank deposit, you know, say I'm a low risk person. So I put my money in the bank, and I always say to people, whoa, that's high risk. 3040 years from now, when you need that money to retire, it's going to be worth a lot less. And that's called shortfall risk, and you're exposed to it. So don't think that just because you're low risk, and you say I don't do this, I don't do that, it doesn't mean that you are reducing your risk. So being aware of risk, I think is what you're explaining from your outdoors. And I think that's you know, so critical.

Chris Mamula 04:34
Absolutely, yeah, and I think everything is just a series of trade offs of risk versus reward. And you know, like, if you never leave your couch, you will certainly never die in an avalanche or die of a rock fall or anything like that. But you also never experienced those things and you set yourself up to have heart disease and obesity and diabetes and all these other risks that come from our sedentary lifestyle. So yeah, everything's everything's a series of trade offs.

Andrew Stotz 04:56
Yeah, I think Thomas soul was the one that said that Are there no solutions, only trade offs? And I think that's a great way to look at things. Well, now it's time to share your worst investment ever. And since no one goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to it, then tell us your story.

Chris Mamula 05:17
Okay, so I think for a lot of people, like it was one bad decision or one thing, my worst investment was a decade long process. And I was a college graduate with a master's degree coming out, becoming a physical therapist. And so starting to spend, you know, seven, eight years learning to make money, never had any idea what to do with it. And I think like many people, I was overwhelmed and intimidated with the technical parts of finance, investing and tax planning. And so this advice that I hear everywhere is, you know, if you don't, if you need help, go seek a recommendation from someone who you trust. So I went to my parents who I trusted more than anyone else in the world. And they were generally decent with their money. As far as you know, stretching a paycheck, managing a budget, they helped get my brother and I through school, what I didn't realize is the reason they were using an advisor is because they had no idea what they were doing with investing in tax planning. But because I trusted them so much, I asked exactly zero questions of the adviser they were using, and I went in blindly trusting everything he told me. And after a decade of receiving really poor advice being sold, I high cost commissioned, you know, insurance and mutual fund products are being advised to skip the tax advantage of my retirement accounts to go with him because he had, quote, better investments. After a decade of this I, I finally stumbled into some better investment advice. And I realized all the mistakes I was making. And I realized that over the course of a decade, I, you know, wasted well over $100,000 in fees, another $100,000 in taxes. And because I've done it so early in my life, it was easily a million dollar mistake when you compound over time. So yeah, my mind mistake lasted a decade. And I put it up there with anybody.

Andrew Stotz 07:04
Yeah. So you managed to drag it along for a while, I'd say yes, that's the record of it. There's a few things I was just thinking about, you know, the first thing is that when people started to make money, and they're like, let's say, an engineer, or a therapist, or a study, you know, medicine or whatever that thing is, they start making money, they get out there, and then they come across a financial person. And then they think, oh, yeah, this is what you're supposed to do. You know, he's supposed to do this, and you're supposed to do that, and he's supposed to get insurance, and you're supposed to get that. And so they actually feel comfortable with the solutions that that financial professional is bringing them. And, you know, one of the lessons I've learned is that, you know, there is, you know, investing is actually quite simple, right? And what ends up happening is it financial professionals oftentimes make it complicated, and they make it complicated to validate their job. So that's the first thing that I was just thinking about when you were talking about that. And then the second thing is that, I always tell people to say, Well, how should I in you know, invest or know what to invest in? I say, just what you should do is never invest in anything that somebody calls you about? Well, they say, How the hell am I supposed to find out anything I mean, that's how I know anything. I'm like, if you someone's if someone's calling, you know, that they're generating income from you, and from that call. And as a result, you know, they're not doing that for free. And I call him because I thought I'd go to the phonebook today and find somebody randomly and call them and help them to make their life better. Those are some of the things but maybe you can talk about the lessons that you've learned from this experience.

Chris Mamula 08:50
Yeah, absolutely. So, I mean, I think that the big lesson that I've learned is that you can't just blindly go in with because there's just so many conflicts with financial advice. You can't just blindly go in trusting anyone. I mean, I talked about my background, and how that makes me in my opinion, more trustworthy, because I don't need to sell anything to support myself. Also, the company I work for, we kind of align our incentives, we're an advice on the company, we don't sell anything. We don't profit from any recommendations. So again, by structure, we set ourselves up, but that still doesn't, you know, I could be, you still have to ask questions, you still have to have your guard up. Even if you come to talk to me, I would give you the same advice like ask questions. Look at what are the conflicts, look at you know, when there is a conflict between my interest in yours? Are you getting the best advice? You would across the board? That's what you always want to do with everybody because otherwise you're setting yourself up for disaster.

Andrew Stotz 09:47
Doesn't mean it's kind of interesting is you know, sometimes a person that works, that works in other it's in other words, it's working for somebody, that doesn't mean that person is going to work for you And that's one of the interesting things. And then the second part of this is that it's very possible that your parents just didn't know the amount of money that he was charging for all the different stuff. And so as a result, I can remember my father saying, I can't figure out how I pay this guy. And I know, that is, you know, one of the signs that you have to be careful of, but, you know, talk for a moment about that concept that, you know, just because someone worked for another person doesn't mean that it's going to work for you.

Chris Mamula 10:31
Yeah, well, I had kind of two thoughts as you were talking there. And that's the question. The first is, my parents absolutely had no idea what they were paying. But despite that, it when I went to them, and I told them that I was taking control of my own finances, and I would like to talk to them and look into things, they were actually a little bit offended, by the way I talked to their advisor, because, like, this was a relationship he built with them. And that's kind of how a lot of the times they go into it, they, a lot of these people, when they're trained, like they are asked to get a list of contacts that they know and people that they trust, and, and to go in, because that is the way in the door. And so eventually, I ended up I do now manage my parents money for them and help them. But it took probably three or four years to the build up the trust that I knew what I was doing, and that they wanted to work with me. And then the second thought that I had is cut. So as bad as my experience was with this advisor and the industry in general, my first thought was still that investing is so complicated, I need to find a better advisor. So I talked to my physical therapist, friend. And I said to him, I said, you know, do you use an advisor? And he said, Yes. I said, Well, how did you find them? And he said, you know, Dr. X and Dr. Y, they both use this woman, and they make a lot more than me. So if they're good enough for them, they're good enough for me. And like, for whatever reason, that was the light bulb moment for me. And I was like, well, these orthopedic surgeons like they went to school to learn how to repair a rotator cuff or replace a hip, what does it have to do with like, what mutual fund to buy, whether you need an annuity, how much life insurance, that has nothing to do, it just means they made more money, and so they can make bigger mistakes. But for whatever reason, that was a lightbulb moment for me, that made me say, you know, I need to learn this for myself and take responsibility for my own financial situation.

Andrew Stotz 12:10
You know, while you were speaking, I typed into the internet shareholder or statement of investor rights. This is a thing that came out from CFA Institute in 2018. And I was president CFA society in Thailand at that time. So I took that statement of investor rights, and I made some presentations about it and talked about it. And I thought it would be interesting just to highlight a couple of the ones that are related to this, right. So first thing is number three, my financial interests take precedence over those of the professional and their organization. That's an important one to think you know, that you have, you are the primary person in this situation, not the advisor. And I think that can help you to put on, you know, put you into a good position. Number five is disclosure of any existing or potential conflicts of interest in providing products or services to me like that, that advisors should be disclosing any conflicts of interests, and another one that I was looking at. So this one's great, number seven, clear, accurate, so I have a right to clear, accurate, complete and timely communications that use plain language, and are prepared in a format that conveys the information effectively. And I'll just highlight one last one, number eight, an explanation of all fees and costs charged to me and information showing how these expenses, these expenses are fair and reasonable. And that's the one I know my father felt like he didn't really understand it at one point. And the one lesson I always tell people about that. One is that if you don't understand the fees that you're being charged, you have a right, and you must ask them to explain it. And if they explain it poorly, where you don't understand, don't let that become your problem, like, oh, maybe I just don't understand the finance. So no, no, no, no, it's your money. It's your fees, you have a right to say no, please explain that in a more simple way. I don't understand that. Any thoughts about those rights and kind of how that fits in with where you feel and think about things nowadays?

Chris Mamula 14:27
Yeah, I mean, now that I'm on the other side of that advisors table, like actually working with clients, as opposed to being the client. And just earlier this week, I mean, of working with someone who was sold three different annuities. And if you've ever read an annuity contracts, if like that last principle, you talked about, like with clarity and simplicity and being able to understand, I mean, you're talking three different contracts, each of them at least a 40 page, and I think the one was 97 pages, and just trying to decipher, you know, with my now education in this and with years of experience writing about and thinking about it and reading about it. I mean, it's so hard for me to decipher these contracts, let alone three of them and for one client, it's insane. Yeah, so but that's, that's kind of what's out there. And that's what you see a lot of

Andrew Stotz 15:13
in my audience is, let's say, you know, half of my audience is in the US and the other half is outside of the US. And when you go outside of the US, it gets a lot more, you know, dangerous between the scams, but also just the legitimate and the charging super high fees. And then you get expat community, you know, for those listeners that are, you know, in the expat community around the world, you know, it's like, you're in a new kind of cool community, and people are gonna call you and talk to you about, but really, most of those financial people are just going to rip you off. And I have an advisor, a friend of mine here in Bangkok, who was part of CFA society. So I knew him well. And I had actually worked with him when we were both younger. So but he told me that he had a client that had some sort of annuity and some some other type of investment vehicle, that some bank that some person that represented a bank, put them into, he said, he said, by the time it the cost related to wrapping that up with something like 20% of the person's assets, and also he was being charged about 5% per year in fees. Now, for anybody that knows the long term return in the stock market, you could argue is probably 8%, maybe 10 over a long period of time. So that means that more 50% or more is being sucked up by fees. So that is a really important thing is to understand, but just stay out of complex situations, investing should be really want to try to make it as simple as possible.

Chris Mamula 16:47
Absolutely, absolutely.

Andrew Stotz 16:49
I mean, the complexity is a big one. Um, the other thing I, I would say this, this is something that I was thinking about, I had a conversation with a client, and I advise like institutional clients about their investment strategies, and also their risk management. And I was just talking about how you know, really, investing is so damn simple. If you were super rich, let's just say you had a lot of money, the first thing you would do is you could put your money into a broad base ETF that owns every stock in the world done, you are now exposed to equity returns, and you've minimized your equity risk, because even if the US market crashes, another market outside of the US may go up. If a particular sector crashes, well, there's another sector that's probably going up. And if a particular stock crashes, well, there's another stock that's going up. So you've diversified your equity exposure pretty much as far as you can go. And then the other part of really is just cash. Let's just make risk management simple. If you could identify when the stock market was super cheap, you would want to have cash at that time to then say, Okay, I'm gonna buy more. So maybe I had 30% of my money in cash. But when the markets super cheap, I reduced that down to, you know, 10%, or whatever that is. Now, we can get more complicated by saying, well, we can replace cash with bonds, and we could look at Gold and stuff like that. But the truth is, that just the diversifying benefit comes ultimately could come from cash. Now, I don't advise that because I think people want to have some kind of bond instrument and all of that, and gold has some value. But if you wanted to make it super simple, that would be a start. What are your thoughts on that?

Chris Mamula 18:33
Yeah, and a couple of things, I would add to that, that simplicity can also be bought for just such a ridiculously low fee. And also, because you're just buying and holding forever, you're going to be extremely tax efficient. And because you're buying just the total market, and you're invested in the whole economy. And you know that over time that tends to grow and go up. You don't ever have to second guess your decisions. Like if things are going bad, we know that the world economy is cyclical. And so you're going to go through up and down periods, you don't ever have to make decisions of when to get in and when to get out. So behaviorally it makes sense. So yeah, on every regard, it makes sense. And, and I would agree with you like there's principles, and there's tactics. So the principles are just that simple, low cost, tax efficient, widely diversified. But then the tactics, yeah. Do you want to hold some bonds? Or do you want to just use cash? Do you want to use more domestic or more international funds? Like those type of things? I don't think there's a set right answer, but the principles are absolutely across the board consistent.

Andrew Stotz 19:37
So the next question I want to ask is, normally I'll ask, you know, what's a resource that you'd recommend? And I do want to hear that, but I also thought, maybe it would be a good idea for you to give the listener has some idea for the typical person that may come to you. What are those core principles that you communicate to them just so that they understand that clearly, and then maybe you can provide a reason So I said they can either of yours or any others that they can, you know, learn more from?

Chris Mamula 20:05
Yeah, so I think the first person when I started taking control of my finances, I'll give two, there's a book, because I'm in the fire community that kind of brings these principles. There's a book called The Simple Path to Wealth written by a man named JL Collins. And then a second, he really turned me on to John Bogle, who started Vanguard. So I think anything by John Bogle and the Bogle heads are really great places to start. And so that's where those principles that I believe so strongly, they came from those resources or collection of resources. And so again, just to kind of reiterate low costs, so the more money you don't spend on your financial advice, financial products, is the more money you can keep. So low cost tax efficient, because taxes are just another cost. So limiting your trading, locating your assets, if you're going to hold interest bearing things, trying to keep them in tax sheltered accounts, things like that. So just very simple tactics, widely diversified. So you're not putting all your eggs in one basket. Because if you look at research, there's a very few number of companies that produce the vast majority of return. And it's really hard. Even with all the research out there, people who do this professionally have a hard time picking those companies. So be widely diversified. And just, you know, average is quite good enough for the vast majority of people. And then the other thing is just focusing on the things you can control. So you, you really can't control what market returns you're going to get in what sequence they're going to come in. But you absolutely can control your own personal finances. So building your savings rate up being able to put more money into the market. And, and on the flip side, then when it comes time to draw down being able to draw down at a very low rate. So you're not subject to those fluctuations in the market, and you're not going to get wiped out

Andrew Stotz 21:56
great advice. And you know, the the one thing that people think about asset classes and stuff, but I always talk about in my one of my businesses that I own in Thailand is a coffee factory, and we have it's run by my best friend, he's the guy, you know, been running it from the beginning, almost 30 years, and he has a great management team. And they work hard. I mean, when COVID came, they worked hard to survive. And when inflation hit and the price of coffee is rising sky, They're busting their butts to try to maintain the profitability and the growth of the company. And they take it super seriously. And then and then if you look at a fund like the VT fund by Vanguard that owns almost 9000 companies across the world, you now have 9000 CEOs working for you, you've got 9000 management teams working for you. This is why equity ends up outperforming in the long run compared to commodities or bonds or gold or anything like that is that yield allows you to get the benefit of those CEOs and those management teams who are trying to figure out, you know how to add value. Let's talk about resource. I know you've got your choose financial independent, your blueprint to financial independence, I'm looking at that right now. Choose fi and also, you know, you've got other stuff from your blog, what would be a resource of yours that you'd recommend people to

Chris Mamula 23:21
if you want to connect with me, if you connect with my story on my home on the internet is can I retire yet? That's my blog, my personal blog, you can find links to everything else from there. The book was a partnership Chuza phi as a very successful podcast where they talk to a lot of different people who have achieved financial independence and retired early or on the path to it. And so what the book is, is kind of exactly what we talked about with those principles versus tactics is everybody if you take stories, people relate to stories. So that's great to kind of draw people in and get them to connect. But then everybody's tactics are going to be different based on their own personal circumstances. So what we tried to do is take a just a bunch of different stories and distill them distill them down into common principles that can be used to create your own kind of like we talked about the very beginning of the interview, create your own adventure, create your own story.

Andrew Stotz 24:10
And we'll have links to that in the show notes. So last question, what's your number one goal for the next 12 months?

Chris Mamula 24:16
You know, after coming out of COVID, I felt like I really needed a big challenge. So the last year I spent going through the CFP Certified Financial Planner curriculum and I sat for the exam last November. And then immediately into that I started this planning job so I kind of been taking that on. And then amidst all this, my mom's health declined and just a few weeks ago, my mom passed away and I was back. So I grew up across the country from where I live now in the western United States and I grew up in Pennsylvania. So I spent a lot of time there. So my big goal is honestly to not have a goal and just to kind of decompress and kind of refine myself and get back to a normal lifestyle. So I am kind of early retired I moved to the mountains to ski and mountain bike and climb and do those things I like to do and I have young daughter. So I really want to enjoy life over the next year. And I don't have a big goal for this year, I kind of feel like I've accomplished some big things last year and also had some hardship in my life. And I just kind of need to get back, get back and back to normal life and enjoy life a little bit.

Andrew Stotz 25:14
It's a good lesson for all of us is that life goes in seasons. And I lost my father, almost seven years ago, and I brought my mother to live here with me in Bangkok. And we've had almost seven years together. And it's a fascinating thing to look back on. Because I kind of think to myself, I don't even really remember my relationship with my mom in the past and like, and it was just so different. And now after seven years of being together every single day, you know, it's just, it's, it's a golden opportunity. And, you know, for all our listeners, I think the lesson is, grab the time with the people that you care about now. And then it sounds like that's what you're doing for the next 12 months. So

Chris Mamula 26:00
yeah, I certainly tried to always but yeah, this was a stark reminder. And, I would also say like I think a lot of times you start down this path to like fire financial independence, retire early, like thinking like, I'm going to travel the world, I'm going to do this and that. But like, just having that freedom and flexibility to be able to be there for my parents to be able to support my dad and to help care for my mom. It's not something I would wish on anybody, but it was something I'm very grateful I had the opportunity to do so. Yeah, there's like these little hidden blessings in, you know, having financial security and freedom. Yeah,

Andrew Stotz 26:30
yeah, it'd be able to contribute to other people's lives. You know, when you're just overwhelmed with a day job and you're not managing your money well and all that. You can't really help other people. So this is a good reminder. Well, listeners, there you have it another story of loss to keep you winning. Remember, I'm on a mission to help 1 million people reduce risk in their lives. If you've not yet joined that mission, just go to my worst investment ever. And join my free weekly become a better investor newsletter to reduce risk in your life. As we conclude, Chris, I want to thank you again for joining our mission and on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Chris Mamula 27:15
I just want to say thanks for having me. I think this is a very important mission. And again, we talked a little bit before we started recording, but the whole reason I started sharing my story and going down this path was to help others because I had such a bad experience. And it's really not that hard. And if you just take a little bit of time and educate yourself and find that confidence. You're going to be very grateful for it in the long run.

Andrew Stotz 27:37
Fantastic. Well, that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast hose Andrew Stotz saying I'll see you on the outside.