3 Bad Financial Decisions That Helped Me Retire Sooner

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We tend to judge our decisions by outcomes. In her book Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke points out the faulty logic of thinking this way.

We love things to fit in neat little boxes. But life is far more nuanced.

Nearly all decisions have to be made with imperfect information, making outcomes uncertain. Rarely does a single cause lead to a direct and predictable effect.

We can certainly make better decisions, and we should try. But it’s important to realize that luck and unforeseen consequences play a role in the outcome of those decisions.

Using this context, I’ll explore three financial decisions that undoubtedly accelerated my path to early retirement. But I’d be reluctant to recommend others make these same decisions.

“Mistake” 1: We Grossly Underinsured

Disability Insurance

For most working people, physical capital is their most valuable asset. It therefore makes sense to insure this asset in the event you can’t continue to work and earn income. There are guidelines for how much disability insurance you should purchase.

My wife always had short-term disability insurance provided through her employers. I never did.

We never felt the need to buy short-term disability insurance for me. We quickly built up an emergency fund, I was able to carry 4 weeks of banked vacation time, and we always lived on only one income. So we were confident we would be fine in the event of short-term disability.

Long-term disability insurance was a different animal. We appreciated how valuable it could be if one of us became disabled.

However, we also looked at the hefty price tag to insure each of us. We also considered that we were eligible for some long-term Social Security disability benefits.

We decided to take the risk of not buying long-term disability policies. To be clear, I am not advising anyone else do what we did.

Life Insurance

There are several rules of thumb to determine how much life insurance you should purchase. By any of these rules, my wife and I have always been grossly underinsured.

We didn’t buy any life insurance until we purchased our home. The house was our only liability and it was valued at $250,000. We purchased $250,000 term life insurance policies for each of us, figuring that if one of us died we could pay off the mortgage (with some money left over) while the other got back on his or her feet.

After paying off the mortgage, we let our policies lapse. When our daughter was born, we again each bought $250,000 term policies.

By that point we were well on our way to financial independence. We figured it would make sense to give ourselves a little bit of financial leeway if one of us passed away prematurely.

With only one adult and one child to support, we figured our assets at the time plus the life insurance benefit would make us financially independent.

Why It Worked For Us

There is an obvious reason why being underinsured accelerated our path to financial independence. We were lucky!

Neither of us died or had a serious medical condition requiring us to miss substantial periods of work aside from my wife’s maternity leave. This is a perfect example of a good outcome not necessarily being indicative of having made good decisions.

I’m confident we made reasonable risk management decisions with life and short-term disability insurance. In either case, a negative event would have created personal hardship, but not necessarily financial hardship. Having more money would not necessarily have lessened the hardships.

Long-term disability insurance is harder to evaluate. According to the Council for Disability Awareness, “1 in 3 Americans do not have adequate disability insurance.”

We made a conscious decision to be in that underinsured one third, knowing we were diligent savers. Our rationale was that by saving and investing those premiums, we could accelerate our wealth building and self insure sooner than if we had followed conventional wisdom.

Our decision was also a bet on our marriage. Having two professional adults and relatively low household spending meant we could survive one of us becoming disabled, assuming the marriage survived the stress and change in relationship dynamics that could come with a long-term disability.

Ultimately this decision was probably more lucky than good. I’m not sure I would make the same decision if I had to do it again.

We’re grateful we’ll never know what would have happened if one of us became disabled or died. But undoubtedly the money we saved by being underinsured accelerated our path to financial independence and helped me retire sooner.

“Mistake” 2: We Paid Off Our Mortgage Quickly

In a popular post on this blog Darrow challenged the conventional wisdom that buying a home is a better financial decision than renting. He backed up his argument with solid mathematical logic.

“Big ERN” wrote in Part 15 of his Ultimate Guide to Safe Withdrawal Rates, “Don’t bother… paying down low-interest debt when young (mortgage, low-interest student loans). Put every last dollar you can scrape together into the stock market early on.” He also backs up his argument with mathematical analysis.

Rick Edelman wrote an article on his site titled 11 Great Reasons to Carry a Big, Long Mortgage. We can debate how “great” these reasons are, but each point has validity.

In spite of these sound arguments, my wife and I went all in on home ownership and paid off our mortgage as quickly as possible.

We had a fifteen year mortgage with a 3.75% interest rate. Instead of paying it down slowly and investing more in the stock market, we paid it off in seven years.

A lot of this was happening around the time of the 2008 market crash when stocks were available at bargain basement prices.

In most situations, paying off a mortgage quickly is not the optimal financial strategy. In hindsight, it was a costly decision for us to bypass putting more money into the stock market at the start of a historic bull run.

Why It Worked For Us

We as a couple, and my wife in particular, have more difficulty spending money from savings and investments than from a paycheck.

Paying off our mortgage quickly eliminated our biggest monthly expense. Analyzing our current expenses reveals that our three biggest expenses are food, outdoor adventure (gear, ski passes, etc) and charitable giving.

We spend roughly the same amount on each of these categories. Our next biggest expenses, medical insurance premiums and property taxes, are a fraction of the others.

We could substantially reduce our food spending and completely eliminate our other two big expenses (at least temporarily) if needed. We could not eliminate a mortgage or rent payment.

Having minimal monthly liabilities gave us courage to take more risks and take them sooner than we otherwise would have.

Being mortgage free first benefitted us after the birth of our daughter. My wife decided she didn’t want to return to full-time work. Having low monthly expenses gave her the courage to cut back to working part-time.

A few years later, it gave her courage to take her current job as the seventh employee at what was then a start-up company. It was a lateral move with less job security. This was strictly a lifestyle decision, to do stimulating work with a flexible schedule and the opportunity to work remotely.

Having low monthly expenses along with the financial ease with which we handled her transitions gave me more courage to leave my job sooner.

Mathematically, we would have been better off with a bigger portfolio which we could draw down to pay a mortgage or rent payment. But it would have been psychologically harder for us to make these lifestyle decisions if we had a large fixed obligation each month. For that reason, eliminating our mortgage was a good decision for us, even if it was a bad financial decision.

“Mistake” 3: I Focused on Low Paying Side Hustles

In my forthcoming book, Choose FI: Your Blueprint to Financial Independence we focus on the relationship between your savings rate and the time it takes to achieve financial independence. To increase your savings rate, you have to decrease the amount you spend, increase your earnings, or do both simultaneously.

For high earning professionals, the fastest and easiest way to earn more is to work more hours utilizing the skills that make you valuable. I could have picked up a few home care physical therapy patients or a weekend side-job to increase my income. Instead, I took on two side-hustles that I worked alongside my professional job over my final working years.

The first side-hustle was to work at the rock climbing gym at a local university. This required me to teach two classes per semester, train the student workers, and take care of ordering supplies. My compensation was about $5,000/year.

The second was to start my original blog. I wrote most every morning before work and spent many lunch hours and weekends working on the blog.

I never made a penny for my efforts. Writing the blog did lead to making a couple hundred dollars a year writing occasional freelance articles for the website Doughroller.

Even though these efforts did not generate a lot of income for the time required, they were instrumental in me being able to retire sooner.

Why It Worked

For many high earners, especially medical professionals, what you do becomes a big piece of your identity. You are a doctor, a nurse, an attorney, an accountant or an engineer. Many professionals also develop a dependence, an addiction even, to the comfort of regular paychecks that come with those titles.

It was both fun and empowering for me to see that work didn’t have to mean continuing on in a career I no longer loved.

The rock wall job showed me that I could earn decent money doing small amounts of fun work. It also taught me that hobby jobs can also help decrease spending. It saved me from having to buy a gym membership and entitled me to pro discounts when ordering gear.

Likewise, writing about personal finance made me feel more comfortable leaving my career behind. I always enjoyed the feeling that I was helping people as a physical therapist.

Writing enabled me to serve others in a different way, fulfilling that core need. Seeing my writing published in major publications also gave me a feeling of credibility and a new sense of identity.

While I never made a penny blogging prior to leaving my career, writing also provided me with a different model of doing work one time, then using leverage to help many people. This is in  sharp contrast to trading time directly for money, which was all I knew as a physical therapist.

I realize some people view retirement as no work and no earned income. This is a valid viewpoint.

But it’s also important to realize that when you limit yourself to that tight definition of retirement, it increases financial risk. Having flexibility with both spending and earning provided confidence to take the leap from my career sooner than I otherwise would have.

Making Better Decisions

Successfully building wealth that enables early retirement then developing a plan to make that money last for the rest of your retired life are complex processes. Each requires making good decisions. But it also involves a lot of good fortune.

It’s important to improve our decision making process to increase our odds of having successful outcomes. This requires stepping back to evaluate our decisions from time to time.

We can control the things we can control. But we also need to acknowledge the many things we can’t control, or even predict. We also need to factor in both the mathematical and psychological impacts of our decisions.

All of these factors impact our ultimate success or failure in retirement . . . and in life.

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  1. Jim Burkholder says

    I appreciate the large charitable contributions. We are trying to give more as we can.

    • Chris Mamula says

      Agree Jim. While mentioned that in passing under the mortgage “mistake”, that is also another reason why we continue to like the idea of earning money in “retirement”. We certainly would be much more conservative with all spending, including giving, if bound to a traditional retirement and worried about drawing down assets too quickly. As is, we more or less still live on earned income and have a very low burn rate, or may even have a positive savings rate some months or years, which makes it a lot easier and more comfortable to give more generously.

  2. Hi Chris, your point that building wealth and then planning retirement requires making good decisions AND also involves a lot of good fortune is spot on.
    Can any of us honestly say that luck had nothing to do with our ability to retire early? Those who say ” it was all me and my hard work” are just full of themselves.

    For me it was an entry level management job after college graduation that ended up being a 17 year career. That job, in the janitorial industry of all things, paid me 1.2 million in the late 1990s over the last 5 years I was there including a $200K severance that enabled an easy transition to self employment. Yes, I worked hard but finding that job in the first place changed my life for good. Then there was an unexpected inheritance when my dad died just two years after a divorce in 2009 in the midst of the financial crash. Talk about timely, I did nothing for it. The source was my grandfather owned an automotive paint shop from from 1930 to the mid 60’s. Here the luck of birth was a blessing.

    Along the way I made good and bad decisions on real estate investments, thankfully mostly good. And again the luck of being born and living in So Cal allowed me the appreciation someone in 90% of the country would not have experienced. I have made good decisions in the stock market, to stay invested no matter what, so I do give myself credit for that decision.

    Luck and timing plays a big part in our lives. Have sympathy for those less fortunate and appreciate your good fortune.

  3. Paying off our house was the best decision we made. It feels so wonderful knowing we own our house and do not have to worry about a large expense every month. Also, now I view our house as our long term care insurance. When we need assisted living, we will sell the house and have enough money for a very nice place. I highly recommend getting mortgage paid off.

    • Chris Mamula says

      Agree 100% with your sentiments Laurel. And your idea of LTC insurance is one I hadn’t thought of. Another which I plan to cover in an upcoming post is that your home can be used to create income in retirement via a HELOC or reverse mortgage if necessary.

      That said, it is often not the optimal mathematical decision. With the benefit of hindsight, it was a pretty bad financial decision from us from the perspective of just dollars and cents. So I would not highly recommend it to others unless they are aware of the potential risks and rewards.

  4. I agree with your decisions and that the same decisions are not applicable to everyone in similar situations. Everyone’s priorities and risk tolerance are different. But I do not agree that these should be termed “mistakes”, quoted or not.

    As for :Mistake” 1, my insurance philosophy is to only buy insurance where I can’t afford the impact of the risk being insured. Most of the time by impact, I mean financial loss but I also sometimes take into account emotional and other impacts, especially with my wife’s high fear-of-loss. This philosophy extends to other similar things like extended warranties which I consider just another form of insurance. I have enough free cash flow to withstand almost any but the most catastrophic losses. The companies selling the insurance would not be selling it unless they were making money doing so, and thus the odds are against me financially benefitting in the long run. For examples, I always get the highest deductibles for health insurance and I never buy trip insurance (as long as my wife lets me get away with it). Of course, my wife and I are in fairly good health now and I may need to re-evaluate this philosophy if that changes since some of the insurance benefits may then outweigh the costs.

    • Chris Mamula says

      Pete. Agree that insurance is tough to evaluate retrospectively.

      You always buy insurance wanting to lose the bet to the insurance company. That’s because losing means nothing bad happened to you and so they win by taking your premium. More often than not, you will lose b/c the insurance company can stack the odds in their favor by spreading risk in a way an individual cannot.

      Because most likely a negative event won’t occur, it can look smart to save money by avoiding those losing bets to insurance companies. But you can never be sure if you really did or didn’t need the insurance until a negative event occurred. Therefore we shouldn’t trick ourselves into thinking we’re smarter or more shrewd than we are, when in fact we may have just gotten lucky.

      • Chris, I think you missed Pete’s point. He said “only buy insurance where I can’t afford the impact of the risk being insured” – which is spot on from a purely expected value risk analysis. If you can’t afford the impact of the risk, you should definitely buy insurance. But otherwise, insurance is for an expected loss you could afford to self insure less expensively – as that is how insurance makes money (they lose occasionally but come out ahead overall). Another rrason people may chhose to buy insurance is emotional – say trip insurance, because they don’t want to feel bad if circumstances warrant cancelling a trip evev if they could have afforded the loss.

  5. I made the same decisions as you and feel zero regret about all of it. I was self employed and retired two years ago at age 57. My experience with disability insurance was it was very expensive relative to the benefit paid. Also, the restrictions on paying benefits were considerable. I carried it for several years and then dropped it. A complete rip-off in my experience.

    We paid off our home by making additional payments. That move eventually enabled us to take advantage of the real estate crash in 2007 and buy a second home on the cheap. Beneficial move. No regrets.

    Yes, you could have invested the extra mortgage payments into the stock market. What if we had gone into a full blown depression? Your stock portfolio would have been virtually worthless. You would still have the mortgage payment and one or both of you might have been unemployed. You could have been looking at foreclosure.

    Life is inherently risky. To try and compensate for every contingency is irrational. We can “what if” ourselves right into a straight jacket!

    You retired early…you won!

    • Chris Mamula says


      You may have misinterpreted my purpose in writing the post. I certainly feel no guilt or regret about my decisions. I noted that they all worked out well for me.

      Re: our decision to pay off our house and not buy more stocks, I just finished reading “The Big Short”. Until reading that, I don’t know that I appreciated just how close we were to a full blown depression we came and how genuinely clueless those in charge of the largest financial institutions as well as those who oversaw them were. This illustrates my point of the post that it is easy to judge decisions in retrospect with the benefit of hindsight, but that is not how decisions are actually made.

      I agree that I, and anyone else in a similar situation has won. Maybe more appropriately stated though, we’re winning, but the game is still being played. At 43 years old, I hope I’m still only in the first half of this game of life. Thus the value in making an accurate assessment of what got us to this point and try to continue to make the best decisions with the information we have available going forward.


  6. Hi Chris,
    Your cited “mistakes” are perfectly reasonable for a higher net worth individual like yourself/us.
    #1. Insurance is a bad bet statistically. IMO, if you can afford to self-insure, you are always better off stats wise, but you need to plan/manage the risk. Earlier in our life, we were a 2 professional income, no kids couple. We never bought life insurance even though term life insurance was perfectly affordable. We eventually had kids and some “experts” recommended that we supplement our employer’s life insurance with a term policy so that the estate would be worth $2M if one of us died. We passed on that idea since either of our single incomes at the time was more than enough to sustain the household if one of us died (we were roughly $1M in net worth then). Although insurance can be a bad bet mathematically, it’s still worth it in many situations for catastrophic protection and “psychological comfort”. In our case, we buy homeowners insurance (we own our home free and clear), auto insurance policies above the liability minimum (no collision, cars owned free and clear) and an umbrella policy. Medical insurance is covered by my employer but we purchase the lowest cost, highest deductible plan offered … but if we were given the money instead, we would buy a much larger deductible plan that only covers catastrophes. If you have sufficient wealth to “self-insure”, the better bet is to not insure if you can tolerate the risk. Yes, very few households have multi-million dollar levels of wealth so will probably want to purchase most of the typical recommended insurance products. But if your household is able to accumulate enough wealth to self-insure, this is a logical option for those with sufficient means and risk tolerance.

    #2 Mortgage pay-off can yield immense psychological comfort. Years ago, we paid off our mortgage even though we could have gotten a 15 year fixed mortgage at 3.125%, no fees/points. With the market performing like it did the past 15 years, we would have more than doubled our money after interest expenses. But living debt free greatly increased our happiness. Living mortgage free allowed my wife to very comfortably reduce her hours to 15 per week or even leave employment and only focus on taking care of the kids. We could have leveraged our home but chose not to even though mathematically, it was the “wrong” thing to do. It was a happily paid price for psychological comfort. Strange that this attitude is in contradiction to my point above but for whatever reason, we’re willing to self-insure on some stuff, yet not bet on the market with housing leverage even if it’s prudent to do so (I guess I really hate insurance and buying bad bets).

    #3. I have an hourly rate I set for myself for side gigs that I do for money. And it’s a premium over my work rate (if I average out my compensation to an hourly rate). So I rarely do side gigs for money. If I do anything as a hobby, it’s for free (like assistant coaching for my boy’s soccer team). I’d rather enjoy the time and have the freedom from the obligations of paid work, even for stuff I enjoy. Not getting paid give me the freedom to really select what I want to do.

    • Chris Mamula says

      Nice analysis Phillip. Thanks for reading and taking the time to comment.

  7. John McPeak says

    I understand, and commiserate, with your wife’s reluctance to spend from “savings and investments”. On paper we are in very good shape yet I am working to lower our costs as much as possible to eventually live off of social security and small pensions. It is purely psychological (and my wife says slightly nuts). It’s not an issue now as I am working part time and making enough to live on (and squirrel away) but my wife is concerned when I (might) need to take a “paycheck”om savings and investments that I may become unhinged! Whats with that? I saved and invested all my life allegedly for retirement and now I don’t want to touch it! Might make for an insightful article!

    • Chris Mamula says

      Interesting comment John.

      Curious if you don’t mind sharing a bit of your background as a child and how you think that colors your view of money. I’ve written a bit about my wife’s and my different upbringings and how that drove each of us to save, but for different reasons.

      Her family struggled with money her whole life, and I think that is still a big piece of her identity. Our financial success doesn’t feel completely real to her. Our portfolio is just numbers on a piece of paper or a computer screen.

      I witnessed my parents build a small business as a child. They never had all the answers, but figured things out as they went, and used their frugality as needed when times were tough.

      I don’t know if those initial feelings and the relationship we develop with money when we’re young ever goes away for some people. Though it is something we can get more comfortable with if we understand where the feelings come from and we work on changing them.

  8. I can’t remember if you were with a health system or private practice? A lot of health systems will put up 1 year salary as a life insurance benefit so you may have also had some protection there (Philip alluded to it in his comment). Certainly part of the risk management strategy. I always wonder if an employer would automatically issue that “1 year salary” payment or if the spouse would need to make a claim. If a claim was required, I wonder how many widowed spouses have no idea a policy even exists? Hopefully I make it until my wife gets home from work tonight so I can tell her about my policy : )

    Its getting green here in the White Mountains btw. I was down in NY over the weekend and it is amazing how far ahead they are. Take care, Max.

    • Chris Mamula says

      Private and no such benefits were available for me. Definitely worth taking the time to know and understand your benefits!

      Very green (and still rainy/muddy) here in Utah at the moment. Using it as a chance to work ahead on writing and house projects.

  9. Excellent post! I find the role luck and timing play in our lives fascinating and often people do not appreciate it. I have had awful luck in some areas such as just missing out on some amazing jobs when I was young. On the other hand I inherited a significant amount of money that allowed me to get on the property ladder. That property has subsequently appreciated by 100% so my original luck has compounded. I also left my job and emigrated just before the 2008 financial crash to start anew in a country and industry that was on the cusp of a huge boom on the back of Chinese growth – perfect and very fortunate timing.

    I agree with your take on not paying off the mortgage on a purely rational basis but on an emotional basis paying it off has a huge effect on most peoples sense of wellbeing, something that I would say is priceless. It is also a good strategy for the risk averse. Having no mortgage allows you to have a very low cost of living and security whereas stock market investments could crash badly leading to extreme stress for many people I should think as they see years of savings evaporate.

    • Chris Mamula says

      Thanks for the feedback Tim.

      Agree that we all have good and bad luck. I think perspective plays into it as well. Some would look at mistakes that I made early in my financial journey as a confirmation that investing is too complicated or the system is rigged and just give up. I look at those mistakes as an advantage that I have. It sent me down a deep rabbit hole that made me understand investing at a far deeper level than most. It also gave me a relatable experience that many who mastered investing from the get go don’t have, which helps me educate and inspire others to take control of their finances.

      Interesting the variety of opinions in the comments, especially related to the mortgage. This reinforces your point that there is often no one right answer for everyone, but you can find the right answer to match your personality, risk tolerance, etc.

  10. Agree with what has been said on house payoff. Will add the cash flow improvement is always empowering especially for low income earners. Think of opportunity loss as Chris has mentioned. Same goes double for investment property. Really, long term stable financially success may primarily depend on cash flow. That is the foundation for ability to make it happen. Problem is home ownership cash flow is locked up with the mortgage. You cashflow is held hostage, so the smart way to manage this is within a taxable investments account. Meaning, to max out your ability for mortgage payoff with stock market high growth funds. Meantime pay the minimum on the mortgage. It’s all or nothing. In that investment account do speculate and take risk. Personally, a Vanguard S&P growth fund, maybe combined with their health care fund. So, if attempting this feat at young age; what better time? Think of low income and minimal tax avoidance with 401 or IRA vs low tax bracket for tax account investment. After paying off house double up on all tax advantaged accounts when making the big bucks. Lots of tax benefits at that time of life in doing so.

    • Chris Mamula says

      Definitely no one right answer for everyone. Thanks for sharing your $.02.

  11. Good stuff Chris. And of course your original blog also helped you get the gig on this blog, so there’s that. To me, learning to become a better writer takes practice and even if it’s not paying immediately it’s a skill that I think everyone should have, but I’m biased.

    • Chris Mamula says

      Good points Dave. I don’t know that I’ve ever really explained that here, but I told my employer I would be leaving my job and moving across country in February of 2017, and never met Darrow until we started exchanging emails later that summer. Similar, I didn’t know Brad or Jonathan of ChooseFI until I sent them a cold email a few months after leaving my job. So I guess both of those opportunities were unexpected consequences of that earlier decision to start blogging, and while I haven’t made much money from either yet both have a lot of upside potential and they gave me something to focus my attention on which helped me transition out of my career.

      Also agree 110% that improving communication skills (writing and speaking) as well as learning to network are vital skills that translate to all areas of life.