Don’t Get Mad, Get Even

My gym contract expires around this time every year. As a subtle reminder, the gym will automatically start charging me higher rates. This irks the crap out of me, but like a jackass standing under a windmill, I keep getting smacked upside the head. Each time, I curse the stupid contraption then go on standing around until it happens again. The other day, I felt the familiar whack! as I checked my credit card statement – once again I was hit with higher dues.


To halt further damage, I went down to renew my contract. They offered a new option to buy into to a cheaper membership that excludes zumba classes and tanning. To save some cash – and spare the community from an orange Crazy Kicks prancing around in yoga pants – I chose the restricted membership.

They filled out the form and let me know that I would have to pay an annual gym upkeep fee of $50. Having just paid my upkeep fee that week, I asked them to waive the charge. The gym employee told me that If I had signed a new contract a week before, I could have avoided paying the fee twice. At this point they could not refund the fee I already paid. Whap!…Goddammit, again? Rubbing the back of my head, I reviewed the rest of the terms and signed a new contract.

I know it’s dumb to sit around stewing over $50, but I hate the contracts they use to chisel a few extra bucks out of me.

I felt like quitting the gym, but I do like working out there. Having plenty of equipment helps me mix things up and stay motivated. The large space is especially nice when there is bad or cold weather. And seeing other people working out helps keep me from being a sissy. It’s also the only place I go to outside of the CK compound some days, now that I’m not going into the office anymore.

I wasn’t going to quit the gym, and with my new membership I would eventually end up saving money. I wasn’t going to change their policies and it wasn’t worth arguing with the people who work there. Instead, I decided to channel my frustration to make up for the fee another way. Then I remembered seeing something in our portfolio that I had been lazy about fixing.

I popped open my laptop, went through our investments, and there it was hiding in my IRA. Over a decade ago, when I started the account, I had invested in some mutual funds. Through the years, I had converted most of my mutual funds over to index funds for tax purposes. But since the IRA is a tax advantaged account, I never got around to optimizing those investments. While the mutual funds were not hurting my taxes, they were charging me fees ranging from .75% to 1.15% every year. Adding to insult, these funds were not performing nearly as well as my index funds.


You can pay for manure, but don’t pay for bullshit.

In our IRA accounts, we had over $26,000 still sitting in various mutual funds. I calculated they were costing us more than $250 a year in fees. That’s over $20 a month we were paying for poor performance. I thought the gym fees were aggravating, but my head was starting to hurt thinking about how much we were paying some bankers to make crappy investments.

While I had to be careful about moving funds in after tax accounts, I could buy and sell funds in the IRAs without worrying about realizing capital gains from the transaction. So I sold all the mutual funds and replaced them with an ETF equivalent to the Total Stock Market Index Fund. Now, for only .03% or $8 a year in fees, I have an even better performing fund. This one optimization was going to save us $250 a year, more than what I was paying for my gym membership.

It was easy to get pissed off about stupid gym fees, but while they were an easy target, there were worse offenders. No matter how optimized I think we are, there are always more opportunities to save when I look deeper – a utility we can call up for a better rate, investments that can be optimized for taxes, or funds we have laying around charging us fees. I could have spent an afternoon arguing with some poor gym employee, but finding a way to put cash back in my pocket was more rewarding and satisfying. Now I think I’ll go pump some iron with my subsidized gym membership.

31 thoughts on “Don’t Get Mad, Get Even

  1. Two great lines here: “like a jackass standing under a windmill” and “You can pay for manure, but don’t pay for bullshit.” Awesome!

    Great things as usual, Mr. CK! Smart move with the IRA. It’s amazing how bent out of shape we can all get about tiny nickel-and-dime stuff but be totally passive about the giant economic levers out there (like investment fees) that are dramatically more impactful.

    Hope the workout’s a good one. Now that I know you won’t be sporting yoga pants and a nuclear orange glow, gimme a shout if you need a spot.

  2. Good for you for finding those budget leaks! I’m always paranoid that we’re bleeding money somewhere and I don’t know about it…

    At what point in your early retirement planning did you start to heavily invest? We’re still in the getting-out-of-debt phase, but we’re trying to plan our next move as far as building wealth to live on during retirement.

    • The more you learn, the more those budget leaks reveal themselves. Every time I think we’re streamlined, I will spot something else. Trimming our sails is an ongoing process.

      I started investing right away, and wish I would have been even more aggressive than I was. I always made sure to pay off high interest debt like credit card balances, but some debt like my student loans and mortgage I still carry. I do plan a whole post about what debt I think is good and can be leveraged.

  3. I love (and am simultaneously scared by) discovering optimizations in either my budget or in my investments. When i first started investing e.g. I didn’t realize that placement matters and I held altogether too many REITs in taxable accounts. Every time I discover something like this it is a mix of yay! and oh-shit-what-waste-all-this-time. Never a dull moment.

    • I still have some tax optimization to do, but I’m waiting till next year when we will have lower income to make the transactions.

      There is always something, but at least it’s nice to celebrate plugging the holes 🙂

  4. Haha this is awesome. Glad you were able to put effort into an area that counted more (literally$) for you. Also, why are all gyms the worst? I’ve been a member of probably 10 gyms over the course of my life time, including local rec centers. They all have stupid policies.

    • Yeah gym contracts never seem to be great. I wouldn’t have though bilking your loyal customers out of a few extra bucks to be a good business practice. But I suppose someone did the analysis and figured out that is the best way to bring in extra cash. For now I’m just happy I came out ahead.

      Thanks for the great comment 🙂

  5. It truly is an iterative process that never ends. Sorry to hear the gym doesn’t refund the difference in rates. I’ve tried to move away from any subscription service that does that for the sole purpose that I tend to forget about the renewal period. Similarly we’ve moved away from a lot of services that have hidden fees. I just much prefer even if I spend a bit more that there is no potential for a surprise expenditure at the end that eats all the savings away.

    • So true that the process never ends, but at least it gives us something to feel good about each time we plug another leak. I definitely hear you on eliminating dubious subscriptions, those hidden fees are more annoying than anything else. I will just have to make sure to get my moneys worth from this gym by going more often 🙂

      Thanks for the insight!

  6. Nice job saving some dough. Honestly though, I think I would have tried harder to get the gym to drop the $50 fee.

    A lot of times if you talk to the manager you can get stuff like that waived. It kind of depends upon the employee and time of the month too.

    (No, not that time of the month)

    What happens is, employees are often given sales goals that end at the end of every month. If you try to renew at the beginning of the month, they’re less likely to make concessions. Renew at the end of the month and they’ll be eating out of your hand.

    Same thing goes for buying cars too. Buy on the last couple days of the month and the car dealership will *move mountains* to make it happen.

    • I knew the employee, and asked if the manager could drop the fee, he said that they tried before and got shut down. Maybe I could have argued further, but I didn’t see them budging considering my alternative was to keep paying out of contract rates.

      That’s interesting insight on monthly sales goals. I’ll have to keep that in mind.

      • I would have thought your alternative was to cancel the gym completely… Which might have made them more likely to get the fee dropped for you.

  7. Way to get even! Now you have extra money to subsidize upkeep at 5 gyms! I actually did something similar recently. I reviewed one of my wife’s old brokerage accounts and holy crap… mutual funds with fees galore! Some had expense ratios of 2%! It goes without saying that these were fixed. But had I not taken the time to dig a little deeper, like you did, this could have gone for who knows how long.

  8. Oh man I’ve been there with mutual funds before. I let a mutual fund stay open way too long before I finally said enough of this. The performance was lagging to the broader market and I kept waiting like a fool for it to come around and outperform. It never did so I switched to a Vanguard index fund and am clearly much happier now.

    • Wise move. When I bought these funds I thought they were doing well. The thing is I had never compared them against the S&P500. Their performance wasn’t looking so good after I did that.

      Glad you’re happy with your index fund, I’m happy with my swap too 🙂

  9. I’m guilty of inadvertently retaining some of the toys-in-the-attic type investments too. For whatever reason they just don’t rise to the top of the to-do list to get cleaned up. One thing that I have found that really helps is the “401k Fee Analyzer” at Personal Capital (under the “Advisor Tools” menu). You can sort all of your securities by their expense ratio and/or $ fees/year. Very useful in picking off the highest ones and dumping them. Great post Mr. CK!

  10. Great work on the savings in fees. We went through our investments a couple of years ago and did the same with the mutual funds in our IRAs. We tried to do our best with the 401k too, but we are limited on our options there. Now you have me thinking we need to take another look though…it’s good to re-evaluate periodically.

  11. It’s so easy to let money slip out of our hands with investments simply because it’s so hard to see. We don’t pay a bill every month like with your gym membership.

    I had a similar thing with extra costs in my old 401(k). I was really slow to roll it over because I’m pretty lazy. The 401(k) came with an 89 dollar per year administrative fee, paid quarterly, so keeping it around when I had really good investment options in my 457(b) didn’t make much sense (I was basically paying two fixed costs when I could have rolled it over and paid only one fixed cost). Finally got around to doing that last week. So even though I could have done this way back in July, I only just got around to doing it now. At least I got it done now though, rather than waiting longer!

  12. Honestly, this is one of my biggest Mo Money Mo Problems problem – I now have money going into so many places, it’s insanely hard to keep track of the increase in fees each year. I recently built a spreadsheet for one of my companies and figured out that I have over 50 recurring payments occurring for the tools that we use. I had one of my team members go in and re-evaluate the billing of each them and it turned out that in the past year the total recurring billing rates had increased a total of 12% on average or a total of $9,020 extra dollars without me seeing anything!!! The more places you invest the more you have to keep track off – do you know of any tools that make it easy to track increases in mutual fund expenses?

    • As Joe Freedom mentioned above, Personal Capital has a fee analyzer. But I think for most people it’s probably just as easy to quickly review investment accounts.

      If all that cash is giving you too many headaches, you can send it my way 😉

  13. Saving $250 this year is small potatoes. Higher mutual fund/ETF fees compound and wreak havoc on asset growth over the long term.

    Assume you have 25 years until you are age 59 1/2 (and can withdraw money from your IRA without the 10% penalty tax).

    Your EFT is about 100 basis cheaper than your old mutual fund was.

    $26,000 compounded at 7% over 25 years would grow to $141,113; at 6% you’d have just $111,588.

    At 30 years, your $26k would be $197,918 at 7% but just $149,330 at 6%.

    The longer your time frame, the more financial havoc you get from high fees. After 40 years, $26k at 7% is $389,335 but 6% is $267,428.

  14. Getting back to the small potato fees. After years of being a couch potato, I took the effort of checking my health insurance policy. It has a “healthy lifestyle” option. I managed to get back $150 a year on my gym fees. Of course my kids and needing physical therapy also motivated me to get
    off the couch.

  15. I am late to this story, but I had the same experience, stumbling upon the revelation that my 401K fees were awful and my funds were terrible. I finally cashed out of it altogether and opened an IRA so I could invest in index funds. My money is doing much better under my care. Even at my regular girl level of financial literacy, I am outperforming the crappy, criminal 401K i was subjected to. And I quit my gym.

  16. I can totally sympathize with getting pissed off about the gym’s unfair practice! It may have been worthwhile for you to ask a manager about getting that fee waived–it doesn’t make sense to make you pay it twice!

    But kudos to you for finding the inefficiency in your IRA and saving that money a couple times over in investment fees!

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