The Simple Path To Wealth

 

The Simple Path to Wealth

By: JL Collins

If the ideas found within a book in any way reflect the type of person the author is, which I absolutely believe they do, then I can assume the following. JL Collins is a simple man. A man with a sound mind and a good heart. I like that kind of person.

What I find most appealing about this book is the books simplicity. The author proposes the following as the secret to wealth.

• Spend less than you earn
• Invest the surplus
• Avoid debt

See, no secrets here. Just plain old wisdom you’ve probably heard someplace else. The catch is… nobody does it. That’s why so few are financially secure today.

I’m a big proponent of financial independence. The primary motivator in my own life is because I want to own and operate a small organic farm one day. Small organic farms generally have a hard time paying the bills, and I don’t want to place a burden on my young family with having to deal with financial stress. Therefore, the solution is financial independence.

The book also clarifies what financial independence is:

FI = Investment portfolio x 4% > living expenses

Financial Independence is reached once your investment portfolio has grown to the size that a 4% withdraw rate could cover your annual living expenses. That’s it, grow a portfolio that size and you never have to work another day in your life. Note that this is done with data of a 50% stock 50% bond portfolio, and estimated with the annual growth of the stock market over its history. Nothing is perfect and past returns don’t guarantee future ones.

If you’re lost at this point I suggest you do some more research and read this book. Moving on.

The author argues the greatest value of financial independence is simply your freedom. It’s not about being able to never work another day in your life (although that is an option) it’s about being able to do the work you enjoy. I enjoy reading simple books like this because they serve as a reminder to be wise with my money.

Note: The author is a huge fan of Vanguard. It what he uses to manage his wealth and he mentions it frequently. I haven’t done enough research to suggest it, but I would definitely check it out.

over and out,

Jacob