Spend less, invest the rest
Collins boils the plan down to a few rules. Spend less than you earn. Invest what's left over. Avoid debt. Keep doing it for long enough, he says, and you'll have enough to live on without working.
Money
The Simple Path to Wealth
by JL Collins
Could investing be this simple?
JL Collins started writing to his daughter about money after she told him it mattered, but she didn't want to spend her life thinking about it. The letters became a blog, then this book. His claim is that building wealth takes a few habits and one kind of fund.
Hear a sample · read by Laura
What you'll learn
- Spend less, invest the rest
- F-You Money
- Own the whole market
- The market always goes up
- Two phases, two funds
The key ideas in The Simple Path to Wealth
F-You Money
Collins's name for having enough saved that you can walk away from a job, or a boss, you can't stand. He argues that freedom is the most valuable thing money can buy, and that even a modest pile gives you choices you didn't have before.
Own the whole market
An index fund buys a small slice of every company in a market, so nobody is paid to pick winners and the fees stay tiny. Collins recommends Vanguard's total US stock market fund, known as VTSAX. Most professionals who try to beat it, he argues, fail over time.
The market always goes up
Collins shows the US market climbing through the Great Depression, world wars and crash after crash. It always goes up in the end, he says, but the ride is rough and the drops keep coming. Most people who lose money do it by selling in a panic.
Two phases, two funds
While you're working and saving, Collins suggests holding shares alone, through that one index fund. Once you're living off your money, he adds a bond fund, which holds loans to governments and companies, to smooth the ride. He calls these the wealth accumulation and wealth preservation phases.
Lines worth underlining
The gap
Live on less than you make and put the gap into investments.
Debt
Treat debt as an emergency and clear it before you invest.
Freedom money
Savings buy freedom. With enough put by, you can walk away from a job you hate.
Crashes
Markets will crash, sometimes badly. Keep buying and don't sell in a panic.
Timing
Nobody can reliably predict the market's next move, so don't try.
Hot take · true or myth?
Most people are better off paying a financial adviser.
See the book's answer
Myth. Collins is wary of advisers. Their fees compound against you year after year, and many are paid in ways that don't match your interests. He thinks most people can learn to do it themselves.
One thing to try
Check what you're paying
Find a pension or investment you already have and look up its yearly fee, often called the expense ratio or ongoing charge. Collins's favourite fund charges a tiny fraction of one per cent. If yours charges far more, write down what the extra buys you.
There's more to The Simple Path to Wealth
Knotd has the key ideas from 250+ non-fiction books, each in a few minutes, in plain words. The Simple Path to Wealth comes with a Hot Take round and a Spot the Trap case to make it stick.
Get the whole book on KnotdOpen in the appQuestions about The Simple Path to Wealth
What is The Simple Path to Wealth about?
Could investing be this simple? JL Collins started writing to his daughter about money after she told him it mattered, but she didn't want to spend her life thinking about it. The letters became a blog, then this book. His claim is that building wealth takes a few habits and one kind of fund.
What are the key ideas in The Simple Path to Wealth?
Spend less, invest the rest; F-You Money; Own the whole market; The market always goes up; Two phases, two funds.
What's one thing to try from The Simple Path to Wealth?
Find a pension or investment you already have and look up its yearly fee, often called the expense ratio or ongoing charge. Collins's favourite fund charges a tiny fraction of one per cent. If yours charges far more, write down what the extra buys you.
Is The Simple Path to Wealth on Knotd?
Yes. Knotd has the key ideas from The Simple Path to Wealth in a few minutes, in plain words, plus a Hot Take round and a Spot the Trap case to test them. It's one of 250+ non-fiction books in the app.
