Index Funds, How To Build Wealth & Financial Independence Wisdom With “The Godfather of FI,” JL Collins

Episode Number: 346

Episode 346: Index Funds, How To Build Wealth & Financial Independence Wisdom With “The Godfather of FI,” JL Collins

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 Index Funds, How To Build Wealth & Financial Independence Wisdom With “The Godfather of FI,” JL Collins

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JL Collins is known as “The Godfather of FI,” and for a good reason: He continues to be a pioneer in the FIRE (Financial Independence Retire Early) Movement and a thought-leader in the Financial Independence (FI) space. 

Today, he joins us to discuss the origin story of his groundbreaking blog, the concept behind his new book, Pathfinders, shiny investing object syndrome, and more.

In this episode you’ll also learn more about:

  • Defining what “the simple path to wealth” means 
  • Breaking down what index funds are, the difference between active and passive investing, and what “self cleansing” means
  • How chasing performance is the best way to underperform in investing 
  • The 4% rule, the importance of understanding the cost of your comfortable lifestyle, purchasing things from a position of strength, and more

Check out the video to this episode on YouTube below or by clicking here

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Other Links Mentioned in episode:

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JL Collins 0:02

I spend my money and I asked my money only to do one thing. And that's making money. I don't I don't expect it to entertain me. I don't expect it to provide excitement in my life. In fact, I don't want that. There. I have other ways to provide excitement and entertainment my life. And I think when you do that, you know, well, then you might as well go to Vegas. I mean, that's the whole point of gambling. It's, it's exciting life while you lose your money. Yeah, I don't expect my money to entertain me. And I don't recommend anybody do.

Intro 0:34

T-minus 10 seconds. Welcome to the Journey To Launch podcast with your host, Jamila Souffrant. As a money expert who walks her talk, she helps brave Journeyers like you get out of debt, save, invest, and build real wealth. Join her on the journey to launch to financial freedom in 5, 4, 3, 2, 1.

If you want the episode show notes for this episode, go to journey to launch.com. Or click the description of wherever you're listening to this episode. In the show notes, you'll get the transcribed version of the conversation, the links that we mentioned and so much more. Also, whether you are an OG journeyer, or brand new to the podcast, I've created a free jumpstart guide to help you on your financial freedom journey. It includes the top episodes, so listen to stages to go through to reach financial freedom, resources and so much more. You can go to journey to launch.com/jumpstart to get your guide right now. Okay, let's hop into the episode.

Jamila Souffrant 1:45

Hey, hey, hey, journeyers Welcome to the journey to launch podcast this week, we have a special guest. I know I say all my guests are special. But I'm really excited to be speaking with today's guest JL Collins because he was on episode 141 originally on the podcast, and he talked all about index funds and The Simple Path to Wealth. And he is back on because he has a new book that will be out by the time you hear this episode called pathfinders. But

Let me just tell you a little bit more about JL Collins, he has the amazing blog, JL Collins nh.com. And in 2011, that's when he created it. But he's been called the godfather of FYI. And we can talk a little bit more about that jail. And you know, go, quick, quick backstory. But you have been in the FBI, the financial independence space for a while now you were one of the first blogs that I actually read when I first started to learn about financial independence and investing and how simple it could be, and thought to myself like, wow, where was this information? Which is why when you were on episode 141 of the podcast way back when it was like really great. And I always direct people if they're interested in learning about investing in index funds to start at that episode of the podcast. So your first book was called The Simple Path to Wealth. And that sold over 500,000 copies, which is amazing, published in multiple countries. And then you had a second book called How I lost money in real estate before it was fashionable. And now you have your third book called Pathfinders, which is just stories from around the world for people following the simple path. And you're back on the podcast. So welcome.

JL Collins 3:28

Well, thank you. I'm delighted to be back and I'm honored that you would have me again we had at least I had a lot of fun the first time we did this and hopefully you and your your listeners enjoyed it as well.

Jamila Souffrant 3:40

Yeah, no, they do. And they they continuously will write me and say that they love the episode and so easy to follow. So I wanted to go back a little bit so if you didn't listen to episode, you can definitely go back and listen, but maybe to bring people up to speed. You know, I do like to back into your like history, and how you how did you get the name the godfather of FYI. How did you come into this space?

JL Collins 4:03

So Christie Shen, who is is the co author of quit like a millionaire is a good friend of mine. One of our Chautauqua. She's a speaker at Chautauqua and one of our photographers and I'm forgetting what year it was probably around 2018 or something. She came up with that term. She called me the godfather of FYI and I, I have to say the first time I heard it, I kind of cringed, woohoo you know and and but it grew on me and I've come to recognize that it has tremendous marketing power you know, it's it's kind of a great moniker and it took hold. He you know, it was one of those I think for her was just a throwaway line. She was probably kind of half teasing me, but other people heard it and they started using it and then other people heard them use it and, and the next thing you know, I'm suddenly commonly here Bring it out in the world. And I've grown accustomed to it. And and I see the value in it. So I'm kind of honored to, to adopt it.

Jamila Souffrant 5:08

Yeah. But you also have a lot of popularity because of your blog. And I want you to talk a little bit about that. Because the reason why Chrissy and who's also been on the podcast, called you, the godfather of FYI, was for a reason. So when you think about building your blog and your brand and getting your work into the world, how did you first start that? And Aaron, that name, right? Like, how did that come about in terms of your career?

JL Collins 5:35

Well, I think Christy's reason for calling me the godfather of AI, first of all, is probably because I'm an old guy. And as he was probably teasing me a little bit. So the blog came about because I had managed to turn my, my now adult daughter, but I managed to turn her off to all things financial, when she was young, because I just pushed it way too soon. And way too hard. And, and, you know, she kind of shut down. Now, my wife, Jane, always assured me that she was absorbing more than I realized, because of course, I kept lecturing and lecturing. And that turned out to be true, but it didn't feel that way to me at the time. And so around 2011, I thought, you know, I better start writing some of this stuff down. So hopefully, at some point in her life, she'll be ready to receive it, then if I'm not around, it'll it'll be there for. So I started writing kind of a series of letters to her talking about this financial stuff. And the way I thought she ought to handle it. And especially for somebody like her really didn't have any inherent interest in the subject. And I shared it, they shared some of these things with a with a friend of mine. And he said, you know, this is kind of interesting stuff, maybe you ought to put it on a blog and share it with your family and friends. And I had heard of blogs before, so I kind of vaguely knew what they were. But I'd never actually seen when I I dropped the first blog post I ever read was the first one I wrote. And I thought what a great way to archive the information, you know, to make it available. So I did that a created j and this is a reason my blog doesn't have a clever name like millennial revolution, or Mister Money Mustache or journey to launch is because I just thought it was gonna go out to friends and colleagues and I want them to know it was me. So and in the NH stood for New Hampshire, which is where we lived at the time, because I think JL Collins was already taken or something. But, you know, I never dreamed that the blog would grow into anything. So I just want to archive the information. I figured my family and friends wouldn't care. And I was right about that. They didn't care. But then Amazingly, it started to develop an audience and kind of like that moniker, the godfather of FYI, which just started, you know, it was kind of a throwaway line, I think at the time it it. People liked it, and they adapted it and it began to expand. And the same sort of thing happened with with the blog, and Mister Money Mustache, discovered it and he liked it and promoted it a little bit. And he had a pretty big audience. And the rest, as they say is history.

Jamila Souffrant 8:25

Yeah, well, and so and then you kind of coined I think, which is a very also great marketing phrase and catch term, The Simple Path to Wealth, which is also the name of your first book. So what is the Simple Path to Wealth? How do you define that?

JL Collins 8:41

So before I before I get into that a little a little side story, if you'll indulge me about about that name, The Simple Path to Wealth was the working title I came up for when I was working on the book, and I never liked it. I always thought you know, at some point in this what turned out to be a three year process and writing the book. At some point I'll come up with something better, more clever more, you know, marketable, whatever. And I just never did. And when the book was finished, I couldn't think of anything better than The Simple Path to Wealth but I really didn't like it that much. But I put it out there and everybody else loved it. And the feedback I got was this as a perfect title it exactly describes what the book is all about. So I like being the godfather of I have grown to like, you can tell my judgment isn't very good on these things.

Jamila Souffrant 9:42

Well, I'll tell you this. So when I was researching about writing books, and just all things books, because my my book, Your journey to financial freedom, which doesn't have a catchy title, it's very straightforward. But one of the things that I heard and I started to research was The How to nail a book title, you know, have a popular book title. And there were all these like formats. I mean, they were like four or five main formats. I think I heard this from James clear an interview, I forget which one it might have been his one with. With Tim Ferriss, I'm not sure. But he was going through like, what makes because he did his research on what makes popular book names. And one of the ones or one of the standards was to have a title where the concepts were opposite. And so, like The Four Hour Workweek, you know, you think of a workweek, but you don't think of four hours you put that together, it makes people want to, you know, understand what that means. So, I can see why originally, The Simple Path to Wealth doesn't seem like it sticks out. But it totally fits into that standard, because it's like, wealth seems complicated. And the simple path, it's like, wait until there's something here that seems opposite than what most people perceive. And so I just thought I'd put that out there. Because while I was not able to come up with a catchy title, for my book, I feel like you're the first book that you wrote The Simple Path to Wealth and that kind of that brand. Like there's there's a science behind why that works.

JL Collins 11:09

Well, I you know, I it's good to know that I but but and I wish I could say Yes, I understood the science and carefully applied it. And this is how I came up with this this title, which turns out to be a pretty great title. But now I'm more of a blind squirrel finding an acorn. But But to answer your question, what it means, you know, it's in the way you describe the the science behind the title and why The Simple Path to work. The Simple Path to Wealth works as a title is because contrary to what people are led to believe, by Wall Street, and all the people selling financial products, which is that this is extraordinarily complicated, and it's way above your pretty little head to understand, therefore, come come to us and pay us our fees, and we'll take care of it don't you don't have to worry about it. Well, that's true for the products they sell. They are extraordinarily complicated. The problem is that they're complicated, they're expensive. And you know what they're not as effective as the simple product the the index funds that Jack Bogle created in 1975. And so I've likened it to imagine a table filled with all kinds of exotic foods. And that are, you know, have incredibly complex recipes to to create. Well, from a nutrition point of view, you could put your arm on that table and sweep it all on the floor. And what's left in that tiny little corner, the simple foods that your body really needs and thrives on. And that's a perfect analogy for investing, you can take all that complex stuff that you hear about in the in the financial media, and that is, is laden with fees, and sweeping on the floor. Because if you're a long term investor, which is what you should be, you don't need it, what you need is low cost broad based index funds. And that is the core of the simple path.

Jamila Souffrant 13:13

Can you just, you know, educate really quickly on just the definition of index funds for people who this is their first time hearing you or what that is?

JL Collins 13:21

Sure. So there is active management and there is passive management, which I'm not terms that I particularly like, an active manager is an is was running, for instance, an actively managed mutual fund. And what that means is that manager and his or her team are out there trying to figure out what stocks are going to do best and that's what they're going to buy and they're always buying and selling which is an expensive proposition. And of course, they're going to charge a lot of fees because they make a lot of money to do this. passive investing is what Jack Bogle recommended. That's what index investing is. And basically, it says, You know what, all of that activity doesn't really outperform the broad market itself costs a lot of money to try, but it doesn't perform and there is now decades of research that backs up that statement was a little bolder when when Bogle was first making the case in the 70s. But now it's irrefutable. And when you buy an index, if you look at say The s&p 500 index and you buy Vanguards s&p 500 Index Fund, you were buying a piece of the 500 largest companies in the United States or if you buy the total stock market index fund, which is my preference index 500 is fine. You are buying a piece of every publicly traded company in the United States and every person in that country in those Companies is now working to make you richer. And you own those companies in the index proportionate to how large they are, which is a proxy for how successful they are. So the larger they are, the more the more of it you own by by definition. And by the same token, the less successful they are, or if they're companies that are in the twilight of their life expectancy and are drifting away, you own steadily less and less of that. And then that's replaced by the new exciting companies that are up and coming. That's a process by the way that I call self cleansing, which is a term I'm very proud to have coin. And what that means is you never have to worry about selling your VTS a x or your s&p 500 fund, because it is always going to be renewing itself. When you buy a portfolio of individual stocks, or you buy a an actively managed fund made up of them. They're always having to worry about how long do we keep this stock? And when do we get rid of it when we buy more of it? And what stock do we buy next? That's an incredibly difficult process to go through and to get right and and skirts, incredibly expensive. Indexing just says, You know what, you're probably going to fail doing it, you're gonna cost me a bunch of money trying. Whereas indexing is gonna give me the better result over time, and for less money, and I can turn it on and not worry about it.

Jamila Souffrant 16:25

Right, well, thank you for the background. Now with index funds. So when we talk about The Simple Path to Wealth, the last time you were on this show was a couple years ago, and you know, since then, you know, they're already finding complicated financial vehicles that were you know, we were talking about, but now even since then, I feel like more of that came to the spotlight, with crypto and NF T's and all the like the digital investments that we we've heard about. And so what are your thoughts there? on just the rise and the appeal? Like, I'll have people come and ask me about investing in crypto currency or NF T's and, you know, very complicated things. And I'm just like, Do you are you aware of index funds are just simple even to stock investing? And, you know, they're just like, Yeah, but that doesn't, you know, doesn't seem to interest them. What has been from your experience, the reason behind people actually gearing towards more complicated strategies than the simple one is that they don't know it exists, or they really do prefer to be more clips and go to the new thing?

JL Collins 17:28

Well, I think the short answer to that is, is all of those things are, are bright and shiny objects that promise quick returns. And they're surrounded by stories of people that in fact, enjoyed quick returns. Just because that may have happened to some few people, doesn't mean that it's going to happen to you when you finally hear about it, and you jump on board. That's called Chasing performance. And it's a classic way to underperform to do poorly. You know, and the other thing I would say is if you happen to be one of the lucky few, who made it big, and in one of these very volatile, new and exciting things, and as I say that does happen, your odds of hanging on to that money are pretty slim, because you're going to be drawn to the next shiny thing and and most of the time they don't work out for the people who do it. Assad Messiah Minaj or the comedian who wrote the foreword to my new book Pathfinders is very astute financial guy, as it turns out, and that's how he and I happen to know each other. And I was just last weekend at his concert in in Madison, Wisconsin. Brilliant show, by the way, if anybody's interested in Vegas, it's still running. I think he's gone back east or somewhere at this point, but he does in that show. He does a bit about cryptocurrency and of course, he does it much better than I do. I won't even try to imitate he does a much better and it's very funny and very well paced. But basically what he's saying is, you know, you look at cryptocurrency and you look at guys like Charlie Munger and Warren Buffett, you know, these gay calls them or as they call them, coffin Dodgers, says these coffin Dodgers are out there, you know, they're each worth 100 You know, billion plus dollars, and they're telling me don't buy this crap. You know, don't don't don't screw around with it. You know, and but I go on tick tock and I see some guy in skinny jeans telling me it's a good idea. And next thing I know, I own it. And so I think that's that's kind of the summary. You know, it's, you know, you don't get wealthy quickly and if you do happen to get lucky enough to get wealthy quickly, as they say you are very unlikely to hang on to it. If you want to, if you want to become wealthy, you build it slowly over time, and that's reliable and then you will hang on to it.

Jamila Souffrant 20:01

Right, well, it's you know, it goes back to the simple, it's simple as usually boring, or not exciting. And like you said, it takes a long time. And so many people feel you know that things need to happen quickly. And for some good reason, right? They feel life is short, they need things and situations handled. Now they want to experience life, in totality with the money they want, sooner rather than later. So it's easy to see why this appeals or this idea of, you know, getting quick, rich, and it's in all areas, right? Whether it's like businesses, and people easy getting scammed, you know, because they want to see, they want to believe in the the idea of quick returns, even though it's very risky.

JL Collins 20:45

Well, you know, that's a great point there. Jamila, you're spot on. And, and it is very appealing. Because who wouldn't want to be rich overnight? I mean, I, you know, I certainly wouldn't, wouldn't mind that myself. But if you look around at the people who are really rich, that doesn't happen very often. And as I say, when it does happen, there is not always but that but the road tends to be littered with people who who make it and then promptly lose it. You know, you think about entertainers, or athletes, or what have you who have enormous talent, and suddenly are making enormous amounts of money. And tragically, so many of them fall by the wayside. I think that's one of the reasons Hassan is so taken by my work, because he lives in that world. I mean, he's a guy whose career is on fire. But he's smart enough to know that he wants to hold on to it, though not all entertainers know that and I think he would like to see that message pass on to the backing up to one of the other things you said, you hit it always, this is something when I hear people say it always kind of makes my blood run cold. When they say, you know, index investing is boring. And you know, I want to have excitement with my A Well, no, no, you don't I expect my money. And I asked my money only to do one thing for me. And that's making money. I don't I don't expect it to entertain me and expected to provide excitement in my life. In fact, I don't want that. There, I have other ways to provide excitement and entertainment in my life. I don't expect my invested money to do that. And I think when you do that, you know, well, then you might as well go to Vegas. I mean, that's the whole point of gambling. It's, it's exciting. Why while you lose your money, yeah, I don't expect my money to entertain me, then I don't recommend anybody do.

Jamila Souffrant 22:40

Right. And so what's interesting about that is that we are living in a time where with social media, tick tock, Instagram, you know, Twitter, or x, that be catchy content, especially now, you know, like personal finance, very popular now, like on social channels, especially for the people who can talk a good game and make it entertaining. And so, and then you have a generation, especially younger people like are attracted to like the content creators or people talking about money. Initially, like when it looks flashy, fun, and then, you know, the materialistic gains that you can achieve when you do well wealthy. And so I feel like there is a generation coming up where, you know, I'm worried for them. Because there is a lot of and for good reason. You know, my kids are pretty young. But again, they're growing up in such a different time where they don't have to wait long for things, you know, they can order something on Amazon really quickly. Everything is instant. And so I think there really needs to be the conversation and like just the old adage that true wealth takes time. And I like to say it's not that you can invest in other things like you know, real estate or more, you know, sexy, complicated fun things, but have the basics like taking care of first, you know, if you have the basics down first and you you're on track and your money's working for you and you have the capacity and want to be more flashy or risky with your investment, you can do that but at least have the basics down where you have a retirement account, you're on track for that if financial independence is your goal, you have a you have a set aside accounts for that and then additional money to if you want like you say gamble it go right ahead and do that.

JL Collins 24:20

I think you're right that in you know this, this impulse that people have to do want to be rich quickly. That goes that goes back in probably the origins of human history. Certainly there was the 1920s when Ponzi first grade it was now become Ponzi scheme. So people have always been it's always been easy to sucker people into into scams and deals and as my father told me if it's too good to be true, it is and I I sort of agree with you when you say get the basics right and then if you want to set a little money aside to play with that's okay. I'm not violently opposed to that, but I also I don't expect any of my money to entertain me. So I would kind of say just, you know, invest your money well, and let it grow for you. And then if you want entertainment with your money, then go to go to Vegas, don't pretend you're investing in something. I had a college buddy of mine. And when I was, you know, we were both in our 20s came to me one time and he said, I want to tell you about this great investment. And this, of course, was before computers and okay, you know, and, well, he had a chain letter and chain letters, or, you know, that's an old style of of scam, you know, and I tried to explain to him, you're not talking to me about an investment. You're talking to me about it best a wild speculation. Let your money work for you while you go out and play is what I'd say. But don't play with your money.

Jamila Souffrant 25:57

Yeah. Oh, I like that. So with your book, pathfinders. Now, you what can you explain the concept behind the book? And then we can go into some of the stories and just samples for people achieving wealth, the simple way.

JL Collins 26:13

Sure. So Pathfinders is, is a book I've wanted to do for years. And actually, it's, it's been a book in progress for the last two years, almost, you know, within six months of The Simple Path to Wealth coming out, I started hearing from people telling me that they'd read it and telling me about their journey and how they uniquely, were applying the principles of it. And this was kind of amazing to me, because if you go back to our earlier conversation, I started the blog. And by extension, I wrote the book for my daughter. I mean, it's, it's written for a specific person. And at the time, Jessica was in college. So this is a young woman, who was just at the beginning of her journey. And she's a She's an American. So the book is very much based on on a young person starting, and it's very US centric. And yet, I was getting the stories from people all over the world. You know, who don't have access to the kinds of things that I talked about in the book, A, you know, like 401k, is they have different versions of it, but they were able to take the principles and adapt it to their unique situation. I had certainly young people like my daughter who were starting. But I had people of all ages, who had already built lifes and lifestyle, inflation, that things that they had one wind, and it was fascinating to me how they were taking all this at heart. So I wanted to share those stories for a long time. And on the blog, I did. I don't I think 12 1315 case studies, which did this a little bit. But when I started working with Herrmann house, we thought, you know, this, this, this should be more than that. And then so we've now collected 100 stories, and again, that's from people all over the world, from all different economic levels, all different ages, and in places of where they came across a Simple Path to Wealth. And it's first of all, it's very gratifying for me to read it. But it's, it's incredibly inspirational. Because so many people, when they first come across it say, you know, this sounds great, but I couldn't do it, given my circumstances. Well, when you read, if you read Pathfinders, and you go through these understories, at the end of the book, you won't be able to say that anymore. You can say, I choose not to do this. But you won't be able to say, I can't do this. Because people probably with more obstacles than you have have and are doing it. And that's what's thrilling, most thrilling to me about the book.

Speaker 2 29:04

So the wealth and goal, or should I say just the goal of wealth that people are obtaining in this book isn't the same for everyone. Like what does wealth mean? What do the different goals of wealth mean for these people? Is it that they're completely retired, they reached their financial independence number? What for them means wealth? Or that? What are the different options you saw in the book?

JL Collins 29:26

Well, I think you know, it's sort of in the title of your book at the last word, it's freedom. I think the universal thing that all of these people seek with their wealth is money buys you freedom money can buy a lot of things, right I mean, it can buys you cars and clothes and houses and nights on the town and what have you. But for me, from the very beginning, the most important thing that money could buy for me was freedom. And I think that's the unifying thing is a read through the stories and all that People I've met over the years that that are in this, that's what they really want. What does freedom mean? Well, it means that you have more control over over yourself, your life, your time, more options. However you want to do that I've had people say, Oh, I jail, I've reached financial independence. And you know, I don't have to work anymore. But I like my job. Keep your job. And there's no rule that says, Once you become financially independent, you, you have to quit, right? But the point is, it's now optional. If you get to the point where you don't like your job anymore, you can quit. Or if you see something you'd rather do, you don't have to, you no longer have to work for money, because your money is now making you money. So I think that's the universal thing is, is freedom. And for me, I can't imagine anything I'd rather buy with my money. There is nothing that's more important to me, there's no car, there's no house, there's no, I don't know, bobble, that I would value more. And so that's where I put my money. And of course, you buy your freedom with investments, and specifically index funds.

Jamila Souffrant 31:11

Were there any through lines of people achieving their idea of freedom, what that meant for them in terms of the steps they taken? So I know, obviously, investing is a big part of that. And index funds for many, mostly probably all the people in the book. But is there something else that you saw a lot of people do or work on in their financial life that helped contribute to obtaining freedom other than investing.

JL Collins 31:34

So going back to the idea that a lot of these people are not starting from the beginning, they, you know, they're there already, at some point in their journey in their lives. The two biggest obstacles are debt and, and lifestyle inflation. And those are two sections of the book. So there are stories in those sections that specifically deal with, with those issues and how people have addressed them. But you can't become wealthy if you're carrying around debt, way too far in debt to carry that house. But we're talking about any other kind of debt. So job one is to is to scrub away that debt. And so there are stories in the book about how people do that. But you just have to It's like being covered with leeches in the because, you know, debts are bloodsuckers and you just got to take your sharpest knife and start scraping those leeches off. And it's amazing to me that, that in our culture, there's so many people that consider debt normal. And it's, it's to me, here, you're walking around with these leeches, drawing your blood, and then it's it's not normal, you know, and it shouldn't be tolerated. And you're never going to be wealthy, you know, until you get get rid of those leeches. And then the other thing, the lifestyle inflation is, you know, when, when people especially if they come from a poor background, and you know, maybe they were poor students in school, and suddenly we get out of school, and you get a good job, and the money's rolling in and it's probably more than you've experienced, and, and you have a whole culture surrounding you saying you deserve a break today. You know, you deserve this. And you deserve that all of this marketing, that is coming at people who says that surprising, you get out and you start making some bucks. Oh, yeah, I deserve that car, and I deserve this wardrobe. And I deserve this apartment or this house, or whatever it is. And you know, it's your money, you can spend it however you want. Personally, I think you ought to consider whether or not you deserve your freedom. And maybe if you think you deserve that, you might want to think about not spending quite so much on those things and more on investing.

Jamila Souffrant 33:54

I know you have profiled different people and different starting points, even different parts of the world. And you know, you always say like, it's really simple, you know, it's income and expenses. And what do you do with the difference of that, that allows you to reach your goals and live the life you want? So for you, and it can be a combination of both? But did you see that most people were able to achieve freedom or wealth because of their income? Because they you know, they earn more and chose to spend less? Or because they were frugal? Or was it a combination of both? Like where you know, the income wasn't as big. They worked on both sides of the equation, income and expenses.

JL Collins 34:31

So that's a that's a great, great question. And because I think it leads to a common misconception and one of the reasons people don't start as they well that's only for people who are making a lot of money. Well, to be clear, if if you're making a lot of money and you're not foolishly spending it then obviously that is an advantage. But I've known people who have achieved financial independence who'd never met More than $40,000 a year. And because that's how they prioritize their lives. I will also tell you no, I like to tell a story back in the 1990s, a, just before Christmas, I was having lunch with a friend of mine. His name was Ken, Ken was in the financial business. And Ken had just gotten his annual bonus for $800,000. And this is in the 90s, when that was real money. And, you know, Ken and I talked about at lunch, how you couldn't live on $800,000 a year. And that sounds absurd to me, even today, I can tell by the expression on your face, it sounds absurd to you. I imagine it sounds absurd to the vast majority of people listening to us. But I will tell you this when I sat there, and I listened to Ken describe the lifestyle that he had put together, the houses, the cars, the private schools, the trips, and you start totaling that stuff up, he was exactly right. $100,000 was not enough money. Now, Ken was certainly making far more money than my $40,000 year friend. But I, I knew clearly at that point that Ken was never going to be financially independent. I mean, unless he dramatically changed his priorities. And I knew for absolute certainty, even back in those days that that my $40,000, your friend would be. So clearly, if Ken had the same priorities as the other person, then yeah, all that income would be a great, a great asset, but you have to have the priorities first. And then certainly, if you can figure out ways to expand or accelerate your income that will expand and accelerate your journey def high. But the other thing to remember is that being financially independent is not a specific amount of money. It's a relationship kind of thing. And it's what's become known as the 4% rule, which is a good rule of thumb. And that basically says that, if you have enough money, that 4% of IT support you during the year, then you're financially independent. So if I need a million dollars a year, I'm going to need $25 million to be there. But if I need $40,000 A year, I only need a billion dollars, both that million and that. And that 25 million, respectively mean that, that individuals that has financial independence, you know, you're only $20,000 with their stories in the book of, of people whose number is $300,000 that makes them financially independent because they've figured out how to live on $12,000 a year.

Jamila Souffrant 37:55

Yeah, and that's the thing your, your lifestyle, desires and needs. And this is something I talked about in my book, I call it the gwoc lifestyle levels. It's important to recognize what they are for you in terms of like, you know, like are you Glock level one one is like the least amount like simple five is you know, you're balling you know, you have your own squawk chef like in house, right and so, one and so block one is like you don't buy guacamole, you make it you make it at home, you never buy guacamole out quantity. Level five is you have your own clock, Chef, Chef, and then in the middle, there's like levels

JL Collins 38:26

will be your own.

Jamila Souffrant 38:29

Yeah, yeah, basically your own factory everything. And so because I think it's really important, like you said, for people to be honest with themselves about like, the trade offs, like what they're willing to give up, and wasting their time and energy to work more to have, you know, the higher gwoc level versus a lower block level and being happy with that. And it's not a bad thing, if you desire a higher gwoc level, but to understand, okay, then you accepted then this life of even if you're trying to reach financial independence, and you're great about it, it's something like for myself, I've adjusted since starting is that I thought I needed less and wanted less of a lifestyle, you know, in guac level and realized quickly, like, I'm more comfortable, at like a mid to higher range, not Glock five, but that means that I need a higher number. And so that also means that, you know, we'll need to, I'll need to work a little longer, or find ways to make more money to then invest so that we can get there. And I think most people are just not considering those trade offs when they're just living their lives and they don't know about financial independence. So they just need to understand the trade offs and if you can, like say, Hey, I choose this, then Okay, that's great, you know, like choose it but I feel like so many people just don't know what they're choosing when they make those decisions with their money.

JL Collins 39:46

Yeah, there there are some people in the fire community that that I think are drawn to to hair shirts, you know, and, and the deprivation that's involved in it and living like a monk and I believe That's, that's a little bit more of my inclination, if I'm, if I'm honest. But, you know, when I started out, I decided I was, I was going to save and invest 50% of my income, simply because buying my freedom was so important to me. And, and I did that from the beginning. And it was pretty easy. But that also meant as my income grew, so did the 50%, I was spending. So when I started my professional career, I was making $10,000 a year. So I lived on five and I, I invested five. And I knew I could do that, because I knew there were people who were making $5,000 a year, and they were paying their bills. So you know, and of course, to be fair, this is the 1970s. So it was, you know, it's probably more like 50,000 or 60,000 a year now to put it in perspective. But then when I was making 20,000, I was also living on 10, you know, my, my lifestyle could double. And then when I was making 100,000, it was a you know, so I'm not at all opposed to expanding lifestyles. But I, the way I think of it is I always want to buy things from position of strength. The that means I never want to stretch myself to buy something where I'm, I have to worry about whether or not I can make the mortgage payments. So I'm talking to you from our house on Lake Michigan, which is pretty sweet. And it's nice to have a house in the lake, we bought it for cash, that's buying it from a position of strength, I'm a lot more comfortable, I enjoy it a lot more than if I'd had to stretch and I had a worry each month about how I was going to pay for the thing, or when something went wrong with it, how I was going to pay for that. So I guess my attitude is, is buy whatever you want, whatever you think will make you happy, as long as you're from a position of strength. And you'll probably learn that a lot of things that you thought would make you happy. Once you own them, don't make you as happy as you thought you were they were going to make you. And by the way, don't ever buy something just to impress people around you. That would be my other piece of advice.

Jamila Souffrant 42:14

When you think back of all the stories that I know, they're, you know, you said they were 100. So you don't have to, you know,

JL Collins 42:20

you got to test by memory and

Speaker 2 42:21

think about all of them. Yeah. But is there one? So is there one, where are a couple, just not necessarily the best one or your favorite, but just one that you feel like, Oh, this is an interesting one to summarize and share to encourage someone listening, who was like, okay, like, I want to, I want to start my Simple Path to Wealth and journey to freedom.

JL Collins 42:42

Well, I think some of the stories that I like the best come from, from people who are starting with the least. And I think the reason I like those stories is is because I think one of the the criticisms that I've seen of the FIE community in general over the 1012 years that I've been involved in it is well, it's only for, you know, wealthy professionals. You know, and and so these stories, you know, I've heard their stories and hear from people who, who grew up thinking if you had a flush toilet, that's you were rich, you know, the people who had flush toilets, those were the rich people. Or there's a story from a guy who was a child migrant laborer, you know, picking, picking fruit in the fields as a child. And you know, who's now financially independent. So I love those kinds of stories. Christy shot and you know, the author of quit like a millionaire, that's her story of growing up in rural China and living on 60 cents a day or something. So I do love those kinds of stories. But I also love the stories of the you know, there's, there's a great story about a young couple in in who are from the Midwest, and they're out in Silicon Valley. And they're making a lot of money as people in Silicon Valley do, but they managed to not get drawn into buying an overly priced house and, you know, the expensive lifestyle that is inherent there and, and they sort of build their wealth, and then they returned to Ohio and they're financially independent. So combination of using a large income, not being drawn into financial area into lifestyle, inflation, and then doing a little bit of geo arbitrage, you know, moving back to a far less expensive part of the country, where they had family and friends. I mean, I love those kinds of stories, too. So, yeah,

Jamila Souffrant 44:44

there's so many that choose from I know, with that, you know, I'd love for you to tell, we'll just see if you want to say like who the book is for and then where they can find it and then more about yourself.

JL Collins 44:56

So, who the book is for Uh, you know, the one of the questions is, do you have to have read The Simple Path to Wealth to benefit from pathfinders. And I imagine that, you know, a lot of the people who have read and enjoy The Simple Path to Wealth will most by definition, read and enjoy this book. But if you happen to come across Pathfinders first, I think that's fine. Because it, if anything, it will inspire you to, to consider this journey. Because, you know, when I, when I put out The Simple Path to Wealth, what I noticed is that for a large number of people, it really resonated. They said, Yeah, you know, I, this is what I want, and you've laid it, you've laid out this, this very understandable way to get there. And I'm gonna go for it. But there were other people who said, Yeah, you know, that probably just isn't for me, you know, maybe, maybe I'm starting, you know, I'm not making enough money in my job, or my lifestyle is too inflated, and they need all these things. And I think then Pathfinders is very useful for those kinds of people to see, well, you know, there is nothing about your situation that prevents you from doing it. You can do this because other people, in even more challenging situations have in fact, done it. Now, you can still choose not to do it. And that's obviously it's your money, your life. But, but if you read Pathfinders, as I said earlier, you will never be able to honestly say to yourself, you can't do this, you will then be forced to say, Okay, this is an option that I choose not not to follow. So I think that's both a value in the danger of reading something like pathfinders. But you can read Pathfinders first and then see how other people have adopted the Simple Path to Wealth. And if you choose, then you can read The Simple Path to Wealth. So it works both ways.

Jamila Souffrant 46:53

And where can they find the book and then you they want to follow up.

JL Collins 46:57

So they come October 31. And I think that'll probably have come and passed by the time this this broadcast is out in the world, they'll be able to find it on Amazon, they'll hopefully be able to find it their bookstore, if it's not in their bookstore, any bookstore will order it for you. You know, one of the nice things about doing this with Herrmann houses my publisher, first time I've used a publisher for any of my books as they have pretty wide distribution. So I think it'll be a fairly easy book to follow. And if people want to follow me, you can go to the blog, which as you mentioned earlier, is JL Collins nh.com. And if you go there and you go to the bottom of any of the posts in there, you'll have an opportunity to sign up for the weekly newsletter if you want that. And then of course, you can find me JL Collins on Twitter. And you can find me on Facebook at JL Collins. And so yeah, I mean, you couldn't have more of me than you wanted or probably do want.

Jamila Souffrant 48:09

Yes, yes, well, I'll link all of that in the show notes. And I want to thank you because you left a very glowing endorsement of my first book. And you know, I can only hope that my book does just as well or make some impacts I should say, as you know, your books have made in the world. So I really appreciate you coming on the show and sharing your wealth of knowledge and I can't wait for people to read your work.

JL Collins 48:32

Well your books deserve that success. And and I encourage people to read them because they will be they will benefit by having done so. So thank you again for having me on the show. It's always fun to hanging out with you. I think we always have a good time.

Intro 48:46

Don't forget, you can get the episode show notes for this episode by going to journey to launch.com or click the description of wherever you're listening to this. And you can still grab your jumpstart guide for free to help you on your journey to financial freedom by going to journey to launch.com/jumpstart. If you want to support me and the podcast and love the free content and information that you get here, here are four ways that you can support me in the show. One, make sure you're subscribed to the podcast wherever you listen, whether that's Apple podcasts, that purple app on your phone, your Android device, YouTube, Spotify, wherever it is that you happen to listen, just subscribe so you are not missing an episode. And if you're happening to listen to this and Apple podcasts, rate review and subscribe there. I appreciate and read every single review number to follow me on my social media accounts. I'm at journey to launch on Facebook, Instagram and Twitter. And I love love love interacting with journeys. They're three support and check out the sponsors of this show. If you hear something that interests you, sponsors are the main ways we keep the podcast lights on here. So show them some love for supporting your girl for and last but not least, share this episode this podcast with a friend or family man Number or coworker so that we can spread the message of Journey to launch. All right. That's it until next week, keep on journeying journeyers

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