Episode 427: The Long Game of Wealth Building & Staying the Course with JL Collins

JL Collins 0:02

If you can't sit and as Jack Vogel said, and do nothing and endure it, then you shouldn't be following a Simple Path to Wealth, and you probably shouldn't be investing in stocks at all, because stocks are always going to be volatile. You're always going to be facing the possibility of of turmoil like we're experiencing at this moment.

Jamila Souffrant 0:27

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 well, join her on the journey to launch to financial freedom in 54321,

Hey, before we get started, I want to let you know about the fire CALC tool. In class, I'm hosting a brand new fire, Calc, live workshop, and giving you the tool that allowed me to quit my job and map out a path to financial independence. It's not just a tool, it's not just a worksheet. It is a pathway to freedom once you use it. And so it's something I've been using, something I created, and have been using within my group, coaching programs, and one on one coaching and all the things. And it's something that people find very valuable. And so I decided to pull it out and share it with you as a standalone tool that you can use very simple, easy to manage, but allows you to map out where you currently are. So where are you with your expenses, your debt, your investments, and if you want to reach financial independence, meaning quit your job, not have to work ever again in 1015, 20 years, maybe less. What does that look like? How can you make that dream a reality? By plugging in the numbers. And it is very powerful, because you get to change and map out different scenarios based on events that might occur. Maybe you want to just take a couple years off of work. Maybe you're like me, and you want to take a risk on entrepreneurship full time, and you want to see how that impacts your journey, so you can model that all out with this very flexible tool that I created. And not only that, you get the workshop, the live workshop that I'm hosting on May 22 at 12:30pm Eastern time. Now, if you can't come, there will be replays, but this is something you should make the time for. So I hope to see you at the class. I also recorded a live walkthrough. So that is one of the things that I got feedback from, from the last class that I did, and the last time I presented this opportunity for you was it was hard for you to figure out what this tool was, even with me just explaining it, so I did a quick walkthrough of the tool that you can see right now by going to journey to launch.com/fire Calc, you'll see all the information about the fire CALC tool, plus a link to the walkthrough so you can watch exactly what it is. And I hope I hope I see you in the class. Remember, if you can't join live, there are replays. And plus, anyone that's signing up for this, I am including some cool bonuses. And trust me, you want to be in this group, so go to journey to launch.com/fire, Calc, and I'll see you soon 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 journey 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 to 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. Hey, hey, hey, journeyers, welcome to the journey. To launch podcast I have today JL Collins, who is known as the godfather of the financial independence movement and community. In fact, he's been on the podcast twice already, on episode 141, and 346, I'll link those in the show notes, where we discuss a bit of his background and his very popular blog and book, The Simple Path to Wealth, which, by the way, that book, has sold millions of copies across 20 languages. He's also the author of Pathfinders and how I lost money in real estate before it was fashionable. His investment philosophy emphasizes simplicity, advocating for low cost index fund investing, which I actually love. That's what I talk a lot about. And he has a revised and expanded edition of The Simple Path to Wealth coming out. So I am so happy to welcome back JL Collins. To the podcast and show, because every time you come on jail, I feel like it's a breath of fresh air, and basically gives us perspective on this investing journey where it's not so complicated. So welcome back to the show.

JL Collins 5:13

Jamila, thank you. It is. It's always such fun hanging out with you, and I'm honored you'd have me back for a third time. So thanks. Yeah.

Jamila Souffrant 5:22

Well, I mean, I'm excited about the new release, or the update of The Simple Path to Wealth, just because I know that it has been a staple. And just your philosophy, your blog, what you've been to, the financial independence community, has been so helpful. And so I think this update, which we're going to talk about to the book, is so timely within these volatile and just unprecedented times where we can see how the Simple Path to Wealth, the philosophy of it all, still makes sense, and how new people who are coming to this work and to your work and want to do well, can succeed. What I'm also going to do is advocate like for the person who says, None of this is simple, and the simple path doesn't work anymore. First, I want to go back to just your philosophy of what The Simple Path to Wealth is, and then we'll dive a bit deeper into everything else. So

JL Collins 6:19

The Simple Path to Wealth has three basic elements, and we're probably going to talk about the third one most today because of what's going on in the world. But basically it's to avoid debt, live below your means, and that third one is invest the surplus. And specifically I talk about, as you already alluded, to, investing in broad based, low cost index funds and holding them for the long term, tying yourself to the mast when things go bad, when the market drops. And of course, as you and I are recording at the moment, the market is being is very, very volatile. We're, you know, we're recording a week after last, last week, Thursday and Friday, it between those two days dropped a little over 10% which is huge for a two day period of time. So this is a very volatile time, and it scares people, but if you're following The Simple Path to Wealth, you're going to do nothing. You're going to do what Jack Bogle once famously said, don't just do something. Stand there, because what we're going through is a perfectly normal part of the process, you know, drops in the stock market, where there are 10% corrections or 20% bear markets or something even worse, they're to be expected. Now, the trigger is always different. You know, last time the trigger was a pandemic this time. It's political, it's it's tariffs, but we never know how long it's going to last or where it's going to go. But if you're on the simple path, you're investing for decades, and you're going to stay that on the path, and it just doesn't matter what the market does in the short term. And

Jamila Souffrant 7:57

just to make sure everyone's on the same page, you know, I like to educate if this is the first time people are hearing about index funds, can you please define what index funds are and how they are beneficial?

JL Collins 8:10

Sure. So an index fund is a is a mutual fund or an ETF that essentially buys a basket of funds that tracks a certain index the one that I like best is the total stock market index fund. There's also an S and p5 100 index fund, a lot of variations. And when you own those, either of those two, you own either the 500 largest companies in the US or you own virtually every publicly traded company in the United States was about 3600 This is opposed to actively managed funds, which try to pick and choose stocks that they think, for whatever reason, will outperform. The challenge with that is it's extraordinarily difficult, the research indicates to actually do that, and it's extraordinarily expensive to try, because you need all kinds of analysts and research and what have you to make the attempt. So an index fund has two advantages. One, the research shows that it actually outperforms over time, and two, it does it at a much lower cost. And again, as Jack Bogle once said, performance comes and goes, but costs are always there.

Jamila Souffrant 9:25

Yes, yes. So when you talk about The Simple Path to Wealth, I love that you broke it down to three simple things, right, avoid debt, live below your means, and invest the surplus in index funds, which we just defined, right? You originally wrote this book, I'm not when did the first version come out? 2016 2016 now, if it's so simple, right? What needs to be updated? So I know you're coming out with updated book, but what needs to be updated if it's such a simple plan?

JL Collins 9:54

So it's a great question, and philosophically, there is nothing different in the new. Version from the old version, the approach The Simple Path to Wealth, is precisely the same. What's updated is all of the data and illustrations and scenarios that were in the simple path that look at what if analysis, and that look at the rules around, say, 401, KS or IRAs or that kind of stuff. Well, obviously, when I was writing it in 2015 to publish it in 2016 that's a decade ago, and those things have changed. So job one was to go through, and this was tedious, but to go through all of those numbers and bring them up to date, and then we expanded it. There's a new section called tools. One of my favorite things in that section is an FAQ, because in the 10 years that the simple bath has been out, I've gotten all kinds of questions. So that was an opportunity to go through some of the most common and some of the best questions and respond to those. I also added a second case study. The original has one case study now it has two. The second one is called what things look like when everything financial goes wrong. And I think that's very instructive for people who listen to podcasts like yours and who read blogs and books like like yours and mine, because they probably don't have anything to worry about. And yet, when I talk to people in the community, they obsess about this stuff, and perhaps because they obsess about it, they don't really have to worry about it all that much. Probably most Americans should worry more than they do. But when everything financial goes wrong, as this case study shows, it's still not the end of the world. So and again, the book is organized a little bit differently. My publisher came up with some organizational ideas that I never dreamed. I thought it was pretty well organized before. I would not have guessed that. I would sit back and say, Wow, yeah, that really does work better. So

Jamila Souffrant 11:59

you bring up this case study when everything goes wrong. And as you said at the time of recording this, there is so much uncertainty and volatility in the market where people are seeing rapid declines in their investments and are afraid, or are scared, and some people are in the position to buy some people have no extra cash and are afraid. They're losing all of their life savings and investments. So what can you talk us through as it comes to investing and feeling still comfortable in this environment? Let's talk about that for a little bit Sure.

JL Collins 12:33

So as I alluded to earlier in our conversation, market drops whether they're 10% corrections, 20% bears something worse. Are perfectly normal part of the process. They are to be expected. And what you do when that happens is nothing, because you have set an investment plan. When you're building your wealth, you are taking a portion of your income, and on a regular basis, you are putting that money in into VTSAX as an example, which is Vanguard's total stock market index fund. And if you're following The Simple Path to Wealth, you are doing that regardless of what the market's doing, whether the market is going up or it's going down or it's moving sideways. In fact, if you are in the process of building your wealth, a market crash is a gift. As scary as it may feel, it is a gift, because if you stay the course, and you keep putting that same amount of money in on a regular basis, which is what you should be doing, you are now accumulating more shares at bargain prices. So think back to the last really bad decade we had in stocks, which was the first decade of this century. So we had the tech crash in in that occurred in 2000 2001 and then we had the financial crisis that was in Oh, oh 809, I mean two horrific I think in the tech crash, the market dropped 49% in the financial crisis, it was 56% over that decade, the market returned about 2% per year, which is minuscule inflation. It actually returned slightly negative. I think it was 1.6 or one, something like that. So that was pretty bad decade. And most people, the conventional wisdom, would say, Boy, I wish I'd known that at the beginning, and then I just would have avoided that decade. Well, first of all, there's no way to know that, but more importantly, if you avoided that decade, if you avoided buying shares in that decade, you would have avoided buying a huge buying opportunity. If you were following The Simple Path to Wealth, you would have been accumulating shares in something like VTSAX that would have turned out to be absolute bargain prices. And even now, with this. Scary time you you, you would still be far, far, far further ahead than if you had not done that. So I have no idea what the market's going to do from here. Nobody does, especially not the people on on TV telling you that they do. It could like in COVID, and COVID crashed. It turned around in six weeks. Nobody, including me, predicted that it could have gone on for years. I don't know where this is going. It's about down 20% as we're talking is it going to get worse? Is it going to turn around and go back? I mean, I just don't know, and nobody does, and that's kind of the point. So it shouldn't, regardless of what it does, if you're following The Simple Path to Wealth, it won't matter for you, because the stock market, through all these travails, always turns around eventually and goes up. And you look at there's some really good chart in The Simple Path to Wealth that illustrates that going back 100 years. And it's instructive to look at it, and I think it bleeds a lot of fear out of any given situation.

Jamila Souffrant 16:06

So if you're in the asset accumulation phase, meaning you are building up your assets, you are putting that extra money into your investments. This, again, feels like a great opportunity if you have the cash to do so. So this is assuming people are already investing consistently, and have the income to pay for the expenses and then invest. What about those who are closer to the retirement age, or who are looking at financial independence as the end goal in a couple years? How should they be thinking about this, you know, even with just index investing? So I know that if you have a long time horizon just, you know, put your money in there and let it go, but as you get closer to retirement age, or the financial independence point that you can pull the trigger and exit the workforce, how does someone look at their investments and index funds at this point and what's happening, and not be scared. Yeah.

JL Collins 17:03

So the way I think about it is you have sort of two phases in your investment life, right? You Your accumulation phase, and then when you're living on your portfolio, right, your preservation phase. So during the accumulation years, you know you were working you're earning money. If you've organized your life properly, you're living on less than you earn, and you're investing that difference and that flow of cash into your investments is what smooths the volatility of the stock market. Because while the stock market is a very powerful wealth building tool, as we are experiencing right now is very volatile. It can be tough to live with, but putting that money in, that earned money in, is what smooths it out. It allows you to buy those shares on sale, as we already discussed. Now, when you get to the point where you're living on the portfolio, as you were just asking about that's when you want to add some bonds to your portfolio has ballast, because you are no longer going to have that income cash flow to do that for you. So now you have bonds, and you add you, you have to decide what your allocation is going to be. I'm pretty aggressive. So personally, mine is 8020 80% stocks, 20% bonds. Somebody less aggressive might be 6040 but then when the stock market drops the percentage, let's say you've chosen 6040 the percentage of stocks begins to drop because the value is lower, and the percentage of bonds begins to rise. Then you have that bond money that you can shift over into stocks to bring that balance back. And now you are again buying those stock shares on sale. This, by the way, is a very difficult thing to do, because your bonds are probably going to be rising in value, and you're going to have to sell them to buy the thing that's declining in value, right? So it takes a certain amount of discipline, but that's how you do it. And the other thing that is, if you're living on the portfolio, you're going to be living on your dividends from your stocks. It's about 1.25% for VTSAX at the moment, the bond fund I recommend is VBT, LX, total bond market index fund that's paying out about three and a half percent. So the first thing you do is take those dividends and that interest, and then you'd be selling a few shares to make up the difference to what you need to live on, especially if you're looking at something like 4% rule. But it's important to remember that even if you're selling shares in a down market, you're not selling your whole holding, you're not selling your whole portfolio, you're selling maybe 2% of it during the course of the year. So it's not as big a hit as listening to the media would make you think. Think. You were going to endure,

Jamila Souffrant 20:01

right? Right? Like, if you see your portfolio decline by 20, 40% it feels like, well, that's everything, but you're not taking all that money out in that month or year or

JL Collins 20:12

no, and you still own exactly the same number of shares. Which is, which is the key thing. Now, little caveat here, and this is not the time to be resolving what I'm about to say, but it is something that any investor needs to think about, as I as I said earlier, what's happening in the market today, this volatility and this dropping is perfectly normal, and you have to be willing to endure it. You've got to be willing to see your market drop, say, 49% as it did in 2000 2002 56% as it did in Oh 809, you have to be willing to endure that, recognize you still have the same number of shares, and know that eventually those shares will go back up in value, and you have an opportunity now to either with your cash flow or by shifting money from your bonds, accumulate even more shares at these lower prices. That's easier said than done, no mistake. And for people listening to this who are really have their heart in their throat, they're learning that firsthand, and you have to know yourself. And if you can't do that, if you can't sit and as Jack Bogle said, and do nothing and endure it, then you shouldn't be following The Simple Path to Wealth, and you probably shouldn't be investing in stocks at all, because stocks are always going to be volatile. You're always going to be facing the possibility of of turmoil like we're experiencing at this moment. Yeah,

Jamila Souffrant 21:49

yeah. So I want to go back to because this is a powerful concept, and I know for you this is you talk about this all the time. You've been here, you've done this, you've educated people on this. I feel like, you know, years ago when I stumbled upon the financial independence movement and discovered index funds and your blog, it helped me tremendously. So there are some people listening who just get it, they get that. And then there are some people who are just like, well, I want to invest, or I want to start, or I want to be an investor. I get that question a lot like, How can I start and I'm like, Well, do you have a 401, K or retirement account already? And are you investing? Are you participating? If you're lucky, to have an employer plan as an employee, you already are investor. Like, I'm trying to tell people that it doesn't have to look the fancy trading stocks and picking a stock the way that it's sold to us, I believe as a cool thing, it looks really different and can be successful in this boring kind of way. And so how can you encourage or speak to people who want to be investors, who say they want to invest, and it's like, it's right on. It's like, right there. For them, they just have to understand how powerful and the access that they already have.

JL Collins 23:00

That's a great point, because if, if you're a novice, looking at the investment world, it looks stunningly complex, and you're not wrong, because Wall Street has made it stunningly complex. Because the more complex it is, the more fees they can charge, and the more they can drive you into their arms, because don't bother your pretty little head about this important investment stuff. We'll take care of it for you. And of course, they have their hand deep in your pocket and doing it. That's the bad news. Here's the good news. Imagine that you had a banquet table just filled with every kind of exotic delicacy and recipe that you could possibly imagine, right? All these complex things and on one little corner of that table are the basic foods that your body really needs to be healthy, right? Well, you can put your arm on that table and sweep all that complex stuff onto the floor. All you need are those basic, very simple foods to have the healthiest possible body. It's the same with investments and what's left you do that with the investment banquet table. What's left is low cost, broad based index funds and things like your 401 K and your IRA. Now let's be clear, your IRA is not an investment. Your 401 k is not an investment. Your 403 B is not an investment. These are buckets in which you hold investments. So if you have a 401 k at work, and most people do, and even if you've signed up for it, they've probably put you in something like a money market fund. There's nothing wrong with that, other than there's no long term growth to be had with it. So the first thing you're going to want to do is, if you have a 401 k, if you don't have a 401 K, sign up for it. If you already have one take a look at where your money is going and make sure that it's where you want it to go. Yeah. And the easiest way, by the way, to find the low cost index funds are to look at that list that you'll have from your 401 K provider of all the investments that you can choose from. Run your finger down the expense ratio column, the ers, and look for the lowest possible number, because that will tell you where the index funds are. And

Jamila Souffrant 25:25

as you talk about just how complex the industry makes everything feel. And you know, sometimes it just is right, like there are all these new forms and types of investments like crypto, which is not as new anymore, but still something people ask me about in terms of, oh, well, how can I get started in that? Or is that the next step? And what I try to tell them about investing in their retirement accounts, it's usually like, oh, but like that is not money that I can have now. People really want to enjoy their money now, ultimately, and so talking to this idea of investing in retirement accounts that people feel like they can't use anytime soon. Like, why should they do that? And then moving to the more complicated things that they feel like they can gain value quicker, you know, they can catch up for lost time, because a lot of people are starting late, and so they want to do they don't want the Slow, simple path they want, like, the prospect of making money faster, not in retirement accounts that they can't touch in 20 years. And so I feel like making people know how important it is in the simple, boring retirement accounts and tax advantage accounts like that is I believe, like, what I'm trying to, like, explain to people that sometimes I don't think they get some people, some people get it. Some people don't. Yeah,

JL Collins 26:40

so, so it's hard. And, I mean, I understand that impulse. I would, I would love to to have bought crypto when it was $1 a coin, or when Bitcoin was $1 a coin, and, you know, I, I'd be a billionaire now. I mean, those are, those are wonderful stories. And there are probably some people who actually did that and actually have held it until it was worth what is it, $80,000 a coin or something? Now, I mean, who wouldn't want that? But what do you have to understand is, it's kind of like winning the lottery. You know, the odds of you're not going to buy crypto today and have it blow up from one to 80,000 you know that's just not going to happen when it's already trading at 80,000 so you have to find if you want that, you have to find the next thing. And the problem is that any given moment, there's a whole range of next things, most of which flame out, so your odds of picking the correct next thing are slim to none. So that news isn't bad enough here. Here's news to make it even worse. Let's suppose that you were lucky enough to have found crypto in those early stages, or you're lucky enough to find whatever the next thing that is out there today is going to be. You are the one who is lucky enough to do that, and it blows up, and suddenly, you know, like Jed Clampett and the Beverly Hillbillies, you know you, you've struck black gold, and you're, you're a millionaire. Well, the odds are you're going to think that you have the magic touch, and you're going to keep looking for the next thing, and you are probably going to give that money back? This is how casinos rope people in, right? Casinos actually pay out something like 95% which is huge, because they want people winning. And the reason they want people winning is that nobody's going to gamble if they don't see anybody else in the casino winning, right? What they know is that even if you win, you will continue playing, and ultimately you will give it all back with very, very rare exceptions. And it's the same thing with anything that delivers you money quickly, is you're very likely to give it back. And that's the that's the danger. So if you're committed to that approach, I can't help you. I can only help you become wealthy over time, and that does mean that you're going to have to decide when you have all the money that is coming into you from your salary. You mentioned people want to enjoy their money now, and I get that, but everybody has a finite amount of money. And so when you're deciding, do I want to buy a Chevrolet, or do I want to buy a Cadillac, right? Oh, gee, the Cadillac could be really nice, but if I bought the Chevrolet, I'd have a whole bunch of extra money that I could go buy something else with, right? It's a choice that you only you can make. You're going to choose whatever is most important to you. One of the things you can choose is your freedom, is your financial freedom, and ultimately, the freedom over your time, to spend your time as you want and to work. For who you want when you want to do that. For me, there was nothing that my money could buy that was more important than my freedom, nothing, not cars, not houses, not wardrobes and nothing. That's how highly I valued my freedom. Now that's me, and nobody has to make the same decision I made, but unless you put that at the top of your want list, buying your freedom, then you are probably not going to organize your life to free up money to invest, because that's investing is how you ultimately buy that freedom. But that's a personal choice. And I, you know, I've had people say to me, hey. JL, I get it, and I understand. But you know, I'd rather have the big house. I'd rather have the fancy car. And I think, Well, God bless you, and Godspeed, don't complain. When, in 2030, years when you don't have the ability to retire, but other than that, you can do whatever you want

Jamila Souffrant 31:07

to do. Yeah, I love when he talked about having just the basic food and being able to sustain yourself from that. And reminds me from analogy in my book, where I talked about, like you can actually do the fancy or fast, quick ways to get rich. But I think first you should do the basics. So kind of like having your basic food groups, like so you have the minimum, maybe you figured out the minimum, minimum number you need to retire to reach financial independence. You're okay with that timeline. And then anything extra, you're okay with losing or gaining and adding to add color to your life, add flavor, you know, to the basic food groups, but just have the basics down first, then you can choose like, however it looks like after. But so many people are skipping the basics, trying to get ahead and real and just basically digging themselves deeper in a hole. Yeah,

JL Collins 31:57

and you know, you know what they say, if you're digging yourself deeper in a hole, the first thing to do is stop digging, right? So what I used to, I mean, when I started out and I didn't have anything, I looked at my income and my first professional job out of college, and it was $10,000 a year. And, of course, adjusted for inflation, that's, that's would be more today, but it was still a very modest amount of money. But I knew I could live on $5,000 a year. It took me two years out of college to get that professional job, and I'd been doing landscaping work for that, so $5,000 a year was a whole lot more, and then I was getting paid for that, and it was a whole lot more than I was living on putting myself through school. So it was a step up in my lifestyle, and I still had half my income to invest. And then as I made more money over the years, you know, and I was making 20,000 Well, now I'm living on 10. I've doubled my lifestyle, and I'm investing 10. When I was making 50, it was 2520 100, it was 50, you know. And and so I allowed my lifestyle to inflate, but I controlled it, and at the same time, I inflated the amount I was investing. But that gives you an idea of my priorities I was I was bound and determined to to be financially free.

Jamila Souffrant 33:17

Hey, journeyers, if you are loving this podcast, then you will love my book, Your journey to financial freedom, a step by step guide to achieving wealth and happiness. I wrote this book for you. This book is for you if you want a clear and enjoyable path to having more money options and a rich life. This book is for you if you hate your commute and the fact that you need to seek approval or permission from a boss. I hated that when I worked this book is for you. If you weren't born into wealth, you didn't marry rich or win the lottery, but you still want freedom. This book is for you. If you're at a crossroads, a major decision or event is imminent, maybe a career change, marriage, starting a family, pressures are reaching a tipping point, and the discomfort and the desire for more can no longer be ignored, and this book is for you. If you find yourself zoned out at meetings, looking out the window or daydreaming about the life you truly want, so go pick up your journey to financial freedom.com. So I can show you how to map out how to get from where you are today to where you ultimately want to be. And enjoy the journey. While you're on the path, head over to your journey to financialfreedom.com to see where you can pick the book up. It's available on Amazon, bookshop.org, Barnes and Noble, your local bookstore everywhere. Go to your journey to financialfreedom.com to get the book now when it comes to debt, so for the people who are currently still in debt, consumer debt, not debt that they necessarily are intentionally holding, but that they have accumulated they actually want to get rid of. And it still goes back to priorities on how you know, important. And it is to get rid of it. How, or what is the advice in terms of allocating money to aggressively paying off debt earlier than that payoff date versus investing? What is your philosophy there? Yeah,

JL Collins 35:12

so if you're carrying debt the way you describe, you are never going to be wealthy. Yeah? I mean, it's a ball and chain that you're dragging around. It's, it's like trying to win the swimming meet with, you know, the ball and chain around your ankle. It's, it's just not going to happen. And our culture encourages this, and I think it's, it's reprehensible, and we've come to accept consumer debt is the norm. And to me, it's like being covered with blood sucking leeches. I mean, it's not normal, and you just need to take out your sharpest knife and start scraping little blood suckers off. So the way I would recommend doing it is I'd look at all the places I have debt, and I would pick the one that was charging me the highest interest rate, and I would focus on paying that down as aggressively as I could. This is an emergency, right, getting out of debt. And then once I blew that one off, I turned to the next highest one, and I'd blow that one off until I was done. Now the good news about this is that in order to do this, you're going to have to organize your life to free up that money, to pay down that debt. And that's a wonderful step to take and a great discipline to have. And once that debt's gone, guess what that money you were paying to the debt, you've learned to live without it now you can easily use it to build your wealth and to increase your freedom, and that's how I would approach it. And

Jamila Souffrant 36:43

you know, you talked about it being so ingrained in our society. I know recently they announced you can now put your like, Uber Eats or the food delivery on on payment plans. It's insane. And I know there were, like, a lot of jokes and memes about it, but I'm just like, Oh my gosh. Like everything. And again, this is, you know, I understand that there is a segment of people who are struggling with income and being able to pay expenses and need to put things on credit cards, but there is a also a large segment that doesn't, and it's a discipline and mindset and habits issue, in my opinion, and this idea of deprivation, and it's not sustained deprivation, because that doesn't feel good, but your gratification that you're insisting on having now being able to sustain that and put that off and realize the benefit of putting that off, you're still you're you're receiving it now, even though it feels like it's a goal a year, two, 510, years down the road, and I think for people, especially with the marketing and social media, it's harder to buy into that when they just want to live their lives. Now it's like, why should I do that? Which I think is your book, and what we're doing is so important to show people there's another way. Our

JL Collins 38:04

whole culture is designed to encourage you to spend money and to spend it on, you know, and this is not some conspiracy, by the way, but every company out there that manufactures a product or a service wants you to buy it. We have very clever marketing teams designed that are charged with and are very skilled at making you want to do that right? But it's your to me, it's never been about deprivation. When I was saving and investing my money, I didn't feel deprived. I was buying the thing I wanted the most. I was making my choice. Now, to be clear, it was very different than the choices of a lot of my friends and peers. But if you're going to lead a different kind of life, if you're going to lead a life that leads to becoming wealthy, which most people don't accomplish, not surprisingly, you're going to have to make some different choices. But again, it comes down to not living your life fully, versus deprivation. To me, it comes down to what do you really want your money to buy for you? Only you can make that choice. I mean, I Jamila, you and I could never say to anybody, you're making the wrong choice. It's their money. It's their life, right? And I, you know, I'm not trying to persuade anybody here. What I am trying to do is say, is say, because there's not a huge company marketing this idea, there is another way to spend your money. There is a another thing that you could buy with that money. And that thing is your financial freedom, that thing allows you to ultimately buy your time and to work where and if you choose and for whom you choose. Now, if that doesn't appeal to you, then go, do you? But at least now, you will never be able to say you didn't know there was another. The way you could have spent your money, and the value that that way could have brought into your life, as opposed to whatever value you're getting from how you are spending your money. Does that make any sense?

Jamila Souffrant 40:12

Oh, it makes total sense to me. And hopefully I have people listening, nodding their heads like, Yes, this is, this is what I want, and understanding that there are, you know, trade offs. There are trade offs. I feel like even the people who have a lot, seemingly a lot of cash flow and money, still complain about not having enough. So it's really this idea of figuring out, what is your enough point, what can make you happy at the bare minimum, not that you can't have more. And then what are you willing to trade off for that, and is it worth it to you to do those things? And again, like you said, only you can make those choices.

JL Collins 40:48

And I think you know, you and I, and the people who are listening to this, who are nodding their heads in agreement, we're unicorns, right? Most people, you know, most Americans, are not going to do this, and I think that's a shame, because I think their life would be considerably better if they did, but I think that's also the reality. You know, this is what we're doing here. Jamila is a teaspoon in the ocean of marketing, trying to persuade people to do what they're currently doing, to stay in debt and to keep in to keep being good little consumers and keep buying trinkets and trash and and you deserve a break today. And you know, if you buy this car, then the opposite sex will flock to you in droves. And you know, I mean all this nonsense, and all we can do is, is reach out to the people who are interested in in making different choices,

Jamila Souffrant 41:46

speaking of choices and building assets, because ultimately you need, you need to build like cash flow. You need to convert your cash flow into building assets so that you can reach financial independence and retire and live off of that income. One of the things that you talk about and you discuss in the book, I saw that actually, when I got the PDF, I scrolled to that because I'm having a question personally about that in my life, is financial advisors or people helping you with your money and the cost of that. I want us to spend a little bit of time here talking about the different types of financial so this educating to the audience on the different types of financial advisors and planners. So there are people who are investing on your behalf, right? Sometimes people say, Well, I have an advisor through my investment company or through my job. And maybe they mean something else, but they say, I have someone already, and when I ask them, like, Okay, what is that relationship like? Are they charging you for any trades they're making? Are they what is their fee? Sometimes they don't know. Then there's, there's this idea of financial planner who is helping you plan out your finances and potentially charging a fee. But there's all these words and people who want to help you with your money. So I want to educate people on like what those options are and when it makes sense. Does it ever make sense for someone to have a financial advisor or planner, and if so, when? And then we can dig deeper in. So

JL Collins 43:14

maybe the way to think about that is advisors who tell you how to invest your money and then advisors who perhaps help you with life choices. Okay, so, as we already talked about, if you're investing, according to my principles, in The Simple Path to Wealth, it's the soul of simplicity. You should not need an advisor or anybody else to tell you how to buy a low cost, broad based stock fund. You can go to Vanguard. You can call Vanguard, and which is my preferred brokerage. But you could do this with any, anyone you do with fidelity, or T Rowe Price, or they all have broad based, low cost index funds. And call them up and say, I want to, I want a total stock market index fund help me out, and they will be happy to do that. You don't need anybody to hold your hand to do that. And if you're at the beginning of this journey, the last thing you need is a financial advisor, because you don't have any money accumulated to advise about right? But at some point, as your wealth builds, if you follow this path, you may be looking at lifestyle, life, kinds of decisions that maybe an advisor could be of use for. Now, you have to be very careful, because not all advisors are good, and they all charge. I would only go with an advisor that charges an hourly fee. It's going to be a lot more painful for you to write those checks to that advisor than to have it buried in commissions that are taken out before you see them, but it'll allow less expensive but even then, you have to worry about conflicts of interest, right? So if you have an advisor, particularly who's charging you a percentage you're you have your assets, right? 1% typically. Well, first of all, that's a huge. Huge long term drag on your returns. The way I think of it is, if you're living on your investments, and you're pulling 4% which is the typical amount that that you can safely pull, and you're paying 1% of the total to an advisor, well, you're paying them 25% of your annual income, right? So when you think of it in those terms, but let's suppose the question becomes, should I pay off my house? You know, I've got, I bought a house, I've got a mortgage, I've accumulated some money. I don't like having this mortgage. I don't like having this debt. So, you know, should I keep the money invested, or should I pay off the house. Well, could be either, either one of those things could be the right answer, depending on your unique situation, but there is only one right answer for your advisor, and that is to not pay off the house. Because if you said, take, say, $250,000 out of your portfolio to pay off the house. That's $250,000 they're not going to get 1% a year on they're going to lose money on that. So are they going to be willing to give you objective advice when it dips into their pocket? Potentially, to do it, that takes a pretty saintly financial advisor, and the financial industry typically doesn't attract saints, so those are the kinds of things you have to be very cautious about. So

Jamila Souffrant 46:30

one of the things I got, you know, as a response to this question of, is it worth it to pay someone 1% was, well, what about them helping you with tax strategies and tax loss or gain harvesting, asset allocation, like where they are saying that they are maybe not beating the market, but they are saving you money in taxes and any drags in your portfolios in other ways. So they're making up for that 1% of their fee. Well,

JL Collins 46:59

theoretically, I think at that point you should maybe have a tax advisor who helps you with your taxes overall. And in fact, I no longer do my for a long time, I did my income taxes myself, because I kind of enjoy it, actually, but I now have a guy who does my taxes. And those are the kinds of questions that I can I can bounce off of him, but that's a very specific kind of advice that I'm buying, and I'm paying a fee to have him him do that. And that's, again, goes back to if you're going to hire anybody, you should pay them either a flat fee or an hourly rate, because that's the only way you're going to get objective advice. Or you can be assured of getting objective advice where there's no conflict of interest. You know, if they're getting paid on commissions of what you buy and sell, well, there's a conflict of interest because they're going to want you to trade as often as possible. That's rarely works out to your advantage. If it's a percent of of your total assets, well, then if you're looking for advice, it might take some of those assets off the table, like the bang off the mortgage illustration. You know, that's, that's a conflict. So it's, you know, seek advice carefully and from specific people about specific things, yeah.

Jamila Souffrant 48:20

Yeah. And one of the questions people typically have, even I have, is, you know, finding qualified and verified people that you can ask these questions to, what is your advice on finding that I know, obviously talking to other people who are doing this and seeing if you get referrals is one way. But have you found, like a trusted resource or referral system that you recommend. I have

JL Collins 48:45

not, and it's, it's very, very difficult. In fact, I'm kind of of the opinion that by the time you've educated yourself in these things well enough to choose an advisor, you probably know enough that you don't need one. Well, one of the things that I've heard advisors say is, well, the great value that we bring to our clients is that in times of turmoil, as we've already discussed, like right now, we keep them from panicking. We help them stay the course. We make sure they don't, they don't do silly things in a moment of panic they'll regret later. And that's great. That sounds wonderful. That would truly be a valuable service, but in the economic crisis of Oh 809, statistically, advisors panicked and sold at a greater percentage than the average investor, so the advisors were more likely to do the wrong thing than the average investor. So now you've got to find the advisor who who doesn't panic themselves. It. In that circumstance. So that's one of the reasons I'm not a huge fan. I'm sure there are lots of wonderful advisors out there. I think I've never used one, but I think I've met a couple, because they follow my work, and they reach out to me, and sometimes they argue with me. But it's tough. It's tough, and I don't think there's any reliable source, you know, recommendations from friends and family. I know one of the most common things I'll hear from people is say, oh, you know, I use old Charlie. And, you know, Mom and Dad use old Charlie. And, you know, so that's how I started using old Charlie. And then you look into how old Charlie is running things, and old Charlie has been ripping off mom and dad for for decades, and you're just fresh meat. But old Charlie's a, he's a nice, affable guy, you know, and we can't get rid of old Charlie. He's, he's a family friend.

Jamila Souffrant 50:51

Yeah, that's a good point about, you know, even hearing, getting recommendations from family or friends, it's like, but if they're not knowledgeable also within what they're doing or on it, then that might not be a reliable source to go to either. You know, it's it's

JL Collins 51:05

too often that when people say, Yeah, I've got a financial advisor and he's great, what they mean is that they like him, that he's a good guy, that he's become their friend. And when you look at the companies, like insurance companies, who hire these people, they don't hire them for their financial expertise. In fact, I've heard it said that they don't even want people with any financial expertise, because that might get in the way of selling their products. They hire people who know how to go out and pretend to be the Friends of the customer, convince the customer that they are their friend. That's the skill that they're looking for. And I think most often, when you're talking to people, they say, Yeah, I've got a financial advisor, and he or she are wonderful. What they really mean is, they've befriended me, right? I like them, and that's great, but that doesn't say anything about their abilities to deliver for you,

Jamila Souffrant 52:04

right? Or their entitlement to 1% of your assets,

JL Collins 52:09

great, and that that's their motivation to be your friend, yeah, right? Is the 1% of your assets, you know? I mean, by the way, anybody's listening and they want to give me 1% of their assets, I'll be your friend.

Jamila Souffrant 52:25

Same, same.

JL Collins 52:27

Grow large enough. Also, you'll hear from advisors, your assets have to be large enough, right,

Jamila Souffrant 52:33

right? Definitely, I've heard, you know, you have to have a minimum of a million and, yeah, all those things. Okay, so I want to kind of wrap up, to give people, like, marching orders for next steps on what they should do. Again, I always just like to say, I understand that there's a segment of people who cannot, like they've tried, I mean, and I'm like saying they I'm believing that they honestly tried at to look at their finances and find a gap, find surplus to invest or get ahead, and they can't, but they're educating themselves and preparing for when they can, but talking to the people who maybe have some cash, you know, I guess that's a good next question, alongside of this, is cash? Like having cash, I know that's important to have an emergency fund, to have something to fall back on for job loss and all this kind of income insecurity that might occur from this fallout of the volatile market. So that's one. I do believe you need cash on hand. Agreed, right? So that's important. Don't invest every single dollar and you don't have anything. But what are the marching orders for someone listening and saying, Okay, I have some money, you know, I don't know how or what to do next, but what should I do? Because this is lighting me up. I want to buy my freedom. I don't want to be here in five or 10 years, and I want to get started. What should they do next? So

JL Collins 53:51

this is going to sound very self serving, but they should read my book and the and the reason I say that Jamila is because the biggest compliment I've gotten a lot of compliments over the decade in the book, which I appreciate all of them, but the one that resonates most with me, and it's a fairly common one, is people will say to me, you know. JL, I've tried to read other financial books. I've tried to understand this stuff. They just make me more confused. And I read yours, and finally I get it, finally it makes sense to me, and the reason that's so gratifying for me to hear is because those are exactly the kind of people I wrote the book for that describes my daughter. And I fundamentally wrote this book for my daughter, and she has zero interest in financial stuff, right? She just doesn't want to spend her time thinking about this, these things, but she knows it's important, and she knows if she gets a couple of simple, basic things right and puts a simple plat path into motion and automates it, then she doesn't have to think about it anymore, and that's how it's designed. Mind. And so I think that's a that's a good place to start. Don't start investing until you really build cash, as you just described, and don't start investing until you're really comfortable with what you're investing in. And if you're investing for the long term, you are comfortable with market declines that are going to be inevitable once this one passes, then there'll be another one on the horizon. Nobody knows what will trigger it, just like nobody knew what was going to trigger this one or what was going to trigger the last one the pandemic. But they will definitely come, and unless you know that you're willing to weather that and stay the course, then you don't want to be following my advice or investing in stocks at all. In fact, I just put a blog post up about what's going on in the market these days, and in one of the comments there's a woman by the name of Rebecca who who said, you know, I I thought I could handle these declines, but I've discovered that I can't, and I've just sold out at a 20% loss, and I'm going to go use the warm method, which is a method a friend of mine created, and it's a guest post on my blog which doesn't involve stocks. It doesn't give you long term returns. But if you can't stay the course, as Rebecca decided she couldn't, and that's perfectly legitimate. Too bad she didn't decide before the decline. But there are other ways to invest,

Jamila Souffrant 56:28

right? And I mean, I would just wholeheartedly agree with someone picking up your book as a starting point and reading your blog, because I know that's helped me tremendously to get comfortable and to understand the possibilities for myself. And I just want to reiterate that this idea, like The Simple Path to Wealth and investing over the long term, what I had to understand, what I didn't understand when I was in my early 20s starting to work and didn't want to invest in my 401, K and what I understand now because of this life that I'm living, and I always have to tell people I am not financially independent. I'm at my my stage, four of my five junior levels to reach financial independence, but yet here I am like I have this flexibility and freedom in my life. I still need money, because there are some things I just want to spend money on. But when you are doing these methods, when you are investing in your retirement accounts, it actually gives you a benefit for today, because having the retirement account, having the investment account, built up the way I did. A lot of me to take more risk and do the things that I'm doing now. I have a security blanket or a pad to fall on. I know that mentally and emotionally to take and do the risk and go out on my own the way I have. And so just wanted to reiterate that to people who find or feel like it's just a far off benefit. I do feel like that benefit actually happens at the same time currently as it does in the future.

JL Collins 57:51

I could not agree more and an incredibly important point you just made, because, you know, it's not like you start this path, and then years later, suddenly you have freedom. Every step you take. It's like going to the gym, right the first day you go to the gym and you work out, you're not going to be bench pressing 300 pounds, but you are stronger than you were the day before, just a little bit, but stronger. And then stronger, and then stronger. Same thing financially, every dollar you save and invest, you're that much stronger. And it's a it's a journey, and you reap those benefits little bit at a time, slowly but surely, more and more. And it ultimately, even if you're not fully financially independent, you're able to make bolder choices I did with my career. You're doing it with your career long before we were officially financially independent. And then let me say one more thing about what the pot of gold at the end of the rainbow looks like. I mean, when you really get there. Years ago, Mr. Money Mustache, Pete and I were in Ecuador at a Chautauqua that I was doing in those days. And I'm financially independent. He's financially independent. We were walking to a local bodega to buy some wine, and Pete had been there before. I hadn't, and as we're going into the to this place, I said, Yes, Pete, how much is the how much is the wine here? And he says to me, it's free. And I said, Pete, I know things are inexpensive in Ecuador, I get that, but it's not going to be free. The shop owner is going to expect us to give him money before we walk out of the store with his wine. How much is it? He said, No, no. JL, you misunderstand me. Said, for you and me, everything's free. And I said, Okay, what are you talking about? And he said, Well, when you achieve a certain level of wealth, that is creating more wealth for you all the time, and it's creating more wealth than you're spending everything is functionally free. And that's true. I mean, once your wealth builds to a point where it's throwing off more money than you're spending, then everything essentially becomes free because of the and that's almost the definition of financial independence. I realized that. I mean, long before I had ever heard the term of financial independence. I was taking a sabbatical, one of the many I did over my career using that financial strength that we were talking about. And it was the third year I was without employment. My wife wasn't working it either, and I'm doing our numbers at the end of the year. And I noticed something remarkable, and that was that we were living the same life. We'd always lived in the same house, paying all our bills, and at the end of the year, I had more money than we started with. And I thought that's kind of remarkable. I didn't make this connection that that Pete shared with me, but essentially, at that point, everything we'd spent that year was free because at the end of the year, we had more money than we started with. To me, that's much more valuable than cars or houses or wardrobes or you know, but that's me. Maybe it doesn't appeal to everybody,

Jamila Souffrant 1:01:15

yeah, but I know freedom does, so it's that choice you have to make. So JL, please tell me and tell everyone where they can find the updated version of the book when it will be out, and all the things and how to follow your blog.

JL Collins 1:01:30

So the blog is, let me start there is JL Collins, nh.com and that's probably where you can go to to find all these things as they as they come out. The book, the new version of the book will be out on May 20, and at that point, it'll be available on Amazon. It should be available in bookstores that it should be pretty easy to find if you want to find it, and if you go to the blog, there'll be links that allow you to find it also in doing this new edition of the book, I now have a publisher. I self published it originally, and through the publisher, they're creating a newsletter that people can sign up for, and that will also be announced on the on the blog, so people want to stay in touch with in that fashion that'll be available. And then you can find me on x and Facebook, and those are the only two social media I've allowed myself to get enmeshed in.

Jamila Souffrant 1:02:29

Good for you. Well, I'm gonna link all that in the show notes. And I do believe, even if this comes out a little bit before the 20th, we'll see may 20, that it'll be available for pre order. Yes, right? So I will link all of this in the episode show notes, so everyone can get the version of the book if they don't have it yet, and follow your work. So thank you so much. JL, for coming back on the show. I appreciate

JL Collins 1:02:51

you so much. Jamila, thank you so much for having me back.

Jamila Souffrant 1:02:55

Hey, journeyers, I want to remind you that the fire CALC tool and workshop is now available for you right now. Go to journey to launch.com/fire Calc, that's f, i, R, E, C, A, L, C. To get more information about the tool that can help you map out your journey to financial freedom and independence. No longer is everything in your head or understanding or not understanding, what it's going to take. This tool allows you to figure out and put into action the things that need to be done. And you can join me for the live workshop on May 22 and I'll see you then go to journey to launch.com/fire Calc. 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/jump start. 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 in Apple podcasts, rate review and subscribe there. I appreciate and read every single review. Number two, 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 journeyers. There 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 four. And last but not least, share this episode, this podcast, with a friend or family member 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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