[Host]: If your goal is to become financially independent at a young age, this is a very controversial thing to say, you probably don't want to go buy a house because people typically buy a house they can't possibly afford. The bank wants you to do that cuz that's how they make the most money. So, you're putting your capital into that house and now it's not going to be earning thing. It's going to be sitting idally. And people say, "Well, you know, I can buy this house cuz my mortgage is the same as my rent." Well, yeah, but your mortgage is just the starting point. So, what comes to mind if I want to be financially wealthy?

[JL Collins]: Okay, so we've got a lot to go through. JL Collins is a renowned financial expert known for his book, The Simple Path to Wealth. He's teaching millions a straightforward and realistic avenue for achieving wealth so that anyone can have financial security.

[Host]: What is the simple path to wealth?

[JL Collins]: So, first of all, avoid debt because you can never be financially independent if you're carrying around debt. Next, live on less than you earn. But the problem is the way our culture has taught us to think about money is solely in terms of what can you buy with it. But the more musthaves you have in your life, the less likely you are to become wealthy. And then the final one, invest the surplus. So stocks are the single most effective, strongest wealth building tool that's ever been created. But the biggest push back I get is from people who say, "Well, that's great. I mean, if you got a big income, 100, 200, $300,000 a year, then yeah, the simple path to wealth will work for you." That's not the truth. For instance, a friend of mine and he was making a million dollars a year and he was broke because people have large incomes are much more likely to be drawn into the competing with the Joneses, whereas the people who make less money probably don't have those same social pressures and are more readily able to do it.

[Host]: So, let's talk about investing then. Where do you think we should be investing our money at this moment of time? Should I buy Bitcoin? Do I need a financial adviser?

[JL Collins]: So, my advice, and this is a little different than the more common advice out there, would be... I actually that book was an outgrowth of my blog. I started the blog to archive information I wanted my daughter to have available because if you get money right, your life is so much better. You have so many more options. And the world offers so much to people who have the resources with which to access it and so little for those people who don't have the resources to access those things. And and if you don't have it, it life is just so much harder than it than it needs to be.

[Host]: When you think about the average person listening right now, what is what are some of the fundamental sort of misconceptions or misunderstandings or what would you call it? Black spots that they have as it relates to money, the things they walk around assuming about money that are incorrect that that you were maybe trying to get out of your daughter's mind.

[JL Collins]: Right? So there's a chapter in the book called how to think about money. And the fundamental way I think the vast majority of people think about money because this is what our culture has taught us. The way our culture has taught us to think about money is solely in terms of what can you buy with it. So if you go to the average person that lottery for instance is like a billion dollars at the moment. So people are buying lottery tickets. And if you interviewed people standing in line to buy lottery tickets and said, "Okay, if you win this million dollar, what are you going to do with it?" Well, what you're typically going to hear is, "Well, I'm going to pay off my debts and I'm going to pay off my mortgage and I'm going to buy my parents a house and I'm going to buy myself a Lamborghini. I'm going to buy I'm going to buy I'm going to buy." That's the way most people think about money. And that's certainly one of the things that money is very good at. It is a means of exchange. But the other thing your money can do for you is work for you. Your money can make you more money. So you can exchange your time and effort and labor to earn money. And that's what most of us do. But you can also divert some of the money you earn into investments into what I call buying your freedom. And now your money is working for you. So instead of just thinking about what your money can buy, you can start thinking about what can your money earn.

[Host]: You can buy your freedom. Why is that an important refraraming of the role of money in your view? What does that do if I start thinking about it through that lens?

[JL Collins]: Well, because as long as you are dependent on exchanging your effort, time, and labor for money, you are beholden to whoever is willing to pay you to do that. That's a limit of freedom. It's a it's a form of, without being too dramatic, a form of slavery. If you are always living paycheck to paycheck to pay the mortgage or the rent or whatever, if on the other hand, work is optional, you're a good example. and you've been a very successful guy. You're not doing this podcast because you need the money. If you were still stuck at a job that paid you a wage, you wouldn't have the option to do this because you'd have to devote all your time to that job so you could pay the mortgage, so you could pay the rent, so you could put food on the table. Money buys freedom.

[Host]: How does one get out of that situation? you know, if I I used to work in call centers um answering phones and selling people things. How does one in your view realistically get from that place where you are kind of beholden to the paycheck?

[JL Collins]: So, a lot of people are obsessed with this idea of [FU Money]. Let me just give you a definition so FU money refers to a financial situation where a person has enough money to live comfortably without needing to work and it gives you the freedom to say f you to anyone or anything you don't want to tolerate such as a job a boss or a situation that doesn't align with your values what does that mean to you?

[JL Collins]: Yeah so for me so that's a good definition but I would substitute in that definition financial independence. FU money for me is the money you accumulate on the way, right? So, for instance, if you're a bodybuilder, you know, financial independence is when you're on the stage and you're winning, you're at the elite level. But along the way, from the moment you start working out, you get a little bit stronger, a little bit stronger, a little bit stronger, right? Same thing financially. The moment you start setting aside money and investing it, you become a little bit financially stronger. And that builds over time. That in my mind is the FU money because long before you're financially independent, that money gives you enormous freedom. You might not be able to never work again, but if you need to, you could leave a toxic job knowing you could survive for months or even years while you looked for the better job because you have that FU money. So it allows you to say f you in that case to an employer.

[Host]: And if your daughter Jessica turns around to you and says, "Dad, what are what is something I should not do with my money if I um want to be wealthy? What is what are like the big what is the first thing that comes to mind to as a no no if I want to be financially wealthy?"

[JL Collins]: The mo more common advice that I think you should avoid if your goal is to become financially independent at a young age. You probably don't want to go buy a house. That's a very controversial thing to say. The reason you want buy a house is because houses dramatically inflate by and large your cost of living. You know, you're you're putting your capital into that house and now it's not going to be earning thing. It's sitting idally along with owning a house. You have the expenses of maintaining it, paying the taxes on it, blah blah blah. If you stay in a apartment that is just enough to meet your needs, which by the way is what my daughter has done and continues to do, your costs will be lower.

[Host]: Explain that to me. Explain why my cost of living goes up if I buy a house.

[JL Collins]: Sure. So people, it doesn't have to, but people people typically buy the most house they can possibly afford. The industry drives them that way. If you go to a real estate agent, you say, "I think I'm I want to buy a house." Right? First question they're going to ask you is, "How much do you make? How much do you want to spend?" You know, and and then you go to the bank and you say, "Okay, I want to buy a house. How much will you lend me?" And they'll say, "Well, how much you make?" And then they'll come back with the large number of how much they're willing to lend you. If you follow those guidelines, you're going to wind up with a house that's going to be a burden. You are not buying it from a position of strength. You are stretching to buy it. You are borrowing the most money a bank's willing to give you. You probably don't want to do that. I mean, you can, that's the bank wants you to do that cuz that's how they make the most money, but that's not the best thing for you to do. But that's what you get drawn into. And then when you buy that house, I don't know that I've ever known anybody, including me, by the way, and I've owned houses most of my adult life, who's owned a house without doing renovations on it. So, you've got those costs. You're going to furnish that house cuz you're probably buying more square footage than you were renting before. You're going to need new furniture, or maybe you just want better furniture for your new house, maybe new appliances, landscaping, taxes, maintenance. I mean, the the list is endless. And people say, "Well, you know, I can buy this house, and my mortgage is the same as my rent." Well, yeah, but your mortgage is just the starting point. You've got all these other expenses with the house. And the other thing is they are variable expenses.

[Host]: It is a bit of a trap, isn't it? It's a trap that um I didn't realize this until I bought a house and most people don't like I even sit here on this podcast doing this for a living and then I I made this stupid mistake of buying a house and I do think it was a stupid mistake because I we'll talk about opportunity cost in a second but I was in hindsight it was like a terrible decision. I spent all this money on this house. It was a house abroad. It was also like a holiday home I guess and every time I come all I see is things that I need to change.

[JL Collins]: Yeah. It's looking at the United States for instance, if 20 years ago, 30 years ago, you'd bought a house in San Francisco, well, you've done very, very well financially. If you bought a house in Detroit, not so much. So then the question becomes, and people will say, well, obviously you don't buy a house in Detroit, you buy a house in San Francisco. Well, I'm not an expert in real estate, but I am reading more and more commonly that San Francisco is has a lot of very challenging problems at the moment. Detroit, on the other hand, where I was just visiting a couple of years ago, is enjoying a renaissance. Detroit's coming back. So, who's to say in 20, 30 years, people won't be saying, "If you bought in Detroit back in 2025, you were golden." And if you bought San Francisco, yeah, not so much. Sometimes real estate, buying a house can work out in a spectacular fashion. And that's the stories people tend to hear, but not always.

[Host]: This point of flexibility as well is one we don't talk about. Which is the ability to go do something else in another country. And my brother said this to me when I was 20. My brother's very smart. He's a year older than me, a financial genius, and has a much different brain to mine. And I remember when I was 20, maybe 24 and I was talking about do I buy a house and he both told me it was the worst investment I could ever make. But he also told me to think about flexibility and my ability to get up and move.

[JL Collins]: Exactly. Well, so I agree with everything you said. I agree I I agree with your brother. Flexibility, especially when you're young and your career is in a dynamic phase, it is not to be underrated. For my daughter, I mean, she loves living in Savannah. They've been there for 3 years, but she has an adventuresome soul. And you know, she said, "I don't know. I mean, maybe at some point I'll want to go live in Europe or somewhere else." Well, if you have a house, that complicates that decision. And even if you are fortunate enough to buy in a market where your values are rising, the cost associated with buying and selling of houses are enormous. the, you know, the real estate commission and the taxes and what have you. So, getting in and out of a house is an expensive proposition. Getting in and out of apartment doesn't cost anything. I mean, maybe your security deposit rate, but that's it. That's that's very clean and simple, but if you're if you were to buy a house in Savannah and then just say, you know, I think I want to go live in in Portugal, well, now you got to sell that house. Or maybe you have to rent it. Now you're a landlord. You're an accidental landlord, which was subject to my second book. You know, that's not optimal. I mean, if you set out to be a landlord, great. But if you become an accidental landlord because you can't sell your house that you don't want to live in anymore, that's not so much great. So flexibility is is enormously important.

[Host]: If I were to ask you, what is the simple path to wealth? and you had to respond in a sentence, what would that sentence be?

[JL Collins]: Avoid debt. Live on less than you earn. Invest a surplus.

[Host]: So, let's talk about debt then. Why did you say avoid debt?

[JL Collins]: You can never be financially independent if you're carrying around debt. It's a ball and chain that you drag drag along, especially consumer debt. Yeah, debt's a ball and chain. It's it's like asking a swimmer to compete and and strapping a weight around their waist. Uh it just is it possible? Well, sure. I guess it is, but it's a whole lot a whole lot more difficult. So, job one if you have debt is to blow it out.

[Host]: And I mean, blowing it out is a dream for many, but it's uh easier said than done. I guess

[JL Collins]: It simply means that you have to organize your life in such a fashion that you can divert some money to either buying your freedom investments or if you have debt paying off that debt. You just you have to do that. And people say, "Well, I can't do that. You know, I I need to have this. I the you know, I need to have the these the two least luxury cars and we need to live in this neighborhood and we need to send the kids to these schools. We need to and I call that the tyranny of the must-haves. The more musthaves you have in your life, the less likely you are to become financially independent." Now, that's your choice. That's an individual's choice. It may very well be that those things are more important to you than buying your freedom. And it's your money. It's not for me to tell anybody how they should spend their money or what's important to me or what's important to them. For me, there was nothing I could spend my money on that was more important than my freedom. Which is why from the beginning, I diverted half of my income to buying that thing. Was never deprivation. Right? Most people say, "Oh, that's this is a path of deprivation. I can't spend my money." Well, not for me. I, you know, I spent every dime that ever came my way. It's just that I spent half of those dimes on the thing that I wanted to own the most, which was my freedom.

[Host]: You talked about compounding. You talked about how one should maybe not open the envelope that has the state.

[JL Collins]: That's Jack Bogle has said that, but I agree with it. Yeah. It shows that if you just leave your money in a place where it's getting this kind of return over time, everything seems to take care of itself. So let me let me close the circle in a sense on on that subject because one of the things that I think gets overlooked with my book is this is the simple path to wealth. Which means if you follow it, you will become wealthy, right? So we go back to, you know, buying those things that people maybe want to buy, whether it's the fancy car or the or the house. Well, once you become wealthy, you can not only buy those things, but you're buying them from a position of power, right? You can easily afford them.

[Host]: Is investing in stocks safe right now?

[JL Collins]: So depends on your time horizon so stocks are are the single most effective strongest wealth building tool that's ever been created but they are also very very volatile so when she says are stocks safe to invest in right now. What I hear is very shortterm thinking and stocks are never safe to invest in for the short term because they're volatile at any given moment. They can take a deep plunge and that's a perfectly natural part of the process. People get all create especially if you watch the news they people go insane and panicked. But crashes and pullbacks in the stock market are perfectly natural part of the process. They are very very difficult if not impossible to predict when they're going to happen. But that's the reason you never want to invest in stocks for money that you're going to need in the new near term. If you zoom out for longer periods of time, which is I re is what I recommend, stocks are stunningly reliable. I mean, there are very few times over the course of 10 years where stocks have not given you a good return. and you go out 20 years and I I mean it's very rare. So if you look long-term stocks are extremely safe and extremely powerful in building in building wealth, but they are very volatile along the way. So you have to be willing and able to endure that volatility. If you're going to panic and sell when the market drops, not if because the market will drop. It's a perfectly natural part of the process. If you're going to panic and sell when that happens, you do not want to invest in stocks because they will leave you bleeding on the side of the road.

[Host]: For the average person, what what should they be putting their money into with everything you see happening in the world?

[JL Collins]: I'm an advocate of investing in broad-based lowcost stock index funds. What is that? That is an example of that is VTSAX which is Vanguard's total stock market index fund. It invests in virtually every publicly traded company in the United States of America. That's very the number of those varies, but it's roughly 3,600 companies. So you're basically investing in America. And that means everybody from the factory floor to the CEO is working to make me richer. Now, some of those companies are going to do extraordinarily well and they're going to succeed dramatically. And because this fund, as most funds like it are, is cap weighted and I'll explain that in a minute. The more successful the company is, the more of it I will own. So cap weighted simply means that the largest larger the market capitalization of the company is the valuation right the market capital the larger that is the greater the percentage of the fund it will represent. Right now, if one of those companies falters and starts failing on their execution or a more aggressive, better organized competitor comes along and displaces them, then they will drift away. But I'm okay with that because whatever that new competitor is, I don't have to predict who it is. I will own them. And that's a process that I refer to as self-cleansing.

[Host]: Like Sears dominated for 100 years, but then it was replaced by Walmart and Amazon.

[JL Collins]: Exactly. I don't have to do anything. I just have to own it and I can own it forever. So, if I went and I bought Sears stock as an example back in the day, well, whenever you own an individual stock, you're going to be thinking about, okay, how long am I going to own this? And what is going to trigger my sale of this particular asset? I don't have to think about any of that owning the index because if Jeff Bezos turns out that his wackiness is brilliance, which it turns out it was, then he's going to rise to the top, which it turns out Amazon did, and I benefited from that. If it turns out it was just wackiness, it would have just faded away as a lot of companies have. But that wouldn't have mattered cuz whatever succeeds, I will I will own and benefit from.

[Host]: You said you're 75. You have the the wisdom of hindsight. What actually matters?

[JL Collins]: Nothing. Nothing really matters ultimately. Yeah. I think that's kind of like asking what's the meaning of life, right? And I don't think there is a meaning to life when you look at the scale of the universe, the scale of the cosmos. The concept that we as individuals bear some meaning seems to me to be silly. Human beings have been around for I don't know two 300,000 years depending on when you define homo sapiens. I mean that's that's a infantestibly small smudge of time in that has happened already and that will happen in the future even if humans last for another few million years. It will be an infinitely tiny bit of time against this huge cosmic universe and our individuality within that is infantessimally small and I think there's some great meaning behind that seems to be to be the height of arrogance. So I think that if you go through life and you treat people pretty well and you have a a pretty good good run of it, I think you've done well. I don't but I don't think there's something profound in that.

[Host]: So what is the point then? Is there a point?

[JL Collins]: There is no point. I mean the the point is we happen to be here and it can be a good fun ride. It can be a very difficult ride depending on what you make of it and in some cases depending on your circumstances. You and I and the vast majority of people listening to us, probably I venture to say 100% of them have a lot more autonomy over over how we can make our life. And will it have great meaning? No, ultimately not. But it's the only life you have and you may as well make the best of it.