The simple path to wealth

The Simple Path to Wealth: Your road map to financial independence and a rich, free life by J.L. Collins https://www.goodreads.com/book/show/30646587-the-simple-path-to-wealth
https://booksthatslay.com/the-simple-path-to-wealth-summary/

Wealth creation for¶

the everyday man No one ever became rich on their salary alone. Avoid debt by all means. “debt never goes away if you keep incurring more in hopes that one day, you’ll pay it back. Debt is the biggest hindrance to creating and sustaining wealth”

How to manage money¶

Credit card debt is not a sustainable debt; it increases with each delayed payment. Debt blocks you to build a sustainable wealth.

“if you already have debt, then you can reconcile everything. Pay it off ahead of schedule. Whatever money you receive, use it to service the debt instead of waiting for it to accumulate.” Tailor your lifestyle to one that doesn't give room to credit.

Investing is the way to make money work for you, even when you're out of work.

The stock market¶

Here’s the simple formula: Spend less than you earn—invest the surplus—avoid debt. ~ J.L. Collins

“An index fund is a type of mutual fund with a portfolio constructed to match or track a financial market index’s component. It is high risk and will test your tolerance and patience, but it holds high rewards for you.

Did you know? Interest rates on bank cash deposits will never beat inflation; putting your money in moderate and high–risk investments is the only way to beat inflation over the long term.”

Index funds and bonds¶

“While buying stocks is like buying a part of a company, buying bonds is technically lending money to a company or institution and having them pay you back with interest. They offer a safer route to wealth–building. It aids in sheltering you from the effect of deflation — when the prices of goods drop, the value of money increases. ”

You only have to worry if the company can pay you when the year ends.

“If the interest rates drop, bonds increase in value, but if the interest rates rise, then the price you can sell them falls. All of this gets regulated by the Secondary Bond Market — this is where bonds are traded and monitored. There are three kinds of treasury securities (bonds) based on the length of time it takes to mature: • Short term bonds which span from 1–5 years and are Bills • Midterm bonds that span from 6–12 years and are known as Notes • Long term bonds are known as Bonds that span from 12 years at the least and more on average.”

Collins points out investing in VTSAX — total stock market index fund — if you look to cast your net and pull in significant returns. By effect, you’d own every single company being publicly traded — that’s about 3,700 companies.

Retirement plan¶

“you probably should invest in Vanguard Total Stock Market Index. It is a surefire way to assure a safe, comfortable and wealthy retirement.”

Any individual should have a retirement plan that will be a reward after working for so long.

Some firms take the initiative to set up a hefty retirement plan for their staff. If yours doesn’t you should set one up for yourself.

“bonds are only good for one thing, smoothing the ride to retirement. Also, make sure you have an HSA — health savings account for those medical bills you’d be unable to cover immediately and for your long–term healthcare.”

Financial freedom¶

“You can withdraw just within 4% of your savings/investments in stocks, and you’d be in the safe zone 8.5/10 times. ” --> do you have to sell 4% of the funds each year? What if you have plenty in a compound PAC?

“What is the most sensible and lucrative ratio for the two? Collins places it at 75 stores in Vanguard Total Stock Market Index Fund (VTSAX), 25 in Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX). This ratio ensures that you are 75% committed to amassing wealth and 25% to preserving it.”

“why not balance it to be 50/50? The answer to that is simple. It takes more effort to invest in gathering wealth than it does to preserve it. "

https://www.investopedia.com/articles/investing/111215/vanguard-total-stock-index-vs-vanguard-500-index-fund.asp

"The Simple Path to Wealth" by J.L. Collins offers several practical suggestions on budgeting, cutting unnecessary expenses, and prioritizing spending to align with personal values and long-term financial goals:

Budgeting¶

Track Your Spending: Collins emphasizes the importance of knowing where your money goes. By tracking your expenses, you can identify areas where you might be overspending.
Create a Simple Budget: Focus on essential categories such as housing, food, transportation, and savings. Allocate a portion of your income to each category and stick to it¹.

Cutting Unnecessary Expenses¶

Live Below Your Means: Collins advocates for a frugal lifestyle. This doesn't mean depriving yourself but rather making conscious choices about spending. Avoid lifestyle inflation, where your expenses increase as your income rises¹.
Avoid High-Interest Debt: Credit card debt and other high-interest loans can quickly erode your wealth. Pay off these debts as soon as possible and avoid incurring new ones¹.
Evaluate Subscriptions and Memberships: Regularly review your subscriptions and memberships to ensure they are still valuable to you. Cancel those that no longer serve your needs¹.

Prioritizing Spending¶

Align Spending with Values: Spend money on things that truly matter to you and bring joy or value to your life. This might mean cutting back on dining out to save for travel or investing in hobbies that enrich your life¹.
Invest in Your Future: Prioritize saving and investing over immediate gratification. Collins suggests automating your savings and investments to ensure you consistently put money aside for your future¹.
Emergency Fund: Build and maintain an emergency fund to cover unexpected expenses. This fund should be easily accessible and cover 3-6 months of living expenses¹.

Long-Term Financial Goals¶

Set Clear Financial Goals: Define what financial independence looks like for you. This could be retiring early, traveling, or starting a business. Having clear goals helps you stay motivated and focused¹.
Invest in Low-Cost Index Funds: Collins strongly recommends investing in low-cost index funds, such as the Vanguard Total Stock Market Index Fund (VTSAX), to grow your wealth over time¹.
Regularly Review and Adjust: Periodically review your financial plan and make adjustments as needed. Life circumstances change, and your financial plan should be flexible enough to adapt¹.

By following these suggestions, you can create a budget that supports your financial goals, cut unnecessary expenses, and prioritize spending in a way that aligns with your personal values and long-term objectives.

¹: Goodreads

(1) The Simple Path To Wealth Summary and Key Lessons. https://booksthatslay.com/the-simple-path-to-wealth-summary/. (2) The Simple Path to Wealth: Your road map to financial i…. https://www.goodreads.com/book/show/30646587-the-simple-path-to-wealth. (3) The Simple Path to Wealth: 5 key investing lessons by JL Collins. https://www.livemint.com/money/personal-finance/the-simple-path-to-wealth-5-key-investing-lessons-by-jl-collins-11702914469358.html. (4) The Simple Path to Wealth with JL Collins. https://www.youtube.com/watch?v=4dLZlGUclHg. (5) The Simple Path to Wealth | JL Collins | Talks at Google. https://www.youtube.com/watch?v=T71ibcZAX3I. (6) The Simple Path To Wealth By JL Collins (Summary). https://www.youtube.com/watch?v=k9BuLHbf7IA. (7) Mastering Wealth Key Lessons from 'The Simple Path to Wealth' by JL Collins. https://www.youtube.com/watch?v=Xyp4VFVp-HE. (8) What is The Simple Path to Wealth? | JL Collins | EP 284. https://www.choosefi.com/jl-collins-ep-284/. (9) The Simple Path to Wealth - Google Books. https://books.google.com/books/about/The_Simple_Path_to_Wealth.html?id=Kf6YzgEACAAJ. (10) The Simple Path to Wealth: Your road map to financial independence and .... https://www.amazon.it/Simple-Path-Wealth-financial-independence/dp/1737724103. (11) undefined. https://amzn.to/2vLnbrt. (12) undefined. https://itunes.apple.com/us/movie/playing-with-fire/id1485494923.