Learning From Literature

The Simple Path to Wealth by JL Collins

Purchase Here

The Simple Path to Wealth: Your road map to financial independence and a rich, free life by JL Collins is a business / finance book published in 2016.

What if achieving financial independence was far simpler than you’ve been led to believe?

The Simple Path to Wealth strips away the noise, confusion, and complexity that often surrounds money management and investing. What he offers instead is a clear, direct roadmap built on timeless wisdom: live below your means, avoid debt, invest in low-cost index funds, and let time and compound growth do the heavy lifting.

Originally written as a series of letters to his daughter, this book isn’t just about money – it’s about freedom. Freedom to work on your terms, live how you want, and spend your time on what truly matters.

Enjoy!

Table of Contents

Financial Independence & Lifestyle

  • Collins and his wife built lives centered around freedom, not jobs
  • They lived simply, invested early, and spent time raising their daughter hands-on
  • Their lifestyle: no car payments, high savings rate, and full autonomy in how they spent time

Philosophy of Simplicity

  • Simplicity is key – no need for complex strategies or multiple income streams
  • Focus on index fund investing, particularly low-cost, broad-based funds like VTSAX
  • Avoid debt, live below your means, and save 50% of your income if possible

Debt: The Wealth Killer

  • Debt is normalized by society but is a vicious destroyer of wealth
  • Easy credit inflates the cost of things like cars and college
  • “Better to adapt yourself to the numbers than adapt the strategy to your comfort level”

Freedom > Consumption

  • True wealth is freedom: to work when and for whom you want
  • Stop asking what money can buy; ask what money can earn
  • Every dollar spent is not only lost — it also loses the potential income it could have generated (opportunity cost)

Power of the Market

Emotional Resilience

  • You must be able to watch your portfolio drop 50% and stay the course
  • “Toughen up, cupcake”
  • Market downturns are normal, temporary, and cleansing

Avoid Common Mistakes

The Case for Indexing

  • Index funds outperform due to low fees, diversification, and simplicity
  • Most S&P 500 companies already generate 50%+ of revenue overseas → no need for separate international exposure
  • Don’t chase performance. Accept the market return – it’s enough

Asset Allocation

  • Your mix depends on:
    • Stage: Accumulation vs. Preservation
    • Risk tolerance
    • Time horizon
  • Sample Allocations:
    • Wealth Accumulation Portfolio (Collins’ daughter):
      • 100% stocks – VTSAX
    • Wealth Preservation Portfolio (Collins + wife):
      • 75% VTSAX (stocks), 20% VBTLX (bonds), 5% cash

Rebalancing

  • Rebalance once a year or after major (20%+) market shifts
  • Do it in tax-advantaged accounts to avoid capital gains taxes

Three Portfolio Tools

  • Stocks (VTSAX): wealth builder and inflation hedge
  • Bonds (VBTLX): income and stability
  • Cash: emergency fund and deflation hedge

Investment Vehicles

  • Use tax-advantaged accounts first:
    • Roth IRA, Traditional IRA, 401(k), Roth 401(k), 403(b), TSPs
  • Consider HSA (Health Savings Account): the most tax-advantaged of all
  • Tax-efficient = qualified dividends and index funds (keep in taxable accounts)
  • Tax-inefficient = bonds, REITs (keep in tax-advantaged accounts)

Withdrawal Strategy & 4% Rule

  • Collins supports the 4% rule for retirement withdrawals
  • Reassess yearly rather than rigidly sticking to a fixed number
  • Prioritize which accounts to draw from for maximum tax efficiency

On Social Security

  • Plan as if Social Security won’t exist
  • If it does – it’s a bonus

Charitable Giving

  • Giving is encouraged and comes with both emotional and financial rewards

Final Word

“The Dow started the 20th century at 68 and ended at 11,497 — through two world wars, a depression, high inflation, and countless crises.”

The market rises over time — learn to trust it, ride the storm, and keep investing

Check out more Business / Finance posts!