If you are looking for a book to help you achieve FIRE (financial independence and retire early), then “The Simple Path to Wealth” is the perfect read for you. I read it and found its principles to be very true and applicable.
J.L. Collins wrote this book, providing a step-by-step guide on building wealth and achieving financial freedom.
In this blog post, we will discuss some of the key takeaways from this book and share our own experiences with it!
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Table of Contents
Keep Things Simple
Pursuing financial freedom may seem like a daunting task. After seeing how others achieved FIRE (financial independence/retire early), it seems like one needed a complex strategy and luck.
However, “The Simple Path to Wealth” shows that FIRE is achievable for anyone willing to commit to it for the long term. The book breaks down the process of building wealth into simple steps anyone can follow.
One of the most important lessons from this book is to keep things simple. Collins advocates using a simple investment strategy that doesn’t require constant monitoring or worry.
Rather than getting caught up in researching every possible investment, he recommends keeping it simple. This approach removes the stress of making complex investment decisions and allows you to focus on other things.
When I could keep my investing process simple and automated, I could focus on my career and generate more income. With more income, I could invest at a much higher rate which ultimately led me to become financially free sooner.
I share this story with you because it feels like many people seeking FIRE try to over-optimize their investment strategy. While there’s nothing wrong with being diligent, don’t forget to keep things simple as well.
Use Tools of The Trade, AKA Index Funds
When I say trade, what I mean is index funds. It’s important to look at stocks as ownership in a company, not just a gambling vehicle.
If you’re looking to build wealth, index funds are one of the best tools at your disposal. Index funds are low-cost, diversified investments that track a specific market index. They offer many benefits, including:
Low fees: When you invest in an index fund, you’re not paying a high management fee to a professional. This alone can save you thousands of dollars over time.
Diversification: Index funds expose you to hundreds or even thousands of different companies, reducing your risk.
Simplicity: Index funds are simple to understand and easy to invest in.
If you’re new to investing, index funds are a great start. They offer a simple way to build wealth over time and don’t require much maintenance. I started investing in index funds when I first started with FIRE, and they have been a crucial part of our ongoing journey to financial freedom and peace.
Income > Expenses = Invest The Rest
The author recommends keeping your expenses low so that you can invest more. This can be a real eye-opener since many feel FIRE is achievable only for those with a high income.
However, after reading “The Simple Path to Wealth,” you can realize it is possible to achieve FIRE or financial freedom without stressing about moving up the tax bracket.
As long as your income is more than your expenses and you stay consistent with investing the rest, you will eventually reach financial freedom. It might take longer if your expenses are high, but it is still achievable.
My wife and I are on the way to FIRE by keeping my expenses low and investing the rest of our combined incomes. This allowed us to save a Save 56% of Our Income and will allow us to reach financial independence sooner.
As mentioned before, this simple formula helped me focus on achieving a higher income. Cutting expenses help widen the gap between income and expenses and are key to reaching FIRE. If you want financial freedom, I recommend using this simple formula.
This might seem common sense, but the complexity and need for perfectionism often deter people from taking action.
If you can keep it simple and focus on income > expenses = invest the rest, you will be well on achieving FIRE. It’s not the most exciting process, but it’s simple and works.
Plus, when you achieve FIRE, you’ll have much more time and freedom to do what truly excites you!
Related Content: How to Retire Early Using the FIRE Method
Debt Is Not Normal
Credit cards have become the norm. Mortgages, car loans, personal lines of credit, layaway, etc., have also been a part of most people’s lives.
We’ve become so used to being in debt that it seems normal. It’s not. It’s one of the biggest impediments to wealth building.
When you’re in debt, you’re paying interest on the money you’ve already spent. This is money that could be working for you and helping you build wealth. Instead, it’s being used to line the pockets of the lenders.
Imagine how much extra money you could be investing if you didn’t have a debt burden. It’s financially harmful and can also affect your mental and emotional well-being.
You must get out of debt if you’re serious about building wealth. The author explains that if the debt has an interest rate of less than 3%, it’s okay to let it ride and invest instead. If the interest rate is 3-5%, you can pay it off early or invest. If it’s 5% or above, it should be paid off as soon as possible.
Related Content: 11 Strategies to Get Out of Debt Fast!
Getting out of debt is one of the best things you can do for your financial future. It will free up money that you can use to invest and save.
It will also reduce your stress and give you more peace of mind. If you’re currently in debt, plan to get out as soon as possible.
Create a Plan and Stay the Course
Another important lesson from the book is the importance of creating a plan and staying the course. There will be ups and downs when you’re working towards financial freedom.
There will be times when you feel like you’re making progress and times when it feels like you’re not moving. It’s essential to have a plan and stick to it, even when things get tough.
Creating a plan is the first step. You need to know how much money you need to save and invest each month to reach your goal.
Once you have a plan, it’s essential to stick to it. Even when things get tough, remember why you’re doing this and keep moving forward. Remember, there are ways that you can enjoy your FIRE journey.
If you can stick to your plan and weather the storms, you will eventually reach your goal of financial freedom. It might take longer than you originally planned, but it will be worth it in the end.
As soon as I sat down and started to budget and wrote down how much I needed to achieve financial freedom, it became much more straightforward. I could stay the course even when there were setbacks because I had a plan and knew where I was going.
Trying to achieve FIRE without a plan is like driving to a new city without a map. You might eventually get there, but it will take longer and be more complicated than if you had a plan.
So, if you’re serious about reaching financial freedom, sit down and create a plan. Then, put it into action, and don’t give up! You’ve got this!
Conclusion
To summarize the book, it’s essential to keep things simple, get out of debt, and create a plan. These are the three main lessons I took from the book and helped me on my journey to financial freedom.
If you’re looking for a simple, straightforward guide to wealth building, I highly recommend “The Simple Path to Wealth” by JL Collins for anyone looking to achieve FIRE. It’s helped me greatly, and I’m sure it can help you too.
What are your thoughts on the book? Have you read it? What lessons did you take away from it? Let me know in the comments below.
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
