The Simple Path to Wealth by JL Collins: Summary

Inspired by: “The Simple Path to Wealth” by J L Collins

The Simple Path to Wealth: Your road map to financial independence and a rich, free life

Before starting this article its important to make you aware of a disclaimer from the book. The concepts and ideas are simply both mine and the authors opinion. It may not work for you. It’s not possible to know the full details of any readers personal situation or needs. I make no representations as to accuracy, completeness, suitability or validity of any information in this post and will not be liable for any errors, omissions, losses, injuries or damages arising from its use. You are responsible for your own choices. There aren’t any guarantees here. Make sure to visit my website’s disclaimer here


Money is the single most powerful tool we have for navigating this complex world. Therefore, understanding it is critical. This article aims to bring-out the key ideas in the book “The Simple Path to Wealth” by J L Collins and give you insights into some possible considerations you should be making when managing your money.

6 Insights into building wealth

1. Try to avoid debt

One of the biggest obstacles to building wealth and gaining financial freedom is becoming too reliant on debt. If you wish to gain financial freedom, it is important to think differently about debt and avoid the temptation to buying things you cannot afford.

Attractive initial offers can make it very easy to become trapped in a cycle of debt after the offers ends. Sometimes you may be tempted to pay back the minimum around required, and in doing so you may feel like what you have bought almost feels free, however, you could find yourself overseeing the high interest rates accumulating on the balance you are neglecting to pay.

To make it worse, being stuck in debt may not only compound your financial worries but your emotional worries too as the amount becomes unsustainable. This could lead to self-destructive patterns causing a self-perpetuating cycle.

To try and escape this trap, the author suggests that the low interest debt should be paid off slowly, with the high interest debt having your focus and being paid off as soon as possible.

2. Build your “F-YOU” money pile

Money can buy a lot of things, but one of the most important things it can buy is freedom. Money gives you the ability to decide where you want to work and who you want to work for.

An important consideration to gaining financial freedom is building a pile of “F-YOU” money. This isn’t a pile of money which you build to show off to everyone to show how successful you are, it is instead a pile of money which grants you a degree of financial freedom. Whilst the size of this pile can be different for everyone, it is simply having enough money to feel comfortable to live off for a while until you decide what you want to do next.

By having this pile of money, it lets you move away from the trap of living paycheck to paycheck and instead grants you the ability to decide what you want to do.

3. Change how you think about money

Wealth is relative

Being independently wealthy is relative. It is every bit as much as about limiting your needs and spending as it is about the money you earn. If you have a high income, but you are also tied to lots of expenses then you will always be at the mercy of work. Alternatively, if you earn a modest income, but have modest expenses, then you can still be wealthy. An easy way to understand this is “Don’t spend more than you earn, invest the surplus and avoid any debt”. If you can follow this, then you’re making a good start to building wealth.

Money has opportunity costs

While buying something like a new car may seem like it’s only making your bank $20,000 lighter, it may be costing you more. If you invested the $20,000 wisely then the cost of the new car isn’t just the amount spent but also the potential return from the investment that is foregone. This is something which depends widely, however. If you desperately need something new, then the benefits of purchasing it significantly outweigh the opportunity costs, but, if you cannot decide whether you need it, thinking about the possible opportunity costs may make that decision easier.

4. Expect the stock market to crash

The stock market has crashed before, and it will probably crash again. The 2008 recessions were not something unheard of, some examples of prior turmoil are: The Great Recession of 1974-75, The Massive inflation of the late 1970’s, The Crash of 1987, The Recession of early 1990 and the Tech Crash of the 1990’s. When dealing with a complex system such as the stock market, you should expect it to crash, as it probably will at some point.  

5. Three reasons you might lose money in the market

1. We think we can time the market

It may sound tempting to try and time the market and get in at the bottom and leave at the top, however, doing this is incredibly difficult. Over the long-term it is not a sustainable method of building wealth. The author believes we are psychologically unsuited to prospering in a volatile market and as a result you should try to avoid timing the market.

2. We think we can pick winning stocks

It is very difficult trying to pick out the next big stock. It would be very rare for you to continuously be able to identify the next Google or Facebook, and if you could its either down to luck or you are one of the most talented investors out there!

3. We think we can pick winning fund managers

Whilst picking a winning sports team has some predictability to it, picking a fund manager is the complete opposite. In 2013, Vanguard – the investment provider – compared the performance of fund managers against the market index. They found that out of all the 1540 actively managed funds that existed at the time, only 55% survived and only 18% managed to survive and outperform the index.

6. Keep your wealth system simple

One of the main points the author makes in the book is to simplify how you approach wealth generation. The more complicated you make something, the less likely you are going to understand it making yourself more likely to burn through money in paying fee’s and bonuses to fund managers “who do” (see prior point).

Your three main considerations

1. What stage are you in your investing career?

Against popular belief, this isn’t always your age. It is instead your financial situation. How you treat and invest your money depends on factors like whether you have started a family, whether you have started a new job, whether you want to quit working and want a simpler lifestyle, etc… All of those factors should influence how you create wealth.  

2. Your appetite for risk

Firstly, the author believes that regardless of your risk – obtaining your “F-YOU” money pile (as mentioned above) is very important. Once you have this, understanding your appetite for risk is important. Do you like taking risks and putting all your money into investments? Or do you want to have some money saved safely just in case you need it?

3. Are you in it for the long-term or short-term?

A final consideration according to the book is whether you are in it for the longer term – potentially decades – or whether you are only planning on saving or investing for the short-term.

Your three main tools

1. Stocks

The book suggests that stocks provide the best returns over time and serve as a hedge to inflation. Stocks are generally the core wealth-building tool because of their propensity to increase over time.

2. Bonds

Bonds provide income, tend to smooth out the rough ride of investing in stocks and serve as a deflation hedge.

3. Cash

Cash is good to have around to cover things like routine expenses and cover emergencies. It is also a good asset to have during times of deflation as the more prices drop the more your cash can buy. In these days of low interest rates, idle cash in the bank doesn’t have much earning potential, but it is always a good thing to keep around to keep you safe if you need it.

Hopefully these insights were useful, I’ll mention again – please make sure you’ve read the disclaimer.

Other things you will learn from the book…

  • More detailed information regarding how to pay off debts depending on their interest rates
  • The exact stocks index which you should consider
  • How and when to take your money out of the market
  • Lots of different real-world examples putting the above points into practice!

If the above points sound interesting, then make sure you check out the book below!

The Simple Path to Wealth: Your road map to financial independence and a rich, free life

Published by Tim Bennett

An avid reader who likes to read anything which could challenge my beliefs. I like to write summaries over on The Herston Project so make sure to check them out :).

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