The key ideas

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life

JL Collins, 2016

Collins's daughter told him she needed money but didn't want to think about it. So he started writing her letters, and those letters grew into this book. Collins explains why savings give you freedom and a salary doesn't, why debt holds you back from getting rich, and why one simple fund can be wiser than a hundred decisions.

Who it is for

For anyone who knows money matters but doesn't want to spend their life thinking about it. And for everyone who hopes to work one day because they want to, not because they have to.

Money can buy many things, but the most valuable thing it buys is freedom.

Letters to a daughter who finds money boring

For years, an American named JL Collins told his daughter about stocks, bonds and markets. She listened politely and was bored. One day she told him straight out: she knew money was important and that she needed it, but she didn't want to think about it or manage it.

Collins could have taken offence. Instead, he started writing her letters about money, short and simple, and posting them on his blog. Thousands of strangers began to read them, and in 2016 those letters grew into a book. Collins is no Wall Street financier, and by his own admission he has made plenty of mistakes with money.

The book's main idea fits on one line: spend less than you earn, invest the rest and avoid debt. Everything else explains why this simple plan works and why it is so hard to follow. Collins isn't after luxury. He is after freedom, the right to decide for yourself what to do with your time.

One caveat. The book is written for Americans, and much of its advice is tied to American accounts and funds. Here they are explained in plain words. This is the author's plan, not universal financial advice, but its logic makes sense in any country.

Money that lets you walk away

By twenty-five, Collins had his first serious job and some savings. He wanted to spend a few months travelling around Europe, so he asked his bosses for unpaid leave. They said no. So Collins handed in his notice. He could afford to, because he had already put aside enough money to live on.

He calls that cushion by a blunt name: F-you money. In plain terms, it is money that lets you say “no”. It doesn't have to be a fortune. Sometimes it is just enough to live on for a few months without a paycheck.

Many years later, Collins found himself out of work again. His eight-year-old daughter saw a news story about people who had lost their jobs and asked if they were poor now. He told her no: their money was working for them.

This is the book's big shift. You can use money to buy things, or you can use it to buy freedom. Freedom to walk away from a bad boss, to get through a hard year calmly, or to choose work you actually like.

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About the author

JL Collins is an American writer who spent many years in the publishing business. From 2011 he wrote about money and investing on his blog, and the book grew out of those letters.

All books by this author: JL Collins

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life Quiz

Terms from the book

  • Mortgage
  • Great Depression
  • Bonds
  • Index fund
  • Financial independence
  • Stocks: Shares in a company. Owning a stock gives you a part of the company's future profits and growth.
  • F-you money: The blunt phrase Collins uses in the book for a cushion of money that lets you say “no” to a job or a boss. It is the author's image, not a financial term.
  • Interest rate: The price of a debt, as a percentage of the amount per year.
  • Investment: Putting money into something that should bring in income. Collins doesn't count your own home as one.
  • Dow Jones: The Dow Jones Industrial Average, one of the oldest measures of the American stock market. It is based on the shares of large US companies.
  • VTSAX: A Vanguard index fund that invests in the stocks of almost the whole US stock market. The core fund in Collins's plan.
  • Vanguard: An American investment company known for low-cost index funds. It is owned by its funds and the people who invest in them.
  • Fees: What a fund or a middleman charges to manage your money, usually a percentage of the amount each year. Over decades, even a small fee eats noticeably into the result.
  • Bogle: John Bogle (1929-2019), the founder of Vanguard, who made index funds available to ordinary investors.
  • 401(k): An American tax-advantaged retirement account opened through an employer.
  • IRA: An American tax-advantaged individual retirement account that a person opens on their own.
  • VBTLX: A Vanguard bond index fund that Collins suggests for the preservation stage.
  • Trinity: Trinity University in San Antonio, Texas. In 1998 three of its professors published a study on how much you can withdraw from your investments in retirement.
  • 4% rule: A guideline from the Trinity University study: withdraw about 4% of your investments a year, adjusted for rising prices. Collins treats it as a guideline, not a law.

All terms

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