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

by J.L. Collins

Spend less than you earn—invest the surplus—avoid debt. Do simply this and you’ll wind up rich. Not just in money. Carrying debt is as appealing as being covered with leeches and has much the same effect.

Money can buy many things, but nothing more valuable than your freedom.

When you can live on 4% of your investments per year, you are financially independent.

me, the pursuit of financial independence has never been about retirement. I like working and I’ve enjoyed my career. It’s been about having options. It’s been about being able to say “no.” It’s been about having F-You Money and the freedom it provides.

If you intend to achieve financial freedom, you are going to have to think differently. It starts by recognizing that debt should not be considered normal. It should be recognized as the vicious, pernicious destroyer of wealth-building potential it truly is. It has no place in your financial life. The idea that many (indeed most) people seem to happily bury themselves

“That’s no problem, honey. We have money that’s working for us instead.” That’s what I said, but what I was thinking was: This was exactly why I had worked so hard to be sure I had F-You Money. In fact I’d been working on it long before I heard the term. I may not have known at first what it was called, but I knew what it was and why it was important. There are many things money can buy, but the most valuable of all is freedom. Freedom to do what you want and to work for whom you respect.

Those who live paycheck to paycheck are slaves. Those who carry debt are slaves with even stouter shackles. Don’t think for a moment that their masters aren’t aware of it.

Being independently wealthy is every bit as much about limiting needs as it is about how much money you have. It has less to do with how much you earn—high-income earners often go broke while low-income earners get there—than what you value. Money can buy many things, none of which is more important than your financial independence. Here’s the simple formula:

Stop thinking about what your money can buy. Start thinking about what your money can

earn. And then think about what the money it earns can earn. Once you begin to do this, you’ll start to see that when you spend money, not only is that money gone forever, the money it might have earned is gone as well. And so on.

Our psychology is such that we can’t help trying to “time” the market. We tend to jump in and out, almost always at the wrong times.

If you had been buying stocks on margin (that is, with money borrowed from your broker) as was all too common at the time, you would have been completely wiped out. Many speculators were. Fortunes were lost overnight. Never buy stocks on margin.

There is no risk-free investment. Once you begin to accumulate wealth, risk is a fact of life. You can’t avoid it, you only get to choose what kind. Don’t let anyone tell you differently. If you bury your cash in the backyard (or in an FDIC insured bank account at today’s near zero interest rates) and dig it up 20 years from now, you’ll still have the same amount of money. But even modest inflation levels will have drastically reduced its spending power. If you invest in stocks, you’ll likely outpace inflation and build wealth but you’ll have to endure a volatile ride.