Why Financial Independence ISN'T Just for the Rich w/JL Collins

Summary

In this episode of the Bigger Pockets Money podcast, hosts Mindy and Scott interview bestselling financial independence author JL Collins about his new book Pathfinders, a companion to his classic The Simple Path to Wealth. They discuss how the book compiles inspirational stories of ordinary people from diverse backgrounds who have successfully followed his framework to achieve financial freedom. Collins shares insights on how spending rate impacts the journey more than income level, the flexibility of the 4% rule, how to reorient priorities towards buying freedom, and why happiness lies more in having 'enough' over accumulating ever more.

Takeaways

• 😀 JL Collins discusses his new book 'Pathfinders' which shares stories of people achieving financial independence by applying principles from his previous book 'The Simple Path to Wealth'
• 📈 Spending is very important - the less you spend, the faster you can reach financial independence
• 💸 Your savings rate amplifies your ability to accumulate assets - saving 50% gets you there much faster than 10%
• 🤑 High incomes don't guarantee reaching financial independence if spending is out of control
• 😎 You can tailor financial independence principles to your own unique situation regardless of starting point or circumstances
• 📚 Reading Pathfinders shows financial independence is achievable for anyone willing to take steps down that path
• 👫 Achieving financial independence enriches lives long before the finish line through reduced money stress
• 🏖 Example stories showcase creative lifestyles supported by the simple path to financial independence
• 💡 The 4% rule is a useful guideline but requires regular fine-tuning over decades to avoid running out or leaving too much on the table
• 🚀 Pay off high interest consumer debt as fast as possible - it's like being covered in blood-sucking leeches!

Q & A

What was JL Collins' inspiration for writing his blog and book The Simple Path to Wealth?

JL Collins originally started writing his blog as a way to archive financial advice letters he had written for his daughter. He wanted to make sure she had access to the information even if he was no longer around to provide it directly.

How does Pathfinders showcase that financial independence is possible for regular people?

Pathfinders shares the stories of nearly 100 regular people from diverse backgrounds and income levels who applied the principles from The Simple Path to Wealth to work towards or achieve financial independence. It shows financial independence is accessible beyond just high earning tech workers.

What was the underlying cause of JL Collins' friend not achieving financial independence despite an $800K annual bonus?

JL Collins' friend had constructed an extremely lavish lifestyle with multiple houses, luxury cars, private schools, and exotic vacations. All those expenses meant his $800K bonus still did not provide enough income to support his chosen lifestyle.

Why does JL Collins dislike referring to the 4% rule as an actual rule?

JL Collins dislikes calling it a rule because that terminology makes people obsess over getting the percentage exactly right. He prefers to consider it a guideline that helps determine if you have enough saved to be financially independent.

What are some examples JL Collins shares of people achieving financial independence on modest incomes?

He shares examples like a child migrant farm worker and a waiter who works at a ski resort for 3 months a year and lives extremely frugally. Their stories show financial independence depends more on your savings rate and expenses than your actual income.

What financial mistakes did JL Collins make early in his journey towards FI?

When JL Collins first started saving and investing 50% of his income after college, he did not have any guidance and made some mistakes along the way. His high savings rate protected him from those early financial missteps.

Why does consumer debt inhibit people from beginning the journey to financial independence?

Consumer debt forces people to dedicate their income to interest payments rather than investing and buying assets. It covers them like financial leeches until they make paying off debt their top priority.

How can developing the discipline to pay off debt help in reaching financial independence?

Paying off debt requires strictly budgeting and cutting expenses, which builds the discipline needed to then channel surplus money into investments instead. The habits transfer directly once the debt is gone.

What makes Tom's story one of JL Collins' favorites in Pathfinders?

Despite everything going financially wrong in Tom's life leading to bankruptcy and foreclosure, he maintains one of the most positive, happy attitudes of anyone JL Collins knows. Tom now works a modest job he enjoys and has enough income to get by.

What is JL Collins' main tip for those just starting their financial independence journey?

He recommends determining early on what percentage of your income you want to dedicate to buying your freedom. That way you never construct an expensive lifestyle that then needs to be unwound later.