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.

Outlines

00:00

😀 An introduction to the Bigger Pockets money podcast and its guest JL Collins, author of Pathfinders

The hosts Mindy and Scott introduce the Bigger Pockets money podcast's New Year's episode featuring returning guest JL Collins, author of the bestselling personal finance book The Simple Path to Wealth. They will discuss Collins' new book Pathfinders, a collection of stories from people around the world who have applied the principles from The Simple Path to Wealth in their own lives and journeys towards financial independence.

05:02

😊 Collins explains how he was inspired to write Pathfinders based on reader stories about applying lessons from The Simple Path to Wealth

Collins shares that within months of publishing The Simple Path to Wealth, he started receiving stories from international readers adapting its principles to their own situations despite vastly different personal circumstances. This inspired him to compile these stories into Pathfinders to showcase the accessibility of financial independence for people from all walks of life.

10:02

😎 The hosts and Collins discuss insights from Pathfinders on the feasibility of financial independence for regular people

The hosts highlight how Pathfinders busts myths that financial independence is only achievable for privileged high earners with tech jobs. Collins affirms this with examples of everyday people featured in the book who have made progress despite modest incomes. He emphasizes that financial independence relies on balancing earnings and spending rather than reaching an absolute wealth target.

15:04

😮 Collins argues why unreasonable lifestyle inflation makes financial independence impossible even on a high income

Collins shares an anecdote about a friend earning over $800k struggling to "make ends meet" due to excessive lifestyle spending. He contrasts this with people he's known earning modest salaries who achieved financial independence by keeping expenses low. This demonstrates why high earnings alone cannot guarantee financial security.

20:05

🤑 Mindy praises Pathfinders for showcasing financial independence success stories beyond tech millionaires

Mindy expresses her appreciation for Pathfinders highlighting financial independence journeys for regular people on modest incomes. She feels the stereotypical depiction of tech professionals saving vast sums shortchanges others from believing financial independence is achievable for them.

25:07

💰 Collins and Scott discuss caveats around the 4% safe withdrawal rule for financial independence

Collins cautions against obsessing over the 4% rule for sustainable retirement income withdrawals. He argues it should be a flexible guideline for determining portfolio sustainability. One still needs to monitor and adjust withdrawals based on market conditions to avoid depletion while enjoying portfolio growth.

30:09

👀 Mindy and Collins note financial independence achievers continue monitoring their portfolios rather than ignoring them after retiring

Mindy highlights how even the financially independent remain engaged in tracking their portfolios. Collins agrees this mindset typifies this community, making perfect long-term Rule adherence unnecessary. Their knowledge and priorities ensure continued oversight.

35:11

😂 Collins shares an inspiring story of his friend Tom who maintained happiness despite experiencing financial disaster

Collins tells of his formerly successful friend Tom who suffered multiple divorces, bankruptcy and home foreclosure only to find joy in simple work dressed in period costume at a historical farm. This exemplifies that happiness and fulfillment need not depend on maintaining wealth.

40:13

😃 JL Collins shares tips for those just starting their financial independence journey

Collins advises new seekers of financial independence not to develop inflated spending habits that will need unwinding. He suggests saving aggressively, eliminating debt and understanding one can live well on far less income than imagined once discretionary excess is removed.

45:13

👋 Conclusion and where to find Pathfinders as well as Collins' continued availability for the podcast

After exchanging appreciation and willingness for future podcast appearances, Collins directs listeners to his website JLCollinsNH.com and notes Pathfinders' availability for purchase via Amazon and potentially in bookstores.

Keywords

💡Financial Independence

The concept of having enough savings and investments to be able to live without needing employment income. It is a major theme throughout the video, as the guests discuss strategies and stories related to achieving financial independence.

💡Pathfinders

The title of JL Collins' new book, which shares stories of people pursuing financial independence around the world. It illustrates different paths people take to reach FI.

💡Simple Path to Wealth

JL Collins' previous bestselling book which provides a framework for achieving financial independence. Pathfinders builds on it by showcasing real-world examples.

💡Savings rate

The percentage of one's income that is saved and invested rather than spent. Collins emphasizes the importance of a high savings rate (e.g. 50%) in accelerating financial independence.

💡Lifestyle inflation

The tendency to increase one's spending as one's income rises. Avoiding this is key to maintaining a high savings rate on the path to financial independence.

💡Consumer debt

Debt taken on to finance personal consumption, like credit cards or auto loans. The guests advise making debt elimination a top priority before pursuing financial independence.

💡Enough

Having the minimum resources needed to fund one's lifestyle. Defining "enough" allows one to quantify their target for financial independence.

💡4% rule

The guideline that you can safely withdraw about 4% of your portfolio annually in retirement. But Collins notes you still need to actively monitor your finances.

💡Trinity study

An influential 1998 study that analyzed different withdrawal rates and portfolios over 30 year retirements. It gave rise to the 4% guideline.

💡Geoarbitrage

Relocating and spending retirement in lower-cost areas, making your savings and investments go further. One Pathfinders story utilizes this technique.

Highlights

Pathfinders shares stories of people from all over the world who have applied principles from The Simple Path to Wealth to reach financial independence.

Pathfinders shows this path is accessible no matter your starting financial position or circumstances.

The less you need financially, the less you need to accumulate, making financial independence more attainable.

Achieving financial independence is about balancing how much you accumulate versus how much you need.

The higher your savings rate, the faster you reach financial independence.

Being debt-free should be priority one before beginning to build wealth.

Once debt is eliminated, divert those payments to assets that build financial freedom.

4% withdrawal rate is a helpful guideline, not an inflexible rule. Pay attention, adjust if needed.

Most who reach FI continue monitoring their portfolio, so risk of 4% failure rate is mitigated.

In practice, few FI folks rely solely on the 4% rule without additional income streams.

Enough money to be happy is quite modest for most pursuing financial independence.

If starting early, not adopting expensive lifestyle inflation gives a tremendous advantage.

Paying off debt first creates spending discipline that easily transfers to saving.

Stories in Pathfinders show financial independence is possible for almost anyone.

Reinforcing examples help persist on the path. You are not alone in this pursuit.

Transcripts

Happy New Year my dear listeners and

welcome to the Bigger Pockets money

podcast today we are talking to the

Godfather of financial Independence and

international bestselling author JL

Collins that's right we're going to be

talking about his new book Pathfinders

which is a sequel or really companion

novel to or novel companion book to the

simple path to wealth you're going to be

hearing about the framework JL

recommends to reach f after he's

collected hundreds of stories uh to

compile in this book and why are we

doing this right now well with the start

of the new year we wanted to bring uh

one of our favorite alltime guests and

serial author now to discuss the path

toi and his new book share all of these

different Journeys and hope that that

inspires you with your New Year's goals

and resolutions around reaching Fi hello

hello hello my name is Mindy Jensen and

with me as always is my finding his own

path co-host Scott trench always a

pleasure to navigate the journey to

financial independence with you Mindy

Scott without further Ado let's bring in

JL Collins JL welcome to the Bigger

Pockets money podcast I am so excited to

talk to you today well thank you Mindy

I'm excited to be here I appreciate the

invitation JL we first spoke to you way

way way back on episode 20 and then

again on episode 116 and 285 but for our

new listeners or just a reminder for our

audience how did you initially get

involved in financial Independence oh

great question I uh I started writing my

my blog JL Collins NH

in 2011 and and I really had no

intention of starting a blog it was just

a way to Archive some letters that I'd

been writing for my daughter I managed

to turn her off to All Things Financial

by pushing it too soon and too hard and

I want to make sure the information was

available to her if and when the time

came she was ready to hear it uh and

even if I wasn't around and a friend

suggested that I I put the stuff on a

Blog and I thought that's a great way to

Archive it I barely knew what a Blog was

I never dreamed it would develop an

audience but that was that was the

beginning and of course none of my

friends and relatives cared about it but

I started developing a a a readership

outside that Circle I think all bloggers

can relate to that your friends in real

life are like yeah we don't care oh sure

I totally read your blog every day

they've never even typed it in exactly

you know you compiled a I think a lot of

that work inspired you know a classic in

the financial Independence world uh in

the simple path to wealth which has been

you know read millions of times now is

that right Millions well it's sold

almost 700,000 copies at this point so

it's probably fair to say it's been read

at least a million times because people

pass it around and they get it out of

the library and that sort of thing

awesome so phenomenal it's it's a

classic we recommend it all the time we

in fact we recommend it it just the

other day to another podcast guest

because because it's just such Timeless

classic awesome advice here um but today

we want to talk about a new book that

you wrote and where I think that's

informed by the success of the simple

path to weth maybe the relationships you

form with your audience over time can

you tell us a little bit about

Pathfinders yeah so Pathfinders is a

book that has been in the back of my

mind to do within a year of the simple

path to wealth coming out because I

wrote the simple path to wealth for my

daughter as I alluded to earlier in

starting the blog and you so it's it's

very specific it's you know she's an

American she was in college at the time

at the beginning of her journey and

within months of the simple path to

wealth coming out I started to hear from

people who read it from all over the

world and from all different stages of

their life and they were taking this

this kind of specific book and adapting

the principles and lessons to their own

unique situations and I just thought

thought that was incredible and it's a

collection of just about a 100

stories uh again from all over the world

all different uh kinds of people

different stages of their own Journey

talking about how they've applied the

lessons from the simple path to wealth

and where they are on that path

everywhere from kind of near the

beginning to already fully financially

independent and and you know I think a

large number of people who discovered

the concept of financial Independence

but aren't really on the path or you

know are on the path but just at the

beginning find that it can be a little

daunting with these large numbers that

need to be invested in order to get to

financial Independence how does

Pathfinders help answer this question

and potentially uh elay some of the

anxiety about being able to reach these

goals yeah that's a great great Point

Mindy because it if you're at the very

beginning it it can look very

intimidating and the first thing I tell

people is that it's a journey it's not

an onoff switch and the moment you start

down the path the moment you start uh

getting rid of your debt if you have it

uh and saving and investing if you don't

or once that debts blown out you get a

little bit stronger than you were the

day before and so it's not like you have

to wait to the end to enjoy the benefits

that come from being just on the path uh

and the stories in Pathfinders really

illustrate that because as I mentioned

there are some people there's some

stories from people that have come to

the end of their Journey but the vast

majority of stories are people that are

at some stage of their journey and they

talk about you know what it's meant to

them and and how they got there and and

how it's enriched their life so I think

it's it's for somebody who's

contemplating uh maybe starting down the

path to being financially independent I

think it's pretty inspirational book

filled with pretty inspirational stories

in fact one of the questions I got uh

early on was should people read the

simple path to Worth to simple path to

wealth

first uh before Pathfinders and I

thought about that I said no I think you

can really read either one of them first

but then the more I thought about that

question the more it occurred to me that

actually Pathfinders is probably the

better introduction to

this because you know I could not have

written Pathfinders obviously without

the simple path to wealth I wouldn't

have the stories but Pathfinders really

talks about how accessible this is no

matter where you're starting from no

matter what your initial starting point

is one of my pet peeves is the push back

against the financial Independence

community that says oh that sounds

wonderful that sounds good but that's

only for people who have very high

salaries and have certain kinds of tech

jobs or engineering jobs and that was

never my experience as I met people in

in in this community and when you read

through Pathfinders yeah there's a

couple stories from people like that but

the vast majority of stories are from

people who are not at all like that and

and who come from very humble beginnings

there's a story in there for instance

from a guy who was a child migrant

laborer you know picking asparagus and

the field you know there's a story from

somebody who says you know when I was a

kid the rich people were the ones that

had flush toilets so it doesn't matter

how humble your Beginnings or your

starting point this is a path that has

worked for other people and can work for

you well one of the things that I

noticed here is you know not all the

stories are people who have completed

the journey to financial Independence as

well so you have people who start from a

variety of different positions and you

also have people who are at various

points along the journey and and your

point earlier you've highlighted how um

the benefits you don't have to wait

until the very end of the journey to get

some of those benefits but were some of

the what were some of the the the

stories that stuck out to you in terms

of the life-changing outcomes that even

just a few years down the path um really

had on some of those folks oh I I mean

it's it's kind of all of them because

most of them are are you know people

that are at some point along along the

journey but you know the stories that

that that stick of some of them that

stick out to me obviously the first two

I I mentioned about the child migrant

labor and the and the flush toilets but

you know there's a story in there from a

guy in Ukraine who is not only following

the simple path to wealth but he has a

podcast which by the way he was kind

enough to invite me to be on for other

ukrainians who are following this path

and you know they're countries at War

they're they've been

invaded um so I mean I love a story like

that because is it just illustrates

anybody can do it it almost doesn't

matter what your circumstances are

there's a story in there from a guy in

the middle of Russia you know his

country is an international Pariah you

know there are huge economic sanctions

against Russia because they invaded

Ukraine makes it extraordinarily

difficult to to try to build wealth but

you know he's he's figuring out ways to

do it in spite of those obstacles and

again this speaks to my heart because

you know one of my pet peeves again is

the people say oh you know that this

can't be done unless you start from some

privileged

position uh or you know that sounds

wonderful but you know I'd have to give

up my least luxury cars and my MCM and

that's just that's just too hard and you

know when you read these stories you

realize no you can choose not to do in

fact I've said if you read PA there's a

risk in Reading Pathfinders especially

if you're a naysayer because if you read

Pathfinders you will never again be able

to look in the mirror and say this can't

be done because there just too many

great stories of people who are in fact

doing it you'll still be able to say I

choose not to do it but you won't be

able to say I can't do it do it well one

of the things that I've noticed you know

we all whenever we're talking to

somebody here in the Bigger Pockets

money podcast about their Journey with

money there's always a catalyst moment

that I'm looking for like what was that

moment where you know

sometimes it's an evolution a process um

many of the stories I think in

Pathfinders cite the simple path to

wealth as that aha moment for them but

excluding that what are some of the AHA

moments that you've seen in those

stories like what are the the the

drivers that prompt the change of

behavior and the journey the beginning

of the journey down the path to

financial Independence wow that's that's

that's a tough one because you're

testing my memory I I think you know

there are situations where where you

know people uh find themselves in a in a

difficult situation maybe they've

they've uh come across hard times but

you know most of them because they're

talking about where they are on the

journey are talking about the the

results of of the benefits of having

done this I mean there's a story in

there of someone and again this is

someone who's not fully financially

independent but was hit with some major

medical

issues and talking about how Challen all

in dealing with those were and what a

tremendous relief it was to not have to

worry about money in that context you

know because if if you if you haven't

begun to to build a financial suit of

armor so to speak uh and you get hit

with something like that well now you're

not you're not only dealing with the

health issue that that is afflicting you

afflicting you or a family member or

whatever but you have to deal with all

the financial ramications around that

and so being on a on a path to to

Building Wealth and resources is just

incredibly powerful uh you know people

talking about how they there's there's a

guy who's a ski bum basically he talks

about how you know he works in a

restaurant I I think he's a server and

how in three months he can not only make

enough to live on for the rest of the

year but he's also putting money aside

to build his his his wealth to you know

to Ultimate Financial Independence and

of course the secret is he just lives

very cheaply you can appreciate he house

haacks is is one of the things you know

and he just hasn't got caught up in

buying a lot of stuff so he's got this

incredible lifestyle that this this

approach walking the simple path to

wealth is is provided so yeah just SP

everybody who's in Pathfinders almost by

definition started by reading the simple

path to wealth and and applying the the

the lesson lesons that are in that book

one of the things I like so much about

Pathfinders is that it isn't just and

this is you know the the stereotypical

fi follower is the tech bro who makes a

ton of money and then just spends less

and invests the rest and feel kind of

hypocritical saying this because we

reached Financial Independence because

my husband is a tech bro who made a lot

of money and we didn't spend very much

but I like that there's so many

different stories with different

circumstances because you know in the

beginning of my financial Independence

media participation that's all I heard

was people who were making like $180,000

and they were saving 50% of their income

oh wow how did you do it like that's

that's not really such an impressive

it's still an impressive story because

you know in America you spend everything

so the fact that you're not spending

everything and instead are thinking

about the future is great but when

you're only spending $60,000 and then of

your $180,000 paycheck wait that doesn't

that's not right well whatever if you're

own $90,000 of your1 180 pay check and

then you're you're uh investing

$90,000 that's you're like well I only

make $45,000 so I guess this isn't for

me and then you go away and and this is

this book is showing that hey you can do

it and you know it's not just rich

people that can do it you can be making

a whole lot less and still pursue

Financial IND dependence and you know

honestly you're not going to get there

as fast as the guy who's saving $90,000

a year but you can still get there and

that's I think it's really encouraging

to show people and you know me telling

you hey you can do it is not nearly as

powerful as reading a real life story of

somebody who did it and and seeing that

yeah somebody in my circumstance can do

this too that's uh I just I really love

this book Jim well well thank you I mean

I'm I'm glad it resonates and I do I you

know now that's been out for for a while

I I'm hearing that kind of feedback and

I absolutely agree with you I as I think

I said a little bit earlier I one my pet

peeves has always been this concept that

oh this is only for wealthy engineers

and this fi path and that was actually

not my experience when I as I when I

first started writing in in this fi

community and starting to get to know

people I certainly met people like that

in including you and Carl but I met a

lot of people who are not like that and

I think what the naysayers lose sight of

or people who become intimidated by this

is that achieving Financial Independence

is not just a function of of

accumulating a certain amount of money

there's not a magic amount of money it's

a balance between how much you have how

much you accumulate and how much you

need right and the less you need the

less you need to accumulate so for

somebody who's making $445,000 a year is

an

example uh you know to replace that

income they're not going to need as much

as the person making

$180,000 so they will probably get to

what they need at about the same time

that the that the higher income person

will get to what they need it's not like

everybody needs $2.5 million which is

throws off

$100,000 so it's it's very much a

balance between what you have and what

you need and the less you need the

stronger you are financially obviously

the more money you have the stronger you

are financially but the other side of

that equation is the less you need the

stronger you are financially going back

to that ski bum waiter you know he's

constructed a life where his financial

needs are very minimal so he he only has

to work three months out of the year and

and not only can he ski the rest of the

time but he's also Building Wealth you

just said the less you need the easier

this is to accomplish and the faster you

can accomplish this so for somebody who

is listening who spends every dime they

make how do you need less well that's a

huge challenge in fact I'm I'm I'm very

grateful that personally I never fell

into the the Trap of Lifestyle inflation

and and I'm very grateful that my

daughter so far has avoided it because

it has to be extraordinarily difficult

to have constructed a certain kind of

expensive

lifestyle and then to unwind it um you

know one of the stories that I like to

tell around this idea that that uh you

know only High income people can Achieve

Financial Independence because my I've

known a lot of people make a lot of

money and they're not all financially

independent and I know a lot of people

have made very modest amounts of money

who are and one of my favorite stories

along those lines is back in the early

1990s I was in Chicago having lunch with

a friend of mine who uh was in the

financial business he had just gotten

his bonus check for

$800,000 uh a bonus you know in that

business is a big part of your income

it's not all of it so I don't know maybe

his income was a million two or

something

and you know what we talked about a

lunch we talked about how an $800,000

bonus was not enough to make ends meet

now I can I can see Mindy your your you

know your draw is on the

floor my draw frankly was on the floor I

imagine for a lot of our listeners

they're having the same Rea a lot of

people are probably saying man pay me

800 grand for one year and I'm

done but when I sat at lunch with my

friend and he walked through the

lifestyle he' created you know the the

least luxury cars the multiple houses

the private schools the Exotic vacations

and you start totaling that up and you

realize that he's he was right he is

actually not making enough money to

support the lifestyle he's put together

let alone begin to build Financial

Independence so you say how the hell can

somebody making say a million two not

already be there well that's how it's

it's the life St you create and he will

never be there unless he makes

significantly more money and resists

spending that extra money or he

reconstructs his his life to to bring it

back to more reasonable levels of

spending uh by the same to token I've

known people who have never made more

than $40,000 a year who are financially

independent again based on that formula

of what their needs are the lesson there

is that boating is a rental sport

no it's just amazing though it's it's

about it's about what you you know and

and it comes down to spending your

spending I think you know I think

Pathfinders validated this for me is

it's not always it's there's always a

factor right it's income spending and

how you invest but spending

overwhelmingly seems to be the most

important variable among the people who

actually get to financial Independence

and have a stable portfolio they can

sleep well at night around has that been

your experience as well J yeah I would I

would say that's true it's certainly

been my personal experience so when I

came out of college in the in 1972 and

it took me two years to get my first

professional job because the 70s were a

very difficult economic time with Stag

flation and all that kind of stuff but

uh I just

arbitrarily said you know I'm G to save

and invest 50% of my income there was no

internet in those days there was no

you know there were no computers for

that matter at least no computers

personal

computers um so I didn't I didn't have

any any guidelines for this I was

wandering in the wilderness making it up

as I went along but I knew that this was

an incredibly important thing to me to

have Financial Freedom

and uh and so I arbitrarily arbitrarily

decided I was going to save 50% that

savings rate not only got me to

fi but it saved me from some Financial

mistakes I made along the way because

again I didn't have any any guidelines

for how to do this I had to had to learn

it all all the hard hard way and then I

you know when my first my first salary

was $10,000 a year well I knew people

who were living on $55,000 in those days

and $5,000 a year was a whole lot more

than I'd been living on in college CU I

put myself through college so this was

not deprivation for me at all this was a

big step up and then when I was making

20,000 a year you know I was saving and

investing 10 and I now was doubling the

amount of money I was living on my

lifestyle money and when I was making 50

you know 25 and 25 and 100 50 and on on

up the scale as as as my career

progressed I in fact I've come to start

saying you know I I have spent every

dime that has ever come into my

possession and I've spent it almost the

moment I got it the difference is that I

spent half of those dimes on the thing

that was most important to me which was

my freedom and I think everybody does

that in their own life they spend their

money on the things that they think are

most important of them in our culture a

lot of times that's fancy cars and big

houses and you know those kinds of

things and I say now that if anybody

listening to us or who reads the simple

path to wealth or

Pathfinders um you know I don't

necessarily hope that they they follow

the simple path that's up to

them but I hope that now they know

that's an option that freedom is

something you can also spend your money

on and that maybe for some people that's

that's so will become the more important

thing because if it isn't the the more

important thing then you're never going

to be financially independent I love it

I think that that's the most important

thing to me that's what I'm spending my

dimes on and I wish more people would do

it it's just the power that comes with

it is so uh incredible to direct the

rest of your life and yeah I at your

point you know my entire Journey has

been the same way right where I spent

50% of my my income or less the entire

time and it feels like I'm spending a

ton now but it's still less you but it's

just because it's been ramping up um the

entire time I started on such a low base

so yeah I love that that framework and I

think it's I think it's super powerful

and that's another benefit of the

compounding it's just the spending piece

the buying Freedom whatever it is has

such a multiplier effect I think Mr

Money Mustache put it this way but it's

like the less you spend the faster you

accumulate and the less your portfolio

has to kick off in order to sustain your

lifestyle so it's like a double it's

like a double uh factor in in the

equation it's all after tax every dollar

you don't spend is after tax

accumulation for you um so it's you know

it's powerful in that regard um and it

just totally der risks your situation if

you spend 50% of what you bring in even

if you get fired and have to take a 20%

pay cut at another job you're still

saving 30% so you can be way more

aggressive yeah you know you probably

are able to you know if if you spend 50%

of what you earn here's another one you

accumulate a year of savings in a year

if you save 10% of what you earn it

takes you 9 years for the math Works to

accumulate one year of saving so I mean

that multiplier is so huge on this and

that also extends to how you invest a

lot of very wealthy people I think who

earn very high incomes but have very low

savings rate perhaps like your friend

with the $800,000 investment cannot

afford to set something aside in an all

stock portfolio and wait 30 years for it

to go up Allah simple bth to wealth but

if he had spent 50% of his income and

had a huge pile of you know was it was

so confident in the annual cash flows

that he had then he doesn't have to

worry about uh not being able to access

the money until Financial Independence

is reached for a very long time Horizon

so it allows him to be more risk take on

more risk associated with the volatility

of that investment so my rant's over and

in complete agreement with you I

absolutely agree with you points well

taken I have a new rant JL let's talk

about the 4% rule it's actually a

question not a rant although I can go

off on the 4% rule forever because I'm a

huge fan uh spoiler alert but uh Michael

kitus in his article how has the 4% rule

held up since the tech bubble in the

2008 financial crisis has this

fascinating chart that shows your

portfolio has a very real chance of

increasing after 30 years of the 4%

withdrawals to two to nine times the

starting balance of 30 years ago how do

you balance the saving with the not

saving too much so the the 4% rule is is

uh uh also something I can go off on a

ranton as well so let let me let me

start by saying I I hate calling it a

rule because I think that that makes

people a little bit crazy and you wind

up you know I I I read debates now is

well is 4% the right amount or should it

be 3.78 to you know just it's a it's

it's a terrible rule It's a Wonderful

guideline right so if you go back to the

Trinity study which came out in the 90s

and you look at and they looked at 30

years and different withdrawal rates and

different portfolios from 100% stocks to

100% bonds different different

allocations of those two things you know

that's where I think the idea of 4% came

from because if you withdraw

4% uh and you adjust it for inflation

every

year there is a 96% chance that that

money will last at least 30 years that

sounds like pretty good odds and so I

think that's where the 4% rule came from

but if you really look at those charts

excuse me if you really look at those

charts what you see is is that that in

the vast majority of times not only does

the money last 30 years but it

grows and in a certain percentage of

those times to your point it it grows

incredibly

large um and so what I say to people is

anybody nobody and I don't think anybody

really would do this but if if you if

you chose a 4% withdrawal rate adjusted

for inflation every year and just set it

on automatic pilot and never paid any

more attention to it that would be a

mistake it would be a mistake for two

reasons the reason most people focus on

is the fact that it does fail 4% of the

time it's not perfect and so you could

wake up one day and find yourself broke

nobody wants that so you need to pay

attention and if the winds go against

you you're going to need to adjust so

you don't wind up broke but the bigger

reason to pay attention to it is the

fact that the the far more likely

scenario is if you just let it run on at

4% for 30 years you're going to wake up

and have this huge pile of money that

you could have been enjoying over those

30 years so 4% is a wonderful guideline

use it as a guideline it's a great way

to determine whether or not you're

financially independent if if you apply

the 4% rule to whatever you have against

whatever you need it's a great formula

to make that call but you're going to

have to pay attention uh you don't want

to run out of money which is the 4%

chance but you also want to be aware of

the 96% chance that you probably could

have taken more along the way and

enjoyed your life a little more than you

might otherwise I think it's really

important to note that you have to pay

attention and I'm wondering how many

people get themselves to a point of

financial Independence and early

retirement uh as OS a traditional

retirement and then stop paying

attention um because I don't I don't

know about you but my husband is

obsessed and goes and checks like his

morning routine is sit down at the

computer and check every single balance

that's not my morning routine I don't

have to pay attention because he pays

attention and we talk about it all the

time but this is you know this is

something that I have found most people

that I know in the f by space continue

to pay attention even after they stop

working it's just like maybe they're not

as obsessed as Carl is but they're still

keeping an eye on it and I was actually

talking to Pete a couple of years ago

and he's like you're not going to run

out of money because if you get yourself

to this position you're going to keep

paying attention and then when you're

paying attention you'll notice that your

balance is starting to go down well

before you get to 30 years out and all

of a sudden you're like hey why do I all

my checks bounce you know you you're

still going to pay attention to it I

think Mindy I think that's a great point

and that anybody who follows the simp

who gets into this SEI community and

especially if you follow the simple path

to wealth almost by

definition you're going to pay attention

to this and this is another reason that

that I find the obsession about whether

4% is the white the correct withdrawal

rate to be kind of absurd because

you know it there's there's an

underlying assumption that people won't

be paying attention you know anybody who

is who has the wherewithal and the

interest and the knowledge to Achieve

Financial Independence or even again

working towards it is by definition

going to be paying plenty of attention

probably too much attention like maybe

your husband does um and it doesn't take

that much attention you just have to

look at it maybe once a year and say gee

you know where do where do I stand I

mean if you had a really bad year like

2022 where the market was down 22% well

okay you know you might want to think

about a taking a little less money the

next year if you have a great year like

we've had so far in

2023 uh you know then you look at it

differently but you're right the kinds

of people who would suffer by not paying

attention are not the kinds of people

who are going to be doing this anyway so

the kinds of people for whom the four

following the 4% rule could actually

result in in what would still be a very

modest

risk they're not the kind of people

doing this so you know yeah I think it's

a it's a great guideline don't it's

nothing to obsess about the the reason

it's so obsessed about is because the FI

community in by definition is kind of

obsessed with enough like what is what

is enough right and enough is a function

of how much you spend or how much you

project you want to spend and how much

how many assets you need in order to to

get to that point so you know the the

first question is a personal choice the

second question is as as closely as we

can do it reasonably benchmarked around

this 4% concept and that's where that

that comes down to what I've detected in

Pathfinders is the understanding and

Define definition of enough among all

the people really that that the story

the story projects that are on the path

they they have that the definition in

place and generally speaking it's fairly

modest it's not this $1.2 million is not

uh covering my needs situation it's

something much less than that that and a

clear definition of what what what uh

drives happiness and I think that's

that's what it's all about and and then

it's an engineering mindset um which I

think is why it attracts so many

Engineers to back into how many assets

do I need to to preserve that I will

also say this about the 4% rule I have

never met a person I've met a lot of

financially independent people I've

never met a person who has the 4% role

and nothing else and calls himself and

and is is actually living the F

lifestyle it is NE I've maybe they're

out there you let me know when when

they're there but I've never met someone

who has that and nothing else no big

cash position no pension from the

military no blog no book no uh uh other

source of passive income all of them go

well past it so guideline or rule

wonderful with whatever we you know it's

in practice not used by people once they

actually get to that point yeah you know

I I I I would agree I don't think I've

ever met anybody like that either you

know I think the other thing in

Pathfinders as I'm as I'm listening to

you you reflect your observations about

it when we were selecting the stories to

go in it we didn't eliminate a bunch of

we didn't we didn't look at stories from

high income earners and say okay we're

not going to include those we're only

going to include stories from people

more modest means I mean that's that was

not a metric we used it's just that was

the kind of stories that are in

Pathfinders were pretty much the kind of

stories that came to us and you know

they were chosen based on on you know

how cool the story was otherwise so you

know there's there's at least one story

in there that I can think of off hand

that is sort of that that stereotypical

model it was a couple from Ohio that

were software Engineers they went to

Silicon Valley they managed to keep

their expenses low they made the big

salary you can make out there and then

when they accumulated their money they

move back to Ohio where the living is a

lot cheaper a little bit of

geoarbitrage and you know so there is

those there are those kinds of stories

in there but yeah mostly it's people who

have a have their feet pretty solidly on

the ground and they know that spending

money does inherently going to make it's

not going to make you happy uh owning a

lot of stuff is not going to make you

happy and but having enough

you know we all need to have enough and

then maybe a little bit extra beyond

that and once you're there what more do

you need J J what do what do um some of

the you know the folks that you interact

with like what like just giving giving

you know some listeners a glimpse into

the folks who completed the journey what

do their day-to-day lives look like uh

by and large once they've accumulated

this enough and left work what are some

of the examples of things that you find

most inspiring or or neat about those

folks like the oh coup one of my very

very favorite stories in there is and I

alluded to this one earlier is from my

my friend Tom and he was also a case

study on the

blog and Tom was a client of mine which

is how I how I know him back in the 90s

when we were both in the I was in the

publishing business he worked for an ad

agency um but in Tom's life everything

went financially wrong you know Tom had

a couple of expensive

divorces uh I think he's got five kids

from you know the two different

marriages uh he had he was a very

talented successful guy but you know in

the ad agency business is is a business

that caters to young people for the most

part so as he got older he became less

and less

employable uh he ultimately lost his

house to foreclosure he went bankrupt

you know he lost his job and was unable

to to uh replace it and at the age of

six so he's going bankrupt and and

losing his house to foreclosure at the

age of 62 right

6062 so he's kind of an old guy uh at

that point and so he takes his Social

Security at 62 which is not optimal

because you don't get your full benefit

doing that but he needed the money to

live on he had a very tiny pension from

one of the companies he'd work for along

the along the way but then you know Tom

went out and and he got a job on the

Firestone I think Firestone the the

Henry Ford museum has a has an 18th

century working farm where you know

people who visit the museum can see how

farming was done back in those days and

they have people who actually do the

farming chores it's a real operating

Farm but who dress up in Peri costume

and they Farm the way it was done in the

1800s well Tom is one of those and so

now in in in his old age he's got this

great job where he's working outside you

know he's Physically Active he's a very

personable sociable guy so he gets to

interact with people who come to the

museum he doesn't make a lot of money

doing that but he's got a little bit of

money coming from that he's got his

Social Security he's got this tiny

little pension Tom's doing fine not

great not wealthy but Tom has enough and

everything went wrong and the other

thing I will say is that Tom is probably

the single happiest human being I know

in my life and everything has

financially gone wrong in Tom's life so

when I hear people in our community who

are riddled with worry about you know is

my $2.5 million dollar really going to

last I I I just want to say yes said it

is and even if it doesn't you'll

probably be okay you know things are are

if you have the right attitude and

things work out JL do you have any tips

for people who are just getting started

on their journey to financial

Independence today well the first thing

I'd say is if you're just getting

started in your life and you're and

you're going to start on a pay path to

financial Independence you've discovered

it you you have a tremendous Advantage

because you don't have that like any

inflated lifestyle that you need to

unwind so I think the first thing I

would say is is don't let that happen to

you and probably as as Scott was saying

you know with his savings rate and I was

talking about mine you know determine

how much of your money you want to SP

spend buying your freedom and of course

the more you you divert to buying your

freedom the sooner you will have your

full Freedom be fully financially

independent and that's an independent

judgment but just start there and then

you never have to worry about unwinding

things and understand that almost no

matter what you make uh if you look at

half of that there are people out there

who probably living successfully on half

of whatever that number is that was

certainly my experience so yeah and then

if you're in debt I mean that's job one

is as our friend Mr Money Mustache likes

to say if you're in debt your hair's on

fire so you know you need to and I I say

you know being in debts like being

covered with blood sucking leeches and

it's appalling to me that in the United

States we think this is normal you know

the idea of carrying Consumer Debt is

considered normal well of course I do

you know that's how I afford all the

stuff I I want to own it's insane it's

like saying I don't wantan to I don't

want to spend X number of dollars for

this thing I want to spend much more

than that in the interest payments and

it's it's again it's like being covered

with blood sucking leeches it's not

normal you got to take your sharpest

knife and start scraping little blood

suckers off I completely agree right

like why why like like Consumer Debt and

and these types of things that you have

to dig yourself out of the hole and then

begin the wealth building Journey which

you have to do in America if you want to

live a comfortable retirement at any

point in your life earlyer or

traditional so it's an emergency and you

know that's not the time to go out going

out and eating eaten out or whatever you

know got Consumer Debt you can pay off

you got to just attack the stuff here's

a silver lining because that's not easy

it's easy for us to say that it's not

easy but if people organize their life

in such a fashion to free up money from

their income to divert to paying off

that debt they have created a wonderful

discipline because once they

successfully blow that debt out all they

need to do is start taking that money

that was going to the debt and now

channel it to buying their freedom which

of course you do by buying assets so

you've already got the discipline in

place you've already created the

lifestyle that you need to become

wealthy and you can turn it around I

mean we we all three of us know people

who have done that successfully well J

where can people find Pathfinders where

can people find out more about you well

so uh I I guess I'll start with the more

about me question because that leads to

both uh my blog is JL Collins NH

at.com and if you go to the blog you

know you'll see uh you'll be easy to

find Pathfinders you'll find a little ad

for simple path to wealth you click on

that that'll take you to Amazon you can

buy Pathfinders at Amazon one of the uh

Pathfinders is my third book it's the

only one I've done with a traditional

publisher and one of the advantages of

that is that they have distribution

channels so my understanding is you

should be able to find it in bookstores

maybe even in

airports um but if it's not in your

bookstore you can certainly ask them to

order it for you but it should

finding it shouldn't be a problem well

thank you so much for coming on today

it's always a pleasure to talk with you

and learn from you really appreciate it

and highly encourage everybody go to

check go and check out Pathfinders in

addition to the simple path to wealth so

thanks for all you do um JL and great to

have you back for the fourth time here

on the bigger money podcast thank you

for having me back I always enjoy

hanging out with you guys in our

conversation and I'm happy to come back

anytime whether I've got a new book or

not so anytime you'll have me I'm I'm up

for it it's always always my pleasure

awesome well thank you J this was so

much fun it's always fun talking to you

and we will talk to you soon all right

Scott that was JL Collins and that was

fantastic I'm so excited about this book

I'm so excited to just have somebody

sharing these stories with other people

because it is so easy to start down the

path and think well I'm the only person

doing this I'll just stop uh I'm the big

weirdo why would I put myself in this

position but to have the reinforcements

of not only can you do it you can do it

at almost any income level you can do it

regardless of how much you're able to

save here are stories that show you you

can do this you can become financially

independent I'm just so thankful that JL

Collins was able to join us and spend

some time with us today what did you

think of the show I thought it was a

great episode and you know really really

enjoyed everything that JL had to say um

look that's what we're about here Bigger

Pockets money Financial Freedom we

believe is attainable for anybody no

matter when or where you're starting and

that's what Pathfinders is at its core

with that should we get out of here

Mindy we should Scott that wraps up this

episode of the Bigger Pockets money

podcast happy New Year 2our listeners he

is Scott trench I am Mindy Jensen saying

chow chow Willow Bigger Pockets money

was created by Mindy Jensen and Scott

trench produced by Kaylin Bennett

editing by Exodus media copyrighting by

Nate wiro lastly a big thank you to the

Bigger Pockets team for making this show

[Music]

possible