The Simple Path to Wealth

The Simple Path to Wealth

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life by J.L. Collins is a great introduction to money management and financial independence.  It covers debt, savings, investing, and strategies for retirement in a way that’s clear and easy to understand.  Each topic is laid out in a very basic and straightforward way.  I found it to be a quick read full of thoughtful insights, and it made me rethink my own strategy even though I’ve been investing since age 16.

A high-level overview of the topics covered:

Part I: Orientation

He covers the basics of debt and why it should be obliterated.  The idea of F-You Money is introduced and sets the groundwork for ideas of financial independence.  This is rounded out with thoughts on savings, money as a tool and market timing.

Part II: How to Harness the World’s Most Powerful Wealth-Building Tool

This section is the meat of the book.  Everything you need to know about the stock market!  There will always be crashes.  History has shown the market always goes back up.  The reasons people lose money in the stock market are all broken out.  Index funds, bonds, and selecting allocations for your wealth accumulation stage and your wealth preservation stage are broken out in an easy to understand way.  He then gives explanations of tax advantaged accounts and savings strategies.  He ends the section with an explanation of why he avoids money managers, and a thoughtful reminder to “Remember that nobody will care for your money better than you.”

Part III: Magic Beans

He elaborates on the reasons that no one is likely to beat the market every time, and details the ways people try.  He also talks about dollar cost averaging, and how it may not be as helpful as you think.

Part IV: What to Do When You Get There

He details the basics of withdrawal strategies and his thoughts on social security.

In Summary…

My high-level overview does not do the book justice, because there’s so much you can learn from it.  For someone new to the idea of financial independence, The Simple Path is one of the best ways to get your feet wet.  I felt that I benefited from reading it, even though I’ve known most of the content for years, because it gave a very broad perspective of finances as a whole at such a basic level.  Whether you are new to managing your money or are an old pro, I recommend everyone read The Simple Path at least once (or read his free website version).

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