Book Review: The Simple Path to Wealth

As a certain TV show used to say, “And now for something *completely* different!”  Not only is this the first book review on this blog, but the book is about Money, not Health.

Rest assured, there is a method to my madness (at least, that’s what I tell Spousal Unit).  Money is related to heath directly, such as when you can’t afford the healthcare you need, and indirectly.  Indirect effects of money on health include the physical and emotional stress that comes from not having enough money to meet your needs, and the strain money problems can have on your relationships.

Therefore, I decided when I was a young lieutenant that understanding the world of finance and mastering my money was a critical life skill.

I started reading personal finance books in the early 90s: Your Money or Your Life, The Wealthy Barber, The Millionaire Next Door, The Tightwad Gazette, and the Bible of personal finance: Making the Most of Your Money, by Jane Bryant Quinn.  Over the years, I put what I learned into practice.  I started saving and investing.  I tried to fight the impulses to buy (too many) cool toys, and the peer pressure to live an affluent (some might say hedonistic) lifestyle.  I made a few mistakes, and I got smarter.  I kept reading books and articles about personal finance.  And then the internet happened.

In 2011, I started reading a personal finance blog – Mr. Money Mustache. That lead to other personal finance blogs: Early Retirement Extreme, The Military Guide, Get Rich Slowly, madFIentist, The Military Wallet, Root of Good, and many more.

And I noticed this guy, jlcollinsnh, in the comments section of many of these blogs. He was making comments that were insightful, with a wry sense of humor. I followed him back to his blog, jlcollinsnh, and I’ve been reading it ever since. In fact, it is my favorite personal finance blog (no offense, Nords!).

At the same time, and even prior to reading personal finance blogs, I was reading blogs about Simplicity and Minimalism.

I remember thinking, “If only there were a way to simplify personal finance”…

“Why can’t there be a simpler way to invest than holding a diversified portfolio of growth and value stocks, small-cap, mid-cap, large-cap, international, and sector stocks, short-term bonds, intermediate-term bonds, long-term bonds, and cash, spread across retirement and non-retirement accounts?”

JL Collins provided the answer: There *is* a simpler way to invest.

**Financial Independence is not incompatible with Simplicity.**

JL Collins gave me my financial freedom: I didn’t have to worry about asset allocation (Is this blended fund more growth or value? Do I have the right percentage of each asset class?). In fact, he blew my mind when he advised his daughter that she’d do quite well financially if all she ever did was live within her means and invest in just one fund. ONE fund??? Inconceivable!

But what I like best about JL is that he backs up his assertions with logic and data.

He “shows his work.” He doesn’t ask his readers to take his word for it. He explains how he reached his conclusions, and he welcomes challenges because he knows he’s not infallible and he just might learn something. He’s not the Oracle; he’s just a smart guy with a knack for explaining personal finance in a very accessible way, and he’s interested in having conversations with like-minded folks so that everyone can learn from each other and get smarter about our money.

That’s why I did a happy dance when I heard JL Collins was releasing his first book, The Simple Path to Wealth.  [Disclaimer: I was sent an advanced copy of the manuscript in exchange for my honest review.  JL doesn’t hustle his readers, and I don’t either.]

To be honest, I think it’s very difficult for authors to transition from a column/blog post format to a book format.

I loved Dave Barry’s newspaper columns, but was disappointed by a few of his books (although others were brilliant). I was slightly disappointed by Jenny Lawson (aka The Bloggess)’s first book, but feel she really hit her stride with her second book.  (Read it.  She talks candidly but humorously about health issues, including depression.)  I will admit I felt that slight prickle of disappointment initially with JL Collin’s book, The Simple Path to Wealth, as well.

The first section (Part One) felt a bit meandering – not the usual tight, crisp prose I’m accustomed to on his blog. But perhaps this is because I am already well-acquainted with the financial fundamentals and philosophy he outlines in this section. If you are still learning the basics, and the whys and wherefores of personal finance, you may benefit from Part One much more than I did.

However, Part Two is classic Collins: the clear, no-nonsense financial advice that I recommend to others, because it is easy to understand and will get them to where they (presumably) want to be – Financial Independence. And it will get them there with a minimum of hassle.

Collins speaks with the wisdom of someone who has spent a great deal of time thinking about personal finance, and has learned some lessons through trial-and-error. And he shares his hard-won wisdom so that, if you will listen, you can avoid his mistakes.

Furthermore, he understands that most people want to save for retirement, but don’t want to (or are so busy they cannot) spend a bunch of time figuring out how to do it. In Jim’s words, “Financial geeks like me are the aberration. Sane people don’t want to be bothered. My daughter helped me understand this at about the same time I was finally understanding that the most effective investing is also the simplest” (p.111).

Collins continues, “Complex and expensive investments are not only unnecessary, they underperform. Fiddling with your investments almost always leads to worse results. Making a few sound choices and letting them run is the essence of success, and the soul of The Simple Path to Wealth” (p.111).

Read that again: “Making a few sound choices and letting them run is the essence of success, and the soul of The Simple Path to Wealth.”

You can simplify your life by simplifying your investments (including retirement accounts), and you’ll probably reach financial independence sooner than your peers with complicated investment strategies who spend a great deal of time, effort, and emotion fiddling with their finances.

Also in Part Two, Collins is one of the only non-military personal finance educators to actually cover the Thrift Savings Plan (TSP) in his discussion of retirement accounts.  He highlights the often-overlooked consideration that TSPs *not* be rolled over to IRAs after separation from the military/civil service because the fees are so low – often lower than industry-leader Vanguard’s IRA fund fees.

He also includes a case study in Part Two.  Case studies are always fun because you get to see the practical application of the theoretical.  In other words, what does this advice translate to in real life?  Go to Chapter 22 to find out.

Part Three contains more whys and wherefores.  In Part Three, Mr. Collins discusses several hot topics and “shows his work”.

Finally, Part Four of The Simple Path to Wealth talks about what to do once you’ve reached financial independence.  Many talk about how to save and invest to reach retirement/financial independence, but few explain what to do once you get there.  This section talks about the nuts and bolts in such a way that you will feel confident you know what to do once you’ve “arrived”.

Afterword: Chapter 33 contains JL Collins’ blueprint for financial independence.

The Big Idea: “Over the years I’ve come across any number of people embracing life on their own terms.  They are intent on breaking the shackles of debt, consumerism and limiting mindsets, and living free. They are filled with ideas and courage.  This freedom, to me, is the single most valuable thing money can buy and it’s why I offer you the strategies in this book” (p.138).

[NOTE: This book is written for a general audience, not a military one.  For military-specific financial advice, see these blogs: The Military Guide and The Military Wallet.  And this book: The Military Guide to Financial Independence and Retirement.  These resources discuss topics such as military pensions, SBP, TSP, VGLI, and many other military finance alphabet soup words.  However, the basic information and the advice in The Simple Path to Wealth still apply to a military audience.]

Bottom Line: The Simple Path to Wealth is exactly what I hoped it would be: a solid financial reference book that I can confidently recommend to people who want to learn a simple, but effective, way to manage their money and to progress toward financial independence. I like the website, www.jlcollinsnh.com, because I still learn useful things about personal finance, despite having decades of experience. This is true of JL Collins’ book, The Simple Path to Wealth, as well.

Read this book.  Get smart about your money.  “Remember that nobody will care for your money better than you” (p.101).  The Simple Path to Wealth will show you how to manage your money simply and effectively.