“Two close childhood friends grow up and go their separate ways. One becomes a humble monk, the other a rich and powerful minister to the king. Years later they meet. As they catch up, the portly minister (in his fine robes) takes pity on the thin and shabby monk. Seeking to help, he says: “You know, if you could learn to cater to the king you wouldn’t have to live on rice and beans.” To which the monk replies: “If you could learn to live on rice and beans you wouldn’t have to cater to the king.”
Now, of course we aren’t suggesting you switch to a diet of rice and beans, but the underlying theme that resonates out of this book is segmented into three core areas:
Avoid Debt Spend less than you earn Invest the surplus
At face value these seem like rather obvious areas to focus on with regards to wealth building, however in reality we find that the majority of us really struggle to transcend this into practice. Life gets in the way and unexpected circumstances arise that throw us off course. In this book, however, Collins makes an excellent attempt at explaining how small changes can make a big difference to your personal finances. He does this is a manner that is digestible for a range of readership, from the experienced investor right through to the beginner.
Collins has a relaxed, conversational writing style that does very well not to engage the novice investor. He highlights that paying off debts should be paramount in beginning your journey to wealth accumulation; if this means reducing expenditure on treating ourselves, then so be it for long-term benefit. Similarly, Jim outlines the importance of living below your means; not an impoverished existence by any means but being smarter with our disposable income by putting it into investments to let the beauty of compound interest take the work. Yes, you will need liquid assets to cover short-term expenditure or unexpected circumstances, but this shouldn’t be at the detriment of planning for your future. There are a couple of chapters that relate to Americans only, however he states beforehand to skip through the chapters that don’t relate to you. His investment suggestions relate to Index Funds, something which our clients will know we espouse here at Manse. He eloquently recalls personal snippets of his life where he himself tried to beat the market by actively investing, only to suffer the inevitable consequences that coincides with this strategy. Now he is trying to educate and inform others so that they don’t make the same mistake!
The book seamlessly moves through the ‘wealth accumulation’ phase of peoples lives to the ‘wealth preservation’ stage as one gets older. Every chapter has something that can relate to all readers, regardless of what stage of life they may be at.
Why read this book? For the vast majority of us, investing has long been an intimidating and complex subject, which has led it to become an avenue that we rarely go down for fear of misunderstanding. The Simple Path to Wealth is a book that can be read by all. It is an excellent education tool for young people who have time on their side and, as explained in this book, time in wealth building is your biggest friend! If you are an older reader, this may benefit you by re-educating your preconceptions and cause you to rethink your current finance and investment situation; or alternatively reinforce what you already have in place. This is a great book and an easy, enjoyable and thought-provoking journey.
“For me (Jim), 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. It’s a big beautiful world out there. Money is a small part of it. But F-You Money buys you the freedom, resources and time to explore it on your own terms”.
— JL Collins