Bogleheads® on Investing Podcast 053: JL Collins on the simple path to wealth, host Rick Ferri

00:00:00.000 | [MUSIC PLAYING]

00:00:10.280 | Welcome, everyone, to the 53rd edition

00:00:12.720 | of "Bogleheads on Investing."

00:00:15.320 | Today, our special guest is J.L. Collins.

00:00:18.220 | He is the author of the bestselling book,

00:00:20.320 | "The Simple Path to Wealth," and a leader in the FIRE

00:00:23.560 | community.

00:00:24.560 | [MUSIC PLAYING]

00:00:32.640 | Hi, everyone.

00:00:33.320 | My name is Rick Ferry, and I'm the host

00:00:35.020 | of "Bogleheads on Investing."

00:00:37.040 | This episode, as with all episodes,

00:00:39.600 | is brought to you by the John C. Bogle Center

00:00:42.120 | for Financial Literacy, a nonprofit organization that

00:00:45.720 | is building a world of well-informed, capable,

00:00:48.680 | and empowered investors.

00:00:50.360 | Your tax-deductible contributions

00:00:52.420 | are greatly appreciated.

00:00:53.920 | Visit boglecenter.net, where you will

00:00:56.380 | find a treasure trove of information,

00:00:59.260 | including transcripts of these podcasts.

00:01:02.260 | Today, our special guest is J.L. Collins.

00:01:05.540 | J.L. has been publishing his blog on JLCollinsNH.com

00:01:11.800 | since 2011, and in 2016, wrote the international bestselling

00:01:17.380 | book, "The Simple Path to Wealth--

00:01:19.620 | Your Roadmap to Financial Independence

00:01:21.820 | and a Rich, Free Life."

00:01:24.100 | So far, a half a million copies have been sold worldwide.

00:01:27.660 | He's also written two other books.

00:01:29.820 | One is a book on real estate, and the other

00:01:32.300 | is to be published in 2023.

00:01:34.940 | I greatly enjoyed my conversation with J.L.

00:01:37.540 | and hope you do too.

00:01:39.140 | So with no further ado, let me introduce J.L. Collins.

00:01:44.820 | Welcome to the "Bogleheads on Investing" podcast.

00:01:47.580 | Rick, thank you for the invitation.

00:01:49.460 | I'm delighted to be here.

00:01:50.740 | Well, I'm great to finally have a chance

00:01:53.140 | to sit down and talk with you about your books

00:01:55.420 | and all the work that you've done on simple investing

00:01:58.580 | and with the FIRE movement, which

00:02:01.140 | we'll get into in a little bit.

00:02:03.140 | But before we do that, you and I are close to the same age.

00:02:07.140 | And let's say that we're on Medicare.

00:02:11.740 | And so before either one of us got

00:02:15.220 | into talking about investment things and finance things,

00:02:20.660 | we did other things.

00:02:21.620 | So could you tell us a little bit about your journey

00:02:24.580 | and what brought you to this career

00:02:27.820 | and what you did before then in your younger days?

00:02:31.300 | You're talking about my professional career

00:02:33.700 | in my younger days?

00:02:35.180 | Your professional life before you became a financial guru.

00:02:39.780 | Wow, I cringed at the term guru, but--

00:02:44.260 | Oh, OK, well, I take that back.

00:02:46.300 | Yeah, I just take that back.

00:02:48.100 | I thank you for it.

00:02:48.980 | That's a nice compliment.

00:02:51.460 | No, I was in the magazine publishing business

00:02:54.180 | until 2011 is when I finally left my last corporate job

00:02:59.820 | in business-to-business magazines.

00:03:02.260 | I started on the sales side, and then I became a publisher

00:03:06.140 | and wound up my career back in the sales side of things.

00:03:09.260 | And you were an English major back in college.

00:03:12.460 | I was an English major, absolutely.

00:03:14.420 | Well, that certainly comes out in your writing,

00:03:16.420 | because when I read anything that you wrote,

00:03:18.340 | it's so crystal clear, unambiguous.

00:03:21.500 | You have a really great talent for writing,

00:03:23.980 | making very complex things simple.

00:03:27.020 | You're very kind to say that.

00:03:28.780 | Actually, I would say that I got my start writing,

00:03:31.500 | I suppose, as an English major.

00:03:33.020 | But to the extent that I have any ability in writing,

00:03:37.140 | I think it was a skill I developed in business,

00:03:39.500 | writing business letters and proposals

00:03:42.460 | and that kind of thing, where you do

00:03:43.980 | have to be clear and succinct.

00:03:45.580 | And so, yeah, I think to the extent

00:03:48.260 | that I have that ability, I actually honed it

00:03:50.780 | in my decades in business.

00:03:53.540 | You wrote The Simple Path to Wealth,

00:03:55.500 | and you've sold half a million copies,

00:03:57.780 | and it's still selling strong.

00:03:59.580 | I found myself the other day when a client of mine

00:04:02.420 | asked me, my young son has just graduated from college.

00:04:07.240 | Can you recommend a book?

00:04:08.820 | The first one that came out of my mouth

00:04:10.440 | was The Simple Path to Wealth, because it's so easy to read.

00:04:13.460 | It's a great book for people who are just getting started.

00:04:16.620 | It clears up a lot of misconceptions.

00:04:18.500 | In fact, when I read all of the accolades in your book

00:04:21.980 | from the various financial bloggers out there,

00:04:24.900 | everyone said the same thing.

00:04:26.460 | That you were able to take something

00:04:27.620 | that was very complex and make it very simple

00:04:30.060 | for somebody who is new to all this

00:04:33.900 | and overwhelmed by all of the acronyms and terms

00:04:36.860 | and all the stuff that Wall Street throws at you.

00:04:39.800 | You're able to cut through all of that,

00:04:41.140 | just get right down to the bottom line

00:04:43.840 | with the way you write, and that comes out very clearly

00:04:46.760 | in The Simple Path to Wealth,

00:04:48.140 | which we'll get into in a minute.

00:04:49.660 | Before we get there, I do have some more questions

00:04:52.600 | about the earlier background, and I'd like to hear about

00:04:55.420 | how you ended up coming to the altar, if you will,

00:05:00.100 | of index investing and all of the mistakes du jour

00:05:04.300 | that you may have made prior to getting there.

00:05:09.100 | - Yeah, well, the answer to that question

00:05:11.220 | is kind of embarrassing.

00:05:12.560 | Strictly by chance, I started investing in 1975,

00:05:19.060 | and that was, of course, the year that Jack Bogle

00:05:22.380 | brought out the very first index fund.

00:05:25.180 | My excuse for not investing in it right away

00:05:28.660 | is that I just didn't know that.

00:05:30.940 | But about 10 years later, in the mid '80s,

00:05:34.300 | a friend of mine who was a financial analyst

00:05:37.220 | and I were talking, and he was the one

00:05:39.020 | who introduced me to this whole concept

00:05:40.980 | of indexing, investing in efficient markets

00:05:44.280 | and all that kind of stuff.

00:05:45.120 | I was a stock picker in those days,

00:05:47.180 | and by extension, I would pick actively managed funds

00:05:51.580 | that were run by stock pickers.

00:05:53.620 | And actually, I did pretty well.

00:05:57.100 | In fact, my dirty little secret

00:05:58.580 | is I achieved financial independence doing that,

00:06:01.160 | not through indexing.

00:06:03.380 | So the key is it's not like picking stocks

00:06:07.140 | or active management doesn't work.

00:06:09.740 | It's just that indexing works better, more easily,

00:06:14.100 | and it's a whole lot less expensive.

00:06:16.740 | So I learned about it in the mid '80s,

00:06:18.920 | but I was not smart enough,

00:06:20.580 | candidly, to make the change then.

00:06:23.060 | It took me another probably 15 years,

00:06:26.700 | probably not until 2000 before I switched over to indexing.

00:06:31.700 | And it was a slow transition.

00:06:35.540 | I think pretty quickly, once I embraced it,

00:06:38.260 | indexing was doing the heavy lifting,

00:06:40.100 | but I probably, I'm trying to think

00:06:43.980 | of the last individual stock I owned,

00:06:45.500 | was probably as recently as 2013, somewhere in there.

00:06:50.120 | So I had and have the disease.

00:06:53.160 | I'm kind of a recovering stock picker.

00:06:55.020 | - You know, it's interesting that you said

00:06:58.340 | it took you about 15 years.

00:07:00.340 | It's not unusual, and I hate using double negatives,

00:07:03.900 | for someone to hear about indexing

00:07:07.900 | and not right away have that aha moment.

00:07:12.180 | It took me, I mean, I worked in the industry

00:07:15.500 | for eight years before I had my aha moment.

00:07:19.780 | And prior to that, I was also trying to figure out

00:07:22.660 | which mutual funds were going to outperform,

00:07:24.680 | and I had my bout of picking bad stocks and all of that.

00:07:29.380 | Oh, you know, you hear about indexing.

00:07:31.740 | You're like, okay, it's there.

00:07:33.540 | It doesn't really mean that much.

00:07:36.580 | Got to go on to the next thing.

00:07:38.180 | And then you circle back.

00:07:39.300 | In fact, I didn't really embrace indexing

00:07:42.220 | until I had read every other book out there on investing.

00:07:45.420 | And finally, the last book on the bookshelf

00:07:47.340 | at Barnes and Noble was Jack Bogle's book,

00:07:49.860 | "Bogle on Mutual Funds."

00:07:51.820 | And that was in 1996, and then I picked up that book

00:07:54.860 | and finally read it, and then it finally dawned on me.

00:07:57.400 | I had my aha moment.

00:07:58.500 | It's like, hey, wow, this is pretty powerful stuff.

00:08:02.660 | You know, I was a financial advisor at the time,

00:08:05.320 | and you must have worked with some financial advisors

00:08:07.700 | during your lifetime as well, correct?

00:08:09.500 | I don't, never have.

00:08:10.780 | Oh, good for you.

00:08:11.700 | Yeah, yep.

00:08:13.260 | That's one disease I've never had.

00:08:15.260 | Okay.

00:08:16.100 | Well, you have some things to say

00:08:19.220 | about financial advisors in your book,

00:08:21.100 | and it all centers around the same thing that I talk about.

00:08:24.100 | And I am a financial advisor, been one for 35 years,

00:08:26.660 | but you talk about the complexity of the industry

00:08:31.660 | and how that might be intentional.

00:08:34.900 | Can you elaborate on that?

00:08:36.620 | Well, yeah, I think that just in general,

00:08:39.460 | I think one of the reasons that most people

00:08:42.900 | are intimidated by investing

00:08:44.980 | is that there's a lot of jargon surrounding it.

00:08:49.040 | And Wall Street is filled with genuinely complex investments.

00:08:54.060 | I mean, they've created investments notoriously

00:08:56.740 | when it led up to the '08, '09 crash

00:08:59.820 | that they didn't understand themselves,

00:09:02.300 | and they were still selling and marketing

00:09:04.660 | to people who obviously didn't understand them either.

00:09:07.420 | And these were professionals.

00:09:09.660 | And I think that happens for a couple of reasons.

00:09:12.900 | One, the more complex an investment is,

00:09:15.020 | the more you could charge for it.

00:09:17.700 | And the more you can convince people

00:09:20.780 | that you just need to go with the program and pay our fees,

00:09:25.420 | and we'll take care of it,

00:09:26.460 | and don't worry your pretty little head about it.

00:09:28.500 | But I contend that the vast majority,

00:09:31.100 | in fact, not the vast majority,

00:09:32.420 | I'll go so far as to say 100% of those complex things,

00:09:36.020 | you can put your arm on the table

00:09:38.580 | and sweep them all onto the floor

00:09:40.940 | and leave only that corner

00:09:42.780 | with the simple, broad-based, low-cost index funds,

00:09:46.980 | because that's all you need.

00:09:49.460 | I've been asked in the past,

00:09:51.260 | "Why is your advice so specific?"

00:09:53.540 | And it's, "Well, it's because I'm writing for my daughter.

00:09:56.700 | "This is exactly what I tell my kid to do.

00:10:00.380 | "It's about what kicked me in the ass and what's worked."

00:10:03.620 | - You just recently wrote another book, though,

00:10:06.140 | on real estate investing.

00:10:07.900 | And there, harking back to your previous investments,

00:10:12.900 | it was titled "How I Lost Money in Real Estate

00:10:16.140 | "Before It Was Fashionable."

00:10:18.020 | And you wrote that back in 2021.

00:10:20.980 | And it talks about your trials and tribulations

00:10:23.780 | in the renter real estate market,

00:10:25.700 | buying real estate and as a landlord.

00:10:28.180 | Tell us why you wrote that book

00:10:29.940 | and what were some of the main points of it.

00:10:32.460 | - So I wrote that book because it was kind of fun

00:10:35.620 | and it's illustrated with some humorous illustrations.

00:10:40.620 | So it was, I wrote it to amuse myself,

00:10:44.220 | but also the subtitle is "A Cautionary Tale."

00:10:47.340 | It's the story of the first piece of real estate

00:10:50.460 | I ever bought, which was a condominium.

00:10:52.860 | And it was an unmitigated disaster

00:10:56.100 | from the moment I bought it

00:10:58.300 | until the moment I finally got rid of it.

00:11:00.500 | And in that period of time,

00:11:02.180 | it was my personal residence initially.

00:11:05.460 | And then when, for a variety of reasons,

00:11:08.380 | it was time to move on from there, I was stuck with it

00:11:11.140 | because the condo market in Chicago had crashed.

00:11:14.300 | And so then it became a default rental.

00:11:17.220 | And there are a few worse ways

00:11:19.220 | to get into rental real estate than by default.

00:11:22.780 | So it was, you know, hemorrhaging cash every month

00:11:26.260 | in what I've learned since was called an alligator.

00:11:30.220 | Alligator is a real estate investment

00:11:31.860 | that's eating you alive.

00:11:33.900 | Real estate can be a wonderful investment done correctly.

00:11:37.460 | And if you know what you're doing

00:11:39.020 | and you operate it as a business,

00:11:40.580 | but I cringe at some of the advice that's out there

00:11:44.020 | and this common attitude that it is easy

00:11:47.540 | and that it's a slam dunk, and it's not.

00:11:52.340 | I mean, you know, real estate can be deadly to your wealth,

00:11:56.340 | but if you take the time to learn how to do it properly

00:12:00.100 | and you go into it intentionally looking

00:12:04.980 | at whatever you're buying as an investment

00:12:07.420 | that meets certain financial parameters,

00:12:10.220 | then yeah, that can work out very well.

00:12:13.100 | If you did it the way I did it that first time,

00:12:16.220 | yeah, not so much.

00:12:17.420 | And in my defense, by the way,

00:12:19.860 | I did learn from that experience

00:12:21.500 | and I continued investing in real estate for a little while

00:12:24.500 | and did much better on those things.

00:12:26.900 | But eventually I decided it's just way too much like work

00:12:30.220 | for my taste and I haven't owned investment

00:12:33.740 | in real estate in decades.

00:12:35.660 | - A lot of people become interested in real estate

00:12:39.740 | because they hear that you can get really great returns

00:12:44.540 | from rental properties and that it is a diversification,

00:12:48.500 | which it's true, both of those things are true.

00:12:50.700 | But when I asked them, "So do you want to be a landlord?"

00:12:55.180 | They say, "No, not particularly."

00:12:58.380 | And I said, "Well, okay."

00:12:59.900 | I mean, have you ever been a landlord?

00:13:01.980 | And they said, "No, never have."

00:13:03.540 | How good are you at fixing plumbing?

00:13:06.060 | Not at all, right?

00:13:08.940 | And I said, "Okay, well, you might wanna think twice

00:13:10.700 | about getting into real estate

00:13:12.820 | just because it sounds like it's a great investment."

00:13:15.700 | And there are other ways of doing real estate

00:13:18.100 | through syndicated deals

00:13:19.540 | and you could do real estate investment trust mutual funds.

00:13:22.220 | So I mean, if you really want to be in real estate,

00:13:24.420 | there's other ways.

00:13:25.300 | But I do have these conversations a lot with people

00:13:28.140 | who, in my opinion, when I talk with them,

00:13:30.500 | I don't really think they should be

00:13:32.260 | getting into that industry.

00:13:33.300 | And a lot of them do have to back into it.

00:13:34.980 | Like you said, there's a piece of property

00:13:36.980 | that didn't get sold, usually in a different city,

00:13:41.180 | sometimes in a different state,

00:13:43.100 | and they're trying to manage this piece of property.

00:13:45.860 | And it's just, it can be very difficult to do.

00:13:50.020 | - Yeah, that wound up being exactly my case

00:13:51.900 | with this condo.

00:13:53.100 | I also wound up, for job career reasons,

00:13:57.020 | moving away from Chicago.

00:13:58.380 | So suddenly I owned this thing

00:13:59.820 | that at the time was unsellable.

00:14:01.940 | I couldn't even get a real estate agent

00:14:04.580 | to take the listing.

00:14:06.740 | If you know anything about real estate,

00:14:08.660 | you know that real estate agents

00:14:10.260 | fall all over themselves to take a listing.

00:14:12.540 | But condos in Chicago were so depressed in those days

00:14:16.740 | that they wouldn't even take the listing.

00:14:19.340 | - What you just hit on with the fact

00:14:21.220 | that the market in real estate was so bad

00:14:24.580 | that you couldn't even get a real estate agent

00:14:27.220 | to take the listing.

00:14:28.820 | You know, you write a lot to the FIRE community,

00:14:31.180 | and they're generally younger investors,

00:14:34.740 | people who are, you know, in their 30s,

00:14:37.620 | perhaps 40s, even their 20s.

00:14:39.420 | And they're looking to become financially independent,

00:14:43.100 | not necessarily retire early.

00:14:45.300 | But they hear the stories,

00:14:46.460 | and they've seen only really a bull market in real estate

00:14:49.420 | for the past 15 years after the financial crisis,

00:14:53.260 | and haven't really seen what you saw

00:14:57.020 | where there are real estate markets

00:14:58.900 | where there's no market.

00:15:00.740 | - You're absolutely right.

00:15:03.060 | You know, and of course,

00:15:04.180 | what you typically hear out there

00:15:06.940 | from people touting real estate

00:15:08.900 | is the places in the country where it's done really well.

00:15:12.300 | Obviously, if you bought San Francisco 10 years ago,

00:15:14.900 | you've done well.

00:15:15.820 | If you bought Detroit, you know, not so much.

00:15:19.180 | And there have also been times in history,

00:15:21.820 | like Chicago back in the late '70s, early '80s,

00:15:26.820 | when I had this condo

00:15:28.460 | where the condo market in particular

00:15:30.180 | was just, didn't exist.

00:15:32.740 | Younger people don't necessarily have the experience

00:15:35.580 | or even the awareness that that has happened in the past

00:15:38.900 | and can happen in the future.

00:15:40.740 | - Let's move on to your writing.

00:15:42.340 | You started your blog in 2011,

00:15:45.740 | and it was because you were trying to give your daughter

00:15:50.180 | good financial advice.

00:15:51.980 | But why start the blog, though, to do that?

00:15:53.980 | I mean, couldn't you just hand her a piece of paper?

00:15:56.660 | - Well, handing her a piece of paper,

00:15:59.420 | or more specifically, a series of piece of paper,

00:16:02.540 | was actually the plan.

00:16:04.180 | I had managed to turn her off to all things financial

00:16:07.940 | when she was young.

00:16:09.220 | (laughing)

00:16:10.060 | I just pushed it too hard and too fast,

00:16:12.580 | 'cause it's so important.

00:16:13.580 | You know, if you get this stuff right,

00:16:15.780 | your life is so much better.

00:16:17.460 | It's so much easier.

00:16:18.820 | You have so many more options.

00:16:20.900 | And if you get money wrong in our modern world,

00:16:24.100 | your life is real hard.

00:16:26.900 | So, you know, obviously, like every parent,

00:16:29.300 | I want it the best for my kid,

00:16:31.060 | and I just pushed it too hard.

00:16:33.140 | So I found that she stopped listening to me,

00:16:36.180 | and I had started to write this stuff down

00:16:38.900 | so it would be available to her, even if I wasn't,

00:16:42.420 | at some point in the future

00:16:43.820 | when hopefully she would be able to hear it.

00:16:46.740 | And a friend of mine that I shared it with said,

00:16:49.700 | you know, this is kind of interesting.

00:16:50.900 | You ought to put this on a blog

00:16:52.820 | and share it with your friends and family.

00:16:55.900 | And I'd never actually seen a blog before.

00:16:59.380 | I'd heard of them, so I kind of knew what they were.

00:17:03.100 | But what appealed to me

00:17:04.340 | was not sharing it with my friends and family,

00:17:06.660 | although I did that.

00:17:08.020 | This is a great way to archive this information

00:17:10.540 | in a way that'll be readily accessible to her,

00:17:13.100 | to my daughter when the time comes.

00:17:15.500 | So that's why I chose to put it on a blog.

00:17:17.780 | And I never, never in my wildest dreams

00:17:20.540 | did I think that people who didn't know me

00:17:24.540 | would become my audience for this material.

00:17:27.220 | You know, I sent the link, when I put the blog up,

00:17:30.140 | I sent a link to it around to friends and family,

00:17:32.300 | and of course, none of them cared.

00:17:34.700 | But then, you know, it started to develop traction

00:17:38.180 | with the wider world, and I still am amazed by that.

00:17:43.180 | But it's been a very gratifying journey.

00:17:46.020 | - Well, yeah, your followers,

00:17:47.980 | many of them from the FIRE movement, as I said earlier,

00:17:52.780 | financial independence, retire early.

00:17:55.940 | You and I are alike.

00:17:56.900 | I think that financial independence is so important,

00:18:00.140 | but retiring early, not so much important.

00:18:03.060 | I mean, you're still working, I'm still working.

00:18:05.300 | But, you know, the FIRE movement,

00:18:06.420 | like we said, are a lot of younger people,

00:18:08.660 | and they took everything you wrote, and they adopted it,

00:18:13.060 | or it was already being adopted,

00:18:14.820 | and you just added some fuel to the fire, pardon the pun.

00:18:19.740 | You know, how did they find you?

00:18:20.740 | I mean, all of the people who wrote comments in your book

00:18:25.660 | were all young FIRE enthusiasts,

00:18:29.700 | like Mr. Money Mustache, and so forth.

00:18:32.020 | And they found you, and they started touting you,

00:18:35.780 | and publishing you, or republishing,

00:18:37.800 | and telling people about you.

00:18:39.620 | It must have been interesting for you

00:18:41.260 | to become involved with these young people

00:18:44.180 | when that was all going on.

00:18:45.940 | - Yeah, it's been wonderful.

00:18:48.660 | I now have friendships with many of these people,

00:18:51.700 | and I don't think there are very many people my age

00:18:55.260 | who have friends who are in their 20s, or 30s, or 40s.

00:18:59.140 | So it's been an incredibly gratifying journey.

00:19:01.820 | It's also led to my third book,

00:19:04.140 | which I just finished the manuscript on a week ago,

00:19:08.340 | and that's "Pathfinders."

00:19:10.020 | - Oh.

00:19:10.860 | - We can talk about it later, but if you want.

00:19:13.260 | - Sure.

00:19:14.100 | - But yeah, it's been an incredible journey,

00:19:16.060 | and one that I didn't anticipate.

00:19:17.820 | I think the main driver of the blog developing an audience

00:19:22.540 | was when I started writing my blog,

00:19:25.500 | I started paying attention to some of the other blogs

00:19:28.380 | that were out there, and I came across Mr. Money Mustache.

00:19:31.660 | And I liked his work, and I would make some comments

00:19:35.660 | on some of his posts, and evidently he liked the comments

00:19:39.540 | because one day he reached out to me,

00:19:41.220 | and he asked me if I would do a guest post on his blog.

00:19:45.260 | And to give you an idea of how ignorant I was

00:19:48.700 | of blogging and the whole concept,

00:19:51.020 | my initial reaction to that was, I didn't say this to him,

00:19:54.000 | but I'm thinking, "Of course not.

00:19:56.100 | "If I'm gonna write a post, I'm gonna put it on my blog.

00:19:58.720 | "Why would I write a post and put it on your blog, right?"

00:20:02.580 | I know that displays an appalling level of ignorance,

00:20:04.940 | but there you go, and that's where I was.

00:20:07.940 | But finally, I reached out to him.

00:20:09.740 | I said, "Well, what exactly do you have in mind?"

00:20:11.620 | He said, "Well, you know, you're older

00:20:13.580 | "than most of the people reading this,

00:20:15.260 | "and you've already walked the path,

00:20:18.100 | "and maybe just sort of talk about that."

00:20:22.340 | And the title of my guest post was,

00:20:24.540 | "It's Never Been About Retirement," to our previous thing,

00:20:28.460 | 'cause for me, it never has been about retirement.

00:20:31.900 | And I think that guest post, well, I remember I sent to him

00:20:36.900 | and I said, "Is this kind of what you have in mind?"

00:20:40.100 | He said, "Yeah, this is great.

00:20:41.020 | "I'm gonna put it up on Sunday."

00:20:43.660 | And this was probably on a Thursday,

00:20:45.140 | and I emailed him back, said, "Great."

00:20:47.220 | And then Monday, it suddenly occurred,

00:20:49.860 | "Oh, I wonder if Pete ever put it up on his blog."

00:20:53.680 | And I logged onto my blog.

00:20:55.700 | Well, my traffic had exploded.

00:20:57.940 | - (laughs) Okay.

00:20:59.260 | - And then suddenly I realized why it's a good idea

00:21:01.380 | to do guest posts on incredibly popular blogs

00:21:04.260 | if you're offered the opportunity.

00:21:06.580 | But yeah, I think that was the beginning

00:21:08.140 | of my blog getting extended traction in the wider world.

00:21:13.060 | - And then you had more and more followers,

00:21:15.060 | and it grew and grew, and then you decided,

00:21:17.900 | "I had enough material.

00:21:19.980 | "I need to put together a book."

00:21:22.260 | And so what was the idea of this paperback book?

00:21:26.220 | What was the idea of doing that?

00:21:27.460 | - I think the idea behind that was twofold.

00:21:30.340 | One, my overarching goal for all of this

00:21:34.700 | is to have this information available to my daughter,

00:21:37.940 | so I had a lot of this information on the blog

00:21:42.140 | that had kind of developed organically,

00:21:44.860 | and I thought, "Wow, I do have the material for a book,

00:21:48.020 | "and I can pull this book together

00:21:49.540 | "and make it more concise, better organized,

00:21:52.320 | "polish the writing a bit,

00:21:54.420 | "and now I can have a book that I can hand her,"

00:21:59.180 | in addition to access to the blog.

00:22:01.820 | And the other factor was I'd always harbored

00:22:06.100 | an ambition to write a book,

00:22:08.100 | probably since my days of being

00:22:09.700 | an English major at university,

00:22:12.060 | and suddenly I had the subject and the material to do it,

00:22:17.060 | so there you go.

00:22:20.340 | - Yeah, it's great.

00:22:21.560 | Books that are personal finance books

00:22:24.780 | tend to maybe sell, if you're lucky, 5,000 copies,

00:22:28.340 | and you've sold, I know, at least a half a million.

00:22:31.460 | - I never dreamed it would be as well-received as it was.

00:22:35.260 | I was just hoping my daughter would read it.

00:22:37.660 | - So have you sold the movie rights yet?

00:22:39.560 | - (laughs) Well, no, and nobody's offered to buy them.

00:22:43.240 | - (laughs) Okay.

00:22:45.280 | - I hope to sell the movie rights,

00:22:46.620 | 'cause Brad Pitt keeps bugging me to play the lead role,

00:22:50.540 | and I keep telling Brad,

00:22:52.140 | "Just 'cause we look alike doesn't mean you're the right."

00:22:54.500 | - (laughs) Okay.

00:22:58.060 | In preparing for the podcast, of course,

00:22:59.900 | I go back and take a look at all the notes that I took,

00:23:02.600 | and as I started to redo the book again,

00:23:06.160 | I realized I didn't have to go very far.

00:23:08.880 | I mean, you very conveniently put the key information

00:23:13.880 | in the first three pages, which I really appreciate.

00:23:16.860 | - (laughs)

00:23:18.080 | - Do you not want people to read this book,

00:23:20.160 | because all I have to do is read these pages,

00:23:21.960 | and it tells me everything that I need to know.

00:23:23.160 | - Oh, yeah, you just stand in the bookstore

00:23:24.160 | and read for a couple of pages.

00:23:25.780 | - (laughs) Right, I said, "This is not good marketing.

00:23:28.760 | "I mean, you're not supposed to do this."

00:23:30.040 | You know, you're supposed to wait to the last chapter

00:23:31.620 | to find out what the conclusion is.

00:23:33.560 | I mean, as I read through these,

00:23:34.840 | it occurred to me very clearly that your ideas

00:23:39.000 | and the Boglehead's ideas

00:23:40.440 | are very much aligned with everything.

00:23:43.340 | Starting out right from the beginning,

00:23:45.120 | we have this 10 things that make you a Boglehead,

00:23:48.680 | and you can see it on video,

00:23:50.040 | you can see it on the boglehead.org website,

00:23:52.280 | on boglecenter.net.

00:23:53.900 | It's just these 10 things,

00:23:55.240 | and all 10 of those things are in your list.

00:23:57.760 | So we are right in line with thinking.

00:24:01.820 | But the first thing you have,

00:24:02.740 | and I just want to go over a few of these,

00:24:04.060 | and you could elaborate on them,

00:24:06.100 | is there's a few key things

00:24:09.140 | that make you good with money, good with money.

00:24:12.940 | And I think that the very first one you put up here

00:24:15.540 | is spend less than you earn,

00:24:17.880 | invest the surplus, avoid debt.

00:24:20.380 | Now, there's three different things there.

00:24:22.020 | - Right.

00:24:22.860 | - You know, comment on your first point,

00:24:24.880 | and then we can go to other points.

00:24:26.460 | - Yeah, I mean, that's the formula.

00:24:28.960 | And I say in the book

00:24:31.720 | that if you do just those three things,

00:24:34.040 | you'll wind up wealthy,

00:24:35.200 | and not just in money.

00:24:37.280 | You'll wind up wealthy in life

00:24:39.200 | if you live below your means,

00:24:41.520 | invest the surplus, and avoid debt.

00:24:44.160 | And of course, avoid debt is the first step,

00:24:46.480 | and then, but yeah, that's the formula.

00:24:49.080 | - And then put something in here

00:24:50.720 | that needs to be said,

00:24:54.040 | although a lot of people would never say it.

00:24:57.380 | Like, I think the benefit that we have

00:24:58.900 | of being in our Medicare and overage

00:25:02.100 | is that we can say things

00:25:03.140 | and people let us get away with it, right?

00:25:05.680 | (laughs)

00:25:07.100 | But you put here,

00:25:08.980 | avoid fiscally irresponsible people.

00:25:13.300 | Never marry one,

00:25:14.940 | or otherwise give him or her access to your money.

00:25:19.820 | That was brilliant.

00:25:21.700 | I mean, I don't know even today

00:25:23.180 | if I would actually say that,

00:25:24.520 | but I guess I could,

00:25:25.760 | given my advancing age.

00:25:28.460 | But tell us about this.

00:25:30.380 | - You know, so first of all,

00:25:31.700 | I appreciate the comment that it's brilliant.

00:25:33.980 | To me, it just seems painfully obvious.

00:25:37.540 | And the idea that it would be controversial to say it

00:25:40.500 | is, it strikes me as odd,

00:25:43.020 | but you're not wrong.

00:25:44.100 | I have gotten pushback on that very comment.

00:25:48.480 | There was one woman in particular,

00:25:50.100 | I forget what format it might have been,

00:25:53.140 | but on my blog,

00:25:54.100 | or probably was a comment on the blog,

00:25:56.300 | but you know, she said something effective.

00:26:00.140 | You lost me immediately.

00:26:01.580 | You know, the only reason to get married is for love

00:26:04.460 | and money should have nothing to do with it

00:26:06.940 | or something like that.

00:26:07.780 | She was very incensed.

00:26:10.180 | But of course the truth is that

00:26:11.940 | if there are problems in a marriage,

00:26:14.060 | money is the most often,

00:26:15.980 | the most common of all causes of that.

00:26:19.060 | If you and your spouse are not on the same page

00:26:21.980 | when it comes to how you spend and invest your money,

00:26:25.000 | it's going to be an incredibly difficult path.

00:26:28.460 | And if God forbid,

00:26:29.780 | you're married to someone who squanders your money,

00:26:34.220 | that's a leaky bucket.

00:26:35.420 | You're never going to be able to fill.

00:26:36.900 | I said it, I stand by it.

00:26:38.420 | I certainly, it's the advice I give my daughter

00:26:41.860 | and it's the advice I would give anybody.

00:26:43.960 | And, but it's not advice that everybody wants to hear

00:26:48.540 | or agrees with.

00:26:50.580 | The next one is something that I agree with,

00:26:54.060 | even though I am one.

00:26:56.420 | And I've been one for 35 years.

00:26:59.180 | It says avoid investment advisors.

00:27:02.140 | Too many have only their own interest at heart.

00:27:06.440 | And then you go on to say,

00:27:07.340 | by the time you know enough to pick a good one,

00:27:10.500 | you know enough to handle your finances yourself.

00:27:13.020 | It's your money and no one will care for it better than you.

00:27:16.600 | Absolutely true.

00:27:17.660 | I mean, you're not going to hurt my feelings.

00:27:19.580 | Go ahead and tell me about investment advisors.

00:27:21.980 | Well, I think that pretty much summed it up.

00:27:24.260 | You know, one thing I will add is

00:27:26.480 | during that, the big crash in '08, '09,

00:27:30.020 | one of the arguments for investment advisors

00:27:32.780 | that I've heard from investment advisors, not surprisingly,

00:27:36.100 | is that, well, okay, you know, maybe we're expensive

00:27:38.460 | and maybe we're not offering investments

00:27:42.460 | that you couldn't do less expensively on your own.

00:27:45.820 | But, but boy, when the market crashes, you know,

00:27:48.820 | we're going to be the one holding your hand

00:27:50.620 | and telling you to stay the course

00:27:52.180 | and keeping you from making a mistake.

00:27:55.380 | Well.

00:27:56.220 | Absolutely.

00:27:57.060 | Yeah.

00:27:57.880 | You better, you better pay us a lot of money to do that.

00:27:59.700 | But it turns out, at least statistically speaking,

00:28:02.380 | that's not true.

00:28:03.380 | Investment advisors.

00:28:04.420 | Oh, what?

00:28:05.260 | Investment advisors actually panic more readily

00:28:08.420 | than their clients.

00:28:10.060 | I am shocked.

00:28:11.500 | So, yeah, I,

00:28:13.580 | so now I'm going to go a little bit positive

00:28:18.060 | on investment advisors.

00:28:19.180 | If you have a specific issue that you're dealing with

00:28:23.420 | and you want some professional advice,

00:28:26.460 | then an advisor can be useful.

00:28:28.660 | I think you should find one that charges by the hour

00:28:31.620 | and pay for the advice that you want.

00:28:35.100 | That was not a paid advertisement, by the way.

00:28:37.060 | No, not a paid advertisement at all.

00:28:38.780 | (laughing)

00:28:40.180 | I've had a lot of advisors tell me, you know,

00:28:42.620 | JL, this hourly thing is, you know, that's a good idea

00:28:47.020 | and maybe that's best for the clients,

00:28:48.580 | but the clients don't like it, you know,

00:28:51.140 | because they see that when I send them the bill.

00:28:53.580 | You know, if I'm charging them a fee that comes out,

00:28:57.700 | you know, that's, they, it might be a lot more money for me,

00:29:00.140 | but they don't see it and they're more comfortable with it.

00:29:02.140 | No, that's a bunch of nonsense.

00:29:03.540 | So I sort of understand the advisors saying,

00:29:06.780 | well, you know, I can go for this,

00:29:09.060 | I can charge fees that the customer really doesn't see

00:29:12.840 | that put a lot more money in my pocket,

00:29:15.860 | or I can charge an hourly amount

00:29:18.040 | that's less money to the customer,

00:29:19.740 | but that they do see and that they're gonna complain about.

00:29:22.380 | (laughing)

00:29:23.220 | You know, I mean, I can kind of see it

00:29:25.180 | from the advisor's point of view too,

00:29:26.760 | but I'm not writing for advisors,

00:29:29.180 | I'm writing for the clients.

00:29:31.220 | - Well, sure, you're writing for individual investors.

00:29:33.780 | And by the way, I mean, the whole bogal head

00:29:36.780 | is about, you know, individuals managing their own money,

00:29:39.680 | basically, although there are some who will use an advisor

00:29:42.220 | and some who need an advisor for various reasons,

00:29:45.140 | because they need to have a professional

00:29:47.780 | by the trust document or whatever particular document

00:29:52.320 | is driving those investments.

00:29:53.660 | Or maybe they've come of age

00:29:54.980 | where they can no longer manage their own portfolio,

00:29:57.900 | they don't feel comfortable,

00:29:58.900 | there might be some cognitive decline there,

00:30:01.200 | and they're worried about their spouse

00:30:02.980 | or their family managing the money.

00:30:04.540 | So they find an advisor that is reasonably priced,

00:30:08.220 | maybe a flat fee advisor who'll manage the money

00:30:10.460 | for a low fee, you know, using the same ideas that they have.

00:30:14.020 | So, and most people probably listen to this podcast

00:30:16.660 | are gonna do it themselves,

00:30:17.580 | but there are reasons why people hire an advisor,

00:30:21.140 | but they do need to look for the one that fits their need.

00:30:25.700 | - Right.

00:30:26.700 | - Let me go on to the next thing.

00:30:28.740 | You own the things you own, and they in turn own you.

00:30:33.740 | Now, a lot of people talk about boats,

00:30:35.860 | but I think you're talking about a lot of things.

00:30:38.100 | - Right.

00:30:38.940 | - Could you elaborate on that one?

00:30:39.900 | - Owning things takes time and energy.

00:30:42.380 | And the more things you own,

00:30:44.820 | the more of your life they occupy.

00:30:48.060 | And, you know, the title of my book

00:30:50.420 | is "The Simple Path to Wealth."

00:30:52.900 | I believe in simplicity in life, you know,

00:30:56.100 | in organizing my finances the way I have.

00:30:59.460 | When I pass on, it will be a lot easier

00:31:03.020 | for my wife and my daughter,

00:31:05.980 | because I don't have a multiple houses.

00:31:09.980 | I don't have boats, I don't have all this stuff.

00:31:13.620 | I had a friend of mine who was a client of mine,

00:31:16.540 | actually, back in the day.

00:31:17.740 | And, you know, he liked to go out

00:31:20.020 | and to pick things and buy things.

00:31:23.180 | And he had a barn that was just full of stuff

00:31:26.860 | that he'd found and bought and stored.

00:31:29.220 | And I remember I said to him at one point,

00:31:31.260 | "Do you ever sell any of this stuff?"

00:31:34.180 | And his reply was, "Theoretically."

00:31:37.260 | And I said, "What's going to happen when you die?"

00:31:40.580 | By the way, he has passed away since.

00:31:42.220 | "When you die," I said,

00:31:43.340 | "Well, you know, what's your wife going to do with this?

00:31:45.780 | What are your kids going to do with it?"

00:31:47.380 | He said, "Well, that's their problem."

00:31:49.260 | But it is a problem.

00:31:50.860 | I mean, so, yeah, I just, you know,

00:31:54.380 | I want my life as simple as unencumbered as possible.

00:31:57.820 | Now, having said all that, I mean,

00:32:00.140 | I know people who own lots of stuff,

00:32:04.020 | and as far as I can tell,

00:32:05.460 | are perfectly comfortable with that arrangement.

00:32:09.420 | You know, it doesn't seem to bother them at all.

00:32:12.980 | Maybe they, I don't know, I don't know how they do it.

00:32:16.000 | It would drive me up the wall.

00:32:18.500 | But yeah, I think that, you know, when you own things,

00:32:21.580 | then they're part of your life,

00:32:23.700 | and they wind up owning you.

00:32:26.340 | - So I saw a cartoon recently,

00:32:28.740 | and it was a picture of an older gentleman

00:32:33.460 | standing in front of a storage unit,

00:32:35.820 | and the storage unit was open,

00:32:37.420 | and all of this junk was in the storage unit.

00:32:41.260 | You know, broken lamps and, you know, paper, books,

00:32:43.980 | all this stuff's flowing out of the storage unit,

00:32:48.160 | and it's clearly just junk.

00:32:50.300 | And he's talking to his son, and he says to his son,

00:32:53.480 | "Someday, son, this will all be yours."

00:32:57.180 | And this is the look on the son's face

00:33:00.220 | as he's looking at all this.

00:33:02.020 | - You can have all of this stuff when you're alive,

00:33:04.900 | but please get rid of it before you die,

00:33:07.900 | because it's gonna end up,

00:33:10.540 | you're just creating a real mess

00:33:12.820 | for whoever has to clean up your estate.

00:33:14.860 | - Yeah. - Very good.

00:33:17.780 | Anyway, all right, next thing.

00:33:19.740 | You put in here savings rate,

00:33:21.980 | and you talk a lot about savings rate in your book.

00:33:25.200 | And you wrote, "Try saving and investing 50% of your income

00:33:31.200 | with no debt.

00:33:34.600 | This is perfectly doable."

00:33:36.180 | And I'm assuming you meant 50% of your after-tax income.

00:33:39.600 | You put down, "The beauty of a high savings rate

00:33:42.520 | is twofold.

00:33:43.760 | You learn to live on less, even as you have more to invest."

00:33:48.240 | Yeah, so comment on a high savings rate

00:33:50.800 | and the extra benefit of a high savings rate.

00:33:53.500 | - So, first of all, this is another thing

00:33:57.400 | that I get a lot of pushback on.

00:33:58.960 | I mean, I've had people say

00:34:00.720 | that I don't put any credence in this book,

00:34:02.920 | "The Simple Path to Wealth."

00:34:04.160 | You know, he lost me the moment he said, "Save 50%."

00:34:07.160 | Nobody can possibly save 50% of their income.

00:34:12.120 | So there is a contingent of people

00:34:14.240 | who come across that idea

00:34:15.880 | and just dismiss it out of hand as being impossible.

00:34:20.020 | By the same token, especially in the fire community,

00:34:24.120 | I have people routinely say to me,

00:34:27.000 | "50%? That's way too low.

00:34:30.040 | I saved 60, 70, 80%, you know?

00:34:33.280 | I mean, you're setting your sights way too low, JL," you know?

00:34:37.140 | (laughing)

00:34:38.000 | So it's certainly, 50% is absolutely doable.

00:34:43.000 | I've done it.

00:34:44.040 | There are lots of people who tell me

00:34:46.600 | that it's much too modest

00:34:48.420 | because they're doing something

00:34:50.080 | considerably larger percentage.

00:34:54.740 | It's just a matter of how you organize your life.

00:34:57.480 | And, you know, when I got out of college

00:35:00.160 | and I got my first professional job in the '70s,

00:35:03.520 | I was making $10,000 a year.

00:35:06.520 | And I thought to myself,

00:35:07.440 | "You know, there are people out there

00:35:08.880 | living on $5,000 a year,

00:35:10.480 | and there's no reason I can't do that."

00:35:12.960 | And that's what I did.

00:35:14.640 | And I had a perfectly good life doing it,

00:35:18.120 | not as extravagant as some of my friends

00:35:20.220 | who were spending all their money.

00:35:22.120 | But it was, I had a great young adulthood,

00:35:25.980 | and then I invested the rest of it.

00:35:29.540 | And then as my income grew, you know,

00:35:31.220 | and I was making $20,000,

00:35:32.740 | now my lifestyle had also doubled

00:35:35.620 | because I'm spending 10 and my investments doubled.

00:35:39.140 | So I think 50% for me is the sweet spot.

00:35:43.980 | But, you know, again, I get it from both directions

00:35:46.660 | that, you know, nobody can do that at all,

00:35:49.740 | and nobody should only save 50%,

00:35:52.760 | they should be saving much more.

00:35:54.120 | So I'm caught in the middle.

00:35:57.000 | - Okay, so I'm going to deviate a little bit from this list

00:36:03.120 | and talk about how much is enough.

00:36:07.720 | So you're saving 50%, it's accumulating,

00:36:10.200 | you're putting it in index funds, it's growing.

00:36:12.880 | You know, you're reaching this FI,

00:36:15.800 | financial independence stage,

00:36:17.600 | but how much is that?

00:36:20.620 | - Well, that's a very individual thing.

00:36:23.780 | So as you mentioned, as you know,

00:36:26.180 | when you're talking about the savings rates,

00:36:29.040 | one of the beauties of having a high savings rate

00:36:32.260 | is you learn that you're living on less

00:36:34.620 | and you figure out, at least I did,

00:36:37.380 | that you can have a very enjoyable life.

00:36:40.920 | Let's say you're making $100,000 a year.

00:36:43.140 | So you're spending $50,000,

00:36:45.700 | you can have a very enjoyable life spending 50,000.

00:36:49.280 | I did back in those days.

00:36:50.860 | And that also means that 50,000 is now,

00:36:56.100 | if you want to continue having that same life,

00:36:58.420 | that's the amount of money you need in retirement.

00:37:01.700 | And it's a whole lot easier, of course,

00:37:03.820 | to have enough money to generate 50,000

00:37:06.660 | than it is 100,000.

00:37:08.260 | The basic formula is what's come to be known

00:37:11.280 | as the 4% rule, which says,

00:37:13.500 | if you have enough money that you can live on 4% of that

00:37:17.500 | drawn each year, then you are financially independent.

00:37:20.740 | So if you have a million dollars

00:37:22.140 | and you can live on 4%, which is 40,000,

00:37:25.460 | you have enough, you're financially independent.

00:37:27.680 | Or you turn the math around and you say,

00:37:30.700 | well, I'm living on 40,000, how much do I need?

00:37:33.900 | You multiply that by 25, you get a million.

00:37:37.060 | It's the same thing.

00:37:37.940 | So that's the basic formula.

00:37:40.180 | - Let me ask you about Social Security.

00:37:44.020 | I'm not taking it yet, but you are there

00:37:49.660 | and you're married,

00:37:50.500 | so your wife is getting Social Security also,

00:37:52.940 | either on her own or a spousal benefit.

00:37:55.980 | I believe Social Security is going to be around for us,

00:38:00.980 | who are Medicare age and older,

00:38:03.960 | but a lot of young people have a belief

00:38:07.140 | that it won't be there.

00:38:08.900 | It's going to be non-existent.

00:38:11.820 | Everything that we paid in is just going to be a tax

00:38:15.060 | or it's going to get cut so considerably

00:38:17.100 | that I can't even factor it into my retirement program.

00:38:21.780 | I think that's a little overstated.

00:38:24.060 | How do you feel about younger people saying

00:38:26.800 | it's not going to be there

00:38:27.900 | or it's not even going to be enough

00:38:30.580 | to make any difference in my retirement?

00:38:32.780 | - So I actually wrote a post about this a number of years ago

00:38:36.980 | and it's a chapter in the book.

00:38:38.560 | So my post had to be before 2016.

00:38:43.060 | And I would say the same thing today

00:38:45.620 | that I said in that post,

00:38:47.580 | which is when I was young,

00:38:50.260 | I also had no confidence that Social Security

00:38:53.240 | was going to be around.

00:38:54.260 | And I invested my money assuming that it wouldn't be.

00:38:58.600 | And if it was, that it'd just be kind of a nice benefit.

00:39:02.780 | Well, now I'm drawing Social Security, as is my wife.

00:39:06.540 | And so obviously it is around.

00:39:09.380 | And I'm surprised candidly at how generous it is.

00:39:13.640 | And you were never intended to live on Social Security

00:39:15.700 | by the way, but we have a pretty modest life.

00:39:19.920 | We do a lot of traveling.

00:39:21.300 | If you pulled that travel off and we have a paid for house,

00:39:26.300 | we'd probably live on Social Security without a problem.

00:39:29.020 | So I'm kind of stunned that it was,

00:39:31.180 | that how generous it is in my retirement.

00:39:35.540 | My advice to young people would be,

00:39:37.580 | and I guess I'm kind of conservative in some ways,

00:39:40.460 | would be to do what I did,

00:39:41.820 | which is to invest assuming

00:39:45.220 | that it's not going to be around.

00:39:48.140 | But my bet would be that it will be in some format

00:39:52.340 | because doing away with Social Security

00:39:54.660 | would be such a politically different thing,

00:39:57.180 | difficult thing to do because old people vote.

00:40:01.420 | - Oh yes, absolutely.

00:40:02.940 | - And politicians, the thing that politicians care about

00:40:07.140 | is they're keeping their position, their job.

00:40:11.100 | - It's staying a politician.

00:40:11.920 | - It's staying a politician.

00:40:13.060 | And, you know, 'cause those are pretty sweet gigs.

00:40:16.980 | - Yes.

00:40:17.820 | - And most politicians don't want to give them up.

00:40:20.340 | And, you know, if you start talking about doing away

00:40:23.500 | with Social Security or severely cutting it,

00:40:26.540 | even if that's the right fiscal thing to do for the country,

00:40:30.140 | you're going to lose your job.

00:40:31.300 | - Absolutely.

00:40:32.140 | - Or there's a high likelihood of it.

00:40:34.300 | So that means that my guess is somehow

00:40:37.900 | we're going to figure out how to keep Social Security going.

00:40:43.740 | But so my, you know, my advice is,

00:40:45.420 | hey, assume it's not going to be there.

00:40:47.900 | My guess is, like me, when the time comes,

00:40:50.540 | you'll be pleasantly surprised.

00:40:52.740 | - I agree with what you just said.

00:40:54.980 | And I believe that, number one,

00:40:57.300 | for at least for people who are, say, over the age of 50,

00:41:00.280 | Social Security is not going away.

00:41:02.300 | - Oh, absolutely, yeah.

00:41:03.620 | - It may change a little bit, but not much.

00:41:06.020 | There are just way too many people in this country

00:41:08.540 | who that's all they have is Social Security.

00:41:11.500 | So it's not going anywhere.

00:41:13.460 | But for younger people, if you want to calculate in

00:41:17.380 | a 20 or 25% reduction in what you would get today,

00:41:22.380 | I think that's reasonable.

00:41:25.300 | But I work with a lot of young people

00:41:26.980 | and they put down zero, you know, none.

00:41:28.900 | We're not going to get any.

00:41:29.720 | And I think that's, I think that is a little unrealistic.

00:41:32.220 | You are going to get something.

00:41:33.380 | It may not be exactly the generous benefits

00:41:35.740 | that are given today.

00:41:36.980 | And they are quite generous, as you said.

00:41:39.220 | Especially if you have a spouse who doesn't have

00:41:42.580 | a work history and can get a spousal benefit.

00:41:45.700 | It's kind of amazing.

00:41:47.000 | You look at it, I get my regular Social Security

00:41:49.540 | and my spouse who isn't, didn't work enough quarters

00:41:53.620 | to get it herself, she's going to get 50%

00:41:57.020 | of my full retirement amount when she hits

00:42:01.600 | full retirement age.

00:42:02.440 | And I said, "Where does this money come from?"

00:42:04.800 | (laughs)

00:42:05.640 | She didn't put any money in.

00:42:06.560 | I didn't put any extra in.

00:42:08.540 | Where does it come from?

00:42:09.380 | And so it comes from other people.

00:42:11.960 | - If I can make one final comment.

00:42:14.760 | You know, my, and this is probably going to be germane

00:42:18.840 | to the sort of people who will be listening to this podcast.

00:42:22.960 | And it's, and I think it's a little bit of bad news.

00:42:25.960 | My best guess is the way they will solve Social Security

00:42:30.960 | in the future is if you are wealthy,

00:42:36.260 | they will take it away from you.

00:42:39.780 | And so the kind of people who listen to a podcast

00:42:42.740 | like this and who read my book and what have you

00:42:45.180 | are probably going to wind up pretty wealthy

00:42:48.680 | when they retire because these approaches work.

00:42:52.680 | And already, if you look at what Social Security,

00:42:55.920 | what they do with Social Security, and I feel this myself,

00:42:59.400 | if you have been successful in your life,

00:43:02.600 | your Social Security is going to be taxed.

00:43:04.640 | So you're going to give back some of this money

00:43:08.480 | that was your money that was put in.

00:43:11.160 | They're going to take, they're going to confiscate from you

00:43:13.520 | in the form of taxes.

00:43:15.120 | Your Medicare payment will be adjusted

00:43:18.120 | depending on your income.

00:43:20.640 | If you make more money, if you have been successful

00:43:23.760 | and you go into your retirement prosperous,

00:43:27.160 | you are going to pay a whole lot more for your Medicare,

00:43:29.360 | which is taken right out of your Social Security

00:43:31.960 | than otherwise.

00:43:33.680 | And I expect that that's the trend that will continue.

00:43:36.840 | And it could be very likely that people like you and me

00:43:40.880 | 30 years from now hitting their retirement

00:43:44.320 | might indeed have no Social Security

00:43:46.600 | because the law will be written in such a way

00:43:50.280 | that if you are too rich, quote unquote,

00:43:53.800 | then we're just going to keep your benefit

00:43:56.840 | and distribute it to somebody else.

00:43:59.880 | - Well, it already is a tax for many people who are,

00:44:03.160 | let's say, reached the point with the amount of money

00:44:08.160 | they paid into Social Security

00:44:09.600 | and the amount of years that they've paid in

00:44:11.360 | where they're maxed out.

00:44:12.760 | Because it doesn't matter how much you pay in,

00:44:15.240 | there's only a maximum amount that you can get out.

00:44:18.000 | It's like $4,200 a month if you wait till age 70 now.

00:44:22.520 | - That's a good point.

00:44:23.360 | - So no matter how much you put in after that,

00:44:25.440 | it's not going to change how much you get out.

00:44:27.960 | And so it's just a tax after that.

00:44:31.640 | - Right.

00:44:32.640 | - So you're working on a new book, "Pathfinders."

00:44:37.640 | I have to tell you, you have some great titles for books.

00:44:41.320 | (laughing)

00:44:43.880 | "Pathfinders" is something I would just pick up

00:44:46.040 | and start reading because, gee, I want to find my path.

00:44:49.640 | It's like the book, "What Color is Your Parachute,"

00:44:54.240 | when you're looking for your career, right?

00:44:56.160 | It's like just the title attracts you to the book.

00:44:59.280 | And you read the book because the title is so good.

00:45:01.200 | I think "Pathfinders" is a great title.

00:45:03.000 | So I wish you luck.

00:45:03.840 | But tell us what's in "Pathfinders."

00:45:06.640 | - So the subtitle of "Pathfinders"

00:45:09.520 | kind of answers that question.

00:45:10.760 | The subtitle being, "Extraordinary Stories

00:45:13.480 | "of People Like You on the Quest

00:45:15.120 | "for Financial Independence."

00:45:17.280 | Ever since I started writing the blog,

00:45:19.040 | but even more so once "The Simple Path to Wealth" came out,

00:45:23.480 | people have shared with me their stories

00:45:27.160 | about how they've adapted the principles

00:45:29.840 | to their own unique situations and lives.

00:45:34.920 | And I wrote this book, as we mentioned earlier

00:45:37.720 | in the conversation, for my daughter.

00:45:40.240 | Now, my daughter is an American,

00:45:42.320 | and she's at the beginning,

00:45:43.760 | or was at the beginning of her financial journey.

00:45:46.200 | And "The Simple Path to Wealth" kind of reflects that.

00:45:49.480 | But most people who read that book

00:45:52.960 | are not at the beginning of their journey.

00:45:55.600 | They're not in college or about to come out.

00:45:57.960 | Most of them are in their 20s, 30s, 40s.

00:46:01.880 | They've already followed other investment ideas and paths,

00:46:06.600 | or maybe they've gotten themselves into debt,

00:46:08.880 | or a lifestyle they need to unwind

00:46:12.360 | to pursue financial independence.

00:46:17.000 | Many of them, you know, I have an international readership.

00:46:20.160 | So I have a lot of readers

00:46:22.280 | who are not in the United States,

00:46:24.000 | and who have different investments available to them,

00:46:27.920 | and different kinds of investment vehicles.

00:46:30.160 | And I've always been fascinated

00:46:31.800 | at how all these diverse people

00:46:34.240 | with their unique situations

00:46:36.960 | have successfully taken the concepts in that book

00:46:40.240 | and made it work for them.

00:46:42.240 | And so this has been an idea

00:46:46.040 | that has kind of tickled around in the back of my mind

00:46:49.360 | ever since I came out with "The Simple Path to Wealth."

00:46:53.480 | And a year ago, a little better than a year ago,

00:46:56.160 | Harriman House, the publishers of Morgan Housel's book,

00:47:00.360 | "The Psychology of Money," a great book, by the way.

00:47:05.000 | And they were the publishers of that.

00:47:07.480 | And they reached out to me about doing something,

00:47:10.320 | and we started kicking around an idea

00:47:13.360 | that was not quite as fleshed out as what I just described.

00:47:17.600 | It took us some time to get there.

00:47:20.120 | But then they were very helpful in that process.

00:47:22.480 | And so anyway, last year, we came to terms.

00:47:27.480 | And in the spring, I sent out a request

00:47:31.920 | on the blog to my readers and said,

00:47:35.080 | "Hey, we're putting this book together.

00:47:37.840 | "And if you have a story you want to share."

00:47:40.400 | And we got a huge response.

00:47:42.360 | - I saw that.

00:47:43.200 | I saw that post that you made

00:47:45.240 | asking for people to contact you, yeah.

00:47:47.800 | - Yeah, and we got a wonderful response

00:47:50.080 | and some incredible stories,

00:47:51.960 | which we've then edited.

00:47:55.880 | And I think we've done a really good job

00:47:59.360 | of keeping their voice.

00:48:01.200 | Well, editing it for space and content, what have you.

00:48:05.040 | And so it's a collection of just

00:48:08.320 | under a hundred of those stories.

00:48:10.880 | Interestingly, and I'm gonna be putting up

00:48:12.640 | a couple of blog posts come January, samples of these.

00:48:16.640 | We have a story from a guy in Ukraine

00:48:19.840 | that's about how do you stay the course

00:48:22.840 | on the simple path to wealth

00:48:24.280 | when your country's at war and it's been invaded.

00:48:28.160 | And we also have a story from a guy in Russia

00:48:33.040 | who's like, "How do you stay on the simple path to wealth

00:48:35.760 | "and stay the course when your country's become a pariah

00:48:39.320 | "in the international community?"

00:48:42.240 | I'm gonna publish those two stories separately

00:48:44.680 | as blog posts, 'cause they're ripped out of the news,

00:48:49.160 | right, it's just incredible.

00:48:51.360 | And so, yeah, that's what Pathfinders is all about.

00:48:56.040 | Pre-orders are gonna be available in the very near future

00:48:59.440 | and I'll be announcing that.

00:49:01.120 | And then the book itself will come out

00:49:02.960 | in October of this coming year.

00:49:05.960 | Well, that's great.

00:49:07.320 | The book that I've been working on for a long time

00:49:10.560 | is called "A Few Good Funds,"

00:49:12.240 | "The Majesty of Simple Investing."

00:49:14.080 | And I break down the way in which you get

00:49:19.080 | to a simple portfolio, 'cause as having the philosophy,

00:49:23.800 | which is what you write about in your book,

00:49:25.600 | you know, low-fee indexing, so forth,

00:49:27.520 | as having that low-fee philosophy.

00:49:30.880 | But the second part of that is strategy.

00:49:33.880 | And what strategy is is using the philosophy,

00:49:37.520 | as you wrote in your book,

00:49:39.440 | how do you apply it to your situations,

00:49:41.960 | which sounds exactly about what this book is about.

00:49:45.160 | How do you create a strategy based on where you are

00:49:49.840 | and what you have available to you,

00:49:51.680 | say, the person in Russia, the person in Ukraine.

00:49:54.520 | They have very different things available to them

00:49:56.640 | than what we have available to us here in the United States.

00:49:59.640 | So how do you take the philosophy

00:50:01.880 | and apply it to your situation?

00:50:03.600 | And that is your strategy.

00:50:05.200 | And then the third thing is discipline,

00:50:07.240 | which is to stay the course.

00:50:08.360 | So those three things, have the philosophy,

00:50:10.680 | come up with the strategy, and then stay the course.

00:50:13.240 | It's really gonna be interesting to read that book

00:50:16.200 | because it's all about how each one of us

00:50:19.840 | has to come up with our own way or our own path

00:50:23.120 | to get to where we need to go,

00:50:26.000 | but at least you have a north star, you know,

00:50:28.000 | a guiding light to follow this direction.

00:50:31.440 | - The other thing that I find inspirational

00:50:33.560 | about reading these stories is,

00:50:36.160 | and we've talked about this a little bit earlier

00:50:37.880 | in our conversation, you know,

00:50:39.160 | people who say it's just not possible.

00:50:42.360 | You know, normal people can't do this.

00:50:44.440 | And, you know, and then you read these stories

00:50:48.320 | and you realize that it absolutely can be done.

00:50:52.720 | And no, you don't have to be a tech engineer to do it.

00:50:57.720 | People from very modest circumstances,

00:51:00.160 | from very difficult circumstances are able to do this.

00:51:04.880 | And so it just really drives home the point

00:51:08.520 | that there's no excuse other than you don't,

00:51:12.440 | you choose not to do it.

00:51:13.640 | And that's fine.

00:51:14.480 | I mean, if you choose not to, you know,

00:51:18.520 | to move towards financial independence,

00:51:21.240 | it's your life, it's your money,

00:51:22.640 | and that's, I have no problem with that choice.

00:51:25.440 | If you tell me it's not possible to do it,

00:51:28.560 | I have a problem with that assertion

00:51:30.160 | because it's absolutely possible.

00:51:32.680 | And I can guarantee that anybody who says it's not possible,

00:51:37.440 | there's somebody who has a much more difficult road than you

00:51:41.520 | who is currently doing it or has done it.

00:51:43.720 | - So one last question,

00:51:46.040 | and this has to do with passing it on.

00:51:50.240 | You know, we at the Bogle has a very big on education.

00:51:54.240 | That's a nonprofit organization.

00:51:57.600 | We are trying to educate people.

00:52:01.560 | And a lot of times,

00:52:02.960 | parents are trying to educate their children

00:52:06.960 | or aunts and uncles are trying to educate

00:52:10.720 | their nieces and nephews,

00:52:12.280 | and they're trying to introduce them to this idea.

00:52:16.600 | And it's difficult, right?

00:52:19.440 | Because they don't want to listen to you

00:52:23.440 | or they have other things on their mind,

00:52:25.440 | or maybe, you know, they just bought Bitcoin

00:52:28.280 | and it went up 5% in one day and they sold it

00:52:30.880 | and this is how you make money or what.

00:52:33.280 | So as the reason, the whole purpose

00:52:36.960 | for your existence on the internet and with the books

00:52:41.720 | is to educate your daughter who did not want to listen,

00:52:44.880 | you know, after a while, heard too much of it.

00:52:47.160 | Could you pass on some advice to the parents

00:52:49.640 | and the aunts and the uncles who are trying to help

00:52:51.440 | their younger generation understand this?

00:52:54.640 | - Oh, you know, I don't feel like I'm qualified to do that

00:53:00.520 | because the whole reason that the blog and the books exist

00:53:05.360 | is because I did such a poor job of that myself.

00:53:09.280 | No, my daughter, my daughter likes to tease me now.

00:53:11.600 | She says, you know, dad,

00:53:13.040 | if I had listened to you when I was young,

00:53:15.320 | there'd be no blog, there'd be no books.

00:53:17.840 | He's absolutely right.

00:53:20.400 | If I had been more skilled at delivering the message to her

00:53:24.720 | when she was young so she could listen to it

00:53:27.440 | without being turned off,

00:53:29.240 | then you and I wouldn't be having this conversation.

00:53:31.640 | I would not have started the blog,

00:53:33.800 | I wouldn't have started the books.

00:53:35.120 | So I guess my only advice would be don't do what I did,

00:53:38.960 | which was to push it too hard, too fast.

00:53:42.280 | - Yes.

00:53:43.120 | - One of the things that's very gratifying to me

00:53:44.840 | and is parents will tell me all the time

00:53:47.400 | that they are gifting "The Simple Path to Wealth"

00:53:50.320 | to their kids.

00:53:51.560 | And obviously I'm gratified by that.

00:53:54.360 | I don't know, candidly,

00:53:55.680 | how many of those kids wind up reading it.

00:53:57.920 | What's even more gratifying

00:53:59.320 | is when I hear from young people themselves

00:54:03.320 | who say that they have read the book

00:54:05.960 | and that it resonates with them.

00:54:09.000 | And, you know, you and I talked about

00:54:10.280 | how long it took us to come to indexing.

00:54:12.960 | Well, I'm hearing from people in their late teens and 20s

00:54:16.280 | who have read my work and the work of other people

00:54:20.000 | who are investing in their index funds now.

00:54:24.160 | - Yes.

00:54:25.000 | - At that age.

00:54:25.840 | And I think to myself of all the decades I wasted,

00:54:29.480 | sounds like the decades you wasted,

00:54:31.280 | sounds like probably a lot of people listening to this,

00:54:35.320 | the huge advantage that it's going to be

00:54:38.640 | to these people coming out in their late teens or 20s

00:54:42.240 | who embrace this stuff early

00:54:43.720 | and don't wander through the wilderness

00:54:45.760 | making the mistakes that I made.

00:54:47.480 | So that's what's really gratifying when I hear that.

00:54:51.640 | - J.L., thank you so much for joining us

00:54:53.280 | on "Bogleheads on a Vest."

00:54:54.480 | And we greatly appreciate your insights and your stories.

00:54:57.640 | And you're a wonderful writer and a great storyteller.

00:54:59.880 | - You're very kind.

00:55:00.720 | I appreciate it.

00:55:01.560 | And I'm honored to have been asked.

00:55:03.320 | And it's been a lot of fun chatting with you today.

00:55:06.320 | - Well, thank you very much.

00:55:07.160 | And good luck with the new book coming out, "Pathfinders."

00:55:09.640 | - Thank you.

00:55:10.960 | - This concludes this episode of "Bogleheads on Investing."

00:55:15.040 | Join us each month as we interview a new guest

00:55:17.800 | on a new topic.

00:55:18.840 | In the meantime, visit boglecenter.net,

00:55:21.760 | bogleheads.org, the Bogleheads Wiki,

00:55:24.360 | Bogleheads Twitter.

00:55:25.560 | Listen live each week to Bogleheads Live on Twitter Spaces,

00:55:29.000 | the Bogleheads YouTube channel,

00:55:30.520 | Bogleheads Facebook, Bogleheads Reddit.

00:55:33.480 | Join one of your local "Bogleheads" chapters

00:55:36.360 | and get others to join.

00:55:37.720 | Thanks for listening.

00:55:38.720 | (upbeat music)

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00:55:43.920 | (upbeat music)

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00:55:49.120 | [BLANK_AUDIO]

Bogleheads® on Investing Podcast 053: JL Collins on the simple path to wealth, host Rick Ferri

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