[00:03:02] JL Collins: Yeah, so I, mean, you characterize him well he’s a a wonderful comedian and a great commentator on our life. If you’ve ever seen him perform live, it’s amazing. I had the privilege to see him and also to hang out with him backstage afterwards, and I said to him at the time, with absolute sincerity, I don’t think I’ve ever seen anyone, or very rarely.

[00:03:25] JL Collins: Do anything with as much mastery as he commands his work in the stage and his audience absolutely loves him for with good reason, but we got to know each other. I wanna say last spring, if my timing’s correct, I didn’t know much about him. I knew who he was and I’d seen some clips of his work and I like those.

[00:03:46] JL Collins: Last spring, he was guest hosting The Daily Show for a week, and one of his guests was Kevin O’Leary, and he was giving Mr. O’Leary a kind of a hard time. And at one point in that interview O’Leary kind of got his back up and he said something like, so you’re saying that when I go into schools I shouldn’t tell them about money and investing and what have you?

[00:04:07] JL Collins: And Hasan says, oh no, absolutely, you should. You should tell them to read the Simple Path to Wealth by Jl Collins and not listen to anything else you say. And I wasn’t watching that program at the time, but of course that led my social media up like crazy. And so I saw the clip and it was kind of amazing and, you know, very flattering obviously.

[00:04:29] JL Collins: So I tried to figure out how to reach out to him. Thank him.

[00:04:39] JL Collins: And, but he had the week before, you know, stepped away from Twitter. So I reached out to my audience and said, Hey, if any of you know how to reach this guy, please let me know. ’cause I’d like to thank him. And somebody did. And they responded and said, you know, I, this is the woman who used to be his PR agent.

[00:04:59] JL Collins: Number of years ago, I don’t know if she still is, but here’s her contact information. So I sent her a note explaining what I was after. And you know, a go week goes by, I didn’t hear anything, and I thought, okay, that was a dead end and maybe there’s no way to reach this guy. And then out of the blue, I got a wonderful email from Hassan himself and turns out he’s a big fan of my work.

[00:05:20] JL Collins: And so that was the beginning of a beautiful friendship. And as I was thinking about who to have right the forward for Pathfinders and this was developing, I thought this guy is perfect. Because as I had a couple of conversations with him, I realized that he really does know his financial stuff. He really has read my work and is embracing in his own life.

[00:05:45] JL Collins: And so I proposed it to. And to his great credit, he didn’t immediately say yes. And the reason was he, before he agreed, he wanted to get to know me better. He wanted to make absolutely sure that I wasn’t some charlatan, that there wasn’t something that he’d missed in what he’d read in my work and the conversations we had.

[00:06:08] JL Collins: So we had two Skype conversations that were probably two hours long each. Where he absolutely grilled me on all this financial stuff. I think part of it was, you know, he was, he had kind of a private session to sort of clarify his own thinking on it. And I was also impressed with the caliber of questions he was asking.

[00:06:28] JL Collins: But so that was, that sort of cemented the friendship and obviously he agreed to do the forward and I think he knocked it out of the park. I mean, I think it’s brilliant. And part of that is he in the foreword, he calls me a savage. So how could you not love that? 

[00:06:43] Kyle Grieve: So let’s discuss what financial independence means to you.

[00:06:46] Kyle Grieve: As you outlined in Pathfinders Financial independence. Doesn’t mean you also need to retire early, but it gives you so much optionality to do whatever you want. So my question for you is, what’s the biggest benefit for you in being financially independent? 

[00:06:59] JL Collins: You kind of expressed it in the way you framed the question.

[00:07:02] JL Collins: You know, for me, I love the acronym F.I.R.E. Because it’s clever. You know, financial independence retire early, but for me it was never about retirement. I mean, I liked working. I just liked to have what I call F.U money that allowed me to work on my own terms. And so throughout my corporate career, back in the day, I would take periodic sabbaticals.

[00:07:24] JL Collins: Because I could afford to. And so that’s what it meant to me. And it’s that optionality that you were talking about. I’ve had conversations with people who’ve achieved financial independence and they’ll say things to me like, but I don’t wanna have to quit my job. I like it. And I just you know, the point is you don’t have to do anything anymore related about money.

[00:07:46] JL Collins: You can do whatever you want. I mean, if you like your job, then by all means, quit doing your job. That’s what I. By the same token, by the way, occasionally I’ll get people who will say, you know, I’m in this soul-crushing job and when I’m running the numbers, I could retire if I could pull 5% against my portfolio.

[00:08:07] JL Collins: But of course, the 4% rule says you should only pull 4%. So my stuck, and you know, my attitude towards that is, you know, if you’re in a soul-crushing job, if you look at the Trinity study, 5%, a pretty high percent. I would certainly pull the trigger and step away from that soul crushing job. You’re gonna wanna pay attention.

[00:08:27] JL Collins: Obviously, if the market turns against you, you’re gonna want to have to either pull back your spending or go back to work or figure something else out. But so there’s a lot of flexibility even as you get closer to that line of becoming financially independent. And that’s that stage that I refer to as having a few money, which is the accumulation of money that allows you to make bolder choices.

[00:08:49] JL Collins: Before you are fully financially independent based on that 4% guideline. 

[00:08:55] Kyle Grieve: So I know you get some pushback from skeptics saying that financial independence is only for the rich or people with high incomes, but you did a great job highlighting examples of a migrant farmer or even someone in Ukraine right now who is well on their way to financial independence despite not having paying jobs or coming for money.

[00:09:12] Kyle Grieve: So it’s clearly possible. The key, as you pointed out, is that we all must make choices with our money that determine our savings rate and our lifestyle. So for people who aren’t currently in a situation to save as part of their income, where do you suggest people get started on the path to financial independence?

[00:09:28] JL Collins: You just put your finger on the thing I love most about Pathfinders, because you can’t read this book, and I mean, if you read this book, you will never again be able to look in the mirror and honestly say to yourself, this can’t be done. Because there are about a hundred stories in the book, and they range from all different parts of the world and all different walks of life, but many of them are from people who started with major challenges from very humble beginnings who are doing it.

[00:09:59] JL Collins: So you can look in the mirror and say, I choose not to do it, but. And the thing I love about that is one of the pushbacks against the pursuit of financial independence has always been, that sounds great for that elite high-income engineers. You know those kinds of people. But it’s not really applicable to us normal folks.

[00:10:19] JL Collins: And that was never my experience. You know, when I started writing the blog in 2011 and started meet people in this financial. It was not a community of those elites. I just, that was not my experience of it. And so it always kind of baffled me that was the perception of it. And Pathfinders really brings to life the fact that it’s a much more diverse kind of community.

[00:10:45] JL Collins: So it’s long preamble. A, to answer your question, where does somebody start? You know, you have. In order to free up capital to either pay down your debt if you have debt. ’cause that’s job one if you do. And then once that debt is gone, or if you don’t have it, you’re freeing up that capital to invest because that’s how you spend your money to buy your freedom.

[00:11:10] JL Collins: So you mentioned in your question, you know, we all have a limited amount of money, the vast majority of us, and we all get to choose how we spend that money. And there’s almost a limitless range of things you could spend it on. For me, the most valuable thing that I could possibly think of to spend my money on was buying my freedom.

[00:11:35] JL Collins: And you buy your freedom by buying investable assets. I think most people don’t even realize that’s an option, that’s a way they could spend their money. And so instead they spend their money on all kinds of different things. And you know, that’s fine. It’s your money. You can spend on whatever you want, but at least if you read Pathfinders and or The Simple Path to Wealth, you will know that one of the options that you can spend your money on is freedom.

[00:12:03] Kyle Grieve: So I really liked how you you had a story in Pathfinders at one of your to talk was where it’s carrying on exactly what you were just saying. That one of your guests had said that the idea of saving just feels like deprivation. You came up and said that you spend all of your money, it’s all, but it all goes into into your savings rather than buying, you know, trinkets.

[00:12:22] Kyle Grieve: And I really like the way you reframe that because you know, it’s not something, I don’t think most people think that way and that’s why they think it’s so hard to save, but. What are I’m interested in knowing some other common complaints that you’ve observed about specifically saving and how you reframe the problem to help them overcome them.

[00:12:38] JL Collins: I don’t, you know, I think most of the people that I interact with have made the decision at this point that, yes, this is something that they wanna spend their money on. The story you were referring to was really in my conversation with her. Really also altered my way of thinking about it.

[00:12:58] JL Collins: ’cause I always thought the way I think most people do that, you know, the money that I was saving investing was money that I wasn’t spending. And if you think about it in those terms, then it has a tendency to begin to feel like deprivation. And that’s the way she was seeing it. And that’s the way she felt about it.

[00:13:16] JL Collins: It.

[00:13:21] JL Collins: Purses or dinners out, or it was, you know, the money she was saving was depriving her of spending that and being able to spend that money. And that’s when that little epiphany hit me that no, it’s just another way of spending your money. And I think, I do think that’s a very useful framework because when you realize, as I said a moment ago, that you making decision about how you money.

[00:13:49] JL Collins: You realize that spending it on investments, buying your freedom is just one more of those, then I think you can make the choice in a more rational way. So you think about it this way, if you’re, you are looking to buy a car and you say, wow, I could buy a Cadillac and then I could be driving around in this fancy car and people will look at me and admire me and life will be good or buy a Chevrolet.

[00:14:13] JL Collins: And probably nobody’s gonna be all impressed that I’m driving around a Chevrolet, but it’ll still work and gimme where I need to go. And if I buy the Chevrolet instead of the Cadillac, I’m gonna have a whole bunch of money left over that I can spend on other things. So I think that’s kind of a thought process that people go through on a pretty regular basis.

[00:14:33] JL Collins: And so if you about it that way and you just put. The idea that in addition to Chevrolets and Cadillacs and wardrobes, one of the things you could buy is your freedom, then maybe that helps. 

[00:14:46] Kyle Grieve: So you had a very simple investing framework that you recommend to anyone looking for a financial independence, which is to save a large percentage of your income and put it away into a low cost index fund like VTSAX.

[00:14:58] Kyle Grieve: But many people mess it up because they try to overcomplicate things. What are some of the most common mistakes you see with people who have their savings dialed in but aren’t doing so hot on the investing side of things? 

[00:15:09] JL Collins: So one of the things I’ve come to realize since I started the blog in 2011 is you know, I write this stuff for my daughter, and my daughter’s not interested in financial things, right?

[00:15:21] JL Collins: But she’s smart and she knows that it’s important, so she wants to know enough to get it right. She can put it on autopilot, and she appreciates that if you get money right, your life becomes so much better. So much easier. There’s so many more options that open up to you if you get money, right? So she wants that as I would think most people would want that.

[00:15:45] JL Collins: But as she said to me once, when she came home from college, she said, dad, I understand that it’s important. I just don’t wanna have to think about it all the time. And that was an epiphany for me. So that’s who I’m writing for. And that’s the simple path is laid out for that. Kind person. The nice thing about it is not only is simple bath symbol for people who really don’t wanna spend a lot of time thinking about it, but is also the most powerful way.

[00:16:12] JL Collins: Now I’ve come to realize that I do have a large portion of my audience that fits that profile, but it’s a financial blog and I write financial books. And so not surprisingly I attract readers that are really into financial stuff, kinda like I am, like I presume you are. And of course, those people are the ones who are always saying, you know, JL, the simple path of wealth is great and its foundation, but if you just tinkered with it this way.

[00:16:41] JL Collins: You could get a better result or if you tinkered with it this other way or you know, and people are gonna tinker, I guess, regardless of anything that I say, but I’d be willing to bet that my daughter who’s not gonna take her with it ’cause she’s not interested over the course of 20, 30 years, is gonna come out far ahead from those people who tinker with it, regardless of how they choose to take her.

[00:17:05] JL Collins: Because investing is one of the very few things that, a couple things right. The less you tinker with it, the better you will do. And that’s very counterintuitive because in every other aspect of our life, the harder you work at it, the better you get. The more podcasts you do, the more skilled the podcaster you are.

[00:17:23] JL Collins: That’s not necessarily true with investing and that’s hard to wrap our heads around.

[00:17:29] Kyle Grieve: Yeah, exactly. It’s interesting because like you said, you know, there, there just, there aren’t that many pursuits. Like investing where doing as little as possible gives you the best possible results. You know, if you are a surgeon, you know, and you’re doing surgery, you can’t just not do anything and succeed.

[00:17:43] Kyle Grieve: It makes no sense. 

[00:17:45] JL Collins: You’re always learning. You’re always, there’re always new techniques you have to absorb. Yeah, absolutely. But investing, that’s the beauty of the symbol path. If you understand a few basic principles. And you understand the couple of tools that is the things that you need to invest in.

[00:18:01] JL Collins: And then you implement that and put it on autopilot with automatic investing. And that guy then, and you’re done, you know, at that point don’t do as, as Jack Bogle. The guy who created index funds and the founder Vanguard once famously said, don’t just do something. Stand there. 

[00:18:17] Kyle Grieve: I love that Jack Bogle quote.

[00:18:19] Kyle Grieve: So you mentioned VTSAX very often as your favorite index fund, so I’m interested in knowing why do you think this is the best index out there for investors who are in search of financial independence? 

[00:18:32] JL Collins: VTSAX is a, an index fund that’s invested in the total stock market. And you know, there are index funds these days that invest in almost anything you can imagine.

[00:18:43] JL Collins: So when I talk about index. I’m talking about low-cost, broad-based stock index funds and sometimes bond index funds. And I prefer a total stock market index fund. An S&P 500 index fund is just as good. So frequently people who are looking at their 401k, for instance, will say things like, you know, I can’t find VTSAX or a total stock market index fund, but there is an S&P 500 index fund.

[00:19:11] JL Collins: Is that okay? And I mean, it’s perfect. The truth is that because index funds invest in a cap-weighted fashion, which means that the bigger the company, the bigger percentage of the index it represents, you know, the S&P 500 is, I wanna say eighty-plus percent of VTSAX inherently. So the two are very similar.

[00:19:35] JL Collins: But I like the little extra. It is like adding Tabasco to your food, right? The little extra spice of mid-cap and small-cap companies. So that’s why I prefer it. I personally invest in VTSAX and I, and my daughter does now too, because that’s Vanguard’s Total stock Market Index Fund. Now to be clear, a total stock market index fund or an S&P index fund is the same regardless of what investment company you buy it from.

[00:20:05] JL Collins: So if you prefer Fidelity for some reason and you wanna buy their total stock market index fund, I can’t think of the ticker for that offhand. That’s fine. I get that question all the time. Same thing with the S&P or TRO Price, or Swab or whatever. I prefer Vanguard because they’re the OGs. They’re the ones that created indexing.

[00:20:27] JL Collins: It’s in their DNA. And Vanguard is the only investment company out there that is structured so that its interests and the interests of its investors are perfectly aligned. We can go into detail about that, why that is if you want, but, so that’s why I prefer Vanguard and because I prefer Vanguard. I’m in VTSAX.

[00:20:48] Kyle Grieve: So yeah. You just mentioned the alignment of incentives, so can you please go over that in some more detail for me in the audience? 

[00:20:55] JL Collins: When Bogle was creating Vanguard he set it up so that the people who invest in the funds are actually the owners of Vanguard. So if you draw a contrast with in any other investment company, you look at Fidelity, for instance, which is a privately held company.

[00:21:16] JL Collins: The owners of fidelity are the individuals, mainly the Johnson family who own that company, right? And the investors are their customers. T. Rowe Price is a publicly traded company. So the owners of T. Rowe Price are the shareholders. And again, the investors are their customers. So those companies have two masters to serve.

[00:21:42] JL Collins: They certainly wanna do a good job for their investors, so their investors keep coming back with. But primarily they wanna drive profits into the hands of their owners. Okay? Now that’s, there’s nothing wrong with that. In fact, that’s the way most businesses are organized, that you look at Apple Computer that’s exactly the same thing, right?

[00:22:03] JL Collins: Apple’s a publicly traded company, apple is, has to serve two masters. It’s owners, the shareholders, which by the way, if you own BTSEX, you’re owning Apple. So I’m in favor of that. And of course they want to, they wanna serve their customers, so they wanna deliver the best products they can at competitive prices to their customers.

[00:22:25] JL Collins: So their customers keep buying, but they do have to serve two masters. Bogle’s brilliance was that the customer base, the investor and the owner’s become one and the same. So Vanguard has no incentive. To increase expenses and therefore profits for the owners, because that’s just taking it out of one of their own, the owner’s pockets and putting it in another, in a taxable way, which is not ideal.

[00:22:55] JL Collins: And by the way, this is one of the reasons that Jack Bogle when he passed away was not a multi-billionaire. He was worth million dollars, which is a.

[00:23:08] JL Collins: It’s a fraction of what he could have done if he’d organized this company in a less advantageous way for US investors. So I, that’s one of the many reasons that I’m prefer Vanguard. 

[00:23:21] Kyle Grieve: I want to look under the hood of index funds in general and pretend someone can’t buy VTSAX for whatever reason. I mean, you mentioned 401k.

[00:23:30] Kyle Grieve: I’m in Canada, so I’m, I would have to buy a different ticker symbol, but let’s say that they just don’t have access to it at all. What exactly should they be looking for in an index fund to help compound their wealth? 

[00:23:41] JL Collins: As I say, index funds are when Bogle first created them. The first one he created was an index 500 SP 500 index fund.

[00:23:51] JL Collins: Now you can get an index fund that tracks almost anything. You can get a, an index fund that buys gold related companies or tech or, you know, it’s in I don’t, I’m not in favor of any of those. So when I talk about index funds, as I think I said a little bit earlier, I’m talking about broad based, which means going across a stocks.

[00:24:19] JL Collins: Because of course the lowest cost ones are affect the broad-based ones and cost matters. Again, as Bogle once said, performance comes and goes, but costs are forever. So that’s what you’re looking for. And I mentioned the ones that are available in the US because I’m an American. There are equivalents in a lot of markets, so a lot of markets, you’re, your other world markets, you’re able to buy things like VTSAX or S&P 500, but not always, but they tend to have something along those lines, and you can most easily identify it because it will probably be called an index fund of some.

[00:25:04] JL Collins: I wanna say VTSAX at the moment is, the ER expense ratio is 0.04 or maybe even 0.03% now. So that’s down to where you wanna be, that’s what you’re kinda looking for. 

[00:25:23] Kyle Grieve: It’s funny I remember when I was like literally just a kid and my mom kind of instilled in me to save for RSPs and so I saved my, so it was a little bit of money each month for RSP, and then I would put it into, it was always a bank mutual fund.

[00:25:35] Kyle Grieve: I had no idea about anything that I know now. I wish I had, ’cause I’d have a lot more money. And then you’d look at the expense ratio and it’d be in the tiniest writing at the very bottom, and it’d be like, you know, 1.4% and you’d be like, oh you know, that’s nothing. But once you break that down into how much money that can be over decades, it makes a huge difference.

[00:25:53] Kyle Grieve: Like even just going from 1.4 to, like you said, with the Vanguard funds of 0.04%. I mean, it’s a huge difference.

[00:26:01] JL Collins: I mean, it’s, it is stunning. And I, you know, as you say, and there are people who have done this, who extrapolate out what that drag means long term on your performance. And there are people who’ve done it better than I have.

[00:26:14] JL Collins: So I haven’t, you know, I haven’t duplicated that, but it’s worth seeking out. But it’s just, it is incredible. And any normal person is gonna say, you know, 1.4%, that’s nothing. I mean, that’s cheap, but it’s not. So maybe the easiest back pocket way to think about how enormous that really is if you think about the, what’s called the 4% rule, right?

[00:26:39] JL Collins: So the 4% rule suggests that you can take any given portfolio and you can pull 4% a year out to live on, and you can expect that portfolio to have a very good chance of lasting for 30 plus years, right? So you get to spend 4%. Now suddenly, if you think about that expense ratio of 1.4%, you know, now suddenly you realize that over 25% of your annual income is going to pay that expense ratio.

[00:27:12] JL Collins: So instead of having 4% to live on, you’re now living on 2.6%. That’s a big difference. If you look at it in that fashion, you know, if you’re pulling $10,000 a year, what does that come to? Anyway I’m confusing myself with the math but yeah, you’re not it’s a big deal. And of course, 1.4 doesn’t sound like a lot.

[00:27:34] JL Collins: But anybody who looks at and compares it to a zero four, you know, you realize well, it far, it’s a multiple what? You should be vague. 

[00:27:47] Kyle Grieve: I really enjoyed your views on dollar cash averaging concerning investing a lump sum of money. So the basics are that the market goes up approximately seventy-seven percent of the time.

[00:27:56] Kyle Grieve: So if you have cash waiting on the sidelines to attempt to time the market and buy, when it comes down, the odds that you’ll get more money in at a cheaper price. They’re only twenty-three percent. So since this is the Millennial Investing Podcast, and many of my listeners are millennials, they’ll probably be in the wealth building phase that you outlined.

[00:28:13] Kyle Grieve: So I think the audience would get a lot from learning specifically what you would tell a millennial today, who is looking to invest to one day become financially independent? 

[00:28:21] JL Collins: So first of all I would tell them the same thing that I was writing for my daughter in The Simple Path to Wealth, which published in 2016, and that’s investing in the broad based index funds in terms of dollar cost averaging you, you described it pretty well.

[00:28:37] JL Collins: I do make the distinction that I’m talking about. If you come into possession of a lump sum that you wanna invest, right then that’s when you have to make the decision about dollar cost averaging. And as you described accurately, I’m not a fan because the odds favor lump sum investing in terms of getting a good result.

[00:28:58] JL Collins: If you dollar cost average, you’re only gonna come out ahead if over whatever period of time you’ve chosen dollar cost average. The market actually goes down and you get to buy those shares at lower prices. If it stays flat, you’ve just delayed putting your money to work. And of course if it goes up, then you are spending more for those shares each time you buy them.

[00:29:21] JL Collins: But there is a form of dollar-cost averaging that I’m very much in favor of, and it’s the one you can’t avoid and that’s if if your are as you should be taking

[00:29:31] JL Collins: portion of your earned income. Every week, every month, whatever it is, and you are buying your investments with it. Now by definition, you are a dollar-cost averaging. You don’t have the option of putting a lump sum in because you have to. You can only invest as the cash flow comes to you. And that’s a very powerful thing because then you really, not only don’t have to worry about the periodic drops in the market and the market’s a very vaLuable thing..

[00:30:00] JL Collins: But they work to your advantage because whenever the market takes a plunge, which it does on a regular basis, perfectly normal part of the process, that money you’re putting in every month is buying more shares. You’re getting ’em on sale. So that’s a form of dollar cost averaging you can’t get away from.

[00:30:18] JL Collins: And that’s how it works to your advantage. But now you’re talking about something you’re gonna be doing over decades. So my advice to millennials is get started because time, you know, you’re young and time is your friend. When you’re investor you know, the longer you’re in the market, the better the results.

[00:30:36] Kyle Grieve: In your opinion, I think I’m probably gonna know the answer to this, but is there any situation where keeping some cash on the sidelines to deploy into a cheap market is a good strategy? Or is that just over-complicating things? 

[00:30:47] JL Collins: Yeah, I think that’s over complicating things. I think that the time to invest is when you have money to invest.

[00:30:53] JL Collins: The only time I would accumulate cash is if you are planning to spend it in the near future. So for instance, maybe you wanna buy a house and you’re saving for the down payment on that house, and you’re thinking it’s gonna take me five years to save the down payment. Then that should probably be in cash because the market is volatile and when the time comes, if it happens to be in one of its swoons, you don’t wanna have to be selling your shares in VTSAX for your down payment.

[00:31:26] JL Collins: Now, if you’re a little more of a gambler and you’re willing.

[00:31:38] JL Collins: Then you’ll probably get a better return keeping your money in the market or some portion of it. But now you’re kinda, you know, you’re kind of playing the odds. And it depends on how flexible you are about buying the house. You know, if you do that, maybe you wind up buying the house in four years instead of five, or maybe it takes you seven years instead of five.

[00:31:59] JL Collins: Right? 

[00:32:01] Kyle Grieve: So the unfortunate reality is the popularity of paying other people to manage money for you. My immediate family, almost everybody is paying someone else to do it. And even when I break down how much fees, you know, my mom or dad are paying, they just keep doing it. So how do you like to simplify the pitfalls of investment advisors to people who are using them?

[00:32:20] JL Collins: You know, wall Street has intentionally, I think, made investing feel very complicated. And the truth is there are, most of the products sold by Wall Street are indeed very complicated. You know, in the collapse of oh 8, 0 9, you know, famously they created products that they themselves didn’t understand.

[00:32:40] JL Collins: So when people think, man I need to get professional help ’cause this is just too complicated for me, a normal person to, to understand they’re thinking rationally. But what I would like them to understand is all those complicated things that they hear about on TV and maybe they read about in the newspaper, you don’t need any of those things.

[00:33:01] JL Collins: You can put your arm on the table and sweep all that on the floor. All you need are these very simple, low-cost, broad-based index funds, and you’ll outperform all those other things and your life will be a lot simpler, and you certainly don’t need a professional to put you into those. In fact, professionals will tend not to precisely because they’re low cost and there’s not.

[00:33:24] JL Collins: The commissions and fees be to using an advisor is. Then that’s the only time you’re gonna get somebody who’s gonna recommend something like an index fund advisors. Inherently what’s good for the advisor is not often the same thing. That’s good for the investor. And so there’s an inherent conflict of interest, and that requires an advisor to put the needs of his clients ahead of his own.

[00:33:59] JL Collins: And that’s a very difficult thing for humans to do. Because if that advisor, you know, wants to buy a boat or has a child who’s about to go to college or, you know, it’s a very human thing to say you know, my needs are gonna come first. And that’s not what they’re consciously saying. Of course they’re saying this high fee investment is still a pretty good investment.

[00:34:24] JL Collins: So nobody’s gonna care about your money more than you do. And I have a, there’s a chapter in The Simple Path to Wealth about this. There’s a post in my stock series about this. You know, if you need help with your tax returns, then hire a tax accountant. I have one if you need specific kinds of help. But in terms of investing, by the time you know enough to pick an advisor needs you.

[00:34:53] JL Collins: So at the risk of sounding self-serving, I would say before you hire an advisor, read The Simple Path to Wealth and Pathfinders. And then if you read those and you say, no, I still don’t wanna deal with this. Okay, maybe. And even if you have an advisor and you’re thinking about it the last thing I’ll say about this is, you know, when you talk to people or using an advisor, almost inevitably, at least in my experience.

[00:35:19] JL Collins: What they’ll say is yeah, maybe, but you know, old Charlie’s a friend or old Charlie was, he was, he manages my parents’ money and you know, he is a family friend and you know, I, how do I leave old Charlie? I’ve heard this so much. I’ve come to think that, you know, the real skill of investment advisors isn’t financial.

[00:35:42] JL Collins: It’s in or pretending, be somebody’s. And the last thing in my cynical frame of mind that I will share on that is I’ve yet to have anybody who made the decision to step away from their advisor, report back and say, you know, Charlie, he’s still my friend. ’cause you know, the moment you tell your advisor that you’re gonna handle it on yourself, then you’re gonna find out how deep that friendship is from old Charlie’s point of view.

[00:36:11] Kyle Grieve: It’s funny the other thing too I would also add is just that most of these funds, you know, their overall performance is essentially whatever the market gets anyways. But then on top of that, you’re paying more and more fees. So because of that, yeah, literally underperformed the market. So it doesn’t make a lot of sense to invest with with an advisor.

[00:36:30] JL Collins: It really doesn’t. Now, to be clear, there are times when advisors can be useful giving advice, and there are, in fairness, good advisors out there if you feel the need. My advice would be seek one that charges on an hourly basis a fee-based advisor. ’cause then there’s not the inherent conflict of interest.

[00:36:49] JL Collins: So let’s just, let’s think about one potential conflict of interest with even a you advisor. You know, let’s suppose you go to them and you say, you know, I’m thinking about paying off my mortgage. I’m thinking about, you know, maybe taking some of the money I’ve invested in selling those shares and paying off my mortgage.

[00:37:10] JL Collins: What do you think? From the advisor’s point of view, if you do, let’s say your mortgage is half a million dollars. If you do that’s half a million dollars. That is no longer gonna be managed by that advisor. And so if that advisor is charging you 1% a year to manage that money, that 1% a year, which is what $5,000 is gonna go out the door.

[00:37:35] JL Collins: So for that advisor to recommend that you pay off your mortgage is gonna cost him $5,000. That’s the kind of conflict of interest now. You’d like to think your advisor would look at the interest rate you’re paying on the mortgage, look at the investments you’re in and what your goals are and all that thing and advise you in that fashion.

[00:37:55] JL Collins: Hopefully they do, but I gotta imagine for most advisors who’ve got a kid coming up to college or a boat payment or whatever, that loss of income gonna be somewhere in the back of their mind as well. So you’re asking a lot from advisor. 

[00:38:12] Kyle Grieve: So you list 18 aspects of what the worst possible investment would look like in a great article on your site.

[00:38:17] Kyle Grieve: Coincidentally, real estate ticks nearly all of the boxes that you list, and I’ve come to the same conclusion that you do. Many years ago myself, my reasoning was quite simple. The opportunity cost of having a mortgage is way too high when you can rent and invest the same amount of capital. The difference is that your investment will be worth a lot more than your house in a few decades.

[00:38:37] Kyle Grieve: So do you think the reason most parents try to tell their kids home ownership is so important is more of a generational thing? 

[00:38:44] JL Collins: I think it probably is. You know, I think there is, you know, home ownership is sort of the American religion and I, it’s, from what I understand, it’s probably even if anything more the Canadian religion, you guys to home ownership.

[00:38:59] JL Collins: And you look back at my parents generation who went through the depression. Which of course was not a good time for financial assets and home ownership just felt more stable to a lot of people. And if you’re not a saver, an investor, if you’re prone to spend every dime that comes your way on other things, then at least if you have a house, that’s kind of a forced savings plan, so to speak.

[00:39:27] JL Collins: That’s the way it worked for my parents. But it’s not optimal. And I think the post you’re referring to is why your house is a terrible investment. And my basic premise is that houses are not good investments for a lot of reasons. That doesn’t mean you should never own a house. I own a house. I’ve owned houses most of my adult life, but I didn’t own them thinking they were investments.

[00:39:51] JL Collins: You know, I owned them because I easily afford them. And they provided a lifestyle that I wanted. So I think of houses as being expensive indulgences. Now, of course, there’s a huge real estate industry out there that is motivated to convince people that houses are great investments, and that’s the drum beat that you hear all the time.

[00:40:12] JL Collins: And then of course, there are all the stories you hear about somebody who. You know, 30 years in San Francisco and you know, they paid a hundred thousand dollars and now it’s worth 10 million or whatever. And those things I’m sure do exist. You don’t hear the stories about somebody who bought in Detroit and saw their investment get absolutely trashed.

[00:40:35] JL Collins: Now it’s important to recognize, and people will say you know, obviously you shouldn’t buy in Detroit. You should only buy in San Francisco. What I understand, San Francisco is having a lot of social problems at the moment, and I’ve been to Detroit recently and Detroit’s beginning to enjoy a renaissance.

[00:40:52] JL Collins: So who’s to say 10 years from now, you know, the people are pro houses are gonna say of course you don’t wanna buy in San Francisco. Everybody could tell that was about to go downhill. You wanted to buy in Detroit. And by the way, I’m not predicting that necessarily, but Detroit of yesterday might be the San Francisco tomorrow and the San Francisco of tomorrow might be the Detroit of yesterday.

[00:41:15] JL Collins: You don’t necessarily know, and you are making a huge bet on a very specific location. If you wanna live in San Francisco and you can afford a house and you see it as expensive, by all means, if you want to live in Detroit, the same thing. I think I’d be a little more comfortable investing in Detroit at this point in house I the beginning rather teetering at the top.

[00:41:44] Kyle Grieve: So you brought a really good point up there just about how us Canadians love the housing market. And I live in Vancouver where it’s probably one of the worst. It’s one of the worst situations. Yeah. So I actually, I know a couple people in Vancouver who have bought houses as an investment, but I’ve looked into it just running, you know, back of the envelope math.

[00:42:03] Kyle Grieve: And the return is, it makes, you know, short, it makes long-term bonds look really attractive, let’s put it that way. I think it depends where you’re from and what you’re saying, completely rational. I, and I agree, but let’s say you were talking to someone in Vancouver’s market who was looking to deploy some money either for an investment purposes and, you know, they saw that their parents’ house, you know, they bought it in the eighties for 200 grand and now it’s worth 2 million.

[00:42:26] Kyle Grieve: So, outside of the risks that you just talked about with, you know, not knowing exactly what’s gonna happen in the future, what are some other risks that are inherent in property that people should know about? 

[00:42:36] JL Collins: If you invest, if you buy a house, I think you would be hard pressed to find anybody who buys the house and doesn’t begin to renovate it or fix it up in some fashion.

[00:42:48] JL Collins: So when you, what people lose sight of is, and I’ll have people say this to me all the time, my mortgage is the same as my rent, and so why not buy? Okay, I’ll take your word for that, but you know, now you’re also paying real estate taxes. Are you gonna remodel your kitchen? Are you gonna replace the carpeting?

[00:43:07] JL Collins: Are you gonna, does it need a new roof? You know, houses both optional things that homeowners choose to do because one of the reasons people say, oh, I wanna have a house ’cause I wanna make it mine. That’s great. That’s part of the expensive indulgence thing, right? I understand that. The moment you start putting money into that house to make it yours, now it’s a whole lot less.

[00:43:27] JL Collins: Nobody rents an A, says, gee, I’m gonna remodel the. So inherently the apartment is going to be less expensive over time. Again, this is lifestyle decisions, which are fine when you own a house. I’ve done it myself. I’ve remodeled houses, and so that’s great. But it’s not a good way to invest your money.

[00:43:45] JL Collins: It’s, it can be depending on what your desires are. A good way to.

[00:43:58] JL Collins: Spending money to maintain it. You’re always gonna be wanting to spend money to make it more yours and improve it. Which by the way, you know that fancy new kitchen you put in when you wanna sell that house 10 years from now might not be in fashion anymore. Or your taste might not be the taste of the buyers.

[00:44:17] JL Collins: So they may be looking at that kitchen you spent 50 grand on and saying, yeah, this is a nice house, but I gotta rip that kitchen out. So there’s all kinds of things to building is always doing its best to return to dust and if you own energy and preventing. 

[00:44:38] Kyle Grieve: It’s funny because kind of bringing it back into the, comparing it, for instance, with an index fund, right?

[00:44:42] Kyle Grieve: I mean it’s essentially basically you know, you can buy a house, you can, or buy an index fund, let’s just say you can buy those two, but the house is gonna have a massive expense ratio because like you said, you know, you’re not just paying rent as your mortgage. There’s tons and tons of expenses and it, and even if you don’t wanna upgrade it, stuff happens, right?

[00:44:59] Kyle Grieve: You get floods your roof collapses. You know, your toilet stop stops working. I, you know, it’s not it’s not oh, I’m gonna gamble and nothing’s gonna happen. I’m not gonna put a dime to the house. It’s no. That’s not how it works. You’re gonna be spending money, 

[00:45:12] JL Collins: on, on that post you referred to that I have on Why your house is a terrible investment there.

[00:45:18] JL Collins: And that’s the post that’s gotten me the most hate. It’s also gotten me the most love and it’s generated the most comments. One of those comments buried in there. You know, I don’t look at the comments anymore because, you know, it’s been a while, but when it was first out, I paid more attention and one of the comments came from a guy who was, you know, arguing the point, the houses were great and he said, you know, I don’t know what you’re talking about.

[00:45:42] JL Collins: I own my house for 30 years and I’ve never spent any money on it.

[00:45:53] JL Collins: Your house is in. If you’ve really spent 30 years and done no maintenance, no improvements, you know, it’s whatever that, so I think people are a little delusional. I think if you really sat down with that guy and said okay, you know, what do you mean you haven’t done anything? Of course I had to replace the roof back in.

[00:46:18] JL Collins: But if you really spent, if you had a house for 30 years and you genuinely spent no money on maintaining it, then good luck with your resale. 

[00:46:28] Kyle Grieve: So you wrote a wonderful passage about when your daughter was eight and you guys were watching the news together on tv. I think it was about the depression era.

[00:46:36] Kyle Grieve: And you mentioned that you hadn’t been working for the past year or so by choice. She asked you, daddy, are we poor unquote? And you re, you reassured her, everything was okay, but under the surface you were thanking the FU money, which you referenced her a little earlier, that you would worked so hard to save up for in situations exactly like this one, you kind of defined what FU money already is.

[00:46:56] Kyle Grieve: But I was wondering if, I know you’ve utilized it that one time that you referred to when you were with your daughter, but is it something that you’ve used multiple times and I would just be interested in knowing how you’ve used it in the past. 

[00:47:07] JL Collins: Yeah, so that particular story comes from, I wanna say 2002.

[00:47:12] JL Collins: So this was in the aftermath of the tech collapse at the end of the, there was the tech boom in the nineties, and then of course it collapsed. One of the worst collapses we’ve had. And then of course there was 9/11. The attack on the World Trade Centers. And that just drove economy into a tailspin and.

[00:47:33] JL Collins: My career was spent in business to business publishing, and I was group publisher of some tech magazines for the company I was working for. And of course, because they were tech magazines, our business fell off the cliff. I worked for the advanced technology division of that company and the whole division just went from posting a record year to just plundered.

[00:47:53] JL Collins: We all lost our jobs, so I was kicked to the curb and my daughter and I were, she knew I wasn’t working and I’d been outta work probably for a year or something at that point, and we’re watching, and these were hard economic times in general, and the news had the story of other people had lost their jobs and they were standing in basically a bread line, and that’s when she asked me, daddy, are we poor? And it was like, gave me a great idea. I said, no, sweetie. And she said you don’t have you. You know, like those people on TV don’t have a job and you don’t have a job and so how come we’re not poor? And I said we have money that’s working for us.

[00:48:27] JL Collins: Which of course is the whole idea, right? So that was the, I’ve stepped away from a lot of jobs in my career. That was the one time when it wasn’t my choice, you know, and I got kicked to the curb, but I loved working and I, and when I was working, I worked pretty intently, which sounds good and sounds like a humble brag, but the downside of it is it’s that you burn yourself out and it’s, you can’t, at least, I can’t do it consistently.

[00:48:52] JL Collins: So I, I would step away periodically to recharge my batteries. So I would take sabbaticals that having the CEFU money allowed me to pay my bills. And also most often I traveled during those sabbaticals. And that’s how I used it. And it wasn’t enough money that I never had to work again, but it was enough money that I didn’t have to worry about paying the rent or the mortgage in the immediate future.

[00:49:20] JL Collins: And I could afford to do other things. That’s how I used it, and it was very powerful to have, and that’s one of the things I tell people is, you know, it can be intimidating if you’re starting at ground zero and you’re thinking, wow, how do I get to a million dollars? Let’s say that just seems like a long journey.

[00:49:38] JL Collins: And it can be, but you have to understand it’s not an on-off switch. It’s not one day you have nothing, and then the next day you have a million dollars along the way. You keep building what I call your F.U money. And the moment you start on the path, the moment you start saving and investing you, you’re a little bit stronger and then you’re a little bit stronger and a little bit stronger and all until finally you’re fully FI.

[00:50:02] JL Collins: But that strength allows you to make bolder decisions long before you are fully financially independent. 

[00:50:10] Kyle Grieve: So I have one quick question about you, onion. Do you delineate between, you know, your general pot of savings and FU money? Like for instance, I know you referenced earlier if you had an expense coming up, you might just put that in cash rather than keeping it in in an index fund.

[00:50:25] Kyle Grieve: But yeah, I’m just interesting. Do you delineate between the two or is it kind of just, you know, FU money’s kind of just a subset of your general savings? 

[00:50:33] JL Collins: I, no, I don’t delineate. So for me to be clear, for a lot of people, F.U money is the equivalent of being financially independent and I’m not the authority on defining what it is, but just for me, I.

[00:50:48] JL Collins: I choose to see F you money. Is that the money that you are steadily building in the interim from start to full financial independence? So for me, it’s the entire amount of money that I have because you know, if, let’s say you’ve decided you need to have a million dollars to retire, and at some point you’re at a hundred thousand, that’s invested in different ways.

[00:51:12] JL Collins: Maybe some of it’s in VTSAX. Some of it’s in, in a money market fund. That totality is would be how I think of the FU money you have because that’s money you can draw on if you need to pay your expenses while you’re stepping away from trading your labor from money.

[00:51:31] Kyle Grieve: I have a fifteen-month-old son, and I wanna eventually teach him as well about lessons, about you know, savings and compounding his money as well.

[00:51:37] Kyle Grieve: Congratulations. And thank you very much. And I know, like you mentioned that basically everything you’ve done with all this FI pretty much started with your daughter. So I’m interested in knowing what do you like to what would you tell parents about how to help teach their kids, you know, understand the, some of these concepts better.

[00:51:52] Kyle Grieve: And also I’m also interested in knowing at what age do you think it’s appropriate to start teaching them? 

[00:51:58] JL Collins: I probably the exact wrong person on this subject. At the very end of Pathfinders, there’s an interview that Christine Benz of Morningstar does with my daughter and myself.

[00:52:13] JL Collins: So you get to hear from, and of course Jessica’s now a, an adult and she’s on the path, but you get to hear from Jessica how she thinks about all this stuff. But I, you know, I pushed it way too hard, way too soon. And in the process, I managed to turn her off to all things investing. You know, I, in my defense, I did it because if you get money right, your life is so much better, have so many more options.

[00:52:41] JL Collins: And if you get money wrong, your life is so much harder. You know, there’s great irony if you get money right and you begin building your FU money and ultimately come financially independent, you really don’t have to think about money all that much, especially if you’re on the simple path to wealth.

[00:52:56] JL Collins: ’cause your investments are really simple and their automated, if you don’t get money right, and you’re spending every dime that comes to you on stuff and you living paycheck to paycheck. Then you’re, you have to think about money all the time and in the most negative possible framework. So clearly I didn’t want that for my daughter, and clearly I wanted all the options and freedom and the expansion of her life that understanding money correctly could provide.

[00:53:27] JL Collins: So that was why I pushed it so hard. I don’t know what the balance is. It turned out okay because, you know, eventually, you know, she started paying attention, but she will say as she does in the interview, she didn’t really pay attention until she got to college and started seeing all the financial problems that people she was meeting had and the lack of understanding.

[00:53:50] JL Collins: And so then I think she, but my daughter loves to tease me. She says you know, dad, if I’d listened when I was young. There’d be no blog. You know, there would be no Chautauqua, there would be no books, and Kyle wouldn’t wanna interview you. So, and she’s right. So I owe all to the little. 

[00:54:12] Kyle Grieve: So I noticed you just mentioned the Chautauqua and I know that you’re pondering not holding them anymore, but I’m interested in knowing what got you interested in holding them in the first place.

[00:54:20] Kyle Grieve: So I run a mastermind community for TIP and we recently did a book club on Robert Pierce exam in the motorcycle maintenance, which was the first time I’d ever seen that word Chautauqua. So I’m just interested, is that where you got the term or was it somewhere else? And I’d love to know more about that.

[00:54:35] JL Collins: You’re the first person who’s ever mentioned that book in this context. And ask that question. And it is, in fact, and I hadn’t even thought about this, but looking back on it, it was that book where I first came across the word, and I love the word. I mean, it’s a Native American word. It means gathering to discuss ideas and concepts and all that kind of stuff.

[00:54:57] JL Collins: And it was just absolutely perfect for what I want it to do. And it’s just a wonderful word, which is I think why he used it in the motorcycle maintenance. I I started the blog in 2011 and by 2012 it suddenly was developing this audience that was interested in this stuff and I thought, wow, it’d be kind of fun to go out and give talks about this.

[00:55:20] JL Collins: So I started looking around for a venue to do that, and at the time there weren’t any, now there are quite a few in the community, but at the time I couldn’t find anything. And in the summer of, I wanna say it was 2011, my wife and I had gone to Ecuador ’cause we’d never been and just hang out for the summer.

[00:55:37] JL Collins: And we really liked Ecuador. And when I came back I subscribed to a newsletter about Ecuador and there was an ad one day in there for a retreat on happiness that this American woman was putting together and she was living in Ecuador. So I reached out to her and I said, Hey, you know, if you have money, it facilitates the pursuit of happiness.

[00:56:01] JL Collins: And you know, if you ever wanna add a financial aspect to the things you’re doing I’d love to talk to you about it. And she responded and said we’re not actually gonna wind up doing this ’cause nobody’s signing up. And that started a conversation and because of my background, I. You know, when I was listening to her, it became pretty clear to me why people weren’t signing up.

[00:56:22] JL Collins: And the solution to that became pretty clear. And so I flew back down to Ecuador to meet her to see if she was a real person and got to know her a little bit. And while I was there, we hammered out the outline of what became Chautauqua and then conducted the first one in 2013 in, in Ecuador.

[00:56:40] Kyle Grieve: JL, I really appreciate you joining me today. But before we say goodbye, where can the audience connect with you and learn more about you? 

[00:56:46] JL Collins: It is been my pleasure, and I’ve had a blast in our conversation. Kyle probably the easiest thing is to start at the blog. It’s jlcollinsnh.com, and then from there you’ll find links to Pathfinders and Simple Path to Wealth.

[00:57:02] JL Collins: And my my second book, which is How I Lost Money in Real Estate Before was Fashionable. You’ll find, you can find your way to my Twitter and Facebook if you wanna hang out there. And when you send me the link for this interview, I’ll be putting it up on both those places and on the blog.

[00:57:19] JL Collins: So yeah, that’s, if anybody’s interested that’s probably how to go about it. 

[00:57:24] Kyle Grieve: Okay folks, that’s it for today’s episode. I hope you enjoyed the show and I’ll see you back here very soon. 

[00:57:30] Outro: Thank you for listening to TIP. To access our show notes and courses, go to theinvestorspodcast.com. Follow us on TikTok @theinvestorspodcast. On Instagram and LinkedIn at The Investor’s Podcast Network (@theinvestorspodcastnetwork), and X @TIP_Network.

[00:57:48] Outro: This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.