The SImple Path to Wealth - by JL Collins

I liked the book, The Simple Path to Wealth, by JL Collins. The book is slim, with less than 170 pages. That is because the message it gives is a simple one. Its basic theme is:

• Avoid debt.
• Save maximum.
• Invest what you don’t spend.

While I would not hesitate to recommend this book to anyone interested in improving their financial life (who isn’t?), I did find many of the details are aimed at North American readers and would be irrelevant to India. But the underlying concept is universal.

Some of the ideas from the book:

• Treat money as your tool to use in creating the life you want.
• Treat money as your servant.
• Don’t be so obsessed with money that it becomes your master.

• Aim to become financially independent.
• If you live salary to salary, you will not be financially free.
• Avoid getting into debt.
• If you already have debts, first do everything to pay off those.
• Build up a reserve fund for emergencies.
• The reserve fund should be at least equal to 6 months’ earnings.
• Limit your spending to increase savings.
• Deploy the savings to increase your investments.
• Prefer index funds over stocks or mutual funds, for your investments.
• Index funds are simpler and more effective at creating long term wealth.
• A portion of your investments can go into top grade bonds.
• Bonds are less volatile and makes your total portfolio grow smoothly.
• As you get older and older, reduce investments in index funds and increase in bonds.
• (We in India can also go for Govt's savings schemes and FDs in banks or in PSUs, in place of bonds.)
• Stay away from stocks and complex financial products.
• Plan your finances in such a way that you can withdraw 4 to 7% annually for your post-retirement life.
• When you plan your finances in a simple, least complicated way, you can focus more on enriching your life.
  
  In short, to have a financially independent life:
  Avoid debts, spend less than you earn, and invest the difference.
  
  That’s it. Simple and straight-forward. Very practical and sane advice.

Simple is not Easy

Do you want to get wealthy?
Do you want to live without many financial worries?
Do you want to reach a comfortable enough position so as to help others?

Here are just seven steps.
They are simple steps.
But they are not easy steps.

Why are these 7 steps important?
Even if you think you do not care much for money, you can follow them.
Why? Because:
 
These steps teach you self-discipline.

These steps show you the magic of compounding.
These steps tell the logic of sacrificing now for gaining later.
These steps equip you with confidence and generosity.
So, you can apply these in your physical, emotional, social, and spiritual life.

Okay, what are the seven steps? Here they are:

You have to save, not spend.

You have to save now, not later.

You have to save more, not less.
You have to invest what you saved.
You have to invest safely.
You have to invest profitably.
You have to invest the profits.

 May God help you all to live a prosperous life.

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