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If you’re new to investing and the concept of financial freedom and want a simple explanation of how it all works, this The Simple Path to Wealth summary, exploring the book by JL Collins, is the place to start.

The summary covers the book’s main takeaways, including how to determine the best investment strategies and savings goals for you.
The Simple Path To Wealth Summary
- Spend less than you earn
- Try to save 25x of your annual expenses, allowing you to withdraw roughly 4% a year
- The market goes up. The market goes down. It’s inevitable.
- At the beginning of your career, invest 100% in the stock market. As you near the end of your working years, begin to shift to a higher ratio of bond investments than stock.
- Cultivate “f you money” (i.e., a large savings balance / emergency fund)
How Long Is the Simple Path to Wealth?
The Simple Path to Wealth, Your Road Map to Financial Independence and a Rich, Free Life, by JL Collins, is roughly 290 pages long, or about an 8-hour read.
6 Important Takeaways from The Simple Path to Wealth
A listing of the wisdom readers can obtain from JL Collins’ book would be endless – just read the book!
However, to give you a taste of what you can expect, I’ve compiled this summary to highlight what I found to be the six most valuable pieces of information.
1. Spend less than you earn and…
If there is one piece of advice you take away from The Simple Path to Wealth, may it be this one:
“Here’s the simple formula: Spend less than you earn—invest the surplus—avoid debt”
But how do you live this concept out?
By reviewing your expenses and identifying which are needs and which are wants and then reducing your spending on “wants” as much as possible.
Now take all that newfound cash and put it into a savings or brokerage account.
Note: Collins views owning a home (and the associated mortgage, property, and maintenance costs) as a “want,” not a “need.” So rather than treating a house as an investment in your future, buy the least house to meet your needs and invest in the stock market instead.
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2. On debt
Building on step one, Collins repeatedly emphasizes the importance of paying down existing and avoiding future debt.
He balances it out with the adage of paying yourself first whenever possible. In this case, “possible” is determined based on interest rates.
Specifically, if your interest rate is:
- 5% or higher: Pay off the debt as fast as possible and before funding your investment accounts;
- 3%-5%: It’s up to you! Balance making debt payments and funding your investments according to your individual goals; or
- 3% or lower: Prioritize funding your investment accounts, limiting debt payoff to the minimum monthly required payments.
3. The stock market
According to Collins, the stock market is the world’s most powerful wealth-building tool.
Why? Because when you invest in the stock market, you are effectively buying a tiny piece of a company. These companies are run by people with dreams of unlimited growth.
And by investing in the company, the financial rewards they reap are yours.
“Everybody makes money when the market is rising. But what determines whether it will make you wealthy or leave you bleeding on the side of the road is what you do during the times it is collapsing.”
But with high-reaching dreams come challenges. Some companies fail. Others grow. And so, while you get a chunk of the gains when a company is flourishing, you also take on losses when a company fails.
This resulting risk, and the associated reward for taking it on, drive the gains – and your personal wealth – even higher.
4. Why people lose money investing
People lose unnecessary amounts of money when investing in the stock market because they fiddle. Or think they can beat the game. Or panic.
Put simply: People lose because they are impatient.
To help mitigate the financial risks arising from this basic human (modern) tendency, Collins offers the following advice:
- Invest your money in the market. And let it sit! You will be tempted to take money out when the economy is at a low point and put money in when it’s up. Don’t. Avoid tinkering with your ratios of stock and bonds in your portfolio and weather out the storms.
- Don’t try to beat the market by constantly buying and selling individual stocks. However, the likelihood that you can beat an index that buys a piece of everything is slim, with every additional year you invest reducing that likelihood of winning. So invest in an index fund, not individual stocks.

5. Change your strategy with age
There are two stages in investing:
- Wealth Accumulation
- Wealth Preservation
You’re in the Wealth Accumulation stage at the beginning of your career (think 20s and 30s). During this period, as you are accumulating wealth, you have a high-risk tolerance and can have a portfolio of 90-100% stocks, with the remainder in bonds.
As you get closer to retiring, you enter the Wealth Preservation stage. During the Wealth Preservation stage, you want to minimize the impact fluctuations in the market have on your investments, so you add an increasing ratio of bonds to your portfolio. You may now have 50-75% stock holdings, with the remainder as bonds and cash.
Collins simplifies this concept with the following rule of thumb:
- Conservative: 100 minus your age = % of portfolio investments to allocate to stock
- Aggressive: 120 minus your age = % of portfolio investments to allocate to stock
6. Vanguard
The bread and butter of the book’s second half are Vanguard index funds.
As previously discussed, trying to beat the market by constantly buying and selling individual stocks is likely to result in losses for the average investor. At the same time, investing in things like actively managed mutual funds, whereby professional money managers hand-pick investments in an attempt to beat the market, may also create a risk for losses and will undoubtedly result in added fees.
Suppose you want to avoid this complexity and risk. In that case, Collins recommends dedicating the majority of your investment portfolio to investing in index funds, which are designed to match the market’s returns. Specifically, Collins touts the Vanguard VSTAX ( Vanguard Total Stock Market) index fund, which allows you to invest in over 4,000 companies.
But there are dozens of reputable index funds available, so do your research to find the one that fits best for you and your goals.
What People Are Saying About The Simple Path to Wealth
Positive Reviews
Overwhelmingly, readers report that The Simple Path to Wealth is a must-read and that the book is:
- Simple and straightforward
- Great for both beginners and experienced investors
- Clear path to financial independence

Negative Reviews
Some reviews indicate that the statistics may be out of date (so be sure to look up recent figures) and that it’s primarily US-centric, and so may be less valuable for non-US readers.

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Social Security
Although Collins recommends you plan for retirement excluding social security earnings, it doesn’t hurt to know what you may receive.
Check out Social Security’s Estimate Retirement Benefits tool to estimate your retirement benefits. The tool gives personalized retirement benefit estimates at age 62, Full Retirement Age (FRA), and age 70.
The European Equivalent to VSTAX
If you live in Europe, check out this article by Banker on Wheels, a leading Investing and Personal Finance website for Global Investors that invest through European and UK Investment platforms and products.
In the article, you’ll find a guide to the best exchange-traded funds for European and UK investors.
Final Thoughts: The Simple Path to Wealth Summary
If you are new to investing and find it too complex and tedious, remember that you can make your money work for you (and build f you money!) if you know a thing or two about finance. And eventually, you may be able to make decisions without thinking about money. To achieve financial freedom.
The easy-to-read The Simple Path to Wealth by JL Collins can help you get there.
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