Source: keepthrifty.com
The Philosophy
JL Collins wrote this book as letters to his daughter about money. The core message: building wealth is simple (not easy, but simple). The financial industry profits from complexity — ignore it.
Three Principles
- Avoid debt — especially high-interest consumer debt
- Spend less than you earn — the gap is your freedom fund
- Invest the surplus — in low-cost index funds
Why Index Funds Win
Active fund managers charge high fees to pick stocks. The data says they fail:
- 95% of active funds underperform the market over 15 years
- Lower costs = higher returns for you
- One fund (VTSAX) gives you ~3,600 stocks
The magic: you own a piece of every publicly traded company in America. When companies innovate, you profit. When companies fail, others rise. You own the haystack, not individual needles.
The Math of Financial Independence
Your FIRE Number
Annual Expenses × 25 = Your Number
Example: $40,000/year × 25 = $1,000,000
The 4% Rule
The Trinity Study (1998) found: withdrawing 4% of your portfolio in year one, then adjusting for inflation, sustained portfolios for 30+ years in ~95% of historical periods.
Your Savings Rate = Your Timeline
- 10% savings rate → ~51 years to FI
- 25% savings rate → ~32 years to FI
- 50% savings rate → ~17 years to FI
- 75% savings rate → ~7 years to FI
The higher you save, the faster you're free AND the less you need.
Asset Allocation
While Accumulating
- 100% stocks — you have time to recover from downturns
- Use VTSAX (mutual fund) or VTI (ETF)
Approaching Retirement
- Add bonds: Start with 80/20 stocks/bonds, adjust as comfortable
- VBTLX (or BND) for bonds
The Key Rule
Never sell during market downturns. The market has recovered from every crash in history. Your job is to stay invested.
F-You Money
The ultimate goal isn't a number — it's options.
"F-You Money is the power to walk away. To say no to things that demean or depress you. To say yes to adventure, to generosity, to your own path."
You don't need to retire. You need the option to retire. That changes everything.
Getting Started
- Eliminate high-interest debt — guaranteed return
- Build a 3-6 month emergency fund — in a money market or savings
- Max tax-advantaged accounts — 401(k) to employer match first, then Roth IRA, then remaining 401(k)
- Invest in taxable accounts — after maxing tax-advantaged
- Set it and forget it — automate contributions, stop checking
The simplest portfolio: VTSAX and chill.