Interview With J.L. Collins, the Godfather of Financial Independence
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What is the main topic discussed in this episode?
And he said, you know, when you achieve a certain level of wealth and that wealth is throwing off a certain amount of more money and that money exceeds what you need to live on and then some, everything essentially becomes free. And that's a wonderful place to be. It was an epiphany for me. I'd never thought about that.
I'm Robert Brokamp, and that was JL Collins, the best-selling author of The Simple Path to Wealth, which was updated and re-released in May. In this replay of an interview I did with JL earlier this year, we discussed the challenges and appeal of being a super saver, the quote-unquote self-cleansing value of index funds, lessons from past market crashes, and how to use the 4% rule.
What does JL Collins mean by 'FU money' and how did he achieve it?
I really enjoyed my conversation with JL, who is often referred to as the godfather of financial independence, and I think you will too. So this is a family show. We'll start with a sentence from your book. Quote, personally, there is nothing I'd rather buy or own than FU money. So what is FU money and what was your path to having enough of it?
So it's a, because it's a family book, that's why I call it F-U money as opposed to spelling out the word. You know, Robert, kind of a little funny aside, I have had people object to that. I've even had people say, I stopped reading the book when I got to that, but I've also had people say, why don't you just use the word? And so anyway, for what that's worth. But yeah, so in my mind, I think of it a little differently than I think most people do. So I think most people equate having a few money to being financially independent. And that's fine. I've always thought of it as the interim on your journey to full financial independence. So full financial independence is when you have enough that your investments are throwing off enough to live on to cover all of your expenses.
And FU money is the money you start having the moment you set foot on this path. And every step of the journey, you acquire a little more. It's like going to the gym. You get a little stronger, a little stronger financially, a little stronger financially.
How can saving 50% of your income lead to financial independence?
And during the course of that journey, having that FU money makes you more able and more comfortable to take bolder decisions than you might otherwise. Maybe to step away from a job that's not really working for you. maybe to pursue something else and take a little bit of a risk. So I had started accumulating FU money long before I heard the term. But I first came across the term in James Clavel's novel, Noble House. And great novel. And it's part of a trilogy. And in Noble House, there is a character and her stated goal is to have F-U money spelled out. And I thought that put a label on exactly what I was after.
So according to your simple path to wealth, the first step is saving 50% of your income, which is what you did. So tell us about how you came up with that percentage and how you managed to live on only half of what you made.
Yeah, so I came up with it pretty randomly. So I came out of college in 1972, and there are probably very few people listening to us who are old enough to remember what that, but that was in the midst of stagflation and it was a bad economy. And it took me a couple of years to get my first professional job. And I spent those couple of years doing landscaping to put food on the table and pay the rent. And my first professional job paid me $10,000 a year. And I knew I wanted to have this FU money. So I just arbitrarily said, you know, I know I can live on 5,000 because other people can live on 5,000. There's no reason I can't do that.
What are the benefits of using index funds for investing?
And then I'll divert the other 5,000 to buying this thing that was most important to me. Plus $5,000 was more than I was making as working at a landscaping crew. And it was significantly more than I'd been living on when I was in college. So living on 50% of my income was a big step up in lifestyle for me. So this was not a problem. What's interesting about the 50% is I get pushback. That's not surprising, but what might be surprising is it comes from both directions.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:01–0:44
2
What does JL Collins mean by 'FU money' and how did he achieve it?
0:44–2:13
3
How can saving 50% of your income lead to financial independence?
2:13–3:58
4
What are the benefits of using index funds for investing?
3:58–7:05
5
What is the 4% rule and how does it apply to retirement planning?
7:05–9:53
6
How do market crashes affect long-term investment strategies?
9:53–13:18
7
What lessons can be learned from past market crashes?
13:18–17:46
8
How does the concept of financial independence evolve over time?
17:46–45:50