If your goal is to become financially

independent at a young age, this is a

very controversial thing to say, you

probably don't want to go buy a house

because people typically buy a house

they can't possibly afford. The bank

wants you to do that cuz that's how they

make the most money. So, you're putting

your capital into that house and now

it's not going to be earning thing. It's

going to be sitting idally. And people

say, "Well, you know, I can buy this

house cuz my mortgage is the same as my

rent." Well, yeah, but your mortgage is

just the starting point. So, what comes

to mind if I want to be financially

wealthy?

>> Okay, so we've got a lot to go through.

>> J Collins is a renowned financial expert

known for his book, The Simple Path to

Wealth.

>> He's teaching millions a straightforward

and realistic avenue for achieving

wealth

>> so that anyone can have financial

security.

>> What is the simple path to wealth?

>> So, first of all, avoid debt because you

can never be financially independent if

you're carrying around debt. Next, live

on less than you [music] earn. But the

problem is the way our culture has

taught us to think about money is solely

in terms of what can you buy with it.

But the more musthaves you have in your

life, the less likely you are to become

wealthy. And then the final one, invest

the surplus. So stocks are the single

most effective, strongest wealth

building tool that's ever been created.

But the biggest push back I get is from

people who say, "Well, that's great. I

mean, if you got a big income, 100, 200,

$300,000 a year, then yeah, the simple

path to wealth will work for you."

That's not the truth. For instance, a

friend of mine and he was making a

million dollars a year and he was broke

because people have large incomes are

much more likely to be drawn into the

competing with the Joneses, whereas the

people who make less money probably

don't have those same social pressures

and are more readily able to do it. So,

>> let's talk about investing then. Where

do you think we should be investing our

money at this moment of time? Should I

buy Bitcoin? Do I need a financial

adviser? So, my advice, and this is a

little different than the more common

advice out there, would be

>> this has always blown my mind a little

bit. 53% of you that listen to this show

regularly haven't yet subscribed to the

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and you like what we do here and you

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for you every single week. We'll listen

to your feedback. We'll find the guest

that you want me to speak to and we'll

continue to do what we do. Thank you so

much.

[music and singing]

JL Collins,

you wrote a book, a very iconic book

that sold millions of copies called The

Simple Path to Wealth. Why did you write

this book?

>> I actually that book was an outgrowth of

my blog.

I started the blog to archive

information I wanted my daughter to have

available because if you get money

right, your life is so much better. You

have so many more options. And the world

offers so much to people who have the

resources with which to access it and so

little for those people who don't have

the resources to access those things.

And and if you don't have it, it life is

just so much harder than it than it

needs to be.

>> When you think about the average person

listening right now, what is what are

some of the fundamental sort of

misconceptions or misunderstandings or

what would you call it? Black spots that

they have as it relates to money, the

things they walk around assuming about

money that are incorrect

>> that that you were maybe trying to get

out of your daughter's mind.

>> Right? So there's a chapter in the book

called how to think about money. And the

fundamental way I think the vast

majority of people think about money

because this is what our culture has

taught us. The way our culture has

taught us to think about money is solely

in terms of what can you buy with it.

[snorts] So if you go to the average

person that lottery for instance is like

a billion dollars at the moment. So

people are buying lottery tickets. And

if you interviewed people standing in

line to buy lottery tickets and said,

"Okay, if you win this million dollar,

what are you going to do with it?" Well,

what you're typically going to hear is,

"Well, I'm going to pay off my debts and

I'm going to pay off my mortgage and I'm

going to buy my parents a house and I'm

going to buy myself a Lamborghini. I'm

going to buy I'm going to buy I'm going

to buy." That's the way most people

think about money. And that's certainly

one of the things that money is very

good at. It is a means of exchange.

But the other thing your money can do

for you is work for you. Your money can

make you more money. So you can exchange

your time and effort and labor to earn

money. And that's what most of us do.

But you can also divert some of the

money you earn into investments into

what I call buying your freedom. And now

your money is working for you. So

instead of just thinking about what your

money can buy, you can start thinking

about what can your money earn.

>> You can buy your freedom.

>> You can buy your freedom, your financial

freedom.

>> Why is that an important refraraming of

the role of money in your view? What

does that do if I start thinking about

it through that lens? Well, because as

long as you are dependent on exchanging

your effort, time, and labor for money,

you are beholden to whoever is willing

to pay you to do that. That's a limit of

freedom. It's a it's a form of, without

being too dramatic, a form of slavery.

If you are always living paycheck to

paycheck to pay the mortgage or the rent

or whatever, if on the other hand, work

is optional, you're a good example. and

you've been a very successful guy.

[snorts]

You're not doing this podcast because

you need the money. If you were still

stuck at a job that paid you a wage, you

wouldn't have the option to do this

because you'd have to devote all your

time to that job so you could pay the

mortgage, so you could pay the rent, so

you could put food on the table. Money

buys freedom.

>> How does one get out of that situation?

you know, if I I used to work in call

centers um answering phones and selling

people things.

>> How does one in your view realistically

get from that place where you are kind

of beholden to the paycheck? And I was

I'd spend my wage within the first week

or so of the month and then I'd just

suffer for the next 3 weeks. In the UK,

we have like a four week paying cycle. I

think in the US it's 2 weeks typically,

but I took a I think a reckless road out

of that life. The thing that gave me the

proclivity to take the risk is like some

kind of insecurity and trauma where like

I couldn't I didn't have a plan B

because I wanted to be I wanted to like

validate myself or something. And so I

wonder if the the skill or the thing

that I was given that I'm most thankful

for is like some kind of chip on my

shoulder,

>> some kind of drama.

>> Yeah. But but on genuinely because I

think like what would make you take a

risk like some of the risks that I took

to leave university to then like be be

broke and I was like, well, I just I was

driven I was dragged by some kind of

trauma.

>> Right? One of the things that I've

observed, and I think to the extent that

I've had some success in my life, this

is true, that successful people do tend

to have trauma in their background. At

least that's my observation. Now, I'm

sure there are exceptions to that, but

it does seem that people like us are

striving to overcome

those past traumas, to have that chip on

the shoulder, to prove something.

I've also met people who are very

content to be completely lacking in

ambition

and to have enough to have a comfortable

life and kind of do what they want to do

to have financial independence maybe but

they don't have this drive to be

successful to to make a mark on on the

world and they tend to have had better

childhoods and and uh and I think that

there is that wasn't me. That doesn't

appear to be you. But I think there's a

lot to be said for for that, right?

>> You I mean you open the book about

talking about a parable of the monk

>> and the minister

>> and the minister.

>> Yeah.

>> Can you uh tell me about that parable

because it seems to somewhat relate to

what we're seeing here. I think

>> very very much so and that's the reason

I open the book with it. So the parable

is there are these uh two boys who grew

up together. their childhood friends. As

frequently happens, they go their

different directions in life as they

become adults. And one becomes a very

successful, powerful minister to the

king, and the other becomes a humble

monk in tattered robes with a begging

bowl and what have you. And years later,

they run into each other on the road.

And they're getting reacquainted.

And as they are, the minister, the king,

takes pity on on his povertystricken

friend and his tattered robes. And he

says, 'You know, if you could learn to

cater to the king, you wouldn't have to

live on rice and beans. To which the

monk replies, if you could learn to live

on rice and beans,

you wouldn't have to cater to the king.

And for me, I've always been a little

bit more towards the monk side. I'm uh

I'm not a very materialistic person, and

I'm comfortable and able to get along on

on very little. And I think there's

something beautiful about needing less.

>> I have from my interviews met people who

are very wealthy, even actually off

camera,

>> who are very, very wealthy and appear to

be happy. Yes.

>> But I think I I think it's safe to say

that the richest people I know are

amongst the least happy people I know.

So if I think about the very top, the

billionaires that I know off camera,

>> they are amongst the least happy

typically.

>> Mhm. Um because I think whatever's taken

them there is still haunting them while

they're there. So it could be the chip

on the shoulder, the insecurity,

whatever happened to them that made them

so driven and obsessed with validation

and climbing is still haunting them now.

But I do also I do know people like I

say that are very very rich and that

live remarkably content lives. And I

think part of it is their relationship

with the stuff. Like I think it is

possible

>> and they probably keep it at arms

length, right? They're a little psychic

distance from the stuff.

>> Yeah. And I just speaking from my own

journey at a very young age up until the

age of 25, I was convinced that buying a

Range Rover Sport was going to like

really make me really happy. And um the

anti-limax once I I got those things was

was like it was staggering. It was a

complete

>> mental it was like someone had shaken my

head. My reality distorted for a second

because I thought this was meant to be

it.

>> And now I can still get things that I

like. But um I was saying to Will the

other day that when I walked into my new

house in LA um I had pre-repped myself

to know that it was going to have zero

impact on my happiness and that meant

that I actually enjoyed it weirdly.

>> Right.

>> Like I was actually super grateful

because I'd pre-repped myself to have a

healthier relationship with the thing

>> to bring the expectation down.

>> Exactly.

>> So there are a couple things at play

there. I think one is it's the journey

that's really satisfying.

>> The destination tends to be less so. And

I think that's one of the problems with

being very materialistic because you

know if your definition of happiness is

if I only owned this watch, right? If I

only had this watch maker make me this

intricate watch, then I would be happy.

Well, I mean maybe, but probably not.

You're probably going to have that

watch. You're going to look at it and

say, "That's really nice. Wow, that's

good." And it'll and then well, what's

next? But if you enjoy the journey or

and I think you made a very wise

decision if you reset your expectations

and say, you know, I'm going to have

this nice house or this nice watch, but

I don't expect it to make me happy, but

it's going to be a nice thing to have in

in my life.

>> And somebody once said much wiser than

me, you know, money doesn't change who

you are. It it can magnify who you are.

So if you're an unhappy person and

you're have lots of money, you will

probably still be an unhappy person.

>> Mhm.

>> Uh if you're a happy person, I mean, one

of the happy, in fact, the single

happiest guy I know. His life was the

biggest financial disaster of anybody I

personally know. And this guy's he's the

literally the happiest human being I've

ever met.

>> Cuz he was happy before.

>> Because he was happy before. And there's

other things besides money that makes

you happy. Money. And the reason that I

I it was so important to me to teach my

daughter this, money gives you options,

right? Money allows you a lot wider

range of choices in life,

but it doesn't necessarily make you

happy, right? If it allows you to pursue

an option

that otherwise you couldn't pursue and

that option makes you happy, that's a

different thing. I think if I was

listening to this and I was broke, like

I used to be very broke, I would still

pursue wealth at all costs because I

know I heard this phrase the other day

which was it is easier to get rich than

it is to give up the idea that getting

rich will make you happy. And I

[laughter] I thought to myself,

>> and if you haven't got rich, you would

always think

>> 100%. You'd always wonder if that was

And you know what? So much of the

unhappiness or anxiety that I had when I

was, you know, in my early early innings

of my life, my career came from looking

down and seeing the baiff letters or

came from the credit card debt or how am

I going to eat today or, you know, can't

go out and see my friends. So much of my

mind was occupied by my inability to

have freedom,

>> right? my lack of freedom, my need to

get up at 8:00 and walk for an hour and

a half to a call center was, you know,

so what I managed to remove was that I

wouldn't say I I added happiness, but I

removed the unhappiness.

>> Well, and that's a that's a key point.

You know, money doesn't necessarily make

you happy, but the lack of money.

>> Oh, yeah.

>> Can be terrible challenge, especially in

this modern culture we've created.

>> Okay. So, if you have kids listening

right now, please cover their ears cuz

I'm going to say a swear word. Parents

always message me and ask me to stop

swearing. going to say well um a lot of

people are obsessed with this idea of

[ __ ] you money

>> right

>> let me just give you a definition so fu

money refers to a financial situation

where a person has enough money to live

comfortably without needing to work and

it gives you the freedom to say f you to

anyone or anything you don't want to

tolerate such as a job a boss or a

situation that doesn't align with your

values what does that mean to you

>> yeah so for me so that's a good

definition but I would substitute in

that definition financial independence

FU money for me is the money you

accumulate on the way, right? So, for

instance, if you're a bodybuilder,

you know, financial independence is when

you're on the stage and you're winning,

you're at the elite level. But along the

way, from the moment you start working

out, you get a little bit stronger, a

little bit stronger, a little bit

stronger, right? Same thing financially.

The moment you start setting aside money

and investing it, you become a little

bit financially stronger. And that

builds over time. That in my mind is the

FU money because long before you're

financially independent, that money

gives you enormous freedom. You might

not be able to never work again, but if

you need to, you could leave a toxic job

knowing you could survive for months or

even years while you looked for the

better job because you have that FU

money. So it allows you to say f you in

that case to an employer.

>> And if your daughter daughter turned

around, what's her name?

>> Jessica.

>> Jessica. If Jessica turns around to you

and says, "Dad, what are what is

something I should not do with my money

if I

um want to be wealthy?

What is what are like the big what is

the first thing that comes to mind to as

a no no if I want to be financially

wealthy?"

The mo more common advice that I think

you should avoid if your goal is to

become financially independent at a

young age. You probably don't want to go

buy a house.

That's a very controversial thing to

say. The reason you want buy a house is

because houses dramatically inflate by

and large your cost of living. You know,

you're you're putting your capital into

that house and now it's not going to be

earning thing. can be sitting idally

along with owning a house. You have the

expenses of maintaining it, paying the

taxes on it, blah blah blah. If you stay

in a apartment that is just enough to

meet your needs, which by the way is

what my daughter has done and continues

to do, your costs will be lower.

>> Explain that to me. Explain why my cost

of living goes up if I buy a house.

>> Sure. So people, it doesn't have to, but

people people typically buy the most

house they can possibly afford. The

industry drives them that way. If you go

to a real estate agent, you say, "I

think I'm I want to buy a house." Right?

First question they're going to ask you

is, "How much do you make? How much do

you want to spend?" You know, and and

then you go to the bank and you say,

"Okay, I want to buy a house. How much

will you lend me?" And they'll say,

"Well, how much you make?" And then

they'll come back with the large number

of how much they're willing to lend you.

If you follow those guidelines, you're

going to wind up with a house that's

going to be a burden. You are not buying

it from a position of strength. You are

stretching to buy it. You are borrowing

the most money a bank's willing to give

you. You probably don't want to do that.

I mean, you can, that's the bank wants

you to do that cuz [clears throat]

that's how they make the most money, but

that's not the best thing for you to do.

But that's what you get drawn into. And

then when you buy that house, I don't

know that I've ever known anybody,

including me, by the way, and I've owned

houses most of my adult life, who's

owned a house without doing renovations

on it. So, you've got those costs.

You're going to furnish that house cuz

you're probably buying more square

footage than you were renting before.

You're going to need new furniture, or

maybe you just want better furniture for

your new house, maybe new appliances,

landscaping, taxes, maintenance. I mean,

the the list is endless. And people say,

"Well, you know, I can buy this house,

and my mortgage is the same as my rent."

Well, yeah, but your mortgage is just

the starting point. You've got all these

other expenses with the house. And the

other thing is they are variable

expenses.

>> Variable expenses.

>> Yeah. With your rent, you know, if if

you're renting an apartment, you're

paying $2,500 a month for your

apartment, right? you know exactly what

your housing costs are for the term of

your lease, right? $500 a month. If you

own a house, maybe your mortgage is

$2,500 a month. And then you need a new

roof. That's 20 grand. Or you need a new

septic system, which by the way, I'm

looking at having to put it in my

cottage, you know. Well, that's another

25 grand, right? And so, and you don't

necessarily know when those things are

going to come at you.

>> It is a bit of a trap, isn't it? It's a

trap that um I didn't realize this until

I bought a house and most people don't

>> like I even sit here on this podcast

doing this for a living and then I I

made this stupid mistake of buying a

house and I do think it was a stupid

mistake because I we'll talk about

opportunity cost in a second but I was

in hindsight it was like a terrible

decision. I spent all this money on this

house. It was a house abroad. It was

also like a holiday home I guess

>> and every time I come all I see is

things that I need to change.

>> Yeah. It's looking at the United States

for instance, if 20 years ago, 30 years

ago, you'd bought a house in San

Francisco,

well, you've done very, very well

financially. If you bought a house in

Detroit,

not so much. So then the question

becomes, and people will say, well,

obviously you don't buy a house in

Detroit, you buy a house in San

Francisco. Well, I'm not an expert in

real estate, but I am reading more and

more commonly that San Francisco is has

a lot of very challenging problems at

the moment. Detroit, on the other hand,

where I was just visiting a couple of

years ago, is enjoying a renaissance.

Detroit's coming back. So, who's to say

in 20, 30 years, people won't be saying,

"If you bought in Detroit back in 2025,

you were golden." And if you bought San

Francisco, yeah, not so much. Sometimes

real estate, buying a house can work out

in a spectacular fashion. And that's the

stories people tend to hear, but not

always.

>> And that's what I tend to see in the

comment section when we talk about this

issue of buying a house. I was just

looking at the comment section actually.

And on a previous conversation where we

talked about whether you should buy a

house, someone said, "I bought a house

and it's the best thing I ever did."

Right? It's launched my mindset in new

directions. Remember that having your

own space has profound psychological

impacts and can be life-changing for

some of that don't live in a healthy

environment. The psychological impact of

buying a house.

>> What that commenter just said is is can

be and for him obviously it's absolutely

true.

I am not anti- house. As I mentioned a

moment ago, I've owned houses most of my

adult life, but I've never bought them

because I thought they were an

investment. I bought them because I

thought they would enhance my life in a

way I wanted it enhanced. They would

make my life better. They are in my view

an expensive indulgence. I have nothing

against expensive indulgences. That's

one of the reasons we accumulate money,

right? I like some expensive and some I

don't care about, some I like. Um, but

that's what they are. And if you can

easily afford it, then by all means buy

the house. Looking at some stats here,

it says home buying was once a solid

investment due to rising property values

and lower mortgage rates. However, for

younger generations, this is no longer

the case because of skyrocketing home

prices. Since 1980, US home prices have

increased by over 300%, outpacing

inflation and wage growth. In 2023,

mortgage rates surged past 7%, making

monthly payments significantly higher

than before. And medium wages have only

risen by about 15% since year the year

2000. While home prices have more than

doubled, making home ownership less

affordable. And lastly, the cost of

renting is often cheaper than buying,

especially in cities where prices have

outpaced wage growth, leading many

younger people to choose renting for

flexibility. This point of flexibility

as well is one we don't talk about.

>> Right.

>> Which is the ability to go do something

else in another country.

>> Exactly.

>> And my brother said this to me when I

was 20. My brother's very smart. He's a

year older than me, a financial genius,

and has a much different brain to mine.

And I remember when I was 20, maybe 24

and I was talking about do I buy a house

and he both told me it was the worst

investment I could ever make. But he

also told me to think about flexibility

and my ability to get up and move.

>> Yes.

>> And I was what do you mean? And he said,

"Well, listen, you're in a certain era

of your career where

you might be called by someone in San

Francisco who offers you a great

opportunity and you might want to go

next week." And actually when I look at

how my career transpired, that's exactly

what happened. I was in Plymouth and

then I went to Manchester for business.

Then I went to London for business. Then

I went around the world to San Francisco

to New York for business. And I'm I'm

moving with the opportunity.

And if I was anchored somewhere because

a mortgage does

>> dragging that along.

>> Yeah. And a mortgage does like

psychologically anchor you. This is what

people don't talk about. It creates a

huge amount of guilt if you then want to

get up and go because you in your head

you're going, "Well, I'm going to be

paying double."

>> Well, so I agree with everything you

said. I agree I I agree with your

brother. Flexibility, especially when

you're young and your career is in a

dynamic [snorts] phase, it is not to be

underrated. For my daughter, I mean, she

loves living in Savannah. They've been

there for 3 years, but she has an

adventuresome soul. And you know, she

said, "I don't know. I mean, maybe at

some point I'll want to go live in

Europe or somewhere else." Well, if you

have a house, that complicates that

decision. And even if you are fortunate

enough to buy in a market where your

values are rising, the cost associated

with buying and selling of houses are

enormous. the, you know, the real estate

commission and the taxes and what have

you. So, getting in and out of a house

is an expensive proposition. Getting in

and out of apartment doesn't cost

anything. I mean, maybe your security

deposit rate, but that's it. That's

that's very clean and simple, but if

you're if you were to buy a house in

Savannah and then just say, you know, I

think I want to go live in in Portugal,

well, now you got to sell that house. Or

maybe you have to rent it. Now you're a

landlord. You're an accidental r

landlord, which was subject to my second

book. You know, that's not optimal. I

mean, if you set out to be a landlord,

great. But if you become an accidental

landlord because you can't sell your

house that you don't want to live in

anymore, that's not so great. So

flexibility is is enormously important.

If I if I were to ask you, what is the

simple path to wealth? and you had to

respond in a sentence, what would that

sentence be?

>> Avoid debt. Live on less than you earn.

Invest a surplus.

>> So, let's talk about debt then.

>> Okay.

>> Why did you say avoid debt?

>> You can never be financially independent

if you're carrying around debt.

It's a ball and chain that you drag drag

along, especially consumer debt. Now, to

be clear, if you're in business and your

business is is carrying debt as a as a

function of of running the operation for

one reason or another, that's kind of a

different thing. But in terms of

personal debt, uh if you're running up

credit card debt, if you're leasing

expensive cars or or borrowing money to

buy expensive cars or what have you,

possibly a mortgage [snorts] is in a

slightly different category, but it has

all the disadvantages we just talked

about. Yeah, debt's a ball and chain.

It's it's like asking a swimmer to

compete and and strapping a weight

around their waist. Uh it just is it

possible? Well, sure. I guess it is, but

it's a whole lot a whole lot more

difficult. So, job one if you have debt

is to blow it out.

>> And I mean, blowing it out is a dream

for many, but it's uh easier said than

done. I guess

>> it simply means that you have to

organize your life in such a fashion

that you can divert some money to either

buying your freedom investments or if

you have debt paying off that debt. You

just you have to do that. And people

say, "Well, I can't do that. You know, I

I need to have this. I the you know, I

need to have the these the two least

luxury cars and we need to live in this

neighborhood and we need to send the

kids to these schools. We need to and I

call that the tyranny of the must-haves.

The more musthaves you have in your

life, the less likely you are to become

financially independent." Now, that's

your choice. That's an individual's

choice. It may very well be that those

things are more important to you than

buying your freedom. And it's your

money. It's not for me to tell anybody

how they should spend their money or

what's important to me or what's

important to them. For me, there was

nothing I could spend my money on that

was more important than my freedom.

Which is why from the beginning, I

diverted half of my income to buying

that thing. Was never deprivation.

Right? Most people say, "Oh, that's this

is a path of deprivation. I can't spend

my money." Well, not for me. I, you

know, I spent every dime that ever came

my way. It's just that I spent half of

those dimes on the thing that I wanted

to own the most, which was my freedom.

And you own that by owning assets. So, I

wasn't I wasn't depriving myself any

more than if somebody said, you know,

I'm looking at buying a a Mercedes or a

Volkswagen, right? If I'm buy the

Mercedes, I'm in this big fancy car and

people will be impressed. If I buy the

Volkswagen, yeah, I'm in this more

modest car, but then I've got a whole

bunch of money left over that I can

spend on a wardrobe or going out to

dinner or a more expensive apartment.

It's just a matter of choosing where you

spend your money on. Right? So, one of

the choices and I I do I am under no

illusion that most people who read my

book will actually follow the simple

path cuz I I think there's just way too

much cultural influence to spend your

money elsewhere. But at least the people

who read the book and listen to this

interview will be aware that there is

something else they could buy with their

money. and that's their personal freedom

and you do that by assets and there was

nothing more important to me nothing I

wanted more so it was not deprivation at

all

>> I amum I reflect back on

where I used to be in my life and if I'd

heard this conversation then I really

really struggled with um saving money

because saving spending money was so

closely linked to my sense of self and

my self-esteem

>> a lot of people feel that way I've

shared this story before, but when I I

was working in those call centers at uh

which one, Swinton Swinton's car

insurance where I used to work, I would

get my paycheck and it might be I don't

know, £1,500 or £2,000, whatever. And

like on my way home on payday, I'd go

buy a 60-in TV [clears throat]

and [laughter] I'd put it in the house

and then I'd try and see if I had enough

money to buy a PlayStation

>> and then about a week later when I

realized that I was broke, I would sell

both. And I look at that behavior as

such absolute like

>> it's objectively like crazy behavior

like repeated videos

but it shows the extent to which I got a

dopamine hit from having a nice thing

and I was trapped in that cycle of like

>> buy the nice thing dopamine hit feel

validated feel like I'm a successful

person and then have to sell it a week

later.

>> Yeah. So, I really have a huge amount of

empathy for people that are stuck in

this spending for self-esteem cycle. And

they hear these, you know, they hear

people like me and you talk about these

things now

and it feels easier said than done.

>> That to me seems kind of insane. And and

you know, one of the things that

somebody pointed out one time is if

you're driving around in a Ferrari, you

know, maybe you're thinking to yourself,

if you're bought the Ferrari because you

want to impress people, everybody's

looking at me and they're thinking,

"Wow, what a cool guy that is driving

driving that Ferrari." No, that's not

what they're thinking.

They're looking at you in that Ferrari.

And what they're thinking is, "Wow, I

would look cool if I was driving that

Ferrari." They're not thinking about you

at all. it doesn't it you're making no

impact on on what their opinion of you

is.

>> So on this point of debt, I did have

some people contact me that were

childhood friends of mine recently and

asked um asked me for advice on getting

out of debt.

>> Mhm.

>> And one particular friend said that he

had $40,000

worth of debt and asked me for advice on

it. And I I really [clears throat]

I'm not an expert in this so I kind of

hesitated to give any advice.

>> But the advice I'm hearing from you is

essentially you have to make a

concession. You have to pull back your

spending and get things back under

control. You have to I know sell your

house.

>> So, here's some good news. So, you're

carrying to your friend. He's carrying

$40,000 in debt, right? My advice would

be, and this is a little different than

the more common advice out there, but I

would look at all my debts and I would

pick the one that was charging me the

highest interest rate and I would I'd

pay the minimums on all the others and I

would focus on paying that one down as

fast as I could because that's the

biggest return on my investment. And

when that one was gone, I'd go to the

second until I worked my way through.

It's going to be hard. And the more

quickly you do it, the harder it's going

to be cuz you're going to have to make

more dramatic adjustments to your life.

That's the bad news. Here's the good

news is once you are out of debt, if you

do this, you've developed a wonderful

discipline of living on less than you

earn and diverting the excess to

something else that you want more. In

this case, to something else you want

more is being out of debt.

If you continue with that discipline,

you now have the cash flow to begin

building those assets and becoming

wealthy. You've already developed that

lifestyle and that discipline. So that's

the one ray of sunshine, if you will, in

in the process of getting out of debt.

>> Okay. Play devil's advocate with me then

on this one.

>> Sure.

>> So when I was 18, 19 years old, my

strategy I was well aware that I'd

[ __ ] up my financial situation. Like I

was it was plainly clear that I'd

figured out what a credit score was and

I realized that I destroyed mine. I also

had these letters that [laughter]

these fail letters and and I had I had

mounting issues. I was avoiding

finances, bills, envelopes, you name it.

I just thought if I don't look at it, it

doesn't exist,

>> which I know a lot of people do because

when I was writing a previous book that

I wrote, I looked into some of the stats

about humans ability to avoid. Mhm.

>> Whether it's health situations, if a

friend of yours gets a bad diagnosis, I

was reading a study that said some

people are more likely to not go get

checked

>> even if their friends had a because they

just want to avoid it.

>> Um, and then with national finances, I

was reading a study that said we're

incurring billions and billions and

billions and billions of debt as a

society just because we don't look at

our bank balance. We don't open

envelopes. So, I know I'm not the only

one.

>> No, not at all.

>> My strategy was my This is such a dumb.

>> I'm not sure I want to hear this.

Well, go ahead.

>> Honestly, and this sounds like crazy

talk, but it's just the truth. In my

head, my strategy was

>> I'm going to get so rich that I outpace

this debt

>> and then I'll deal with it later.

>> My strategy was if I can just get really

rich, which is kind of the inverse of

what you're advising,

>> then this debt won't be a problem.

>> At 18 or 19 years old, you don't know

the world. You are guessing,

>> right?

>> And I was guessing that I could earn my

way out of it. The probability says I

was wrong.

>> The probability says that I was like

delusional or some or just like I

watched too many rap videos or

something,

>> right?

>> Um, so objectively that is a reckless

choice. Even if even if it's true and it

ends up being true for you, you end up

being what it's still a bad choice

because probability is stacked against

you.

>> Well, that's true. And but you just made

a critical point in that you can make a

bad choice where things work out well

for you.

>> Yeah, exactly. It's a bad choice.

>> So, a great example of that is investing

in Bitcoin, right? I'm not I'm not a

proponent of investing in Bitcoin.

Certainly, for those people who bought

Bitcoin 10, 15 years ago, they've done

extraordinarily well.

They got lucky. Lots of speculations

don't work out that well. So if you are

speculating

then you it might work out

extraordinarily well for you but it's

you're taking some pretty heavy risks in

doing that right it's same thing with a

lottery ticket I mean the chances of

winning the lottery are infantestimally

small but people buy lots and lots of

lottery tickets somebody somebody does

win it but that's probably not a good

way to spend your money

>> Bitcoin

>> you're not a fan of Bitcoin No. And I'm

not I'm not opposed to Bitcoin existing

in the world.

Uh but for me, it's a speculation and

I'm not a speculator.

>> When you say spec, give me some color

because I'm sure there's some people who

are listening now that are either

thinking about Bitcoin or have invested

in Bitcoin.

>> I mean, if you want to speculate that

Bitcoin, so I I would recommend against

it. So, and people and they might push

back and say, "Well, but JL, you know,

you were recommending against against it

10 years ago, which I was, and you

you've been wrong. I mean, absolutely

wrong. It's been great 10 years. It's

blown. It's done far better than the S&P

500." Well, that's true. If you'd had a

crystal ball, if I'd known that 10 years

ago, yeah, well, I would have been in

Bitcoin, right? We don't have crystal

balls. So the question isn't how is

Bitcoin done in the last 10 years. It's

how how is it going to do in the next 10

years. I don't know the answer to that.

But that's the question. Is it worth

$100,000 a coin now? Is it going to

continue to grow at that pace that you

regret that you missed over the last 10

years? That's the question you have to

ask yourself.

But I could say its success is evidence

that it's serving some kind of utility

for some people somewhere. Its success

means that there is demand for it by

very nature that the price has increased

so crazily over the last 15 years.

>> Yeah. That and that's an argument that

people make and there's a lot of debate

around that, right? is, you know, what

is the function that it has or that it's

going to develop? And you might well be

right. I don't I don't know the answer

to that question. It's not currently at

least a currency because it's way too

volatile to serve as a currency unless

you're doing illegal things that

make it more attractive than the

volatility makes it unattractive. So

that's not necessarily good for society,

but but so it can't function as a

currency. So, right now it's just a

speculation. Is it going to grow into

something that's more functional? Well,

you know, listening to one of the other

interviews you you you did,

that woman absolutely believes that

that's what's happening. And they Kathy

Wood, so that's why she's in Bitcoin.

And she may be right, but she's

speculating. And again, I have nothing

against speculating as long as you

understand, as I'm sure she does, that

that's what you're doing.

>> You'd prefer investing.

>> I prefer to have an engine creating

wealth behind where I put my money.

>> I had um a text message from a really

good friend of mine who my audience will

know because they've been on the show

before as a guest and uh they're very

well known in the UK. Um they text me

and said, "Please, can I ask you a

question? If you had mortgages and you

had a lump sum of money, thinking about

the future of AI, potential market

crashes, would you pay off chunks of the

mortgage or would you invest? My feeling

is that stocks aren't really safe. Am I

being paranoid?

>> Well, there that's there are a couple

questions embedded in that. So, the

first question is would I pay off a

mortgage? And the second question is are

stocks safe? Right?

>> [snorts]

>> So the mortgage one first to me is is

pretty easy. It kind of depends on your

interest rate.

>> What is an interest rate?

>> So an interest rate is what you pay to

borrow money. So when you when you get a

mortgage, you're borrowing money, right?

You're borrowing it from a bank or a

financial institution

and they they want to be paid for

letting you use their money. And three

three and a half% or less, that's really

cheap money. I would hold on to that. I

I would be in no hurry to pay that off.

On the other side, if you have a

mortgage rate that's say 6% or higher,

well, when you pay off that mortgage,

essentially you're locking in a

guaranteed return of that interest rate,

right? So, if you pay off an 8%

mortgage, you've locked in an 8% return

on that money effectively. And then to

finish the thought is if your interest

rates between those those two like three

and a half percent to five and a half

six percent then I would say it would

depend whether you pay it off or not is

what makes you emotionally more

comfortable and there's value in being

emotionally comfortable. So if you are

comfortable carrying the debt you might

say well I think I can do better in the

stock market so I'm going to carry it.

If emotionally like me you just would

rather not have any debt at all than you

then you blow it off. Maybe we could use

the coins as a an example of what an

interest rate is.

>> Sure. Let's say I'm sitting on this pile

of gold and you want to borrow some of

my gold. I'm happy to loan you, Stephen,

these 10 very valuable old pieces. But I

don't like you well enough to just let

you borrow them for free.

I want to be paid. I want to get a

reward back for that. So, when you

return these gold pieces to me in a

year, you're going to return 11 gold

pieces to me. You're going to pay me

10%. Cuz an extra gold piece is 10% of

these 10, right? Make sense?

>> Yeah.

>> That's what interest is.

>> So, I if I say, "Okay, I'm going to buy

a house,

>> right? You're going to take you're going

to take those 10 gold pieces. Go ahead

and take them."

>> So, I'm buying a house that costs 10

gold pieces, right? Right. So, I'm going

to accept your 10% interest rate.

>> Okay. Am I paying 10% a year on the to

on the total

>> on the balance? So, the way a mortgage

works is in the let's say it's a 30-year

mortgage, you're going to be sp giving

me a certain amount of money every

month, right? That's your mortgage

payment. And in the beginning, most of

that payment is going to be interest to

me. And a very tiny sliver of it will be

paying down the principal part of the 10

gold pieces that you bought or that you

Yeah. that you borrowed. A very tiny

sliver. And then over the course of 30

years that ratio changes as you pay down

the debt and less and less of it is

interest payments and more and more of

it is paying down the principal until at

the end of 30 years you've paid all the

principal and you've paid me a fairly

enormous amount of money in debt over

that or in uh interest over that 30

years.

>> And how do I get a good interest rate?

How do I get a very very low interest

rate? And what is a low interest rate

>> on a mortgage?

>> Yeah. So the only way you can get a So

first of all, you're going to pay

basically whatever the current interest

rates are.

>> Who sets the current interest rates?

>> So the Fed sets an overall interest

rate. You've heard the Fed will raise or

lower interest rates and that will

influence what lenders like bank and

mortgage companies will charge. It

doesn't require them to do a certain

level, but it will influence up or down

how much they're going to expect in

return for their money. The Fed is a

government.

>> Yeah, the Fed is a government agent

partially because the the Fed is

anticipating inflation

by how they set interest rates. So if

I'm lending you money and I'm worried

about inflation, if [clears throat] I

lend you my 10 gold pieces and say I

want 11 back in a year, 10%. But

inflation is 15%. Well, I've just made a

very, very bad deal. So if I think

inflation is going to be 15%, I'm going

to want two gold pieces back and maybe

or you know, so I so I'm I'm making a

profit above and beyond inflation. So

going back to your question, how do you

get a good mortgage rate? Well, you shop

around to various lenders at the time

you want the mortgage and see, you know,

who's offering what? And there'll be

some variation within a eighth of a

percent or a quarter of a percent or

something, but for the most part,

they're all going to be very tightly put

together because they're looking at the

overall projection of what inflation's

going to be, what they can charge, what

the cost of money is, what they can

charge in interest, and then

competitively what they what they have

to do to get your business. So, there's

not going to be a lot of variation.

you're not going to get a a

significantly better interest rate than

somebody else, but if you shop around,

you can probably do a little bit better.

And interest rates have been fluctuating

quite a lot over the last 20 odd years.

In the early 2000s, interest rates in

the US were relatively high, peaking at

almost 7%

in 2006 due to efforts to curb

inflation. And then after the financial

crisis, um they dropped a little bit.

Um, and I was looking here. Post 2008,

central banks around the world adopted

ultra low interest rates to revive

economies. US rates were slashed to near

0% by 2008 and remained there for nearly

a decade.

>> Right.

>> Damn. Um, COVID 19 pandemic uh interest

rates led to another record in cuts

globally with the US Fed lowering

interest rates to 0% to 0.25% to combat

economic disruption. So, does this mean

I should really be waiting for a time

when the interest rates are really

really low if I want to buy a house?

>> Well, not necessarily because you never

know when that's going to happen. I

mean, some some people have said

predicting what the stock market is

going to do is very very difficult.

Predicting where interest rates are

going to go even more so. So I think if

you're going to if you're going to buy a

house then again you buy it based on

whether you can easily afford it,

whether it meets your needs at a given

time and you deal with the interest

rates you have to deal with. And of

course they'll be part of the equation

in terms of how much you can afford

because the interest rate on your

mortgage is going to have a lot to do

with how much you have to pay every

month

>> and it's quite high at the moment.

Interest rates

>> high compared to what? So the fir you

know right now mortgage rates are 6% 7%

somewhere in there. The first mortgage I

took out was 18%.

>> 18%. That would have been in 1979

because in the 1970s we had really high

inflation. And when you have high

inflation, you have high interest rates,

right? So to me, I hear a 6% mortgage

rate and it's doesn't sound bad to me,

but for people who grew up where

mortgage rates were 2 and a half, 3%.

Well, yeah, I mean, it's huge. It

depends on your perspective.

>> And the other half of the lady's

question who sent me that text message

was around is investing in stocks safe

right now? and she did sort of preface

it by saying the questions in the

context of AI all of this disruption

that's going on in the world people are

going to lose their jobs etc et like is

it safe to invest in stocks right now

>> so depends on your time horizon so

stocks are are the single

most effective strongest wealth building

tool that's ever been created but they

are also very very volatile so when she

says are stocks safe to invest in right

now.

What I hear is very shortterm thinking

and stocks are never safe to invest in

for the short term because they're

volatile at any given moment. They can

take a deep plunge and that's a

perfectly natural part of the process.

People get all create especially if you

watch the news they people go insane and

panicked. But crashes and pullbacks in

the stock market are perfectly natural

part of the process. They are very very

difficult if not impossible to predict

when they're going to happen. But that's

the reason you never

want to invest in stocks for money that

you're going to need in the new near

term. If you zoom out for longer periods

of time, which is I re is what I

recommend, stocks are stunningly

reliable. I mean, there are very few

times over the course of 10 years where

stocks have not given you a good return.

and you go out 20 years and I I mean

it's very rare. So if you look long-term

stocks are extremely safe and extremely

powerful in building in building wealth,

but they are very volatile along the

way. So you have to be willing and able

to endure that volatility. If you're

going to panic and sell when the market

drops, not if because the market will

drop. It's a perfectly natural part of

the process. If you're going to panic

and sell when that happens, you do not

want to invest in stocks because they

will leave you bleeding on the side of

the road. Following my advice will leave

you bleeding on the side of the road if

you panic and sell. It's 100% dependent

on tying yourself to the mass during the

storm and ignoring the volatility and

continuing to invest into it because now

you're actually accumulating shares on

sale because prices are down because the

storm never lasts. It always blows over

and the sunshine comes back out and

prosperity returns. You're talking here

about the emotional side of investing,

which

>> which is critical.

>> Yeah.

>> If you if you can't control your

emotions, you're you're going to be

selling at the wrong time and buying at

the wrong time.

>> So, this is such a huge part of it that

people don't talk about enough. They

talk about tactics, strategies, what to

invest in, etc. But they don't talk

about the emotional side, which is

really like arguably a even bigger

element of this because if you think

about even how the brain is set up and

what drives us most, it's it's fear.

It's it's emotion.

>> You're in greed.

>> And when the when the prices drop, you

know, I mean, we've all got a story. So

many people listening. I remember my

first ever investment. I put £10,000

into Facebook stock a long long long

long time ago. And then it went down and

I sold.

>> I thought, I'm never investing again.

>> And if I just left it,

>> Yeah.

>> Um, God, that would be worth so much

money. It probably be worth six figures

now,

>> right?

>> But I I hadn't, no one had ever taught

me about the emotional side. And

actually part of the reason I sold it

was because I needed that money.

>> So there's two things there. One is the

emotional side of selling it. The other

thing is investing money that is not for

the long term cuz you turned out you

should never invest in money in the

stock market that is you're not willing

to commit for decades. This is a

longterm horizon because that's what

allows you to weather the storms. If

you're saving for a house for instance,

well you probably don't want to be in

the stock market. The best investor I've

ever met is my girlfriend. Uh because

she she loses the password [laughter]

to the investing app. And honestly,

every like two years I go, "Babe, do you

remember?" I was like, "You bought loads

of that index fund or Bitcoin or

whatever it is."

>> I was like, "Do you know the price of

it?" And she's like, "No, I forgot. I've

forgotten the password to the app." And

we always like log back in once every

two years and look at it. I'm like, "Oh

my god, babe. You're rich." And she's

like, "Oh, okay." And then she loses the

password again. She forgets it. This is

an incredibly important point you just

touched on. So Jack Bogle, the guy who

created retail index funds that we can

invest in now, created the Vanguard

Group in 1975.

Bogle once said, you know, invest in the

S&P 500 and don't even open your

statements when they come. Just let them

stay. Don't even open them for 20 years

and then open the final one and have a

cardiologist standing by because you

will be stunned at the level of wealth

that you've accumulated. One of the

things that I wrote this this book for

my daughter, right? My daughter is

sounds like she's kind of like your

girlfriend. She's very smart, but she

has zero interest in this financial

stuff.

That is a superpower because unlike me

and maybe a lot of people listening to

us who are interested in this stuff and

who are watching the market all the

time, she and your girlfriend are never

going to be tempted to panic when the

market drops because they're not going

to notice the market dropped, right?

Because they're they don't they don't

care. And the less you tinker with your

investments.

Charlie Munger, who was Warren Buffett's

partner, once said, "The worst thing you

can do as an investor is get in the way

of compounding, right? And that means

dancing into the market trying to sell

and buy back in and what have you. Just

[clears throat] let the compounding

run." I get so many people who read my

work and they say, "Wow, JL, I I I

really get it and it's wonderful and

you're absolutely right about

everything, but if we just did this one

little thing differently, it would be

even better." And they are I've come to

think of them as the tinkerers, right?

>> Are they men?

>> They I think a lot of them are men. I

think I think women are a little less

inclined to tinker because men put their

masculinity on the line in doing these

things and that's not useful.

>> I asked the question about men and women

because I got some stats here from

actually from Vanguard that says men are

70% more likely to invest in high-risisk

assets like individual stocks versus

safer assets than women. Men's portfolio

are 50% more volatile, which leads to

higher potential returns, but also huge

greater losses. As it relates to men,

again, despite having higher

risk-taking, men underperform women in

long-term returns annually due to

overtrading, tinkering,

>> and timing mistakes, tinkering. And men

trade 45% more often than women,

resulting in more fees because every

time they make a trade, they pay a fee

and lower gains. That's according to

Berkshire Hathaway.

The summary here is that men take more

risks, but in the long term tend to earn

less because of frequent mistakes and

emotional trading, whereas women are

more cautious and their approach tends

to yield better returns.

>> So, you know what we've learned here?

>> Yeah.

>> I have a very strong feminine side.

[laughter]

>> Well, gosh. Yeah. Damn.

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>> You talked about compounding. You talked

about how one should maybe not open the

envelope that has the state.

>> That's Jack Bogle has said that, but I

agree with it. Yeah.

>> I I don't have to explain the graph I've

just passed you for you to know what

that is, right?

>> On the bottom, the red line is 11%

>> Mhm. returns. So the blue line that's

that's running fairly flat is the

contributions to this hypothetical

investment and the red line is the value

that that how it how it grows. And

what's striking, and this is this is

what's striking about compounding in

general, is that the two track each

other almost exactly for a surprisingly

long time, and then they begin to

diverge, and then the compounding makes

the value of the investment skyrocket.

It hockey sticks.

And I didn't know you were going to show

this to me, but what's interesting to me

about [clears throat] this is I used to

do these shitakas. They were events

where we'd take a small group of people

to some cool place in the world and hang

out. And there were people who followed

my work and and I would have one-on-one

sessions with them and we talk about

whatever they wanted, but mostly it was

their finances. And very commonly these

people would lay out their their

investments, their their finances, and

and

they would ask, "Am I financially

independent?" And that's a there's a

very simple mathematical formula about

that. How much did you spend? I spend

$100,000 a year. Okay. If you take the

4% guideline, what's that?

>> Withdrawal. So, a guy named Bill Ben

came up with the idea that you could

safely withdraw 4% of your portfolio and

it would continue to survive over time

and it would so you could you could pull

that out without depleting the

portfolio. There was a woman who came to

one of our [ __ ] talk. She was a banker.

So obviously knows her way around basic

math, right? She was at the end of Stuck

where she was going to take a new job

starting that Monday was going to pay

her a million dollars a year [snorts]

and we're going over her finances and

she said, you know, I've got $5 million

invested. Okay.

Am I financially independent? Well, I

can't answer that question until I know

how much are you spending. Said, well,

I'm spending $100,000 a year. Okay.

Well,

$100,000 a year, if you multiply it by

25, you get $2.5 million.

4% of 2 and a.5 million is 100,000,

right? So, that's how that math works.

So, if you need 100,000 to live on, you

need 2.5 million invested. Make sense?

>> Yeah.

>> Okay. So, you can look at it either way.

You can say, I've got two and a half

million. If I take 4% of that a year,

that's 100,000. or I I I'm spending

100,000. How much do I need? You

multiply that by 25 two and a half.

>> So, just to make sure I'm clear,

[snorts]

>> if I look at my investment portfolio and

I have $100 in there,

>> if I can live, are you saying that if I

live on $4,

which is 4% of my investment portfolio,

then I'm financially independent.

>> Right. That's a good Now, it's a good

guideline. I mean there's lots of

variations but this is a guy guideline

this financial adviser Bill Benin came

up with

u and then there was a thing called the

Trinity study which was done I want to

say in the '9s that looked at a lot of

these scenarios and basically verified

that this was a very good baseline. Um,

so 4% is I don't like the word rule

because that implies that it's hard and

fast, but it's a great guideline. If you

want to have a have an idea of whether

or not you're financially independent or

not, this is a good guideline. So

anyway, this woman says she's spending

$100,000 a year and she's got 5 million.

She wants to know, am I financially

independent in financially independent?

And I said, times two. I mean, you have

twice as much money as you need given

your level of spending. So, the question

that I always had going back to this

little chart is how and I would get this

question a lot, Stephen. You know,

they'd show me their numbers and they

would very clearly be financially

independent on that based on that math

we just discussed. And these were smart

people who can easily do basic

arithmetic. Said, how how is it that

they're asking me this this question?

And suddenly it dawned on me, this is

how

because compounding

is a is a hockey stick. It goes along

and and kind of doesn't appear to be

happening and then it's slowly starts to

happen and all of a sudden it's way up

here. It happens so quickly and so

stunningly they can't quite believe it.

It turned out is not that they couldn't

do the basic math. They certainly could

do the basic math.

What it was is they couldn't quite

[clears throat] believe what the math

was telling them and they wanted me to.

It's like

you you see what's on that wall over

there. I mean, are you seeing what I'm

seeing? Cuz I can't quite believe that

I'm seeing that. I need you to confirm

that. Yeah, you're seeing the same thing

I'm seeing. And in this example, all it

is is someone has, you know, they've

started with zero

>> and they've paid in a small contribution

every year to their investment. The

investment is getting 11% return a year

>> and suddenly the thing goes

>> I think that was one of the most pivotal

moments in my life where I went online

>> five six years ago and looked at a

compounding interest calculator. So

>> it's stunning.

>> It's it is stunning.

>> It is absolutely stunning.

And it shows that if you just leave your

money in a place where it's getting this

kind of return

over time,

everything seems to take care of itself.

>> So let me let me close the circle in a

sense on on that subject because one of

the things that I think gets overlooked

with my book is this is the simple path

to wealth.

Which means if you follow it, you will

become wealthy, right? So we go back to,

you know, buying those things that

people maybe want to buy, whether it's

the fancy car or the or the house. Well,

once you become wealthy, you can not

only buy those things, but you're buying

them from a position of power, right?

You can easily afford them. you become

financially independent, which means

that your investments are throwing off

more money than you're spending. My wife

and I are basically uh pretty naturally

frugal people. And that's one of the

ways I suppose that we got to where we

are. But that doesn't necess necessarily

serve us at the level of wealth now. And

so we still have this tendency to say,

"Oh, we're thinking about getting this

stuff. How much does it cost? And do we

really want to spend that money?" And

depending on who it is, either she'll

turn to me or I'll turn to her and say,

"Doesn't matter. It's free. Everything's

free. It doesn't." And that's a very

liberating way to look at things. So

that's where the simple path ultimately

will will get you. That's what I bought

all those years ago.

>> One of the thoughts that I had, which I

do think is somewhat illogical, was my

brother and me are very different

people. So he was very, very frugal and

I was reckless. And one of the ways that

I self-justified my recklessness was,

well, you know, you've got to enjoy

life. And I'm only young once, so I'm

only going to get the opportunity to do

some of these things that are part of

being young once, going to a nightclub

and buying champagne and partying, you

know? So, I thought, yeah, I could save

and save and save and save and I could

get to, you know, 70, 80 years old and

have all this money, but what is the

point if I haven't like enjoyed myself?

I think it is a mistake to think that

you need to spend money to be happy, to

enjoy yourself. And the other thing I

will say is that

it's a lot more useful having money at

this age than it would have been in my

20s because

money buys comfort among other things

and comfort becomes much more important

to you as you age.

They did a study where they put people

in a brain imaging scanner and they

asked them to think about themselves

tomorrow. Then they asked them to think

about themselves in a couple of years.

Then they asked them to think about

themselves in 10 years time and they

looked at the brain. And then they did

another study where they got the same

people to think about a celebrity.

>> Mhm.

>> That they didn't know. I think it was

Matt Damon or someone famous like that.

And what the study proved was that we

think about ourselves in 10 years time

in the same way that we think about Matt

Damon. The further away

the time horizon, the more it becomes a

total stranger, right?

>> And so I was writing I was writing

recently for a chapter in my upcoming

book about this idea that our future

self is a stranger. To the brain,

thinking about me when I'm 60

>> is like thinking about Matt Damon,

right?

>> I don't know a [ __ ] guy.

>> So why do I care? Why do I care about

protecting him? And I think this kind of

speaks to what we were saying there is

young people and even me as a young

person kind of didn't really give a [ __ ]

about 60-year-old me,

>> right?

>> Like I I it's so far away that I I don't

really care about protecting his

interest. I almost think that's a

different person. He can figure that

out,

>> right?

>> And you know, you are How old are you

now?

>> I'm 75.

>> So you have the the wisdom of hindsight.

So you can tell me as a 33y old what

it's like to be both 33 and 75. When I

was 33, I didn't think about

me at an older age at all. I mean, it

never crossed my mind to do such a

thing. Right? So, I was not doing what I

was doing for the benefit of 75year-old

JL. I was doing it for the benefit of

25-year-old JL, 30-year-old JL. Right?

remember going back to an early part of

our conversation

what my definition of FU money it's the

money that you're accumulating

before that gets you ultimately to being

financially independent which is when

you no longer need to trade your labor

for money right your money is doing all

that

I wanted that right now so when I was 25

I'd saved the princely sum of $5,000

adjusted for inflation to be about 25

$30,000 today. U and I wanted to go back

around Europe, right? But that meant

quitting my job, which I kind of liked.

But the fact that I had that money gave

me the financial strength to go in and

negotiate that deal. If I was living

paycheck to paycheck, I wouldn't have

had that. I was far from being fully

financially independent. So, I wasn't

doing this for 75 year old JL. I was

doing this right now for 25 year old JL.

And it's just like when you work out,

and clearly you do, right? You don't go

to the gym thinking, at least I'm making

a presumption here, I'm doing this for

75year-old Steven. You're doing this

because you want to be stronger tomorrow

than you are today. for 33 year olds

even. So that's my way of thinking about

it. I I never did this for future me.

Maybe some people do and that's probably

not a bad exercise. It's probably a bit

of wisdom in that. I wasn't that smart.

>> So you would you would save $5,000 a

year.

>> Well, in those days, so my first

professional job paid me $10,000 a year

and I saved 5,000. Yeah, I saved half of

it. Going back to this point of

compounding and how how important it is

to start investing in things that will

offer you compounding returns.

>> If you started investing $500 per month

and you got an annual return of 8%

because you're investing in some of the

things that we'll talk about in a

second.

>> In 35 years

you will be a millionaire. You'll have

more than a million dollars. You'll have

1.043 043 million

>> over those 35 years you would have

invested about $200,000 but you would

have made $850,000

from the interest over that period of

time.

>> Well, just to be clarified, not

necessarily the interest, but the growth

cuz that 11% is not interest. It's it's

growth. Some of it might be uh dividends

in the case of which is a kind of a form

of interest you can think of but it's

not just just to be technically correct

right which is which is interesting. So

if I was when I was born if my parents

had put $500 a month away in a

investment that we'll talk about now

>> by the by the age I am now I would have

roughly been a millionaire just from

them putting $500 a month away from me.

Right.

>> Pretty crazy.

>> Yeah. But that's the power of

compounding. I mean, the, you know, it's

it's very gratifying to me that twice a

year I I'm a guest lecturer for a friend

of mine who's a professor at uh

University of Colorado in Boulder. And

it's always fun to talk to her students

because they're exceedingly bright. They

ask great great questions and it's just

stimulating for me. But I think about

these young people. I mean, these are

18, 19, 20 year olds who are thinking

about doing this stuff at that age. And

the remarkable amount of time that they

have for this compounding to work for

them, it's it's just incredible. They

are going to be so much better off than

if not. Um, so let me throw out a tip

for for you if and when you ever have

kids and for anybody who's listening who

has has young children, you know, as

your kids start to grow and hopefully

they get part-time jobs, right? They

start whether it's shoveling snow or

busting tables at a local restaurant or

whatever it is and they start earning

some income. Well, you can take that

income and up to I think it's $7,000 is

the limit now. Put that in a Roth IRA

which will never be taxed. It will grow

tax-free forever and they're going to be

by definition because they're making

almost no money in in they're not paying

any income tax. So, you don't need any

any deduction from that. And it doesn't

have to be their money. So, let's say

your kid makes $3,000 during the course

of a year.

you can take $3,000 and fund a Roth IRA

for them. Imagine just if they never

added anything other than that, you

know, you do that until they they get

out of college or whatever. You know,

that baseline is going to grow tax-free

for an extended period of time. That's

one of the great keys to wealth building

is just time. And and is that advice

that you still believe in that people

should be saving 50% of their income?

>> Yeah, I think it's a good rule of thumb.

It gets you to financial independence in

a pretty reasonable depending on what

the market does in say a 10 to 15 year

time period. The push back that you

might anticipate is from people who say

that's impossible. Nobody can save 50%

of their money. Just that's that's

that's silly. And I'm sorry, but I've

did it and I've now at this point I've

known countless people who've done it.

So, it's certainly you may choose not to

do it, but it's certainly possible.

>> Let's say you're earning $40,000

a year, which is the low end,

>> the average medium. So, that would be

let's say $3,000 a month.

>> Mhm.

>> So, you're you're earning $3,000 a

month. You're then going to pay tax on

that. This is what my my math says here.

It says very little tax would be would

be paid after all of your taxes. And so

you're still you've still got roughly

$3,000 a month, about 2,900 um which you

you would take home.

>> I so I would need to save 1,400 of that

which means my total expenses need to be

1,400 a month. So first thing I need to

do is live somewhere very very

affordable

>> depending where I live, you know, what

city I live in.

>> Then I need to basically radically

reduce my my expenditure, right,

>> to be able to save 50% a month. And I

guess the question is most people

would assume they wouldn't like that

lifestyle.

They wouldn't like to prepare their own

lunches every day. They wouldn't like to

not have a Starbucks coffee. They