Valuable Insights From the Simple Path to Wealth

The Simple Path To Wealth by J. L. Collins is creating quite a buzz in the personal finance space. As you might expect from the title, it is — at its core — an incredibly simple book. It offers a three-step path to wealth based on living within your means, avoiding debt, and wise investing. This core advice in this book is so obvious many might decide to skip it entirely.

That might be a mistake, because the joy of this book isn’t really in the big picture advice, but more in the smaller insights to be gained along the way. Here’s a snippet of what I got out of it.

Wealth Is Freedom, But Freedom Is Wealth Too

We all know this, kind of. But we don’t always put it in the context of our real lives. The book opens with a parable about two childhood friends who grow up and depart on their own life paths, one to become a powerful advisor to the king, the other a monk living a simple, but fulfilling life. When they eventually meet again, the king’s advisor feels sorry for his friend.

“If you learned to serve the king, you wouldn’t need to live on rice and beans,” he tells him. But the monk answers, “If you learned to live on rice and beans, you wouldn’t need to serve the king.”

It reminded me of the meme about the guy who goes to a job in the city that he hates to afford a house in the suburbs he doesn’t like. He really wants to live in the country, but he needs the job he hates to afford the house he doesn’t like and he needs the house he doesn’t like so he can be commuting distance from the job he hates.

If you want to be a minister to the king or have a fancy job in the city, that’s fine. But never lose sight of the link between wealth and freedom. You can feel wealthy on a relatively modest income, if that income actually provides you with everything you want in life.

Think About What Money Can Earn, Not What It Can Buy

Most of us think about the money we have in terms of what we can trade it for. Collins encourages us to stop thinking about what money can buy, and start thinking about what it can earn. And then adds:

“And then think about what the money it earns can earn.”

The book gives advice on investments and how you can get your money earning for you and your future, but even at a very basic level, thinking of money as something that earns you more money can be a big shift.

Once I had a decent amount of money in a safe, relatively high-interest savings account, I would challenge myself to wait until the end of the month (and the next interest payment) so I could use the interest to make small purchases on things I wanted, that would otherwise have been impulse spends.

Usually, not only did I not particularly want to still make the purchase at month’s end. I’d generally forgotten what it was.

The Happiness Per Dollar Concept

An important question the author poses is simply:

Which expense in your life delivers the least happiness per dollar and which delivers the most happiness per dollar?

Obviously we can’t abandon all the payments that we need to make but don’t enjoy making (like rent and insurance), but I find this is a great way to think about pretty much all our expenses.

Sometimes small purchases give us a huge amount of happiness and larger ones none at all. Sometimes a large purchase seems extravagant, but actually brings us immeasurable joy.

The happiness per dollar concept makes us think about our expenses and what’s really worth spending on, given what truly makes us happy.

Enjoy the high happiness per dollar returns, and have a think about the low happiness per dollar ones. We can sometimes eliminate the low happiness per dollar expenditures, but if we can’t it can still help to consider them and maybe tweak them.

If you live somewhere you hate, rent can be a very low happiness per dollar expense, so maybe it’s time to move to somewhere you love, even if it costs a little more.

You might find that a book or music subscription has a low happiness return — not because you don’t love reading or listening to music, but because you never have time to actually use the service. If that’s the case, it might be time to make room in your schedule rather than drop the subscription.

Once I started thinking like this I tweaked all kinds of things in my life that I hadn’t previously given much thought to.

Want to read The Simple Path To Wealth? Find it here, or read a short summary here.

About the Author

Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen