How to Manage Your Money: 3 Principles from JL Collins

Here at Republic Wireless, we are passionate about helping you save money for the more important things in life. We also know that personal finance and managing your monthly expenses while also thinking about long term savings goals can be overwhelming. In fact, we learned in a recent survey that 53% of Americans feel at least somewhat overwhelmed by financial burdens, and that thinking about finances keeps 59% of us up at night1

So, we recently sat down with financial guru JL Collins to get his take on personal finance and learn his tricks of the trade. Collins is an internationally known financial blogger and author – and a valued Republic Wireless member! In 2011, when his daughter was a freshman in college, he wanted to pass along the financial wisdom he gained through years of successes and failures. But, he was smart enough to know that this well-intentioned advice would likely be met with heavy sighs and eye rolls from his teenage daughter. So, he started his blog to archive this invaluable advice so she could access it when she was ready to listen.

Purely by accident, Collins’s blog picked up a quick and loyal following within the Financial Independence, or FI, community. Financial independence means you have accrued enough wealth to live on without working for an income – instead, you earn passive income through dividends from investments you own. Although people have for years been striving for financial independence, many were working toward this goal in isolation.

“People along the path to financial independence are probably unicorns.”

As Collins says, “I think people along the path to financial independence are probably unicorns. It kind of runs counter to the message that is hammered home in our consumer culture, which is that the key to happiness is to spend more money.” Blogs like JL Collins’s, Mr. Money Mustache, and Mad Fientist gave those working towards financial independence an avenue through which to connect with one another, get advice and support, and celebrate their successes.

“I believe in distilling everything down to the simplest possible approach.”

Collins recognizes that most people, including his daughter, aren’t passionate about investing or personal finance. “She knows that this investing stuff is important,” he says of his daughter, “and she knows that if she gets it right, it can have a very powerful and positive impact on her life. But she’s not interested in it.” So, from the get-go, his goal was to provide the simplest path to wealth that anyone would be able to follow. He says, “I believe in distilling everything down to the simplest possible approach” – from that mindset, his well-known Stock Series and book, The Simple Path to Wealth, were born.

Although we can’t cover all his recommendations in this post, we’ve distilled it down to the clearest and simplest path:

Principle 1: Live Below Your Means

This sounds simple, and fairly obvious. Your monthly expenses – all of your monthly expenses – should be well below your monthly income. If not, you are at the mercy of your employer and of your lenders. But, with the average individual credit card debt at $5,331 in 2019 and 55% of Americans not paying their credit card balance in full each month2, we see that this is easier said than done for many people.

Collins’s recommendation, and what he has done since graduating from college, is to spend no more than 50% of your take-home pay. One of the ways Collins is able to follow this budget is by making smart financial decisions like using Republic Wireless for his cell phone service – this allows him to  enjoy the benefits of a smartphone risk-free and at a great value.

He instituted this conservative approach to managing his money after seeing his parents struggle to make ends meet when his father’s health declined. While he was growing up, Collins enjoyed an upper middle class lifestyle – his father owned his own business, and, like many Baby Boomers, put his family first and took pride in providing a wonderful life for them.

“It’s a very insecure world out there – you can’t count on your job, you can’t count on your health even. So, you had better lay down some financial armor.”

However, when his health and therefore business started declining, he didn’t have a back up plan, and didn’t have the money saved to continue to take care of his family the same way he had in the past. “As his health declined, our life declined,” Collins reminisces. “And it was very difficult, very ugly, and very scary. It taught me that it’s a very insecure world out there – you can’t count on your job, and you can’t count on your health even. So, you had better lay down some financial armor, so to speak.”

For those of us (myself included) who are definitely spending more than 50% of our take-home pay, this goal can sound incredibly intimidating. At first, when Collins shared this with me, my initial reaction was, “I’ll never get there – why bother trying?” But, every little bit counts, and every step you take to managing your money today will pay dividends in the future.

We recommend getting started by tracking your spending. You can use tools and apps like Mint or You Need a Budget, you can use an Excel or Google Sheets spreadsheet, or you can go completely analog and write down your spending in a notebook. However you choose to do it, keep track of every single dollar you spend – from your mortgage all the way down to the chips you got from the vending machine that afternoon you were so hungry you thought you were going to pass out in your staff meeting.

“At a glance, I can see what I’m spending money on, so I can see where I can cut back if I ever need to.”

Even Collins, someone I consider to be a financial mastermind, tracks his spending. Once you start recording where your money is going, you can uncover spending patterns and habits you may not realize you had. You can also identify some small changes that could have a big impact on your monthly expenses. As Collins says, “I track everything that we spend. If the market were to make a major dive like it did in 2007 and 2008, I would want to be able to look at where my money is going. At a glance, I can see what I’m spending money on, so I can see where I can cut back if I ever need to.”

Check out some of the small changes you can make to your daily and monthly habits to reduce your expenses and live more within your means. For more significant changes, Collins points out that the three biggest financial culprits tend to be (1) housing, (2) transportation, and (3) food. Of course you need a roof over your head, safe and reliable transportation, and to sustain yourself. But, if you take a hard look at your monthly expenses, you may find that there are areas where you can save a lot of money by, for example, purchasing a used car outright rather than saddling yourself with an expensive monthly car payment (plus interest!).

Principle 2: Invest Your Extra Money

Once you’ve reduced your monthly expenses, you will be able to start saving and invest your surplus. When investing, think about both short- and long-term savings goals and balance your risk accordingly.

Money that you’ll need to access in order to address short-term needs, such as your emergency fund, should be easily accessible and liquid. But, that doesn’t mean you need to keep an envelope of cash under your mattress – unless that’s your thing, in which case, we support you! If you want your emergency fund to still work for you and earn you money like some of your long-term investments, but without the risk, you can consider a high yield savings account. No, these won’t give you the same yield that an investment account could give you (over the long term), but your money is safe, easily accessible, and still working for you.

Depending on your age and penchant for risk, your long-term savings can go into more aggressive and volatile funds. Collins recommends investing in index funds – specifically VTSAX, or the Vanguard Total Stock Market Index Fund. An index fund is a type of mutual fund that is built to reflect the components of a total market index, such as the Standard & Poor’s 500 Index (S&P 500). Index funds allow you to passively invest, they have lower expenses than active investments, and, if you “set them and forget them,” they generally outperform active investments.

“Investing is one of the only things I can think of in life where you get a better result by doing less.”

Thinking of his daughter, Collins says about index funds, “The good news is, not being interested in investing is actually a bit of a super power…. The people who are really interested in this investing stuff are looking at it all the time, and when the market dips, they panic and sell. Investing is one of the only things I can think of in life where you get a better result by doing less.”

How you manage your investments is a highly personal decision. But, if you are interested in learning more, we do recommend that you start with Collins’s Stock Series – if you want to have reference material easily accessible, read his book, The Simple Path to Wealth. And, stay tuned – the Republic Wireless team is reading The Simple Path to Wealth and will be doing a book review in an upcoming blog post.

Principle 3: Become Debt Free Then Stay Out of Debt

Staying out of debt could easily be Principle 1 on this list, rather than Principle 3. But, if you follow Principle 1 – live below your means – then you will never have to worry about going into debt to maintain your lifestyle.

“Debt is a ball and chain that keeps people literally enslaved.”

As Collins aptly puts it, “Debt is a ball and chain that keeps people literally enslaved.” With almost a third of Americans stating that they have more credit card debt than emergency savings1, debt is a real problem in this country that we should tackle head on.

There are many approaches to tackling debt – and, like investing, the approach that will work best for you is highly personal. What’s important is that you take stock of your debt and your monthly expenses and take action to pay off your debt. The best part about paying off your debt is that it sets you up for a lifetime of success in living below your means and investing the surplus. To pay off your debt, you will naturally need to cut back your spending to the extent that you aren’t adding more to your debt – and then, you cut back further in order to free up money to put against the debt and pay it off.

“It’s not deprivation. It’s freedom.”

Once you pay off your debt, do not do what I would be tempted to do, which is to celebrate and treat myself by adding more debt with a nice meal out, a nice bottle of wine, or even a vacation. If you want to improve your financial wellbeing, you may need to reframe how you think about spending and saving money. For people who are used to prioritizing spending over saving, Collins advises “Maybe you can think about [saving money] not as deprivation, but as spending on something different than you normally would. So, instead of buying the clothes or the new car, you are choosing to buy your freedom. It’s not deprivation. It’s freedom.” And that’s something we can get behind.

What’s Next For JL Collins?

One of the most interesting parts about sitting down with Collins, who many refer to as the Godfather of the FI movement, is that although he is financially independent, he’s still busy and working. He books speaking engagements (including a very popular Google Talk with over 300,000 views), continues upkeep on his blog, and runs multiple events throughout the year to convene with like-minded folks in the FI community.

“People tell me about how profoundly the ideas they found on my blog and in my book have improved their lives.”

These events, known as Chautauquas, are week-long retreats in super-cool cities that serve as a gathering for individuals deeply involved in the FI community. They bring in speakers, have 1:1 consultation sessions, get to know one another, and share their stories and successes. Now that Collins has passed along his wisdom to his daughter, now an adult, through his blog, it is these events and the individuals he connects with that inspire him. He says, “It’s the community and the very positive feedback that I get that keeps me motivated to continue. People tell me about how profoundly the ideas they found on my blog and in my book have improved their lives.”

“Anybody who is driven enough, smart enough, and has the kind of self discipline that it takes to save and invest enough money to be financially independent at an early age is not the kind of person who’s going to just sit on the beach.”

So, will he ever retire? Maybe – but it depends on how you define “retirement.” The FI movement has morphed into the FIRE movement – Financial Independence, Retire Early. However, Collins has observed that many of his connections in the FIRE movement are not retired in the traditional sense of the word – that is, they aren’t just not working. He’s observed, “Anybody who is driven enough, smart enough, and has this kind of self discipline that it takes to save and invest enough money to be financially independent at an early age is not the kind of person who’s going to just sit on the beach.” And, goes on to say, “So very frequently, financial independence allows them the freedom to invest their time and work in projects that engage them and that they find valuable as opposed to just necessary for paying the bills.”

Share Your Financial Journey

We feel so honored to have gotten to know JL Collins, and learned a lot through the process. While not everyone has the interest or ability to save 50% of their take-home pay, and not everyone wants to achieve financial independence (at all or at an early age), Collins leaves us with this powerful thought – “Even if you have no interest in being financially independent, you ought to have some interest in living below your means and saving money to protect yourself against the hard times.”

We couldn’t agree more, JL. Thank you for sharing your story with us. What about you? What does your financial journey look like, and how have your life experiences shaped your spending and saving philosophies? Start the discussion below, and stay tuned for more posts about financial well-being and the financial independence movement.

1 Source: Nationally representative survey of N=1,323 adults aged 18+ conducted by Republic Wireless, March 2019.

Share on Facebook0Tweet about this on TwitterShare on LinkedIn0Pin on Pinterest0Share on Reddit0

Notable Replies

  1. Overall, great advice, however, Collins’ principles might seem unattainable for a lot of people who are struggling day to day. I absolutely agree about tracking expenses - I’ve been doing this for almost 40 years. I retired at 62, put two kids through college debt free and have no debt and that’s not a coincidence. By the way, some debt is ok, like a mortgage. Credit card debt, auto debt or leasing is an anchor.

    Spending only 50% of your take home pay isn’t really necessary unless you want to be financially independent at a very young age (BTW - don’t have children!). If someone works for an employer that has a 401k, start with small percentage contribution. Let’s say they get a 4% raise. Allocate 2% to the 401k. Keep doing this until they get to 10% or more. If they start early enough, and invest it properly, they will get to financial independence.

    He’s right on with the investing part. Low cost index funds or exchange traded funds are the way to go. Come up with a suitable allocation scheme (you can get help with this) and then just don’t do something, stand there! Do not panic and over react when the market gets crazy. This is where using an independent registered financial advisor can be a big help. They should be registered with FINRA (check them out at which requires them to be a fiduciary. A fiduciary can only act in your best interest. So called advisors that work for insurance companies or the big brokerage houses are NOT fiduciaries. They make money buying and selling. A RIA gets paid a fee (usually a percentage of assets). They have an interest in making your account grow, not churning your account to make their quotas. They will also talk you down off the ledge should the market have a major correction. Full disclosure: I am not a financial advisor nor do I have one, but I’ve been studying this stuff for over 40 years.

  2. Thank you, @robertm.alhqls, for sharing your story and for your thoughtful and well-articulated advice. Congratulations on your financial successes! How are you spending your time enjoying your retirement?

    I also totally agree with you that some of the goals might seem intimidating - even JL acknowledges that folks on the FI (at an early age) path are “unicorns”! When he and I were chatting, I was surprised (and really impressed!) by the 50% savings rate. I’m certainly not even close to that. But, hearing such an aggressive goal did encourage me to take a step back and take stock of where my money is going. In the coming weeks, we’ll be sharing additional savings stories that are equally as inspiring, but less aggressive (and therefore more attainable).

    I feel really fortunate that a big part of my job is talking to members like you and JL, hearing your stories, and learning from you. Thank you again for sharing!

  3. SHEK says:

    Overall, good advice. However, I agree with @robertm.alhqis in that few can handle all of Collins’ principles and many may have trouble doing just one of them. I believe that most people need more attainable goals laid out for them, at least to start.

    I started my career in 1983, opened my first investment account for retirement in 1984, and retired in 2012. Yes, I retired after less than 30 years in the work force and I fully expect to be retired longer than I was in the work force. (FYI: I was 51 when I retired.)

    Collins is correct, budgeting all of your money is key. However, his 50% advice on spending is probably going to make most people walk away before they even try, as @cstudwell said. Budgeting of some form is needed and, for many, that may be a process of taking it one step at a time to control their spending and allocate savings.

    Of course, proper budgeting will include saving. Saving enables investing. And, investing is how you get your money to work for you, which will allow you to retire comfortably.

    When I started investing, I followed the herd and went to a financial adviser and bought into the recommendations and accepted the costs and fees. Some of which were not openly declared. Over time, I realized that these costs and fees were reducing my gains. I started looking at index funds and, like others, determined that I could do just as well if not better by investing in index funds. Over time I narrowed my focus down to just the S&P 500 index. In particular, low-cost investing in the S&P 500 index. Don’t “play the market,” don’t be more aggressive with your long-term money, just put it all into the S&P 500 index via a low-cost fund or ETF through a low-cost broker. (I, too, like Vanguard but there are others that are just as good.) Bottom line, ALL money that you do not need for seven or more years, put it into the S&P 500.

    Google “The Buffett Bet” and see for yourself how well that worked. The bet started in 2007, not long before the biggest downturn in recent history, and he still won quite handily.

    You can download the returns for the S&P 500 going back to 1927 and the inflation rates going back to 1914. Pick any 45-year period (roughly a career) and run the numbers. Heck, check out what I did, take any 30-year period and run the numbers. If you saved only 10 to 15% of your pay, through-out your career, what would you have had? Imagine if you could save more than 15%.

    After I realized the value of low-cost index investing, I began investing more and more into the S&P 500. Due to my regular saving and diligent investing, I became financially independent. After developing and double-checking my approach to retirement withdrawals, I knew I was financially able to retire.

    Through my experience, I developed an approach to personal finance which I call BSIR. Budget, Save, Invest, Retire. You need to budget wisely, save regularly, invest diligently, to retire comfortably.

    My life’s experiences make me believe that many people need a guide to help them develop their own simple plan that will get them to where they need to be. I developed BSIR for myself and then tried to pass it along to my younger family members. (Similar reaction, BTW.) So, after retiring, I published three short (20 to 30-minute read) books on the approach. The goal was to provide my nieces and nephews a guide that gave specific percentages to allocate towards saving, investing, and spending as start-points to allow them to make a budget that will work for themselves. That budget, coupled with low-cost investing, and a managed withdrawal plan, can make for a comfortable retirement.

    Before you decide to retire, make sure you have three things in hand:

    1. Finances.
    2. Social network.
    3. Plan to fill your day (hobby, activity, volunteer, etc.)

    You can do this.

  4. Back in the day, early in my “real job” working days a guy I worked with told me this: “start a budget, and you will get a 10% raise in pay without having to talk to the boss.” Since I was in civil service and my boss couldn’t give me a raise anyway, it seemed like a good thing to try. I have now been budgeting for over 35 years and he was, if anything, shooting low on the benefit.

    As others have pointed out, starting with financial monitoring is important and just that practice lowered our spending (had to write it down…had to admit/justify it to self and spouse…). We did this for a couple months, then built as many categories into a budget as we wanted based on those records. Over the years, these categories have changed with our needs.

    One real key for us was to manage the bills that come seemingly out of the blue, once or twice a year. If you have ever been caught off guard by an insurance or property tax bill, or needed new tires just when you went broke this is a powerful tool! It is a little tricky to get this started but essentially, once on track, we were saving for these kind of bills each month (insurance twice a year? Total divided by 6. Property tax once a year? Total/12. Energy bills vary? Monthly totals added up/12 And so on). We kept the funds in our checking account, but if you are not disciplined enough for that, keep the funds in a separate place, a little harder to reach. While those funds were building up, if we ran out of “spending money” we were essentially broke until the next paycheck, despite the money set aside for bills and other budget items (monthly ones too, of course). When a big bill or predictable car repair bill came due, we could simply write a check and move on.

    We both had learned early that debt was to be avoided, having both been caught in the trap of thinking that next month we would have enough money to pay it off…but of course we did not. We went to the extreme of saving up, long and hard, for even the biggest of purchases, including cars (after those first few) and house/land (after only one mortgage). This was in the 70’s and 80’s, perhaps more feasible then but I suspect still possible.

    I could go on. Suffice it to say, we are sold: budgeting can be a powerful tool for getting your finances in order and making your financial life easier. And it is might just be easier to set up and maintain than you think!

  5. @jimnjo Great feedback! You bring up a really good point about the “non-regular” bills, or those that are inevitable, but that are easy to forget (unlike your mortgage/rent payment, utilities, etc.). One trick I’ve started to employ is to keep a dedicated savings account for each of those categories - so I have a savings account for insurance premiums (2x yearly auto insurance payment and 1x yearly life insurance payment), one for car maintenance and saving for an eventual new car purchase, one for vacations, etc. Similar to how you approach it, except I have to keep it in dedicated accounts because I’m not as disciplined as you are! :slight_smile: Then, when I make a payment associated with each of those categories, I simply transfer the payment amount into my checking account. I would only recommend this if you have access to no-fee savings accounts - it’s certainly not something you would want to pay fees for. Thanks for the great ideas and advice!

  6. @SHEK Thank you for your feedback and wonderful advice! I love your BSIR acronym. Are your books published on Amazon, or somewhere for purchase?

    What are your thoughts on the 4% rule for retirement withdrawals? Is that the approach you took to determine when you were FI? Do you think that rule is still relevant today?

  7. It seems retirement is busier than I envisioned. We are doing a lot more traveling, both internationally and in the US. We love the hiking opportunities in our National Parks in the West and Southwest. We’re also doing grandchildren childcare 2 days a week. My wife volunteers at a local food pantry and I’ve been doing volunteer tax prep work for AARP at local senior centers. I’m working on a short financial education course aimed at high school students to introduce them to the concepts of savings and investing EARLY. Sadly my work at the senior centers has revealed a lot of malfeasance on the part of the financial services business. Many seniors are having their accounts churned for the benefit of their broker, but not for them. So I’m thinking about developing some material that could be presented in small groups or one on one to help counteract this.


  8. SHEK says:

    Yes, @cstudwell, my three books are available on Amazon, iTunes, and Audible. They are easy to find with a search of “BSIR” on Amazon. From there, you can get any of the three options (e-book, audio book, or paperback). I will include links at the bottom of this note. On iTunes, I always have trouble finding them, but they are there.

    As for the 4% rule (also known as the Bengen rule), I think using it as a planning tool to determine how much you might need is a good idea. However, when it comes to your actual withdrawal plan, I suggest another option. I address this in chapter 4 of my third book, A Tiny Book on Personal Finance: Retirement Withdrawals. I actually list five options for a withdrawal strategy. The last I list is my strategy, which is a mixture of two rules / principles that I developed and call The Faucet and The Funnel. These principles are designed to allow an individual the ability to control the rate of withdrawal and to provide a buffer for when the market is in a downturn.

    To determine that I was FI, I not only ran my numbers through some of the rules I list in my book, but also against historical market data and through multiple on-line retirement calculators. While there is never certainty in guessing the future of the markets, my conservative withdrawal approach more than assured me that I should have sufficient financial reserves to live well past 100 years old. And, by using my Faucet and Funnel principles, possibly extending that by five or so years. (I don’t expect to live to 100, but knowing that I can means I can plan for my heirs without impacting my quality of life in retirement.)

    The three books I have published are:

    Book 1:
    A Tiny Book on Personal Finance: Budgeting



    Book 2:
    A Tiny Book on Personal Finance: Saving and Investing



    Book 3:
    A Tiny Book on Personal Finance: Retirement Withdrawals



    All the Best,

  9. Hi @SHEK’ husband,

    I’ll be glad to change your Community username, just let me know what you’d like it to be!

    The links to your books are within the Community guidelines and appropriate to the conversation, thanks for sharing!

Continue the discussion at our Community forums