When I heard one of my favorite bloggers was coming out with a book I was very excited, but when I found out I could get an advanced copy and spew my opinion of it on the internet I couldn’t wait to get started. Now I’m not normally a ‘book review guy’. In fact I hated book reports with a passion when I was in school. It took all the fun out of reading. And while I can’t say I really enjoyed this process I felt like this could be the sort of book I could at least be a little inspired to write about.
JL Collins is a financial blogger who is well known in the FIRE (financial independence retire early) crowd. He preaches the importance of two things: Low cost efficient investing and the importance of F-you money (or if you are slightly more polite ‘no thank you money’). I am attracted to this message of freedom and using money as a tool to achieve it.
This book is designed for a specific type of person. This person is a saver, wants to achieve financial independence, and is primarily interested in building wealth and income streams through paper assets (stocks, bonds, cash) as opposed to building a business or real estate. However, even if you do generate money from a business or real estate you will still need somewhere to park your assets and grow them, and nothing has been as powerful as the stock market in modern history.
Now a caveat here. I am reading this book as a guy who knows almost everything in the book because I have been reading financial books and blogs like this for many years. It is impossible for me to know what this book would feel like to someone with minimal financial education.
The ideas in the book are incredibly simple (get out of debt, have a high savings rate, use simple low cost index funds and let the awesome power of the capital markets multiply your wealth). The more complicated part (the behavioral psychology) is where people get tripped up. I think Jim does a great job of explaining the benefits of simplicity, efficiency and focus while addressing the psychological issues one will inevitably face while investing.
The meat of the book is in providing a framework for investing in broadly diversified index funds and the distractions and pitfalls you will experience on the way. There is plenty of specific, actionable tactical information as well, specifically with regards to different retirement account options, taxes and distribution strategies.
There is a solid explanation of the 4% rule, dollar cost averaging and social security. Each of these is approached from a standpoint of simplicity and each could be a book on their own, but that is the point of this book – simplicity. The book is a template of a simple strategy that is time tested, and if followed should lead to a very predictable outcome – financial freedom.
That is the thing that I like most about this book; the focus on freedom. F-You money (maybe the F stands for freedom) gives you the freedom to live life on your terms. Money is only a tool to achieve freedom and Jim understands this deeply. It is why I read his blog, and why I like the book.
This book is not for everyone, but to those that it resonates with it will be a great resource to get the motivation and tactical tools to achieve financial independence. It fits nicely on the shelf with my other books on personal finance…and plus the cover is pretty cool.
I would have liked to see a chapter on insurance, which I think many financial independence writers gloss over. A big pile of F-You money can be easily chewed up by a disability or untimely death of the primary income earner. Hedging against disaster is part of the path to wealth.
I also slightly disagree on the need for a financial advisor and other consultants. While it is certainly possible to manage your finances some people would probably be best served by having help. Cost and competence of advisors is a big issue as pointed out in the book, and I don’t have great answers. I agree with him that no one will have your best interests in mind like you do and there are a lot of questionable characters in the financial services industry. The paradox is you need a solid understanding of finance to be able to assess an advisor, and by the time you are in this position you will have the knowledge to do much of it yourself. It is entirely possible to use this book to manage your own financial plan on your own.
The major advantage of a financial advisor is not asset allocation though; this is the easy part. The benefit of a financial advisor is to holistically look at the big picture, see the blind spots in your knowledge and guide you through in times of personal or financial crisis. A great financial advisor will save us from ourselves when we are fearful and not thinking clearly. Personal finance is a whole different animal when it is your money on the line as opposed to abstract strategies in a book.
Regardless of this minor quibble though, increasing your own financial intelligence is to your advantage whether you have a financial advisor or not. Knowledge is the antidote to being taken advantage of.
I highly recommend the book, although if you choose not to read it at the very least check out his blog for some entertaining and informative financial information.
A few of my favorite quotes from the book:
“Spend less than you earn—invest the surplus—avoid debt. Do simply this and you’ll wind up rich. Not just in money.”
“One of my very few regrets is that I spent far too much time worrying about how things might work out.”
“There are many things money can buy, but the most valuable of all is freedom to do what you want and to work for whom you respect. Those who live paycheck to paycheck are slaves. Those who carry debt are slaves with even stouter shackles. Don’t think for a moment that their masters aren’t aware of it.”
“Life choices are not always about the money, but you should always be clear about the financial impact of the choices you make.”
“The greater the percent of your income you save and invest, the sooner you’ll have F-You Money.”