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My name is Lukas and as your dedicated Finance Friend, I'm here to help you on your path to financial independence. 
 
This is part of our book summary series! We are reading through the most popular finance books and summarizing them here! We find that most finance books are either repetitive or sales-driven and so our goal with the summaries is to only showcase the useful or interesting content from the book. I have you enjoy! 

Table of Contents

1.  Ratings
2.  Quotes
3.  TL;DR
4.  P.S. Commentary

The Simple Path to Wealth Summary

Ratings

Ratings:

How difficult: Entry Level 
How useful: For entry level, quite useful.
How annoying: Not annoying.

Quotes

Quotes:

"If you choose to master it, money becomes a wonderful servant."


"Seek what meets your needs, not what you can afford." (abbreviated)


"In regards to student loans: We are creating a generation of indentured servants.
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."
*Unless it’s less than 3% 


"Becoming wealthy is about controlling your needs as much as expanding assets."


"Spend less than you earn—invest the surplus— avoid debt."


"Avoid fiscally irresponsible people. Never marry one or otherwise give him or her access to your money."


"If it sounds too good to be true, it is."


"Money can buy many things, but nothing more valuable than your freedom."

TL;DR

TL;DR

  • This is a ‘Start Here’ book. This could be the first book you ever read about investing.

  • Goal: To be financially independent. To live off of your investments. To have the freedom to choose where to spend your time and efforts.

  • -----------------------------------------

  • Spend less than you earn—invest the surplus— avoid debt.

  • Aim to save + invest 50% of what you make.

  • Debt:

    • Debt limits your options. Forces you into less than ideal situations because you need to make that next payment. Essentially takes away your freedom to choose what is best for you. 

    • Seek what meets your needs, not what you can afford. 

      • Debt makes you think you can afford things which were previously not possible. This is a trap. Buy what meets your needs, not what debt will enable you to afford.

    • Debt will enslave you (unless it’s less than 3%).

    • Money is relative. You can be a slave making $1M a year if your spending is out of control. 

    • Opportunity cost is the evil twin of the ‘magic of compounding’. When you buy something that is not needed, you are not only losing that money, you are losing the additional value it could have been accumulating. 

  • Invest everything you do not absolutely need in Vanguard index funds. Once you are approaching retirement, shift some of that into Vanguard bond funds. 

    • Ignore the noise. Ride the storm. Do not panic sell.

    • Crashes are inevitable, when it happens, buy more shares.

    • A crash at the beginning of your investment career is a gift, you are now able to buy everything at a steep discount!

    • Selling when there is blood in the streets (market is crashing) is financial suicide. It indicates lack of planning, and you pay the piper as a result. 

    • This is the authors #1 piece of advice. Invest everything in VTSAX.

  • How people lose 

    • Trying to time the market. 

    • Trying to pick individual stocks. 

    • Trying to pick winning fund managers.*

  • Find your ideal mix of tax advantaged retirement accounts (401k, IRA, roths etc) and max them out. 

  • Once you are rich enough, starting your own foundation is a good tax strategy. 

  • When 4% of investments can cover your expenses - you are financially independent. 

 

*The author is his own financial manager. If you enjoy researching finance and investments, as the author does, it does not make sense to hire an investment advisor. 

P.S. Commentary

Jack Bogle and the first index fund:

Jack Bogle is the founder of Vanguard and is the reason we have index funds. Prior to this you had to buy individual stocks. The author really, REALLY loves Jack Bogle and what he did for the investing community, we here at Finance Friends agree. 


Why are index funds so special? The risk is spread across multiple companies instead of one. It is the representation of a more stable system, a more distributed network. His efforts represent a more decentralized form of investing. We think that any step towards the ideals of an electric future (decentralized, non-physical, non-temporal, etc*) will find great success. Jack Bogle is the first to make a step in this direction, as least per my awareness right now. 


*if you want to read more about this idea, check out: Understanding Media by Marshall McLuhan
 

Why everyone shits on financial advisors and how to pick the right one:

  • The author heavily advises against picking advisors for the following reasons

    • The industry is rife with con artists. 

    • Historically, they cannot beat the market. 

  • While both of these are true, there is one assumption the author makes that we do not think is necessarily true. His assumption became clear through nondescript commentary throughout the book. 

    • “My Friday night ritual consists of watching Wall Street Week.” 

    • “My wife manages our day-to-day finances.” 

  • The assumption the author makes when recommending not to use an advisor is that everyone enjoys researching finance as much as he and his wife do. 

    • The equivalent of this would be if a mechanic told you to do all your own car repairs because it will save you money and the effort of having to find a good mechanic.

    •  If you are the type of person to DIY everything, then it makes sense to also DIY your finances. It is more than possible with the massive wealth of information available for free online. 

    • If you do not change your own oil, iron your own clothes, do your own taxes, etc, then we recommend finding an advisor that you can trust. 

    • This is where the author throws in the towel. When it comes to picking an advisor, his advice is, “beats me”.

    • Just like everything else in life, it comes down to: is this worth my time, do I actively enjoy doing this or do I want to pay someone to do it better than I can. 

  • The struggle and how Finance Friends is helping.

    •  The author is correct in stating that the finance industry is rife with conmen. Both my dad and my grandpa were conned at some point in their investment career. 

    • Again, this is where taking a step towards a more electric future will massively benefit the advisor selection process. 

    • Finance Friends is crowdsourcing data about financial advisors. This decentralized information gathering and non-physical/non-temporal access (free on the internet to anyone at any time) will enable a more efficient future. This is only now legally possible starting May of 2021, thanks to a new law passed by the SEC.

    • In simpler terms, if we crowdsource reviews, there should be massively less cons because any potential investor will have the ability to look up reviews about the advisor. 

    • Additionally, as we continue to collect the performance data about what advisors, we will be able to filter those out who continually underperform. 

    • We do not want to write off advisors like most of the older generation who have heard many a horror story. We know that if we hold advisors to higher standards via the crowdsourcing and public presentation of their information, the cream will rise to the top and the cons will be outed. 

    • This is only possible with your help! If you or a friend have been conned please find their profile and leave a review (or send us a message at info@financefriends.org). Equally, if you have found what you think to be an amazing advisor, leave them a review as well!

 
 
 
 

More Resources

Resources

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