How I Failed My Daughter and a Simple Path to Wealth

Literally since the day she was born people have been complimenting my daughter. Her looks, her brains, her charm (she takes after her mother) and her behavior. For that last one I sometimes get credit. Not that I deserve it. Mostly I’ve stood by and simply watched in awe and tried not to get in the way.

A few years back I actually lost a friend over this. He was so insistent I take credit and so upset when I didn’t, he hasn’t spoken to me since. But the truth is the truth. In fact, I have this vision of the Birth Angel approaching God in ‘91 and saying, “Hey there, God, we’re planning to send a little baby girl down to that Collins guy.”

angel statue

And God saying, “Ah, man. Really? Did I authorize this? I did?? Guess this day hadda come. Well, send him the easiest, best one you’ve got. He can’t handle much.” And so, I got Jessica.

You might be thinking I’m overstating this. Not so. In the one area I actively tried to influence her, I failed miserably. Money. See, I hold a few core beliefs. One is that this whole civilization thing has been a huge mistake and we’d all be better off as hunter/gatherers.

(Now there is even a book that agrees with me on this:

Great read if, like me, you are into this kind of thing)

Another is that, since we do live in this complex, technical world you had best learn about money. Money is the single most important, effective tool in navigating it.

I started her early. Allowance. Envelopes for spending, saving and charity. “The Richest Man in Babylon.”  Checking account. Saving account. Mutual fund. Endless conversations (ok lectures) on the subject. What child wouldn’t love this stuff?

bored girl

Now she’s in college and, home from one recent break, I brought it up again. She stopped me. “Dad,” she said “I know this is important. I appreciate money. I know I need it. I just don’t want to have to think about it and manage it.”

Yikes. The one thing I tried to instill….

But then I thought about it. This likely describes most people. Financial geeks like me are the aberration. Sane people don’t want to be bothered. So is there a simple way for folks who have better things to do with their time? Yep, there is. Below is what I created for her, and she’ll get better results with it than the vast majority active money managers.

 Country path

The simple path to wealth

It starts with nine basics. She doesn’t have to read any further than these to make it work. Just do it.

  1.  Avoid fiscally irresponsible people. Never marry one or otherwise give him access to your money.
  2. Avoid money managers. It’s your money and no one will care for it better than you.
  3. Avoid debt.
  4. Save a portion of every dollar you get.
  5. The greater the percent of your income you save and invest, the sooner you’ll have F-You money. Try 50%. With no debt, this perfectly doable.
  6. Put this money in the Vanguard Total Stock Market Index Fund (VTSAX). This is the fund you already own, so just keep adding to it.
  7. Realize the market and the value of your shares will sometimes drop dramatically. People all around you will panic. They’ll be screaming Sell, Sell, Sell. Ignore this. Even better: Buy more shares.
  8. When you can live off the dividends VTSAX provides you are financially free.
  9. The less you need, the more free you are.

Willing to go a step further? Notice what you are not doing:

  • No expensive money managers
  • No fancy strategies
  • No exotic, hard to understand investments
  • No weekly, monthly or even yearly management
  • No effort; just keep adding to the pot.

More? I thought you’d never ask!

The Details:

1) Avoid fiscally irresponsible people. Nothing will destroy your wealth faster than letting someone else have access to it. Fiscally irresponsible people have squandered their money and will happily squander yours. They will try every dirty trick possible to get their hands on it. Kick them to the curb. Look for people who will add to your efforts. This applies to more than just money.

2) Avoid Money Managers. They are expensive at best and will rob you at worst. Google Bernie Madoff. Seek advice cautiously and never give up control. It’s your money and no one will care for it better than you. But many will try hard to make it theirs. Don’t let it happen.

3) Avoid debt. Never borrow money. Never carry a credit card balance. Almost everyone else you meet will be borrowing money to buy this or that. It will look normal. You might be mocked. You don’t want to run with this crowd. People still refuse to believe I have never had a car payment.

  •  The only exception might be for a house. But don’t be in any hurry. Think long and hard before taking out that mortgage. If you are a disciplined saver, renting is damn near always the better fiscal choice. (If you are not, a house can act as a forced savings plan. A poor one, but at least a plan.)
  •  A house is not an investment. In fact it has the very worst characteristics of an investment. It is only place to live and an expensive indulgence. Buy one only if you can easily afford it and want that particular lifestyle.
  •  Most people will argue this strenuously. They are wrong. This is why

 4) Save a portion of every dollar you get. 50% is good. With no debt, this perfectly doable. Think this is too extreme? Check out the conversations here: Early Retirement Extreme and Mr. Money Mustache. The most valuable thing you can buy with money is not cars or clothes or vacations or houses. It is your financial freedom. So pay yourself first. Most people spend every cent they make and borrow to spend even more. This is nuts. Those who do are slaves to their employers and slaves to their debt holders. You weren’t raised to be a slave.

5) The greater the percent of your income you save and invest, the sooner you’ll have F-You moneyThe obvious reason this works is that the more you save the more you’ll have. The less obvious reason is the less you learn to live on the less you’ll need to be financially independent. See point #9 and The Monk and the Minister.

6) Put this money in the Vanguard Total Stock Market Index Fund (VTSAX). You want the money you save to work hard for you. In VTSAX it will.

  • This is an “index fund.” You can learn more about exactly what that means anytime (The Stock Series is a good place to start), but for our purposes here it means very low cost so you keep more of your money.
  • VTSAX is an index fund that invests in stocks. Stocks, over time, provide the best returns.
  • Vanguard is the company that operates the fund and it is the only investment company you need (or should) deal with. Vanguard’s unique structure means that its interests and yours are the same. This is unique among investment companies.
  • You might find a fund in another investment company that is a bit cheaper. But you can’t trust these other companies long-term. Their interests are not your interest. If you play with snakes, to quote Dave Ramsey, you’ll eventually get bitten. Don’t bother. Stick with Vanguard.
  • You will hear occasionally how “actively managed” funds beat index funds. It will seem obviously better to switch to one of these. It’s not. Don’t. Very rare is the manager who can consistently outperform the index. While who they are it is obvious after the fact, it is impossible to know who it will be out of the thousands trying at the start. Even if you were to get lucky, they retire, quit, die or simply lose their touch. Plus they are more expensive. Don’t bother.
  • We choose to invest in stocks because, over time, stocks outperform everything else. They give you the best returns with, using an index fund like VTSAX, the lowest effort and cost. Never try to pick individual stocks unless you turn pro. Even then you likely will underperform the index. The vast majority of pros do.

Owning 100% stocks like this is considered “very aggressive.” It is, but you have decades ahead. Market ups and downs don’t matter as long as you avoid panic and stay the course. Perhaps 40+ years from now you might want to add a Vanguard’s Total Bond Index Fund to smooth out the ride. Worry about that 40 years from now.

7) Realize the market and the value of your shares will sometimes drop dramatically. No worries. You’ll be holding this fund for 40-50+ years. During that time the stock market will very likely drop dramatically 4 or 5 times. There will be real and serious problems that cause it. Each time people will panic. Each time they will predict this is the end. Each time you’ll be hearing Sell! Sell! Sell! If you are smart, you will ignore this. If you are very smart you will use these times as an opportunity to buy more shares at bargain prices.

As I write this in June 2011 the S&P is trading around 1300. Two years ago it was at 670 and people were predicting with certainty it would go to zero. Oops. It doubled. By the way, there will also be times then the market soars and people will begin to say this is a new age. Things are different this time. Things will never go down again. They, too, are wrong. Warren Buffett, the greatest investor of my age, said “When others are fearful be greedy. When others are greedy, be fearful.” Sound advice. The wheel always turns. Things always recover. If someday the end really does come, it won’t matter anyway.

8) When you can live off the dividends VTSAX provides you are financially free. Actually a bit sooner. VTSAX typically pays a dividend of ~2%. Sometimes this will be higher, sometimes lower. Anytime you can live off it you are financially independent. But when you can live off of 3-4% per year of your net worth you are also free.

There you have it. Remember, this advice is for my 19-year-old daughter. (We do things a bit, but not much, differently) Now, if I can just get her to read it…..


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Addendum 1: The case study: putting-the-simple-path-to-wealth-into-action

Addendum 2What if you can’t buy VTSAX? Or even Vanguard?

Addendum 3: When the time comes and you want to know more about this investing stuff, here you go: Stock Series.

Addendum 4: My Path for my kid: The first 10 years

Addendum 5: Some suggest my 50% target savings rate is too aggressive. Others that it is too wimpy. That for you to decide. But if reaching financial independence is important to you, the chart below will give you a good idea as to just how powerful your savings rate can be.


The numbers in the chart above assume an 8% annual investment return and that you’ll live on the classic 4% withdrawal rate which implies assets of 25 times your annual needs. So, this is not a gospel, but a guideline.

The chart is taken from my pal Darrow’s (Can I Retire Yet?) book:

Addendum: This is a good primer on getting started with retirement plans:

“… if I were like him, I’d watch my account balance grow to $1,000.  Then watch it move to $2,000 and upwards…once I had a balance of $10,000, each successive $1,000 milestone would pass more quickly than the last.  Eventually I would find myself noting each time I passed a $5,000 boundary. He enthusiastically explained the “fun” of being able to measure balances by crossing the tens of thousands threshold: seeing twenty thousand turn to thirty. And thirty thousand on to forty, and on and on to financial freedom.”

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Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Empower is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.


  1. Trish Rempen says

    I sent it on to my three boys….they also have heard much of the same advice all their lives, and thank you for putting it in a nice, numbered, detailed format!

    • jlcollinsnh says

      hope they like it and find it useful. my core belief is not only should investing not be complicated, simple gets better results. complicated, of course, pays Wall Street better. for those of you worried about them.

      Knowing you, your boys and how you raised them — they’ll be just fine and can likely teach us a thing of two. 😉

      • Hiep Vu says

        What do you mean by “simple” and “complicated” investments?
        Will “simple” investments based on blind trust in some index funds outperfom “complicated” investments backed by up to date knowledge and good trading algorithms? I will take my chance with the complex one.

        But in a marketing point of view, I do understand your ideas that your target audience mostly are those who do not want their minds boggled by money. That is why you have tried to cater your blog to them.

        Can you please cater your advice to financial geek to be like me?
        Thank you very much!

        • jlcollinsnh says

          Here’s what I mean by simple investments:

          My advice to financial geeks is the same as that to those less interested. As I said to Trish above, simple gets better results.

          Many financial geeks, but certainly not all, tend to have trouble accepting this.

    • jlcollinsnh says

      Hey, I’ve got the bills to prove it!

      University of Rhode Island. They gave her a 12k yearly scholarship and she just finished her Freshman year with a 4.0. she’s in Iceland with her pal Libby at the moment. on her own dime.

      Pappa proud.

  2. Trish Rempen says

    Okay, Jim –
    I’m setting up the kids with their own Vanguard account (you’ve inspired me to finally get around to doing it-)
    Would you recommend – for them – an IRA? Or just the investment account?
    Thanks, Guru-

    • jlcollinsnh says

      Hi Trish…

      that’s great news! The answer depends on a few variables and questions.

      1. Do your boys have earned income? IRAs can only be opened with earned income. So if this is money you or other people have given them it can only go into a regular investment account. That’s where Jessica’s VTSAX fund is.

      2. If they have earned income then an IRA is a great choice. But that leads to another question. Regular or Roth IRA?

      3. A regular IRA is tax deductable in the year of contribution and your kid’s income must be below certain limits to open one. Unless your kid is a child star this shouldn’t be a problem.  While in the IRA it grows tax free. But, and this is a big but, once your kid starts withdrawing the money taxes are due.

      4. A Roth IRA is NOT tax deductable in the year the contribution is made and again your kid’s income must be below certain limits to open one. Unless your kid is a child star this shouldn’t be a problem.  While in the IRA it grows tax free. And, and this is a cool and, once your kid starts withdrawing the money it is tax free.

      How to choose? If your kid is in a very high tax bracket and needs the current deduction use a regular IRA. This is unlikely for most kids.
      If they are in a low tax bracket, typical of most kids, the current deduction is worth little. The chance to grow for decades tax free and be withdrawn tax free is almost priceless! Go Roth.

      Using Jessica as an example, her money is in VTSAX in a regular (non-IRA) account. This is money that has come from gifts from relatives, allowance, etc. UN-earned income. This summer she plans to get a job as a bartender. She’ll have earned income and will then be able to open a Roth IRA. Since she’ll be in a low tax bracket and taxes are likely to be much higher years from now this is a great deal.

      What could go wrong? Well we are looking at money that will be in the Roth for decades and we are counting on the government not changing course mid-stream. Two ugly possibilities:

      1. The feds see all this $$ building in Roths and get greedy. They could rewrite the law and tax it after all. I think this is unlikely as the public outcry would be huge.

      2. Decades from now the feds could look at all the $$$ in Roths and eliminate the income tax. This would mean you paid tax way back when and didn’t need to. Plus if this were to happen it would be replaced with a national sales tax. And, of course, you have to pay that anytime you spent that Roth money. Gottcha!

      But we can speculate on what might happen forever. It’s best to take action based on what we know now. That why my kid will be in a Roth as soon as she has earned income.


      • Bill at FamZoo says


        Really terrific article. Love all the points and certainly empathize with the challenge of getting our kids to embrace them (I have 5 with 2 in college already – where did the time go? Same place my hair did I guess…).

        I’m also a big fan of the open-a-Roth-IRA-for-your-working-teens concept, or as Dan Kadlec calls it the “Family 401(k)”. Here’s a quick video on the topic that I did for the GetRichSlowly 2min video contest:

        Keep up the great work,

        • jlcollinsnh says

          Thanks Bill….

          glad you liked it!

          and thanks for the video link. That’s exactly what I plan to do for Jessica once she has earned income. Didn’t know someone had coined a name for it: Family 401k. I like it!!

      • Jereme says

        This is great, Jim. Thanks so much for this. I will start implementing this immediately.

        My question is, I want to semi-retire in about 20 years. So what strategy can I implement to get my wife and I there? I’m 26, her 28. We could potentially save up to 2000 a month.

        I currently have a 401k Roth with my work and invest 6% and they match 3% of it. Currently sitting at 15k. Wife doesn’t have one or any retirement account yet. Mine is through Vanguard 100% invested in VIIIX (closest option I have that isn’t VSTAX).

        So do you think my wife and I should open up a regular investment account, a personal Roth IRA, or just continue to put as much as possible in my 401k roth? However, if I choose the latter, I can’t take any money out unless I rollover my 401k Roth into a personal Roth, correct?

        Just trying to figure out the best plan of action here so I can got to working part time in about 20 years and live off my dividends.

        Thanks so much. Appreciate your blog and just ordered your book.


  3. Dan McLellan says

    Malachi linked me this. I like what I’m reading.

    I’m in the process of getting rid of my credit card debt (1 card down, 1 to go!) and plan on implementing these rules.


    After I pay off my debt I want to build savings. Now my goal is to have 4000 by the end of the year. At what point should I put that in Vanguard? Is there a base of easily accessible money I want before I open the Vanguard account? Or should I just put it all in?

    • jlcollinsnh says

      thanks Dan…

      glad you liked it and thanks to Malachi for linking you in.

      Congrats on dumping your debt. That’s huge, not easy and critical. well done.

      It is difficult to give you specific advice without knowing a lot more about you, your income, family, age, goals et al. more than you want to post on an open forum like this.

      That said, let me offer a few general thoughts;

      First, job one is paying off the debt. keep doing that and pour as much into the effort as you can. feels good, doesn’t it?!

      Second, one of the benefits of this is you are also learning to live on less. your income less the borrowing you used to do less paying debt.

      Third, once your debt is paid off just pour that money into your savings.

      Fourth, that saving is your emergency fund. get it up to 3-6 months of your living expenses (not your income, just what you spend each month to survive.

      Fianlly, VTSAX. Remember this is for very long term money and there will be times the market drops considerably. you don’t want to be selling into a drop so you have to be sure you can leave it to work for you thru thick and thin.

      hope this helps!

      • Wrightius Maximus says

        How come you say Vanguard is paying 1.68 at the mo and then say to expect 9% return per annum. I’m confused?

        • jlcollinsnh says

          Hi WM…

          The 1.68% is the dividend yield on VTSAX at the time I wrote this post. Currently it is 2%.

          The 9% is the average total return, which includes capital gains. Historically this runs between 8-12%.

          However, it is very important to note that this is an average. The actual return for any given year can be much higher or much lower. This is why investing is a long-term venture.

          If you haven’t already, please read the stock series on this blog for more.

          • Homer Dhoe says

            In looking around the internet, not exhaustively mind you, but poking around, it looks like a few places such as:




            seem to say the annualized return for VTSAX is around 5% for at least the last 15 – 20 years. How did you arrive at 8-12%? The concept of investing in an index fund is intriguing, but a 5% return over the long term doesn’t sound that attractive. Am I missing something? Just curious.

          • jlcollinsnh says

            Hi Homer…

            Way back in 1896 a guy named Charles Dow selected 12 stocks from leading American industries to create his Index. Since then other indexes have been created, like the S&P 500. The average market return over all those years has been ~8-12% depending on which index you look at and for what period of time.

            When you say “the annualized return for VTSAX is around 5% for at least the last 15 – 20 years” you are playing fast and loose with the facts.

            Your first source says the ~14-year (since inception) return on VTSAX is 5.5% and the second says 5.2% for the Vanguard total stock market index. My guess is they are looking at VTSMX, the “investors’ shares” version for that last one.

            Looking at
            Here’s the return on VTSAX in context:

            3-year = 23.07%
            5-year = 15.83%
            10-year = 8.61%
            Since inception in 11/13/2000, ~14-year = 5.5%

            For the older VTSMX (same portfolio as VTSAX):

            Since inception in 11/13/1995, ~19-year = 9.49%

            That ~14 year period of 5.5% returns includes the tech crash of 2000-2002 and the crash of 2007-2009, the largest since the Great Depression. That’s what you are missing.

            What is remarkable is that the ~19 year period also includes both those crashes and still returned 9.49% — right in the middle of our 8-12% range.

      • Charles says

        “Dave Ramsey has a good book out that might help in your situation: Total Money Makeover. Good stuff and I only disagree with him when he claims you can expect 12% annually from the stock market and safely withdraw 8% per year. ”

        Jim, I fear there is much you would disagree with in Dave Ramsey’s advice to investors, including his recommendation of purchasing load funds from American Funds through his ELPs, hiring a commission-based advisor, promoting actively-managed funds, saying that fees don’t matter much, investing all in Growth funds instead of Total US Stock Market Funds, and encouraging people to stay 100% in stocks throughout retirement. His investment advice is pretty dangerous to those who don’t know any better. Thanks for all your hard work on the site. I love your blog!

        • jlcollinsnh says

          Thanks Charles…

          You are right. I would disagree, strenuously, with all those points.

          I very much appreciate you pointing this out.

          I’ve removed that paragraph from my reply to Dan

        • Matt M. says

          Years ago, when my wife and I were paying off a mountain of debt, I used to get so ticked off when people would besmirch the teachings of Dave Ramsey, who, in my eyes, could speak no wrong. I have since learned differently. I agree with his get-out-of-debt advice, but his investing advice . . . not so much.

          Over the past two months, I have moved my money from American Funds (with 5.75% front-end loads with high expense ratios) to Vanguard, in VTSAX. Man, it just feels right!

  4. Wolfgang Rempen says


    Monica & I are with you. How in life to you have time to write these lengthy spreads? By the way, here’s something I would like you to comment on: the horrors of inflation and whet it will do to your ROTH’s. So why not suggest diversification into various vehicles. It’s OK to start with a ROTH, I agree, but after a while you need to protect yourself from inflation. And I think it’s coming.

    Knowing you all these years, Jim, I am not at all surprised of your eloquence in writing!

    Cheers to you!

    • jlcollinsnh says

      Hey guys…

      great to see you here! glad you like it!
      Here’s how I’ve found the time:
      I quit my day job. 🙂

      I agree, inflation has the potential to be a very real concern going forward. Couple of points:

      A Roth is not an investment but rather a bucket in which you place the investments you chose.

      VTSAX (the investment in the Roth) is an Index Fund of the entire US stock market. Diversification.

      Many of the large companies are international in scope. That’s why I’m not concerned with specific international investments for diversification.

      Stocks are, over time, a fine inflation hedge. People forget that stocks are not just pieces of paper traded. Stocks are pieces of ownership in operating businesses. Sales, inventory, plants, equipemnt, brands et all. all of which rise in value with inflation.

      Finally, remember this is for my 19-year-old and other young folks with decades ahead of them. My wife and I hold some other stuff in our portfolio (Mmmm, another post idea!) but 50% of what we have is still in VTSAX.


    • jlcollinsnh says

      BTW, everybody.
      Wolfgang mentions that he has known me for years. very true. what he doesn’t mention is that we met when he and his accomplice Trish kidnapped me in Ireland while I was on a bicycle trip. They tucked me in to the back seat of their VW bug and hauled me from Dingle up to Galway. Upon my release I had to hitch-hike back.

      strange how some friendships begin….

  5. Janine says

    Jim, I loved the article. While I do pretty well with the big picture stuff, for me, it’s a trip to the dollar store where I easily lose control. I guess it could be worse!

    I can’t wait to hear your theory on hunters and gatherers. I myself feel that those brave enough to come to this country, before it was a country, had all the characteristics of a successful hunter/gatherer. I think our greatest leaders throughout history were “hunters” – capable of thinking and moving quickly from one thought to another. Today, in our compliant world, those with many of those same “skills” are outcast and given the label ADD – attention deficit DISORDER! How sad.

  6. Janine says

    PS: You didn’t fail your daughter. You just let her be who she is — which in reality is all she ever can be successfully and happily.

    I know this is off topic, but I have the six year old girl with the fully developed personality. I know who she will be as an adult. Unfortunately, her amazing spirit and well developed moral compass is not appreciated by her kindergarten teacher. When asked to write something nice about each of her classmates, she often wrote a vague statement like “Ryan can play.” When she was told she should write “Ryan can play well with others” as a better answer, she refused as “he does not play well with others – he just plays”. When she put her foot down, I was called in for a conference. My mother always taught me, if you can’t say something nice, don’t say anything at all. She also taught me not to lie. For my daughter, those ideals are just part of her instinct.

    If we keep our eyes open, our children will amaze us. You have had the pleasure of seeing it. I am just on the opening act.

  7. Tom Innis says

    Hi, Jim:

    Nice blog – just signed up on the mailing list. We are also in the process of educating our daughter on finances. She’s very conscientious and has shown an ability to save her money for things she really wants, while having enough left over for charitable donations and a little savings. Hopefully this is a positive start to a secure financial future.

    I enjoyed the blog and look forward to more. Thanks for sending me the link.

    Best to you,

  8. John Noss says

    Big Jim,

    Nice to here from you! I can just hearing you saying this at lunch or dinner, miss our conversations. I agree with no debit , no debit, no debit! Not sure I totally agree with home ownership portion, but can see the point.


    • jlcollinsnh says

      Hey John…..

      Great to see you here. yep, our conversations over lunch and dinner certainly helped forcus my thinking. Great times.

      Most folks will disagree with my stance on home ownership. I’m planning a post focused on that subject in detail.

      hope you stick around!

  9. Mark Key says

    Hello, good to hear from you via email, and enjoyed your blog as I have 3 boys growing up and we are in the process of doing the same thing. I am a bit behind you since my oldest is 11, 2nd 9 and 3rd 7years, but with cub scouts they all have savings accounts and we (I try to expaln) these things, and they appear to be picking it up.

    I look forward to seeing your home ownership blog (the detailed one you referenced) as I understand to a point (having read link), but the argument about appliance repair etc. are really amortized and thus a renter is paying for it anyway (however big complexes have benefit of buying at wholesale prices sometimes, but still a renter pays for this in the long run), additionally, these articles are coming just after the crash, and with the advice you mentioned about stocks (buy when they drop while others pull out), this is a great time to get a house at a steal (but an opportunity only if you are in the market now, and need to be in it for the long haul as with investments as you mentioned).

    In an unrealistic housing market it is better to rent, but with things the way they are now, as long as you are serious about wanting a home for long haul, then in many cases it will be less expensive to buy than rent (I have a friend who owns a number of duplex’s and apartment bldg’s and we have had these conversations, he agrees it is the best time to buy a home, but like stock market, when it is the best time to buy, economy down and stock market down, no one has money to take advantage, which is why he is full).

    However, single and moving around, moving up corp. ladder with potential to move in a few years, then renting is best. Overall GREAT ADVICE, unfortunately the school of hard knocks often is the best and only teacher, just be there without or restained “I told you so” reaction in the future. Of course, easier for me to say, but I will be dealing with this in the near/far future. Have a great day! Sincerely, Mark

    • jlcollinsnh says

      Hi Mark….

      Welcome to the blog and thanks for participating.

      My post “Why houses are a good investment only for the undisaplined” is under construction and should be up in the near future. I’ll look forward to your feedback on it. You are one of the most astute finacial guys I know.

      Your points above are well taken and I’ll be addressing them. I will say, for those who want to own a home, now is an excellent time to be a buyer. It’s just not a good investment.

  10. Cassie says

    Great advice, particularly , ” Avoid fiscally irresponsible people. Never marry one or otherwise give him access to your money” . Do everything else right except this and you still may end up with nothing !

  11. Alison says

    How have we not had the civilization is the source of all our problems discussion?

    Love the blog, agree with everything. Jessica will probably come around to thinking about and managing money as she gets older (I will admit, I am shamed by my blase attitude to money back when I was 19).

  12. Lil Pappy says

    Just found your blog and was mesmerized. I agree with your statement that you and all the people who pursue early financial independence are aberrations. Your pursuit to transfer this interest/discipline to your daughter is a most interesting one.

    It is impressive when an individual does something rare. It is my pursuit to figure out how to get greater numbers of people on this seemingly rarest of paths. Most particularly, I am trying to transfer this pursuit to my own children. I have an experiment that I have been piecing together and will know in 13 years how it turns out. If I am able to, then I am interested in pursuing this with anyone who has an interest.

    I will be returning to your blog. Will let you know how the experiment turns out if you are still blogging in 2025.

    • jlcollinsnh says

      Hi Lil Pappy….

      ….thanks for the very kind words. Glad you are enjoying the blog.

      If you care to, I’d be interested in hearing more about your experiment. My guess is just engaging your kids in the conversation will go a long way.

      As for 2025, I’ll be happy if I can still get out of bed and draw breathe by then. 😉

      • Lil Pappy says

        Sorry for the long delay.

        As a parent, I want my children to be able to regulate their emotions, behavior, and their finances. As you indicate, some children are born with temperaments that make many of these things occur with seemingly little effort on the parent’s part. I believe parent’s can do things to antagonize or disrupt a well-regulated child through all types of chaos. In that sense, you did a great job not introducing chaos into your daughter’s life and derailing her from her natural place of peace.

        I see many people having difficulty with the three areas I mentioned above. My kids, whether on their own or through the efforst of my wife and I, do well with their emotions and behavior. The financial is the last big bugaboo. Financial regulation is something automatically appealing to many people. They are internally motivated, by whatever means, to do this well. The data are clear that most people, even when exposed to lifestyles and conversations about money management, fail to be wise with money until after they have experienced significant pain and come to the lesson the hard/long way.

        If something is not internally motivated, are external motivators appropriate? I believe so and wish to make it most likely that my children enter adulthood with financial regulation as something that they have learned how to practice.

        One assumption I have: The pre-frontal lobe of the brain is not fully developed until 25. So 25 is the age of full intellectual competence. That is how I got to 2025 as the end of my experiment (but these ideas are all in the formative stages and subject to change as data come in). So, if I am to get someone to engage in an activity they must freely choose to engage in it and that if they have the practice by 25, then they have a great likelihood to keep the practice after that.

        So, my idea is to incentive saving and no consumer debt from 18-25. Use monthly dollar amounts with year end bonuses for sticking through the year. Increase the amount the longer they are in the plan.

        Requirements: They work 40 hrs/wk or volunteer if work is unavailable. Set aside 50% of gross and have no credit debt. If they do this, $100 will be placed in their account. At the end of the year if they have done this each month, another $1200 will be added.

        Year 4: After having done this for 3 years, the amount of incentive is increased (to $200 per month and $2400 year end bonus.

        Year 7: After having done that for 3 years, the amount of incentive is increased (to $400 per month and $4800 year end bonus.

        This can continue after age 25 if my wife and I so choose. We also promise other support such as cell phone on family plan through this time, car insurance starting at 18 through age 22 (if at all), room and board at home as long as they are good roomates and wish to do so.

        Another element, certain things kill the plan. They are free to withdraw the money at any time. But doing so ends the experiment. Also, pregnancy or marriage would end it as well.

        This is not set in stone, but does mark the framework of my thinking. I am interested in your thoughts. My target is that my kids learn that financial independence is a more important target than what they do for their education. They are free at 25 to use their money anyway they see fit. I just want them avoiding making decisions that have multiple years and hundreds of thousands of dollars associated with them until they are 25.

        So, that is the basis of my mad scientist ideas. I am interested in your thoughts.

        • jlcollinsnh says

          Very interesting and detailed approach. I’m certainly no expert in child rearing but any positive thing we parents can do to guide their relationship with money is a good thing.

          Your technique certainly would have worked with me, but then I was on that path anyway.

          Since my daughter started working, I do something somewhat similar. Each year I fund her Roth IRA. While she likes the idea, the money is so long-term I think sometimes she’s not very aware of it. It certainly is not what motivates her to work.

          My concern with your plan would be along the same lines. The money might be too remote to motivate.

          BTW, if you haven’t already read it you might find this of interest:

          • Lil Pappy says

            Thanks for the reference to the article. I had enjoyed reading it in the past. It does get to the internal/external motivation issue. Data from studies are clear, if someone in already internally motivated to do a thing, providing some reward for what they do will actually decrease their motivation and negatively affect their performance.

            The remoteness of the money is an issue. I remember my first job when they offered me $$s to invest at 22 to be able to spend them at 59 1/2. I said no thanks, which the majority of people do.

            I call my approach an experiment. To intercept someone’s spending muscle before it grows very strong and offer the development of a savings/investing habit in its place. I believe it has to be voluntary, but I stack the deck in the favor of what I thing will have the biggest payoff. By allowing money access at 25, they have to wait only a few years to access it. And, those years correspond to when their peers have little money as well.

            Will see how it works. I understand the benefits of frugality. Transferring that to other generations or people who don’t intuitively grasp this is of great interest to me.

            Thx for your articles and wisdom. I thoroughly enjoy them.

    • jlcollinsnh says

      Hi Matt….

      great to see you over here, and welcome. I’ve been enjoying your blog and just finished reading the link above. well written and an important perspective. I urge my readers to check it out.

      You and I are not so far apart. Here’s what I said in my original comment to you:

      “Ramsey is worth reading but he is way off base on his 12%. What he has done is take an average over decades and present it as a realistic annual expectation.”

      The last is what is important here. As you say in your post, you are looking at a 40 year investment time horizon. For you, my daughter and other young people that’s the best way to think about the market.

      Over that extended period, provided you have the courage to stay invested during the gut wrenching drops, you can indeed expect 10%+ returns. (Ramesy’s 12% is an outlier)

      That said, presenting 10-12% as a realistic annual expectation year over year is the problem. Some years in that 40 year span your investments will take a 40%+ hit. Others will see 40%+ gains. It is a rocky ride.

      When the time comes to live off your investments, the time also comes to accept that the 5 and 10 year average returns can a do easily underperform. Just as your chart of investments shows.

      Make sense?

      • jlcollinsnh says

        one big caution for my readers, Matt is investing with American Funds. These are load (they charge commission to buy them) and they have high expense ratios (what the fund charges in fees to operate) These both are a huge drag on your returns over time.

        Typically, they are bought thru money managers, those are the guys that get the commission, violating rule #2 in my post above.

  13. Fuji says

    What a great blog – wonderful insight and writing. Many thanks for sharing your thoughts. Not sure how I stumbled across your blog, but very happy to have found it. Now I just need to make time to have a little wander around here.

    I understand the advice to your daughter, but do you also subscribe to the same advice for yourself regarding VTSAX? Did you stash all your money there all these years, and if so, do you still stash it there as you grow older? I was just wondering because I’ve heard that as we grow older, or nearer retirement we should move out of stocks into more conservative allocations and it makes me wonder if you have or will do so anytime soon.

    • jlcollinsnh says

      Welcome Fuji….

      …Glad you found your way here. Thank you for your very kind words. Sometimes writing this feels like talking to myself so it is great to hear someone is reading it and finding value.

      Great question. As my wife and I are older we have expanded beyond VTSAX although it is still 50% of our holdings. Details here:

      Unfortunately for us, I wasted decades and lots of money trying to “beat the market” picking individual stocks. I had known for a long time that Index investing was the better choice but the rush of picking a stock that rises had me in thrall.

      For the past 15 years or so we’ve been on the path I describe. It has only been in the last couple of years I’ve added the bonds which is moving into a more conservative position.

      hope this helps and hope to see more of your comments.

  14. Claire in CA, USA says

    Came to your blog from Frugal Babe. 🙂 I think our daughters came from the same mold. I don’t take credit, either, for her beauty, charm, smarts, etc., but I do take “credit” for not teaching her well about money. No one taught me, and at 46 years old, I am in really bad shape financially. Not good. My kids have seen the struggle, so I am going to print out this post, and start applying it to me as well as encouraging the kids. (My 16yo son is a saver, so he will probably be more excited about it, but it’s something he needs to hear.). Thanks for the wisdom!

    • jlcollinsnh says

      Welcome Clare….

      I am glad you found your way over here and I am honored you find enough value in this post to print it out.

      Based on page views it is the most popular one I’ve written and it is very likely my favorite. In many ways it covers most everything I have to offer on the subject.

      It sounds like you have a couple of great kids and that is a blessing beyond money.

      Don’t beat yourself up if you’ve made financial mistakes along the way. No one taught me either and if I’ve learned anything my mistakes have most frequently been my teachers.

      At 46 you still have lots of time and, while hard, your kids will benefit from from the struggle and your eventual success.

  15. Caroline L (@LaMarEstaba) says

    I’m the same age as your daughter. My parents taught me about saving money and my dad was/is a minimalist before it became trendy. First, when he came to the US as a refugee with the clothes on his back, it was out of necessity. Now, it’s because he has a saving habit. I’ve been taught that I need to save my whole life. However, my parents told me all through high school (we had the Talk about college when I was 13) that they were giving me $X for college, the same amount that my older sister got. The cost of attendance was 35% higher when I started to college. They told me I could get loans or get scholarships to make up the difference. I got scholarships and use 2k-3k out of $X every semester to pay for tuition, housing, room and board, and books. The deal with $X was that I got to keep the extra (the converse of having to make up the difference), so I have a pretty nice ‘stash for someone who is 20. I picked up a job my freshman year and have kept it since. I’m a financial nerd (shown by me posting on this blog) but it’s funny to see the similarity between you and my dad. Jessica probably just doesn’t want to actively manage her money. I’d recommend Ramit Sethi’s book, I Will Teach You To Be Rich, and combine the knowledge in there with the simple rules you’ve stated above. She’ll be a wealth accumulating machine.

    • jlcollinsnh says

      Hi Caroline….

      Welcome and thanks for your comment.

      Please pass my kudos on to your dad. I have tremendous respect for the courage it took walk that path. And clearly he has done a wonderful job raising you.

      Congratulations on your progress so far. What a great start! As I say to my own daughter, your future’s so bright it hurt my eyes to look at it.

      What are your post-college plans?

      • Caroline L (@LaMarEstaba) says

        Thanks! After college, I have two options: joining the wonderful world of work or going to law school. My family would be thrilled if I went to law school. I’d rather start earning money instead of living off of my dearly beloved parents. My dad’s been retired since 2005 and my mom has a few more years to go, since I’m still in college and my older sister is in law school.

  16. Adam says

    Just found this blog and am catching up on it. My question is this: the VTSAX currently requires a $10k initial investment, and my wife and I, being young, have nowhere near this amount to invest. Any advice for us in this scenario? Right now, we are throwing all our investing money at Schwab’s SWTSX fund

    • jlcollinsnh says

      Welcome Adam!

      Hit the link for VTSAX. When you get to the Vanguard page for it you’ll see it is available as “Investor Shares” (and as an ETF). The Investor Shares version is exactly the same fund, but with slightly higher expense ratio and a 3k initial investment. Once you hit the 10k level you can switch to VTSAX (what they call Admiral Shares) and the lower fee.

      SWTSX is Schwab’s total stock market index fund. As such you can expect the same performance over time as VTSAX. Even its expense ratio, at .09%, is excellently low. You are fine putting your money there.

      Following Vanguard’s lead and huge success, it seems virtually every mutual fund company now offers total stock market index fund and most have lowered their expense ratios to competitive levels. that’s great for investors.

      Still, the moment I could, I’d make the switch to Vanguard. The other firms use these funds as “loss-leaders” hoping to lure you into their more expensive and (for them) more profitable offerings.

      Low cost for Vanguard is a core value. Check out my post “Stocks Part X: What if Vanguard gets Nuked” for more on this.

  17. Prob8 says

    Well written blog. Clear, concise, and convincing. In this post, you indicated financial freedom is achieved when you can live off 3-4% of net worth. Did you mean 3-4% of the money you have invested and working for you (i.e. excluding your house, cars, etc.)? Does the withdrawal rate change if you decide to invest in the Vanguard balanced index fund (60/40 stock/bond split) as opposed to VTSAX? Does the rate change if you add in the REIT?

    Also, are you currently living off the 3-4% as your sole income or do you have other sources of income. I’m not trying to be intrusive, but I am trying to achieve FI within the next 4-5 years (I’m 37 now and have a spouse and 2 kids). I am very interested in hearing from those who have taken the theoretical SWR and put it into practice. Especially from those doing so with kids.

    • jlcollinsnh says

      Hi Prob…

      Thanks for stopping in and leaving some comments!


      I should do a post of withdrawal rates one of these days. (Update. Here it is:

      If I were 37 with a couple of kids, 3% would be my target. Lots of years and expenses ahead of you. 3% is a nice conservative number, assuming your earning days are truly done. And assuming having to adjust your lifestyle would be unacceptable.

      I wouldn’t vary it, even with REITS and bonds in the mix, as they should be once you move to the wealth preservation phase.

      But much of this also depends on you, your temperament, your flexibility and your plans. If it would be easy for you to return to work or pick up part time gigs, you might be more aggressive. If the market goes your way. All’s good. If not, plan B.

      Personally, I’m pretty flexible with my own withdrawal rate, but then I’m very comfortable with a reduction in lifestyle if things move against me.

      At the moment I’m pulling about 5%, and our net worth is still increasing. I’ve got a kid in college and that’s about 30k per year that goes away in 1.5 years. We also spend a big chunk on travel, about 20k this year. If needed we could cut that out instantly and completely.

      We’ll also have Social Security coming on-line in a few more years. Being a geezer does have some advantages. 🙂 We could live on that alone if need be.

      My wife still works and loves her job at the local school. We have our health care thru her work. Both she and I have worked/not-worked throughout our lives. Mostly at different times, but not always.

      I think I’m retired for good this time (and loving it), but who knows. If get bored or something interesting presents itself….

      If you haven’t read it already, here’s my story:

      • Prob8 says

        Thanks for the comments. Perhaps I’m being a bit optimistic on being completely FI within 5 years. I’m sure the cost of raising children will be more expensive than I anticipate. Health insurance expenses also concern me. Those issues alone will likely lead me to continued work beyond the point where I feel we can get by on a 3% withdrawal rate. Anyway, thanks for the comments and, as always, I look forward to your next post.

  18. Renee S says

    Hi! Love you blog 🙂 Will you please help me understand something? I have VTI (the ETF, and I just looked and it has more than $3,000 in it.) Is there a reason that I should switch my ETF to the Investor share mutual fund? Or should I just sit tight until I can get my balance up to $10,000 and get the VTSAX?

    • jlcollinsnh says

      Thanks Renee!

      Sure. With VTI you have exactly the same portfolio as VTSAX. And you have exactly the same ultra-low expense ratio of .06%.

      There is no need now or in the future to switch to VTSAX. Rest easy and keep adding to it!

  19. Renee S says


    I have posted comments before and I have another question (of course!). I graduated school and landed my first job a year ago. I have no student loans (due to MANY scholarship applications) and maxed out Roth last year. 10% of my income goes into a Public Employee Retirement Account (PERS) and my employer matches 15%. I also put $100 into my 403b every paycheck. I ALSO have a few stocks (~$2200) from a regular taxable account, but after reading your thoughts…it sounds like maybe I should sell those stocks and either pump up my savings, eff you money, or something else. What do you think should be my strategy?

    I want to be able to do your Step 8—living off of dividends (eventually). Can I do that if everything is in my Roth? I just won’t be able to live off of them until 59.5 years old? How can I do step 8 in the most cost efficient, streamlined way? 🙂

    Thanks for your time 🙂

    • jlcollinsnh says

      Hi Renee…

      Congratulations on graduation with no debt. Well played! And on your new job and fine savings/investing start. Definitely keep maxing out your PERS for the match and your Roth.

      If you plan to retire before 59.5 almost by definition you’ll have a savings rate that will have you investing money after you’ve maxed out all the tax deferred stuff. This is what will fund the retirement years before 59.5.

      I would sell the stocks and use the money to start your VTSAX account.

      If you haven’t already, be sure to read the stock series on this blog. The answer to your question about #8 is there in Parts VI & XIII.

      You’ve got a long investment life ahead and it will be rough at times. To stay the course and profit you’ll need to be mentally tough.

      Keep us posted on your progress!

  20. Jeremy says

    New subscriber here! Firstly, thanks for sharing all your insight jlcollinsnh, tons of fantastic info. I’ve been reading your blog for the past 3 hours and was wondering if you could help provide some direction for my situation.

    I’m 24, single, finished college 1.5 years ago and have been working at my first “real” job making ~$30k/year. I’m debt free, living at home, and have very low expenses thanks to Mom & Dad. I have $6k in an online savings account (Ally) and want to start investing immediately with Vanguard’s VTSMX.

    But my employer doesn’t offer 401k/IRA options. I was going to open a Roth IRA through Vanguard and start from there, but my concern is the short-term parking of my money when I move out or have a spouse within the next 5 years. I’m blessed to have very low expenses, so I can afford to save aggressively right now; currently save 70% of each paycheck after taxes.

    Since VTSMX/VTSAX is for the long-haul, should I go ahead and start a Roth IRA or put my $6k into a fund that’s more liquidatable and just keep saving? I’d eager to get started so I’m tempted to just go ahead with the VTSMX, but I don’t want Uncle Sam taxing the dividends if it’s not in an IRA.

    Thank you very much in advance and I’m looking forward to reading the rest of your blog!

    • jlcollinsnh says

      Welcome Jeremy…

      Great to have you here!

      Congrats on graduating debt free and your truly excellent 70% savings rate.

      Since you are making 30k a year you are already in a very low tax bracket. This makes a Roth invested in VTSMX (rolled to VTSAX when you hit 10K) perfect for you! That’s 5k per year.

      You’ll still have ~15k to invest each year and that I’d put in a regular VTSMX account. This will be easy to access anytime, but of course you’ll have to pay capital gains and you’ll not want to put yourself in the position of having to sell in a down market. You want to be holding this literally forever.

      You mention you might move out/get married in the next five years. That’s a long time and those are things you’ll have a long lead time on. For now I wouldn’t worry. Just keep investing.

      When you see one or both of these things are going to happen about a year out, just divert your savings from investing to a bank savings account. At your 70% saving rate at the end of 12 months you’ll have 15k in cash to handle whatever you need to handle.

      You’re off to a great start! Hope you stick around, keep commenting and let us know how you progress. Cheers!

      • Jeremy says

        Thanks for the prompt response, Jim. So Vanguard will allow me to have both a Roth IRA and a regular investment account using VTSMX for both? Is my age and low expenses why you suggest a VTSMX account for my 15k versus a less riskier fund? And this is assuming I have a 6 month emergency fund put away in a savings account.

        I’m currently listening to your “Importance of F-you money” podcast while browsing your blog, lol. You should put up a PayPal donate button! 🙂

          • Aaron L. says

            Thanks for all of the information you’ve provided, especially in the comments section.

            My situation is similar to Jeremy’s where I’m making around 25k/yr, no debt, saving 60%, with 9k in savings. However, my employer offers a 401k with access to Vanguard shares and a match of 5% but its vested after 6 years and I’m not sure if I’ll stick around for that long.

            Prior to reading your recent 401k article I was planning on doing what you’ve suggested above in hopes of becoming FI in 12-15 years. Should I still contribute to the 401k and build to a Roth containing VTSMX?

          • jlcollinsnh says

            Hi Aaron..

            Nice to have you here.

            First that is some serious badassity, to steal a phrase from my pal MMM, living on 10k per year. Kudos!

            You absolutely want to fully fund your 401k, especially since you have access to Vanguard in it. Any money you put in is yours and you can roll it over to a Vanguard IRA anytime you leave the company.

            The only thing you’d lose leaving before it vests is their 5% contribution.

            Also, especially at your low tax rate income level, definitely fund the Roth.


            1st fund the 401k up to the 5% match. Just in case you are around long enough to get it.
            2nd fully fund the Roth.
            3rd for any investable money left, back to the 401k.

            Of course, you’ll also want to be sure to keep some emergency cash.

            Hope this helps!

          • Aaron L says

            Thanks for the tips Jim. I really appreciate the work you’ve done to inform people on powers of investing. Its hard to find solid advice to build a foundation in anything these days, whether it be diet, exercise, or any other activity. It seems like everyone is trying to sell some unique secret or trick on the old tried and true.

            So, my Vanguard VTSMX ship has been launched, and my 401k will be modified within the week.

            I used the Mackenzie early retirement calculator to estimate my totals around age 35 and it looks as though it’d be a large amount; at least $150k. By then my income should be higher and hopefully I’ll be able to maintain my annual expenses <15k.

            Thanks for the help.

          • Aaron L says

            I forgot to ask, since more than 50% of my investment savings will be in the 401k and since I can only save 5.5k in the ROTH/ yr, would I need (assuming these are my only two accounts) a regular IRA to have enough to live off interest should I decent to semi-retire at 35? Or is this getting ahead of myself?

          • jlcollinsnh says

            I think what you are asking is if you need non-tax advantaged accounts to live on before you turn 59.5. A regular IRA wouldn’t help in this regard.

            You might be getting a bit ahead of yourself as the rules could change. I wouldn’t worry about it.

            1. You can always withdraw your Roth contributions penalty and tax free. Not the money it earns, but whatever you put in.
            2. When you leave your job you’ll want to roll your 401k immediately into an IRA for reasons I discuss here:
            3. Once it is in the IRA you might consider the strategies discussed in this great article:

            Don’t worry too much about the details of all this. Just know options are available. They may be different when the time comes, but you can’t worry about that until then.

          • Aaron L says

            Upon changing my 401k contributions I’ve come up with some ideas, and I would appreciate your opinion.

            To give you a bit my information about my income. I work by the hour and receive anywhere from 0-20+ hours of overtime in a week. What I’d like to do is contribute 60-65% of my pre-tax income into the 401k. On a 40 hour week this would leave enough for expenses but with overtime this should allow me to max out my ROTH before the years over. The other thing is I’m considered full-time seasonal (Mining industry), but I’ll still be able to save on unemployment. Do you see any concerns with this plan?

            Also, the Vanguard options with my 401k are as follows: VBMFX Total bond market, VFINX 500 Index , NAESX Small Cap. Index, VTSGX Total Intl Stock index. What are you thoughts, or your thoughts on how to choose? I know MMM use to recommend just VFINX.

            Also, your interview with Mr. Sheats was awesome. Really enjoyed it, it further reinforced my decision to keep renting.

          • jlcollinsnh says

            Hi Aaron…

            You don’t mention your income level, but remember there are limits to how much you can invest in a 401k: $17,500 I think is the current ceiling. Other than that, I see no problem.

            If you retire before 59.5, there are also some great stratgies for pulling IRA/401k money before. Check out:

            As for the funds, if you are young and/or have 10+ years till retirement, I’d go with VTSGX. If the date is sooner you might want to smooth out the ride with VBMFX. I’m retired and hold 25% in bonds, which most consider very aggressive. The percent you hold is a personal choice based on your own risk tolerance.

            I prefer VTSGX to VFINX because it holds mid and small cap stocks in addition to the S&P 500. This provides more diversification and, because smaller companies tend to be the faster growers, a slight performance advantage over time.

            Glad you enjoyed the interview! Do me a favor? Post a comment over on Joshua’s post and let him know. Thanks!

          • Aaron L says

            Thanks again for the help. I’ll stop over and leave a comment. I’m the Aaron L. from above.

  21. Dtree says

    Great blog! I’ve been making my way through the old posts. I do have a question: you advocate to regularly invest into the index, which I completely get. But how do you feel about taking profits in your investment account? For example: if your account gas gone up 50% in 2 years in VTSAX, will you sell some shares and move some money into cash to protect profits or continue adding after the run up? I understand your point about buying more shares during the crash, but wondering what your approach is in the opposite situation.


    • jlcollinsnh says

      Welcome Dtree…

      and thanks for the kind words. Glad you are enjoying it around here.

      As you make your way further thru the blog the answer to your question will become clear in some detail. In short, I don’t believe timing the market is possible. We can never really know what is “high” and what is “low”

      Using your example, if the market has gone up 50% in the last two years that really tells us absolutely nothing about what it will do in the next two, or 10.

      If you are in the wealth building phase and you have determined you can ride out the gut wrenching drops that will surely come along the way without panic and without selling, just keep adding to VTSAX when you can and as much as you can. This is a decades long plan.

      If you are in the wealth preservation stage, you will be balancing your investments between your allocation. My personal allocation these days is 50% stock, 25% bonds and 25% REITS. The advantage of asset allocation and rebalancing is that over time it has the effect of buying low and selling high without having to predict the market.

      • Dtree says

        Thanks, Jim, for such a prompt response. I’m definitely in the building stage, so trying to decide if now is the right time to start an account with Vanguard (already have a Roth), and am a little hesitant with the recent run up. Your answer makes it easier though, thanks!

  22. cv says

    dear Jim,

    Thank you so much for putting an important issue into simple terms for simple folks like me. I’ma 35 yo single gal who’s been working for 10 years but not stashing like she should until now. I don’t owe debt but was more than happy to live from check to check. Like your daughter, I was not ready to listen to my dad years ago or buy into his frugality advise. Everything has its own timing.

    My question is, you mentioned that the percentage breakdown of your Vanguard funds as you have them now(50-25-25); what would be a more appropriate mix for someone in my shoes who is trying to be aggressive as she can to reach financial freedom in 10-15 years?


    No house (renting).
    income pretax 90k;
    401k employer match first 5%, I put in additional 10% (15% total own contribution)
    40K each in fidelity and TIAA-cref.
    30K of a different retirement company that I am in the process of rolling over to Vanguard.
    Roth IRA started in Vanguard 10K
    25K at edward jones (hoping to pull the plug on the manager soon)
    20K personal loan to a friend hoping for 2% return over next two years.
    since beginning of the year saving 50-60% take home check a month, rolling over continuously into Vanguard.

    Thanks for looking at my mess!

    • jlcollinsnh says

      Welcome CV….
      and my pleasure. Glad it is making sense to you and that you’ve picked up on the sheer simplicity of this stuff. Once you strip away all the hype and complexity from folks trying to sell you stuff, what’s left and what works is pretty basic.

      At age 35 it looks to me like you’ve done well. Just avoiding debt is huge, but you are also sitting on 135k. Not a bad base from which to move forward. I’ve discarded the 20k you have in a loan to your friend as I have no way to evaluate your chances of getting repaid. If you do, all to the better!

      As for the allocation, if your goal is FI ASAP I’d tilt to 100% stocks. Over 15 years that should give you the best end result. But it will also give you the roughest, most heart stopping ride. Only you can answer the question as to whether you can handle that.

      Adding bonds will serve to smooth the ride and, if you are conscientious about rebalancing, will give you the chance to buy low and sell high with the stocks. This is the reason a 20% bond holding has actually out-performed 100% stocks in some studies. But it takes a bit of extra effort.

      Let’s look at your


      No house (renting) — Being single and with your savings/investment discipline this is your best option. Gold star!

      income pretax 90k — Very nice cash flow to work with. Gold Star!

      401k employer match first 5%, I put in additional 10% (15% total own contribution) — Great match from your employer and a great maximization on your part. Gold star!

      40K each in fidelity and TIAA-cref — I’d move these to Vanguard index funds.

      30K of a different retirement company that I am in the process of rolling over to Vanguard — Gold Star!

      Roth IRA started in Vanguard 10K — Gold Star!

      25K at edward jones (hoping to pull the plug on the manager soon) — Good plan. Hope they don’t give you too much grief on the way out. Keep us posted.

      20K personal loan to a friend hoping for 2% return over next two years — Hopefully you’ll get paid back. Otherwise you’ll have to wait for Heaven to see a return on this “investment” 🙂

      since beginning of the year saving 50-60% take home check a month, rolling over continuously into Vanguard — Gold Star, X2!!

      More people should have this kind of “mess” to work with.

      A final thought: With your income, savings rate, single status and investment plan I doubt it will take you 15 years to reach your goal. Once you do (that is your investments at a 4% withdrawal can cover your living expenses) pause for a few months. Consider if your really want to quit and what you’ll do with your time.

      If you decide to hang it up, Great! But work is a lot easier to take when you have F-you money. You might decide to continue. If you do, live off your investments and invest 100% of your income. Your stash will grow rapidly, as will the dollar amount of the 4%. This is the time and way to expand your lifestyle, if you so choose.

      Enjoy the ride!

      • cv says

        Wow, thanks!!! It is really reassuring to hear your advise, I feel like someone has my back. It’s good to know also that should I decide to continue at least part time after the FY money, I should invest my income. Per your recommendations, I’m working on setting up a plan for getting back my personal loan, and pulling out of edward jones. Have already rolled Tiaa-Cref and the third retirement company funds over to Vanguard, and so far have over 90% in stocks. Will definitely update everyone here with my progress, especially if it involves swearing and tears when the roller coaster ride is on the way down…

      • cv says

        Dear Mr. collins,

        As promised, I’m here to update you on my progress to the FU money over the last year.

        Pulled the plug on edward jones and rolled $25k into vanguard; had to fake a reason and lost some capital but I think it is worth it in the long run.

        Made a plan/pact with my friend regarding the $20k loan, so she’s paying back a fixed amount every month over 3 years at a CD interest rate; not great but at least they are coming back…; money going straight to VG; now into year #2.

        Pre-tax Match from my employer is actually 2:1 (for a combined total of 15%), although starting in 2015, they are cutting back to 9:5; I figure I just make up the difference each month rolling into an after-tax account at VG starting 1/1/15; I have been putting an extra 15% pre-tax into a supplemental retirement account since a year and half ago.

        The only other thing I did differently is changing all the accounts in which I am actively contributing to each month in Vanguard to 100% VTSAX; even with fiddling all the transactions over the last year, still made a 15% return on the investments.

        Been eyeing my monthly spending/budget and trying to keep the goal of saving (net/take home) at 65%;

        took your advise about donating to charity in creative ways (aside from money) including volunteering time and contributing personal possession from downsizing efforts.

        Finally, spreading your blog-message like wild fire among family/friends/co-workers; and still counting down the days until i can get my hands on some copies of your book.

        with regards,

      • jlcollinsnh says

        Hi CV…

        Great to hear from you and thanks for checking back. Wow! Great progress! Major league, big-time kudos!

        I’d be curious to hear more of the details concerning your move from Edward Jones. Why did you feel the need to fake a reason and how was the capital lost?

        I’m very impressed that you’ve worked out a repayment plan with your friend on that loan. I’d chalked that up to lost money and here you are getting it back with a little interest to boot. 🙂

        65% is an awesome savings rate and if you haven’t already, check out the chart I just added to this post as Addendum #4. Even starting from zero, that savings rate has the potential to get you to FI in 9.5 years.

        Finally, thanks so much for spreading the word on this blog. Very much appreciated!

        That is the highest praise of all. Oh, and I am hard at work on the book. I hope to have it out by this Fall.

        I’m also thinking of making this conversation of ours into a Case Study blog post like these:

        From there it might even become part of my second book which I intend to be based on these. Does that work for you?


        • cv says

          Thank you Mr. Collins, and yes please use any of the above information into case study as you wish. I have a suggestion for a title such as “the story of the prodigal daughter…” or something to that extent.

          To expand on my experience of Edward Jones; I started with this investment advisor in early part 2012 (met through a mutual friend). Both due to the short duration of the funds invested, and because of tricky situation of people we know in common, I didn’t feel it was diplomatic to all the sudden use the phrase “your service is no longer needed”. I stumbled upon your blog during a 6 month futile search to buy a house (which I’ve since abandoned due to your suggestion), but it gave me a perfect fake reason to withdraw the funds in entirety from EJ- “hey, I need the money for downpayment of a house”. With the RE market the way it was in 2013, he didn’t question. The few individual stocks he selected for me were not bad, but were really meant for long term investment, and at the time of sale, of course they were not exactly the price as when I purchased them; so I lost money when I cashed out, plus I had to pay him commision on buying/selling; all in all, he’s not a bad guy; and I plan to send him a gift note when I reach the goal of my FU money, for letting go my money. 🙂 You are absolutely correct in saying that no one should be managing our money except ourselves.

          Retrospectively speaking though, I am so grateful I found your blog before I made (what would have been) the second biggest financial setback/mistake of my life (on top of living check to check being a gilded slave). I don’t think I can thank you enough, you’ve really altered the course of my life and my destiny.

          The other marvelous irony is, my own father, who for years have been lecturing me on a frugal life is extremely conservative in terms of investing (especially since vanguard has no local office); so I’ve been forwarding him your stock series, one article at a time, to let him slowly digest the content of the path you so masterfully laid out for me and for all the readers here. He’s now more open to talking about it and discussing his options. It definitely drew us closer, and I think he’s slowly realizing that I’m in the process of becoming a good stewart of my own money.

        • jlcollinsnh says

          Thank you CV…
          I’ll start work on it. I’m curious, why “The Prodigal Daughter”?
          Thanks, too, for the additional detail on EJ. With the market up 30%+ in 2013 I’m a bit surprised the stocks your advisor chose for you sold at a loss. A purely random selection should have done better.
          Your kind words are also appreciated and I’m glad you’re excited about this new start. But remember, as I said in my first reply, investing in VTSAX/stocks is for the long term and “…it will also give you the roughest, most heart stopping ride.”
          The market has been rising strongly since we began our conversation and everybody makes money when that happens. But whether the market will make you rich or leave you bleeding on the side of the road depends on how you handle the inevitable corrections, bear markets and crashes.
          Understand those events are normal and to be expected, ignore the panic from the media “experts,” and stay the course.
          Wonderful that you and your father have this interest in common. Please give him my regards.

          • cv says

            prodigal daughter- I felt like I wasted my given talent/education all these years pursuing things that really didn’t matter; but eventually turned around and ran back to my father.

            I keep your commandment of “staying the course in roughest ride” close to me; along with Mr. (W) Buffett’s words “be afraid when others are greedy; be greedy when others are afraid”. I also don’t own a TV so it makes tuning out the media relatively easy.

  23. vvrogers4 says

    Just stumbled across this blog after stumbling across Mr. Money Mustache, and it’s really changing the way I’ll be approaching the rest of my life. I have a quick question about the best way to invest in VTSAX. My wife and I just turned 24 and are only starting this whole journey, so this post for your daughter has been extremely useful. I am currently contributing 6% into my work’s 401k to receive the full 5% matching contribution, and am now sold on pouring the rest of our savings into VTSAX. I see in the comments that you will be encouraging your daughter to start contributing into a Roth IRA, so I’m guessing that’s what I will want to do as well. I guess I just don’t fully understand how that works. What’s the benefit of contributing to a Roth IRA instead of a regular account? Isn’t there a limit to how much we can contribute to a Roth IRA? I would love to be financially independent before I turn 59 and a half, but would be penalized for drawing from a Roth IRA before that point, right? Sorry I’m just getting started with this and have a lot to learn. I truly do appreciate all of your insight and wisdom here. Grace and Peace.

    • vvrogers4 says

      I’ve continued to read other comments and am finding the answers to all of my own questions 🙂 I guess I’ll be opening both a Roth IRA and a regular investment account, from which I can draw before the 59.5 restriction on my Roth IRA. I’m just about to jump into part 1 of your stocks blogs. Thanks again for all of your insight. It’s greatly appreciated from a true newbie like me.

  24. Yung says

    Hello Jim,

    I would like to know what is the best way to save money for my 2 little boys. One is 8 and another 20 months. I purchased 500 credits from GET (guarantee education tuition) and already done with that. I also save a few hundreds a month ($700) for them but right now just sit in the saving account, around 20K cash. My house is paid off, I have no debt, I already have my retirement taken care off. I just don’t know how to invest those money since there is not much out there that with good interest right now. The reason I save money for them now so that they could use those extra money later for board, books, cars, etc. Please help me with this.

    • jlcollinsnh says

      Hi Yung…

      When our daughter was young we opened up a VTSAX account for her. We funded part of it and used a portion of the financial birthday/holiday gifts she received from relatives to fund the rest. But this was pretty small.

      For the bulk of her college costs we’ve just drawn on our total holdings. In other words, I never saw much value in keeping the funds separate.

      That said, by default the money we are now using has been invested in the same funds as the rest of our money:

      Since your boys are very young, you have lots of time. Whether you hold the money in specific investments target for them or simply by increasing your own investments I would invest in stocks for their powerful growth potential. VTSAX is the tool I’d use.

      When they are about five years out from college, I’d start shifting the money you’ll need to cash. One year at a time. That is five years before their freshman year pull the money needed for that year and keep it in cash. Five years before their second year, do it again. Do this for four years and a year before they start you will have all the money needed ready to go.

      Hope this helps!

  25. Petey says

    Hi Jim,

    I think I have almost read every one of your posts in the past fortnight. Absolutely love it all and have linked a bunch of friends too including my wife.

    My wife and I (both 29) have ~$300k worth of savings sitting in the bank, losing purchasing power every day thanks to inflation and tax on interest income.

    So far you have taught me NOT to dollar cost average. That said I probably won’t plummet it all into an index fund on the one day, purely just for that warm fuzzy feeling, but I suspect that we will drop a fair chunk in on say 4 days over the course of a month or so.

    You have also taught me to keep it simple. If I was in the states, I’d be sinking most of it into VTSAX however I am from Australia and currently living in Canada. Tricky.

    Right now I am trying to choose between the following:
    Vanguard Index International Shares Fund:
    – MSCI World ex-Australia Index
    – High management costs (max 0.90% pa / min 0.35% pa)
    – Buy cost 0.15%, Sell cost 0.10%
    – Dividend reinvestment option

    “Vanguard US Total Market Shares Index ETF (VTS):
    – CRSP US Total Market Index
    – Low Management Cost (0.05% pa)
    – Buy/sell cost through my bank 0.11%
    – No dividend reinvestment

    The VTS ETF seems like the most similar option to what you have in the USA however it’s shortfall is that dividends aren’t able to be reinvested, which means I will lose 37% of each year to the tax man… At least that is how I understand the situation anyway!

    Thank you once again for your great blog. Your daughter is very lucky to have such an experienced parent. My parents unfortunately don’t understand money too well, but thankfully my mother always taught me to save!

  26. Rob says

    Hi Jim,
    I’ve been doing a lot of reading in your blog lately and totally love every single one of them. I have one question,
    I am 27 and don’t have much experience in personal finance. My portfolio only holds VTSMX. I just started contributing last year and will be increasing my monthly contributions to $300. Should I invest on other index funds to break down my portfolio? if so what do you recommend? or should I just stick with VTSMX and keep contributing 100% to that fund?
    Thank you so much and I will definitely be coming back to your site every day 🙂

    • jlcollinsnh says

      Thanks Rob…

      Very kind of you to say!

      Yep, just keep putting your money into VTSMX. Once you hit 10k, Vanguard will automatically upgrade your fund to VTSAX and its Admiral status for even lower cost.

      As long as you stay tough and don’t panic and sell during the drops sure to come over the next 40 years, this fund is really all you need until you retire.

      For more, if you haven’t already, check out the posts here:

  27. Dylan says


    Thanks for your work. I have enjoyed reading your blog for some time now and your posts are always the bright spot in my RSS. For the past couple years I have been saving ~%70, maxing my tax advantaged accounts, and putting as much as possible into VTSAX. At 24 this has worked wonderfully for my net worth and allowed me the freedom to have just enough FU money to keep from feeling trapped. I know if I stay on this path I will be FI before I am 32, but with a strong local real estate market I am seriously entertaining buying a rental property. Assuming I like being a landlord, I could easily see myself “Semi-Retiring” from my regular job with 4-10 rentals before fully retiring. You have alluded in your previous posts that you consider well researched rentals to be a good investment and have owned them yourself in the past. What would the simple path look like if one were to want to include them in their holdings?

    • jlcollinsnh says

      Welcome Dylan…

      and thanks! Your comment is a bright spot in my day!

      Awesome savings rate, BTW. Kudos!

      RE can be a very powerful wealth building tool, Provided you…

      –understand it is a job as well as an investment. Even if you hire property managers.
      –enjoy that kind of work: Managing others, dealing with tenants and/or working on property.
      –understand the risks as well as the rewards of leverage, which is what makes it powerful.

      Personally I quickly learned that the work in my career was much more enjoyable to, and easier for, me than the work on my properties. So you might want to think carefully about your personal preferences.

      Lastly, while owning 4-10 rental properties can certainly effectively get you to FI, you really are no longer on “The Simple Path.” 🙂

  28. Jeremy says

    Hi jlcollinsnh,

    You gave me personal advice ~8 months ago, and since then I’ve opened a Roth IRA and funded it with VTSMX — it’s grown %16 so far! (If I calculated it correctly) This was a monumental step in my personal finance and I (and future me) can’t thank you enough!

    I have a 1-year old nephew and I’d love to start an investment account for him. I think I’m decided on a UGMA account (vs. 529 college savings plan). I’d like to start him off with $250-500 and go from there, but I don’t know where the best place would be. Could you please advise? And if UGMA is the best route for a 1 year old? His mom is a single mom, so I think it’d help them both in the long run financially.

    • jlcollinsnh says

      Welcome back Jeremy!

      Glad to hear things have worked out so well. But I hope you’ve also taken to heart my many, many cautions that the market will have its tough times. Everybody makes money when the market is on a tear like now. But whether it will make you wealthy rests on if you stay the course do when it plunges and everybody is in a panic, and it will.

      Wonderful idea for your nephew and you have several options:

      1. 529 fund. Money grows tax free in his name. Details here:

      2. UGMA. For a nice comparison between this and the 529 go to
      and find this on the opening page:

      Other ways to save for education goals
      Uniform Gifts/Transfers to Minors Act (UGMA/UTMA)
      ›Compare all college savings options

      Click on: “Compare all college savings options”

      3. Set up a regular taxable account for him in his name. Low taxes as he’ll be in a lower bracket than you.You’ll be the custodian and have control until he’s 18. Then it is his. For better or worse. We did this for our daughter and it worked out fine.

      4. Create an account in your name, earmarked for him. Max taxes, depending on your bracket, and max control.

      Bonus idea:

      Once he starts working, fund a Roth IRA for him in his name. We also do this for our daughter and it is the greatest gift you can offer as long as you train him to understand it is not to be touched. At the moment, you can fund it with $5500 0r the total amount of his annual earnings up to $5500, which ever is less. By the time he’s working that will be different, of course.

  29. Peter Hamby says

    Hey jlcollinsnh:

    Pretty new here but I’ve devoured almost the entire blog. Great stuff! I’ve learned more about finances here than from my parents, high school, and college combined.

    I have a question, though. When you say invest into VTSAX with Vanguard, are you talking about putting it into a regular brokerage account, or a traditional or roth IRA? (I’m shooting for an early retirement btw).

    I’m guessing a brokerage account because 50% of my income (which I now save) is far more than 5,500 a year.

    • jlcollinsnh says

      Welcome Peter…

      glad you’re here!

      Both, actually. Fund your Roth first and then your taxable account. You can use VTSAX in both.

      You don’t need, or want a brokerage account. Deal directly with Vanguard.

      Congrats on the 50% savings rate!

      Oh, and thanks for subscribing!

      • Peter Hamby says

        Are you kidding? The subscribe is a no-brainer!

        I have another question if you don’t mind. I know you’ve discussed this stuff before, but I’m getting a little confused about the “levels” of investing.

        Specifically, I guess I’m confused about two things: 1) will the tax benefits of a 401k plan overcome a company’s poor matching and options, and 2) How big of a hit are the taxes in a taxable account

        My employer offers a 401k with pai. They will match the first 20% of the first 5%, which is pretty awful. Only $500/year. Combine that with the fact that all of the plans are expensive mutual funds, everything I’m learning to avoid, I’m hesitant to contribute at all.

        So here’s what I’m thinking:

        1)Invest in 401k for match (Maybe, maybe not)
        2)Max out my VTSAX Roth ira
        3)Max out wife’s VTSAX roth IRA

        But then do I

        4a )Max out the 401k for tax benefits
        4b)Put the rest in a taxable account in VTSAX

        Should I skip 1 and 4A?

        Again, thank you so much! You’re really making a difference to people out there!

  30. Ally says

    Hi Jim, I saw your name on MMM and thought I’d give you a shot. I like what little I have read so far. My quesiton to you is, I have some savings (15K) and was going to use some to open a Roth IRA with Vangard. But when reading MMM he said he put his money in investments so that he still had access to it for emergencies/bills/etc. I am 31, have a house payment with all the utilites, just paid off my car, no cc, no debt and do not want to dump all of my savings into an IRA fund that I wont be able to access. Honestly, it scares the crap out me to put even some of my 15K into investments but if I am ever going to be financially free – I NEED to just do it. I understand IRAs but not so much Investments. What would you suggest, IRA or Investments? If I opened up the VTSMX as an investment, how do I even access my money if I needed to? Also, would I have to do claim gains on my taxes as the end of the year? Please help, please advise!! Ally

  31. Jon Sheridan says

    On Feb 20, 2014, at 9:51 AM, Jon Sheridan wrote:

    Greetings from Las Vegas, JC. I hope this email finds you well. Just wanted to drop you a quick line about how much I appreciate and enjoy your writing. As a fella with a gal outta my league and a lovely daughter, I can relate to your lucky lot in life. Now…if I can only turn that “F-you!” missile key on the corporate “correctional facility” Im currently housed at…. Keep up all you do for us prisoners trying to gain the courage to shake loose and get on with our lives. You and the other members of the financial blog “Mount Rushmore”…MMM aka Pistol Pete, the understated Darrow Kirkpatrick, 1500 Daze and up and comer Johnny Moneyseed give us lackeys hope when there seems to be very little. You’re inspiring more folks like me than you can imagine.

    All the best,

    Jon Sheridan
    Las Vegas, NV

  32. financialblogger23 says

    Hi Jim,

    I’m an idiot, but an idiot that learns quickly or maybe not so quickly. I come from an economically depressed area of the US , so I never learned about money or respected it. My family simply didn’t know about personal finances or any other finances, consequently I never learned until now. Any who, I got lucky and escaped to college. After college I went To Peace Corps and never looked back. Thus unlike you and all the other personal finance gurus I did all of my traveling around the world while fairly young, while you guys worked hard during those years putting money away to travel now , kinda a reverse strategy I guess. I’m still in my late 30’s, and that will be over soon 🙂 I’ve travelled and lived mostly in developing countries. That’s where the most beautiful travel is for me. Experiencing cultures in the developing world and living with people from the developing world. With the exception of a year working a 9 to 5 in the US, A year volunteeering on a organic farm,and Graduate School. I’ve lived, worked, and traveled in over 50 countries over the last 15 years I reckon:
    Ivory Coast
    Burkina Faso
    Sierrra Leone
    South Sudan
    Congo – Kinshasa
    Central African Republic
    United Arab Emirates
    United Kingdom
    Czech Republic
    Dominican Republic
    Cuba (Legally Graduate School Studies)

    As I mentioned above I worked a year in the states and my employer did something I should be thankful for too, they forced me into an Employee matching 401k with Vanguard. Like the Idiot I am, I fought and fought against it. However they took about 3k from my check and then matched it with 3k. I never contributed again. I left the same year 2007/2008 Looking back, I wished I would have dumped half my salary in it! So know I have this 401k, I checked it in July 2012 and it was 7000k plus. I check it today and it’s 10K plus and I haven’t done a thing 🙂 Sorry for torturing with all the above. But now on to my question. My fund is Vanguard Wellesley Income Fund Admiral Shares and according to the breakdown I’m 35% stocks and 65% bonds if I’m reading it correctly. Also looks like I can roll it over to a 401k plan, because I left my former employers years ago and can no longer contribute to it. Also looks like there’s an option to convert it to ROTH 401k. I’d like to roll it over, but what do I roll it over to? C Any suggestions? Can I keep the Wellesley fund, it’s doing really well? Should I convert to ROTH? Ideally I’d like to have ROTH and regular 401K and max them both out yearly if possible. Can i do that? What would you do in this situation. Before you answer, here’s some more info. I paid off 70 k in debt! Told you I’m an idiot that learns quickly 🙂 I’m totally debt free, no mortgage. Pay off my credit card at the end of every month, if I charge purchases. I have 22k in commodities, subject to capital gain taxes if I sell, but I plan on keeping then until I hit my price target (Long term). I’ve done well there. I’m in a special situation where my living abroad has let with me with certain language and other skills sets that an employee is going to pay me well for, for the next two years for certain if I stay and possible year extension ( If wife agrees). Difficult place to live. Best case scenario, I have 93k after taxes to play with per year. Everything else is paid for (health insurance, housing, lunch, car, utilities etc.) no pension plan however. My monthly expenses are low 600 dollars, unless I travel ( 3 times per year on the company dime anywhere int he world) then I budget 1500 per trip. Your advice, if you have any for me. I’d like to retire and live like you in the future. So i want to make the most out of this experience. Opportunities don’t come along like this very often and the burn out rate is high in this job. Help me get my FU Money! Thanks! LOVE YOUR BLOG! You’re a SAINT, thanks for helping us all!

  33. Free To Pursue says

    I am sure I will be quoting your “9 basics” many times in the not-too-distant future. Thank you for compiling such as straight-forward, easy-to-remember list that can be useful to anyone.

    Saving 50% of your income is a significant target to shoot for. Not sure I have ever reached such a high savings percentage. Historically, we saved somewhere between 12-30% and in the past 18 months we have been saving 30%+. We feel pretty good about that level but the 50% target is certainly food for thought. It might prompt us to do another spending audit to figure out whether or not we want to get even more aggressive.

    • jlcollinsnh says

      Glad you like it, FtoP!

      As for the 50% target, for some more food for thought check out the addendum I just added to the post.

      You comment made me think of it. Thanks!

      • Free To Pursue says

        Thanks for the addendum. Maybe it’s just my browser, the chart did not load.

        I like the fact that you point to a continuum in your addition. It’s a choice whether one saves 10% per year or 70%…as long as you are saving. It all depends on how much we want to tax our future self and how quickly we want to be either out of the workforce or “selfishly employed”

      • jlcollinsnh says

        Nope, not your browser. The issue is on my end. I had some trouble getting that chart to “stick.”

        Should be good now if you want to give it another try…

  34. Lisa P says

    Hello Mr. Collins!

    First, thank you very much for being an invaluable resource and making complicated topics more approachable for newbies like me.

    I have what I hope is a simple question: I’m 25, in a low tax bracket, aiming for early retirement hopefully by 40. I have $17k in a taxable account with Vanguard, fully invested in VTSAX. I also have some individual stocks my parents bought in my name years ago that are doing well. I don’t have a 401(k) or HSA and don’t foresee getting either at least in the next year, but I can continue to save some money now. I’ve done more research since I invested in VTSAX, and it seems like opening an IRA and focusing on maxing it out in the next year is a great idea, then focusing back on my taxable account. Is this right, and should I open a traditional or Roth IRA?

    I read Mad Fientist’s post on this (, but the part about slowly converting a traditional IRA to a Roth IRA in early retirement just confused me! (Full disclosure: I’ve never done my own taxes.) It seems like a Roth IRA is going to be easier to deal with than a traditional IRA, but if I’m in the same tax bracket now as I will be in early retirement, Mad Fientist’s point that non-taxed money adds up faster makes some sense.

    What do you think? Thank you!!

    • jlcollinsnh says

      Welcome Lisa…

      ..glad to hear this blog has simplified some of this investing stuff for you. That’s a big goal around here!

      Also glad you are reading the Mad Fientist. Great resource.

      Time was I would have suggested that, being in a low tax bracket, you chose a Roth. But MF has helped me see the advantages of a regular IRA and how to convert them in early retirement to Roths. I was so impressed I asked him to write this guest post on those conversions:

      The advantage of a regular IRA is that you get the full tax deduction. With a Roth, you have to pay tax on the money before you make the contribution. If you are in the 10% tax bracket and you have $5000 to invest…

      with a Roth $500 goes to pay the tax and only $4500 goes in the Roth.
      with a regular IRA all $5000 goes in.

      Not only do you lose the $500 to taxes, you lose all the money it could have earned for you over the decades. If we use this calculator:

      and we assume an 8% annual return over the 40 years until you are 65, that comes to

      That’s just for one year contribution. I’ll leave it to you to figure the impact of paying that $500 in tax each year you fund your Roth. 🙂

      Now I’ve heard some say, pay the tax out of other money and then fully fund the Roth. Well then, yes, at the end a Roth is nicer to have than a traditional. But you still had to give up that extra $500 paid to taxes each year no matter where it came from.

      In short, go traditional and always defer taxes if you can. Better to keep the money working for you.

      Make sense?

      • Lisa says

        Yes! Thank you!

        I’m actually paying taxes in a foreign country but will qualify for the foreign income exclusion for taxes next year, so funding a Roth while I’m abroad makes sense. Then, once I’m home, I’ll switch to a traditional IRA!

        Thanks for the help!

  35. dave says


    I’m a good saver and I’m trying to figure out the financial world to make my money work for me, mostly by reading your stock series. I mentioned my plan to invest in index funds in the near future to my mom recently. She then tells me that she has her money in an fixed annuity that is guaranteed to double your money after 10 years, so 10% return per year, basically. Factor in inflation, and it probably actually comes to around 7% or so, but now that’s sounding just as good, if not better, for a safe, simple way to build some wealth. Am I missing something?

    • jlcollinsnh says

      Welcome back Dave…

      But, oh my, I hate questions like yours. 😉

      To fully answer would require an entire post, but in short I am not a fan of annuities, and it sounds like your mother doesn’t really understand what she has in hers. And that leads me to be concerned she was probably sold on it by someone who made a very handsome commission at her expense.

      First, her annuity isn’t going to double her money in 10 years, or in 110 years. Her money is GONE. The insurance company she brought the annuity from has it and they are never going to give it back.

      What she got in return for her money was a promise that the insurance company would send her a monthly check. The more money she gave them and the longer she waits to receive her monthly checks, the larger they will be. Once she dies, the checks stop.

      So annuities are a way to provide an income stream. But they are NOT a wealth building tool.

      Some risks:

      1. The insurance company fails. There are no Federal guarantees for annuities. Nothing like the FDIC for banks. Some states provide some limited protection. Hope she picked a strong insurance company in the right state. Personally, I wouldn’t want my money tied to any one company, even a strong one. Too much can happen as the years roll by.

      2. Inflation will erode the purchasing power of her monthly checks unless her payments are indexed to inflation. If they are, she has accepted a much lower payment, certainly nothing close to 10%.

      Annuities provide a fixed flow of income until death and that is their appeal. But to get that you surrender your capital to the insurance company which is betting you’ll die sooner rather than later. They have very sophisticated actuarial tables that tell them with great accuracy when the people in any given group are likely to die. They then set the payouts accordingly and low enough that they are left with handsome profits and plenty of money to pay those who live for an exceptionally long time. I hope your mom is one of those. 🙂

      I also hope she has access to other capital in case of emergencies.

      For more:

  36. Wolfgang Rempen says

    Hello Jim,

    Greetings! I’m wondering what you would suggest for a guy at age 67. I have not been newly invested in the stock market in the past, predominantly in real estate, and the stock market investments which I made with a broker (a member in the family) only lost me money. I’ve been “investment shy”, pulled it all out last year and now it’s just sitting in a non-interest bearing account. Where do I see VTSAX’s performance? In your opinion, is this a good time to by VTSAX?

    Thanks Jim!

    • jlcollinsnh says

      Hey Wolfgang…

      Nice to see you here.

      The short answer is it is always a good time to buy VTSAX as basically you are buying the US economy:

      The longer answer is, you shouldn’t buy VTSAX or any other investment until you understand it fully. To answer that question would take a whole series of posts.

      Fortunately, I have them already written:

      Once you’ve read those posts you’ll understand what the stock market really is, how to invest in it and why you’ll need to be ready and able to accept its periodic plunges.

      You’ll probably also understand why you lost money with your broker. 🙂

  37. Kathy says

    Great article and even greater follow-up discussions. I totally agree about the government and Roths. I love the Roth option and have it as well as a traditional IRA. My paranoid, cynical, conspiracy theory mind firmly believes that someday the government is going to either tax Roths, or even try to take them into a government run fund like social security. Oh, if they tax it, it won’t be called a tax because the people would fight that based on the tax-free promise that has been made. It will instead be called a distribution fee, or they’ll back-door tax the companies that hold the funds and call it an administration fee or something like that (which of course gets passed on to the owner.) All of this doesn’t negate the value of Roths. As a citizen, you just have to be vigilant and realize that the government lies as much as it fulfills promises.

    • jlcollinsnh says

      Hi Kathy…

      It always pays to be aware the government can change the laws anytime. I doubt they will directly go after Roths, simply because too many voters have them now and politicians are loath to take things away from those who vote.

      My best guess is that instead they implement a VAT (value added tax) or a national sales tax, thus taxing your Roth withdrawals as you spend them. Of course this won’t be part of the debate surrounding the proposal.

      Anyway, this is one reason I prefer to take any tax benefits now rather than later with a Roth. With a traditional IRA you get the deduction now and that money saved in tax can grow and compound for you over the decades.

      Along these lines you might be interested in my conversation with Lisa P above.

  38. Ryan M says

    Thank you Mr. Collins!

    Your site has been very helpful to me. I value your experience and insight. This post is excellent! I will use it as a guide for both of my teenage children on this important topic!

    Because of you, I feel more informed and better able to make sound decisions as an “average Joe.” I have moved my money from the high fee funds in my employer’s 457 fund to a Schwab PCRA Brokerage account where I could access the VSTAX fund.

    I wouldn’t have had the confidence to make the move had it not been for your insight. Reading your Stock Series led me to seek more information from outside sources, which all supported your information. The move has already been beneficial.

    Thank you for taking the time to inform others. I appreciate all of your work and I am confident my family will benefit from your wisdom for generations to come.

    Keep up the good work,
    Ryan M

    • jlcollinsnh says

      Welcome Ryan…

      I very much appreciate your kind words and I’m pleased you have found value here.

      Thanks for taking the time to let me know!

  39. PhilH says

    I have some money in Edwards Jones mutual funds. Not quite the $10,000 needed for a minimum Vanguard investment. Is it better for me to move it into a Vanguard account as soon as we have the minimum investment or leave it there and start a fresh account? I am 60, retired and have a pension that covers all our expenses. I have a fairly new business that is making a fair profit and I plan on investing most of what the business brings in until I can’t work or decide I don’t want to. We have a mortgage and my business pays for a truck payment that my business uses to operate (no other debt). We have a fully funded emergency fund.



    • jlcollinsnh says

      Hi Phil

      First, $10,000 is only the minimum if you are looking at an Admiral Shares version of a fund, like VTSAX. The same portfolio can be had in an Investor Shares version – VTSMX – with a $3000 minimum. It has a slightly higher expense ratio, but once your account hits $10,000 you can switch to VTSAX. Or you can buy the ETF version: VTI. I discuss this in some depth here:

      Second, are your EJ funds in a taxable account? If so, you have to consider the impact of capital gains if any. If your tax bracket is 15% or lower the cap gain rate is 0. At 25, 28, 33 and 35% it is 15%. At the top rate of 39.4% it is 20%.

      However, if these funds are in a tax-advantaged account, think IRA or 401k, you can move them without tax consequences.

      With this in mind, I would move the accounts ASAP if there is no or minimal tax hit. If the tax hit will be large, I’d leave them in place and then draw on them first as you need money in retirement until they are depleted. Any new money, I’d steer to a fresh account with Vanguard.

      Congratulations on the new business!

  40. Steve says

    I really like these points except for the investing advises. I don’t have your confidence in the markets. Your lifetime seems to have aligned with long term bull markets. But what about a long term bear market? It could happen according to Kondratieff wave for example.

    • jlcollinsnh says

      Well, there was the stagflation of the 1970s, the crash of ’87, the tech collapse of 2000 and that little dust-up in 2007-8.

      But other than that, it’s been one long bull. 😉

      • Steve says

        I was referring to the possibility of a long term bear market not crashes. 😉 The wave theory I mentioned accounts for this.

  41. Amy says


    Great article. I’m very interested in personal finances and have dreams of being financially independent one day. You gave me a lot to think about.

    I’ve been able to pay off all my debt and have been pretty successful at saving a large portion of my take home. Now I’m interested in putting that money somewhere where it can start working for me verses just sitting in a very low interest savings account.

    I actually have appointments with two different financial advisors later this week to discuss some options and see which one works better for me. After reading some of your blog posts I’m second guessing myself if this is a good choice. I am excited to read your stocks series to learn more.

    A quick question if you have time is I am a Canadian and wondering if Vanguard would still be recommended for me and if they have VTSAX for us (sorry if this is a stupid question).

    Some of my background is: 25 year old female making approx. $100,000 annually before tax. Debt free. Currently I have RRSP – 23,900, TFSA – 37,300 and generic bank savings account – 43,000.

    Thanks for the great read!


  42. Leslie says

    Having just read the simple path…how could a 401 k fit into this plan? Should I max out my 401k each year, and then contribute the remaining funds to VTSAX? I don’t really have much control over how my 401k from work is invested other than choosing “moderate” or “aggressive”, would I be better served just forgoing 401k and investing completely in VTSAX? If I am going to eventually live off of withdrawals from the VTSAX account, would this eventually deplete it, and then I’d need to transition to living off of 401k?


  43. dana says

    can i ask a dumb dumb q? I can see in my 403b with Transamerica via work that there are some vanguard funds, do i just add to them, or do i go to vanguard independently of the 403b.. i know nothing about how this works thanks!

    • jlcollinsnh says

      Hi Dana…

      You set up your investment choices in your 403(b) with your employer. Your plan administrator or HR department should be able to help with this.

      Make sense?

      • dana says

        yes, thanks! I will contact them to find out. I know however, i want it to be different from this retirement fund, so i can withdraw whenever i like.I am excited to start your series, just finished part 1:)

  44. Sergey says

    Jim, first of all – thank you for your incredible blog.

    Of course, I won’t be the first to exclaim “If only I could apply this attitude to my finances 10 years ago!”

    Anyway, I am 28 now and ready to start.

    I’d be extremely grateful if you could briefly comment on my situation.

    I come from a small country in Eastern Europe (Latvia), and therefore cannot become a client of Vanguard or any other major investment company operating reasonable index funds.

    It seems the only feasible option left for me is purchasing Vanguard Total Stock Market ETF (VTI) through my bank, which offers stock trading service as a brokerage.

    Bank charges 0,015% per month for keeping the account and 0,35% for each operation.

    For my long-term investing (30 years) I plan to invest $6000 in VTI now, and add $500-$1000 each month.

    May I ask if this seems reasonable? Thank you very much in advance.

    • jlcollinsnh says

      Hi Sergey…

      Just be glad you didn’t find it 10 years from now at 38. 😉

      I hear Latvia is a beautiful place and it is one I hope to visit someday.

      VTI is exactly the same portfolio as VTSAX, so it will work for you just fine. Your costs won’t be as low as we enjoy in the US, but they are not bad.

      Starting with 6000 and investing as much as you can each month is a great plan. Just don’t get scared out when the market drops.

      You might also check out:

  45. John says

    Hi Jim, your site and insights have been so valuable to me, thank you.

    Regarding bullet #8 and financial freedom with dividends from VTSAX, I have a few questions for you if you don’t mind. My investments are allocated across three buckets right now: an employer 401(k) which I continue to participate in, $220k in a Rollover IRA with Vanguard from previous 401(k)s all in VTSAX, and $20k in an after-tax personal account with Vanguard all in VTSAX which I contribute to weekly.

    At 44 currently, when I think about VTSAX dividends and getting to financial freedom, should I be thinking broadly across both my VTSAX holdings (my Rollover IRA plus my after-tax personal account)? Ideally, can those dividends generated from my Rollover IRA help me with living expenses in my late 40s and early 50s?

    Also with regard to VTSAX, do you suggest reinvesting dividends during the wealth building phase? Do you suggest doing anything different with those dividends once you’re drawing on them for living expenses?

    Thank you,

    • jlcollinsnh says

      Hi John…

      Yes, think about all your VTSAX accounts broadly and together.

      –The concept of living just off the ~2% dividend is mostly a mental exercise. You’ll want to handle your actual withdrawal differently and depending on your accounts and situation.

      –Yes, I always reinvested dividends in the wealth accumulation stage.

      –Now that I am living off the portfolio, I have the dividends in my taxable account paid out direct as they are issued. No point in reinvesting them only to withdraw them a short time later.

      –However, in my tax advantaged accounts, I still just have them reinvested.

      All of this is explained in detail here:

  46. RA says

    Dear Mr. Collins,
    Help! I am 57, and at this very late stage of life I have 40.000 dollars to begin investing. I will be working for another 7 to 8 years, and can add 1000 dollars per month to my investment. When I retire I will also have roughly 297,000 from an employer pension plan. I live and work in Switzerland, but plan on returning to the US when I retire. The pension plan I mentioned is mandatory, and can be paid out as a one time lump sum or as a yearly payment for life.
    After reading your posts I am very keen on opening a Vanguard account.
    I am not sure if I should put 40,000 in the VTSAX or if I should put 30,000 in the VTSAX and 10,000 in VBTLX.
    I think you mentioned that you automatically transfer a weekly amount to your VTSAX, is this a safe way to minimize risk and maximize buying potential? Considering this should I open my account with 10,000 and then add the rest monthly or weekly? Perhaps the amount I am talking about is so low that it doesn’t really matter.
    As you see I am a complete newbie and would appreciate any and all advice.
    Thank you for your blog! It gives me hope that I can influence my quality of life with the decision to invest.
    All the best RA

    • jlcollinsnh says

      Welcome RA….

      I’m glad you found your way here.

      I can indeed see you are new to this investing stuff, and there is nothing wrong with that. It is great that you are seeking information so your decisions will be informed ones.

      It is not too late for you to start and you are fortunate to have a pension coming and that you have time to educate yourself before you need to decide how to take it.

      You’ll find the answers to your specific questions here:

      But before you do anything, I strongly encourage you to read thru the entire Stock Series. Only then will you know the risks and the potential. Without understanding the thinking behind investing in VTSAX and/or VBTLX (or anything else) you very likely won’t be able to stay the course and the market’s first drop will have you fleeing for the exits.

      Good luck!

  47. CR says

    I’ve seen the chart above “years to retire according to percentage of saving”…. i’d like to know how this works when mixing in real estate? I have a property which i rent out, it fully pays for itself. Mortgage, condo fees and insurance. I pay the taxes $3k/year out of pocket. Should be finished paying itself off in approx 9-10 years, and its worth ~$300k at the moment. The way i see it is… its currently adding approx $14k to my net worth every year for $3K/year out of pocket in taxes. I currently rent an apartment which is significantly less expensive then the property.

    Should i consider this as “savings”, if so how does it factor into the formula above?

    I also regularly invest in tax sheltered accounts along with an employer matched pension plan. However at the moment 66% of my worth is in the property. Is this too much? Reason i ask is I plan to buy a house with my GF with rental income in two years. I’m asking myself if thats too heavy on the real estate side, and wondering if i’m not better off selling this property to buy the other one. Its just too easy to hold on to given how it pays itself off so nicely.

    • jlcollinsnh says

      As you can see from the note under the chart, it is based on assuming 8% annual returns.

      So to apply it to your personal situation you want to take your projected annual returns for your RE holdings and see how they compare to 8%.

  48. YC says

    Hi Jim,
    Love your blog! it is super helpful. I found it through MMM. I am in Australia and have (finally) moved my superannuation (401K equivalent) into half Vanguard International shares index fund (unhedged) and the other half into the Super company’s ‘growth porfolio’ which is mostly Australian shares index. What are your thoughts on hedged vs. unhedged for overseas readers? It seems like unhedged is better for the long term. And would it be better to move 100% into the Vanguard International shares but I am nervous about big fluctuations in the AUD. I am 34 and will probably have to work for another 20 years so looking at long term investing. Vanguard link here:
    THANK YOU!! Warm regards, YC

    • jlcollinsnh says

      Thank YC…

      Glad you found your way here.

      It depends on how you view the future strength of the Aussie dollar and I haven’t a clue about that. 😉

      Since the Aussie market is relatively small I would hold more in the international fund. You don’t have to go to 100% if you like the future prospects of Australia. How much you like those will determine the allocation.

      You might also post your question here:

      Don’t worry about the title. Aussies have found their way there too. 🙂

  49. Gráinne says

    Hi Jim, what a great blog, everyone should be telling their kids this! I am going to take your advice on board wholeheartedly and stop squandering my wage on consumerism while I’m still relatively young. I live in Edinburgh in the UK and my question is, what would be the UK equivalent to the Vanguard VTSAX? I have an ISA in FTSE All Share Index, but I just want to make sure I start investing on the right foot. Many thanks.

  50. Syed says

    My son just turned 3 and I’m starting to figure out ways to get him on the fast track to financial freedom. My dad never really taught me so I had to teach myself. I was clueless up until the age of 28. I hope my son “gets” it by his teenage years. This is great material.

  51. Steel says

    This information is exactly for which I have been searching for years! Unfortunately, it has taken me 39 years to find it. I truly want to be financially free. I have 0 debt and I make good money. Is it too late for me to follow these steps such that I could be free in 10 – 12 years or sooner or do no longer have time to make this work?

    • jlcollinsnh says

      Never too late, Steel…

      10 years of investing, all things being equal, will take you exactly as far whether you are 20 or 60.

      • Steel says

        Many, many thanks for your advice and your quick reply. You are truly making a difference in peoples’ lives.

        I am in the process of reading all of your stock series right now and hope to come across more of a “how-to-invest” as I read. I read that you encouraged one person to save 50% and to max a Roth IRA, put 3% into his company match and out the rest into the Vanguard funds, I think it was? Everyone’s sitch is different, for sure. Still, I really feel like I can do this with a little guidance, which you are providing. Again, many, many thanks.

  52. ttarr says

    Hi Mr. Collins,

    What amount do you suggest for an emergency fund? I’ve read your book/blog and I see only vague comments about it. If I am fully invested and we get a 50% drop in the total market index and I lose my job, what amount of cash should I have on hand so I do not sell the index fund at market lows? I realize there is a balance in that too much cash is inefficient and does not keep up with inflation, but too little poses the risks of having to sell investments at lows. When you were jobless for 3 years did you sell shares or did you live off of cash?

  53. ZJ Thorne says

    I hope that she learned from you even as she was expressing frustration. She saw your behavior for her whole life, which matters far more than your words in the long run. Thank you for sharing the simple version of your philosophy; I’ll be sharing this with young relatives.

  54. JP says

    I bank with USAA. I have a Brokerage Roth IRA account already set-up with them which has been invested in one of their target date funds. I want to start investing in the VTSAX as you recommend. Should I simply invest in this fund via my account at USAA or should I open an account at Vanguard? What would be the pros/cons to each? Will I encounter hidden fees at USAA? Thanks.

    • jlcollinsnh says

      If you are going to invest in Vanguard funds, I’d just go to Vanguard.

      I don’t know what fees USAA charges, but you can check with them and ask.

  55. EL says

    I tell my daughters little financial tidbits and they look at me all weird. I can relate with you on how you said us financial geeks are the aberration, but what else can we do, we love talking about this stuff. Money management is very important and teaching my daughters this fact, is one of my goals also.

    • jlcollinsnh says

      Keep at it.

      My daughter admits at least some of it sunk in and she even makes comments that confirm it.

      Small price for weird looks 🙂

  56. vorlic says

    Mr Collins,

    “And I know a father who had a son
    He longed to tell him all the reasons for the things he’d done
    He came a long way just to explain
    He kissed his boy as he lay sleeping
    Then he turned around and he headed home again”

    Well, a missed opportunity for that man, I think it’s what every parent worries about…

    As I grow; as I watch my daughter and son grow; as I remember the few, calmly stated facts my father has expressed to me, and by my mother, in her way; as I listen to my wife; and as I read your most excellent blog: you have explained… mastery of money sure is important… if only to make sure we leave someone behind, someone made in our own image, to continue the good things we strive for – that’s what it’s finally all about, right?

  57. Richard says

    Regarding point 3. Does this even include 0% interest periods on credit cards? I’m not sure about the US but in the UK you can get 0% offers lasting as long as 41 months. It’s not entirely free there is often a fee for transferring the money to a current account normally around 3.79% for offers lasting that long but over 3.4 years that’s just over 1.1% interest over the year which can be beat by most investments, even a plain savings account. It’s called stoozing and it’s obviously only for those that are disciplined enough to make sure it’s paid off before the 0% period expires but a fair amount of money can be made.

    • jlcollinsnh says

      There are always ways to try to game the system, and more created all the time.

      Some work and some lead to heartache.

      But this blog is The Simple Path.

  58. Somera says

    Just found this and very happy I did. I think i’m around your daughter’s age. I’m not very bright, and on top of it, my parents did me a grave disservice raising me without any concept of money, saving, spending, investing, etc. They were entirely in debt and didn’t have a clue themselves. I hope I’m able to understand your article and use the information well. Thank you.

  59. Donny says

    Hi there great article! Quick question in calculating savings rate – do you use gross or net income as the denominator? I suspect after tax dollars, given if you were in a high tax bracket it would be difficult to get to 50% savings rate on a gross basis as taxes would eat up almost 50% of your gross income.



    • jlcollinsnh says

      Hi Don…

      No hard and fast rule here.

      Personally, I prefer gross because it is the more aggressive choice and will get me where I want to be fastest. Gross or net, the important thing is as much as possible if FI is important to you.

    • Jimmy says


      If you want to use the posted savings chart you should calculate your savings rate as S/(E+S) where S is your current annual savings and E is your expected retirement / post financial independence annual expenses with predicted retirement / FI taxes included.

      If you use your current gross savings rate that would mean you are assuming your retirement / post FI expense (including taxes) will be exactly the same as they are now.

      Applying your net savings rate with taxes removed from the equation to that chart would mean you are expecting to pay $0 in taxes in retirement / post FI life.

  60. AKK says

    Hello Mr. Collins:
    I stumbled on your blog through your Google Talk video. Your advice is perfect but hard to follow emotionally by most. I had given your advice to my kids though 12 years ago who are now in their late 20s. They are thankful not only for advice but that they can spend time on things they like and let lazy investing do the work for them.

    My concerns are about the tax man when I retire or pass away – so reading about it and listening to Ed Slott also. The investing is the easy part, it is the tax man on retirement or death that is quite complicated and it is spinning my head. I would hire experts but do not want to sign anything over. Looks like they do not say taxes and death are inevitable for nothing.

  61. cmm says

    I am a 2o-year-old college student how much do you believe I should put what I have saved in an index fund and how do you feel about what I have heard from others that is bad and I should distribute my savings. Is it okay since its almost like I am with an index fund?

  62. dha says

    I would have loved to read this when I was in my twenties, but I am not late, would have been a really great advice! thank you some much Mr. Collins

  63. Matt says

    Hi! I’m brand new to your blog and all having to do with the financial world other than staying debt free and living within my means. I’ve been quickly going through your blog and I love what you have to share!

    The chart in your addendum showing the % set aside and the number of years it would take to retire…is that based off a certain income? Say, $30,000 a year?


    • jlcollinsnh says

      Welcome Matt!

      Good question.

      I believe it is based on the percent needed to save to reach FI in a given number of based on the 4% guideline with the amount needed being the income level itself.

      So it would work the same for 30k or 300k.

  64. NoviceInvestor says

    Hi Jim,

    I am brand new to your site and I’m really thankful you’re having this very informative blog for us. My coworker shared your blog with me last month and I’m grateful he did. I bought into the VTSAX a couple of weeks ago. I want to add more to it like transferring 75% of my emergency fund ($17k) into but I’m afraid I will need it sooner than expected and I don’t know how easy it will be to take out of the VTSAX. So I’m hesitating if you can help with some advice.

    I am 43 years old, married with 3 kids ages 14, 12, and 10. I’m a federal employee with 16yrs of service and I’m putting 6% into my TSP. Instead of adding 1% raises into my TSP, I’m thinking I should add that 1% amount into the VTSAX account. What do you think? Or is the TSP better option? By the way, it is a Roth TSP.

    My wife is 42 years old and is a school principal. Her retirement plan is under the Texas Retirement System with currently 18 years of service. We currently only have 1 new car payment at 7 months old out of 3 vehicles and a mortgage with about 25 years left.

    We also want to do some investing and are looking into real estate rentals and starting it the traditional 20% down way. My neighbor have been doing this and currently have about 30 properties with about 20 ongoing mortgages in his and his wife’s name since they are limited to 10 loans each. At first, all those mortgage loans at once scares me but my neighbor will be having a nice retirement in his late 50s when money will be working for him while he manages the rentals. My wife and I want to retire comfortably like they will and thinking about investing in that path too. However, since hearing about your VTSAX, I’m reconsidering not going into real estate rental and put all into the VTSAX. Which way should I go? All VTSAX or RE rentals?

    I also have about $14k in a Chase Bank brokerage which haven’t been doing well at all for the last 5 years. I’m thinking about putting all that into the VTSAX.

    Thanks in advance for your help!!


  65. Donny D. says

    JL – Love your blog and stock series. The S&P 500 hit an all time high yesterday, consistent with your mantra, “the market always goes up”. How should we think about certain non-US stock markets, some which are materially below their all time highs reached years ago (Shanghai Composite still 50% below 2007 high and Japan’s Topix 45% below 1989 high).
    See blurb from Bloomberg today:
    “As the rest of the world woke up on Wednesday to fresh all-time highs for U.S. stocks, it was only natural for a wave of jealousy to spill forth. Many global markets, particularly those in Japan and China, remain a long way below their record peaks. While the feeling of envy might be strongest in Shanghai, where stocks are still almost 50 percent down from their 2007 peak, spare a thought for Japan’s beleaguered investors who last saw a record high back in 1989.”

  66. Donny D. says

    Hi JL – Barron’s had a piece out this week and mentioned the equal-weight S&P 500 has been the market cap-weighted S&P 500 index by an average of 0.75% annually since 1996. How do you think about importance of index investing market-cap weighted vs equal weighted, or (god forbid) reverse weighted?

    Thanks in advance!

  67. James says

    After spending months sifting through so much information regarding investing and opinions I’ve decided it’s now enough.

    I’ve sat hesitant with $120k in a high interest savings account unable to pull the trigger on anything due to constantly researching conflicting opinions from researches, investors and “gurus”.

    I give up now and will put $100k into VTSAX (and reinvest all dividends) and keep $20k cash as an emergency fund. My savings rate is around 80% so this should hopefully pan out well.

    Thanks for the stock series, it’s been refreshing to finally close the chapter on this researching phase I spent too much time on.

    Being 27 I’ll stick with this for a while before needing to look at it again.

    Cheers from Australia

    • jlcollinsnh says

      Thanks for weighing in, James.

      As you say, there is so much conflicting information out there, I have often wondered how those who chose to embrace my ideas come to do so.

  68. James says

    Well here’s an example of opportunity cost.

    In March 2016 I learned about indexing and decided to put $50k into VTSAX. After being a newbie and drowning in the pool of information I sold all of stocks within 2 months and have since sat on the sideline.

    I’ve continued to save my money but had I just held it in there instead of wasting my time reading so much conflicting, pointless information and trying to find the ‘best’ I would have nearly triple what I have now.

    This physically hurts me. Now I’m buying in at all time highs, the market has had ATH more than once in history and always gone up. This is the last article I will ever read on personal finance as I can’t bare to make the same mistake.

    Thanks again, you’ve brought me back to where I should never have left off.

  69. Brandon Clark says

    So I e been itching to start. I have a little money in an old checking account that earns a couple pennies a year and each as a teacher I have a little time each summer to work off jobs and one will make me 10k.

    I recently moved my roll over IRA of about 1700 to Betterment and wonder if I would be wise to handle after tax dollars in the same place while I dust off my old finance books from college. Wish I had been using them but didn’t get a job in the field I graduated so I’m a bit rusty.

    Btw these posts and the money mustache posts, are great. Love the simplicity. Takes all guess work out, but I’m just a little unsure on exactly how to live off the 4%. To actually go through the specifics. Right now as I’m working it makes sense to just let interest roll back into more growth but when I am at 25x income saved, I’m probably ready to live off that interest. How do I go about setting that up? If I put it in an IRA I’m waiting till a specific age but that doesn’t work for early retirement.

    So should I just be buying in a regular account with Vangaurd or Betterment?

    • jlcollinsnh says

      Thanks for your comment!

      Mr. Collins is currently traveling and unable to respond just now.

      We find for most questions, he has already covered the topic. Using the Search button might very well provide your answer. If not, please post your question again after October 15, 2019.

  70. Ed says

    Hey there! Why not just invest in the individual stocks that VTSAX owns? That would cut cost out totally and put dividends straight into your pocket (or even better, reinvested). I know they change their ownership frequently but many of what they own are dividend aristocrats.

  71. Alek says

    We have been saving some funds for our two kids since before they were born. We are looking for strategies for good growth in this money (since birth to leaving our house could represent a lot of investment growth time if they were putting this money away during their adult or working lives).
    The money currently held for them:
    -529 plans for their education (one in Vanguard, another to be rolled into Vanguard, and grandparents have a plan for each in North Dakota state plans)
    -Some 5 year CDs that comprise a few years of birthday gifts
    -Savings accounts for each at our credit union to catch any new birthday gifts, holiday money, etc.

    We are looking to create a better strategy for low cost, tax advantaged, long-term growth for the money they do not even know they have. Since our kids really have no use for the liquidity of savings accounts or CDs, we would love to get their money in stocks. Custodial accounts seem like they have options, but we lose control of them between 18 and 21. Ideally, we are passing on fiscal lessons that will make them mature enough at those ages to take control of those accounts, but that remains to be seen.

    In a few years, when they can work simple jobs, we plan to match any of their income in Roth IRAs or other IRAs in their names.

    What would you recommend for investing on their behalf before they are old enough to even know something is waiting for them?

    Thanks very much!

  72. n8dawg says

    Is there any notable difference between VTSAX and the ETF VTI? Thanks in advance, I have really enjoyed reading your posts so far!

  73. Ankit Singh says

    I’m an undergrad student from
    India and I’ve just finished reading this blog of yours and I just wanted to ask that your content about VSTAX and other terms…is it relevant to Indian investors as well? i know nothing about finances and investing and after reading this I want to learn about managing finances, investing, stock markets, index funds and finally achieve the goal of financial independence that you are talking about.Like you suggested I’ll start with your stock series as my starting point in this journey. Talking about my finances and savings as of now is zero and I’m 24 years old but I want to walk this ‘simple path to wealth’ and achieve freedom. Your word of advice would really get me going and boost my efforts.

    Thank you!

  74. Chris@TTL says

    Still great advice to this day.

    And it should be for 9 years from now, too.

    And even perhaps 90 years from now.

    Simple, direct, easy to follow. Tearing down those barriers of complexity are key for getting people to do the basics, from which most of the value is earned. Great.

    I wish I could have read this and really understood it back when it was written in 2011. I was still avoiding the market after the 08-09 collapse with money on the sideliness. It took me years to really get back in. What a loss…

    Time in the market as they say.

    Great job advice Mr. Collins. The sort of post I’ve passed along to others for the basics as a primer. Cheers!

  75. Nathan says

    Hey Jim,

    Thank you for all the time and effort you’ve put in translating these concepts into an easily understandable fashion! I was wondering what your opinion would be on me opening a Vanguard account vs staying with Fidelity (I only have a small brokerage account and an HSA account with under $500 currently). I do like having everything in the same place but I just wanted to see if you thought it would be worth going with Vanguard or not? Thanks!!

  76. Don says

    Hey Jim-

    That chart you posted from your friend Darrow, it doesn’t seem realistic. If someone was making $90k per year and managed to save 80% a year, that’s $72k per year invested at 8% is not gonna grow to an amount they could retire on within 5.3 years. Even if you started with a lump sum of $381,600 ( $72k X 5.3 years ) it would only grow to around $600k, which means they’d be trying to get by on $24k per year? ( using the 4% rule ). What am I missing?

    • Michael C says


      Earning $90k per year and saving 80% or $72k per year implies that this persons spending needs are only $18k per year.

      As you mentioned, after 5.3 years of $6000 monthly contributions ($72k/year), at an 8% rate of return, the nest egg would be $476,477.

      Using the 4% annual withdrawal guideline, a nest egg of $476,477 would net you $19059.08 annually which exceeds your living expenses of $18k which we came to above. Make sense?

  77. KF says


    I’m attempting to follow your advice and buy VTSAX regularly with my income. I am charged a flat $75 on fidelity to buy any vanguard fund. Is it something I should ignore and go on and buy or am I missing a trick?

    Thank you

    • Ben L says

      I would suggest opening an account with Vanguard to buy VTSAX, you will not have any purchase fees.

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