How to Manage Your Money: 3 Principles from JL Collins

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


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

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

"People along the path to financial independence are probably unicorns."

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

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

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

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

Principle 1: Live Below Your Means

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

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

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

"It's a very insecure world out there - you can't count on your job, you can't count on your health even. So, you had better lay down some financial armor."
However, when his health and therefore business started declining, he didn’t have a back up plan, and didn’t have the money saved to continue to take care of his family the same way he had in the past. “As his health declined, our life declined,” Collins reminisces. “And it was very difficult, very ugly, and very scary. It taught me that it's a very insecure world out there - you can't count on your job, and you can't count on your health even. So, you had better lay down some financial armor, so to speak.” For those of us (myself included) who are definitely spending more than 50% of our take-home pay, this goal can sound incredibly intimidating. At first, when Collins shared this with me, my initial reaction was, “I’ll never get there - why bother trying?” But, every little bit counts, and every step you take to managing your money today will pay dividends in the future. We recommend getting started by tracking your spending. You can use tools and apps like Mint or You Need a Budget, you can use an Excel or Google Sheets spreadsheet, or you can go completely analog and write down your spending in a notebook. However you choose to do it, keep track of every single dollar you spend - from your mortgage all the way down to the chips you got from the vending machine that afternoon you were so hungry you thought you were going to pass out in your staff meeting.

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

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

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

Principle 2: Invest Your Extra Money

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

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

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

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

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

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

Principle 3: Become Debt Free Then Stay Out of Debt

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

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

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


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

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

What’s Next For JL Collins?

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

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

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

Share Your Financial Journey

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

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

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