Frequently called “The Godfather of Financial Independence,” JL Collins, author of The Simple Path to Wealth, has built a devoted following by cutting through financial industry noise with brutally honest advice. His philosophy centers on living below your means, avoiding debt, and consistently investing in low-cost index funds like VTSAX.
Collins exposes how the middle class gets trapped in wealth-destroying purchases disguised as smart financial moves through his Stock Series blog posts and book. His message is clear: stop falling for these five costly mistakes that keep you from achieving financial independence.
1. Stop Treating Your Primary Residence as an Investment
Collins challenges one of America’s most sacred financial beliefs: buying a home builds wealth. While homeownership is often promoted as the path to prosperity, Collins argues it’s frequently a wealth destroyer disguised as an asset.
The numbers tell a sobering story. While the stock market has historically delivered average annual returns around 10%, real estate appreciation typically runs closer to 3-4% annually. This gap becomes devastating when you factor in homeownership’s hidden costs. Maintenance alone generally consumes 1-3% of a home’s value each year, before considering property taxes, insurance, and transaction costs that can reach 6-10% when buying or selling.
Collins speaks from personal experience, sharing stories of real estate investments that became costly lessons. He emphasizes the opportunity cost of tying up capital in an illiquid asset when that same money could grow in the stock market. A house forces you to become a landlord to yourself, responsible for every repair, upgrade, and maintenance issue.
The flexibility argument resonates strongly in his philosophy. Renters can relocate for better job opportunities or life changes without the burden of selling property in potentially unfavorable markets. Collins advocates renting if it frees up capital for stock market investing, challenging the conventional wisdom that renters are “throwing money away.” In his view, mortgage interest, property taxes, and maintenance are equally “thrown away” without the liquidity benefits of stock ownership.
2. Avoid New Cars and Luxury Vehicle Debt Traps
Collins views car payments as wealth killers, representing everything wrong with middle-class financial habits. Transportation should serve as a utility, not a status symbol, yet many Americans trap themselves in perpetual car payments that prevent wealth accumulation.
New vehicles lose approximately 20% of their value the moment they leave the dealership, with total depreciation reaching 60% within five years. Collins advocates buying reliable used cars with cash, eliminating depreciation hits and interest payments that compound against your financial future.
The opportunity cost calculation is staggering. A typical $500 monthly car payment, if invested instead at historical market returns, could grow into substantial wealth over decades. Collins emphasizes that every dollar flowing to car payments does not work in your investment portfolio.
His philosophy extends beyond mere numbers to psychology. Car payments normalize debt and create acceptance of living paycheck to paycheck. Collins argues that this mindset prevents the accumulation mindset necessary for wealth building. He advocates driving reliable transportation until it no longer serves its purpose, replacing it with another modest, paid-in-full vehicle.
The luxury car trap particularly troubles Collins because it represents pure lifestyle inflation. These vehicles provide transportation identical to less expensive alternatives while draining resources that could fund early retirement through index fund investing.
3. Skip Timeshares and Vacation Property Scams
Collins explicitly warns against timeshares, calling them high-pressure scams to separate middle-class families from their money. These products combine the worst aspects of real estate investing with vacation planning, creating ongoing financial obligations disguised as lifestyle upgrades.
Timeshares lose 80-90% of their value immediately after purchase, making them among the worst “investments” available. The resale market is virtually non-existent, with desperate owners often paying companies to take these properties off their hands. Annual maintenance fees start modestly but increase relentlessly, creating perpetual financial obligations that can outlast the original owners.
Collins calculates the opportunity cost of typical timeshare purchases, showing how the same money invested in index funds would provide far more vacation flexibility while building actual wealth. Instead of being locked into specific locations and time periods, investors could use portfolio growth to fund diverse travel experiences.
Collins is particularly concerned about the sales tactics, as they target emotional decision-making rather than financial logic. High-pressure presentations create artificial urgency around purchases that should never be made hastily. Collins advocates renting vacation properties instead, maintaining flexibility while avoiding the economic quicksand of timeshare ownership.
He connects timeshares to his broader philosophy about avoiding complex financial products that enrich sellers more than buyers. Simple index fund investing provides better returns with complete liquidity and no ongoing obligations.
4. Don’t Finance Consumer Electronics and Big-Screen TVs
Collins warns against financing rapidly depreciating consumer goods, particularly electronics that become obsolete within years of purchase. The middle class often falls into lifestyle creep, upgrading gadgets and entertainment systems through credit purchases that destroy wealth-building potential.
Electronics depreciation accelerates faster than vehicles, with new technology constantly making previous generations obsolete. Financing these purchases adds interest charges to the declining assets, compounding the financial damage. Collins advocates a simple rule: pay cash or don’t buy.
The opportunity cost extends beyond the purchase price to ongoing payments. Credit card interest on electronics purchases can exceed 20% annually, making these among the most expensive purchases possible. Meanwhile, the same money invested in broad market index funds would likely generate positive returns while maintaining liquidity.
Collins emphasizes questioning every purchase decision. Does this upgrade provide lasting value or temporary entertainment? Will this purchase matter in five years, or is it merely meeting social expectations? His philosophy prioritizes delayed gratification over instant satisfaction, recognizing that today’s sacrifice enables tomorrow’s financial freedom.
The psychology of electronics financing troubles Collins because it normalizes debt for consumption rather than investment. This mindset prevents the accumulation of habits necessary for building wealth through consistent index fund investing.
5. Say No to Expensive Investment Products from Financial Advisors
Collins reserves his harshest criticism for the financial services industry, costly investment products sold to middle-class investors. In his Stock Series blog, he exposes how actively managed funds, annuities, and complex financial products enrich advisors while underperforming simple index funds.
Expense ratios tell the story clearly. Actively managed funds typically charge 0.5-2% annually, while broad market index funds cost as little as 0.03-0.2%. These minor differences compound dramatically over decades, potentially costing investors hundreds of thousands in retirement wealth.
Collins advocates DIY investing through low-cost index funds, particularly emphasizing VTSAX (Vanguard Total Stock Market Index Fund) for its broad diversification and minimal costs. He argues that complexity in investing usually benefits advisors more than clients, as simple approaches consistently outperform expensive alternatives.
Collins particularly criticizes annuities for their high fees, complexity, and poor performance relative to straightforward stock market investing. These products often combine insurance with investing in ways that benefit neither objective.
Collins challenges the myth that professional management adds value, citing decades of data showing actively managed funds typically underperform their benchmark indices after accounting for fees.
Conclusion
Collins’ philosophy is simple: live below your means, avoid debt, and consistently invest in low-cost index funds. The five purchases he warns against share common characteristics—they drain wealth while appearing beneficial, often through debt financing or ongoing fees that compound against your future.
His path to financial independence requires discipline and the courage to reject conventional wisdom about homeownership, car payments, and professional financial management.
By avoiding these wealth destroyers and consistently investing in broad market index funds, middle-class families can achieve the financial freedom that seems impossible while trapped in cycles of consumption and debt. Collins proves that building wealth isn’t about earning more—it’s about keeping more of what you earn and investing it wisely.